04-HP-876_newMDA.qxd 12/15/04 3:04 PM Page 29 Depreciation expense was $94.4 million in 2004, $82.5 million in 2003, and $61.4 million in 2002. D epreciation expense increased  significantly over the three-year period as the Company placed into service 13 new rigs in 2002, 19 ne w rigs in 2003, and 5 new rigs in 2004. The Company anticipates 2005 depreciation expense to be  consistent with 2004, unless capital expenditures rise unexpectedly. Additional depreciation as a result of the 5 new land rigs put in  service during 2004 and capital expenditures will be offset by the reduction in offshor platform rig depreciation as a result of the asset impairment charge discussed below.  During the fourth quarter of 2004, the Company recognized a pre- tax, non-cash asset impairment charge of $51.5 million related to its Gulf of Mexico offshor platform rigs. During fiscal 2004, average revenue per day for the Company’s  offshore platform rigs steadily declined from an average of $32,790 per day during the first quarter to $28,380 during the fourth quar ter. Average cash margins per rig day declined throughout the year fr om $15,206 during the first  quarter of 2004 to $11,003 during the fourth quarter. Total operating profit for the offshor platform rig segment had averaged over $9  million per quarter for both fiscal y ears 2002 and 2003, with an $8.9 million operating profit recorded for the fourth quarter of 2003. During fiscal 2004, operating profit was $4.4 million, $4.1 million, $3.8 million, and $4.3 million (ex cluding the asset impairment charge) for the four sequential fiscal quarters as shown below. Quarters Ended 12/31/2003 3/31/2004 6/30/2004 9/30/2004 (in thousands) Operating profit, as reported $ 4,375 $ 4,106 $ 3,826 $ (47,180) Asset impairment charge – – – 51,516 Operating profit, excluding asset impairment charge $ 4,375  $ 4,106  $ 3,826  $ 4,336 30