Hercules Offshore reports increased revenues

Hercules Offshore LogoJULY 27, 2012 — Hercules Offshore, Inc. (HERO) today reported revenue of $179.0 million for the second quarter 2012 compared with revenue of $170.2 million for the second quarter 2011. However, the company took a non-cash charge of $47.5 million to reflect the impairment of the Hercules 185 and related deferred costs. That contributed to its showing a loss from continuing operations of $55.1 million for second quarter 2012, compared with a loss of $14.3 million,in second quarter 2011.

CEO and President John T. Rynd said "Our second quarter results, excluding the impairment of the Hercules 185, reflect improvements in revenue and operating income for each segment from first quarter 2012 levels. A continuation of the strong drilling fundamentals in the U.S. Gulf of Mexico has led to a fifth consecutive quarter of revenue growth in our Domestic Offshore segment. Discussions with customers suggest solid jackup rig demand in the U.S. Gulf of Mexico well into 2013.  We are also encouraged by the strong bidding activity at the latest Central Gulf of Mexico Lease Sale, which is another positive indicator of future rig demand by E&P companies active in the region.  

"International offshore performance was limited by shipyard downtime largely related to contract specific work and the idling of the Hercules 185. The decision to impair the book value of the Hercules 185 was prompted by our belief that it is unfeasible to repair the damage and return the rig to service. We are working with the customer and insurance underwriters on options for the Hercules 185, and we are hopeful for a timely resolution. While year-to-date results in our international drilling operation have been impacted during this transitional period marked by heavy shipyard projects, our work will establish a strong base to build upon in future years, especially as we seek to expand our drilling presence outside the U.S."

Offshore

Domestic offshore revenue for the second quarter 2012 increased by 85.2 percent to $90.1 million from $48.6 million in the same period in 2011, due to an improvement in dayrates, higher overall utilization, and a full quarter of operations from the acquired Seahawk rigs. Average revenue per rig per day improved by 32.2 percent to $60,734 for the second quarter 2012 compared to $45,933 in the second quarter 2011, while operating days increased by 40.0 percent to 1,483 days from 1,059 days in the same periods, respectively. Operating expenses increased to $55.5 million in the second quarter 2012 from $46.2 million in the respective 2011 period, due in part to a full quarter of operations from the Seahawk rigs, higher labor and repair and maintenance expense, as well as a $2.3 million accrual for state sales and use tax, partially offset by $3.0 million of additional asset sale gains in 2012 compared to 2011 and a reduction in workers' compensation costs. Overall, Domestic Offshore generated operating income of $15.1 million in the second quarter 2012 as compared to an operating loss of $17.2 million in the second quarter 2011.

International Offshore revenue declined to $30.1 million in the second quarter 2012 from $70.0 million in the second quarter 2011. Operating days declined to 329 days in the second quarter 2012 from 564 days in the same prior year period, due to downtime on the Hercules 185, contract expiration on the Hercules 258, and shipyard upgrade work on the Hercules 261 and Hercules 262. Average revenue per rig per day decreased to $91,404 in the second quarter 2012 from $124,197 in the comparable prior year period. The majority of the company's current contracts for its international rigs were signed during 2011 when market rates were considerably lower than previously contracted rates signed during 2008. Operating expenses declined to $28.8 million in the second quarter 2012 from $36.9 million in the prior year period. Year ago expenses included approximately $8.0 million for expenses related to the permanent importation of Rig 3 into Mexico. International Offshore's operating loss of $51.6 million in the second quarter 2012 includes a $47.5 million non-cash asset impairment charge related to the Hercules 185, and compares to operating income of $18.2 million in the comparable 2011 period.

Inland

During the second quarter 2012, Inland generated revenue of $8.2 million compared to revenue of $7.6 million in the second quarter 2011. Average revenue per rig per day increased by 9.7 percent to $30,753 during the second quarter 2012, from $28,033 during the second quarter 2011. Utilization remained relatively flat at 98.0 percent during the same periods, respectively. Second quarter 2012 operating expenses of $8.5 million includes a $2.3 million accrual for state sales and use tax.  Inland recorded an operating loss of $3.7 million in the second quarter 2012 compared to an operating loss of $2.2 million in the second quarter 2011.

Liftboats

Domestic liftboats revenue declined 3.7 percent to $16.2 million in the second quarter 2012 compared to $16.9 million in the second quarter 2011. Average revenue per liftboat per day increased by 6.9 percent, or over $500 per day, to an average of $8,580 per day. The improvement in pricing was offset by a reduction in the number of marketed vessels and lower utilization.  Operating days declined to 1,893 in the second quarter 2012, compared to 2,100 operating days during the second quarter 2011. Second quarter 2012 operating expenses were $11.2 million compared to operating expense of $10.6 million during the comparable period of 2011. Domestic liftboats recorded operating income of $583,000 in the second quarter 2012 compared to operating income of $1.9 million in the second quarter 2011.

International liftboats generated revenue of $34.4 million in the second quarter 2012 compared to $27.0 million in the second quarter 2011, as a result of increases in both utilization and dayrates. Operating days increased to 1,379 in the second quarter 2012, from 1,270 operating days in the second quarter 2011. Average revenue per liftboat per day increased to $24,915 in the second quarter 2012 from $21,280 in the same period in 2011. Second quarter 2012 operating expense was $17.1 million, compared to operating expense of $14.6 million during the second quarter 2011, primarily due to incremental costs associated with the mobilization of the Kingfish to the Middle East and higher workers compensation expenses. International liftboats recorded operating income of $11.9 million in the second quarter 2012 compared to operating income of $6.0 million in the prior year period.

MORE

http://phx.corporate-ir.net/phoenix.zhtml?c=192573&;p=irol-newsArticle&ID=1719430&highlight=

Want more? Subscribe now!

News from NASDAQ