Hercules Offshore Q3 2010 Results
Hercules Offshore, Inc. (Nasdaq: HERO) reported a loss from continuing operations of $15.1m, or $0.13 per diluted share, on revenues of $168.5m for the third quarter 2010, compared with a loss from continuing operations of $37.2m, or $0.38 per diluted share, on revenues of $159.3m for the third quarter 2009, excluding the effects of non-recurring items.
During the third quarter of 2009, when including the effect of non-recurring items, the Company reported a loss from continuing operations of $47.0 million, or $0.48 per diluted share. These non-recurring items include a $15.1 million charge related to the write-off of previously deferred unamortized debt issuance costs and the payment of certain third-party fees in connection with the amendment of our Credit Agreement. On an after-tax basis, these adjustments approximated $9.8 million, or $0.10 per diluted share.
John T. Rynd, Chief Executive Officer and President of Hercules Offshore, stated, "In spite of the continuing uncertainty surrounding the permit approval process, we credit our customers and marketing group for finding opportunities to keep our Domestic Offshore segment relatively busy during what has been a very challenging regulatory environment for the shallow water drilling industry in the third quarter. While the pace of permit and exploration plan approval remains slow, the pick up in permit issuances for new wells in recent weeks gives us measured confidence that the Bureau of Ocean Energy Management, Regulation, and Enforcement ("BOEMRE") and the industry are gaining common ground on compliance with the new regulations."
"Our Domestic Liftboats benefited from spill remediation related work throughout the third quarter. Going forward, the recently issued Notice to Lessees – G05 is expected to provide a solid base of plug and abandonment and decommissioning work for our domestic liftboats over a multi-year cycle."
During the third quarter 2010, Domestic Offshore generated revenues of $25.1 million compared to $19.0 million in the same period of 2009, primarily as a result of an increase in industry activity year over year from the extremely low levels of demand experienced following the financial crisis. Utilization increased in the third quarter 2010 to 62.9% from 41.9% in third quarter 2009. Average revenue per rig per day decreased to $39,338 in the third quarter 2010 from $44,715 in the comparable 2009 period. Operating costs increased by $2.2 million to $38.7 million in the third quarter 2010, in part due to one time repairs and maintenance expense associated with our compliance with recent regulatory changes. Domestic Offshore recorded an operating loss of $32.1 million for the third quarter 2010 compared to an operating loss of $35.3 million in the third quarter 2009.
Revenues generated from International Offshore for the third quarter 2010 were $74.4 million, a $15.6 million decrease over the comparable 2009 period, due to a decline in operating days to 538 from 768 in the same periods, respectively. The decrease in operating days stems from the mobilization of the Hercules 205 and Hercules 206 from Mexico at the conclusion of their contracts to the U.S. Gulf of Mexico, as well as idle time on the Hercules 185 in Angola. Lower activity was partially offset by an increase in average revenue per rig per day, which increased to $138,344 in the third quarter 2010 from $117,241 in the third quarter 2009. Average operating expense per rig per day decreased to $37,518 from $43,945 in the respective third quarter periods of 2010 and 2009. International Offshore operating income remained relatively flat at approximately $27.0 million year over year.
Inland revenues of $5.7 million in the third quarter 2010 were more than double third quarter 2009 revenue of $2.4 million, bolstered by an increase in operating days to 269 from 116 in the same periods, respectively. Average revenue per rig per day remained relatively flat at $21,357 in the third quarter 2010 versus $21,009 in the third quarter 2009, while utilization increased to 97.5% from 42.0% over the same periods. Operating expenses in the third quarter 2010 increased slightly to $8.3 million compared with third quarter 2009 operating expenses of $7.4 million, largely due to an accrual of approximately $3.0 million related to a multi-year state sales and use tax audit. This segment recorded an operating loss of $8.6 million in the third quarter 2010 versus $13.5 million in the respective 2009 period.
Domestic Liftboats generated revenues of $24.6 million in the third quarter 2010 compared to $19.3 million in the third quarter 2009, as a result of a 30% increase in operating days to 3,203 from 2,466 in the same periods, respectively. Average revenue per liftboat per day declined modestly to $7,684 in the third quarter 2010 from $7,813 in the third quarter 2009. Utilization for the third quarter was 91.6%, a marked improvement from 68.6% in the third quarter 2009, reflecting incremental demand related to the Macondo well incident and spill remediation efforts. Domestic Liftboats recorded operating income of $9.4 million in the third quarter 2010 compared to $1.0 million in the third quarter 2009.
International Liftboats revenues increased 24% to $27.8 million in the third quarter 2010 versus $22.3 million in the third quarter 2009. Average revenue per liftboat per day was $23,176 in the third quarter 2010, a $3,750 increase from third quarter 2009 levels, while utilization declined to 56.6% from 62.4% in the same periods, respectively. Operating costs decreased slightly in the third quarter 2010 to $13.0 million from $14.5 million in the third quarter 2009. Operating income increased to $9.4 million in the third quarter 2010 from $2.6 million in the third quarter 2009.
Liquidity and Capitalization
At September 30, 2010, the Company had unrestricted cash and cash equivalents totaling $134.6 million and unused capacity of approximately $164 million under its revolving credit facility. As of September 30, 2010, the Company's balance sheet reflects total debt of $859.5 million.