Hercules sells rigs due to dragging oil slump

Hercules rig in GoM

A Hercules rig sits idle in the Gulf of Mexico/ Aaron M. Sprecher

Houston-based Hercules Offshore Inc. (Nasdaq: HERO) has sold four shallow-water rigs in the Gulf of Mexico, according to its recent fleet status report.

Back in April, Hercules announced during an earnings call that it reduced its workforce by almost 40 percent as demand weakened due to sluggish oil prices.

Related: Houston offshore firm reduces staff by 40 percent, records net loss

Utilization rates for the company’s U.S. offshore rig division, its biggest business, fell to 60.1 percent from 83 percent this time a year ago.

The four rigs sold have been all cold-stacked since 2009. Also, the fleet status report includes 11 other cold-stacked rigs with nine under contract, ready for work.

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According to company CFO Troy Carson back in April, cold-stacked domestic rigs have an operating cost of about $2,000 to $2,500 per day, and warm-stacked rigs’ operating cost is around $7,500 to $9,000 per day. That’s down from nearly $40,000 per day for a full crude marketed rig.

Related: 2015 Offshore Decommissioning Report- Gulf of Mexico Infographic

The company shares dropped to 81 cents during trading Tuesday, amid the news.

“The market is getting very competitive right now,” stated CEO John Rynd. “There haven’t been many new jobs. There have been some extensions, but as far as incremental demand, it’s been almost over half of what it was last year, and you have about 180 jackups this year rolling off primary term with the contracts.”

Hercules reported a net loss of $57.1 million back in April for the first quarter compared to a net profit of $19.9 million the same time the year prior.


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