National Oilwell Varco, Inc. today reported that for its first quarter ended March 31, 2012 it earned net income of $606 million, or $1.42 per fully diluted share, compared to fourth quarter ended December 31, 2011 net income of $574 million, or $1.35 per fully diluted share.
The first quarter 2012 results included transaction costs totaling $7 million pre-tax, and, excluding these, earnings were $612 million, or $1.44 per fully diluted share. Earnings per share improved 44 percent from the first quarter of 2011 and five percent from the fourth quarter of 2011, excluding transaction and devaluation charges from all periods.
Revenues for the first quarter of 2012 were $4.3 billion, an increase of one percent from the fourth quarter of 2011 and an increase of 37 percent from the first quarter of 2011. Operating profit for the quarter, excluding the transaction and devaluation charges, was $881 million, or 20.5 percent of sales. Sequentially, first quarter operating profit increased two percent, resulting in operating profit flow-through (change in operating profit divided by the change in revenue) of 48 percent, excluding transaction and devaluation charges. Year-over-year first quarter operating profit increased 40 percent, resulting in operating profit flow-through of 22 percent, excluding transaction and devaluation charges.
Capital equipment orders for the Company’s Rig Technology segment increased 15 percent sequentially to $1.91 billion during the first quarter, reflecting higher demand for drilling equipment for new build offshore rigs. At March 31, 2012 the segment’s backlog was $10.36 billion, up two percent from the end of the fourth quarter.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, “Our Company got off to a good start in the first quarter of 2012, with strong results in all three segments. Our Petroleum Services & Supplies group performed exceptionally well, helped by high levels of oilfield activity which is spurring demand for all our products and services. National Oilwell Varco continues to provide critical, enabling technologies to improve the efficiency and safety of oil and gas operations around the globe. Our outlook for demand for our capital equipment is very strong and our expectations high for the remainder of the year. Overall, efficient execution of orders in our backlog, innovation in our leading technologies, commitment to great service, and, most importantly, the hard work of the best team in the industry, led to solid earnings again this quarter.”
National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production operations, the provision of oilfield services, and supply chain integration services to the upstream oil and gas industry.
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Hercules Offshore, Inc. today reported a loss from continuing operations of $17.0 million, or $0.12 per diluted share, on revenue of $163.0 million for the third quarter 2011, compared with a loss from continuing operations of $16.1 million, or $0.14 per diluted share, on revenue of $157.6 million for the third quarter 2010.
John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, “Activity levels in the U.S. Gulf of Mexico Shelf are on the rise, as operators increasingly focus on liquids rich drilling opportunities. Concurrently, several jackup rigs have departed for international opportunities, resulting in a tight environment for rig availability in the region. Hercules Offshore has been the primary beneficiary of the improving fundamental trends in the shallow water U.S. Gulf of Mexico, which have accelerated during the third quarter. Average dayrates in our Domestic Offshore segment have increased by nearly $10,000 per day over the past year, with leading edge rates suggesting further upside for our domestic jackup fleet.
“Our International Offshore segment was recently successful at securing several contracts, including attractive, long term extensions for the Hercules 261 and Hercules 262 in the Middle East. These contracts are a testament to our strong performance and relationship with the customer, Saudi Aramco. Tempering our international success was the recently announced damage to the Hercules 185, where we are anticipating approximately six months of downtime for repairs.”
Domestic Offshore revenue increased to $60.2 million in the third quarter 2011 from $25.1 million in the comparable period in 2010. Approximately 70% of the revenue increase is attributable to the acquisition of the Seahawk rigs, while higher utilization and dayrates on the legacy fleet contributed to the remaining revenue growth. Average revenue per rig per day increased by $9,722 per rig per day to $49,060 in the third quarter 2011 compared to $39,338 in the prior year period. Utilization in the third quarter 2011 increased to 74.2% from 62.9% in the third quarter 2010. However, operating days rose by more than 90%, largely as a result of the acquisition of the Seahawk rigs. Domestic Offshore operating expenses increased to $53.2 million in the third quarter 2011 from $38.7 million in the third quarter 2010, due to costs associated with the acquired Seahawk rigs. Domestic Offshore recorded an operating loss of $12.8 million in the third quarter 2011 compared to an operating loss of $32.1 million for the respective prior year quarter.
International Offshore revenue declined to $49.0 million in the third quarter 2011 from $74.4 million in the third quarter 2010. The decline was primarily driven by new contracts at lower market rates on the Hercules 208, Hercules 258, Hercules 260 and Rig 3, as well as the downtime related to transition between contracts. The reduction in revenue related to these aforementioned rigs was partially offset by the increased utilization on the Hercules 185. Overall, average revenue per rig per day declined to $96,388 in the third quarter 2011 from $138,344 in the third quarter 2010, and operating days declined to 508 days from 538 days, in the respective periods. Third quarter 2011 operating expenses were $29.1 million compared to $31.1 million in the third quarter 2010, as lower costs associated with new contract terms on the Hercules 258 and Hercules 260 were partially offset by higher costs on the Hercules 185. International Offshore general and administrative expenses during the third quarter 2011 include an $8.0 million benefit, compared to a $1.5 million benefit during the third quarter 2010, from the reversal of an allowance for doubtful accounts related to payments received from a customer in Angola. Operating income decreased to $12.9 million in the third quarter 2011 from $26.9 million in the third quarter 2010.
Inland revenue for the third quarter 2011 increased to $8.1 million from $5.7 million in the third quarter 2010, primarily driven by an increase in average revenue per rig per day to $31,008 in the third quarter 2011 from $21,357 in the third quarter 2010. Utilization of 94.9% during the third quarter 2011 is comparable to 97.5% for the prior year period. Third quarter 2011 operating expenses were $3.5 million, which includes approximately $2.6 million in gains for asset sales, compared to $8.3 million in the comparable period in 2010. Year ago results include an accrual of approximately $3.0 million related to a multi-year state sales and use tax audit. Inland recorded operating income of $0.9 million in the third quarter 2011 compared to an operating loss of $8.6 million in the third quarter 2010.
Domestic Liftboats generated revenue of $16.7 million in the third quarter 2011 compared to $24.6 million in the third quarter 2010. Year ago results were positively impacted by coastal remediation work related to the BP-Macondo incident. The absence of the BP-Macondo related work led to a decline in utilization to 69.8% during the third quarter 2011 from 91.6% for the prior year period. Average revenue per liftboat per day was down slightly to $7,443 in the third quarter 2011 compared to $7,684 in the third quarter 2010. Operating expenses were essentially flat at $11.4 million in the third quarter 2011. Operating income for Domestic Liftboats was $0.6 million in the third quarter 2011 compared to operating income of $9.4 million in the comparable prior year period.
International Liftboat revenue increased modestly to $28.9 million in the third quarter 2011 compared to $27.8 million in the third quarter 2010, largely due to higher utilization, which rose to 64.1% in the third quarter 2011 from 56.6% in the prior year period. This was partially offset by a decline in average revenue per liftboat per day to $21,325 from $23,176 in the same periods, respectively. Operating expenses increased to $14.1 million in the third quarter 2011 versus $13.0 million in the prior year period due to higher labor and maintenance costs. Operating income for International Liftboats was $8.5 million in the third quarter 2011, compared to $9.4 million in the same period of the prior year.
Discovery Offshore S.A. Investment
Since Hercules Offshore’s initial $10 million investment in Discovery Offshore S.A. (Oslo Axess: DISC), which gave the company an 8% ownership stake, the Company has completed several purchases of Discovery common stock, totaling approximately $24.2 million. The most recent purchase on September 13, 2011 increased Hercules’ holding in Discovery to 18.4 million shares, corresponding to 28.0% of Discovery’s share capital.
Headquartered in Houston, Hercules Offshore, Inc. operates a fleet of 49 jackup rigs, 17 barge rigs, 65 liftboats, two submersible rigs, and one platform rig. The Company offers a range of services to oil and gas producers to meet their needs during drilling, well service, platform inspection, maintenance, and decommissioning operations in several key shallow water provinces around the world. Hercules Offshore currently holds 28.0% of share capital in Discovery Offshore, a pure play, ultra-high specification jackup rig company.
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