Hercules Offshore, Inc. (HERO)
Q2 2010 Earnings Call Transcript
August 3, 2010 11:00 am ET
Sun Van – Director, IR
John Rynd – President and CEO
Jim Noe – SVP, General Counsel and Chief Compliance Officer
Stephen Butz – SVP, CFO and Treasurer
Arun Jayaram – Credit Suisse
Jeff Tillery – Tudor, Pickering and Holt
Matt Beeby – Global Hunter Securities
Geoff Kieburtz – Weeden & Co.
David Griffiths – Copia Capital
Previous Statements by HERO
» Hercules Offshore Inc. Q1 2010 Earnings Call Transcript
» Hercules Offshore, Inc. Q4 2009 Earnings Call Transcript
» Hercules Offshore Q3 2009 Earnings Call Transcript
I would now like to turn the presentation over to your host for today's conference, Mr. Sun Van, Director of Investor Relations. Please proceed.
Thank you, Maria, and good morning. I'd like to welcome everyone to our second quarter 2010 earnings conference call. With me today are John Rynd, our Chief Executive Officer and President, Jim Noe, our Senior Vice President and General Counsel, Stephen Butz, our Senior Vice President and Chief Financial Officer and Troy Carson, our Chief Accounting Officer.
This morning we issued our second quarter financial results and filed an 8-K with SEC. The press release is available at our website at Herculesoffshore.com. John will begin today's call with some general remarks and discussions regarding our outlook, followed by Jim who will speak to the state of the regulatory environment. And Stephen will close out with a discussion of our second quarter 2010 financial results, provide cost guidance for the remainder of the year and give an update on our cash flow and liquidity before opening the call up for questions and answers.
Before John begins with his remarks, I'd like to remind everyone that this conference call will contain forward-looking statements. All statements other than statements of historical fact that address our remaining outlook for 2010 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 filing with SEC which can be found on our website and the SEC's website, SEC.gov.
Now it's my pleasure to turn the call over to John.
Good morning, thanks for joining us today. This morning we reported our financial results for the second quarter 2010 which show a net loss from continuing operations of $19 million or a 17 loss per diluted share compared with a loss from continuing operations of $7.6 million or $0.09 per diluted share for the second quarter 2009, excluding the effects of nonrecurring items.
The latest quarterly results reflect the continuation of the positive momentum that we've experienced, since the fall of 2009 lows in shallow water Gulf of Mexico drilling activity, along with a nice pickup in demand from our domestic liftboat and Delta Towing segments in support of the cleanup efforts related to the Macondo well incident in the Gulf of Mexico. However, at the tail end of the second quarter and extending through today, our domestic offshore segment began feeling the impact of the slowdown in the drilling permit approvals.
Prior to the new regulatory requirements, there were a total of 99 permits approved between January through May of this year. Since then there's only been 19 new permits approved of which 17 were compliant with NTL 05 and only two permits issued complied with both NTL 05 and NTL 06. This is based on information we gathered from the BOEM website. As Sun mentioned in the opening remarks, Jim will go into more detail on the regulatory environment.
We currently have seven of our 11 to market jackups contracted with the Hercules 350 due out of the yard on 11 of August going back on contract with Chevron. Five of our jackups have gone out since late April with another three rigs that have contracts set to expire by the end of September. Consequently, our average days backlog for marketed rig in July has slipped to 54, compared to 108 days at the end April or one less marketed rig.
As an industry, of the 48 marketed jackups in the Gulf of Mexico, there are currently 15 rigs un-contracted. Of the 33 contracted rigs we estimate that nine are not working as the operators are waiting on permits. Furthermore, of the 33 rigs under contract, 19 have contracts set to expire by the end of September. As these jackups roll off contracts, operators will need to obtain new drilling permits to keep these jackups working.
We were hopeful that the pace of permit approval will improve in the near term particularly given the fact that the number of permits issued has picked up in recent weeks. In the meantime we will continue to work diligently with our customers to obtain permits.
The silver lining in all this is that, as everyone involved in the permitting process gains a full understanding and comfort with the new requirements, we expect a healthy backlog of applications for drilling permits to get through, which would feed demand for shallow water drilling assets in the Gulf. Along these lines, we have commitments from operators on five of our rigs pending permit approvals.