HERO beats estimates CORRECTED - CORRECTED-UPDATE 3-Hercules Offshore posts narrower-than-expecte
Tue Apr 28, 2009 4:55pm EDT
(Corrects paragraph three to clarify that the company is looking to market, not sell, 12 domestic offshore rigs and 42 domestic liftboats)
* Q1 loss from cont ops $0.05/shr vs est -$0.07/shr
* Q1 rev up 5 pct to $223.5 mln
* Says will cold stack more equipment to reduce costs
* Higher international rev offsets drop in domestic rev
* Sees weakening demand & pricing in international regions (Recasts; adds conference call details, analyst comments, updates share movement)
By Shradhha Sharma
BANGALORE, April 28 (Reuters) - Hercules Offshore Inc (HERO.O: Quote, Profile, Research, Stock Buzz) posted a narrower-than-expected quarterly loss, boosted by its international business, but said it would cold stack more equipment to reduce costs further.
"Since our last conference call, we have decided to stack an additional two jackups, five inland barges and one domestic liftboat," Chief Executive John Rynd said on a conference call with analysts. The drilling contractor is now looking to market 12 domestic offshore rigs and 42 domestic liftboats, Rynd added.
Houston-based Hercules has been trying to sell retired rigs amid analysts' concerns about its outlook and debt in a tough market for oil and gas drillers operating in shallower waters. [ID:nN30356156]
Morgan Keegan analyst Michael Drickamer does not see Hercules getting a buyer for its retired rigs in the near term.
"I would be surprised if anyone stepped in to buy a drilling rig for non drilling purposes. There are uses outside of drilling for those rigs but that's limited, especially in the current credit market," the analyst said by phone.
He added that there was a strong chance of Hercules breaching covenants, but it was also likely that the company will be able to renegotiate with lenders for some relief.
Tristone Capital analyst Waqar Syed agreed.
Syed, who expects the company to breach covenants some time during the fourth quarter, however, warned that it could get into trouble earlier if some of its international contracts are cancelled.
"The five contracts -- two in Saudi Arabia, two in India and one in Malaysia -- are really supporting the entire company right now. As long as those contracts hold up, I think they'll be fine," Syed said by phone.
CEO Rynd said the company was continuing to monitor its compliance with covenants and was in discussions with its agent bank, lenders and other financial institutions.
Hercules had an outstanding debt of $1.03 billion as of March 31.
Q1 BEATS STREET
Hercules swung to a first-quarter loss of $4.9 million, or 6 cents a share, compared with a profit of $4.9 million, or 5 cents a share, a year earlier. It posted a loss from continuing operations of 5 cents a share.
Revenue rose 5 percent to $223.5 million.
Analysts on average were looking for a loss of 7 cents a share, before items, on revenue of $215.4 million, according to Reuters Estimates.
"Demand for drilling rigs in the U.S. Gulf of Mexico region remains very weak, however, the rate of decline appears to have slowed in recent weeks and activity may be at a near-term bottom," CEO Rynd said in a statement.
Domestic offshore revenue dipped 5 percent to $59.2 million in the quarter, hurt by a 21 percent drop in operating days to 864 due to weaker demand. A significant slowdown in industry activity also hit revenue at the company's inland segment, which dropped 68 percent to $12.9 million.
The steep fall in oil prices from record highs in July last year has hurt shallow water Gulf of Mexico drilling demand, which has been accelerated by dayrate declines and a drop in rig utilization rates.
However, Hercules' international offshore revenue jumped 58 percent to $103.5 million, while revenue at its domestic liftboats segment rose 42 percent.
Hercules, which has a market capitalization of about $247 million, has lost 89 percent of its value in the last 12 months.
Shares of the company were trading up about 5 cents at $2.85 Tuesday afternoon on Nasdaq.
For the alerts, double-click. [ID:nWNAB9074][ID:nWNAB9357] (Editing by Anil D'Silva, Himani Sarkar)
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