Jones Act OSV New-build Program Expanded by Hornbeck Offshore

Hornbeck Offshore expands OSV new-build program, anounces retrofits & other related developments.

The Company has exercised the first four of its 48 options to build additional HOSMAX vessels at an aggregate incremental cost of approximately $180 million, excluding construction period interest, for vessel deliveries in the fourth quarter of 2014 and first quarter of 2015.  These four new vessels will expand the Company's fifth OSV newbuild program, which was announced in November 2011, from 16 vessels to a total of 20 U.S.-flagged HOSMAX class DP-2 new generation offshore supply vessels ("OSVs") for its Upstream business segment.

These 20 vessels are being built at two shipyards in the United States, which qualifies them for coastwise trade in the U.S. Gulf of Mexico ("GoM") under the Jones Act; however, the Company expects them to service the anticipated increase in deepwater and ultra-deepwater drilling activity in all three of the Company's core geographic markets of the GoM, Brazil and Mexico.

The HOSMAX class DP-2 vessel designs contemplated by this newbuild program feature three different size vessels (300, 310 and 320 feet in length) each with cargo-carrying capacities ranging from 5,650 to 6,200 deadweight tons and more than 20,000 barrels of liquid mud. 

In addition to the expansion of its HOSMAX newbuild program, the Company has 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.

Hornbeck summarizes recent developments as follows:

    •    Exercises first four of 48 shipyard options for two additional 310 class OSVs and two additional 320 class OSVs
    •    Extends exercise dates for 44 remaining options by ~60 days each, while maintaining original pricing and delivery dates
    •    Next option exercises are not required until February 2013, providing additional time and greater flexibility
    •    Commences retrofit program to stretch and upgrade six 200 class DP-1 OSVs into 240 class DP-2 OSVs
    •    Updates net interest expense guidance to reflect GAAP accounting treatment for recent convertible bond financing
    •    Reports no vessel damage from Hurricane Isaac and no pre-storm cancellation of vessel charters by customers