HERCULES OFFSHORE, INC. HOUSTON, Oct. 23, 2014 /PRNewswire/ -- Hercules Offshore, Inc. (Nasdaq: HERO) today reported a loss from continuing operations of $88.6 million, or $0.55 per diluted share, on revenue of $221.9 million for the third quarter 2014, compared to income from continuing operations of $17.2 million, or $0.11 per diluted share, on revenue of $225.3 million for the third quarter 2013. As outlined in the Reconciliation of GAAP to Non-GAAP Financial Measures, third quarter 2014 results included the following pre-tax items:
-- $82.5 million non-cash impairment charge related to the cold stacking of
the Hercules 202, Hercules 204, Hercules 212 and Hercules 213;
-- $4.7 million net gain related to the sale of the Hercules 2500, Hercules
2003 and Hercules 156.
On an after-tax basis, these items approximated a net charge of $77.8 million, or $0.48 per diluted share.
John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "Third quarter results reflect the slowdown in U.S. Gulf of Mexico drilling activity, idle time across various international rigs, and weak operating conditions in West Africa for our international liftboat fleet. In the U.S. Gulf of Mexico, while we have recently seen some activity improvement with a portion of our customer base, this has been offset by further pullback from some of the larger customers in the region. As a result, we expect the overall environment to remain relatively soft at least through early 2015. Given these market conditions, we are executing on cost saving measures, including the cold stacking of four domestic rigs. We currently believe that this is an appropriate step to better balance the market and support utilization on our marketed rigs. However, should we see indicators of stronger demand, we will respond timely to these signals to protect our market leading position within the region.
"In International Offshore, the recent contract signing for the Hercules 267 will partially offset expected idle time on the Hercules Triumph and Hercules Resilience during the fourth quarter. Preparations are underway for the Hercules Triumph to mobilize to the North Sea, while the Hercules Resilience concluded its drilling program in the Congo earlier this month. We are in discussions with various customers to contract these rigs. As for International Liftboats, delays in Nigerian activity continue to hamper utilization, which we expect could continue well into 2015."
Domestic Offshore
Revenue generated from Domestic Offshore for the third quarter 2014 decreased to $123.3 million from $139.0 million in the third quarter 2013, due to lower utilization, partially offset by higher dayrates. Average revenue per rig per day increased by approximately 19.2% to $108,844 in the third quarter 2014 from $91,311 in the comparable 2013 period. Utilization declined to 68.4% in the third quarter 2014 from 90.7% in the third quarter 2013 on lower demand. Operating expenses of $65.8 million in the third quarter 2014 include a gain of $5.2 million from the sale of two previously cold-stacked rigs, compared to expenses of $73.6 million in the third quarter 2013. Domestic Offshore generated operating loss of $45.2 million in the third quarter 2014, which includes the aforementioned non-cash impairment charge of $82.5 million, compared to operating income of $44.3 million in the third quarter 2013.
International Offshore
International Offshore revenue increased to $74.2 million in the third quarter 2014 from $46.3 million in the third quarter 2013, largely due to the addition of the Hercules Triumph and Hercules Resilience, as well as improved operating results on the Hercules 208. The combination of these factors also contributed to a 40.8% increase in average revenue per rig per day to $153,025 for the third quarter 2014 from $108,707 in the third quarter 2013. Utilization fell to 65.9% in the third quarter 2014 from 77.2% in the third quarter 2013, primarily as a result of the contract termination for the Hercules 267 in Angola, idle time of the Hercules 260, and downtime on the Hercules 261 as it completed its scheduled regulatory survey. Operating expenses for the third quarter 2014 were $61.6 million, which includes a loss of $0.5 million from the sale of the previously mentioned cold-stacked rig, an increase from $28.2 million in the respective 2013 period, primarily due to incremental operating cost associated with the addition of the Hercules Triumph, Hercules Resilience and Hercules 267. International Offshore recorded an operating loss of $10.1 million in the third quarter 2014 compared to operating income of $2.5 million in the prior year period.
International Liftboats
International Liftboats revenue declined to $24.3 million in the third quarter 2014 from $40.0 million in the prior year period, primarily due to lower utilization. Continued lower activity from some of our larger consumers in Nigeria led to a decline in utilization to 47.1% during the third quarter 2014, compared to 74.6% in the comparable 2013 period. Average revenue per liftboat per day declined slightly to $24,420 in the third quarter 2014 from $25,364 in the third quarter 2013. Operating expenses during the third quarter 2014 were $19.0 million, compared to $21.0 million in the third quarter 2013. International Liftboats recorded an operating loss of $1.4 million in the third quarter 2014 compared to operating income of $12.8 million in the third quarter 2013.
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 income from continuing operations 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, income from continuing operations, and not as a substitute for, 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 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 Operating Income, Income from Continuing Operations 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 October 23, 2014, to discuss its third quarter 2014 financial results. To participate in the call, dial 877-546-5018 (Domestic) or 857-244-7550 (International) and reference access code 15028929 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 October 23, 2014, beginning at 3:00 p.m. CDT (4:00 p.m. EDT), through October 30, 2014. The phone number for the conference call replay is 888-286-8010 (Domestic) or 617-801-6888 (International) with access code 64266504. Additionally, the recorded conference call will be accessible through our website at http://www.herculesoffshore.com for 7 days after the conference call.
Additional Information
Headquartered in Houston, Hercules Offshore, Inc. operates a fleet of 33 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)
September 30, December 31,
2014 2013
---- ----
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $192,053 $198,406
Accounts Receivable, Net 206,428 220,139
Prepaids 31,196 20,395
Current Deferred Tax Asset 10,876 10,876
Other 5,026 17,363
----- ------
445,579 467,179
Property and Equipment, Net 1,720,584 1,808,526
Other Assets, Net 25,451 25,743
$2,191,614 $2,301,448
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $67,121 $80,018
Accrued Liabilities 71,410 81,500
Interest Payable 39,416 33,067
Insurance Notes Payable - 9,568
Other Current Liabilities 14,160 35,735
------ ------
192,107 239,888
Long-term Debt 1,210,857 1,210,676
Deferred Income Taxes 14,497 14,452
Other Liabilities 6,742 12,732
Commitments and Contingencies
Stockholders' Equity 767,411 823,700
$2,191,614 $2,301,448
========== ==========
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2014 2013 2014 2013
---- ---- ---- ----
Revenue $221,884 $225,308 $721,581 $622,959
Costs and Expenses:
Operating Expenses 146,297 122,728 413,774 355,539
Asset Impairment 82,507 - 82,507 -
Depreciation and Amortization 44,319 38,040 128,072 110,906
General and Administrative 19,659 19,284 60,405 59,821
292,782 180,052 684,758 526,266
------- ------- ------- -------
Operating Income (Loss) (70,898) 45,256 36,823 96,693
Other Income (Expense):
Interest Expense (25,194) (19,360) (74,164) (54,495)
Loss on Extinguishment of Debt - - (19,925) -
Gain on Equity Investment - - - 14,876
Other, Net (168) (337) 196 (1,652)
Income (Loss) Before Income Taxes (96,260) 25,559 (57,070) 55,422
Income Tax Benefit (Provision) 7,707 (8,400) (4,921) 18,609
----- ------ ------ ------
Income (Loss) from Continuing
Operations (88,553) 17,159 (61,991) 74,031
Income (Loss) from Discontinued
Operations, Net of Taxes - 8,093 - (40,996)
--- ----- --- -------
Net Income (Loss) (88,553) 25,252 (61,991) 33,035
Loss attributable to Noncontrolling
Interest - 21 - 39
--- --- --- ---
Net Income (Loss) attributable to
Hercules Offshore, Inc. $(88,553) $25,273 $(61,991) $33,074
======== ======= ======== =======
Net Income (Loss) attributable to
Hercules Offshore, Inc. Per Share:
Basic:
Income (Loss) from Continuing
Operations $(0.55) $0.11 $(0.39) $0.46
Income (Loss) from Discontinued
Operations - 0.05 - (0.25)
Net Income (Loss) $(0.55) $0.16 $(0.39) $0.21
Diluted:
Income (Loss) from Continuing
Operations $(0.55) $0.11 $(0.39) $0.46
Income (Loss) from Discontinued
Operations - 0.05 - (0.26)
Net Income (Loss) $(0.55) $0.16 $(0.39) $0.20
Weighted Average Shares Outstanding:
Basic 160,794 159,743 160,526 159,416
Diluted 160,794 161,851 160,526 161,472
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
-------------------------------
2014 2013
---- ----
Cash Flows from Operating Activities:
Net Income (Loss) $(61,991) $33,074
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization 128,072 121,804
Stock-Based Compensation Expense 7,153 7,464
Deferred Income Taxes (5,573) (29,792)
Provision for Doubtful Accounts Receivable 6,319 356
Gain on Disposal of Assets, Net (22,623) (3,140)
Asset Impairment 82,507 44,370
Gain on Equity Investment - (14,876)
Other 4,858 4,667
Net Change in Operating Assets and
Liabilities (52,017) 15,476
Net Cash Provided by Operating Activities 86,705 179,403
Cash Flows from Investing Activities:
Acquisition of Assets, Net of Cash Acquired - (200,957)
Capital Expenditures (134,610) (314,654)
Insurance Proceeds Received 9,067 1,430
Proceeds from Sale of Assets, Net 35,109 107,404
Other 1,145 2,214
Net Cash Used in Investing Activities (89,289) (404,563)
Cash Flows from Financing Activities:
Long-term Debt Borrowings 300,000 400,000
Redemption of 7.125% Senior Secured Notes (300,000) -
Redemption of 3.375% Convertible Senior
Notes - (61,274)
Payment of Debt Issuance Costs (3,914) (8,208)
Other 145 1,288
Net Cash Provided by (Used in) Financing
Activities (3,769) 331,806
Net Increase (Decrease) in Cash and Cash
Equivalents (6,353) 106,646
Cash and Cash Equivalents at Beginning of
Period 198,406 259,193
Cash and Cash Equivalents at End of Period $192,053 $365,839
======== ========
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING DATA
(Dollars in thousands, except per day amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2014 2013 2014 2013
---- ---- ---- ----
Domestic Offshore:
Number of rigs (as of end of period) 24 29 24 29
Revenue $123,320 $138,975 $406,968 $387,088
Operating expenses 65,757 73,577 202,095 198,887
Asset impairment 82,507 - 82,507 -
Depreciation and amortization expense 18,599 19,811 53,948 59,291
General and administrative expenses 1,692 1,238 4,824 4,705
Operating income (loss) $(45,235) $44,349 $63,594 $124,205
International Offshore:
Number of rigs (as of end of period) 9 11 9 11
Revenue $74,217 $46,309 $226,880 $126,836
Operating expenses 61,578 28,191 153,177 93,769
Depreciation and amortization expense 19,586 12,768 55,287 35,555
General and administrative expenses 3,161 2,843 7,157 10,507
Operating income (loss) $(10,108) $2,507 $11,259 $(12,995)
International Liftboats:
Number of liftboats (as of end of
period) 24 24 24 24
Revenue $24,347 $40,024 $87,733 $109,035
Operating expenses 18,962 20,960 58,502 62,883
Depreciation and amortization expense 5,126 4,721 15,868 13,872
General and administrative expenses 1,614 1,539 9,867 4,387
Operating income (loss) $(1,355) $12,804 $3,496 $27,893
Total Company:
Revenue $221,884 $225,308 $721,581 $622,959
Operating expenses 146,297 122,728 413,774 355,539
Asset impairment 82,507 - 82,507 -
Depreciation and amortization expense 44,319 38,040 128,072 110,906
General and administrative expenses 19,659 19,284 60,405 59,821
Operating income (loss) (70,898) 45,256 36,823 96,693
Interest expense (25,194) (19,360) (74,164) (54,495)
Loss on extinguishment of debt - - (19,925) -
Gain on equity investment - - - 14,876
Other, net (168) (337) 196 (1,652)
Income (loss) before income taxes (96,260) 25,559 (57,070) 55,422
Income tax benefit (provision) 7,707 (8,400) (4,921) 18,609
Income (loss) from continuing
operations (88,553) 17,159 (61,991) 74,031
Income (loss) from discontinued
operations, net of taxes - 8,093 - (40,996)
Net income (loss) (88,553) 25,252 (61,991) 33,035
Loss attributable to noncontrolling
interest - 21 - 39
Net income (loss) attributable to
Hercules Offshore, Inc $(88,553) $25,273 $(61,991) $33,074
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING DATA - (Continued)
(Dollars in thousands, except per day amounts)
(Unaudited)
Three Months Ended September 30, 2014
-------------------------------------
Operating Days Available Days Utilization (1) Average Average
Revenue per Operating
Day (2) Expense per
Day (3)
-------
1,133 1,656 68.4% $108,844 $39,708
Domestic Offshore
485 736 65.9% 153,025 83,666
International Offshore
997 2,116 47.1% 24,420 8,961
International Liftboats
Three Months Ended September 30, 2013
-------------------------------------
Operating Days Available Days Utilization (1) Average Average
Revenue per
Day (2) Operating
Expense per
Day (3)
-------
1,522 1,678 90.7% $91,311 $43,848
Domestic Offshore
426 552 77.2% 108,707 51,071
International Offshore
1,578 2,116 74.6% 25,364 9,905
International Liftboats
Nine Months Ended September 30, 2014
------------------------------------
Operating Days Available Days Utilization (1) Average Average
Revenue per
Day (2) Operating
Expense per
Day (3)
-------
3,774 4,914 76.8% $107,835 $41,126
Domestic Offshore
1,535 2,139 71.8% 147,805 71,612
International Offshore
3,473 6,279 55.3% 25,261 9,317
International Liftboats
Nine Months Ended September 30, 2013
------------------------------------
Operating Days Available Days Utilization (1) Average Average
Revenue per Operating
Day (2) Expense per
Day (3)
-------
4,576 4,993 91.6% $84,591 $39,833
Domestic Offshore
1,115 1,540 72.4% 113,754 60,889
International Offshore
4,503 6,220 72.4% 24,214 10,110
International Liftboats
(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
operating income, income from continuing operations,
net income or diluted earnings per share excluding
certain charges or amounts. These adjusted income
Three Months Nine Months Ended
September 30,
Ended
September 30,
-------------
2014 2014 2013
---- ---- ----
Operating
Income
(Loss):
GAAP
Operating
Income
(Loss) $(70,898) $36,823 $96,732
Adjustment 77,766 (a) 59,887 (b) -
------ ------ ---
Non-
GAAP
Operating
Income $6,868 $96,710 $96,732
====== ======= =======
Other
Expense:
GAAP
Other
Expense $(25,362) $(93,893) $(41,271)
Adjustment - 19,925 (c) (14,876) (d)
--- ------ -------
Non-
GAAP
Other
Expense $(25,362) $(73,968) $(56,147)
======== ======== ========
Benefit
(Provision)
for
Income
Taxes:
GAAP
Benefit
(Provision)
for
Income
Taxes $7,707 $(4,921) $18,609
Tax
Adjustment - - (37,729) (e)
Non-
GAAP
Benefit
(Provision)
for
Income
Taxes $7,707 $(4,921) $(19,120)
====== ======= ========
Income
(Loss)
from
Continuing
Operations
attributable
to
Hercules
Offshore,
Inc.:
GAAP
Income
(Loss)
from
Continuing
Operations $(88,553) $(61,991) $74,070
Total
Adjustment 77,766 79,812 (52,605)
------ ------ -------
Non-
GAAP
Income
(Loss)
from
Continuing
Operations $(10,787) $17,821 $21,465
======== ======= =======
Diluted
Earnings
(Loss)
per
Share:
GAAP
Diluted
Earnings
(Loss)
per
Share $(0.55) $(0.39) $0.46
Adjustment
per
Share 0.48 0.50 (0.33)
---- ---- -----
Non-
GAAP
Diluted
Earnings
(Loss)
per
Share $(0.07) $0.11 $0.13
====== ===== =====
(a) This amount represents a $82.5 million
non-cash impairment charge of
property and equipment and a $4.7
million net gain on the sale of three
cold-stacked drilling rigs.
(b) This amount represents a $82.5 million
non-cash impairment charge of
property and equipment and a $22.6
million net gain on the sale of cold-
stacked drilling rigs.
(c) 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.
(d) This amount represents a non-cash gain
of $14.9 million related to the
adjustment of our investment in
Discovery Offshore to fair market
value at the date our controlling
interest was obtained.
(e) This amount represents a tax benefit
recognized of $37.7 million related to
the change in characterization of the
Seahawk acquisition for tax purposes
from a purchase of assets to a
reorganization.
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SOURCE Hercules Offshore, Inc.
