Hercules Offshore Announces First Quarter 2015 Results

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April 29, 2015 7:02 AM EDT

HOUSTON, April 29, 2015 /PRNewswire/ -- Hercules Offshore, Inc. (Nasdaq: HERO) today reported a net loss of $57.1 million, or $0.35 per diluted share, on revenue of $122.6 million for the first quarter 2015, compared to net income of $19.9 million, or $0.12 per diluted share, on revenue of $256.7 million for the first quarter 2014. As outlined in the Reconciliation of GAAP to Non-GAAP Financial Measures, first quarter 2014 results included an after-tax charge of $15.2 million, or $0.10 per diluted share, related to early debt retirement and issuance costs.

John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "2015 is shaping up to be a very challenging year for our industry in general and our company in particular.  Demand for jackup rigs remains weak in every region of the world and the market is still scheduled to deliver a significant number of newbuild rigs over the next several years.  Given this backdrop, we are very pleased to have signed our five year contract on the Hercules 260 which will keep the rig working into 2020 with potential dayrate upside.  We expect continued weakness in rig utilization through the remainder of 2015, or at least until we see a meaningful improvement in commodity prices.  Additionally, our International Liftboat business continues to suffer low utilization, especially in Nigeria, which we expect to continue through this year.  In response to these conditions, we have implemented a number of cost saving measures, including cold stacking several rigs, which have made a significant impact on our first quarter results and should show additional benefits in future quarters." 

Domestic Offshore

Revenue generated from Domestic Offshore for the first quarter 2015 decreased 63% to $52.9 million from $143.3 million in the first quarter 2014, driven by lower utilization and dayrates on a reduced marketed rig fleet. Operating days during the first quarter 2015 declined to 533 days with utilization of 60.1% as we exited the quarter with 9 marketed rigs, compared to 1,344 days on 18 marketed rigs at 83.0% utilization during the first quarter 2014. Average revenue per rig per day decreased to $99,203 in the first quarter 2015 from $106,596 in the comparable 2014 period. Operating expense decreased approximately 51% to $36.0 million in the first quarter 2015 from $72.8 million in the first quarter 2014, largely attributable to the reduced number of marketed rigs in operation. Domestic Offshore generated operating income of $3.8 million in the first quarter 2015, compared to $51.5 million in the first quarter 2014.

International Offshore

International Offshore revenue declined to $51.6 million in the first quarter 2015, from $80.9 million in the first quarter 2014, driven largely by reduced utilization and partially offset by slightly higher dayrates. Utilization decreased to 47.9% in the first quarter 2015 from 88.1% in the first quarter 2014, largely due to scheduled downtime for equipment recertification on the Hercules 262, as well as idle time on the Hercules Triumph, Hercules Resilience and Hercules 260. Average revenue per rig per day increased to $149,704 in the first quarter 2015 from $136,030 in the first quarter of 2014, driven in part by a demobilization fee of $4.5 million received for the Hercules 208 following its contract conclusion, as well as higher dayrates on the Hercules 261 and Hercules 262 as these rigs rolled to new contracts. Operating expense in the first quarter 2015 was $50.2 million, up slightly from $47.5 million in the respective 2014 period. Preparation costs for the Hercules 260 prior to commencing its contract with ENI in Gabon, as well as mobilization costs of the Hercules 208 to Malaysia, contributed to the increase in segment operating expenses. International Offshore recorded an operating loss of $20.9 million in the first quarter 2015 compared to operating income of $14.6 million in the prior year period.

International Liftboats

International Liftboats revenue declined to $18.1 million in the first quarter 2015 from $32.5 million in the prior year period, due to lower utilization and dayrates. First quarter 2015 utilization of 38.1% reflects a continuation of lower activity in Nigeria as well as shipyard work on multiple boats in both West Africa and the Middle East, and compares to 57.9% utilization during the first quarter 2014 period. Average revenue per liftboat per day decreased to $22,964 in the first quarter 2015 from $27,132 in the first quarter 2014, primarily due to a shift in revenue mix toward the smaller class liftboats while larger boats were in the shipyard. Operating expenses in the first quarter 2015 declined by 34% to $13.5 million, compared to $20.4 million in the first quarter 2014, reflecting lower activity levels and the impact of our cost reduction measures. International Liftboats recorded an operating loss of $0.4 million in the first quarter 2015 compared to operating income of $5.6 million in the first quarter 2014.

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, 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 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 April 29, 2015, to discuss its first quarter 2015 financial results. To participate in the call, dial 855-641-5843 (Domestic) or 262-912-6154 (International) and reference access code 22987992 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 April 29, 2015, beginning at 1:00 p.m. CDT (2:00 p.m. EDT), through May 6, 2015. The phone number for the conference call replay is 855-859-2056 (Domestic) or 404-537-3406 (International) with access code 22987992. Additionally, the recorded conference call will be accessible through our website at http://www.herculesoffshore.com for 7 days after the conference call.

Additional Information

Headquartered in Houston, Hercules Offshore, Inc. operates a fleet of 33 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)

March 31,

December 31,

2015

2014

(Unaudited)

ASSETS

Current Assets:

Cash and Cash Equivalents

$

218,172

$

207,937

Accounts Receivable, Net

108,053

166,359

Prepaids

8,571

19,585

Current Deferred Tax Asset

4,461

4,461

Other

2,557

5,955

341,814

404,297

Property and Equipment, Net

1,568,485

1,574,749

Other Assets, Net

23,156

23,361

$

1,933,455

$

2,002,407

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts Payable

$

46,424

$

52,952

Accrued Liabilities

54,296

66,090

Interest Payable

39,132

32,008

Other Current Liabilities

12,177

13,406

152,029

164,456

Long-term Debt

1,210,981

1,210,919

Deferred Income Taxes

4,403

4,147

Other Liabilities

7,479

7,854

Commitments and Contingencies

Stockholders' Equity

558,563

615,031

$

1,933,455

$

2,002,407

 

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months EndedMarch 31,

2015

2014

Revenue

$

122,619

$

256,734

Costs and Expenses:

Operating Expenses

99,599

140,752

Depreciation and Amortization

37,218

40,083

General and Administrative

15,760

18,227

152,577

199,062

Operating Income (Loss)

(29,958)

57,672

Other Income (Expense):

Interest Expense

(24,960)

(22,901)

Loss on Extinguishment of Debt

-

(15,158)

Other, Net

420

150

Income (Loss) Before Income Taxes

(54,498)

19,763

Income Tax Benefit (Provision)

(2,617)

153

Net Income (Loss)

$

(57,115)

$

19,916

Net Income (Loss) Per Share:

Basic

$

(0.35)

$

0.12

Diluted

$

(0.35)

$

0.12

Weighted Average Shares Outstanding:

Basic

161,057

160,070

Diluted

161,057

161,883

 

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended March 31,

2015

2014

Cash Flows from Operating Activities:

Net Income (Loss)

$

(57,115)

$

19,916

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

Depreciation and Amortization

37,218

40,083

Stock-Based Compensation Expense

820

2,400

Deferred Income Taxes

(278)

(4,616)

Other

(243)

3,089

Net Change in Operating Assets and Liabilities

56,171

(20,227)

Net Cash Provided by Operating Activities

36,573

40,645

Cash Flows from Investing Activities:

Capital Expenditures

(30,740)

(40,665)

Insurance Proceeds Received

2,418

-

Proceeds from Sale of Assets, Net

1,984

1,679

Net Cash Used in Investing Activities

(26,338)

(38,986)

Cash Flows from Financing Activities:

Long-term Debt Borrowings

-

300,000

Redemption of 7.125% Senior Secured Notes

-

(220,072)

Cash Designated for Debt Retirement

-

(79,928)

Payment of Debt Issuance Costs

-

(2,961)

Other

-

108

Net Cash Used In Financing Activities

-

(2,853)

Net Increase (Decrease) in Cash and Cash Equivalents

10,235

(1,194)

Cash and Cash Equivalents at Beginning of Period

207,937

198,406

Cash and Cash Equivalents at End of Period

$

218,172

$

197,212

 

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

SELECTED FINANCIAL AND OPERATING DATA

(Dollars in thousands, except per day amounts)

(Unaudited)

Three Months EndedMarch 31,

2015

2014

Domestic Offshore:

Number of rigs (as of end of period)

24

28

Revenue

$

52,875

$

143,265

Operating expenses

35,966

72,800

Depreciation and amortization expense

11,693

17,371

General and administrative expenses

1,386

1,548

Operating income

$

3,830

$

51,546

International Offshore:

Number of rigs (as of end of period)

9

10

Revenue

$

51,648

$

80,938

Operating expenses

50,167

47,538

Depreciation and amortization expense

20,339

16,626

General and administrative expenses

1,994

2,132

Operating income (loss)

$

(20,852)

$

14,642

International Liftboats:

Number of liftboats (as of end of period)

24

24

Revenue

$

18,096

$

32,531

Operating expenses

13,466

20,414

Depreciation and amortization expense

4,432

5,126

General and administrative expenses

549

1,427

Operating income (loss)

$

(351)

$

5,564

Total Company:

Revenue

$

122,619

$

256,734

Operating expenses

99,599

140,752

Depreciation and amortization expense

37,218

40,083

General and administrative expenses

15,760

18,227

Operating income (loss)

(29,958)

57,672

Interest expense

(24,960)

(22,901)

Loss on extinguishment of debt

-

(15,158)

Other, net

420

150

Income (loss) before income taxes

(54,498)

19,763

Income tax benefit (provision)

(2,617)

153

Net income (loss)

$

(57,115)

$

19,916

 

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

SELECTED FINANCIAL AND OPERATING DATA - (Continued)

(Dollars in thousands, except per day amounts)

(Unaudited)

Three Months Ended March 31, 2015

Operating Days

Available Days

Utilization (1)

AverageRevenue per Day (2)

Average Operating Expense per Day (3)

Domestic Offshore

533

887

60.1%

$

99,203

$

40,548

International Offshore

345

720

47.9%

149,704

69,676

International Liftboats

788

2,070

38.1%

22,964

6,505

Three Months Ended March 31, 2014

Operating Days

Available Days

Utilization (1)

AverageRevenue per Day (2)

Average Operating Expense perDay (3)

Domestic Offshore

1,344

1,620

83.0%

$

106,596

$

44,938

International Offshore

595

675

88.1%

136,030

70,427

International Liftboats

1,199

2,070

57.9%

27,132

9,862

(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 operating income, income from continuing operations, net income 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 months ended March 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 table:

Three Months EndedMarch 31, 2014

Operating Income:

GAAP Operating Income

$

57,672

Adjustment

-

Non-GAAP Operating Income

$

57,672

Other Expense:

GAAP Other Expense

$

(37,909)

Adjustment

15,158

(a)

Non-GAAP Other Expense

$

(22,751)

Benefit for Income Taxes:

GAAP Benefit for Income Taxes

$

153

Tax Adjustment

-

Non-GAAP Benefit for Income Taxes

$

153

Net Income:

GAAP Net Income

$

19,916

Total Adjustment

15,158

Non-GAAP Net Income

$

35,074

Diluted Earnings per Share:

GAAP Diluted Earnings per Share

$

0.12

Adjustment per Share

0.10

Non-GAAP Diluted Earnings per Share

$

0.22

(a)

This amount represents a charge of $15.2 million related to retirement of a portion of our 7.125% senior secured notes and issuance of our 6.75% senior notes.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hercules-offshore-announces-first-quarter-2015-results-300074126.html

SOURCE Hercules Offshore, Inc.


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