Marine Log

August 3, 2006

Hornbeck adds to newbuilds

"We are, yet again, increasing our investment in new vessels. Continued strong customer demand for our assets and services has prompted us to expand our OSV and TTB newbuild programs," said Todd Hornbeck, Chairman, President and CEO of Hornbeck Offshore Services, Inc. (NYSE: HOS).

Hornbeck Offshore today reported record results for the second quarter, ended June 30, 2006. riven by record dayrates in each of the company's business segments and a 45.3% increase in the average barrel-carrying capacity of the Hornbeck Offshore tug and tank barge (TTB) fleet.

"We are very pleased with yet another quarter of record financial results, which were largely driven by our diversified business model," said Todd Hornbeck.

Second quarter revenues increased 72.0% to $70.7 million compared to $41.1 million for the second quarter of 2005. Operating income was $32.4 million, or 45.8% of revenues, for the second quarter of 2006 compared to $13.8 million, or 33.6% of revenues, for the prior-year quarter.

OSV Segment. Revenues from the OSV segment were $44.2 million for the second quarter of 2006, an increase of 66.2% from $26.6 million for the same period in 2005. This increase in revenues is primarily due to record dayrates in the U.S. Gulf of Mexico (GoM) and diversification of the company's OSVs into non-oilfield related services, such as military applications.

The average OSV dayrate for the second quarter of 2006 improved 56.3%, or $6,957 per day, to $19,321 compared to $12,364 for the same period in 2005. Since OSV utilization remained consistent with year-ago levels at 96.6%, Hornbeck Offshore's effective, or utilization-adjusted, dayrate for the OSV segment also increased 56.3% from the prior-year quarter.

TTB Segment Revenues from the TTB segment for the second quarter of 2006 were up 82.9% over the same period in 2005 to $26.5 million. Average TTB dayrates rose to $18,420 compared to $12,673 during the same period of 2005. These increases in revenues and average dayrates were primarily related to the full-quarter contribution of four of the five new double-hulled tank barges that were delivered on various dates throughout 2005. Utilization in the TTB segment for the second quarter of 2006 was 90.5% compared to 85.4% in the prior-year quarter. This increase in utilization was primarily the result of a change in contract mix from contracts of affreightment (COAs) to time charters and a change in fleet mix from smaller, single-hulled barges to larger, double-hulled barges. Operating income increased by $8.3 million, or nearly six times the year-ago level, to $9.7 million for the second quarter of 2006, while operating margins nearly quadrupled to 36.5% this quarter from 9.6% for the second quarter of 2005.

Update on MPSV Conversion In May 2005, Hornbeck Offshore announced a conversion program to retrofit two coastwise sulfur tankers into U.S.-flagged, new generation 370-foot multi-purpose supply vessels (MPSVs). The estimated total project cost to acquire and convert the two vessels remains at $110.0 million in the aggregate. Since the inception of this program, the company has incurred approximately $17.7 million, with $4.3 million spent during the second quarter of 2006.

The first of the two sulfur tankers was recently mobilized to the East Coast shipyard where it is undergoing conversion.

Anticipated completion of the two converted vessels is projected to be in the latter half of 2007.

Update on OSV Newbuild Program No.4. In September 2005, the Company announced its fourth new vessel construction program for its OSV business segment, which was to be comprised of an innovative high-end proprietary class of vessel that would add approximately 20,000 deadweight tons of capacity at an aggregate cost of $170.0 million.

However, in February 2006, the company decided to defer contracting these vessels, now referred to as Phase 1 of this program, until more favorable shipyard conditions materialize for the construction of this type of vessel.

In conjunction with the deferral of Phase 1, the company also announced Phase 2 of this program, which was last reported to be comprised of nine proprietary OSVs with an aggregate capacity of 26,000 deadweight tons.

Today, Hornbeck Offshore announced that it is further expanding the scope of Phase 2 by an additional four vessels, for a total of 13 proprietary OSVs, bringing the aggregate capacity to approximately 38,000 deadweight tons. These 13 vessels will be a mix of proprietary 240 ED and 240 EDF class OSVs with projected delivery dates ranging from early 2008 through 2009. Based on current contracts and internal estimates, the total cost of the 13 new OSVs to be constructed under Phase 2 of this program, before construction period interest, is now expected to be approximately $295.0 million in the aggregate.

Update on TTB Newbuild Program No. 2. In September 2005, the company announced its second TTB newbuild program. This program is expected to add approximately 400,000 barrels of total barrel-carrying capacity of double- hulled barges and related tugs.

Today, Hornbeck Offshore announced that it has expanded the scope and specifications of the vessels to be constructed under the second TTB newbuild program to include additional tugs.

With all of its barges currently operating under time charters rather than contracts of affreightment, the company plans to move toward a 1:1 tug-to-barge ratio by expanding its tug fleet.

The costs for this program are now expected to be approximately $145.0 million in the aggregate.

The company recently purchased four 3,000 horsepower ocean-going tugs to be retrofitted under this program.

The aggregate cost to acquire and retrofit these four tugs is included in the total project budget of $145.0 million.

The precise number and specifications of the remaining vessels to be constructed or retrofitted under this program will be finalized as certain internal milestones are completed, including the negotiation of shipyard contracts.

All of the vessels to be constructed or retrofitted under the company's second TTB newbuild program have projected delivery dates starting in mid-2007 and ending in 2008.