Hercules Offshore in Q2 slowdown
- Business & Finance
Hercules Offshore, Inc. has reported income from continuing operations of $6.6 million, or $0.04 per diluted share, on revenue of $243.0 million for the second quarter 2014, compared to income from continuing operations of $16.6 million, or $0.10 per diluted share, on revenue of $211.5 million for the second quarter 2013.
As outlined in the Reconciliation of GAAP to Non-GAAP Financial Measures, second quarter 2014 results included a pre-tax gain of $17.9 million, related to the sale of three of cold-stacked drilling rigs, as well as a pre-tax charge of $4.8 million, related to early debt retirement and issuance costs.
On an after-tax basis, these items approximated a net gain of $13.1 million, or $0.08 per diluted share. This compares to the second quarter 2013 results that included a non-cash gain of $14.9 million, or $0.09 per diluted share, related to the adjustment of former investment in Discovery Offshore S.A.
John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, “Second quarter results reflect a general slowdown in domestic drilling activity, as well as idle time on certain international rigs. The slowdown in the U.S. Gulf of Mexico has largely been driven by significant property transfers and consolidation among our customer base, which has led to disruptions in their respective drilling programs. Our latest discussions with various domestic customers suggest activity levels will rebound late this year. In the meantime, we have taken proactive measures to reduce costs, including our recent decision to postpone the regulatory survey on one of our domestic rigs until visibility improves. Dayrates remain firm in the U.S. Gulf of Mexico, as stable crude oil prices support customer economics. Our International Offshore segment was impacted by downtime, due in part to the contract termination on the Hercules 267 in Angola. Lastly, International Liftboats experienced wide fluctuations in utilization, principally due to poor weather in West Africa. Customer capital spending reductions in Nigeria has also hindered activity.
While our third quarter results will likely be impacted by the current operational challenges, conditions are expected to improve toward year end. We are also making progress on the construction of our newbuild rig, which holds a five year contract with Maersk Oil. This award demonstrates how we are able to leverage the skillset of our organization to advance the Company’s strategic initiatives of expanding our operational footprint and high-grading our fleet.”