|HORNBECK OFFSHORE SERVICES INC /LA filed this Form 10-Q on 05/09/2018|
In the GoM, two high-spec OSVs have been delivered into the domestic market so far this year. We expect an additional six high-spec OSVs to be delivered into domestic service through 2019. We do not anticipate significant growth in the supply of high-spec OSVs beyond the currently anticipated level of 199 of such vessels by the end of 2019. During the first quarter of 2018, there was an average of roughly 34 floating rigs available in the GoM, while an average of 21.3 were working. As of May 2, 2018, there were 31 rigs available and 23 were working. However, five floating rigs have contracts that will expire during the remainder of 2018. We do not know whether the remaining rigs will receive contract renewals for operations in the GoM. Once a rig arrives in the GoM, it can take several months to commence work and, therefore, we do not know the timing of when operations of newly arrived rigs will begin, if at all. Given these market conditions, we anticipate our average dayrates and utilization levels will continue to be depressed for the foreseeable future. However, the GoM is one of the premier deepwater markets in the world and we are committed to supporting our customers in this market. We believe that once the current supply and demand fundamentals return to more normal conditions, our results from operations will improve. Due to a seasonal slowdown in demand, we experienced soft market conditions for our MPSVs in the first three months of 2018. These vessels are used for a wide variety of oilfield applications that are not necessarily related to drilling. Also, we have not seen a significant pick up in the expansion of offshore infrastructure, such as field development that more meaningfully drives MPSV utilization.
In recognition of these weak market conditions, we stacked OSVs and MPSVs on various dates commencing on October 1, 2014. As of March 31, 2018, we had 44 OSVs stacked. As of May 2, 2018, we had 40 OSVs stacked. These 40 stacked vessels represent 57% of our fleetwide vessel headcount, and 39% of our total OSV and MPSV deadweight tonnage. We may consider stacking additional vessels or reactivating vessels as market conditions warrant. By stacking vessels, we have significantly reduced our on-going cash outlays and lowered our risk profile; however, we also have fewer revenue-producing units in service that can contribute to our results and produce cash flows to cover our fixed costs and commitments. While we may choose to stack additional vessels should market conditions warrant, our current expectation is to retain our active fleet in the market to accept contracts at the best available terms even if such contracts are below our breakeven cash cost of operations. Upon completing the pending four-vessel acquisition from Aries Marine and certain of its affiliates, we plan to introduce the vessels into our operating fleet and do not currently plan on stacking the vessels.
During the first quarter of 2018, Mexico completed Round 2 of its deepwater auctions. In such auction, there were 19 deepwater blocks awarded that are estimated to bring in USD $4.5 billion of investment in each block over their respective lives. We consider Mexico to be a long-term market for our services, especially in light of energy reforms expected to be carried out there. We continue to explore opportunities to place additional vessels into Mexico to support PEMEX in its ongoing shallow water activity and non-PEMEX customers in support of future shelf and deepwater activity there. In June 2018, Mexico will elect a new President. The leading candidate has stated his intention to roll back some or all of the energy reforms. We continue to monitor political developments and their impact on the Mexican market.
In Brazil, Petrobras has moved towards an "all Brazilian flag" vessel fleet, which has limited opportunities in Brazil for foreign-flagged vessels, except where highly specialized services are required. In January 2016, we placed one of our newbuild HOSMAX 310 class OSVs into Brazilian registry and have imported that vessel into Brazil. In October 2016, Brazil enacted new legislation that will allow international oil companies to participate as operators of pre-salt offshore developments, reversing a policy that had reserved such properties to Petrobras, exclusively. By doing so, the Brazilian government has created the possibility that foreign operators might spur additional exploration and development activity that has been dampened by low oil prices and Petrobras' difficulties. In March 2018, the Brazilian National Petroleum Agency completed a deepwater auction that netted over USD $2.0 billion for the Brazilian government. The outcome of this bidding process is viewed positively for growing the participation of international oil companies in the Brazilian offshore sector, which is one of our core markets.