2014

Hercules Offshore Announces First Quarter 2012 Results

HOUSTON, April 26, 2012 /PRNewswire/ -- Hercules Offshore, Inc. (Nasdaq: HERO) today reported a loss from continuing operations of $38.3 million, or $0.28 per diluted share, on revenue of $143.3 million for the first quarter 2012, compared with a loss from continuing operations of $13.6 million, or $0.12 per diluted share, on revenue of $159.4 million for the first quarter 2011.

John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "This year has started off with the completion of several positive transactions, beginning with our acquisition and concurrent long-term contracting of the Hercules 266, followed shortly thereafter by our debt refinancing and capital raise.  The strategic importance of these achievements cannot be overstated, as they add a sizable and stable source of earnings and cash flow to our international drilling operations, strengthen our relationship with a key international client, and improve our balance sheet by effectively extending our debt maturity schedule well into 2017 and allowing greater flexibility to pursue strategic investments.

"Operationally, Domestic Offshore continues to experience the positive uptrend in drilling activity and dayrates, which we expect will continue as the year progresses.  Recently, this has been offset by downtime in International Offshore, mainly related to previously announced shipyard projects for contract specific items that impacted four of our six contracted rigs during the first quarter 2012.  While a portion of this downtime will extend into the second quarter, we expect utilization will rebound sharply from the lows experienced in the first quarter, positioning our international rig fleet, and the Company, for substantially better performance during the second half of 2012."

Offshore
Revenue generated from Domestic Offshore for the first quarter 2012 increased by 144% to $82.3 million from $33.8 million in the same period in 2011, due to an improvement in dayrates and the acquisition of the Seahawk rigs. Average revenue per rig per day increased by 30% to $55,961 for the first quarter 2012 compared to $42,892 in the respective 2011 period. Operating days increased to 1,471 in the first quarter 2012 from 788 in the first quarter 2011, due to the addition of the Seahawk rigs as well as higher utilization from the Company's legacy rigs. Operating expenses increased to $59.9 million in the first quarter 2012 from $41.0 million in the respective 2011 period, due to the addition of the Seahawk rigs. Domestic Offshore generated operating income of $1.8 million in the first quarter 2012 versus an operating loss of $25.1 million in the first quarter 2011.

International Offshore revenue declined to $18.0 million in the first quarter 2012 from $77.1 million in the first quarter 2011, primarily due to significant scheduled shipyard downtime. Operating days declined to 247 days in the first quarter 2012 from 582 in the first quarter 2011, due to downtime incurred on the Hercules 185, which was undergoing repairs, Hercules 208, which was mobilizing to a job in Indonesia from Vietnam, Hercules 261 and Hercules 262 related largely to contract preparation work, and Hercules 258, which concluded its previous contract in early January 2012.  Average revenue per rig per day decreased to $73,069 in the first quarter 2012 from $132,507 in the comparable prior year period. This is due to current contract rates on our working international rigs which were signed at various points in 2011 when market rates were considerably lower than previously contracted rates in 2008. Operating expenses declined to $24.1 million in the first quarter 2012 from $33.8 million in prior year period, primarily due to lower costs associated with rigs that were either idle or in the shipyard during the first quarter 2012 undergoing contract preparation and repair work. International Offshore recorded an operating loss of $20.8 million in the first quarter 2012, versus operating income of $32.7 million in the comparable period during 2011. First quarter 2011 general and administrative expenses and operating income include a $5.0 million benefit from the reversal of an allowance for doubtful accounts related to a payment received from a customer in Angola.

Inland
During the first quarter 2012, Inland generated revenue of $4.3 million compared to revenue of $5.5 million in the prior year period, as a result of lower utilization partially offset by higher dayrates. Average revenue per rig per day rose to $31,628 during the first quarter 2012, from $26,839 during the first quarter 2011, while utilization declined to 50.2%, from 75.9% during the same periods, respectively. First quarter 2012 operating expenses decreased to $5.7 million from $7.0 million in the first quarter 2011, primarily on lower labor, worker compensation and equipment rental costs. Inland recorded an operating loss of $4.6 million in the first quarter 2012 compared to an operating loss of $6.4 million in the first quarter 2011.

Liftboats
Domestic Liftboats revenue was relatively flat at $10.4 million in the first quarter 2012 compared to $10.6 million in the first quarter 2011. Average revenue per liftboat per day was $7,773 with 1,342 operating days in the first quarter 2012, compared to average revenue per day of $7,993 and 1,330 operating days during the same period of 2011. First quarter 2012 operating expenses of $8.5 million include a $1.8 million gain from the insurance claim on the Starfish, and compares to operating expense of $9.9 million during the first quarter 2011. Domestic Liftboats recorded an operating loss of $2.3 million in the first quarter 2012 compared to an operating loss of $3.4 million in the first quarter 2011.

International Liftboats generated revenue of $28.2 million in the first quarter 2012 compared to $32.3 million in the first quarter 2011. Operating days declined to 1,202 in the first quarter 2012, from 1,395 operating days in the first quarter 2011. This was partially offset by a modest improvement in revenue per day which averaged $23,452 in the first quarter 2012, compared to $23,173 in the same period in 2011. First quarter 2012 operating expenses of $13.1 million include a $1.6 million gain from the insurance claim on the Mako, and compares to operating expense of $14.7 million during the first quarter 2011. International Liftboats recorded operating income of $8.6 million in the first quarter 2012 compared to operating income of $11.6 million in the prior year period.

Liquidity and Capitalization
At March 31, 2012, the Company had unrestricted cash and cash equivalents totaling $165.1 million. The Company's balance sheet reflects total debt of $823.9 million.

During March, the Company completed the issuance of 20.0 million shares of common stock for net proceeds of approximately $96.7 million. A portion of the net proceeds were used, together with cash on hand, to acquire the Hercules 266 for $40.0 million.

During April, the Company also completed the private placement of $300.0 million of 7.125% Senior Secured Notes due 2017 and $200.0 million of 10.25% Senior Notes due 2019 for net proceeds of approximately $489.5 million. Concurrently, the Company repaid $435.3 million in indebtedness outstanding under the Company's term loan and terminated its $140.0 million revolving credit facility which was scheduled to mature in July 2012. The Company entered into a $75.0 million five year revolving credit facility with a syndicate of financial institutions. The facility is currently unfunded.

Conference Call Information
Hercules Offshore will conduct a conference call at 10:00 a.m. CDT (11:00 a.m. EDT) on April 26, 2012, to discuss its first quarter 2012 financial results. To participate in the call, dial 866-362-5158 (domestic) or 617-597-5397 (international) and reference access code 31545030 approximately 10 minutes prior to the start of the call. The conference call will also be broadcast live via the Internet at http://www.herculesoffshore.com.

A replay of the conference call will be available by telephone on April 26, 2012, beginning at 12:00 p.m. CDT (1:00 p.m. EDT), through May 3, 2012. The phone number for the conference call replay is 888-286-8010 (domestic) or 617-801-6888 (international) with access code 13212310. Additionally, the recorded conference call will be accessible through our Web site at http://www.herculesoffshore.com for 7 days after the conference call.

Additional Information
Headquartered in Houston, Hercules Offshore, Inc. operates a fleet of 43 jackup rigs, 17 barge rigs, 63 liftboats, two submersible rigs, and one platform rig. The Company offers a range of services to oil and gas producers to meet their needs during drilling, well service, platform inspection, maintenance, and decommissioning operations in several key shallow water provinces around the world. Hercules Offshore currently holds 28.0% of share capital in Discovery Offshore, a pure play, ultra-high specification jackup rig company.  For more information, please visit our website at http://www.herculesoffshore.com.

The news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are subject to a number of risks, uncertainties and assumptions, including the factors described in Hercules Offshore's most recent periodic reports and other documents filed with the Securities and Exchange Commission, which are available free of charge at the SEC's website at http://www.sec.gov or the Company's website at http://www.herculesoffshore.com. Hercules Offshore cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.



HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)












March 31,


December 31,





2012


2011





(Unaudited)



ASSETS






Current Assets:







Cash and Cash Equivalents


$   165,057


$       134,351



Restricted Cash


13,261


9,633



Accounts Receivable, Net


139,256


153,688



Prepaids


8,516


16,352



Current Deferred Tax Asset


15,543


15,543



Other


30,747


20,435





372,380


350,002









Property and Equipment, Net


1,600,530


1,591,791


Equity Investment


34,645


34,735


Other Assets, Net


33,767


30,176





$2,041,322


$    2,006,704








LIABILITIES AND STOCKHOLDERS' EQUITY






Current Liabilities:







Short-term Debt and Current Portion of Long-term Debt


$     52,886


$         22,130



Accounts Payable


58,635


49,370



Accrued Liabilities


60,248


70,421



Interest Payable


18,546


9,899



Insurance Notes Payable


-


5,218



Other Current Liabilities


25,849


18,366





216,164


175,404









Long-term Debt, Net of Current Portion


771,002


818,146


Deferred Income Taxes


67,605


83,503


Other Liabilities


20,028


21,098









Commitments and Contingencies













Stockholders' Equity


966,523


908,553





$2,041,322


$    2,006,704



HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)











Three Months Ended

March 31,





2012


2011
















Revenue


$     143,319


$     159,378









Costs and Expenses:







Operating Expenses


111,237


106,381



Depreciation and Amortization


42,978


41,793



General and Administrative


17,674


12,826





171,889


161,000









Operating Loss


(28,570)


(1,622)









Other Income (Expense):







Interest Expense


(19,669)


(18,506)



Other, Net


1,009


(194)









Loss Before Income Taxes


(47,230)


(20,322)


Income Tax Benefit


8,888


6,679


Loss from Continuing Operations


(38,342)


(13,643)


Loss from Discontinued Operations, Net of Taxes


-


(576)


Net Loss


$      (38,342)


$      (14,219)









Basic and Diluted Loss Per Share:







Loss from Continuing Operations


$         (0.28)


$         (0.12)



Loss from Discontinued Operations


-


-



Net Loss


$         (0.28)


$         (0.12)









Basic and Diluted Weighted Average Shares Outstanding


139,208


114,906




HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)










Three Months Ended

March 31,




2012


2011

Cash Flows from Operating Activities:






Net Loss


$ (38,342)


$ (14,219)


Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in)






Operating Activities:






Depreciation and Amortization


42,978


42,911


Stock-Based Compensation Expense


1,487


1,158


Deferred Income Taxes


(16,872)


(18,027)


Provision (Benefit) for Doubtful Accounts Receivable


1,218


(5,021)


Amortization of Deferred Financing Fees


993


874


Amortization of Original Issue Discount


1,183


1,089


Gain on Insurance Settlement


(3,400)


-


Gain on Disposal of Assets


(274)


(702)


Other


(972)


238


Net Change in Operating Assets and Liabilities


10,105


40,811


Net Cash Provided by (Used in) Operating Activities


(1,896)


49,112







Cash Flows from Investing Activities:






Acquisition of Assets


(40,000)


-


Additions of Property and Equipment


(16,573)


(10,277)


Deferred Drydocking Expenditures


(3,213)


(4,124)


Cash Paid for Equity Investment


-


(10,000)


Insurance Proceeds Received


13,139


-


Proceeds from Sale of Assets, Net


3,312


3,421


Increase in Restricted Cash


(3,628)


(1)


Net Cash Used in Investing Activities


(46,963)


(20,981)







Cash Flows from Financing Activities:






Long-term Debt Repayments


(17,571)


-


Common Stock Issuance


97,102


-


Other


34


(1,831)


Net Cash Provided by (Used in) Financing Activities


79,565


(1,831)







Net Increase in Cash and Cash Equivalents


30,706


26,300

Cash and Cash Equivalents at Beginning of Period


134,351


136,666

Cash and Cash Equivalents at End of Period


$165,057


$162,966



HERCULES OFFSHORE, INC. AND SUBSIDIARIES


SELECTED FINANCIAL AND OPERATING DATA


(Dollars in thousands, except per day amounts)


(Unaudited)












Three Months Ended

March 31,





2012


2011









Domestic Offshore:







Number of rigs (as of end of period)


36


25



Revenue


$            82,318


$            33,799



Operating expenses


59,871


41,002



Depreciation and amortization expense


18,018


15,082



General and administrative expenses


2,652


2,845



Operating income (loss)


$              1,777


$          (25,130)









International Offshore:







Number of rigs (as of end of period)


10


9



Revenue


$            18,048


$            77,119



Operating expenses


24,127


33,828



Depreciation and amortization expense


12,341


13,300



General and administrative expenses


2,429


(2,683)



Operating income (loss)


$          (20,849)


$            32,674









Inland:







Number of barges (as of end of period)


17


17



Revenue


$              4,333


$              5,502



Operating expenses


5,679


7,030



Depreciation and amortization expense


3,209


4,621



General and administrative expenses


43


230



Operating loss


$            (4,598)


$            (6,379)









Domestic Liftboats:







Number of liftboats (as of end of period)


40


41



Revenue


$            10,431


$            10,631



Operating expenses


8,480


9,864



Depreciation and amortization expense


3,787


3,641



General and administrative expenses


486


495



Operating loss


$            (2,322)


$            (3,369)









International Liftboats:







Number of liftboats (as of end of period)


23


24



Revenue


$            28,189


$            32,327



Operating expenses


13,080


14,657



Depreciation and amortization expense


4,990


4,498



General and administrative expenses


1,550


1,571



Operating income


$              8,569


$            11,601









Total Company:







Revenue


$          143,319


$          159,378



Operating expenses


111,237


106,381



Depreciation and amortization expense


42,978


41,793



General and administrative expenses


17,674


12,826



Operating loss


(28,570)


(1,622)



     Interest expense


(19,669)


(18,506)



     Other, net


1,009


(194)



Loss before income taxes


(47,230)


(20,322)



     Income tax benefit


8,888


6,679



Loss from continuing operations


(38,342)


(13,643)



Loss from discontinued operations, net of taxes


-


(576)



Net loss


$          (38,342)


$          (14,219)




HERCULES OFFSHORE, INC. AND SUBSIDIARIES

SELECTED FINANCIAL AND OPERATING DATA - (Continued)

(Dollars in thousands, except per day amounts)

(Unaudited)














Three Months Ended March 31, 2012



Operating Days


Available Days


Utilization (1)


Average

Revenue per

Day (2)


Average

Operating

Expense per

Day (3)













Domestic Offshore

1,471


1,638


89.8%


$     55,961


$         36,551


International Offshore

247


637


38.8%


73,069


37,876


Inland

137


273


50.2%


31,628


20,802


Domestic Liftboats

1,342


3,094


43.4%


7,773


2,741


International Liftboats

1,202


1,836


65.5%


23,452


7,124














Three Months Ended March 31, 2011



Operating Days


Available Days


Utilization (1)


Average

Revenue per

Day (2)


Average

Operating

Expense per

Day (3)













Domestic Offshore

788


990


79.6%


$     42,892


$          41,416


International Offshore

582


720


80.8%


132,507


46,983


Inland

205


270


75.9%


26,839


26,037


Domestic Liftboats

1,330


3,420


38.9%


7,993


2,884


International Liftboats

1,395


2,070


67.4%


23,173


7,081
























(1)

Utilization is defined as the total number of days our rigs or liftboats, as applicable, were under contract, known as operating days, in the period as a percentage of the total number of available days in the period.  Days during which our rigs and liftboats were undergoing major refurbishments, upgrades or construction, and days during which our rigs and liftboats are cold-stacked, are not counted as available days. Days during which our liftboats are in the shipyard undergoing drydocking or inspection are considered available days for the purposes of calculating utilization. 












(2)

Average revenue per rig or liftboat per day is defined as revenue earned by our rigs or liftboats, as applicable, in the period divided by the total number of operating days for our rigs or liftboats, as applicable, in the period.












(3)

Average operating expense per rig or liftboat per day is defined as operating expenses, excluding depreciation and amortization, incurred by our rigs or liftboats, as applicable, in the period divided by the total number of available days in the period.  We use available days to calculate average operating expense per rig or liftboat per day rather than operating days, which are used to calculate average revenue per rig or liftboat per day, because we incur operating expenses on our rigs and liftboats even when they are not under contract and earning a dayrate. In addition, the operating expenses we incur on our rigs and liftboats per day when they are not under contract are typically lower than the per day expenses we incur when they are under contract.

SOURCE Hercules Offshore, Inc.



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