Hercules Offshore, Inc. (HERO)

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Hercules Offshore (HERO)

Q2 2013 Earnings Call

July 31, 2013 10:00 am ET


Son P. Vann - Vice President of Investor Relations & Planning

John T. Rynd - Chief Executive Officer, President and Executive Director

Stephen M. Butz - Chief Financial Officer and Executive Vice President


David Wilson - Howard Weil Incorporated, Research Division

Gregory Lewis - Crédit Suisse AG, Research Division

Ian Macpherson - Simmons & Company International, Research Division

John Booth Lowe - Cowen and Company, LLC, Research Division

Collin Gerry - Raymond James & Associates, Inc., Research Division

Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Nigel Browne - Macquarie Research

Ryan Fitzgibbon - Global Hunter Securities, LLC, Research Division

Kathryn O'Connor - Deutsche Bank AG, Research Division



Good day, ladies and gentlemen, and welcome to the Second Quarter 2013 Hercules Offshore Earnings Conference Call. My name is Deborah, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And I'd now like to turn the call over to Mr. Son Vann, Vice President of Investor Relations and Planning. Please proceed, sir.

Son P. Vann

Thank you, Deborah. Good morning, and welcome, everyone, to our second quarter 2013 earnings call. With me today are John Rynd, Chief Executive Officer and President; and Stephen Butz, Executive Vice President and Chief Financial Officer, along with members of our senior management team, including Jim Noe, Executive Vice President; Troy Carson, Senior Vice President and Chief Accounting Officer; Beau Thompson, General Counsel; and Craig Muirhead, Vice President and Treasurer.

This morning, we issued our second quarter results and filed an 8-K with the SEC. The press release is available on our website, herculesoffshore.com. John will begin the call with some broad remarks regarding our quarterly performance, current market conditions and recent company events. Stephen will follow with a more detailed financial discussion and provide cost guidance for 2013. We will then open the call up for Q&A.

Before we begin, let me remind everyone that our call will contain forward-looking statements. Except for statements of historical facts, all statements that address our outlook for 2013 and beyond, as well as activities, events or developments that we expect, estimate, project, believe or anticipate may or will occur in the future, are forward-looking statements.

Forward-looking statements involve substantial risks and uncertainties that could significantly affect expected results. Actual future results could differ materially from those described in such statements. You can obtain more information about these risks and other factors in our SEC filings, which can be found on our website or the SEC's website, sec.gov.

With that, let me call -- turn the call over to John Rynd.

John T. Rynd

Good morning, everyone, and thanks for joining us today. While the purpose of today's call is to review our second quarter results and provide an update as to our outlook, I would like to start the call this morning with an update on the recent well control incident at South Timbalier 220.

Just to recap what has been disclosed since last week, on the morning of July 23, we experienced a well control incident on the Hercules 265 while drilling a natural gas well for ultra oil and gas at South Timbalier 220 in the U.S. Gulf of Mexico. We safely evacuated and secured all 44 personnel on board that afternoon, incurring no injuries in the process. Later that evening, the natural gas flowing -- falling from the well ignited. Flames emanating from the well spread to our rig, mainly through the cantilever and drilling package, which sustained heavy damage. Some time during the late evening hours of July 24, the fire subsided at the well apparently bridged over. By the morning of July 25, it appeared that the fire was reduced to a small residual flame. Recently, this flame has also been extinguished.

Over the past few days, a site assessment has been completed by a third-party well control specialist. The operator, working closely with BSEE, is formulating options to primarily secure the well and have made preparations to drill a relief well. We will not put people on board the Hercules 265 for an assessment until the South Timbalier 220 well is killed and secure. So until we have our people on the rig, we cannot confirm the condition or provide much detail on the current condition of the rig, other than to say the pictures and video images appear to show that the rig sustained significant damage.

As you might expect, given the infancy of the investigation and in light of the fact that the incident is subject of an ongoing investigation, we will not be able to provide much additional commentary on this matter at this time. This incident highlights the importance of safety training and crisis response in our industry. That we safely evacuated all 44 personnel on board in an orderly and timely fashion demonstrates the emphasis our company places on our training of our people and our overall culture of safety.

We also made it a priority to immediately coordinate our response efforts with the customer, the U.S. Coast Guard and BSEE. We will continue to do so as the operations move to primarily secure the well and to do a salvage operation. There are a lot of details to sort through going forward, but I want to commend everyone involved in the response efforts thus far to make sure what was a difficult situation injury free. We're also grateful for the assistance that both the BSEE and the Coast Guard have provided.

Moving on to the financials. This morning we reported second quarter 2013 financial results, which reflect the impact of a number of transactions that were announced during the quarter. These transactions included the acquisition of Discovery Offshore and the divestiture of the Domestic Liftboat and Inland segments, which are treated as discontinued operations.

Read the rest of this transcript for free on seekingalpha.com