Hercules In Talks To Manage Two New Shallow-Water Rigs
January 12 2011 - 6:29PM
Dow Jones News
Hercules Offshore Inc. (HERO) said Wednesday that it is
negotiating a contract to manage and market a pair of new
harsh-environment drilling rigs that are expected to be ready to
operate in 2013.
Hercules, which announced the talks in a regulatory filing,
didn't say with whom it is negotiating or where the rigs, which
will be able to drill in water depths of up to 400 feet, might
operate. The company also said "there can be no assurances" a deal
will be reached.
Son Vann, the Houston company's director of investor relations
and finance, declined to comment on the disclosure, which
accompanied Hercules' monthly fleet status report.
Hercules' backlog wasn't substantially changed from its December
report, which noted several new drilling contracts.
Hercules owns the Gulf of Mexico's largest fleet of
shallow-water rigs and operates offshore equipment in West Africa,
India, Malaysia and the Middle East.
The company struggled through the drilling slow-down in the U.S.
Gulf that followed BP PLC's (BP, BP.LN) Deepwater Horizon disaster.
But Hercules Chief Financial Officer Stephen Butz said last month
that the pace of new well permits and the day rates the company can
charge customers are picking up.
Hercules shares have climbed 25.2% since the Dec. 16 fleet
report, closing at $3.58 on Wednesday. But some analysts fear that
that trend will be short lived. Analysts with Wells Fargo
Securities told clients last week that they believe the Hercules
could run afoul of its lenders within the next five quarters by
exceeding its debt covenants and be forced to raise "substantial"
equity.
Hercules said Wednesday that the management contract it is
negotiating would require a $10 million investment but said the
company wouldn't incur additional debt or financial
obligations.
Early last month Hercules said that Bahrain-based First Energy
Bank BSC's MENAdrill unit canceled an agreement that called for
Hercules to operate one of its newly built rigs. Hercules said it
planned to still market and manage the second of MENAdrill's two
rigs.
Vann declined to say if Wednesday's disclosure was related to
MENAdrill.
-By Ryan Dezember, Dow Jones Newswires; 713-547-9208;
ryan.dezember@dowjones.com