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Hercules Offshore Inc. Reports Operating Results (10-K)

March 01, 2012 | About:
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10qk

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Hercules Offshore Inc. (HERO) filed Annual Report for the period ended 2011-12-31.

Hercules Offshr has a market cap of $741.9 million; its shares were traded at around $5.19 with and P/S ratio of 1.1.

Highlight of Business Operations:

Domestic Offshore. Revenue for our Domestic Offshore segment was $217.5 million for 2011 compared with $124.1 million for 2010, an increase of $93.4 million, or 75%, primarily due to revenue of $74.4 million related to the rigs acquired from Seahawk. Excluding the revenue from the rigs acquired from Seahawk, revenue increased $19.0 million for the legacy Hercules rigs due to an increase in average dayrates, $47,000 in 2011 compared to $37,357 in 2010, which contributed to an approximate $32 million increase in revenue. This increase was partially offset by a decline in operating days for the legacy Hercules rigs to 3,043 days during 2011 from 3,321 days during 2010, which contributed to an approximate $13 million decrease in revenue in 2011 as compared to 2010.

International Offshore. Revenue for our International Offshore segment was $237.0 million for 2011 compared with $291.5 million for 2010, a decrease of $54.5 million, or 19%. Hercules 258 and Hercules 260 contributed to a reduction of $26.5 million and $29.0 million, respectively, as their contracts matured in June and May 2011, respectively, and subsequently operated at lower dayrates. Additionally, there is no provision of marine services associated with the subsequent contracts. Hercules 262 and Hercules 208 contributed to a reduction of $6.9 million and $5.2 million, respectively, primarily due to fewer operating days in 2011 as compared to 2010. These decreases are partially offset by Hercules 185 operating a large portion of 2011 compared to not meeting revenue recognition criteria in 2010 which contributed to a $15.2 million increase in revenue. Average revenue per rig per day decreased to $111,237 in 2011 from $138,422 in 2010 primarily due to lower average dayrates earned on Hercules 258 and Hercules 260.

Domestic Offshore. Operating expenses for our Domestic Offshore segment were $186.1 million in 2011 compared with $147.7 million in 2010, an increase of $38.4 million, or 26%, primarily due to operating expenses of approximately $41 million related to the rigs acquired from Seahawk. Excluding the operating expenses related to the rigs acquired from Seahawk, operating expenses decreased approximately $3 million driven by a decrease in labor expense, equipment rentals, insurance, repairs and maintenance and freight costs of $6.6 million, $5.2 million, $3.8 million, $0.9 million and $1.3 million, respectively, offset by an increase in workers compensation expenses of $12.1 million as well as $7.0 million fewer gains on asset sales in 2011 as compared to 2010. Additionally, 2010 included an accrual of approximately $3.0 million related to a multi-year state sales and use tax audit. Average operating expenses per rig per day were $32,343 in 2011 compared with $36,151 in 2010.

Domestic Offshore. Revenue for our Domestic Offshore segment was $124.1 million for 2010 compared with $140.9 million for 2009, a decrease of $16.8 million, or 12%. This decrease resulted primarily from a 29% decline in average dayrates which contributed to an approximate $41 million decrease during 2010 as compared to 2009. Partially offsetting this decrease was an increase in operating days to 3,321 days during 2010 from 2,676 days during 2009, which contributed to an approximate $24 million increase in revenue. Average utilization was 81.3% in 2010 compared with 58.9% in 2009.

Domestic Offshore. Operating expenses for our Domestic Offshore segment were $147.7 million in 2010 compared with $175.5 million in 2009, a decrease of $27.8 million, or 16%. The decrease was driven in part by 458 fewer available days during 2010 as compared to 2009, or a 10% decline, due to our cold stacking of rigs. Our cold stacking resulted in a reduction to our labor, repairs and maintenance, and workers compensation expenses. Additionally, 2010 includes gains totaling $10.2 million for the sale of Hercules 155, Hercules 191 and Hercules 255. Partially offsetting these decreases are increases in insurance costs and equipment rentals of $5.1 million, accrued sales and use tax expense of approximately $3.0 million related to a multi-year state sales and use tax audit as well as a gain of $6.3 million in 2009 for an insurance settlement related to hurricane damage. Average operating expenses per rig per day were $36,151 in 2010 compared with $38,616 in 2009.

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