Hercules Offshore, Inc. Announces Second Quarter 2015 Results

Jul 23, 2015, 07:00 ET from Hercules Offshore, Inc.

HOUSTON, July 23, 2015 /PRNewswire/ -- Hercules Offshore, Inc. (Nasdaq: HERO) today reported a net loss of $88.3 million, or $0.55 per diluted share, on revenue of $79.2 million for the second quarter 2015, compared to net income of $6.6 million, or $0.04 per diluted share, on revenue of $243.0 million for the second quarter 2014. As outlined in the Reconciliation of GAAP to Non-GAAP Financial Measures, second quarter 2015 results include a pre-tax adjustment of $13.4 million related to retroactive dayrate concessions on the Hercules 261, 262 and 266, $10.6 million of costs related to financing and restructuring activities, a $3.6 million net loss related to asset sales, including the sale of six cold stacked jackups and a $1.9 million charge related to the termination of our Credit Facility. These items resulted in a second quarter after-tax adjustment of $28.8 million, or $0.18 per diluted share. Second quarter 2014 results included an after-tax gain of $17.9 million related to the sale of three cold stacked jackups as well as a $4.8 million charge related to the early retirement of debt and issuance costs for a total net adjustment of $13.1 million, or $0.08 per diluted share.

John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "Second quarter results reflect the weak operating conditions across the offshore services sector as well the impact of our resolution with Saudi Aramco for our three rigs in the Middle East. The latest pullback in the price of oil is likely to delay any improvement in worldwide activity levels well into 2016. The limited visibility and challenging market conditions that we expect to persist for some time drove our decision to restructure our capital base. As previously disclosed, we have reached an agreement with the majority of our noteholders, and anticipate obtaining final approval of our restructuring plan in late October. We also continue to aggressively reduce costs without compromising the safety of our employees or the quality of our services. By controlling costs and establishing a stronger balance sheet, we will be better positioned to weather this protracted downturn and possibly capitalize on opportunities that may arise in such industry conditions."

Domestic Offshore

Revenue generated from Domestic Offshore for the second quarter 2015 decreased 71% to $40.6 million from $140.4 million in the second quarter 2014, driven by lower utilization and dayrates on a reduced marketed rig fleet. Operating days during the second quarter 2015 declined to 439 days with utilization of 53.6% on a marketed fleet of 9 rigs, compared to 1,297 days on 18 marketed rigs at 79.2% utilization during the second quarter 2014. Average revenue per rig per day decreased to $92,538 in the second quarter 2015 from $108,237 in the comparable 2014 period. Operating expenses of $26.4 million in the second quarter 2015 include a net loss of $3.4 million related to asset sales, including the Hercules 85, 153, 203, 206, 207 and 211, compared to expenses of $63.5 million in the second quarter 2014, which includes a gain of $7.4 million from the sale of the Hercules 250 and 2002. The significant reduction in operating expenses in the current quarter, after adjusting for asset sales, was largely attributable to the reduced number of fully crewed rigs in operation. Domestic Offshore reported operating income of $1.4 million in the second quarter 2015, compared to $57.3 million in the second quarter 2014, including the aforementioned asset sale gains and losses.

International Offshore

International Offshore revenue of $17.5 million in the second quarter 2015 includes a $13.4 million adjustment related to retroactive dayrate concessions on the Hercules 261, 262 and 266 made on their existing contracts with Saudi Aramco, and compares to revenue of $71.7 million in the second quarter 2014. Utilization decreased to 50.0% in the second quarter 2015 from 62.5% in the second quarter 2014, largely due to idle time on the Hercules Triumph, Hercules Resilience and Hercules 208, partially offset by higher utilization on the Hercules 261 and Hercules 260. Average revenue per rig per day decreased to $47,975 in the second quarter 2015 from $157,637 in the second quarter of 2014, driven largely by idle time on the Hercules Resilience and Hercules Triumph, lower renegotiated dayrates on the three rigs working for Saudi Aramco, as well as the retroactive dayrate adjustments on these three rigs. Operating expense decreased to $35.5 million in the second quarter 2015, from $44.1 million in the respective 2014 period, which includes a $10.5 million gain on the sale of Hercules 258. This reduction in operating expense was driven in part by lower costs on the Hercules 261 and 262 as well as lower costs incurred on the idle rigs. International Offshore recorded an operating loss of $40.5 million in the second quarter 2015 compared to operating income of $6.7 million in the prior year period, including the aforementioned rig sale gain.

International Liftboats

International Liftboats revenue declined to $21.2 million in the second quarter 2015 from $30.9 million in the prior year period, due to lower utilization and dayrates. Second quarter 2015 utilization declined to 49.7% from 61.0% in the respective 2014 period. Average revenue per liftboat per day decreased 16% to $20,329 in the second quarter 2015 from $24,162 in the second quarter 2014, primarily due to market pressure on dayrates. Operating expenses in the second quarter 2015 declined by 21% to $15.0 million, compared to $19.1 million in the second quarter 2014, reflecting lower activity levels and the impact of our cost reduction measures. International Liftboats recorded operating income of $0.8 million in the second quarter 2015 compared to an operating loss of $0.7 million in the second quarter 2014, which includes approximately $5.3 million of bad debt expense.

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 net income 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, revenue, net income, operating income, 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 Revenue, Operating Income, Net Income and Diluted Income per Share.

Conference Call Information

Hercules Offshore will conduct a conference call at 10:00 a.m. CDT (11:00 a.m. EDT) on July 23, 2015, to discuss its second quarter 2015 financial results. To participate in the call, dial +1 (855) 865-4806 (Domestic) or +1 (262) 912-6154 (International) and reference access code 80887652 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 23, 2015, beginning at 1:00 p.m. CDT (2:00 p.m. EDT), through July 30, 2015. The phone number for the conference call replay is +1 (855) 859-2056 (Domestic) or +1 (404) 537-3406 (International). The access code is 80887652. Additionally, the recorded conference call will be accessible through our website at http://www.herculesoffshore.com for 7 days after the conference call.

About Hercules Offshore, Inc.

Headquartered in Houston, Hercules Offshore, Inc. operates a fleet of 27 jackup rigs, including one rig under construction, and 24 liftboats. 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. 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,

2015

2014

(Unaudited)

ASSETS

Current Assets:

Cash and Cash Equivalents

$

143,373

$

207,937

Accounts Receivable, Net

94,176

166,359

Prepaids

21,528

19,585

Current Deferred Tax Asset

4,009

4,461

Other

3,427

5,955

266,513

404,297

Property and Equipment, Net

1,555,954

1,574,749

Other Assets, Net

21,157

23,361

$

1,843,624

$

2,002,407

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Current Portion of Long-term Debt

$

1,211,044

$

-

Accounts Payable

45,283

52,952

Accrued Liabilities

53,987

66,090

Interest Payable

32,005

32,008

Other Current Liabilities

10,704

13,406

1,353,023

164,456

Long-term Debt

-

1,210,919

Deferred Income Taxes

3,947

4,147

Other Liabilities

14,752

7,854

Commitments and Contingencies

Stockholders' Equity

471,902

615,031

$

1,843,624

$

2,002,407

 

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,

2015

2014

2015

2014

Revenue

$

79,249

$

242,963

$

201,868

$

499,697

Costs and Expenses:

Operating Expenses

76,991

126,725

176,590

267,477

Depreciation and Amortization

37,451

43,670

74,669

83,753

General and Administrative

24,990

22,519

40,750

40,746

139,432

192,914

292,009

391,976

Operating Income (Loss)

(60,183)

50,049

(90,141)

107,721

Other Income (Expense):

Interest Expense

(24,737)

(26,069)

(49,697)

(48,970)

Loss on Extinguishment of Debt

(1,884)

(4,767)

(1,884)

(19,925)

Other, Net

(200)

214

220

364

Income (Loss) Before Income Taxes

(87,004)

19,427

(141,502)

39,190

Income Tax Provision

(1,246)

(12,781)

(3,863)

(12,628)

Net Income (Loss)

$

(88,250)

$

6,646

$

(145,365)

$

26,562

Net Income (Loss) Per Share:

Basic

$

(0.55)

$

0.04

$

(0.90)

$

0.17

Diluted

$

(0.55)

$

0.04

$

(0.90)

$

0.16

Weighted Average Shares Outstanding:

Basic

161,523

160,713

161,290

160,392

Diluted

161,523

161,795

161,290

161,839

 

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30,

2015

2014

Cash Flows from Operating Activities:

Net Income (Loss)

$

(145,365)

$

26,562

Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities:

Depreciation and Amortization

74,669

83,753

Stock-Based Compensation Expense

2,412

4,771

Deferred Income Taxes

(396)

(5,213)

Provision (Benefit) for Doubtful Accounts Receivable

(431)

5,088

(Gain) Loss on Disposal of Assets, Net

3,083

(17,003)

Other

2,105

4,220

Net Change in Operating Assets and Liabilities

54,582

(37,208)

Net Cash Provided by (Used in) Operating Activities

(9,341)

64,970

Cash Flows from Investing Activities:

Capital Expenditures

(65,927)

(100,448)

Insurance Proceeds Received

3,543

9,067

Proceeds from Sale of Assets, Net

7,161

23,717

Net Cash Used in Investing Activities

(55,223)

(67,664)

Cash Flows from Financing Activities:

Long-term Debt Borrowings

-

300,000

Redemption of 7.125% Senior Secured Notes

-

(300,000)

Payment of Debt Issuance Costs

-

(3,914)

Other

-

107

Net Cash Used in Financing Activities

-

(3,807)

Net Decrease in Cash and Cash Equivalents

(64,564)

(6,501)

Cash and Cash Equivalents at Beginning of Period

207,937

198,406

Cash and Cash Equivalents at End of Period

$

143,373

$

191,905

 

 

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,

2015

2014

2015

2014

Domestic Offshore:

Number of rigs (as of end of period)

18

26

18

26

Revenue

$

40,624

$

140,383

$

93,499

$

283,648

Operating expenses

26,441

63,538

62,407

136,338

Depreciation and amortization expense

11,665

17,978

23,358

35,349

General and administrative expenses

1,134

1,584

2,520

3,132

Operating income

$

1,384

$

57,283

$

5,214

$

108,829

International Offshore:

Number of rigs (as of end of period)

9

10

9

10

Revenue

$

17,463

$

71,725

$

69,111

$

152,663

Operating expenses

35,511

44,061

85,678

91,599

Depreciation and amortization expense

20,959

19,075

41,298

35,701

General and administrative expenses

1,469

1,864

3,463

3,996

Operating income (loss)

$

(40,476)

$

6,725

$

(61,328)

$

21,367

International Liftboats:

Number of liftboats (as of end of period)

24

24

24

24

Revenue

$

21,162

$

30,855

$

39,258

$

63,386

Operating expenses

15,039

19,126

28,505

39,540

Depreciation and amortization expense

4,166

5,616

8,598

10,742

General and administrative expenses

1,140

6,826

1,689

8,253

Operating income (loss)

$

817

$

(713)

$

466

$

4,851

Total Company:

Revenue

$

79,249

$

242,963

$

201,868

$

499,697

Operating expenses

76,991

126,725

176,590

267,477

Depreciation and amortization expense

37,451

43,670

74,669

83,753

General and administrative expenses

24,990

22,519

40,750

40,746

Operating income (loss)

(60,183)

50,049

(90,141)

107,721

     Interest expense

(24,737)

(26,069)

(49,697)

(48,970)

     Loss on extinguishment of debt

(1,884)

(4,767)

(1,884)

(19,925)

     Other, net

(200)

214

220

364

Income (loss) before income taxes

(87,004)

19,427

(141,502)

39,190

     Income tax provision

(1,246)

(12,781)

(3,863)

(12,628)

Net income (loss)

$

(88,250)

$

6,646

$

(145,365)

$

26,562

 

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

SELECTED FINANCIAL AND OPERATING DATA - (Continued)

(Dollars in thousands, except per day amounts)

(Unaudited)

Three Months Ended June 30, 2015

Operating Days

Available Days

Utilization (1)

Average Revenue per Day (2)

Average Operating Expense per Day (3)

Domestic Offshore

439

819

53.6%

$

92,538

$

32,284

International Offshore

364

728

50.0%

47,975

48,779

International Liftboats

1,041

2,093

49.7%

20,329

7,185

Three Months Ended June 30, 2014

Operating Days

Available Days

Utilization (1)

Average Revenue per Day (2)

Average Operating Expense per Day (3)

Domestic Offshore

1,297

1,638

79.2%

$

108,237

$

38,790

International Offshore

455

728

62.5%

157,637

60,523

International Liftboats

1,277

2,093

61.0%

24,162

9,138

Six Months Ended June 30, 2015

Operating Days

Available Days

Utilization (1)

Average Revenue per Day (2)

Average Operating Expense per Day (3)

Domestic Offshore

972

1,706

57.0%

$

96,192

$

36,581

International Offshore

709

1,448

49.0%

97,477

59,170

International Liftboats

1,829

4,163

43.9%

21,464

6,847

Six Months Ended June 30, 2014

Operating Days

Available Days

Utilization (1)

Average Revenue per Day (2)

Average Operating Expense per Day (3)

Domestic Offshore

2,641

3,258

81.1%

$

107,402

$

41,847

International Offshore

1,050

1,403

74.8%

145,393

65,288

International Liftboats

2,476

4,163

59.5%

25,600

9,498

(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.

 

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 revenue, operating income, income from continuing operations, net income or diluted earnings per share excluding certain charges or amounts. These adjusted amounts are not a measure of financial performance under GAAP. Accordingly, they should not be considered as a substitute for revenue, 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, 2015 and 2014. 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,

2015

2014

2015

2014

   Revenue:

      GAAP Revenue

$

79,249

$

242,963

$

201,868

$

499,697

      Adjustment

13,427

(a)

-

-

-

      Non-GAAP Revenue

$

92,676

$

242,963

$

201,868

$

499,697

    Operating Income (Loss):

      GAAP Operating Income (Loss)

$

(60,183)

$

50,049

$

(90,141)

$

107,721

      Adjustment

27,570

(b)

(17,879)

(d)

14,143

(f)

(17,879)

(d)

      Non-GAAP Operating Income (Loss)

$

(32,613)

$

32,170

$

(75,998)

$

89,842

    Other Expense:

      GAAP Other Expense

$

(26,821)

$

(30,622)

$

(51,361)

$

(68,531)

      Adjustment

1,884

(c)

4,767

(e)

1,884

(c)

19,925

(g)

      Non-GAAP Other Expense  

$

(24,937)

$

(25,855)

$

(49,477)

$

(48,606)

   Provision for Income Taxes:

      GAAP Provision for Income Taxes

$

(1,246)

$

(12,781)

$

(3,863)

$

(12,628)

      Tax Adjustment

(671)

-

-

-

      Non-GAAP Provision for Income Taxes

$

(1,917)

$

(12,781)

$

(3,863)

$

(12,628)

   Net Income (Loss):

      GAAP Net Income (Loss)

$

(88,250)

$

6,646

$

(145,365)

$

26,562

      Total Adjustment

28,783

(13,112)

16,027

2,046

      Non-GAAP Net Income (Loss)

$

(59,467)

$

(6,466)

$

(129,338)

$

28,608

    Diluted Earnings (Loss) per Share:

      GAAP Diluted Earnings (Loss) per Share

$

(0.55)

$

0.04

$

(0.90)

$

0.16

      Adjustment per Share

0.18

(0.08)

0.10

0.02

      Non-GAAP Diluted Earnings (Loss) per Share

$

(0.37)

$

(0.04)

$

(0.80)

$

0.18

(a) This amount represents $13.4 million related to the retroactive dayrate concessions on the Hercules 261, Hercules 262 and Hercules 266 made from their existing contracts with Saudi Aramco. On an after-tax basis, this adjustment approximated $12.8 million.

(b) This amount represents $10.6 million of costs related to financing and restructuring activities and a $3.6 million net loss on the sale of assets, including six cold stacked drilling rigs. Additionally, this amount includes a $13.4 million revenue adjustment related to the retroactive dayrate concessions on the Hercules 261, Hercules 262 and Hercules 266 made from their existing contracts with Saudi Aramco, which on an after-tax basis, this adjustment approximated $12.8 million.

(c)  This amount represents a charge of $1.9 million related to the termination of the Credit Facility. 

(d) This amount represents a $17.9 million gain on the sale of three cold stacked drilling rigs.

(e) This amount represents a charge of $4.8 million related to retirement of the remaining portion of our 7.125% senior secured notes in April 2014.

(f) This amount represents $10.6 million of costs related to financing and restructuring activities and a $3.6 million net loss on the sale of assets, including six cold stacked drilling rigs.

(g) This amount represents a charge of $19.9 million related to retirement of our 7.125% senior secured notes and issuance of our 6.75% senior notes.

 

SOURCE Hercules Offshore, Inc.



RELATED LINKS

http://www.herculesoffshore.com