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Hercules Offshore (HERO)

Q4 2011 Earnings Call

February 09, 2012 11:00 am ET


Son Vann -

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

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


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

David Wilson - Howard Weil Incorporated, Research Division

Michael W. Urban - Deutsche Bank AG, Research Division

David C. Smith - Johnson Rice & Company, L.L.C., Research Division

Ian Macpherson - Simmons & Company International, Research Division

Robin E. Shoemaker - Citigroup Inc, Research Division

Robert MacKenzie - FBR Capital Markets & Co., Research Division

Jeffrey Spittel - Global Hunter Securities, LLC, Research Division

John D. Lawrence - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Unknown Analyst



Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Hercules Offshore Earnings Conference Call. My name is Brian, and I will be your operator for today's call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to now turn the call over to your host for today's call, Mr. Son Vann, Director of Investor Relations and Finance. Please proceed, Mr. Vann.

Son Vann

Thank you, Brian. Good morning, everyone, and welcome to our Fourth Quarter and Full-year 2011 Earnings Conference Call. With me today are John Rynd, Chief Executive Officer and President; Stephen Butz, Senior Vice President and Chief Financial Officer; and Troy Carson, Chief Accounting Officer.

This morning, we issued our fourth quarter 2011 results and filed an 8-K with the SEC. A press release is available on our website at John will begin today's call with some broad remarks on our recent performance and current outlook. Stephen will follow up with more detailed discussions on financial results, as well as provide cost guidance for 2012. We will then open the call up for Q&A.

Before we begin, please note that this call will contain forward-looking statements. Except for statements of historical fact, all statements that address our outlook for 2012 and beyond, activities and 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 these 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,

Now it's my pleasure to turn the call over to John.

John T. Rynd

Thank you, Son, and good morning. Thank you for joining us today. This morning, we reported our fourth quarter and full-year 2011 results.

For the fourth quarter, we reported a net loss from continuing operations of $21.5 million or $0.16 per diluted share compared to a loss of $82.5 million or $0.72 per diluted share for the fourth quarter 2010.

For the full-year 2011, we reported a net loss from continuing operations of $66.5 million or $0.51 per diluted share compared to $132.1 million or $1.15 per diluted share for the full-year of 2010.

Before discussing our latest results and outlook for 2012, I want to make some quick comments on the year that just passed. 2011 marks what I believe was a turning point for the industry and our company. After 3 very difficult years for the offshore drilling business, which started in late 2008 with the global economic meltdown, followed by the Macondo incident in 2010, worldwide demand really start to pick up in early 2011. By midyear, industry utilization for jackups had substantially increased across most major offshore regions. For our company, this has translated to much better pricing than what we had previously anticipated both for our domestic and international jackup fleet.

Beyond the marketing improvements, we took proactive steps during the year to strengthen our leading position in the Gulf of Mexico with the acquisition of Seahawk rigs, at possibly the bottom of the cycle in the Gulf, while simultaneously strengthening our balance sheet with the issuance of equity and amended our credit facility, all of which were favorably viewed by the market.

We positioned the company for long-term growth in fleet renewal with the formation of Discovery Offshore and ordering of 2 ultra-high spec rigs from Keppel FELS. Upon delivery in 2013, these rigs will be in the top 7% of the global jackup fleet in terms of rig capabilities.

Significant headway was made in our asset rationalization programs as we divested Delta Towing as well as 12 stacked rigs, including 2 recent sales closed in early January. These sales are important for our business going forward, not just because they were non-core to our strategy and reduce our cost structure, but the rig sales remove out of capacity from the industry once they are converted to alternate use or scrapped.

Finally we continue to place heavy emphasis on our HSE training and standards. Despite the transition that came with the Seahawk asset acquisition, which expanded our domestic offshore employee base by over 40%, our overall loss time and total recordable incident rate saw a 20% year-over-year improvement. Our fifth year of continuous year-over-year improvement and we've continued to perform ahead of industry standards.

As we begin 2012, I believe the improvements in market fundamentals began in 2011 will continue through the year. We will continue to be prudently manage our asset base, train our people and seek strategic opportunities to grow.

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