Hercules Offshore, Inc. reported income from continuing operations of $19.9 million, or $0.12 per diluted share, on revenue of $256.7 million for the first quarter 2014, compared to income from continuing operations of $40.3 million, or $0.25 per diluted share, on revenue of $186.2 million for the first quarter 2013, the company said in its press release. As outlined in the Reconciliation of GAAP to Non-GAAP Financial Measures, first quarter 2014 results included an after-tax charge of $15.2 million, or $0.10 per diluted share, related to early debt retirement and issuance costs, while first quarter 2013 results included a non-cash tax gain of $37.7 million, or $0.23 per diluted share, related to the Seahawk acquisition completed in April 2011.
John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, "First quarter results reflect a healthy jackup rig market in the U.S. Gulf of Mexico and fleet growth in our International Offshore segment. Domestic drilling activity remains active, with the possibility of an improvement in demand later this year. Average dayrates in the U.S. Gulf of Mexico continue to rise as various rigs roll into higher paying contracts. Going forward, we expect stable pricing in the U.S. Gulf of Mexico, as all new contracts signed during the latest quarter were executed at current dayrates. Our International Offshore segment benefitted from the contributions of new assets, including the Hercules Triumph and Hercules Resilience. Our International Liftboats segment was impacted by soft demand in West Africa for the small to mid-size vessel classes and a heavy repair and maintenance schedule. We have seen some recent improvements in West Africa, but activity levels in this region could remain variable during the rest of the year."
Domestic Offshore
Revenue generated from Domestic Offshore for the first quarter 2014 increased by 18.3% to $143.3 million from $121.1 million in the first quarter 2013, largely driven by higher dayrates. Average revenue per rig per day increased by approximately 36.2% to $106,596 in the first quarter 2014 from $78,240 in the comparable 2013 period. Utilization declined to 83.0% from 95.6%, largely a result of the Hercules 150, Hercules 205 and Hercules 264 undergoing scheduled regulatory surveys during the period. Operating expenses increased to $72.8 million in the first quarter 2014 compared to $59.8 million in the first quarter 2013, due in part to higher labor, workers compensation, and sales tax expenses, gains on asset sales in the prior quarter as well as incremental operating costs associated with the Hercules 209, partially offset by the removal of the Hercules 265 from the operating fleet. Domestic Offshore generated operating income of $51.5 million in the first quarter 2014 compared to operating income of $40.0 million in the first quarter 2013.
International Offshore
International Offshore revenue increased to $80.9 million in the first quarter 2014 from $31.8 million in the first quarter 2013. Revenue growth was primarily driven by the additions of the Hercules Triumph, Hercules Resilience, Hercules 266 and Hercules 267. The rig additions also contributed to a 15.2% increase in average revenue per rig per day to $136,030 for the first quarter 2014 from $118,119 in the first quarter 2013, and 121.2% increase in operating days to 595 days from 269 days over the same periods. Operating expenses for the first quarter 2014 increased to $47.5 million from $31.9 million in the respective 2013 period, primarily due to the incremental operating cost associated with the rig additions, partially offset by lower repair costs on the Hercules 260. International Offshore recorded operating income of $14.6 million in the first quarter 2014 compared to an operating loss of $12.2 million in the prior year period.
International Liftboats
International Liftboats revenue was $32.5 million in the first quarter 2014, compared to $33.3 million in the prior year period. Average revenue per liftboat per day increased by 18.1% to $27,132 in the first quarter 2014 from $22,970 in the first quarter 2013. This was offset by a decline in utilization to 57.9% from 72.1% in the same periods, respectively, primarily due to decreased activity levels in West Africa and a heavy repair and maintenance schedule. Operating expenses during the first quarter 2014 were $20.4 million, compared to $22.3 million in the first quarter 2013. First quarter 2013 expenses included a $2.6 million write-down of a cold stacked vessel in West Africa. International Liftboats recorded operating income of $5.6 million in the first quarter 2014 compared to operating income of $5.2 million in the first quarter 2013.
Liquidity and Capitalization
On March 12, 2014, the Company commenced a tender offer (the "Tender Offer") for all of its outstanding $300.0 million aggregate principal amount of 7.125% senior secured notes due 2017 ("7.125% Senior Secured Notes"). On March 26, 2014, the Company completed the sale of $300.0 million in aggregate principal amount of senior notes with a coupon rate of 6.75% due 2022 ("6.75% Senior Notes") and used a portion of the proceeds to settle approximately $220.1 million aggregate principal amount of the 7.125% Senior Secured Notes for $232.7 million. The Company expects to use the remaining net proceeds from the 6.75% Senior Notes offering, together with cash on hand, to complete the redemption of the remaining $79.9 million aggregate principal amount of the 7.125% Senior Secured Notes on April 29, 2014 for approximately $84.2 million. As such, the Company has classified approximately $79.9 million of its cash on hand as Cash Designated for Debt Retirement on the Balance Sheet as of March 31, 2014.