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Odyssey Marine Exploration Inc. Reports Operating Results (10-Q)

November 04, 2010 | About:
Barel Karsan

10qk

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Odyssey Marine Exploration Inc. (OMEX) filed Quarterly Report for the period ended 2010-09-30.

Odyssey Marine Exploration Inc. has a market cap of $133.5 million; its shares were traded at around $1.99 with and P/S ratio of 30.7. Odyssey Marine Exploration Inc. had an annual average earning growth of 18% over the past 5 years.OMEX is in the portfolios of Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.
This is the annual revenues and earnings per share of OMEX over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of OMEX.


Highlight of Business Operations:

In June 2010, we entered into agreements to provide project research and shipwreck search and survey services for a project code-named “Shantaram” associated with Robert Fraser Marine, Ltd. projects. Under the agreements, Odyssey furnished research related to “Shantaram” and its sinking and provided a research vessel, equipment and crew to search a specified area and inspect targets in that area. The contract provides for cash payments totaling approximately U.S. $3.4 million representing initial cash payments of $1.7 million and additional payments of approximately $1.5 million within 30 days and $0.2 million upon project completion, plus additional payments upon the sale of coins or artifacts from the “Shantaram” project. After the re-payment of salvage costs and fees, we will receive 75% of net revenue in aggregate until an additional £11.4 million (approximately $18 million) has been received and then 50% in aggregate of all further net revenue. The survey of the “Shantaram” search block is complete. Targets of interest have been inspected by our remotely operated vehicle and several other targets remain to be inspected. An amount of approximately $1.5 million remains due which we are still expecting to receive. In the event of non-payment, Odyssey has secured collateral which includes the right to receive an additional percentage of the net proceeds assuming the target shipwreck is located.

The increase in total revenue of $9.0 million was primarily related to a $9.8 million increase in expedition charter revenue associated with subsea mineral mining work in the South Pacific with Dorado Ocean Resources Ltd. ($5.1 million), syndicated shipwreck search projects which include Enigma II, Shantaram and Firebrand ($2.5 million), government and insurance company services in the wake of the airline accident in the Eastern Mediterranean ($1.5 million) and other miscellaneous charter services ($.7 million). We are currently working under a charter agreement with Dorado Ocean Resources Ltd. which will extend into the fourth quarter 2010 and longer. We are also planning other syndicated projects in the South Pacific in late 2010 and in 2011.

Operations and research expenses were $6.6 million in 2010 as compared to $2.9 million in 2009. The $3.7 million increase was due to higher vessel - related expenses in 2010 versus 2009 primarily attributable to the volume of projects underway and the addition of our two chartered vessels. The Dorado Discovery comprised $2.6 million of the increase and has recently completed renovations and mobilization in Southeast Asia and has been deployed to the South Pacific to work on subsea mineral mining and exploration projects under a charter agreement with Dorado Ocean Resources Ltd. Our second chartered vessel was deployed during the second quarter 2010 to work on the “Shantaram” project and has recently been sub-chartered to a third party which comprised $1.4 million of the increase. These increases in vessel-related expenses were offset in part by decreases Ocean Alert expenses of $.3 million while she is waiting to be deployed on the next project. We are currently anticipating several options for the Ocean Alert including charter, use on the recovery of the aircraft which crashed in the Easter Mediterranean and potential sale.

The increase in revenue of $15.2 million was primarily related to a $16.5 million increase in expedition charter revenue associated with several syndicated shipwreck search projects including Enigma I and II, Shantaram and Firebrand ($8.0 million), subsea mineral mining work in the South Pacific with Dorado Ocean Resources Ltd. ($5.1 million), government and insurance company services in the wake of the airline accident in the Eastern Mediterranean ($2.9 million) and other miscellaneous charter and expedition services ($.5 million). We are currently working under a charter agreement with Dorado Ocean Resources Ltd. which will extend into the fourth quarter 2010 and longer. We are also planning other syndicated projects in the South Pacific in late 2010 and in 2011.

Operations and research expenses were $15.3 million in 2010 as compared to $8.9 million in 2009. The $6.3 million increase was due to higher vessel - related expenses in 2010 versus 2009 primarily attributable to the volume of projects underway and the addition of our two chartered vessels. The Dorado Discovery comprised $3.7 million of the increase and has recently completed renovations and mobilization in Southeast Asia and has been deployed to the South Pacific to work on subsea mineral mining and exploration projects under a charter agreement with Dorado Ocean Resources Ltd. Our second chartered vessel was deployed during the second quarter 2010 to work on the “Shantaram” project and has recently been sub-chartered to a third party which comprised $2.6 million of the increase.

Net cash used in operating activities for the first nine months of 2010 was $7.5 million. This amount primarily reflected an operating loss of $7.9 million offset in part by non-cash items including depreciation and loan discount amortization ($1.7 million), share-based compensation ($1.4 million) and loss from unconsolidated entity ($2.4 million). Working capital changes also included an increase in accounts receivable of $8.4 million ($1.6 million represents the amount due on the “Shantaram” project, $5.4 represents amount due from Dorado Ocean Resources, Ltd. and $.8 million due from an insurance adjuster in the wake of the airline accident in the Eastern Mediterranean ), an increase in accounts payable of $2.8 million ($1.7 million represents ship charters and fuel), an increase in deferred revenue of $.4 million ($1.6 million representing deferred revenue outstanding on the “Firebrand” project offset by recognition of revenue for projects “Enigma” and “Shantaram”), and other net sources of working capital of $.1 million. Net cash used in operating activities for the first nine months of 2009 was $11.8 million. This amount primarily reflected an operating loss of $14.7 million and non-cash items including depreciation and amortization ($1.7 million) and share-based compensation ($1.6 million), a decrease in inventory, accounts receivable and other assets ($.9 million), offset in part by a decrease in accounts payable and accrued expenses ($1.3 million).

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