Hercules Offshore, Inc. (NASDAQ:HERO) reported a loss from continuing operations of $16.0 million, or $0.14 per diluted share, on revenues of $150.8 million for the first quarter 2010, compared with a loss from continuing operations of $4.5 million, or $0.05 per diluted share, on revenues of $223.5 million for the first quarter 2009.
John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "While our financial results remain depressed following the industry-wide downturn that began in 2008, drilling activity in the U.S. Gulf of Mexico has increased meaningfully over the past two quarters, and bidding activity has remained fairly steady despite the recent pressure on natural gas prices. We remain encouraged by the improving sequential trends in most of our business segments, and given our significant cost reduction measures and skilled workforce, we are well positioned to benefit from the ongoing recovery in the markets we serve."
Domestic Offshore revenues decreased to $29.0 million in the first quarter 2010 from $59.2 million in the comparable period in 2009. This decrease was primarily driven by a reduction in average revenue per rig per day to $35,191 in the first quarter 2010 from $68,497 in the first quarter 2009 as a result of the industry wide downturn that pressured dayrates throughout 2009. Operating expenses declined approximately $15.3 million, or 28%, to $39.2 million in the first quarter 2010 from $54.4 million in the comparable 2009 period primarily as a result of our stacking plan, which resulted in lower labor costs and fewer repair and maintenance expenses. Domestic Offshore recorded an operating loss of $30.1 million for the first quarter 2010 compared to an operating loss of $11.9 million for the first quarter 2009.
International Offshore revenues decreased to $73.4 million in the first quarter 2010 from $103.5 million in the first quarter 2009 as a result of a decline in our utilization to 60.6% from 93.9%, in the same periods, respectively. Utilization was hampered by the Hercules 156 and Hercules 170 which were contracted in the first quarter 2009 but did not work during the first quarter 2010, the recent mobilization of the Hercules 205 and Hercules 206 to the U.S. Gulf of Mexico and the brief period of uncontracted days in January 2010 on Platform 3 prior to commencing a 440-day contract. Average operating expenses per rig per day decreased to $39,953 in the first quarter 2010 from $52,115 in the comparable quarter in 2009 largely as a result of our cost reduction efforts. Operating income decreased to $22.5 million in the first quarter 2010 from operating income of $42.9 million in the prior year period.
Inland revenues for the first quarter 2010 were $4.8 million, a decrease from $12.9 million in the first quarter 2009, largely due to a decline in average revenue per rig per day to $19,796 from $43,332 during the same periods, respectively, as a result of continued weak demand in the industry. Operating expenses decreased by $14.5 million, or 72%, to $5.7 million in the first quarter 2010 from $20.3 million in the first quarter 2009 as a result of our stacking plan and other cost reduction measures. Our first quarter 2010 operating expenses are net of a $1.8 million gain from the sale of three of our retired barges. Inland general and administrative expense benefitted from the reversal of a $3.5 million balance in allowance for doubtful accounts as the receivable is now expected to be collected in the second quarter 2010. This segment recorded an operating loss of $5.3 million in the first quarter 2010 versus an operating loss of $16.2 million in the first quarter 2009.
Domestic Liftboats generated revenues of $11.4 million in the first quarter 2010 compared to $22.6 million in the first quarter 2009. The decrease in revenue stems from weaker market conditions which led to decreases in both utilization and average revenue per liftboat per day. Utilization decreased to 50.5% during the first quarter 2010 from 63.0% in the first quarter 2009, while average revenue per liftboat per day decreased to $6,626 from $9,270 in the same periods, respectively. Our average revenue per liftboat per day was also adversely impacted due to shift in mix as we moved four of our larger liftboats to West Africa in the fourth quarter 2009. This segment recorded a first quarter 2010 operating loss of $2.6 million compared to operating income of $3.0 million in the first quarter of the previous year.
International Liftboat revenues increased by 39% to $26.0 million in the first quarter 2010 compared to $18.6 million in the first quarter 2009 primarily due to the aforementioned transfer of four vessels to West Africa from the U.S. Gulf of Mexico. Operating days increased to 1,174 in the first quarter 2010 from 918 in the first quarter 2009 and average revenue per liftboat per day increased slightly to $22,114 from $20,307 in the same periods, respectively. Operating income for the segment of $5.3 million during the first quarter 2010 declined from $6.9 million during the first quarter 2009 primarily as a result of shifting, and in some cases, cancellation of certain of our customers' projects and the amortization of a portion of the deferred mobilization costs associated with the aforementioned vessel transfer.
Income Tax Benefit
The Company's income tax benefit increased to $26.1 million, for an effective rate of approximately 62% during the first quarter 2010 from $2.8 million, for an effective rate of 39%, during the first quarter 2009. During the quarter, the Company effectively reached a compromise settlement with the Mexican tax authorities of all issues for 2004-2007 in the amount of approximately $10.8 million which we expect to pay in the second quarter. This resulted in a net income tax benefit of approximately $6.2 million during the first quarter 2010.
Liquidity and Capitalization
At March 31, 2010, the Company had unrestricted cash and cash equivalents totaling $130.8 million and unused capacity of $164.8 million under its revolving credit facility. As of March 31, 2010, the Company's balance sheet reflects total debt of $860.7 million.
4. Oceanco Changes Ownership
Oceanco, builder of luxury superyachts, has been acquired by Mohammed Al Barwani, a private investor, who is based in the Sultanate of Oman. Barwani has interests in oil, gas, manufacturing and minerals in Europe, the Middle East and Asia Pacific through MB Holding Company LLC as well as investments in various other diversified assets. Barwani said, "I see Oceanco as a great brand. The company offers an outstanding growth opportunity as the world economy recovers. Oceanco's order book is healthy and the business shows a strong balance sheet."
Marcel Onkenhout, former Deputy Managing Director of Oceanco, who has been with the company for 16 years, has been appointed as the new CEO.
The latest yachts from the shipyard are the 280.5-ft Vibrant Curiosity, launched 2009 and the 280.5-ft Sunrays, launched 2010. Vibrant Curiosity is Oceanco's third project with Venice-based designers, Nuvolari and Lenard. She has been nominated for several of this year's industry awards. Currently under construction at Oceanco are three yachts over 262.5 ft, a fourth is in the planning phases, and various other designs and proposals are on the drawing boards. Plans are underway for construction of a new shed that can accommodate yachts up to 110 meters in length.
Barwani holds a Bachelor of Science degree from Miami University of Ohio and a Masters degree in Petroleum engineering from Heriot-Watt University in Scotland.