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A brief overview of Hornbeck Offshore Services
According to an SEC S-1 registration statement, Hornbeck Offshore Services, LLC (HOS) has filed to raise $100 million in an initial public offering of its common stock.
The company offers Marine transportation services for customers in offshore oil fields and other markets.
Hornbeck Offshore Services, LLC has achieved strong revenue growth and is profitable.
I will provide an update as soon as we hear further details from management about the IPO.
Hornbeck overview
Hornbeck Offshore Services, Inc., based in Covington, Louisiana, was formed to acquire, lease and operate a fleet of offshore support vessels to transport people and supplies to offshore drilling rigs and other offshore customers outside of the oil fields .
Management is led by founder, president, chairman and CEO Todd M. Hornbeck, who has been with the company since its inception in 1997 and was previously director of marketing for the Gulf of Mexico Tidewater and served on the boards of several shipping industry associations.
The company's coverage includes the following regions:
-
United States
-
Latin America.
As of September 30, 2023, Hornbeck has recorded $209 million in investments at fair market value from investors including affiliates of Ares Management, Whitebox, Highbridge and Merced.
Hornbeck customer acquisition
The Company markets its transportation services, 60 offshore support vessels and 15 multi-purpose support vessels, to offshore platforms and other non-oilfield systems (e.g. wind farms) through direct sales, marketing and business development.
The company's multi-purpose supply vessels can be configured as “flotels” and can accommodate up to 245 workers.
The share of general and administrative expenses in total revenue has fallen as revenue has increased, as the following figures show:
|
General and administration |
Expenses vs. Income |
|
Period |
percentage |
|
Nine moss. Ended September 30, 2023 |
11.1% |
|
2022 |
13.1% |
|
2021 |
15.9% |
click to enlarge
(Source – SEC.)
The general and administrative efficiency multiplier, which is defined as how many dollars of additional new revenue are generated by each dollar of general and administrative expenses, decreased to 2.5 times in the most recent reporting period, as shown in the following table:
|
General and administration |
Efficiency rate |
|
Period |
Several |
|
Nine moss. Ended September 30, 2023 |
2.5 |
|
2022 |
3.3 |
click to enlarge
(Source – SEC.)
Hornbeck's market and competition
According to a 2022 market research report by Market Research Future, the global offshore support vessel market (as an indicator of the growth of the related service industry) was estimated at $9.8 billion in 2021 and is expected to reach 14 in 2030 .6 billion US dollars.
This represents a projected CAGR (Compound Annual Growth Rate) of 5.11% from 2022 to 2030.
The main drivers of this expected growth are increasing demand for offshore shipping services from oil and gas platforms and offshore wind farms.
The industry is also making technological improvements to its vessels, allowing service providers to improve their service offerings to customers.
The following graphic also shows the expected development of the market until 2030:
Market research future
Key competitors or other industry participants include:
-
Tidal water
-
Edison Choest Offshore
-
Harvey Gulf International Marine
-
Seacor Marine
-
Siem Offshore
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Oceaneering International (OII)
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Other.
Hornbeck Offshore Services, Inc. Financial Performance
The company's recent financial results can be summarized as follows:
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Increasing sales
-
Increasing operating profits
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Higher cash flow from operations.
Below are relevant financial results derived from the Company's registration statement:
|
Total sales |
||
|
Period |
Total sales |
% Variance vs. Previous |
|
Nine moss. Ended September 30, 2023 |
$438,588,000 |
37.8% |
|
2022 |
$451,226,000 |
76.1% |
|
2021 |
$256,300,000 |
|
|
Operating profit (loss) |
||
|
Period |
Operating profit (loss) |
Operating margin |
|
Nine moss. Ended September 30, 2023 |
$115,504,000 |
26.3% |
|
2022 |
$165,059,000 |
36.6% |
|
2021 |
$53,773,000 |
21.0% |
|
Net income (loss) |
||
|
Period |
Net income (loss) |
Net margin |
|
Nine moss. Ended September 30, 2023 |
$46,951,000 |
10.7% |
|
2022 |
$80,762,000 |
17.9% |
|
2021 |
$2,987,000 |
1.2% |
|
Cash flow from operating business |
||
|
Period |
Cash flow from operating business |
|
|
Nine moss. Ended September 30, 2023 |
$114,714,000 |
|
|
2022 |
$112,967,000 |
|
|
2021 |
$49,611,000 |
|
|
(Glossary of terms.) |
click to enlarge
(Source – SEC.)
As of September 30, 2023, Hornbeck had $146.3 million in cash and $590.0 million in total liabilities.
Free cash flow was $154.1 million for the twelve months ended September 30, 2023.
Hornbeck Offshore Services, Inc. IPO Details
Hornbeck intends to raise gross proceeds of $100 million through an initial public offering of its common stock, although the final figure may vary.
No existing shareholders have expressed interest in purchasing shares at the IPO price.
Management says it will use the net proceeds from the IPO for general corporate purposes.
There is no presentation of the company roadshow by management.
In view of outstanding legal disputes, the firm has initiated legal proceedings against Secretaria de Marina [SEMAR] The merchant shipping regulator has blocked the company from using its Mexican-flagged vessels in Mexico's coastal trade. The SEMAR lawsuit has been stayed while the Company pursues its lawsuit against SEMAR.
The listed bookrunners for the IPO are JP Morgan, Barclays and a number of other investment banks.
Commentary on Hornbeck's IPO
HOS is seeking financing through the U.S. public capital market for its general working capital needs and growth initiatives.
The company's financials have resulted in increasing sales revenue, higher operating profit and growing cash flow from operations.
Free cash flow for the twelve months ended September 30, 2023 was $154.1 million.
The share of general and administrative expenses in total revenue has decreased as revenue has increased. The general and administrative efficiency multiplier fell to 2.5 times in the last reporting period.
The Company currently plans not to pay dividends and to retain future earnings to reinvest in the Company's growth and working capital needs.
HOS's recent investment history shows that the company has made low investments relative to operating cash flow.
The market opportunity for providing offshore transportation services is significant and is expected to grow at a moderate growth rate through 2030.
Risks to the Company's prospects as a public company include regulatory risk and market risk, as the majority of the Company's revenue depends on the extent of offshore drilling activity in the Gulf of Mexico.
Additionally, because the Company is subject to the Jones Act, at least 75% of the outstanding shares of each share class must be owned and controlled by U.S. citizens.
As soon as we hear more details from management about Hornbeck Offshore Services' IPO, I will provide a final opinion.
Expected IPO pricing date: To be announced.
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