Seahawk Swings to Loss on GOM Drilling Permits in 3Q10
Seahawk Drilling reported a loss of $32.1 million from continuing operations, or $2.69 per diluted share, for the three months ended September 30, 2010, compared to a loss of $32.4 million, or $2.80 per diluted share, for the three months ended September 30, 2009. Revenues totaled $18.6 million during the three months ended September 30, 2010 compared with $67.6 million during the three months ended September 30, 2009.
Seahawk's third quarter 2010 results included the impact of the following items:
- An asset impairment charge for the pending sale of the Seahawk 2505, of $28.2 million, or $18.3 million after tax, and $1.54 per diluted share;
- Repair costs for the damage to the Seahawk 3000 of $4.1 million, or $2.7 million after tax, and $0.22 per diluted share;
- A gain on the sale of assets of $0.7 million, or $0.5 million after tax, and $0.04 per diluted share; and
- A deferred tax benefit related to additional deferred tax assets, which were allocated to Seahawk by Pride in connection with the completion of certain activities of the Tax Sharing Agreement and the filing of the Pride International, Inc. ("Pride") and Seahawk tax returns for 2009, of $6.8 million, or $0.57 per diluted share.
Seahawk's consolidated balance sheet at September 30, 2010 included cash and cash equivalents of $41.4 million and net working capital of $11.4 million. Seahawk's net working capital included a net balance of approximately $14.5 million owed to Pride. Capital expenditures during the third quarter of 2010 were $4.5 million. On September 30, 2010, Seahawk had total assets of $504.9 million, stockholders' equity of $380.4 million, and short-term debt of $17.9 million.
President and Chief Executive Officer Randy Stilley commented, "Due to dramatic delays in the issuing of shallow water drilling permits in the U.S. Gulf of Mexico resulting from the Macondo well blowout, as well as the continued low prices for natural gas and the economic slowdown, Seahawk's liquidity and operations have been adversely affected. As previously announced, we have engaged Simmons & Company International to explore strategic alternatives for the company in order to examine all possible options to best realize the potential of our assets and maximize value to our shareholders."
Stilley continued, "The Seahawk 3000 is near the end of its shipyard project and is expected to be on location performing its six-months of contract backlog in early December. We continue to market an additional eight jackups in the U.S. Gulf of Mexico where dayrates remain at steady levels. The recently issued Notice to Lessees G05 may provide incremental work for our fleet over the next few years as idle wells must be plugged and abandoned. Much of this additional work will likely require a jackup rig; however, these P&A operations will also require permits issued by the Bureau of Ocean Energy Management, Regulation and Enforcement. New drilling permit approvals increased during the month of October, and it appears that the approval process might continue to improve over the next several months, resulting in more demand for our services."
Stilley added, "We are also considering additional opportunities to sell idle assets in a disciplined manner, such as our recent announcement of an agreement to sell the Seahawk 2505 for $14.6 million, contingent upon a third party contract award. Our current priority is the maximization of our liquidity, and we are also taking action to further reduce expenses in all areas of our business."
Consolidated and Combined Results
Revenues for the third quarter of 2009 include $21.8 million attributable to rigs retained by Pride after Seahawk was spun-off from Pride in August of 2009. Third quarter of 2010 average revenue per day for owned rigs decreased to $43,200 compared to $93,300 in the third quarter of 2009 due to the after effects of the Macondo blowout, the loss of higher dayrate contracts in Mexico, and the economic downturn. Operating days remained relatively flat at 430 days in the third quarter of 2010 compared to 450 days during the third of quarter 2009. Seahawk recorded an operating loss of $57.3 million in the third quarter of 2010 compared to an operating loss of $54.1 million for the third quarter of 2009. The rigs retained by Pride accounted for $8.6 million of operating income in the third quarter of 2009.