Contract drilling services provider Hercules Offshore Inc. ( HERO ) has decided to acquire additional shares of Luxembourg-based Discovery Offshore S.A through its subsidiary. The shares will be purchased at 15.00 Norwegian Kroner each and will increase Hercules' total investment in Discovery to more than 50%.
Simultaneously, Hercules Offshore inked a deal with All Coast LLC to sell its domestic liftboat assets for $54.0 million in cash. The transaction includes 29 marketed liftboats, 10 cold-stacked liftboats and associated assets. Hercules Offshore will keep existing working capital of $7.3 million as of May 31, 2013 within the Domestic Liftboat segment. The deal is likely to close in early July, subject to customary closing conditions. The company expects to incur an impairment charge of $4 million upon closure.
Additionally, Hercules Offshore also declared its intention to offer $400 million senior notes due 2021 in a private placement. Net proceeds from the offering along with available cash in hand will be used by the company to finance its purchase of shares of Discovery Offshore S.A. and the payment of $333.9 million due for Discovery Triumph and Discovery Resilience.
Headquartered in Houston, Hercules Offshore operates a fleet of 38 jackup rigs, 13 barge rigs and 63 liftboats. It provides various services to oil and gas producers, which are required during drilling, well service, platform inspection, maintenance, and decommissioning work.
Hercules Offshore currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
However, there are certain other firms in the energy sector that are expected to perform better over the short term. These include InterOil Corporation ( IOC ), Cheniere Energy Partners LP ( CQP ) and Oiltanking Partners LP ( OILT ). All these firms sport a Zacks Rank #1 (Strong Buy).