Hornbeck Offshore expands newbuilding program

hos brimstone new indexSEPTEMBER 5, 2012 — Covington, La., headquartered Hornbeck Offshore Services, Inc. (NYSE: HOS) has expanded its OSV newbuilding program at VT Halter Marine and Eastern Shipbuilding and has started a new 200 Class OSV retrofit program.

Hornbeck has exercised the first of four of 48 options it holds at the two U.S. shipyards to take two more 300 ft platform supply vessels from each yard. It says the aggregate incremental cost of the four vessels will be approximately $180 million, excluding construction period interest, for vessel deliveries in the fourth quarter of 2014 and first quarter of 2015.

The four new vessels will expand the company's fifth OSV newbuild program from 16 vessels to a total of 20 U.S.-flagged HOSMAX class DP-2 new generation offshore supply vessels. Though the vessels will be Jones Act qualified, Hornbeck expects them to service the anticipated increase in deepwater and ultra-deepwater drilling activity in all three of the company's core markets of the GoM, Brazil and Mexico.

Hornbeck still has 44 more options under the program and has been able to extend the exercise dates for its 44 remaining options by approximately 60 days each without changing the pricing and original delivery dates. It says that its decisions on the exercise of the next options at each of the two shipyards are now not due until February 1, 2013 and February 19, 2013, respectively.

The company expects the aggregate cost of the first 20 vessels committed under this potential 64-vessel construction program, including the four option vessels just announced, to be approximately $900 million.

200 Class OSV Retrofit Program:

Hornbeck has also decided to move forward on a new retrofit program that will upgrade and stretch six of its 200 class DP-1 new generation OSVs converting them into 240 class DP-2 OSVs. The vessels the company has committed to this program are six of its ten Super 200 class DP-1 vessels, four of which recently completed two-year charters with Petrobras in Brazil.

These new generation OSVs were built in 1999 and 2000 and were acquired by the company in 2007. Due to their 56-foot wide beams, the planned 40-foot mid-body extensions and DP-upgrades are expected to add approximately 600 tons to the vessels' 2,250 tons of current deadweight capacity and roughly double the vessels' current liquid-mud capacity to approximately 8,000 barrels.

Hornbeck says it is now in the process of finalizing negotiations with a U.S. shipyard it has selected, but whose name it has not disclosed, and expects to enter into a definitive contract in the very near future. Based on preliminary estimates, the company expects the yard to complete two of the six vessels in each of the following redelivery months: May 2013, August 2013 and December 2013, respectively.

The project costs for these discretionary vessel modifications are expected to be approximately $50.0 million, in the aggregate, and the Company expects to incur approximately 762 vessel-days of aggregate commercial downtime for the six vessels (127 vessel-days each).

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