2014

Hercules Offshore Announces Second Quarter 2012 Results

HOUSTON, July 27, 2012 /PRNewswire/ -- Hercules Offshore, Inc. (Nasdaq: HERO) today reported a loss from continuing operations of $55.1 million, or $0.35 per diluted share, on revenue of $179.0 million for the second quarter 2012, compared with a loss from continuing operations of $14.3 million, or $0.11 per diluted share, on revenue of $170.2 million for the second quarter 2011. As outlined in the Reconciliation of GAAP to Non-GAAP Financial Measures, second quarter 2012 results include the following pre-tax items:

  • A non-cash charge of $47.5 million to reflect the impairment of the Hercules 185 and related deferred costs;
  • A $6.4 million expense related to the April 2012 debt refinancing; and
  • A non-cash charge of $1.4 million and $1.3 million related to the termination of the Company's prior term loan facility and the early retirement of a portion of the Company's  3.375% Convertible Senior Notes, respectively.

On an after-tax basis, these items approximated $36.8 million, or $0.23 per diluted share. 

John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "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% 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% to $60,734 for the second quarter 2012 compared to $45,933 in the second quarter 2011, while operating days increased by 40.0% 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 our current contracts for our 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% to $30,753 during the second quarter 2012, from $28,033 during the second quarter 2011. Utilization remained relatively flat at 98.0% 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% 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%, 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.

Non-GAAP

Certain non-GAAP performance measures and corresponding reconciliations to GAAP financial measures for the Company have been provided for meaningful comparisons between current results and prior operating periods. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles. In order to fully assess the financial operating results, management believes that the adjusted loss from continuing operations figures included in this release are appropriate measures of the continuing and normal operations of the Company. However, these measures should be considered in addition to, and not as a substitute for, or superior to, income (loss) from continuing operations, operating income (loss), cash flows from operations, or other measures of financial performance prepared in accordance with GAAP. The non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure in the table that follows the financial statements. Please see the attached Reconciliation of GAAP to Non-GAAP Financial Measures for a complete description of the adjustments made to Operating Loss, Loss From Continuing Operations and Diluted Loss per Share from Continuing Operations.

Conference Call Information

Hercules Offshore will conduct a conference call at 10:00 a.m. CDT (11:00 a.m. EDT) on July 27, 2012, to discuss its second quarter 2012 financial results. To participate in the call, dial 800-599-9795 (domestic) or 617-786-2905 (international) and reference access code 88431631 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 July 27, 2012, beginning at 12:00 p.m. CDT (1:00 p.m. EDT), through August 3, 2012. The phone number for the conference call replay is 888-286-8010 (domestic) or 617-801-6888 (international) with access code 91451546. 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 42 jackup rigs, 16 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)












June 30,


December 31,





2012


2011





(Unaudited)



ASSETS






Current Assets:







Cash and Cash Equivalents


$           175,473


$           134,351



Marketable Securities


30,000


-



Restricted Cash


8,011


9,633



Accounts Receivable, Net


140,773


153,688



Prepaids


36,723


16,352



Current Deferred Tax Asset


15,543


15,543



Other


20,559


20,435





427,082


350,002









Property and Equipment, Net


1,546,435


1,591,791


Equity Investment


34,359


34,735


Other Assets, Net


40,641


30,176





$       2,048,517


$       2,006,704








LIABILITIES AND STOCKHOLDERS' EQUITY






Current Liabilities:







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


$            65,605


$            22,130



Accounts Payable


65,409


49,370



Accrued Liabilities


64,958


70,421



Interest Payable


17,277


9,899



Insurance Notes Payable


24,149


5,218



Other Current Liabilities


24,038


18,366





261,436


175,404









Long-term Debt, Net of Current Portion


797,588


818,146


Deferred Income Taxes


54,225


83,503


Other Liabilities


22,051


21,098









Commitments and Contingencies













Stockholders' Equity


913,217


908,553





$        2,048,517


$        2,006,704

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)














Three Months Ended
June 30,


Six Months Ended
 June 30,




2012


2011


2012


2011





















Revenue


$     178,951


$     170,201


$     322,270


$     329,579











Costs and Expenses:










Operating Expenses


121,089


114,328


232,326


220,709


Asset Impairment


47,523


-


47,523


-


Depreciation and Amortization


42,395


43,011


85,373


84,804


General and Administrative


6,513


16,820


24,187


29,646




217,520


174,159


389,409


335,159











Operating Loss


(38,569)


(3,958)


(67,139)


(5,580)











Other Income (Expense):










Interest Expense


(20,293)


(20,140)


(39,962)


(38,646)


Loss on Extinguishment of Debt


(9,156)


-


(9,156)


-


Other, Net


(921)


(1,474)


88


(1,668)











Loss Before Income Taxes


(68,939)


(25,572)


(116,169)


(45,894)

Income Tax Benefit


13,868


11,269


22,756


17,948

Loss from Continuing Operations


(55,071)


(14,303)


(93,413)


(27,946)

Loss from Discontinued Operations, Net of Taxes


-


(9,127)


-


(9,703)

Net Loss


$     (55,071)


$     (23,430)


$     (93,413)


$     (37,649)





















Basic and Diluted Loss Per Share:










Loss from Continuing Operations


$         (0.35)


$         (0.11)


$         (0.63)


$         (0.23)


Loss from Discontinued Operations


-


(0.07)


-


(0.08)


Net Loss


$         (0.35)


$         (0.18)


$         (0.63)


$         (0.31)





















Basic and Diluted Weighted Average Shares Outstanding


158,515


131,208


148,861


123,057

 

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)










Six Months Ended June 30,




2012


2011

Cash Flows from Operating Activities:






Net Loss


$                (93,413)


$                 (37,649)


Adjustments to Reconcile Net Loss to Net Cash Provided by






Operating Activities:






Depreciation and Amortization


85,373


86,460


Stock-Based Compensation Expense


3,274


2,748


Deferred Income Taxes


(30,308)


(36,332)


Benefit for Doubtful Accounts Receivable


(7,625)


(4,200)


Amortization of Deferred Financing Fees


1,727


1,871


Amortization of Original Issue Discount


2,249


2,170


Gain on Insurance Settlement


(3,400)


-


(Gain) Loss on Disposal of Assets and Businesses, Net


(5,507)


11,002


Non-Cash Portion of Loss on Extinguishment of Debt


2,738


-


Asset Impairment


47,523


-


Other


(94)


996


Net Change in Operating Assets and Liabilities


22,079


10,809


Net Cash Provided by Operating Activities


24,616


37,875







Cash Flows from Investing Activities:






Acquisition of Assets


(40,000)


(25,000)


Investment in Marketable Securities, Net


(30,000)


-


Additions of Property and Equipment


(47,478)


(25,821)


Deferred Drydocking Expenditures


(7,285)


(8,661)


Cash Paid for Equity Investment


-


(21,894)


Insurance Proceeds Received


20,639


-


Proceeds from Sale of Assets and Businesses, Net


10,405


38,917


Decrease in Restricted Cash


1,622


1,532


Net Cash Used in Investing Activities


(92,097)


(40,927)







Cash Flows from Financing Activities:






Long-term Debt Borrowings


500,000


-


Long-term Debt Repayments


(452,909)


(16,231)


Redemption of 3.375% Convertible Senior Notes


(27,606)


-


Common Stock Issuance


96,696


-


Payment of Debt Issuance Costs


(7,717)


(2,109)


Other


139


2,500


Net Cash Provided by (Used in) Financing Activities


108,603


(15,840)







Net Increase (Decrease) in Cash and Cash Equivalents


41,122


(18,892)

Cash and Cash Equivalents at Beginning of Period


134,351


136,666

Cash and Cash Equivalents at End of Period


$               175,473


$                117,774

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

SELECTED FINANCIAL AND OPERATING DATA

(Dollars in thousands, except per day amounts)

(Unaudited)














Three Months Ended
June 30,


Six Months Ended
June 30,




2012


2011


2012


2011











Domestic Offshore:










Number of rigs (as of end of period)


35


44


35


44


Revenue


$            90,068


$            48,643


$   172,386


$           82,442


Operating expenses


55,532


46,204


115,403


87,206


Depreciation and amortization expense


18,253


16,861


36,271


31,943


General and administrative expenses


1,185


2,745


3,837


5,590


Operating income (loss)


$            15,098


$          (17,167)


$     16,875


$         (42,297)











International Offshore:










Number of rigs (as of end of period)


10


9


10


9


Revenue


$            30,072


$            70,047


$     48,120


$         147,166


Operating expenses


28,750


36,877


52,877


70,705


Asset impairment


47,523


-


47,523


-


Depreciation and amortization expense


12,386


13,256


24,727


26,556


General and administrative expenses


(6,953)


1,707


(4,524)


(976)


Operating income (loss)


$          (51,634)


$            18,207


$   (72,483)


$           50,881











Inland:










Number of barges (as of end of period)


17


17


17


17


Revenue


$              8,211


$              7,625


$     12,544


$           13,127


Operating expenses


8,535


6,128


14,214


13,158


Depreciation and amortization expense


3,208


3,407


6,417


8,028


General and administrative expenses


133


283


176


513


Operating loss


$            (3,665)


$            (2,193)


$     (8,263)


$           (8,572)











Domestic Liftboats:










Number of liftboats (as of end of period)


39


41


39


41


Revenue


$            16,242


$            16,860


$     26,673


$           27,491


Operating expenses


11,150


10,554


19,630


20,418


Depreciation and amortization expense


3,853


3,860


7,640


7,501


General and administrative expenses


656


536


1,142


1,031


Operating income (loss)


$                 583


$              1,910


$     (1,739)


$           (1,459)











International Liftboats:










Number of liftboats (as of end of period)


24


24


24


24


Revenue


$            34,358


$            27,026


$     62,547


$           59,353


Operating expenses


17,122


14,565


30,202


29,222


Depreciation and amortization expense


4,063


4,976


9,053


9,474


General and administrative expenses


1,233


1,525


2,783


3,096


Operating income


$            11,940


$              5,960


$     20,509


$           17,561











Total Company:










Revenue


$          178,951


$          170,201


$   322,270


$         329,579


Operating expenses


121,089


114,328


232,326


220,709


Asset impairment


47,523


-


47,523


-


Depreciation and amortization expense


42,395


43,011


85,373


84,804


General and administrative expenses


6,513


16,820


24,187


29,646


Operating loss


(38,569)


(3,958)


(67,139)


(5,580)


     Interest expense


(20,293)


(20,140)


(39,962)


(38,646)


     Loss on extinguishment of debt


(9,156)


-


(9,156)


-


     Other, net


(921)


(1,474)


88


(1,668)


Loss before income taxes


(68,939)


(25,572)


(116,169)


(45,894)


     Income tax benefit


13,868


11,269


22,756


17,948


Loss from continuing operations


(55,071)


(14,303)


(93,413)


(27,946)


Loss from discontinued operations, net of taxes


-


(9,127)


-


(9,703)


Net loss


$          (55,071)


$          (23,430)


$   (93,413)


$         (37,649)

 

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

SELECTED FINANCIAL AND OPERATING DATA - (Continued)

(Dollars in thousands, except per day amounts)

(Unaudited)














Three Months Ended June 30, 2012



Operating Days


Available Days


Utilization (1)


Average

Revenue

per Day (2)


Average

Operating

Expense per

Day (3)













Domestic Offshore

1,483


1,638


90.5%


$     60,734


$           33,902


International Offshore

329


637


51.6%


91,404


45,133


Inland

267


273


97.8%


30,753


31,264


Domestic Liftboats

1,893


2,959


64.0%


8,580


3,768


International Liftboats

1,379


1,826


75.5%


24,915


9,377














Three Months Ended June 30, 2011



Operating Days


Available Days


Utilization (1)


Average

Revenue

per Day (2)


Average

Operating

Expense per

Day (3)













Domestic Offshore

1,059


1,453


72.9%


$     45,933


$           31,799


International Offshore

564


728


77.5%


124,197


50,655


Inland

272


273


99.6%


28,033


22,447


Domestic Liftboats

2,100


3,215


65.3%


8,029


3,283


International Liftboats

1,270


2,093


60.7%


21,280


6,959














Six Months Ended June 30, 2012



Operating Days


Available Days


Utilization (1)


Average

Revenue

per Day (2)


Average

Operating

Expense per

Day (3)













Domestic Offshore

2,954


3,276


90.2%


$     58,357


$           35,227


International Offshore

576


1,274


45.2%


83,542


41,505


Inland

404


546


74.0%


31,050


26,033


Domestic Liftboats

3,235


6,053


53.4%


8,245


3,243


International Liftboats

2,581


3,662


70.5%


24,234


8,247














Six Months Ended June 30, 2011



Operating Days


Available Days


Utilization (1)


Average

Revenue

per Day (2)


Average

Operating

Expense per

Day (3)













Domestic Offshore

1,847


2,443


75.6%


$     44,636


$           35,696


International Offshore

1,146


1,448


79.1%


128,417


48,829


Inland

477


543


87.8%


27,520


24,232


Domestic Liftboats

3,430


6,635


51.7%


8,015


3,077


International Liftboats

2,665


4,163


64.0%


22,271


7,019


























(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.

 

 

Hercules Offshore, Inc. and Subsidiaries

 Reconciliation of GAAP to Non-GAAP Financial Measures

 (Unaudited)

 (In thousands, except per share data)

















We report our financial results in accordance with generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP performance measures and ratios may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. Non-GAAP financial measures we may present from time to time are operating income, income from continuing operations or diluted earnings per share excluding certain charges or amounts. These adjusted income amounts are not a measure of financial performance under GAAP. Accordingly, they should not be considered as a substitute for operating income, income from continuing operations, net income, earnings per share or other income data prepared in accordance with GAAP.  See the table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and six months ended June 30, 2012. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. The non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure in the following table:


 



Three Months Ended
June 30,



Six Months Ended
June 30,




2012



2012









    Operating Income (Loss):







      GAAP Operating Loss


$                  (38,569)



$                  (67,139)


      Adjustment


47,523

(a)


47,523

(a)

      Non-GAAP Operating Income (Loss)


$                      8,954



$                  (19,616)









    Other Expense:







      GAAP Other Expense


$                  (30,370)



$                  (49,030)


      Adjustment


9,156

(b)


9,156

(b)

      Non-GAAP Other Expense  


$                  (21,214)



$                  (39,874)









   Benefit (Provision) for Income Taxes:







      GAAP Benefit for Income Taxes


$                    13,868



$                    22,756


      Tax Impact of Adjustment


(19,838)



(19,838)


      Non-GAAP Benefit (Provision) for Income Taxes


$                    (5,970)



$                      2,918









    Loss from Continuing Operations:







      GAAP Loss from Continuing Operations


$                  (55,071)



$                  (93,413)


      Total Adjustment, Net of Tax


36,841



36,841


      Non-GAAP Loss from Continuing Operations


$                  (18,230)



$                  (56,572)









    Diluted Loss per Share from Continuing Operations:







      GAAP Diluted Loss per Share from Continuing Operations


$                      (0.35)



$                      (0.63)


      Adjustment per Share


0.23



0.25


      Non-GAAP Diluted Loss per Share from Continuing Operations


$                      (0.12)



$                      (0.38)









 

(a)

This amount represents a non-cash charge of $47.5 million related to the impairment of the Hercules 185 and related unamortized deferred costs. On an after-tax basis, this adjustment approximated $30.9 million.



(b)

 

This amount represents (i) a charge of $6.4 million related to our debt refinancing in April 2012; (ii) a non-cash charge of $1.4 million related to the write-off of unamortized issuance costs in connection with the April 2012 termination of our prior term loan and (iii) a $1.3 million loss on the retirement of a portion of our 3.375% convertible senior notes. On an after-tax basis, these adjustments approximated $6.0 million.

 

SOURCE Hercules Offshore, Inc.



RELATED LINKS
http://www.herculesoffshore.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.