Complete Fleet Analysis and Status as of Jan. 26, 2016
Jackup Fleet (Including Two Perisai Rigs)
|Year built|| |
|1||Hercules Highlander|| |
7/31/16 en route
|Company to receive a mobilization fee of approximately $9 million|| |
|2||Hercules Triumph|| |
Keppel Fels Super A -HE
|Ready for North Sea operations||Netherlands|
|3||Hercules Resilience|| |
Keppel Fels Super A -HE
|4||Hercules 150||1979|| |
|5||Hercules 173||1971|| |
|6||Hercules 201||1982|| |
|7||Hercules 205||1979|| |
|8||Hercules 208||1980|| |
|9||Hercules 209||1981|| |
|10||Hercules 260||1979||4/13/20||75 (if oil brent <$86)-125(if brent oil>$125)|| |
|11||Hercules 261||1979|| |
1/1/15 - 12/31/16
12/31/16 - 9/29/19
|12||Hercules 262||1982|| |
1/1/15 - 12/31/16
12/31/16 - 11/8/19
|13||Hercules 263||1982|| |
|14||Hercules 264||1976|| |
|15||Hercules 266||1978|| |
|16||Hercules 267||1980|| |
|17||Hercules 300||1974|| |
|18||Hercules 350||1982|| |
|1||Perisai Pacific 101|| |
4 + 12% Ebitda (See "1" below)
|2||Perisai Pacific 102|| |
|4 + 12% Ebitda (See "1" below)||Singapore|
|Rigs Cold Stacked|
|1||Hercules 120||2/15||US GoM|
|2||Hercules 200||1/15||US GoM|
|3||Hercules 202||10/14||US GoM|
|4||Hercules 204||10/14||US GoM|
|5||Hercules 212||11/14||US GoM|
|6||Hercules 213||1/15||US GoM|
|7||Hercules 214||1/15||US GoM|
|8||Hercules 251||1/15||US GoM|
|9||Hercules 253||1/15||US GoM|
("1") Hercules Offshore acts as operations and maintenance manager for the rig, owned by a wholly owned subsidiary of Perisai Petroleum Teknologi Bhd ("Perisai"). Hercules will receive a daily management fee of approximately $4,000 per rig, payable starting at the contract commencement date, and a daily operational fee equal to 12% of the rig-based EBITDA. Hercules will be reimbursed for all operating expenses and Perisai will pay for all capital expenditures.
Hercules Fleet Status Snapshot
|Total||Domestic||International (including 1 under-construction)||Under Management|
|Warm Stacked JU||7||5||2||0|
|Ready Stacked JU||3||1||2||0|
|Cold Stacked JU||9||9||0||0|
Liftboat Vessels (West Africa and the Middle East)
As per Hercules' website:
Liftboats, commonly referred to as the 'workhorse' of the offshore industry, are reliable, versatile and self-propelled. They provide a cost-effective and efficient alternative to traditional pipelay/derrick vessels. With their large, open deck areas, they are self-propelling and self-elevating. Our fleet provides a work platform for a wide range of services, from coiled tubing and wireline operations to well intervention.
Data as of Dec. 31, 2015:
|Number of Vessels||Actively Marketed||Day Rate $||Op. days||Utilization %||Vessel Drydock|
The liftboats vessel contract for December was worth $2.920 million, compared to $2.342 million for November. That's 24.7% increase, month to month (however January 2015 revenues were $7.443 million).
Hercules Offshore released its January fleet status:
1 - Only one minor change involving the Hercules 205, and the Hercules 264. The Hercules 205 is picking up a contract from the Hercules 264 for Byron Energy, in between two contracts from Renaissance. The Hercules 264 will work for Linder until 2/10/16.
2 - The Hercules 263 is now warm stacked from ready stacked.
3 - The liftboat revenues increased from $2.342 million to $2.920 million this month, but it is still well under the breakeven point. My estimate is a loss of $2 million per month.
Just a reminder, for the ones who are not familiar about Hercules offshore:
Hercules Offshore emerged from bankruptcy on Nov. 6, 2015. The stock switched from HEROQ -- which was trading at $0.065 -- to the ticker HERO using a conversion where old shareholders received one HERO share for 268 shares of HEROQ, and worthless warrants were also distributed.
About the warrants, the 8-A12G is indicating the following:
The company will issue warrants to the holders of equity interests ... totaling 5,000,000 warrants outstanding, exercisable until the expiration date, to purchase up to an aggregate of 5,000,000 shares of common stock at an initial exercise price of $70.50 per share.
Chart of HERO:
I am not really optimistic about the chance of HERO survival, despite the fact that the company is debt free, now. The company is burning cash at an increasing rate and there is no relief in sight.
Obviously, I am not the only who thinks that HERO should not be in business any longer, and should "close the door". A simple look at the PPS just shows what I mean.
Perhaps selling the entire fleet, and make a cash distribution to all shareholders, after paying for all expenses, is the right strategy?
The business model is definitely not working and the actual shareholders may get a good premium, if the company can be sold in part or even much better as a whole, to another offshore driller (Pick your choice).
What represents the value of Hercules Offshore, as it is today?
The fleet is comprised of 27 Jackups and 2 Jackups Perisai.
19 Jackups are warm stacked, ready stacked and cold stacked with a minimum value.
8 Jackups plus one Perisai are actually (or will for the Hercules Highlander) generating revenues.
|Perisai Pacific 101||11||8||0||0||0||0||8||4,56|
|Total contract in month||58,23||56||48||45||16||7||-||731|
I came up with a total backlog of approximately $731 million, including the Hercules Highlander ($413 million with mobilization fee)
Obviously, the major part of HERO's value is essentially based on the Hercules Highlander, and the rest of the fleet -- which is either cold stacked, idle or contracted at under-breakeven point -- will not be estimated more than their scrap value, if HERO want to have a chance to find an acqueror.
Some JUs are quite valuable, of course, such as the Hercules Triumph, which has been equipped to work in harsh environment recently and is stacked in North Sea. However, the market situation is not offering any potential work for this unit and selling it, now, will involve a large discount.
The liftboat segment has a residual value, however, the entire segment is losing about $2 million a month, as we speak. Thus, this value will be certainly very low.
I will not guess a price, but I have given what could be the base of such estimate.
It seems that from a shareholder's point of view, the best and only solution would be to sell the entire company at a distress price, which will eventually represent more value per share than the actual PPS.
The cash proceeds will then be distributed to HERO shareholders, or the company who will acquire HERO, may pay with a certain amount of shares instead of cash -- acquisition and shares swap. This situation will eventually be a good synergy after all for another major offshore driller.
The main problem is that management will lose their lucrative job, even if a large compensation is awarded to them. Thus, the idea will not be accepted at the management/board level, even so it is the best solution for the company and its shareholders, in my opinion. The second element is about the Hercules highlander contract? How good it has been negotiated and what if the shipyard is late for delivery?
However, trying to survive in this environment is a lost battle for HERO and its shareholders. The more the company waits to end this ordeal the less shareholders will get at the end.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I may trade the PPS again soon.
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