Hercules Offshore Announces First Quarter 2007 Earnings
Hercules Offshore, Inc. (Nasdaq: HERO) reported net income of $33.4 million, or $1.03 per diluted share, on revenues of $110.5 million for the first quarter 2007, compared to net income of $30.9 million, or $1.00 per diluted share, on revenues of $56.1 million for the first quarter 2006. The first quarter 2006 results include a gain of $18.6 million ($0.60 per diluted share), net of tax of $11.0 million, related to the settlement of the Company's insurance claim on the loss of Rig 25 in hurricane Katrina. Excluding the effect of this item, net income was $12.3 million, or $0.40 per diluted share, in the first quarter 2006.
At March 31, 2007, the Company's balance sheet reflected total assets of $642.2 million, including cash and equivalents of $74.1 million, short-term marketable securities of $34.0 million, total debt of $92.9 million and stockholders' equity of $430.9 million.
Randy Stilley, Chief Executive Officer and President of Hercules Offshore, Inc., stated, "The Company's results were particularly impressive, given the relative weakness in the Gulf of Mexico jackup drilling market and the seasonal decline in domestic liftboat utilization. Commodity prices have remained strong so far in 2007, and based on recent increases in our customers' drilling plans, we are optimistic that a recovery in Gulf of Mexico jackup drilling will commence within the next several months. Our domestic liftboat business has already witnessed a return to utilization in excess of 70% and liftboat dayrates have remained firm. We are continuing our strategy of international expansion, and due to the continued strength of the international jackup market we anticipate a contract award on Rig 26 in the near future."
Mr. Stilley continued, "We expect to complete the previously announced $2.3 billion acquisition of TODCO around mid-year. We recently filed our Registration Statement with the Securities and Exchange Commission, and we will be filing our Hart-Scott Rodino notification form with the Department of Justice and the Federal Trade Commission on Monday April 30, 2007. Joint integration planning teams have been formed, and I am pleased with the early progress we have made to ensure a smooth transition."
Contract Drilling Services Highlights
During the first quarter 2007, revenues from Domestic Contract Drilling Services were $42.8 million, a 59% percent increase over revenues of $27.0 million in the first quarter 2006, which resulted from an increase in operating days and higher average daily revenue per rig. Operating days during the quarter increased to 474 from 382 during the same period a year ago. The average daily revenue per rig in the segment increased to $90,363 in the first quarter 2007, compared to $70,673 in the first quarter 2006. Operating income increased to $24.8 million in the first quarter 2007 from $12.5 million in the prior year period. Current quarter utilization was 87.8%, compared to 84.9% during the first quarter 2006.
International Contract Drilling Services revenues and operating income were $20.9 million and $11.6 million, respectively, during the first quarter 2007. Prior to the second quarter 2006, during which we commenced work with Rig 16 under our first international drilling contract, we did not have international drilling operations. The average daily revenue per rig was $115,978 in the first quarter 2007, and utilization was 100.0%.
Marine Services Highlights
Domestic Marine Services revenues were $32.7 million in the first quarter 2007, up from $25.6 million in the first quarter 2006. Operating income increased to $12.5 million in the first quarter 2007 from $11.7 million in the same period a year ago. The average daily revenue per liftboat increased to $12,262 in the first quarter 2007 from $8,981 in the first quarter 2006. Utilization for the Company's domestic liftboats decreased to 65.1% in the first quarter of 2007 from 82.4% in the first quarter 2006 while the total number of operating days decreased to 2,667 during the current quarter from 2,850 a year ago.
International Marine Services revenues were $14.1 million in the first quarter 2007, up from $3.5 million in the first quarter 2006. This increase was due primarily to the successful execution of our West Africa liftboat acquisitions which contributed in an increase in the total number of operating days to 1,162 from 357. Operating income increased to $4.5 million in the first quarter 2007 from $0.9 million in the first quarter 2006. The average daily revenue per liftboat increased to $12,095 in the first quarter 2007 from $9,913 in the first quarter 2006. Utilization for the Company's international liftboats decreased to 78.8% in the first quarter 2007 from 99.0% in the first quarter 2006.
Tax and Other
The Company's effective tax rates were 29.3% and 37.5% for the three months ended March 31, 2007 and 2006, respectively. The lower effective tax rate for the current quarter compared to the year-ago period was primarily driven by the increasing component of international earnings.
The Company is providing 2006 net income before the gain on the insurance settlement of Rig 25 because management believes that this measure better reflects the normal operations of the Company, as this measure excludes a significant, one-time item that materially affects period-to-period comparability. The adjusted net income and earnings per share amounts are non-GAAP financial measures. 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 ("GAAP"). In order to fully assess the Company's financial operating results, management believes that the adjusted net income figure included in this release is an appropriate measure of the Company's continuing and normal operations. However, this measure should be considered in addition to, and not as a substitute, 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 measure included in this press release has been reconciled to the nearest GAAP measure in the table that follows the financial statements.
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