Hercules Offshore Boss Highlights Importance of Positive Momentum in U.S. Gulf
Hercules Offshore, Inc. today reported income from continuing operations of $17.2 million, or $0.11 per diluted share, on revenue of $225.3 million for the third quarter 2013, compared with a loss from continuing operations of $37.2 million, or $0.23 per diluted share, on revenue of $160.2 million for the third quarter 2012.
As outlined in the Reconciliation of GAAP to Non-GAAP Financial Measures, third quarter 2012 results include a non-cash charge of $60.7 million to reflect the impairment of the Hercules 252 and Hercules 258; a gain from the sale of Platform Rig 3 and related entities of $18.4 million; and a gain from the insurance settlement on the Hercules 185 of $27.3 million. On an after-tax basis, these items approximated $22.1 million, or $0.14 per diluted share.
John T. Rynd, CEO and President of Hercules Offshore, states “The latest quarterly results reflect the positive momentum in the U.S. Gulf of Mexico and healthy conditions in the international drilling and liftboat markets. We expect these trends to carry forward through 2014. Several positive long-term developments also occurred during the third quarter, including our consolidation of Discovery Offshore and subsequent contracting of the Hercules Triumph, five-year extensions on two of our rigs in the Middle East at significantly higher pricing, and successful refinancing of $300 million in senior notes which lowers our borrowing cost and strengthens our liquidity. These developments have led to a substantial growth of backlog, which currently exceeds $1 billion, and build upon our foundation for long-term growth and sustainability. Over the coming months, backlog is expected to grow further, as several new contracting opportunities exist in our domestic and international drilling operations.”
Revenue generated from Domestic Offshore for the third quarter 2013 increased by 51% to $139.0 million from $92.3 million in the third quarter 2012 primarily due to higher dayrates and utilization. Average revenue per rig per day increased by 44% to $91,311 in the third quarter 2013 from $63,203 in the comparable 2012 period. Operating days increased modestly by 62 days due to the addition of the Hercules 209 and reduced downtime on several rigs, partially offset by lost operating days on the Hercules 265. Operating expenses increased to $73.6 million in the third quarter 2013 from $61.9 million in the prior respective period, due to incremental cost for the Hercules 209, salvage cost incurred on the Hercules 265 of approximately $3.2 million, and higher labor, insurance and workers compensation expense. Domestic Offshore generated operating income of $44.3 million for the third quarter 2013 compared to an operating loss of $16.9 million in the third quarter 2012, which includes a non-cash charge of $25.5 million to reflect the impairment of the Hercules 252.
International Offshore generated revenue of $46.3 million in the third quarter 2013, an increase of 25% compared to $37.1 million in the third quarter 2012, as both utilization and dayrates improved. Utilization increased to 77.2% from 65.3%, due in part to the addition of the Hercules 266. Average revenue per rig per day for the third quarter 2013 increased to $108,707 from $94,377 in the third quarter 2012, primarily as a result of the addition of the Hercules 266 to the fleet, as well as the sale of Platform Rig 3 during third quarter 2012. Operating expenses for the third quarter 2013 declined to $28.2 million as compared to the third quarter 2012, after excluding the $27.3 million benefit from the insurance settlement gain on the Hercules 185 and the $18.4 million gain on the sale of Platform Rig 3. International Offshore recorded operating income of $2.5 million in the third quarter 2013 compared to operating income of $3.5 million, which includes the aforementioned gains and a non-cash charge of $35.2 million to reflect the impairment of the Hercules 258.
International Liftboats revenue increased by approximately 30% to $40.0 million in the third quarter 2013 from $30.8 million in the third quarter 2012. Utilization increased to 74.6% from 68.0%, and operating days increased by 264 days over the comparable periods. Average revenue per liftboat per day increased by 8% to $25,364 in the third quarter 2013 from $23,432 in the third quarter 2012. Much of the improvement in utilization and average dayrate can be attributable to the addition of the Bull Ray in West Africa and stronger performance from the Middle East vessels. Operating expenses during the third quarter 2013 were relatively flat at $21.0 million compared to $20.4 million in the third quarter 2012, despite the addition of the Bull Ray. International Liftboats recorded operating income of $12.8 million in the third quarter 2013 compared to operating income of $6.5 million in the third quarter 2012.
Press Release, October 24, 2013