Hercules Offshore Hurdles Lower Results in Q2 2008
Tuesday, July 29, 2008
Hercules Offshore, Inc. has reported net income of $20.0 million, or $0.22 per diluted share, before separation related charges, on revenues of $270.8 million for the second quarter 2008, compared to net income of $24.2 million, or $0.74 per diluted share, before charges, on revenues of $99.0 million for the second quarter 2007.
Net income for the quarter ended June 30, 2008, inclusive of $3.6 million, after tax, in separation related costs, was $16.4 million, or $0.18 per diluted share. Net income for the second quarter of 2007 was $23.5 million, or $0.72 per diluted share, which includes $0.7 million, after tax, in severance-related costs and a net loss related to the early retirement of debt and an interest rate swap termination.
Sequentially, the company's second quarter diluted earnings per share, before non-recurring items, were $0.17 higher than the first quarter 2008 diluted earnings per share of $0.05.
John Rynd, Chief Executive Officer and President of Hercules Offshore stated, "Our second quarter results reflect improving market conditions for our Domestic Offshore and Domestic Liftboat segments. The domestic offshore environment is expected to remain positive as current commodity prices are driving attractive well economics and higher capital spending by our customers."
"In keeping with our long-stated strategy, we are also continuing to expand our international operations. We are mobilizing the Amberjack liftboat to the Middle East from the U.S. Gulf of Mexico and we anticipate operations on this vessel will commence in the fourth quarter. This represents the third additional liftboat we will put into service internationally this year, in addition to the four additional jackups that we previously announced, providing substantial growth in our earnings over the next two years."
During the second quarter 2008, Domestic Offshore revenues increased to $97.4 million from $28.3 million in the second quarter 2007 as a result of additional operating days stemming from the acquisition of TODCO in July 2007. While utilization increased to 79.6% from 68.7%, it was offset by a decline in average revenue per day per rig to $60,445 from $75,531 in the second quarters of 2008 and 2007, respectively. Domestic Offshore generated operating income of $23.6 million for the second quarter 2008 compared to operating income of $10.1 million in the second quarter of 2007.
International Offshore revenues were $74.2 million for the second quarter 2008 compared with $19.6 million for the prior year period. This increase was also largely due to increased operating days resulting from the TODCO acquisition as well as the activation of the Hercules 260. Average revenue per day per rig for the second quarter 2008 was $115,556 compared with $109,719 in the corresponding period of 2007, while utilization declined to 87.7% from 98.4% for the same periods largely due to downtime on the Hercules 110. Average operating expense per day per rig increased by $10,662 to $50,967 in the second quarter 2008 from $40,305 in the corresponding period of the prior year due to a significant increase in the amortization of mobilization expense and rental expense that is rebilled to the customer. Operating income increased by over 175% to $27.4 million in the second quarter of 2008.
Inland recorded revenues of $40.3 million and an operating loss of $2.9 million during the second quarter 2008. Average revenue per day per rig was $39,589 on utilization of 68.4%. The Company did not have inland barge operations prior to the third quarter of 2007.
Domestic Liftboats revenues declined to $22.3 million for the second quarter 2008, from $37.2 million in the second quarter 2007 due to a reduction in demand which adversely impacted both dayrates and utilization. Average revenue per day per liftboat declined to $9,030 in the second quarter of 2008 from $12,482 in the same period of 2007 while utilization decreased to 63.7% from 71.2% in the same periods, respectively. Operating income for the second quarter 2008 was $3.0 million compared with $14.8 million in the second quarter of the previous year.
International Liftboats revenues increased $6.4 million to $20.3 million in the second quarter 2008 from $13.9 million in the second quarter 2007 due to strong demand in West Africa and the completion of the reactivation of the Black Jack vessel. Average revenue per day per liftboat increased by 38% in the second quarter 2008 to $15,255 from $11,090 in the prior year period on slightly higher utilization. Operating Income increased to $6.8 million in the second quarter of 2008 from $3.5 million in the same prior year period.
Our Other segment includes the results of our wholly-owned subsidiary, Delta Towing, and the results associated with the completion of the fourth quarter sale of our land rigs, which were acquired as part of the TODCO acquisition. This segment recorded operating income of $2.3 million on revenues of $16.4 million in the second quarter 2008.
Balance Sheet Highlights
At June 30, 2008, the Company's balance sheet reflected total assets of $3.9 billion, including cash and equivalents totaling $98.0 million, total debt of $1.2 billion and stockholders' equity of $2.0 billion. During the quarter, the Company improved liquidity significantly through an increase in the commitments on its revolving credit facility to $250 million from $150 million and the issuance of $250 million in principal amount of 3.375% Convertible Senior Notes due 2038. The notes will be convertible under certain circumstances into shares of Hercules Offshore common stock at a rate which is equal to a conversion price of approximately $50.08 per share. The Company utilized approximately $49.2 million of the proceeds from the offering to repurchase 1.45 million shares of its common stock and $100 million to repay amounts outstanding under its revolving credit facility.