Houston-based Hercules Offshore Inc. (NYSE: HERO) sees 2015 as a challenging year as demand weakens for its rigs due to sluggish oil prices.
The company disclosed on its earnings call that it has reduced its workforce by almost 40 percent over the past few months.
According to public records, the firm had approximately 1,800 employees as of December 2014.
“The personnel decisions have been very difficult as these are our friends and colleagues,” Hercules President and CEO John Rynd said in the call. “They have contributed to the success of our business over the past several years. But, unfortunately, these are actions we have to take.”
The price of crude oil dropped 50 percent from its high back in June of 2015, causing companies to have to cut CAPEX and their workforce to stay competitive.
Hercules operates 33 jack-up 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.
Hercules is focusing on its cold-stacked rigs instead of warm-stack rigs because they have a larger cost savings that could take 60 to 90 days to reflect in the firm’s financials, according to new CFO Troy Carson.
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, Carson said. That’s down from nearly $40,000 per day for a full crude marketed rig.
The company reported a net loss of $57.1 million, or 35 cents per share for the first quarter, compared to a net profit of $19.9 million, or 12 cents per share the same time last year.
At the close of the market on Tuesday, the firm’s shares had fallen 86 percent since last June.