Question-and-Answer Session
Operator
(Operator Instructions). We will go first to Jud Bailey with Jefferies & Company.
Judson Bailey - Jefferies & Company, Inc.
Thank you. Good morning. Question first on your day rates. You would list out that the July average in comparison to what they did for the June quarter. Can you give a little color on the PSV segment and also the Subsea segment, they are down a little bit, but I imagine is that a mix issue or some vessels coming off for dry dock. Can you give us a little color around that please?
Geoff Jones
Yes Jud, on the Subsea segment on those SPSVs, you will see utilization was down in the second quarter. The vessels are supposed going through some dry dock. So it is a mix issue as the vessel comes back, it slightly adjusted downwards the average rate. Again on the PSVs that is a mix issue as well.
Judson Bailey - Jefferies & Company, Inc.
Okay, and next question is on the need of vessels being built in India. Joe, you mentioned you are going to upgrade for the last four, can you give us little more color as far as the cost involved and I presume you are looking for higher day rate potential or maybe quantify what that could be?
Joe Compofelice
Yes, I think for all four vessels $24 million, $25 million about $6 million each, when we acquired Active Subsea, our valuation was based on pricing all of those vessels at $28,000 a day for a 15% cash-on-cash internal rate of return, fully tax affected at 35%, which obviously is neither our book rate and four times higher than our cash rate.
We have never quoted anything there in terms of a time chart. I am not talking bear board. I am talking of time chart below 31,000 on those and for the new ones that we are upgrading; we are probably looking at $3,000 or $4,000 a day higher. So when you compare it to the $28,000 a day we started with, it is probably a point or two more internal rate of return. The big addition is the boat is wider and because boats are always longer than they are wide when you add width. You add a good percentage increase in cargo space, dead weight load and stability on the vessel which effects how far you might reach and how deep you could go from the cranes?
- To read the full transcript on Seeking Alpha, click here »
