World News: 02:07 GMT Tuesday 16th April 2019. [Deep Down Inc. via Globe Newswire via SPi World News]
HOUSTON, April 15, 2019 (GLOBE NEWSWIRE) -- Deep Down, Inc. (OTCQX: DPDW), a specialist in deep water oil and gas production and distribution equipment and services, today reported results for its year ended December 31, 2018. Deep Down will hold a conference call tomorrow, Tuesday, April 16th at 10:00 am ET to review its results and 2019 outlook (call details below).
“There has been a resurgence in exploration, development and production across the Gulf of Mexico where a sizeable portion of the global oil supply lies. In March, we announced $4.4M in new orders from various operators for subsea equipment and offshore services in the Gulf of Mexico. Nearly 75% of the work was for U.S. operations and the balance was for a project based in Mexico. We believe our 2019 sales momentum will be driven largely by activity in this region where operators are seeing success focusing on incremental near-field opportunities.
“Internationally, there has been a noticeable uptick in deep water spending with a number of governments implementing fiscal incentives to attract investment in new deep-water projects. For example, Latin America is emerging as a region of future opportunity as a result of an increase in exploration projects being initiated by large operators. Our efforts to focus business development efforts in markets where we have seen ramping exploration activity continue to bear fruit. As an example, we expect to be fully operational in one new international location this year, subject to final local regulatory approvals.”
Excluding a non-recurring depreciation charge related to asset impairments, gross margin declined to 20% in Q4'18 compared to 44% in Q4'17, principally due to lower levels of higher-margin service work in Q4’18 vs. Q4 ’17, as well as the revenue related impact of lower overhead absorption in the Q4’18 period. Excluding the non-recurring depreciation charge, gross margin decreased to 32% in 2018 compared to 44% in 2017, primarily due to a larger proportion of higher-margin service and equipment rental revenues in 2017 compared to 2018 as well as lower overhead absorption resulting from lower revenues in 2018.
Reflecting the benefit of cost containment measures enacted during 2018, including the rightsizing of Deep Down’s workforce to better reflect its current project activity, Deep Down’s Q4’18 selling, general and administrative expense decreased to $2.0M compared to $2.1M in Q4’17, and 2018 SG&A expenses declined to $7.8M compared to $9.1M in 2017.
Q4’18 and full year 2018 operating expenses were impacted by a one-time asset impairment charge of $2.3M, of which $1.9M was recorded as an asset impairment expense and the balance of $0.4M was recorded within depreciation expense. The asset impairment was performed to adjust the carrying amount of certain long-lived assets to their current fair value. Reflecting the impairment, Deep Down’s Q4’18 operating expenses increased to $4.0M from $2.2M in Q4’17, and full year 2018 operating expenses rose to $9.9M compared with $9.4M in 2017.
Excluding the impairment charge, Deep Down reported a Q4’18 net loss of $1.2M or, ($.09) per basic share, compared to net income of $0.01M, or $0.00 per diluted share, in Q4’17. Deep Down reported a 2018 net loss of $4.7M, or ($0.35) per basic share, compared to a net loss of $0.1M, or ($0.01) per basic share, in 2017. The increase in net loss in the 2018 periods was due primarily to lower revenue due to the slower than expected initiation of new projects as well as asset impairment expenses which more than offset reductions achieved in SG&A expense.
Per share results in Q4’18, Q4’17, 2018 and 2017 are based on are based on 13.69 million, 13.44 million, 13.55 million and 14.23 million weighted average shares outstanding in the respective periods.
Deep Down reported a modified EBITDA loss of $1.4M compared to positive modified EBITDA of $739,000 in 2017. The decrease in modified EBITDA in 2018 was principally due to the impact of lower revenues and gross margins compared to 2017. A reconciliation of modified EBITDA, a non-GAAP measure, to net income is provided below.
Charles Njuguna, CFO, commented, "Deep Down entered 2019 on a strong financial footing, with a solid order backlog of $15M and a range of encouraging indicators regarding future business opportunities. Our review of strategic alternatives to maximize shareholder value remains in progress and is supported by our financial advisor, GulfStar Group, LLC. While we are unable to comment on the duration or possible outcomes of this process, we can confirm that it did play a role in recent changes to our Board which we will discuss during tomorrow’s conference call.”
Globe Newswire: 02:07 GMT Tuesday 16th April 2019
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