Net income for the nine months ended September 30, 2005 was $29.7 million, or $1.22 per diluted share as converted, on operating revenues of $113.3 million. The results for the nine months ended September 30, 2005 also include $2.8 million ($0.12 per diluted share as converted) of expense related to the early retirement of debt in the second quarter.
Randy Stilley, Chief Executive Officer and President of Hercules Offshore, Inc., commented, "We are pleased with our third quarter results, particularly in light of the substantial challenges our company faced during the recent hurricanes. Our results would not have been possible without our employees' hard work, perseverance and dedication. Looking forward, we anticipate that our results will be positively impacted by the strong demand for our rigs and liftboats and by the contribution from the rigs and liftboats we have strategically acquired during 2005."
Contract Drilling Services Segment Highlights
During the third quarter of 2005, revenues for the Contract Drilling Services segment rose to $28.2 million, compared to revenues of $26.3 million in the second quarter of 2005. Operating income for the segment increased to $12.2 million in the third quarter, up from $11.2 million in the second quarter. The average daily revenue per rig in the segment increased to $49,471 in the third quarter compared to $43,653 in the second quarter. Utilization for the company's drilling rigs rose to 95.5% in the third quarter from 94.5% in the second quarter.
Marine Services Segment Highlights
The Marine Services segment generated revenues of $13.9 million in the third quarter, up from $10.8 million in the second quarter. Operating income for the segment increased to $3.4 million in the third quarter from $3.0 million in the second quarter. The average daily revenue per liftboat decreased to $5,432 in the third quarter from $6,109 in the second quarter due partly to the impacts from lower standby dayrates earned while the vessels were off location during Hurricanes Katrina and Rita and also to a shift in the revenue mix toward smaller vessels acquired in June 2005. Utilization for the company's liftboats increased to 79.7% in the third quarter of 2005 from 73.8% in the second quarter of 2005.
Update on Recent Events
As previously announced, we closed the acquisition of the liftboat fleet from Danos & Curole Marine Contractors in November 2005 and have begun the integration process. Danos & Curole will continue to operate four of the vessels purchased by Hercules that are currently operating in Nigeria under an operating agreement until Hercules has established its own operations in Nigeria. This operating agreement expires in September 2006, and can be terminated earlier by Hercules upon 30 days' notice to Danos & Curole.
Salvage operations on Rig 25, which was severely damaged in Hurricane Katrina, are continuing and the decision on whether the rig is a constructive total loss has not yet been made by the company's insurance underwriters. However, based on a preliminary evaluation of the extent of the damage to the rig, the company believes that the rig will be declared a constructive total loss. The costs of the salvage operation are covered by insurance, and if the rig is declared a constructive total loss, the Company would receive $50 million in insurance proceeds. The repairs to Rig 21, which was also damaged in Hurricane Katrina, are progressing as scheduled and the company expects that the rig will be available for service in the second quarter of 2006. The costs of the repairs to Rig 21 are covered by the company's insurance policies, subject to a $1 million deductible, which was accrued during the third quarter.
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