DPDW.. $0.055..Hercules Warns That Rig Work May Be Scarce In US Gulf >HERO
Dow Jones & Company, Inc. - Oct 22 at 15:49
Company Symbols: NASDAQ-NMS:HERO
By Ryan Dezember, Of DOW JONES NEWSWIRES
HOUSTON (Dow Jones)--Shallow-water driller Hercules Offshore Inc. (HERO) warned investors that government approval for new Gulf of Mexico oil and gas wells may be delayed indefinitely, making new business scarce in the coming months
"Our idle rigs and our other rigs that are scheduled to complete their contracts over the next several weeks are unlikely to secure new contracts until our customers receive new drilling permits," the company said in a regulatory filing. "In addition, we believe that some of our customers do not have drilling permits that would cover the entire duration of our contracts in the U.S. Gulf of Mexico."
The U.S. government's four-month moratorium on deepwater drilling didn't officially curtail operations in shallow water, which refers to depths of less than 500 feet. But shallow water operators have said delays for new drilling permits and uncertainty over new safety regulations have resulted in a "de facto" moratorium on their business. Since June, when the new rules were enacted, the Bureau of Offshore Energy Management has issued 12 permits for new wells.
Hercules's filing was made Thursday after market close.
Hercules is scheduled to report third-quarter earnings on Wednesday, Oct. 27.
Simmons & Co. analyst Bill Herbert said that Hercules's disclosure won't alter expectations for third-quarter earnings, but will nudge the fourth quarter forecast lower. Despite the company's cautionary language, Herbert said, "Our impression is that the momentum is actually beginning to improve."
Equities analysts with Tudor, Pickering, Holt & Co. also said it was " positive" to see short-term work added to the fourth-quarter backlog of several Gulf of Mexico rigs.
Houston-based Hercules operates the Gulf of Mexico's largest fleet of jackup rigs, which are drilling platforms that stand in shallow water, as well as liftboats and other offshore drilling equipment. Of the company's 25 rigs in the Gulf of Mexico, 14 are cold stacked--meaning that they are unmanned and must be refurbished before they can drill--one is idle and 10 are working on contracts that are set to expire by the end of the year, according to a fleet status report.
Hercules said it has been able to keep some equipment leased for jobs to plug and abandon wells and other short-term work, but "approval of permits for these types of activities has also slowed significantly."
Shares of Hercules fell 4%, to $2.26 in recent trading.
-By Ryan Dezember, Dow Jones Newswires; 713-547-9208; ryan.dezember@ dowjones.com
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10-22-10 1549ET
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