HERCULES OFFSHORE, INC. HOUSTON, July 23, 2015 /PRNewswire/ -- Hercules Offshore, Inc. (Nasdaq: HERO) today reported a net loss of $88.3 million, or $0.55 per diluted share, on revenue of $79.2 million for the second quarter 2015, compared to net income of $6.6 million, or $0.04 per diluted share, on revenue of $243.0 million for the second quarter 2014. As outlined in the Reconciliation of GAAP to Non-GAAP Financial Measures, second quarter 2015 results include a pre-tax adjustment of $13.4 million related to retroactive dayrate concessions on the Hercules 261, 262 and 266, $10.6 million of costs related to financing and restructuring activities, a $3.6 million net loss related to asset sales, including the sale of six cold stacked jackups and a $1.9 million charge related to the termination of our Credit Facility. These items resulted in a second quarter after-tax adjustment of $28.8 million, or $0.18 per diluted share. Second quarter 2014 results included an after-tax gain of $17.9 million related to the sale of three cold stacked jackups as well as a $4.8 million charge related to the early retirement of debt and issuance costs for a total net adjustment of $13.1 million, or $0.08 per diluted share.
John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "Second quarter results reflect the weak operating conditions across the offshore services sector as well the impact of our resolution with Saudi Aramco for our three rigs in the Middle East. The latest pullback in the price of oil is likely to delay any improvement in worldwide activity levels well into 2016. The limited visibility and challenging market conditions that we expect to persist for some time drove our decision to restructure our capital base. As previously disclosed, we have reached an agreement with the majority of our noteholders, and anticipate obtaining final approval of our restructuring plan in late October. We also continue to aggressively reduce costs without compromising the safety of our employees or the quality of our services. By controlling costs and establishing a stronger balance sheet, we will be better positioned to weather this protracted downturn and possibly capitalize on opportunities that may arise in such industry conditions."
Domestic Offshore
Revenue generated from Domestic Offshore for the second quarter 2015 decreased 71% to $40.6 million from $140.4 million in the second quarter 2014, driven by lower utilization and dayrates on a reduced marketed rig fleet. Operating days during the second quarter 2015 declined to 439 days with utilization of 53.6% on a marketed fleet of 9 rigs, compared to 1,297 days on 18 marketed rigs at 79.2% utilization during the second quarter 2014. Average revenue per rig per day decreased to $92,538 in the second quarter 2015 from $108,237 in the comparable 2014 period. Operating expenses of $26.4 million in the second quarter 2015 include a net loss of $3.4 million related to asset sales, including the Hercules 85, 153, 203, 206, 207 and 211, compared to expenses of $63.5 million in the second quarter 2014, which includes a gain of $7.4 million from the sale of the Hercules 250 and 2002. The significant reduction in operating expenses in the current quarter, after adjusting for asset sales, was largely attributable to the reduced number of fully crewed rigs in operation. Domestic Offshore reported operating income of $1.4 million in the second quarter 2015, compared to $57.3 million in the second quarter 2014, including the aforementioned asset sale gains and losses.
International Offshore
International Offshore revenue of $17.5 million in the second quarter 2015 includes a $13.4 million adjustment related to retroactive dayrate concessions on the Hercules 261, 262 and 266 made on their existing contracts with Saudi Aramco, and compares to revenue of $71.7 million in the second quarter 2014. Utilization decreased to 50.0% in the second quarter 2015 from 62.5% in the second quarter 2014, largely due to idle time on the Hercules Triumph, Hercules Resilience and Hercules 208, partially offset by higher utilization on the Hercules 261 and Hercules 260. Average revenue per rig per day decreased to $47,975 in the second quarter 2015 from $157,637 in the second quarter of 2014, driven largely by idle time on the Hercules Resilience and Hercules Triumph, lower renegotiated dayrates on the three rigs working for Saudi Aramco, as well as the retroactive dayrate adjustments on these three rigs. Operating expense decreased to $35.5 million in the second quarter 2015, from $44.1 million in the respective 2014 period, which includes a $10.5 million gain on the sale of Hercules 258. This reduction in operating expense was driven in part by lower costs on the Hercules 261 and 262 as well as lower costs incurred on the idle rigs. International Offshore recorded an operating loss of $40.5 million in the second quarter 2015 compared to operating income of $6.7 million in the prior year period, including the aforementioned rig sale gain.
International Liftboats
International Liftboats revenue declined to $21.2 million in the second quarter 2015 from $30.9 million in the prior year period, due to lower utilization and dayrates. Second quarter 2015 utilization declined to 49.7% from 61.0% in the respective 2014 period. Average revenue per liftboat per day decreased 16% to $20,329 in the second quarter 2015 from $24,162 in the second quarter 2014, primarily due to market pressure on dayrates. Operating expenses in the second quarter 2015 declined by 21% to $15.0 million, compared to $19.1 million in the second quarter 2014, reflecting lower activity levels and the impact of our cost reduction measures. International Liftboats recorded operating income of $0.8 million in the second quarter 2015 compared to an operating loss of $0.7 million in the second quarter 2014, which includes approximately $5.3 million of bad debt expense.
Non-GAAP
Certain non-GAAP performance measures and corresponding reconciliations to GAAP financial measures for the Company have been provided for meaningful comparisons between current results and prior operating periods. 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. In order to fully assess the financial operating results, management believes that the adjusted net income figures included in this release are appropriate measures of the continuing and normal operations of the Company. However, these measures should be considered in addition to, and not as a substitute for, or superior to, revenue, net income, operating income, cash flows from operations, or other measures of financial performance prepared in accordance with GAAP. The non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure in the table that follows the financial statements. Please see the attached Reconciliation of GAAP to Non-GAAP Financial Measures for a complete description of the adjustments made to Revenue, Operating Income, Net Income and Diluted Income per Share.
Conference Call Information
Hercules Offshore will conduct a conference call at 10:00 a.m. CDT (11:00 a.m. EDT) on July 23, 2015, to discuss its second quarter 2015 financial results. To participate in the call, dial +1 (855) 865-4806 (Domestic) or +1 (262) 912-6154 (International) and reference access code 80887652 approximately 10 minutes prior to the start of the call. The conference call will also be broadcast live via the Internet at http://www.herculesoffshore.com.
A replay of the conference call will be available by telephone on July 23, 2015, beginning at 1:00 p.m. CDT (2:00 p.m. EDT), through July 30, 2015. The phone number for the conference call replay is +1 (855) 859-2056 (Domestic) or +1 (404) 537-3406 (International). The access code is 80887652. Additionally, the recorded conference call will be accessible through our website at http://www.herculesoffshore.com for 7 days after the conference call.
About Hercules Offshore, Inc.
Headquartered in Houston, Hercules Offshore, Inc. operates a fleet of 27 jackup rigs, including one rig under construction, and 24 liftboats. The Company offers a range of services to oil and gas producers to meet their needs during drilling, well service, platform inspection, maintenance, and decommissioning operations in several key shallow water provinces around the world. For more information, please visit our website at http://www.herculesoffshore.com.
The news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are subject to a number of risks, uncertainties and assumptions, including the factors described in Hercules Offshore's most recent periodic reports and other documents filed with the Securities and Exchange Commission, which are available free of charge at the SEC's website at http://www.sec.gov or the Company's website at http://www.herculesoffshore.com. Hercules Offshore cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2015 2014
---- ----
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $143,373 $207,937
Accounts Receivable, Net 94,176 166,359
Prepaids 21,528 19,585
Current Deferred Tax Asset 4,009 4,461
Other 3,427 5,955
----- -----
266,513 404,297
Property and
Equipment, Net 1,555,954 1,574,749
Other Assets, Net 21,157 23,361
--------------
$1,843,624 $2,002,407
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Liabilities:
Current Portion of Long-term
Debt $1,211,044 $ -
Accounts Payable 45,283 52,952
Accrued Liabilities 53,987 66,090
Interest Payable 32,005 32,008
Other Current Liabilities 10,704 13,406
------ ------
1,353,023 164,456
Long-term Debt - 1,210,919
Deferred Income
Taxes 3,947 4,147
Other Liabilities 14,752 7,854
Commitments and
Contingencies
Stockholders'
Equity 471,902 615,031
--------------
$1,843,624 $2,002,407
========== ==========
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ---- ----
Revenue $79,249 $242,963 $201,868 $499,697
Costs and Expenses:
Operating Expenses 76,991 126,725 176,590 267,477
Depreciation and Amortization 37,451 43,670 74,669 83,753
General and Administrative 24,990 22,519 40,750 40,746
139,432 192,914 292,009 391,976
------- ------- ------- -------
Operating Income (Loss) (60,183) 50,049 (90,141) 107,721
Other Income (Expense):
Interest Expense (24,737) (26,069) (49,697) (48,970)
Loss on Extinguishment of Debt (1,884) (4,767) (1,884) (19,925)
Other, Net (200) 214 220 364
-----
Income (Loss) Before Income
Taxes (87,004) 19,427 (141,502) 39,190
Income Tax Provision (1,246) (12,781) (3,863) (12,628)
------ ------- ------ -------
Net Income (Loss) $(88,250) $6,646 $(145,365) $26,562
======== ====== ========= =======
Net Income (Loss) Per Share:
Basic $(0.55) $0.04 $(0.90) $0.17
Diluted $(0.55) $0.04 $(0.90) $0.16
Weighted Average Shares Outstanding:
Basic 161,523 160,713 161,290 160,392
Diluted 161,523 161,795 161,290 161,839
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
-------------------------
2015 2014
---- ----
Cash Flows from Operating
Activities:
Net Income (Loss) $(145,365) $26,562
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by (Used in)
Operating Activities:
Depreciation and Amortization 74,669 83,753
Stock-Based Compensation Expense 2,412 4,771
Deferred Income Taxes (396) (5,213)
Provision (Benefit) for Doubtful Accounts
Receivable (431) 5,088
(Gain) Loss on Disposal of Assets, Net 3,083 (17,003)
Other 2,105 4,220
Net Change in Operating Assets and
Liabilities 54,582 (37,208)
------
Net Cash Provided by (Used in) Operating
Activities (9,341) 64,970
Cash Flows from Investing
Activities:
Capital Expenditures (65,927) (100,448)
Insurance Proceeds Received 3,543 9,067
Proceeds from Sale of Assets, Net 7,161 23,717
Net Cash Used in Investing Activities (55,223) (67,664)
Cash Flows from Financing
Activities:
Long-term Debt Borrowings - 300,000
Redemption of 7.125% Senior Secured Notes - (300,000)
Payment of Debt Issuance Costs - (3,914)
Other - 107
Net Cash Used in Financing Activities - (3,807)
---
Net Decrease in
Cash and Cash
Equivalents (64,564) (6,501)
Cash and Cash
Equivalents at
Beginning of
Period 207,937 198,406
Cash and Cash
Equivalents at
End of Period $143,373 $191,905
======== ========
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING DATA
(Dollars in thousands, except per day amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ---- ----
Domestic Offshore:
Number of rigs (as of end of period) 18 26 18 26
Revenue $40,624 $140,383 $93,499 $283,648
Operating expenses 26,441 63,538 62,407 136,338
Depreciation and amortization
expense 11,665 17,978 23,358 35,349
General and administrative expenses 1,134 1,584 2,520 3,132
-----
Operating income $1,384 $57,283 $5,214 $108,829
===
International Offshore:
Number of rigs (as of end of period) 9 10 9 10
Revenue $17,463 $71,725 $69,111 $152,663
Operating expenses 35,511 44,061 85,678 91,599
Depreciation and amortization
expense 20,959 19,075 41,298 35,701
General and administrative expenses 1,469 1,864 3,463 3,996
-----
Operating income (loss) $(40,476) $6,725 $(61,328) $21,367
===
International Liftboats:
Number of liftboats (as of end of
period) 24 24 24 24
Revenue $21,162 $30,855 $39,258 $63,386
Operating expenses 15,039 19,126 28,505 39,540
Depreciation and amortization
expense 4,166 5,616 8,598 10,742
General and administrative expenses 1,140 6,826 1,689 8,253
-----
Operating income (loss) $817 $(713) $466 $4,851
===
Total Company:
Revenue $79,249 $242,963 $201,868 $499,697
Operating expenses 76,991 126,725 176,590 267,477
Depreciation and amortization
expense 37,451 43,670 74,669 83,753
General and administrative expenses 24,990 22,519 40,750 40,746
------
Operating income (loss) (60,183) 50,049 (90,141) 107,721
Interest expense (24,737) (26,069) (49,697) (48,970)
Loss on extinguishment of debt (1,884) (4,767) (1,884) (19,925)
Other, net (200) 214 220 364
-----
Income (loss) before income taxes (87,004) 19,427 (141,502) 39,190
Income tax provision (1,246) (12,781) (3,863) (12,628)
-------
Net income (loss) $(88,250) $6,646 $(145,365) $26,562
===
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING DATA - (Continued)
(Dollars in thousands, except per day amounts)
(Unaudited)
Three Months Ended June 30, 2015
--------------------------------
Operating Days Available Days Utilization (1) Average Average
Revenue per Operating
Day (2) Expense per
Day (3)
------
Domestic Offshore 439 819 53.6% $92,538 $32,284
International Offshore 364 728 50.0% 47,975 48,779
International Liftboats 1,041 2,093 49.7% 20,329 7,185
Three Months Ended June 30, 2014
--------------------------------
Operating Days Available Days Utilization (1) Average Average
Revenue per Operating
Day (2) Expense per
Day (3)
------
Domestic Offshore 1,297 1,638 79.2% $108,237 $38,790
International Offshore 455 728 62.5% 157,637 60,523
International Liftboats 1,277 2,093 61.0% 24,162 9,138
Six Months Ended June 30, 2015
------------------------------
Operating Days Available Days Utilization (1) Average Average
Revenue per Operating
Day (2) Expense per
Day (3)
------
Domestic Offshore 972 1,706 57.0% $96,192 $36,581
International Offshore 709 1,448 49.0% 97,477 59,170
International Liftboats 1,829 4,163 43.9% 21,464 6,847
Six Months Ended June 30, 2014
------------------------------
Operating Days Available Days Utilization (1) Average Average
Revenue per Operating
Day (2) Expense per
Day (3)
------
Domestic Offshore 2,641 3,258 81.1% $107,402 $41,847
International Offshore 1,050 1,403 74.8% 145,393 65,288
International Liftboats 2,476 4,163 59.5% 25,600 9,498
(1) Utilization is defined as the total
number of days our rigs or liftboats,
as applicable, were under contract,
known as operating days, in the
period as a percentage of the total
number of available days in the
period. Days during which our rigs
and liftboats were undergoing major
refurbishments, upgrades or
construction, and days during which
our rigs and liftboats are cold
stacked, are not counted as available
days. Days during which our liftboats
are in the shipyard undergoing
drydocking or inspection are
considered available days for the
purposes of calculating utilization.
(2) Average revenue per rig or liftboat
per day is defined as revenue earned
by our rigs or liftboats, as
applicable, in the period divided by
the total number of operating days
for our rigs or liftboats, as
applicable, in the period.
(3) Average operating expense per rig or
liftboat per day is defined as
operating expenses, excluding
depreciation and amortization,
incurred by our rigs or liftboats, as
applicable, in the period divided by
the total number of available days in
the period. We use available days to
calculate average operating expense
per rig or liftboat per day rather
than operating days, which are used
to calculate average revenue per rig
or liftboat per day, because we incur
operating expenses on our rigs and
liftboats even when they are not
under contract and earning a dayrate.
Hercules Offshore, Inc. and
Subsidiaries
Reconciliation of GAAP to Non-GAAP
Financial Measures
(Unaudited)
(In thousands, except per share data)
We report our financial results in
accordance with generally accepted
accounting principles (GAAP). However,
management believes that certain non-
GAAP performance measures and ratios
may provide users of this financial
information additional meaningful
comparisons between current results
and results in prior operating
periods. Non-GAAP financial measures
we may present from time to time are
revenue, operating income, income from
continuing operations, net income or
diluted earnings per share excluding
certain charges or amounts. These
adjusted amounts are not a measure of
financial performance under GAAP.
Accordingly, they should not be
considered as a substitute for
revenue, operating income, income from
continuing operations, net income,
earnings per share or other income
data prepared in accordance with GAAP.
See the table below for supplemental
financial data and corresponding
reconciliations to GAAP financial
measures for the three and six months
ended June 30, 2015 and 2014. Non-
GAAP financial measures should be
viewed in addition to, and not as an
alternative for, the Company's
reported results prepared in
accordance with GAAP. The non-GAAP
measures included in this press
release have been reconciled to the
nearest GAAP measure in the following
table:
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ---- ----
Revenue:
GAAP Revenue $79,249 $242,963 $201,868 $499,697
Adjustment 13,427 (a) - - -
--- --- ---
Non-GAAP
Revenue $92,676 $242,963 $201,868 $499,697
======= ======== ======== ========
Operating
Income
(Loss):
GAAP Operating
Income (Loss) $(60,183) $50,049 $(90,141) $107,721
Adjustment 27,570 (b) (17,879) (d) 14,143 (f) (17,879) (d)
------- ------ -------
Non-GAAP
Operating
Income (Loss) $(32,613) $32,170 $(75,998) $89,842
======== ======= ======== =======
Other Expense:
GAAP Other
Expense $(26,821) $(30,622) $(51,361) $(68,531)
Adjustment 1,884 (c) 4,767 (e) 1,884 (c) 19,925 (g)
----- ----- ----- ------
Non-GAAP
Other Expense $(24,937) $(25,855) $(49,477) $(48,606)
======== ======== ======== ========
Provision for
Income Taxes:
GAAP Provision
for Income
Taxes $(1,246) $(12,781) $(3,863) $(12,628)
Tax Adjustment (671) - - -
Non-GAAP
Provision for
Income Taxes $(1,917) $(12,781) $(3,863) $(12,628)
======= ======== ======= ========
Net Income
(Loss):
GAAP Net
Income (Loss) $(88,250) $6,646 $(145,365) $26,562
Total
Adjustment 28,783 (13,112) 16,027 2,046
------ ------- ------ -----
Non-GAAP Net
Income (Loss) $(59,467) $(6,466) $(129,338) $28,608
======== ======= ========= =======
Diluted
Earnings
(Loss) per
Share:
GAAP Diluted
Earnings
(Loss) per
Share $(0.55) $0.04 $(0.90) $0.16
Adjustment per
Share 0.18 (0.08) 0.10 0.02
---- ----- ---- ----
Non-GAAP
Diluted
Earnings
(Loss) per
Share $(0.37) $(0.04) $(0.80) $0.18
====== ====== ====== =====
(a) This amount represents $13.4
million related to the
retroactive dayrate concessions
on the Hercules 261, Hercules
262 and Hercules 266 made from
their existing contracts with
Saudi Aramco. On an after-tax
basis, this adjustment
approximated $12.8 million.
(b) This amount represents $10.6
million of costs related to
financing and restructuring
activities and a $3.6 million
net loss on the sale of assets,
including six cold stacked
drilling rigs. Additionally,
this amount includes a $13.4
million revenue adjustment
related to the retroactive
dayrate concessions on the
Hercules 261, Hercules 262 and
Hercules 266 made from their
existing contracts with Saudi
Aramco, which on an after-tax
basis, this adjustment
approximated $12.8 million.
(c) This amount represents a
charge of $1.9 million related
to the termination of the Credit
Facility.
(d) This amount represents a
$17.9 million gain on the sale
of three cold stacked drilling
rigs.
(e) This amount represents a
charge of $4.8 million related
to retirement of the remaining
portion of our 7.125% senior
secured notes in April 2014.
(f) This amount represents $10.6
million of costs related to
financing and restructuring
activities and a $3.6 million
net loss on the sale of assets,
including six cold stacked
drilling rigs.
(g) This amount represents a
charge of $19.9 million related
to retirement of our 7.125%
senior secured notes and
issuance of our 6.75% senior
notes.
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SOURCE Hercules Offshore, Inc.
