Hercules Offshore announces Q1 2013 results
Hercules Offshore, Inc. (Nasdaq: HERO) today reported net income of $35.2 million, or $0.22 per diluted share, on revenue of $205.3 million for the first quarter 2013, compared with a net loss of $38.3 million, or $0.28 per diluted share, on revenue of $143.3 million for the first quarter 2012. First quarter 2013 results include a non-cash tax gain of $37.7 million, or $0.24 per diluted share, relating to the Seahawk acquisition which was completed in April 2011, said in the company's press release.
John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "Market conditions in the U.S. Gulf of Mexico remain strong, as dayrates continue to trend higher and contract backlog stays near record levels. Our first rig reactivation, the Hercules 209, is nearing completion, and we are assessing market demand for a second reactivation. Internationally, we continue to add scale and upgrade our global fleet. We recently commenced operations on the Hercules 266 under its long term contract, and closed on the acquisitions of the Hercules 267 (formerly Ben Avon) and the White Shark (formerly Titan 2). These acquisitions demonstrate our ability to successfully deploy capital toward high return opportunities, while de-risking the investments with assets that have strong long term demand prospects and through long term contracts. We continue to look for acquisition opportunities to enhance our international footprint and high-grade our asset base."
Offshore
Revenue generated from Domestic Offshore for the first quarter 2013 increased by approximately 47.1% to $121.1 million from $82.3 million in the first quarter 2012 bolstered by higher dayrates and improved utilization. Average revenue per rig per day increased by approximately 39.8% to $78,240 in the first quarter 2013 from $55,961 in the comparable 2012 period. Utilization increased to 95.6% in the first quarter 2013 from 89.8% in the first quarter 2012, due to less shipyard downtime primarily on the Hercules 214 related to regulatory survey requirements. Operating expenses increased to $61.1 million in the first quarter 2013 compared to $59.9 million in the first quarter 2012, primarily due to higher labor costs. Domestic Offshore generated operating income of $39.5 million in the first quarter 2013 compared to operating income of $1.8 million in the first quarter 2012.
International Offshore generated revenue of $31.8 million in the first quarter 2013 as compared to $18.0 million in the first quarter 2012. Average revenue per rig per day for the first quarter 2013 increased to $118,119 from $73,069 in the first quarter 2012, primarily due to higher rebillable items and the absence of Platform Rig 3, which was previously contracted at a below fleet average rate and sold in August 2012. Utilization increased to 59.8% from 38.8% due to the recommencement of operations for the Hercules 208, Hercules 261 and Hercules 262, as these rigs incurred downtime for contract preparation work during the first quarter 2012, partially offset by greater downtime on the Hercules 260, as it underwent repairs and regulatory survey requirements during the first quarter 2013. Operating expenses for the first quarter 2013 increased to $31.9 million from $24.1 million in the respective 2012 period. First quarter 2013 operating expenses include approximately $5.7 million for repairs for the spudcan damage on the Hercules 260. International Offshore recorded an operating loss of $12.2 million in the first quarter 2013 compared to an operating loss of $20.8 million in the prior year period.
Inland
Inland revenue during the first quarter 2013 of $4.3 million was flat with first quarter 2012 levels, as higher dayrates were offset by lower utilization. First quarter 2013 average revenue per rig per day increased by 8.2% to $34,236 from $31,628 in the first quarter 2012, while utilization declined to 47.0% compared to 50.2% in the prior year period. Operating expenses decreased to $4.6 million in the first quarter 2013 compared to $5.7 million in the first quarter 2012. Gains from asset sales reduced operating expenses by $1.9 million in the first quarter 2013. Inland recorded an operating loss of $3.5 million in the first quarter 2013 compared to an operating loss of $4.6 million in the respective prior year period.
Liftboats
Domestic Liftboats revenue increased to $14.8 million in the first quarter 2013 from $10.4 million in the first quarter 2012. Average revenue per liftboat per day increased by 16.0% to $9,015 in the first quarter 2013 from $7,773 in the first quarter 2012, with pricing gains achieved on all active vessel classes. Utilization increased to 60.7% in the first quarter 2013 from 43.4% in the comparable 2012 period. First quarter 2013 operating expenses were $10.7 million compared to first quarter 2012 operating expenses of $8.5 million. Operating expenses during the first quarter 2012 benefitted from an insurance gain of $1.8 million. Domestic Liftboats recorded an operating loss of $99,000 in the first quarter 2013 compared to an operating loss of $2.3 million in the first quarter 2012.
International Liftboats revenue increased to $33.3 million in the first quarter 2013 from $28.2 million in the prior year period. Average revenue per liftboat per day decreased slightly to $22,970 in the first quarter 2013 from $23,452 in the first quarter 2012, while utilization increased to 72.1% from 65.5% in the same periods, respectively, on increased activity levels in West Africa. Operating expenses during the first quarter 2013 were $22.3 million, which include a $2.6 million write-down of a cold stacked vessel in West Africa, compared to $13.1 million in the first quarter 2012, which benefitted from an insurance gain of $1.6 million. The increase in operating expenses was primarily driven by higher labor and repair and maintenance costs. International Liftboats recorded operating income of $5.2 million in the first quarter 2013 compared to operating income of $8.6 million in the first quarter 2012.
Income Tax
First quarter 2013 results include a non-cash tax gain of $37.7 million relating to the Seahawk acquisition which was completed in April 2011. Initially, the Seahawk acquisition was recorded assuming that the transaction would be characterized as a purchase of assets for income tax purposes. However, in the first quarter 2013, certain distributions were made to Seahawk's former equity holders, that, taken together with other aspects of the acquisition, changed the tax treatment and caused this acquisition to be characterized as a reorganization for tax purposes. Therefore, for tax purposes, we recorded a carryover basis in the former Seahawk assets and other tax attributes which, based on the Company's current tax position, produced additional deferred tax assets.
