Hercules Offshore Gains Strength in Q1 on International Operations
Hercules Offshore, Inc. reported net income of $4.5 million, or $0.05 per diluted share, on revenues of $213.4 million for the first quarter 2008, compared to net income of $33.4 million, or $1.03 per diluted share, on revenues of $110.5 million for the first quarter 2007.
Randy Stilley, Chief Executive Officer and President of Hercules Offshore stated, "Our first quarter results are indicative of a challenging environment for all of our domestic business segments, and the anticipated upturn in U.S. Gulf of Mexico shallow water drilling activity did not arrive in a meaningful way until late in the quarter. However, we believe the gradual improvement in activity in this region will positively impact results in our Domestic Offshore and Inland segments throughout the remainder of the year."
Mr. Stilley continued, "Our international operations gained strength in the first quarter as we continued to successfully execute our growth strategy. We expanded our fleet to include three additional jackup rigs capable of working internationally as well as relocating the Whale Shark liftboat to the Middle East. International contract backlog was also extended with the three-year contracts in Saudi Arabia that were secured for two of these new rigs along with lengthy contract extensions at significantly higher dayrates for three other international jackups. Our successful international expansion efforts will benefit our financial results as we move throughout 2008 and beyond."
During the first quarter 2008, Domestic Offshore revenues were $62.4 million compared to $42.8 million in the first quarter 2007. This 46% increase was the result of additional operating days stemming from the acquisition of TODCO in July 2007, partially offset by a decline in average revenue per day per rig to $56,873 from $90,363 and a decrease in utilization to 54.8% from 87.8% resulting from weak demand in the U.S. Gulf of Mexico. Average operating expenses per day per rig decreased in the first quarter 2008 to $23,862 from $25,117 in the corresponding quarter of 2007 due primarily to the warm stacking of several idle rigs. Domestic Offshore recorded an operating loss of $1.9 million for the first quarter 2008 compared to operating income of $24.8 million in the prior year period.
International Offshore revenues increased 213% to $65.3 million in the first quarter 2008 from $20.9 million for the comparable period of 2007 due primarily to increased operating days resulting from the TODCO acquisition. Average revenue per day per rig for the first quarter 2008 declined by 14% to $99,913 from $115,978 in the first quarter 2007 due to a mix shift in the type of rigs in this segment, while utilization declined from 100% to 92.2% largely due to the transport of one of our jackups from Brazil to West Africa. Average operating expense per day per rig decreased to $32,147 in the first quarter 2008 from $41,016 in the year-ago period. Operating income increased by approximately $22.8 million to $34.4 million in the first quarter 2008 from $11.6 million in the first quarter 2007.
Inland generated revenues of $40.3 million and an operating loss of $1.9 million during the first quarter 2008. Average revenue per day per rig was $42,930 on utilization of 60.6%. The Company did not have inland barge operations prior to the third quarter of 2007.
Domestic Liftboats revenues decreased to $15.9 million in the first quarter 2008 from $32.7 million in the first quarter 2007. Unusually rough weather conditions in the U.S. Gulf of Mexico, coupled with an increase in the number of vessels servicing this region resulted in a decline in utilization to 38.2% in the first quarter 2008 from 65.1% in the prior year period. Average revenue per day per liftboat decreased to $9,965 from $12,262 in the same periods of 2008 and 2007, respectively, due to a shift toward smaller vessels in the mix of liftboats being utilized and general weakness in dayrates. Domestic Liftboats recorded an operating loss of $4.6 million in the first quarter 2008 versus operating income of $12.5 million in the first quarter 2007.
International Liftboats revenues increased to $18.3 million in the first quarter 2008 from $14.1 million in the prior year period. This increase is attributable to an increase in average revenue per day per liftboat of approximately $3,000 to $15,030 in the first quarter 2008 from $12,095 in the first quarter 2007. Utilization essentially remained flat at 78.7%. Average operating expense per day per liftboat declined to $4,667 in the first quarter 2008 from $4,709 in the prior year period. Operating income increased by 83% to $8.1 million in the first quarter 2008 from $4.5 million in the first quarter 2007.
Our Other segment includes the results of our wholly owned subsidiary, Delta Towing, which was acquired as part of the TODCO acquisition and the wind down costs associated with our fourth quarter 2007 land rig sale. This segment recorded an operating loss of $1.3 million on revenues of $11.1 million in the first quarter 2008 primarily as a result of the aforementioned delayed recovery in drilling activity in both the U.S. Gulf of Mexico and Inland regions.
Balance Sheet Highlights
At March 31, 2008, the Company's balance sheet reflected total assets of $3.6 billion, including cash and equivalents and marketable securities totaling $34.5 million, total debt of $909.4 million and stockholders' equity of $2.0 billion. During the first quarter of 2008, the Company purchased two jackup drilling rigs and related equipment for $220.0 million with cash on hand. In addition, during the first quarter of 2008, the Company paid a deposit of $10.0 million to be applied to the purchase of a third jackup rig upon closing.
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