|HORNBECK OFFSHORE SERVICES INC /LA filed this Form 10-Q on 05/10/2016|
expenses were primarily driven lower by vessels that were removed from our active fleet count since December 2014, which resulted in a substantial reduction in mariner headcount. This decrease was partially offset by $3.8 million of operating costs related to the full or partial-period contribution from vessels added to our fleet since December 2014. Aggregate cash operating expenses for our vessels are projected to be in the approximate annual range of $150.0 million to $165.0 million for the year ending December 31, 2016. Such cash operating expense estimate is exclusive of any additional repositioning expenses we may incur in connection with the potential relocation of more of our vessels into international markets or back to the GoM, and any customer-required cost-of-sales related to future contract fixtures that are typically recovered through higher dayrates.
Depreciation and Amortization. Depreciation and amortization expense of $28.5 million was $1.0 million, or 3.6%, higher for the three months ended March 31, 2016 compared to the same period in 2015. Depreciation increased by $2.2 million primarily due to the contribution of six vessels that were placed in service on various dates since December 2014 and the conversion of one OSV into a MPSV. The depreciation increase was partially offset by a decrease in amortization expense of $1.2 million, which was mainly driven by postponed recertifications for certain of our stacked OSVs. Depreciation expense is expected to continue to increase from current levels as the vessels under our current newbuild program are placed in service. Amortization expense is expected to decrease as the result of the deferral of regulatory recertification activities for vessels that have been stacked.
General and Administrative Expense. G&A expenses of $8.7 million, or 11.3% of revenues, was $3.2 million lower during the three months ended March 31, 2016 compared to the same period in 2015. The decrease in G&A expenses was primarily due to lower short-term and long-term shoreside incentive compensation expense.
Gain (Loss) on Sale of Assets. During the first three months of 2016, we sold our last remaining non-core conventional OSV, the Cape Breton, for cash consideration of $420,000. The sale resulted in a pre-tax loss of approximately $45,000 ($31,000 after-tax or $0.00 per diluted share). During the first three months of 2015, we completed the sale of three 250EDF class OSVs, the HOS Arrowhead, the HOS Eagleview and the HOS Westwind, to the U.S. Navy for cash consideration of $114.0 million. The sale resulted in a pre-tax gain of approximately $33.1 million ($20.7 million after-tax or $0.57 per diluted share).
Operating Income (Loss). Operating income decreased by $67.7 million, or 101.2%, to a loss of $0.8 million during the three months ended March 31, 2016 compared to the same period in 2015 for the reasons discussed above. Operating loss as a percentage of revenues was 1.0% for the three months ended March 31, 2016 compared to an operating income margin of 49.7% for the same period in 2015. Excluding the 2015 gain on sale of assets, our operating income for the first three months of 2015 would have been $33.8 million, or 25.1% of revenues.
Interest Expense. Interest expense of $11.1 million increased $0.8 million during the three months ended March 31, 2016 compared to the same period in 2015, primarily due to capitalizing a lower percentage of interest compared to the prior-year period driven by a lower average construction work-in-progress balance under our newbuild program in 2016. During the three months ended March 31, 2016, we recorded $5.0 million of capitalized construction period interest, or roughly 31.1% of our total interest costs, compared to having capitalized $5.8 million, or roughly 36.1% of our total interest costs, for the year-ago period.
Interest Income. Interest income was $0.4 million during the three months ended March 31, 2016, which was $0.2 million higher compared to the same period in 2015. Our average cash balance increased to $257.3 million for the three months ended March 31, 2016 compared to $245.4 million for the same period in 2015. The average interest rate earned on our invested cash balances was 0.6% and 0.4% during the three months ended March 31, 2016 and 2015, respectively. The increase in average cash balance was primarily due to lower cash outflows associated with our fifth OSV newbuild program in 2016 compared to the prior year period.