HOUSTON, August 3 /PRNewswire/ --
Hercules Offshore, Inc. (Nasdaq: HERO) today reported net income of US$23.5 million, or US$0.72 per diluted share, on revenues of US$99.0 million for second quarter 2007, compared to net income of US$22.9 million, or US$0.71 per diluted share, on revenues of US$76.3 million for second quarter 2006.
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Included in the results for the quarter ended June 30, 2007 are US$0.5 million in severance-related costs incurred in anticipation of the recent acquisition of TODCO, and a loss of US$0.6 million related to the early retirement of debt, net of a US$0.3 million interest rate swap gain. On an after-tax basis, these items approximated US$0.7 million, or US$0.02 per diluted share. Excluding the effect of these items, net income was US$24.2 million, or US$0.74 per diluted share.
Randy Stilley, President and Chief Executive Officer, stated, "While we remain confident that a tightening of the supply and demand balance of jackups in the U.S. Gulf of Mexico will ultimately come to fruition, the recent deterioration in the outlook for U.S. natural gas prices could delay the expected recovery in jackup demand. Despite the ongoing weakness in jackup demand in the U.S. Gulf of Mexico, the company still increased earnings per share versus the year-ago quarter, a testament to the success of our international expansion, growth in our liftboat business and ongoing cost management."
Mr. Stilley continued, "The recent TODCO acquisition not only adds significant scale to our domestic drilling business, but also improves our operational flexibility and adds exposure to key selected international markets. During July, we announced a contract to move a rig from Brazil to West Africa, where the company will now operate 18 liftboats and two jackup rigs. We will continue to seek opportunities to improve our position in our core locations through acquisitions and mobilization of additional assets."
Contract Drilling Services Highlights
During second quarter 2007, revenues from Domestic Contract Drilling Services were US$28.3 million, a 26% percent decrease over revenues of US$38.3 million in second quarter 2006, which resulted from lower utilization and lower average daily revenue per rig. Second quarter 2007 utilization was 68.7%, compared to 94.3% during second quarter 2006 and average daily revenue per rig decreased US$1,982 to US$75,531 in second quarter 2007 as a result of softer demand. Operating income decreased to US$10.1 million in second quarter 2007 from US$22.4 million in the prior year period.
International Contract Drilling Services revenues were US$19.6 million, up from US$4.3 million in second quarter 2006. Prior to second quarter 2006, during which we commenced work with Rig 16 under our first international drilling contract, we did not have international drilling operations. During second quarter 2007, we had two rigs working internationally, with 179 total operating days, as compared to 33 days during the same period a year ago. Operating income increased to US$9.9 million in the second quarter 2007 from US$2.0 million in the prior year period.
Marine Services Highlights
Domestic Marine Services revenues were US$37.2 million in second quarter 2007, up from US$30.2 million in second quarter 2006. Operating income increased to US$14.8 million in second quarter 2007 from US$14.0 million in the same period a year ago. The higher revenue and operating income reflect an increase in the average daily revenue per liftboat to US$12,482 in second quarter 2007 from US$10,765 in second quarter 2006, as well as an increase in the total number of operating days to 2,980 during the current quarter from 2,802 a year ago.
International Marine Services revenues were US$13.9 million in second quarter 2007, up from US$3.6 million in second quarter 2006. This increase was due primarily to the successful completion of our West Africa liftboat acquisition, which contributed to an increase in the total number of operating days to 1,252 from 355. Operating income increased to US$3.5 million in second quarter 2007 from US$1.1 million in second quarter 2006.
Acquisition of TODCO
On July 11, 2007, the company completed its previously announced acquisition of TODCO for total consideration of approximately US$2,398.0 million consisting of approximately US$925.8 million in cash and 56.6 million shares of Hercules common stock. In connection with the acquisition, the company entered into a new US$1,050.0 million credit facility, consisting of a US$900.0 million term loan facility and a US$150.0 million revolving credit facility, which is currently undrawn.
TODCO Highlights
To assist investors in evaluating business trends affecting the company, the company is furnishing, separate from its reported results, certain selected financial information of TODCO for the quarter ended June 30, 2007, which was prior to the acquisition of TODCO. The selected financial information furnished herein is reported pursuant to the accounting policies, practices and internal controls consistently utilized by TODCO prior to the acquisition.
TODCO second quarter 2007 results were US$0.62 per diluted share on revenues of US$229.4 million and operating income of US$55.5 million. Excluding transaction related expenses, TODCO diluted earnings per share were US$0.65 for the second quarter.
TODCO's results will be included with Hercules Offshore's third quarter results from the date of acquisition. The company is the accounting acquirer in the transaction. Therefore, the company will apply the purchase method of accounting, and the purchase price will be allocated to the net assets acquired based upon their estimated fair values at the date of acquisition. Furthermore, certain adjustments, reclassifications and changes in classification, accounting treatment, policies and estimates will be made to conform TODCO's accounting policies to the company's policies. For these reasons, the preliminary estimates of selected TODCO financial information furnished in this press release may not be indicative of future results.
Non-GAAP
Certain non-GAAP performance measures and corresponding reconciliations to GAAP financial measures for the company and TODCO 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 and TODCO. However, these measures should be considered in addition to, and not as a substitute, 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.
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