Hercules Offshore: Challenges Ahead in 2015

Posted by Joseph Keefe April 29, 2015

Drilling contractor Hercules Offshore Inc forecast a challenging year ahead as demand for its rigs remains weak with producers scaling backing drilling due to a slump in global oil prices.

Shares of the company, which reported a smaller-than-expected loss, rose 21 percent to 84 cents in light trading before the bell.

Demand for jackup rigs remains weak in every region of the world, Chief Executive John Rynd said, adding that a "significant" number of new rigs were expected to be delivered over the next several years, burdening an already weak market.

Hercules operates 33 jackup rigs, used in shallow-water drilling. Utilization rates for the company's U.S. offshore rig division, its biggest business, fell to 60.1 percent from 83 percent, a year earlier.

"2015 is shaping up to be a very challenging year for our industry in general and our company in particular," Rynd said in a statement.

Land rig providers Patterson-UTI Energy Inc and Helmerich & Payne Inc said last week that they expect rig count to drop in the current quarter.

Hercules slashed its workforce by nearly a third and cut salaries in February to ride out the slump in oil prices, which are down 44 percent since June .

The company said on Wednesday it was shutting down, or cold stacking, several rigs.

Hercules reported a net loss of $57.1 million, or 35 cents per share, for the quarter ended March 31, compared with a net profit of $19.9 million, or 12 cents per share, a year earlier.

Analysts on average had expected 38 cents per share, according to Thomson Reuters I/B/E/S.

Total revenue more than halved to $122.6 million.

Hercules's shares, which closed at 70 cents on the Nasdaq on Tuesday, have fallen 86 percent since June.