March 20, 2008
Hercules Offshore announces jackup contracts
Hercules Offshore, Inc. (Nasdaq: HERO) has announced contracts for two of the three jackup drilling rigs it is buying from Transocean, Inc. in a $320 million deal announced last month.
Hercules Offshore says it has signed contracts to provide Saudi Aramco with two jackup drilling rigs for three-year terms plus one-year fixed price options at the same rate.
The Hercules 300 and Hercules 261, currently known as the High Island I and High Island VIII, respectively, will fulfill the contract commitments. The Hercules 300 was acquired on March 14, 2008, and the closing on the purchase of the Hercules 261 is expected upon the completion of its current contract commitment in May 2008.
Hercules Offshore is presently negotiating contracts, which are expected to be executed shortly, for the dry tow transportation of the rigs, from the U.S. Gulf of Mexico to a shipyard in the Middle East in the second quarter of 2008, where they will commence 90 to 120 days of contract preparation work. The contracts with Saudi Aramco are expected to commence on approximately September 30, 2008. Potential revenue generated over the three-year contracts totals approximately $151 million for Hercules 300 and approximately $140 million for Hercules 261; which excludes payment to Hercules Offshore of reimbursable expenses and a total of approximately $25 million for mobilization of both rigs.
Randy Stilley, CEO and President of Hercules Offshore, stated, "The acquisition of these high quality rigs, coupled with their redeployment to the Middle East, reflects the culmination of another key step in the execution of Hercules Offshore's strategic plan. We are extremely pleased to establish a relationship with one of world's largest operators, Saudi Aramco. These contracts, together with our recent contracts with ONGC in India, reaffirm our position as one of the world's leading shallow water offshore drillers."
Commenting on current market conditions, Executive VP and COO John Rynd added, "While our international segments have continued to perform well, the first quarter has been extremely challenging, with demand and utilization remaining very weak in all of our domestic segments. While domestic liftboats and inland drilling have yet to experience a recovery, we are beginning to experience what appears to be a considerable improvement in demand for our domestic offshore rigs as we enter the second quarter, which should bode well for utilization levels for the remainder of 2008."