Complete Fleet Analysis and Status as of Feb. 25, 2016
Jackup Fleet (Including Two Perisai Rigs)
|Year built|| |
|1||Hercules Highlander|| |
7/31/16 en route
225 (+5k Mob.)
|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|| |
12/31/16 - 9/29/19
|12||Hercules 262||1982|| |
12/31/16 - 11/8/19
|13||Hercules 263||1982|| |
|14||Hercules 264||1976|| |
|15||Hercules 266||1978|| |
|Well in progress|| |
|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)||Rig owner in discussion to defer delivery.||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||4||2||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 Feb. 29, 2016
|Number of Vessels||Actively Marketed||Day Rate $||Op. days||Utilization %||Vessel Drydock|
|230-280||4||4||0||0||0||(2v) March (1v) April|
The liftboats vessel contract for February was worth $3.474 million, compared to $3.241 million for January. That's a 7.2% increase, month to month (however, January 2015 revenues were $7.443 million). I believe the break-even revenue is around $5 million.
Hercules Offshore released its March fleet status report: No new contract. The Perisai Pacific 102 delivery is being delayed, the Hercules 260 will work until 5/1/2016 (work in progress) and the Hercules 205 had a minor change in contract time.
As you can see in the graph above, revenues are shrinking very rapidly. I estimated a total contract backlog of $696 million, which includes about $405 million for the Hercules Highlander alone.
The financial situation cannot be clearer and HERO is losing about $40 million per quarter, this income loss will be reduced to under $30 million, when the Hercules Highlander will be working.
20 rigs out of 27 are either cold stacked, warm stacked or ready stacked and the seven remaining rigs are contracted at a day rate average of $60k/d, representing a total backlog of $291 million - excluding the Hercules Highlander.
I will not discuss the liftboat segment, you will have to look at my graph above to see that it is another loss. However, monthly revenues for the last three months was $3.212 million, which is about $9.6 million/Q.
The company's decision to sell the business is still the only alternative; however, the main issue is who can be interested?
My first idea was that Maersk (OTCPK:AMKAF) may be the only potential acquirer for Hercules, because of the Hercules Highlander, but I start to wonder if they will make a global offer?
From a shareholder's perspective, it is simply how high the price per share can reach if Maersk decides to acquire the company?
It is hard to estimate a fair price, but I will not be surprised if HERO can get about 50%+ above the actual stock value or a range between $2.50 and $3 (Just a quick estimate here - I raised it a little from last month).
The problem is that Maersk is not in a hurry at all and HERO is still bleeding cash at a fast rate now, setting a situation where HERO will have no more leverage and will be forced to accept whatever the potential acquirer will be willing to offer. Time is of the essence...
I believe the company should be much more pro-active and officially put the company for sale, as soon as possible.
However, HERO needs to "cleanse the house" first and get rid of its obsolete fleet and eventually sell the Hercules Triumph and the Hercules Resilience separately.
The International liftboat segment should also be sold separately, if it is possible. The segment is losing money on a monthly basis and presents no interest for a potential acquirer.
HERO can reduce its fleet to less than 10 jackups mostly contracted and the Hercules Highlander, which is the main interest.
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 trade the stock occasionally.