We're going to be right along. Up next this morning is Hercules Offshore. Speaking for the company this morning is John Rynd, Hercules President and CEO.
John was named CEO of Hercules in 2008, just in time for an industry downturn and he and his management team successfully navigated. He was then faced with the Gulf of Mexico moratorium and [promatorium] which his team also successfully navigated. And now John has been doing a solid run in the Gulf of Mexico jack-up market with day rates improving, (contract) durations increasing as well. And during the moratorium, it should be noted they did acquire really its main competitor domestically. And more recently the company has started to push up the technology curve with their investment in Discovery Offshore. Prior to joining Hercules, John spent 13 years with Noble and a variety of other drillers before that.
Please welcome back to the CEO Energy Conference, John Rynd.
Thank you, James, and thanks for having us again, and thanks for those kind words. It's been a nice trip. And I think that what I'll show today is we've had a pretty busy and a pretty transformative year for Hercules Offshore, and I'll walk through some of the steps we've taken to get where we are today and talk about them, the specific markets where we participate in.
Starting out, those that know us, we have 40 jack-ups, 24 lift boats. All of our lift boats now are in the international market. And you can see where we have operated and are operating currently. And those of you that know our management team, we come with a lot of experience with all the major drillers and all of the major jack-up markets. So there is not a market we cannot work in. We have been qualified even to work in Norway for Statoil, went through that process. So the world is open to us as we can continue to grow our business.
Recent events, James talked about Discovery Offshore. We bought 100% of it in the end of June. We started out our investment at 8% in the first quarter 2011. Through open market transaction, had got our ownership up to 32%. And then this summer, went ahead and elected to take over the remaining percentage. So now we own 100%. And we did that on an all-debt deal (inaudible) know, Hercules (inaudible) get that done.
And coinciding with that, we sold our domestic lift boats. It was a business that we could not grow. The margins were very flat. We did not see any room for growth. And if you can't grow it, you got to get out of it. We had harvested seven of the highest spec boats out of the Gulf of Mexico, moved four to our major market in Nigeria. And then we have moved, subsequently moved, three of the big boats into the Middle East, and those boats are doing extremely well.
Again by going ahead and selling another non-core, non-performing division, the Inland Barge business, that's again another -- we generated proceeds of these sales of a little about $110 million which again we did not have to issue equity on the back of these two sales as we required the Discovery shares.
Again on the barge business, if you go back to the summer of 2008, we were running 17 barges, average day rate were $40,000 a day. We could barely run three of the barges and rates were high 20s, low 30s. We were basically cash flow breakeven. We were just looking for an exit, and fortunately we were able to do that.
Again we sold these two businesses combined at about 10 times our cash flow. So I think it was a very opportunistic time for us to get out of those divisions.
Why did we do the Discovery acquisition? I think there's numerous reasons. The obvious, as everybody in the industry is going through a fleet renewal, we had to participate. When we came up with this idea kind of in the back half of 2010, the shipyards at that time, the order due to the recession, had backed up and they were getting hungry. So we were able to finance the Discovery rigs at 20% down, 80% due. So we did it really off our balance sheet, very low risk, we were the manager.
Discovery had no employees, had an independent board, it was just the right thing for us to do at that time, with the goal ultimately to acquire all of it. And again this summer that came to a head. The first rig is under tow, I'll go into that a little bit to its first job. The second rig will be delivered, fully outfitted sometime November, December, really much on schedule and on budget.
Again what's the benefit to us? Obviously higher capacity, newer fleet, high day rates to our margins, lower capital - lower CapEx annually, overall drives down and lowers our cost to capital. Again it's all good. And we're very excited about the future of these assets.
There's rigs starting its tow. Its first contract is with Cairn Energy off the east coast of India. It's a high-pressure, high-temperature well right up the alley of this rig, fits what it was built for and what we are focusing on. It's 110 days. The effective day rate -- the day rate is about 215. We received a [MOB/DMOB] combination of about $14 million. That puts the effective rate over that 110 days for our operators willing to pay $330,000 a day to get that well drilled.
I think the significance of this fixture shows that these rigs can garner this type of day rates not only just in the North Sea. I think there was a belief that the only way you're going to get plus $200,000 a day on these assets were in the North Sea. We disagree obviously and we're proving that. And I think we saw Noble announce earlier this week two very nice fixtures for a light rig in the Middle East three years in the 250 range. So we've got about four months of work which should commence November 1 -- late October, November 1. We are working work hard as we have been to find the follow-up contract post the Cairn well, and there's multiple opportunities. We're again very excited about that.
And again as I mentioned, the Resilience is coming out late this year. We guided on our second quarter conference call that we expected to be on day rates somewhere in the world March 14. We're standing firm with that. We're still confident with that. And again, we still expect to rate range anywhere in the world to be 200,000 to 230,000. And then we'll, just depending on where we go, there's multiple opportunities. We're just trying to match up delivery and timing.
Go through our business outlook. We touched -- James touched briefly on kind of the challenges we see in the Gulf of Mexico with the recession and then Macondo. At the bottom of the [chart], as he mentioned, we bought our largest competitor out bankruptcy. The market at that time was still fairly soft, day rates were about 38,000 a day. We paid $105 million for those assets.
At the time, looking in a rear-view mirror, that was a [dead pipe cinch]. It didn't feel like a [dead pipe cinch] when we get it. There was still a lot of risk fortunately. Our customers already began their shift from dry gas to oil and liquids. So since about late 2011 we've been running at full utilization and day rates have been moving nicely, as well as determine the contracts.
Here's kind of what we call our waterfall slide, what's going on the Gulf of Mexico. You could see there's a total of 59 jack-ups in the Gulf. Twenty of those are coal-stacked. We have nine of those 20. Rowan has a few, [Insco] has a few, Diamond has a couple, they're kind of spread out. So you've got a marketed supply of 39. Current demand is roughly running at 34. Really the actual supply is 38.1. One of the 39 is scheduled to leave U.S. Gulf. And then there's two jack-ups that are in that count that really only do work-overs, they're not drilling rigs. So really the industry has been running flat-out full utilization for two years as as our fleet.
Here's our backlog. You'd go back on the far left, that's the summer of '07. Why is that an important place to start? Well, that was a previous peak in day rates in the Gulf of Mexico, 200-foot [McCann] levers, we're getting $120,000 to $125,000 a day. But we had 45 to 60 days of backlog. So there wasn't any visibility.
You can see as we progressed, 2012 and into '13, our backlog has kind of been between 180 and 220. Day rates are in the ZIP code of the previous peak day rates, but we've got four to five times the backlog. So for us, we are de-risking what had been a cyclical, volatile Gulf of Mexico business and able to get our term along with day rates. And we have yet to have to trade day rate for term. We have not had to do it. We don't think we have to do it because the market is that tight.
One thing, when you look at our monthly backlog report and our fleet status report, I think keep in mind that with 18 active rigs now, we eat up 540 days of backlog. So if we stay plus or minus 20% month-over-month, we're doing fairly well. Also as we progress through this year, you're going to see the backlog start to kind of wind down a little bit, that is some of the term contracts that we entered to are winding down. We're starting now. In the fourth quarter we'll start the negotiation of those renewals. So as you get into the first quarter, you'll see our backlog probably run back up. The outlook for 2014, in our conversations with our customers domestically, is very robust.
Here's the rate progression. Again it's moved pretty high and pretty fast to the right. I think there is still day rate upside in the Gulf of Mexico. Again it is -- there's -- every rig that can work is working. I think the level of increase has got to do moderate. We run pretty hard our -- you know, like I said, two years ago our customers were paying 38,000 a day and now they're paying 108,000 a day, [so there's an adjust period] they had to get their hands around. Their economics are not impacted at these day rates. But I think you're going to see a more moderate clime of this day rate scale. But I still believe again there is day rate potential -- day rates have the potential to move higher.
Like I talked about, really the shift started in 2009. If you go back, give you a little history, the summer of 2009 was the low point in the jack-up business in the history of the Gulf of Mexico jack-up business. At the bottom of the summer we had -- the total industry had 14 jack-ups working, we had three of the 14. As we came out in the third quarter, rigs started going back to work. We exited 2009 with about 35 jack-ups working as an industry. Natural gas prices were between $4 and $5 an Mcf. So as we started talking to our customers going, what's going on, what's driving this, you know, ramp in activity? They all said, hey, we gave up on gas. We got -- we see the gas coming from the shale plays, we've got to change our portfolio of oil.
And if you look at our larger customer base, we probably have, rough count, about 11 jack-ups contracted to these guys, nine to 11 right now. And you can see their exposure to oil. You know, they sell their oil (inaudible) fleet, is trading in parity with Brent. Their economics are very robust.
Again we've got a very diverse and large customer base. Our largest customer domestically is Chevron, then it's Apache, and then it's Arena, and EPL -- are all bunched in. They're running two to three rigs consistently. The two operators, the [Count Rom] was the third of all the jack-ups. So if you think about you've got 36 active jack-ups, 12 of them are already accounted for, that leaves 24 for the rest of the operators. It's very, very tight.
And if you -- I think the other thing that's comforting for us, we now have 35 customers off the bottom of 23 in 2009. So a very simplistic way to look at it, there's 35 jack-ups that can drill wells deep within 10,000 feet and there's 35 customers. That sounds pretty good. And it's turned out to be pretty good. So again we've got a very large, diverse customer base that have really focused on all. There's been a lot of seismic shot. The seismic shoots are going on right now in the [shelf]. We've had a slug of capital come in from private equity, they're looking to put it to work. So it's all added up to a very robust market.
Here's the M&A activity that's going on since late 2010. So again you can see a slug of capital has poured into the Gulf of Mexico over the last two and a half to three years. And they're putting this capital to work. They're getting -- they're trying to get a return on this property. So that's what's driving this market.
Obviously the biggest, most recently announced is [Filwood's] acquisition of Apache shelf properties. I'll be honest, kind of caught flat-footed with that one when we read the news. We know the [Filwood] guys very well, that came out of Dynamic, and we did a lot of work with Dynamic. Our sense is that they will redeploy the capital slowly back into Gulf of Mexico. There's no pull for competing capital as there was in Apache to go to Australia, North Sea, Egypt. And I think that they will be running more rigs this time next year than they are today.
So I think -- we view this as very positive for the Gulf of Mexico and very positive for us as we've had a long-term relationship with Apache, and most of the Apache guys are staying. And we've had a long-term relationship with the new management of [Filwood]. So we think we're in good shape and we think they're going to deploy a lot of capital back into the [shelf].
We activated the Hercules 209 earlier this year. Its capital cost that we activated was about $14 million. The initial day rate was 90,000, it's currently at 102,000. So you're getting about an eight-month payback on that acquisition -- on that reactivation. The next reactivation is the Hercules 203. Its activation cost is right around $20 million. Leading-edge rate for that class of asset right now is $107,000 a day. So you're looking at just shy of a year payback.
We have been fairly disciplined about adding capacity. I think that we, you know, $20 million is a lot of money. We do not want to not do that and not get a return, so we have been very cautious. I would say with the event on the 265, that it is going to be out-of-service maybe forever or at least 12 to 15 months, depending on the -- when we get it to the shipyard and see the state of play of the remaining hull. We know we've lost the drilling package. We may go ahead and pull the trigger and reactivate the 203. And we were running 19 rigs flat out. Wth very healthy backlog, there's room for the 203 in the market.
The upside to the EBITDA is pretty compelling. If you look at the 18 rigs, you get a $10,000 a day increase across the 18, plus it's 19 now if we active the 203, you can see it's $100 million -- a little over $100 million of annual EBITDA impact to us. Right now our leading-edge rate is $107,000 a day, but our average rate today is probably about $88,000 to $89,000 a day. So you see we already got about $20,000 a day as we move up the rigs that are on the legacy contracts and move up to the leading-edge rates. And as I mentioned, I still think there's upside in rates, albeit it's going to be a modest growth from here. There is rate improvement in '14.
We get a lot of questions and we ask ourselves, because if you look at what's our risk to our Gulf of Mexico story. I think we have three risks to the Gulf of Mexico story. All price risks, without question, that's what's driving the business. We all have an idea on what it was going to do. The other is supply. We are supply constrained, hence, why rates and terms have grown.
Where is the supply going to come from? That's what you always worry about in our business. Our business is a supply-driven business. If you look around the world right now, there's more jack-ups working than it ever has been. We're at an all-time high in every major jack-up market and shorter rigs. So you're not going to see people migrate out of West Africa, Southeast Asia, West -- Middle East back to the Gulf.
I talked about the 20-stack rigs. We have nine of those. We've heard publicly Diamond, [Insco] and Rowan say they're probably not going to reactivate a jack-up in the Gulf. That's not their best use of capital both human and financial, as they are embarking on other big deepwater projects.
So next place is Mexico. Mexico has been very aggressive about retaining the assets they have on location, the jack-ups. And as those of you that have followed Pemex, they are making a very aggressive move to grow their rig count. They're currently at about 42 jack-ups. If you kind of do the math of the new builds that are owned by Mexican contractors that are scheduled, they could get 62 rigs. That was pre the talk about the privatization. If you look at the privatization, I think that's going to take a while, but it looks like it's getting momentum. And of course the focus there is deepwater. But if you look at the Mexican shallow water shelf, I'll be off by a little but not by much.
In the U.S. Gulf of Mexico, we have drilled about 56,000 shallow, less than 300-foot wells and less than 300 feet of water. In Mexico it's about 5,600, but got the big horse, the Cantarell Field. So I think there's phenomenal upside as well for long-term increased activity on the jack-up business for Mexico, and we'll how all this privatization falls out.
But here's the math that people look at. I got off-track a little bit, I apologize. If you're going to bring a rig back to the Gulf, right now a 250 [IC] just signed up $125,000 a day for nine months. A 300-footer in West Africa just got six months of $145,000. A 300-footer in Asia and Middle East got 104 in four months, 300-footer got 155 for 12 months. Those are very robust day rates with very high margins. You're not going to give that up. And then by the way, paid a nickel to get back here and $5 million to $10 million back to the U.S. Gulf of Mexico, from that region, because customers in the Gulf are not going to pay you to come here. It's tight but it's not that tight.
When you take in the insurance cost, if you look, it's about a 60% increase for a jack-up working in the Middle East versus your daily allocated insurance cost in the U.S. Gulf of Mexico because of the wind coverage, because of the hurricane risk. The U.S. offshore is the highest tax jurisdiction. So there's all of these hurdles that you got to get over to come in. It's the same hurdles why everybody left. They're still here. Plus you had a very robust environment with good visibility. So we don't see whole influx of jack-ups back to the Gulf. Not to say one or two may come in from Trinidad or somewhere in the world, but we don't see strategically our major jack-up competitors around the world coming back.
International offshore, honestly it was running really flat out in 2008 before the crisis. Now it took about 18 months for the financial crisis to kind of hit the international markets. You can see we really didn't start rolling over until late 2010. The term nature of the contracts, big capital projects get a life of their own. We're off bottom, we're coming back up. These are the day rates in the West Africa, they're about $125,000, $130,000 a day. You can see the backlog now is past its previous peak. All these things are reasons why less and less rigs are likely to come back to the Gulf of Mexico. If you look at our international fleet, we're in good shape. We talked about the Discovery rigs, but we also have other jack-ups at other regions, and the outlook for their renewals is very robust.
I touched on this briefly. We're running more jack-ups today than we ever have. And all the major markets need more rigs.
If you look at what we call the big three, Pemex, Saudi Arabia, Saudi Aramco, you know, in GC and India, they run between 25% and 30% of the world's jack-up fleet every day and they're out looking for more jack-ups. And it is important with that, they typically issue three-year contracts. So when they go to the market, they take that capacity out of the market. It is not going to be bidding on any jobs for the foreseeable future, continues to tighten the international jack-up market.
Following on our Discovery piece, you can see that the darker blue is the high-spec jack-ups that can peak in day in and day out around the world with our Discovery assets. Right now we're in about the top five percentile. After this building cycle which right now there's about 124 jack-ups on order around the world for delivery through 2017, we'll still be in the top 10%.
On the right-hand side is kind of the rate cluster of the kind of the legacy 30-year-old jack-ups, the premium jack-ups and then the ultra-premium jack-ups. And you can see in the blue above the $200,000 range, those rates have not wavered. If you go back to 2010 when the international market fell on its face, those rates never [bottled].
When we talk about bifurcation in the jack-up business, there is a bifurcation but I think it's a little different than a lot of people on the sales side presented. And these rates play it out right here. There is a bifurcation between the ultra-high-spec, high-capacity harsh environment, high-temperature, high-pressure rigs. Their rates are consistently over 200.
What we've seen over this year is the rate coming together of the newer jack-ups that aren't as high-spec, more the premium new builds and the legacy jack-ups. Their rates have bunched. So that's the bifurcation right now. It's not old and new. You've got to slice it another slice. So that's why we again are very optimistic about the results and the future of the Discovery assets.
Here's our fleet, the Triuph as I mentioned, under tow, should be on the payroll late October, early November, about 30 days ahead where we forecasted. We talked about the Resilience. Again we're standing by our previous guidance of a March 2014 on day rates somewhere in the world. The 267 commenced its three-year contract with Saudi Aramco -- I'm sorry, it was about to commence its three-year contract with -- in Angola, which should get under tow the 15th of September. And for those that follow us, we've had a mess of trying to get work visas for our work crews out of the Angola government and is the latest by about 90 days. We have got the appropriate visas now and are making amends to get the tugs to the rig and to get on location to commence that [two-year] contract.
The 266, again started, that was the acquisition of Diamond offshore jack-up. We had a three-year deal with Aramco and it's going very well. 262, 261 through '14, I think the future there in Saudi for those units is very bright. This is the second go-around we've had on the second three-year -- set of three-year contracts we've had on those assets. And right now in our conversations with Aramco, they're going to keep just about everything they have and they're looking for more.
The 208 just got into the shipyard in Singapore, left Myanmar after a successful drilling program in Myanmar. We were the first U.S. driller back in Myanmar since they lift the sanction, so it was a great learning curve for us. That rig has about 90 days and a five-year special survey. We'll leave Singapore early January and commence the 235-day contract with Cairn in India. They had previously been a very good client, they're now again a very, very solid client. We're going to have two rigs working for them. And that day rate is $125,000 a day. And they've got options to extend. So the future for the 208 is very bright.
260 is through the May of 2014 with [Perenco]. Kind of early conversations with [Perenco] on '14 drilling plans, wouldn't be surprised if the 260 stays with [Perenco] through '14 and maybe into '15.
The 170, it's not going to work. It's just not -- with the specs now that are being required in the Middle East, that rig is just a little shy, plus it takes probably about $25 million or $30 million to get that rig back up and running. It went stuck in 2010, our certificates have lapsed, so we're looking at a fairly substantial amount of capital. And so with that capital, we want to match it up to a three-year program to de-risk that capital spend. We just don't see that happening. Not that we're not looking, but I think in a realistic view, that rig is not going to work. And we have sold 19 jack-ups since 2009, and that's accounted for sale. Obviously every rig we sold have come with some form of drilling restriction or we scrap them, and we're going to continue with that philosophy.
Our international lift boats don't get a lot of publicity. We were asked when we sold domestic, is international mixed? And the answer is emphatically no. It's our highest-margin business. It gives us good synergies. We have three boats in the Middle East. We have four jack-ups working in the Middle East. We have 24 lift boats in West Africa. That market has surprised us to the upside. Those of you that have followed us over the last couple of years, we had been getting concerned about the growing capacity of lift boats, specifically in Nigeria, and we thought that was going to kind of dent the momentum. Well, it hasn't. The work has out-surpassed supply. The rates are very, very solid. Our outlook is very good in both the Middle East and Nigeria.
We mentioned on our second quarter conference call we are entering labor negotiations with the labor unions in Nigeria. We, kind of a funny story, we -- our call was on a Thursday, the negotiations were going to start on Friday, and we said, really? I mean we've never had a work stoppage. We've always worked through this. Do we even need to mention? It is probably going to cause some angst in the market.
But we thought, all right, we're on a call on Thursday, we start negotiations Friday morning which is midnight Houston time, and all of a sudden, on Friday night we're filing 8-Ks and we've got a work stoppage, because they're very volatile. We said, well, let's just get it out.
But good news is, all that's behind us. So that's not an issue. The pay raises were right in line where we had kind of forecasted they would be. So really -- and if you look at the overall wage to that -- out of those unions relative to our cost, it's only about 8% of the cost. So it wasn't going to knock us out of the whack anyway.
But anyway, all good, things are running smooth. You can see the EBITDA and utilization and rates starting to move high into the right. So that market, we're very excited about it. It's performing kind of as expected this year. So we're very optimistic about '14.
Talk about our corporate initiatives. We touched on some of the activities we've done this year. It was a very busy year, very transformative year. We kind of took advantage of everything that came in front of us either on the acquisition or the disposition side. And I think we've hit our targets that we headed into this year. Just because we hit our targets, it doesn't mean we're going to stop. So we will stay busy, we'll stay focused on shareholder value.
This is kind of the history of our growth, it's a fairly busy side. But really I think there's been some key transactions, obviously the acquisition of TODCO in the summer of 2007, was a big acquisition, also caused us some heartache and pain in '09 and '10. But we wouldn't have made it without the acquisition of TODCO. That's flat it. We had five jack-ups and 24 lift boats, we weren't going to make it through that down cycle with that little bit of capacity, we had no flexibility.
We bought three jack-ups from Transocean, two of those are the ones working for Saudi, the other is working in the Gulf of Mexico, on their 15-month contract at $137,000 a day. There had been solid cash flow generations as we bought them. Then obviously this year, with the sale of the non-core domestic lift boats, the non-core Inland Barges and the acquisition of Discovery Offshore. Also this year we bought -- in the first quarter we bought a jack-up and put it on that three-year contract for Chevron which will start late September, and we bought a lift boat in the West African market. We paid $45 million for the lift boat. It has worked consistently since the acquisition at $60,000 to $65,000 a day day rate, operating cost of $15,000 a day. So the margins are very robust. As I mentioned, the international lift boat business is our highest-margin business.
Here's kind of a snapshot, a report card of the three most recent individual asset acquisitions -- Hercules 266, the ocean in Colombia, it's on a three-year deal with Aramco. We got $125,000 a day day rate and $25 million [MOB]. At the time that was the highest day rate in its cycle for that class of assets. So we picked that. You can see a 21% return on capital, $32 million of EBITDA. So we'll pay for the rig in this primary term of its contract.
And as we look at the older assets, that's really our target. If we buy one, lock it into a contract, take the capital risk out of it, because they are older assets, and we don't want to be exposed with a lot of capital hanging out if the cycle turns on.
The 267, we mentioned that's the one going to Chevron in Angola -- again, 20%, 21% return, $20 million of EBITDA annually. Again that rig will pay for itself under its primary term. The Bullrunner -- Bullray, excuse me, the lift boat we acquired at $47 million, $2 million that was a shipyard stay, $45 million was the acquisition price. Again at 20%, we're probably going to outperform that 20%. The demand for that rig, that lift boat, in the region, not just Nigeria, is very, very solid. And it's almost, as I mentioned, worked uninterrupted in the high 60s, so -- mid 60s. So again a very, very good acquisition, again de-risking these acquisitions.
Also if you look at the lift boat combined with Discovery, we've ticked the box of moving upscale, higher-capacity equipment move. The Bullray was built in 2008, so we're renewing our fleet on both fronts, both the lift boat side and the jack-up side.
Again if you look at the legacy, domestic offshore is about 51% of our business, the domestic lift boat is about 9%, and you see inland was only about 4%. International offshore -- international lift boats is about 17%, and international offshore is 19%. Pro forma, the [depositions], the acquisitions were more balanced. We're at about, you know, 40/60. I think as you look at '14, with again us -- just our average day rates moving up to leading-edge rates which is about an $18,000 to $20,000 move, then we're probably closer to 50/50, because the outlook again is very, very robust. We have multiple rigs with multiple operators. And conversations with them is they're going to keep those and potentially add an incremental rig. So the outlook in '14 for the Gulf of Mexico is very, very solid.
We've come to the end. It's been a busy year. It's been a busy five years for us. And so we fought and we clawed and we're back. But I think if you look at the Discovery acquisition, it was a step-out when we did it because we didn't have a balance sheet when we undertook the Discovery acquisition, but we felt it was too good of an opportunity to pass up. We structured around the Discovery offshore piece. We've consummated that, a great step forward for high-grading our fleet and the fleet renewal process. Again, sale of domestic lift boats and the inland barges, get out of the non-core businesses, focus that capital, obviously redeploy it back in the Discovery offshore, a good, turns out, $100 million, plus it lessens our -- we can more focus on really the high-return parts of our business and not spend any time on two divisions that were really generating nothing actually.
The trends in the Gulf of Mexico I've talked about. '14 again is shaping up to be rock-solid. I'm usually very cautious. I've been in this business 33 years. I got my head slapped around more often than once. But this is the strongest I've seen the Gulf of Mexico in my 33-year career. Why is that? Well, I think I've touched on the points. There's very limited supply, without any real appreciable supply growth. Very high visible demand, a slug of capital has come back into the Gulf of Mexico shallow water, it just never set up as well. Day rates had been higher, no question. Term has never been better. And our day rates are in the area code of previous peak day rates. I think we can reach the previous peak day rates. I'm not going to say when but I think it's a achievable. So again, shaping up well.
The international jack-up market continues to surprise to the upside for all of us. I was, to be honest, the first six months of this year, I was a little surprised at the lack of rig growth internationally. But we've caught up as an industry. You've seen some recent announcements around the world, rates are moving very nicely, even in the face of the 124 jack-ups that are coming through 2017. It just shows you this market is very, very tight.
Again the backlog both domestically and internationally, the domestic backlog again is near all-time highs. We have opportunities to refresh the backlog internationally as we progress through this year and early next year to really strengthen our international piece as well and really give us some great visibility.
Again as I mentioned earlier, we're taking the volatility out of this thing. We're smoothing this thing out, which is, you know, really, really important for our visibility, how we attack the balance sheet and those issues.
Again the balance sheet is fairly solid, we got a chance to own our 10-1/2's in October, we got early call in April on our secureds, we have an early call. So we have the flexibility coming over the next six to eight months to again further strengthen the balance sheet, which we will do appropriately.
I think our management team, as James mentioned, we've navigated through some challenging times. We've kept the management team. Nobody has left. I think that's very important. As we were going through some tough times financially, everybody stuck together as a team and the team is still together and we're growing and we're bringing in some young folks to the business. We got -- our CFO is very young, our VP of ours, very young, so we've got some great talent here. And we're also for the first time since we've been at Hercules, we've hired eight college graduates and put them in a three-year training program. We've got to build for the future. We're getting the assets moved, we got to get the folks moved. So we've got a renewal on both fronts. So we're very excited about the future. It's very, very solid.
Obviously this is a cyclical business. Something can always come from left field to surprise you. But we have the balance sheet and the liquidity to handle the [battle] because we've worked very diligently on that liquidity because, you know, when you're looking forward, it's never really available. So we'd rather be looking at it than looking forward.
So with that, I'll open it for questions.
Time for probably one or two questions for John [before the break].
Having that large backlog, particularly in the Gulf of Mexico is a very nice thing, it's a somewhat unusual thing now. How contractually strong is that backlog? Certainly, you know, your customer set has been willing to just back out of things as soon as the commodity price breaks. Land rig guys have done a pretty good job as far as evolving to some pretty strong contractual statements. How strong is the contractual writing in those -- in that backlog?
They're as strong as we could get them which were pretty solid. Again it's a customer-by-customer issue. But we're, you know, to put this -- this is being webcast, so we're in good position to deal from strength. So we're comfortable. If you look at who our -- who most of that backlog is with, it's Chevron, it's Apache, it's EPL. It's very solid, well-financed, customers who we have to have a pretty dramatic fall in commodity prices given the economics on the shelf for oil. So it's a risk, but I don't see it as a significant risk.
On the international lift boats, understand that's your high-margin business. Typically it's the time to sell when the margins are high and not sell when margins are low. So maybe spend a little bit more time on that, because the margins (inaudible).
Right. Fair enough. Well, I think a couple of things. One, we think we can still grow it, so we're going to take that avenue. If we get to a point where margins are still robust and for whatever reason we can't grow it, that becomes a candidate. Right now given the EBITDA it throws off and the synergies we can derive from having boats and lift boats in the same market makes sense. But it's a fair question. Because everything for sale has a price.
Okay. With that, we're going to go ahead and we want to break. There's [snack] available in the beverage --
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