Hercules Offshore, Inc. (HERO)

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Hercules Offshore, Inc (HERO)

Q309 Results Call

October 27, 2009 11:02 AM ET


Stephen Butz - Vice President and Treasurer

John Rynd - Chief Executive Officer and President

Lisa Rodriguez - Senior Vice President and Chief Financial Officer.


Jeff Tillery - Tudor Pickering Holt

Igor Levi - Morgan Stanley

James West - Barclays Capital

Arun Jayaram - Credit Suisse

Pierre Connor - Capital One Southcoast

Geoff Kieburtz - Weeden

Brian Uhlmer - Pritchard Capital

Collin Gerry - Raymond James

Ian McPherson - Simmons & Company

Dave Wilson - Howard Weil

Mike Urban - Deutsche Bank

Robin Shoemaker - Citigroup



Good morning ladies and gentlemen and welcome to the Q3 2009 Hercules Offshore Earnings Conference Call. My name is Glen and I will be your co-ordinator for today.

(Operator Instructions). I will now like to turn the presentation over to your host of today’s conference, Mr. Stephen Butz, Vice President and Treasurer of Hercules Offshore, please proceed.

Stephen Butz

Thank you Glen. Good morning. I would like to welcome everyone to our third quarter 2009 earnings conference call. Participating this morning from the Hercules Offshore management team are John Rynd, our Chief Executive Officer and President and Lisa Rodriguez, our Senior Vice President and Chief Financial Officer.

This morning we issued our financial results and filed in a 8-K with the SEC. The press release is available on our website at www.herculesoffshore.com. We will follow our normal format today, but before John begins his remarks, I would like to remind everyone that this conference call would contain forward-looking statements.

All statements other than statements of historical fact that address our remaining outlook for 2009 and beyond, activities, events or developments that we expect, estimate, project, believe or anticipate will or may occur in the future are forward-looking statements.

Forward-looking statements, by their nature, involve substantial risks and uncertainties that could significantly affect expected results and actual future results could differ materially from those described in such statements.

You can obtain more information about these risks and factors in our filings with the SEC which can be found on our website and the SEC’s website, sec.gov. John will begin the call with some general remarks and discussion regarding the outlook and Lisa will detail our third quarter financial results and provide cost guidance for the fourth quarter.

I will then have some closing remarks before opening the call for questions and answers answers. Now it’s my pleasure to turn the call over to John.

John Rynd

Thank you Stephen and good morning and thanks for joining us today. We reported our financial results before the market opened today.

Excluding non-recurring items, we recorded a net loss from continuing operations of $37.2 million or a $0.38 loss per diluted share for the third quarter 2009 compared with income from continuing operations of $31.9 million or $0.36 per diluted share for the third quarter of 2008.

Our reported results for the third quarter of 2009 included a total of approximately $9.0 million after tax of expense associated with the amendment of our credit agreement.

The decrease in our third quarter 2009 earnings per share from the comparable quarter in 2008 can be attributed to the weakest market conditions we've seen domestically in years and the lowest activity levels since the onset of the industry.

Domestic results where somewhat offset by solid performances in our international offshore and liftboat segments. As Stephen mentioned Lisa will talk to these items in greater detail later in the call and Stephen will discuss the significant headway we have made in strengthening our capital structure.

I will discuss the outlook in each of core segments, including our continued international expansion efforts and the early signs we are seeing that point to recovery in demand in our domestic offshore and inland segments.

While many industry observers are getting more constructive on the outlook for international jack-up markets, our optimism there is measured as we continue to believe even in the $70 to $80 a barrel of oil environment and perhaps with growing capital spending, with 33 of the 37 jack-ups scheduled for delivery through 2010 on contract.

In addition to the plus or minus 80 jack-ups currently idle in the international markets, this will push out any recovery of the utilization of day rates into 2011. Although rising demand could stamp further reduction in the utilization of day rates.

While we believe the number the new build orders for delivery in 2011 and beyond will get cancelled or be significantly delayed and as well we recognize a further number of the orders or for captive markets such as our Iran and China.

This is still a fair amount of capacity to work through prior to any significant rate improvements. That said we're well positioned and continue to have strong contract rig coverage with six of our 11 of our rigs contracted into 2011.

We recently secured a two well work over contract for Hercules 156 in West Africa, which operates, it may commence as early as mid November for about 30 to 40 days of work.

This program however is subject to Nigerian regulatory approval subject to during regulatory approval, which we understand as not yet been received and those may delay commencement.

The rig has been warm stacked since February so we will pleased, once it get back on the payroll. The Hercules 206 which has been in Mexico since late 2003 wrapped up its work with Pemex, two to three weeks early and we headed back to the U.S Gulf of Mexico for cold stacking.

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