Hercules Offshore, Inc. Announces Fourth Quarter and Full Year 2015 Results

Successor

Predecessor

Successor

Predecessor

Period fromNovember 6,2015 toDecember 31,2015

Period fromOctober 1,2015 toNovember 6,2015

Period fromNovember 6,2015 toDecember 31,2015

Period fromJanuary 1,2015 toNovember 6,2015

Reorganization Items:

Non-cash net loss due to fresh start accounting adjustments

$                   -

$  1,019,255

$                   -

$  1,019,255

Non-cash gain on settlement of liabilities subject to compromise (debt forgiveness)

-

(686,559)

-

(686,559)

Non-cash charge related to write-off of unamortized debt issuance costs

-

-

-

11,535

Professional fees

1,330

10,045

1,330

12,819

Total Reorganization Items

$           1,330

$     342,741

$           1,330

$     357,050

Professional fees related to the Reorganization:

Costs incurred prior to Bankruptcy Petition (General and Administrative Expense)

$                  -

$                -

$                  -

$       18,879

Costs incurred post Bankruptcy Petition (Reorganization Items)

1,330

10,045

1,330

12,819

Total Professional fees related to Reorganization

$           1,330

$       10,045

$           1,330

$       31,698

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

Successor

Predecessor

December 31,

December 31,

2015

2014

(Unaudited)

ASSETS

Current Assets:

Cash and Cash Equivalents

$       330,780

$       207,937

Accounts Receivable, Net

63,668

166,359

Prepaids

11,740

19,585

Current Deferred Tax Asset

-

4,461

Other

4,015

5,955

410,203

404,297

Property and Equipment, Net

465,497

1,574,749

Restricted Cash

200,000

-

Other Assets, Net

32,440

23,361

$    1,108,140

$    2,002,407

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts Payable

$         43,616

$         52,952

Accrued Liabilities

49,108

66,090

Interest Payable

-

32,008

Other Current Liabilities

6,148

13,406

98,872

164,456

Long-term Debt

428,715

1,210,919

Deferred Income Taxes

-

4,147

Other Liabilities

16,622

7,854

Commitments and Contingencies

Stockholders' Equity

563,931

615,031

$    1,108,140

$    2,002,407

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Successor

Predecessor

Period fromNovember 6, 2015 toDecember 31, 2015

Period fromOctober 1, 2015 toNovember 6, 2015

Three Months EndedDecember 31, 2014

(Unaudited)

(Unaudited)

(Unaudited)

Revenue

$                   32,442

$           27,534

$            178,670

Costs and Expenses:

Operating Expenses

29,675

22,428

129,462

Asset Impairment

-

-

117,001

Depreciation and Amortization

4,534

14,765

42,826

General and Administrative

7,120

7,295

14,703

41,329

44,488

303,992

Operating Loss

(8,887)

(16,954)

(125,322)

Other Income (Expense):

Interest Expense

(7,939)

-

(24,978)

Reorganization Items, Net

(1,330)

(342,741)

-

Other, Net

(4,785)

13

(235)

Loss Before Income Taxes

(22,941)

(359,682)

(150,535)

Income Tax Provision

(728)

(2,096)

(3,584)

Net Loss

$                  (23,669)

$         (361,778)

$           (154,119)

Net Loss Per Share - Basic and Diluted

$                      (1.18)

$               (2.24)

$                 (0.96)

Weighted Average Shares Outstanding - Basic and Diluted

19,989

161,641

160,816

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

ANNUAL CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Successor

Predecessor

Period fromNovember 6, 2015 toDecember 31, 2015

Period fromJanuary 1, 2015 toNovember 6, 2015

Twelve MonthsEnded December 31, 2014

(Unaudited)

(Unaudited)

Revenue

$                   32,442

$          303,206

$            900,251

Costs and Expenses:

Operating Expenses

29,675

271,988

543,236

Asset Impairment

-

-

199,508

Depreciation and Amortization

4,534

126,963

170,898

General and Administrative

7,120

79,884

75,108

41,329

478,835

988,750

Operating Loss

(8,887)

(175,629)

(88,499)

Other Income (Expense):

Interest Expense

(7,939)

(61,173)

(99,142)

Loss on Extinguishment of Debt

-

(1,884)

(19,925)

Reorganization Items, Net

(1,330)

(357,050)

-

Other, Net

(4,785)

284

(39)

Loss Before Income Taxes

(22,941)

(595,452)

(207,605)

Income Tax Provision

(728)

(7,042)

(8,505)

Net Loss

$                  (23,669)

$         (602,494)

$           (216,110)

Net Loss Per Share - Basic and Diluted

$                      (1.18)

$               (3.73)

$                 (1.35)

Weighted Average Shares Outstanding - Basic and Diluted

19,989

161,430

160,598

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Successor

Predecessor

Period fromNovember 6,2015 toDecember 31,2015

Period fromJanuary 1, 2015 to November 6,2015

Twelve MonthsEnded December 31, 2014

(Unaudited)

(Unaudited)

Cash Flows from Operating Activities:

Net  Loss

$        (23,669)

$         (602,494)

$        (216,110)

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

Depreciation and Amortization

4,534

126,963

170,898

Stock-Based Compensation Expense

26

6,922

8,348

Deferred Income Taxes

16

1,931

(7,691)

Provision for Doubtful Accounts Receivable

1,855

7,665

5,627

(Gain) Loss on Disposal of Assets, Net

(28)

970

(22,598)

Asset Impairment

-

-

199,508

Non-Cash Reorganization Items, Net

-

344,231

-

Non-Cash Loss on Derivative

4,837

-

-

Other

342

2,146

4,810

Net Change in Operating Assets and Liabilities

(14,372)

102,065

(28,079)

Net Cash Provided by (Used in) Operating Activities

(26,459)

(9,601)

114,713

Cash Flows from Investing Activities:

Capital Expenditures

(5,066)

(78,097)

(147,522)

Increase in Restricted Cash

-

(200,000)

-

Insurance Proceeds Received

-

3,543

9,067

Proceeds from Sale of Assets, Net

78

9,697

35,135

Other

377

227

1,479

Net Cash Used in Investing Activities

(4,611)

(264,630)

(101,841)

Cash Flows from Financing Activities:

Long-term Debt Borrowings

-

436,500

300,000

Redemption of 7.125% Senior Secured Notes

-

-

(300,000)

Payment of Debt Issuance Costs

-

(8,356)

(3,914)

Other

-

-

573

Net Cash Provided by (Used in) Financing Activities

-

428,144

Net Increase (Decrease) in Cash and Cash Equivalents

(31,070)

153,913

9,531

Cash and Cash Equivalents at Beginning of Period

361,850

207,937

198,406

Cash and Cash Equivalents at End of Period

$       330,780

$          361,850

$         207,937

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

QUARTERLY SELECTED FINANCIAL AND OPERATING DATA

(Dollars in thousands, except per day amounts)

(Unaudited)

Successor

Predecessor

(a)

(b)

(c)

(a) + (b) - (c)

Period fromNovember 6,2015 toDecember 31,2015

Period fromOctober 1, 2015 to November 6,2015

Three MonthsEnded December 31, 2014

Change

% Change

Domestic Offshore:

Number of rigs (as of end of period)

18

18

24

Revenue

$            9,859

$        10,347

$            90,241

$       (70,035)

(77.6%)

Operating expenses

8,966

5,408

59,304

(44,930)

(75.8%)

Asset impairment

-

-

117,001

(117,001)

n/m

Depreciation and amortization expense

1,097

4,466

16,628

(11,065)

(66.5%)

General and administrative expenses

404

484

1,490

(602)

(40.4%)

Operating loss

$              (608)

$              (11)

$        (104,182)

$       103,563

(99.4%)

International Offshore:

Number of rigs (as of end of period)

9

9

9

Revenue

$          17,321

$        12,394

$            64,606

$       (34,891)

(54.0%)

Operating expenses

14,395

13,251

54,013

(26,367)

(48.8%)

Depreciation and amortization expense

1,870

8,510

20,385

(10,005)

(49.1%)

General and administrative expenses

2,691

970

1,165

2,496

214.2%

Operating loss

$           (1,635)

$       (10,337)

$          (10,957)

$         (1,015)

9.3%

International Liftboats:

Number of liftboats (as of end of period)

19

19

24

Revenue

$            5,262

$          4,793

$            23,823

$       (13,768)

(57.8%)

Operating expenses

6,314

3,769

16,145

(6,062)

(37.5%)

Depreciation and amortization expense

1,567

1,539

4,895

(1,789)

(36.5%)

General and administrative expenses

626

918

1,845

(301)

(16.3%)

Operating income (loss)

$           (3,245)

$         (1,433)

$                 938

$         (5,616)

n/m

Total Company:

Revenue

$          32,442

$        27,534

$          178,670

$     (118,694)

(66.4%)

Operating expenses

29,675

22,428

129,462

(77,359)

(59.8%)

Asset impairment

-

-

117,001

(117,001)

n/m

Depreciation and amortization expense

4,534

14,765

42,826

(23,527)

(54.9%)

General and administrative expenses

7,120

7,295

14,703

(288)

(2.0%)

Operating loss

(8,887)

(16,954)

(125,322)

99,481

(79.4%)

     Interest expense

(7,939)

-

(24,978)

17,039

(68.2%)

     Reorganization items, net

(1,330)

(342,741)

-

(344,071)

n/m

     Other, net

(4,785)

13

(235)

(4,537)

n/m

Loss before income taxes

(22,941)

(359,682)

(150,535)

(232,088)

154.2%

     Income tax provision

(728)

(2,096)

(3,584)

760

(21.2%)

Net loss

$         (23,669)

$     (361,778)

$        (154,119)

$     (231,328)

150.1%

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

ANNUAL SELECTED FINANCIAL AND OPERATING DATA - (Continued)

(Dollars in thousands, except per day amounts)

(Unaudited)

Successor

Predecessor

(a)

(b)

(c)

(a) + (b) - (c)

Period fromNovember 6,2015 toDecember 31,2015

Period fromJanuary 1, 2015 to November 6,2015

Twelve MonthsEnded December 31, 2014

Change

% Change

Domestic Offshore:

Number of rigs (as of end of period)

18

18

24

Revenue

$            9,859

$      131,308

$          497,209

$     (356,042)

(71.6%)

Operating expenses

8,966

95,279

261,399

(157,154)

(60.1%)

Asset impairment

-

-

199,508

(199,508)

n/m

Depreciation and amortization expense

1,097

39,031

70,576

(30,448)

(43.1%)

General and administrative expenses

404

5,462

6,314

(448)

(7.1%)

Operating loss

$              (608)

$         (8,464)

$          (40,588)

$         31,516

(77.6%)

International Offshore:

Number of rigs (as of end of period)

9

9

9

Revenue

$          17,321

$      113,438

$          291,486

$     (160,727)

(55.1%)

Operating expenses

14,395

131,291

207,190

(61,504)

(29.7%)

Depreciation and amortization expense

1,870

71,033

75,672

(2,769)

(3.7%)

General and administrative expenses

2,691

6,225

8,322

594

7.1%

Operating income (loss)

$           (1,635)

$       (95,111)

$                 302

$       (97,048)

n/m

International Liftboats:

Number of liftboats (as of end of period)

19

19

24

Revenue

$            5,262

$        58,460

$          111,556

$       (47,834)

(42.9%)

Operating expenses

6,314

45,418

74,647

(22,915)

(30.7%)

Depreciation and amortization expense

1,567

14,599

20,763

(4,597)

(22.1%)

General and administrative expenses

626

11,608

11,712

522

4.5%

Operating income (loss)

$           (3,245)

$       (13,165)

$              4,434

$       (20,844)

n/m

Total Company:

Revenue

$          32,442

$      303,206

$          900,251

$     (564,603)

(62.7%)

Operating expenses

29,675

271,988

543,236

(241,573)

(44.5%)

Asset impairment

-

-

199,508

(199,508)

n/m

Depreciation and amortization expense

4,534

126,963

170,898

(39,401)

(23.1%)

General and administrative expenses

7,120

79,884

75,108

11,896

15.8%

Operating loss

(8,887)

(175,629)

(88,499)

(96,017)

108.5%

     Interest expense

(7,939)

(61,173)

(99,142)

30,030

(30.3%)

     Loss on extinguishment of debt

-

(1,884)

(19,925)

18,041

n/m

     Reorganization items, net

(1,330)

(357,050)

-

(358,380)

n/m

     Other, net

(4,785)

284

(39)

(4,462)

n/m

Loss before income taxes

(22,941)

(595,452)

(207,605)

(410,788)

197.9%

     Income tax provision

(728)

(7,042)

(8,505)

735

(8.6%)

Net loss

$         (23,669)

$     (602,494)

$        (216,110)

$     (410,053)

189.7%

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

QUARTERLY SELECTED FINANCIAL AND OPERATING DATA - (Continued)

(Dollars in thousands, except per day amounts)

(Unaudited)

Period from November 6, 2015 to December 31, 2015 (Successor)

Operating Days

Available Days

Utilization (1)

AverageRevenue perDay (2)

Average OperatingExpense per Day (3)

Domestic Offshore

159

495

32.1%

$     62,006

$                    18,113

International Offshore

220

440

50.0%

78,732

32,716

International Liftboats

298

990

30.1%

17,658

6,378

Period from October 1, 2015 to November 6, 2015 (Predecessor)

Operating Days

Available Days

Utilization (1)

AverageRevenue perDay (2)

Average OperatingExpense per Day (3)

Domestic Offshore

164

333

49.2%

$     63,091

$                    16,240

International Offshore

147

296

49.7%

84,313

44,767

International Liftboats

244

666

36.6%

19,643

5,659

Three Months Ended December 31, 2014 (Predecessor)

Operating Days

Available Days

Utilization (1)

AverageRevenue perDay (2)

Average OperatingExpense per Day (3)

Domestic Offshore

850

1,329

64.0%

$   106,166

$                    44,623

International Offshore

490

736

66.6%

131,849

73,387

International Liftboats

859

2,116

40.6%

27,733

7,630

(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

ANNUAL SELECTED FINANCIAL AND OPERATING DATA - (Continued)

(Dollars in thousands, except per day amounts)

(Unaudited)

Period from November 6, 2015 to December 31, 2015 (Successor)

Operating Days

Available Days

Utilization (1)

AverageRevenue perDay (2)

Average OperatingExpense per Day (3)

Domestic Offshore

159

495

32.1%

$     62,006

$                    18,113

International Offshore

220

440

50.0%

78,732

32,716

International Liftboats

298

990

30.1%

17,658

6,378

Period from January 1, 2015 to November 6, 2015 (Predecessor)

Operating Days

Available Days

Utilization (1)

AverageRevenue perDay (2)

Average OperatingExpense per Day (3)

Domestic Offshore

1,497

2,867

52.2%

$     87,714

$                    33,233

International Offshore

1,221

2,480

49.2%

92,906

52,940

International Liftboats

2,776

6,686

41.5%

21,059

6,793

Twelve Months Ended December 31, 2014 (Predecessor)

Operating Days

Available Days

Utilization (1)

AverageRevenue perDay (2)

Average OperatingExpense per Day (3)

Domestic Offshore

4,624

6,243

74.1%

$   107,528

$                    41,871

International Offshore

2,025

2,875

70.4%

143,944

72,066

International Liftboats

4,332

8,395

51.6%

25,752

8,892

(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 information. 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 tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the periods January 1, 2015 to November 6, 2015, October 1, 2015 to November 6, 2015 and November 6, 2015 to December 31, 2015 and the three and twelve months ended December 31, 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 tables:

Successor

Predecessor

Period fromNovember 6,2015 toDecember 31,2015

Period fromOctober 1, 2015 to November 6,2015

Three MonthsEndedDecember 31,2014

    Operating Loss:

      GAAP Operating Loss

$       (8,887)

$        (16,954)

$        (125,322)

      Adjustment

-

2,890

(b)

117,001

(d)

      Non-GAAP Operating Loss

$       (8,887)

$        (14,064)

$           (8,321)

    Other Expense:

      GAAP Other Expense

$     (14,054)

$      (342,728)

$         (25,213)

      Adjustment

1,330

(a)

342,741

(c)

-

      Non-GAAP Other Expense  

$     (12,724)

$                 13

$         (25,213)

    Provision for Income Taxes:

      GAAP Provision for Income Taxes

$          (728)

$           (2,096)

$           (3,584)

      Tax Adjustment

-

-

-

      Non-GAAP Provision for Income Taxes

$          (728)

$          (2,096)

$           (3,584)

   Net Loss:

      GAAP Net Loss

$     (23,669)

$      (361,778)

$       (154,119)

      Total Adjustment

1,330

345,631

117,001

      Non-GAAP Net Loss

$     (22,339)

$         (16,147)

$         (37,118)

    Diluted Loss per Share:

      GAAP Diluted Loss per Share

$         (1.18)

$            (2.24)

$             (0.96)

      Adjustment per Share

0.06

2.14

0.73

      Non-GAAP Diluted Loss per Share

$         (1.12)

$            (0.10)

$             (0.23)

(a) This amount represents a  $1.3 million charge for reorganization items related to professional fees.

(b) This amount represents an $8.1 million charge for stock-based compensation due to bankruptcy and a $5.2 million gain on settlement of a contractual dispute.

(c) This amount represents a $342.7 million charge for reorganization items which includes a $1.0 billion non-cash net loss due to fresh start accounting adjustments, a $686.6 million non-cash gain on settlement of liabilities subject to compromise (debt forgiveness) and a $10.0 million charge for other reorganization items related to professional fees.

(d) This amount represents a $117.0 million non-cash impairment charge of property and equipment.

Hercules Offshore, Inc. and Subsidiaries

 Reconciliation of GAAP to Non-GAAP Financial Measures (Continued)

 (Unaudited)

 (In thousands, except per share data)

Successor

Predecessor

Period from November 6,2015 toDecember 31, 2015

Period from January 1, 2015 to November 6,2015

Twelve MonthsEnded December 31, 2014

    Operating Income (Loss):

      GAAP Operating Loss

$       (8,887)

$      (175,629)

$         (88,499)

      Adjustment

-

25,333

(b)

176,888

(d)

      Non-GAAP Operating Income (Loss)

$       (8,887)

$      (150,296)

$          88,389

    Other Expense:

      GAAP Other Expense

$     (14,054)

$      (419,823)

$       (119,106)

      Adjustment

1,330

(a)

358,934

(c)

19,925

(e)

      Non-GAAP Other Expense  

$     (12,724)

$        (60,889)

$         (99,181)

Provision for Income Taxes:

      GAAP Provision for Income Taxes

$          (728)

$          (7,042)

$           (8,505)

      Tax Adjustment

-

-

-

      Non-GAAP Provision for Income Taxes

$          (728)

$          (7,042)

$           (8,505)

   Net Loss:

      GAAP Net Loss

$     (23,669)

$      (602,494)

$       (216,110)

      Total Adjustment

1,330

384,267

196,813

      Non-GAAP Net Loss

$     (22,339)

$         (19,297)

    Diluted Loss per Share:

      GAAP Diluted Loss per Share

$         (1.18)

$            (3.73)

$              (1.35)

      Adjustment per Share

0.06

2.38

1.23

      Non-GAAP Diluted Loss per Share

$         (1.12)

$            (1.35)

$             (0.12)

(a) This amount represents a $1.3 million charge for reorganization items related to professional fees.

(b) This amount represents $18.9 million of costs related to pre-petition financing and restructuring activities, an $8.1 million charge for stock-based compensation due to bankruptcy, a $5.2 million gain on settlement of a contractual dispute and a $3.6 million net loss on the sale of assets, including six cold stacked drilling rigs.

(c) This amount represents a $357.1 million charge for reorganization items which includes a $1.0 billion non-cash net loss due to fresh start accounting adjustments, a $686.6 million non-cash gain on settlement of liabilities subject to compromise (debt forgiveness), an $11.5 million non-cash charge related to a write-off of unamortized debt issuance costs and a $12.8 million charge for other reorganization items related to professional fees.  Additionally, this amount includes a $1.9 million charge related to the termination of the Predecessor Credit Facility.

(d) This amount represents a $199.5 million non-cash impairment charge of property and equipment and a $22.6 million net gain on the sale of cold stacked drilling rigs.

(e) 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.