Hercules Offshore could emerge from bankruptcy protection soon
Posted on November 5, 2015 | By Rhiannon Meyershandout)
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Houston Chronicle
A group of idle rigs is seen behind James Noe, Senior Vice President, General Counsel and Chief Compliance Officer for Hercules Offshore while aboard the Hercules 251 a shallow water drilling rig owned by on Wednesday, Aug. 11, 2010, near Port Fourchon, La.. While shallow offshore drilling is not subject to a federal moratorium, Hercules officials say only two permits have been issued since June, idling activity in their fleet. The company has about 250 employees on idle rigs, with each rig costing the company about $25,000 per day to operate while generating no revenue for the company.( Smiley N. Pool / Chronicle )
Hercules Offshore plans to emerge from Chapter 11 bankruptcy on Friday, becoming one of the first embattled oil and gas firm to restructure since the slump began.
“While we are excited to have this milestone behind us, the hard work of successfully turning around the company is just beginning,” CEO John Rynd said in a conference call with investors Thursday.
The embattled shallow-water rig contractor worked for months with creditors to hammer out an agreement to convert most of its corporate debt into shares. Upon emergence, Hercules’ existing debt will be terminated, new shares will be issued and it will receive funding for a new $450 million term loan.
“Our business is going through a challenging time,” Rynd said. “That is why we have moved proactively with a comprehensive restructuring to significantly improve our balance sheet. Very soon, we will emerge with a clean balance sheet.”
Because it has yet to complete its bankruptcy proceedings, Hercules declined to take questions from investors.
The restructuring comes as the offshore market continues getting hammered by plummeting demand coupled with a glut of offshore rigs. To cope with the tough market conditions, Hercules has slashed costs by operating a smaller fleet, and continues to look for ways it can save money, Rynd said. Under the restructuring plan, Hercules will get an injection of new liquidity into its balance sheet, allowing the company to continue funding operations and pay for the delivery of the Hercules Highlander, a jackup rig that’s under construction.
Still, the cost-cutting measures haven’t offset the weaker utilization of its fleet and pressure from oil companies to offer cheaper dayrates.
Hercules lost $95.4 million, or 59 cents per diluted share, for the three-month period ending Sept. 30. That’s deeper than the loss of $88.6 million, or 55 cents per diluted share, the company posted the same time last year.
Its third quarter results included an $82.5 million charge associated with cold-stacking four of its jackup rigs and a $4.7 million gain on the sale of three jackups. Overall revenue fell from $221.9 million to $73.8 million driven by lower utilization of its smaller fleet at cheaper dayrates in both domestic and international markets.
In domestic markets, Hercules’ average revenue per rig per day fell from $108,844 to $76,072 during the period.
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