Hercules Offshore, Inc. (HERO)
Q3 2010 Earnings Conference Call
October 27, 2010 11 AM ET
Sun Van – Director, IR
John Rynd – President and CEO
Stephen Butz – SVP, CFO and Treasurer
Collin Gerry – Raymond James
Ian Macpherson – Simmons & Company
Max Barrett – Tudor Pickering Holt
Luke Lemoine – Capital One Southcoast
James Gorman – Stifel Nicolaus
Mike Breard – Hodges Capital
Matt Beeby – Global Hunter Securities
Michael Mallardi – Wells Capital
Chris Taylor – FBR
David Smith – Johnson Rice
Richard Repania (ph)
Previous Statements by HERO
» Hercules Offshore, Inc. Q2 2010 Earnings Call Transcript
» Hercules Offshore Inc. Q1 2010 Earnings Call Transcript
» Hercules Offshore, Inc. Q4 2009 Earnings Call Transcript
» Hercules Offshore Q3 2009 Earnings Call Transcript
We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the presentation over to your host for today’s call, Mr. Sun Van, Director of Investor Relations and Finance. Please proceed, sir.
Thank you, Shontelle, and good morning. I’d like to welcome everyone to our third quarter 2010 earnings conference call. With me today are John Rynd, our Chief Executive Officer and President; and Stephen Butz, our Senior Vice President and Chief Financial Officer; along with members of our senior management team, including Jim Noe, our Senior Vice President and General Counsel; and Troy Carson, our Chief Accounting Officer.
This morning we issued our third quarter financial results and filed an 8-K with SEC. The press release is available on our website at herculesoffshore.com.
For today’s call, John will begin with some general remarks and discussion regarding our most recent quarterly performance and current business outlook. Stephen will follow John with a more detailed discussion of third quarter 2010 financial results, offer cost guidance for the fourth quarter, and give an update on our cash flow and liquidity before opening the call up to Q&A.
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 filings 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.
Thank you, Sun, and good morning, and thank you for joining us today on the call. This morning, we reported our financial results for the third quarter 2010, which show a net loss from continuing operations of $15.1 million or a $0.13 loss per diluted share, compared with a loss from continuing operations of $37.2 million or $0.38 loss per diluted share for the third quarter 2009, excluding the effects of nonrecurring items.
Before I begin my discussions on our operating results, I would like to take a moment to thank our Gulf of Mexico customers as well as our domestic offshore team in their tireless efforts to keep our shallow water rigs active during a very challenging time for the industry.
As many of you know, since the new Federal regulations on offshore drilling were imposed in June due to notice of lessees 05 and 06. Operators have had a difficult time in interpreting these new regulatory requirements.
Consequently the number of shallow water permits approved by the BOEM has been significantly curtailed since June, running roughly at about half the pace prior to the new rules. In particular, permits to grow new wells were virtually nil during the initial three months after the regulatory changes with only four new well permits approved between June to mid-September.
During this time, we were fortunate to have found work for our domestic jackup fleet with operators who had shifted their activities to workovers and sidetrack jobs. These type of jobs have not encountered us much permit delays to the new well applications, largely because they typically only require compliance with the NTL 05, which deals primarily with equipment safety and certification. New well permits have had to comply with both NTL 05 and NTL 06, the latter dealing with worst case discharge scenario and spill response measures.
E&P operators have always had submit this information even prior to the new regulations. But the hang-up with NTL 06 lies in a new methodology of the calculation. As a result of this shift in the types of work, we are able to keep an average of seven rigs working out of our 11 marketed rigs which were available throughout the third quarter. While there is certainly a lot of room for utilization to improve, this is higher than we would have expected during the early days of the new regulations, when we always saw handful of permits issued for the entire shallow water industry.
Over the last month or so we have seen some encouraging signs to shallow water permitting process maybe improving. Since mid-September, the BOEM has approved another eight permits for new wells, along with a number of permits for sidetracks and workovers. While this is still well below the previous rate of permitting from prior to the Macondo incident, it is a big improvement from just four new well permits in the first three months after the issuance of NTL 05 and NTL 06.