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November 4, 2010

Hornbeck Offshore revenues get boost from GoM response activities

Hornbeck Offshore Services, Inc. (NYSE:HOS) results for the third quarter ended September 30, 2010 got a boost from its efforts in the Deepwater Horizon incident response. But as these efforts are wrapped up, Hornbeck is looking to stack some of the vessels involved. Third quarter revenues showed a 39 percent year-over-year increase, attributable to a larger fleet and oil spill relief efforts. Those response efforts accounted for 46 percent of third quarter consolidated revenue for the quarter. In terms of vessel days worked, spill response accounted for 96 percent of activity for Hornbeck's MPSV's, 54 percent of TTB activity and 22 percent of OSV activity.

Third quarter 2010 revenues increased to $125.4 million compared to $90.1 million for the third quarter of 2009 and increased 12.1 percent compared to $111.9 million for the second quarter of 2010. Operating income was $43.3 million, or 34.5 percent of revenues, for the third quarter of 2010 compared to $27.1 million, or 30.1 percent of revenues, for the prior-year quarter; and $34.5 million, or 30.8 percent of revenues, for the second quarter of 2010. Net income for the third quarter of 2010 was $18.2 million, or $0.67 per diluted share, compared to $13.8 million, or $0.51 per diluted share for the year-ago quarter; and $13.0 million, or $0.48 per diluted share for the second quarter of 2010. EBITDA for the third quarter of 2010 was $63.1 million compared to third quarter 2009 EBITDA of $43.6 million and second quarter 2010 EBITDA of $54.1 million. The year-over-year increase in revenues, operating income, EBITDA and EPS was primarily due to incremental revenues from the vessels placed in service since September 2009 under the company's newbuild and conversion programs

Getting vessels back into other kinds of work following the Deepwater Horizon spill clean-up requires that they go through a decontamination process. Hornbeck says this has generally lasted 15 to 30 days for OSVs and 30 days for MPSVs. All of the company's vessels have remained on charter while undergoing the decontamination process. In addition, BP has borne the entire shipyard costs related to this effort. Of the vessels that Hornbeck had deployed on the Gulf spill response, seven OSV's, one MPSV, two barges and two tugs have yet to complete decontamination processes. Hornbeck expects they will be decontaminated and redelivered on various dates within the next one to six weeks.

Some of these vessels will be stacked. Hornbeck's full-year 2010 Upstream guidance includes a partial-year contribution from new vessels delivered in 2010 under its MPSV program and its fourth OSV newbuild program. With the September 2010 delivery of the DP-2 HOS Wildwing, the company now owns 51 new generation OSVs. Vessel additions under the fourth OSV newbuild program, which is now complete, should result in an average new generation OSV fleet of 51.0 and 49.9 vessels for the fourth quarter of 2010 and the full fiscal year 2010, respectively. As of September 30, 2010, Hornbeck had five inactive new generation vessels stacked and expects to stack at least four additional new generation OSVs during the fourth quarter as they are released from their oil spill relief spot charters. The current Upstream guidance gives effect to a quarterly average of 7.7 and an annual average of 7.1 new generation OSVs being stacked for the fourth quarter and full fiscal year 2010, respectively. Accordingly, the company's active fleet of new generation OSVs, which averaged 39.2 vessels for fiscal 2009, is expected to average 43.3 vessels for the fourth quarter of 2010 and 42.8 vessels for the full fiscal year 2010.

The 2010 Downstream guidance reflects an active operating fleet of nine double-hulled tank barges and nine ocean-going tugs for the fiscal year 2010. The company will consider stacking one or more double-hulled barges and additional tugs in its Downstream segment during the fourth quarter 2010 to deter further operating margin declines.


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