Hercules Offshore Inc. Q1 2008 Earnings Call Transcript

Hercules Offshore Inc. (HERO)

Q1 2008 Earnings Call

May 01, 2008 11:00 am ET

Executives

Randy Stilley - President and CEO

John Rynd - EVP and COO

Lisa Rodriguez - SVP and CFO

Stephen Butz - VP of Finance and Treasurer.

Analysts

Arun Jayaram - Credit Suisse

Jeff Tillery - Tudor Pickering

Pierre Conner - Capital One Southcoast

Peters Santana - Markston

Presentation

Operator

Good day ladies and gentleman and welcome to the first quarter 2008 Hercules Offshore Earnings Call. My name is Katy and I will be your coordinator for today. At this time, all participants would be in a listen-only mood. We will be facilitating a question and answer session towards the end of this conference. (Operator Instructions). I would like to now turn the call over to your host for today Mr. Stephen Butz, Vice President of Finance and Treasures. Sir you may proceed.

Stephen Butz

Thank you, Katy. Good morning, I would like to welcome everyone at our first quarter 2008 earnings conference call. Participating this morning from Hercules Offshore management team are Randall Stilley, our Chief Executive Officer and President, John Rynd, Executive Vice President and Chief Operating Officer, and Lisa Rodriguez, our Senior Vice President and Chief Financial Officer.

We issued our earnings results and filed an 8-K with the SEC this morning. The press release is available on our website at www.herculesoffshore.com. Before Randy begin his remark, I would like to remind everyone that this conference call will contain forward looking statements including our discussion regarding the outlook for 2008 and beyond. Our actual results may differ materially from those projected in the forward looking statements. There are number of known and unknown risks and factors that may cause our actual results to differ from the results discussed in our forward-looking statements. You can obtain more information about these risks and factors in our filings with the SEC, which can be found on our website and the SEC’s website www.sec.go. Now it is my pleasure to turn the call over to Randy.

Randy Stilley

Thank you. I will begin with some general remarks and operating highlights from the first quarter. And John will highlight some of our international expansion activities and recent contract awards and Lisa will review our first quarter financial results and provide some forward-looking cost guidance for the duration of the year. Then we will open up the call for Q&A

As Stephen mentioned, we have reported our financial results this morning prior to the market opened. We reported net income of $4.5 million or $0.05 per diluted share for the first quarter of 2008, compared with net income of $33.4 million or a $1.03 per diluted share for the first quarter of 2007.

First quarter operating results reflect the challenging market conditions that we experience at all of our domestic business segments. As anticipated shallow water drilling activity in US Gulf of Mexico finally began to improve. But unfortunately it was too late in the quarter to have a meaningful impact in our results. While I am disappointed with the results; I am pleased with our response to the weak market and making quick decisions to reduce cost. John will review the results for our cost reduction activities and provide an update on our ongoing cost management plans.

While our domestic conditions were difficult, our international operations posted good results in the first quarter and we continue to make progress in international regions. We have reached agreement to acquire three independent leg rigs, closing on two of those during the quarter and expect to close on the acquisition of the third rig in May.

We have already secured long-term term contracts on two of the new rigs and are moving them out of the Gulf of Mexico. We also received lengthy contract extensions on three of our international rigs with significantly higher day rates.

These activities along with the improving market conditions in the US Gulf of Mexico will have a positive impact on our financial results throughout the remainder of 2008.

Now, I will provide some operating highlights and discuss the outlook for each of our business segment, starting domestic offshore. Utilization in this segment of 55% in the first quarter was relatively flat versus utilization in the fourth quarter as result of weak demand in Whale Shark and our decision to take capacity off the market to reduce cost.

At the time of our last earnings call we had six rigs in one stack mode. Since then we put three of those rigs back in to service. Our domestic backlog has steadily improved and currently stands at 41 days with utilization of 74%.

US-Gulf of Mexico jackup demand currently stands at 57 against the marketed supply of approximately 65 rigs. The Hercules 261 will be departing the region for Saudi Arabia when it finishes its current obligation and the Hercules 350 is also being marketed internationally and should be leaving the region by the end of this year.

By yearend marketed supply in the Gulf of Mexico will likely be there in the low 60s and this is a level we believe will be supported by ongoing demand.

Average revenue per rig, per diem, declined by approximately 6,000 to 56,900 during the quarter. However, this is about 5,000 higher than our guidance at the time of fourth quarter earnings call, reflecting the modest improvement in rates that we have experienced so far.

Recent contract fixtures have been the 60,000 to 70,000 range for majority of our rigs and we are confident that we'll continue to see a steady improvement in demand in day rates over the next several months based on our customers indications. As many of you know, our operating leverage to improving conditions in the US Gulf of Mexico is significant, with every 10,000 increase in day rates at 85% utilization translating into an additional $0.50 per share in earnings.

Now to international offshore; we continue to post strong results in our international offshore segment. Operating income for the quarter was almost 40% above the prior quarter due primarily to the start up of the Hercules 205 in Mexico and a $10,500 improvement in average revenue per day.

We expect improvements in average revenue to continue throughout the year as new contracts and extensions with our day rates coming to effect. Our international backlog now stands at 650 days and approximately $950 million, further improvement from 525 days of our fourth quarter earnings call and 365 days at the time of our third quarter earnings call.

With five of our 11 international rigs contracted in 2011 and a fixed rig contracted into 2010, we are in a good shape to deal with any softness that might occur in international markets due to new rig deliveries over the next two years. However, we are remain very optimistic about the ongoing strength in international jack-up markets based on our recent contract awards and incremental demand we expect over the next 12 to 18 months.

Now to our inland segment; since inland barge drilling activity is largely subject to the same drivers as domestic offshore drilling, this segment also posted weak results in the first quarter. We experienced a significant decline in utilization to 61% from 72% in the fourth quarter, which lead to a decline in average revenue per day per rig to 42,930 from and 47,312.

Near-term we expect demand to remain fairly soft for inland barge drilling due to the lengthy permitting process require prior to drilling a well. Our current utilization is approximately 65% with an average backlog of 23 days, and average revenue per day of about 40,000.

Over the intermediate term we are more optimistic about the segment and expect activity in this area to improve this activity strengthen and growth opportunities for deep gas drilling continue.

Now to domestic Liftboats. Results in our domestic Liftboat segment were particularly disappointing we suffered from extremely low utilization of only 38.2% during the quarter versus utilization of 65% in both the fourth quarter and year-ago quarter. While the first quarter typically suffers from increasing weather-related downtime, we experienced unusually rough weather this winter

The situation was exacerbated by the influx of new capacity with approximately 10 new liftboats entering the market over the past year. Another nine liftboats are expected to be delivered by mid 2009, in a market that already has ample supply. This weak utilization with pressure on passing, and together with the change in mix towards smaller liftboats our average revenue per day, declined by $1700, to just below $10,000 per day.

Utilization finally started to improve in April, when we started t market about 35% and we are currently running at about 60%. We expect to see a return to normal utilization in the 65% to 70% range during the remainder of the second quarter. However, we believe our average revenue per day may decline to the $8500 range based on mix and current pricing levels.

We are mobilizing a 260 class liftboat of Whale Shark to the Middle East and we are continuing to seek opportunities to move additional liftboats to more attractive international markets.

Now, onto our international liftboat segment, our international liftboat operations continue to post excellent results. Average revenue per day per liftboat increased for the third consecutive quarter to $15,000 and utilization remained steady at just below 80%.

The Black Jack, a 200 class liftboat that we acquired last year has been in the shipyard for refurbishment and will go into service in West Africa later this week. We have secured some short-term work for this vessel while we complete negotiations on a longer term contract.

As I mentioned earlier, we have expanded our international liftboat operations into the Middle East with the relocation of the Whale Shark. This lift boat is expected to arrive in the second week in May and we are currently bidding the

This lift was expected to arrive during the second week in May and we are currently bidding this space in both short-term and long-term projects in the region. Now, I will finish up with our other segment.

Results for the other segment consisted primarily of Delta Towing and the wind down costs associated with the fourth quarter sale of our land drill business. As with our other domestic businesses, Delta was affected by relatively weak demand during the first quarter. This segment generated revenue of $11.1 million and recorded an operating loss of $1.3 million compared with revenue of $35.6 million and operating income of $6.5 million in the fourth quarter of 2007.

Much like the recovery we have experienced in our domestic offshore business, Delta is also experiencing a turnaround and I expect to see a significant improvement in second quarter results. Also we recently decided to consider a possible divestiture of Delta Towing and it solicited proposals from outside parties for the potential sale of this business. Now I turn the call over to John.

John Rynd

Thank you, Randy and good morning. I will review the results of our warm stacking plan as well as provide an update us to new cost control measures we are taking into inland and domestic liftboat segments to soften the impact of the downturn these businesses are experiencing.

Now, I would now like to highlight some of the key changes and new contracts we have secured in our international segments. As you know, last fall in response to the weakening market conditions in our domestic offshore segment and inland segment we warm stacked six of our shallow water offshore rigs and one inland barge removing them from active bidding.

We took advantage of this opportunity to both upgrade some of the selected rigs and provide much needed maintenance in others. We established a budget of $7.4 million for this work and it was completed all in time and in line with budget. We also reduced our personnel on these rigs to six persons per rig and repositioned excess personnel to optimize support for active operating rigs and to back fill for normal attrition.

As a result of these measures we reduced our operating cost by almost $12 million from August of '07 to March 2008, but still retained our key personnel who for a while enjoy success on a go forward basis.

The warm stacking plan also enabled us to focus our operating, engineering and marketing resources to improve our overall results. As Randy mentioned we are now down to three warm stack rigs in our domestic offshore segment and we anticipate putting at least two those to work by the end of the second quarter.

The positive results of the warm stacking plan are becoming evident as we have responded to the recent upturn and are now operating 17 rigs offshore moving to 20 later this month. Our average backlog will increase 50% during this period.

Our safety performance operating upturn and customer satisfaction continue to show marked improvement. While the domestic offshore business is slowly improving, the inland barge business as Randy mentioned will likely lag in it is recovery. We are therefore going to cold-stacked rig 28, the barge rig that we previously warm stacked. This will allow us to save an additional 10,000 per day in operating expense or just under $1 million per quarter.

Well there are costs to cold-stack and later restart operations, at this point the breakeven on this move is two to three months. Given that this is our least marketable barge rig and likelihood that it will not secure work through the remainder of 2008, it is a clear decision.

Further we are suspending all discretionary maintenance CapEx plus or minus $3 million for the inland rigs until market conditions justify the capital spending. While the near-term conditions were challenging we are optimistic that this business will improve throughout the year.

Permits have increased in the mid 50s for the fourth quarter of '07 to the mid 70s in the first quarter with 11 wells permitted for well-depths greater than 15,000 feet a marked increased from the second half of 2007. This positive trend for our barge segment is, this increases our average days on a well. Although longer term we are very optimistic on the prospectivity in the barge business.

We currently have 30 lift boats working in the Gulf of Mexico this morning with another four scheduled to be on contract by early next week. We are currently only marketing 42 Liftboats domestically, so our market utilization would at 80%. As a reminder, in early March we had just 11 Liftboats under contract. The conditions would still likely merit cost reduction and rationalization of capacity. We are therefore cold stacking four of lease capable Liftboats, these will consist the two 105 class, one 120 class and one 130 class Liftboats, which has a combined 1.5 million budgeted for maintenance and dry docking cost in 2008.

Along with other cost reduction measures in this segment we expect to save approximately $3.5 million to $4 million on an annual basis. In addition, through the first quarter of '08 we reduced our dry docking regulatory cost relative to budget by $1.3 million by reducing days and costs in the yard.

We will continue to be disciplined about our yard timing costs and we will monitor market conditions and quickly decide in any other measures are needed and we will closely evaluate all capital spending to ensure that we generate an acceptable return.

Now, I will provide some update regarding the status of our international offshore, international Liftboats segments that we believe will have a positive impact on our results throughout this year and beyond as well as a brief update on the Hercules 350.

Please note that the majority of these contracts and contracts extension have been previously announced and the specific details can be found on our fleet’s status report, which was issued today.

The Hercules 350, which was acquired in March, is currently in the US Gulf of Mexico, we are towing of the rig in preparation for our plus or minus 45 day contract that commence in late May. As Randy mentioned, we are actively pursuing international opportunities for this unit.

The Hercules 300 also recently acquired is rigged to Lampo shipyard in Sharjah where we will begin contract preparation work. We anticipate that this rig will commence its three years contract with Saudi Aramco at the end of September at a day rate of $137,000.

We expect to close on the acquisitions of the Hercules 261 later this month following its current contract in US Gulf of Mexico. We also mobilize this rig to the Lampo shipyard in Sharjah to begin preparing it for its three year contract with Aramco. The day rate for this contract is a $128,000 and it is going to commence operations in the fourth quarter.

Hercules 258 upgrade to handle hot pressure and hot temperature capabilities are progressing. It should be completed in mid-May. The rig will then begin a three year contract with ONGC in India at approximately $111,000 per day. The Hercules 260 began its three year contract with ONGC on April 23 at a 143,000 per day would provide a significant increase in our revenues for this segment. You may remember we acquired the rig in 2006 for $20 million, invested an incremental $70 million and upgrading the rig to 250 IOC, international capable rig. All in all we expect the rig to generate a return on capital employed of 26% of the life of its 3 year contract.

The refurbishment of Hercules 208 Malaysia is still in progress we expect the rig to begin this three year contract for Murphy Malaysia at a day rate of 110,000 in mid-June. The Hercules 156 is having an additional six month contract with ADDAX in Cameroon since the time of our last call. The work will carry the unit to February 2009 at a day rate of $150,000 effective September 1,’08 up from its current $135,000 a day.

The Hercules 185 will remain with Angola Drilling will come in at a day rate of $150,000 up from his current rate of $125,000 for an 18 month extension following approximately 120 days of maintenance and upgrades that are scheduled to commence in November of this year. Then it will be under contract until September of 2010.

The Hercules 110 is now being prepared for cold stacking stocking in Trinidad after completing a lengthy contract with Trinmar. We will continue to seek work for the rig in the region, but in the mean time the cold stacking should result in a significant reduction of daily cost in the rig from nearly 20,000 per day to approximately 1,000 per day.

Platform 3 was awarded a ten month extension with PEMEX at the rate of $52,000 a day which is approximately $25,000 higher than its previous contract. In the international Liftboat segment, as Randy mentioned our Liftboat, the Black Jack should be on contract May third. The vessel will then operate on a few short-term projects and we are currently negotiating with an operator for a long-term contract following those two short programs.

As Randy also mentioned, Whale Shark is mobilizing into the Middle East along with Hercules 300. We are negotiating work for that vessel.

We are also exploring opportunities to add additional Liftboat to the voyage of the 261. We are excited about this project as they will provide substantial growth in our earnings in the upcoming quarters. Furthermore we should see a full year contribution from units in 2009.

Now I will turn the call over to Lisa.

Lisa Rodriguez

Thank you, John. As Randy mentioned, I will provide a little more detail with respect to our financial results for the first quarter as well as provide cost and capital spending guidance for 2008. My comments will focus on sequential comparison and largely on per day, per asset result, as these are probably the most useful for analytical purposes.

We generated fully diluted earnings per share of $0.05 during the first quarter versus $0.35 per share during the fourth quarter. A $0.30 sequential decline in earnings per share was the result of weak market conditions in all our domestic business segments, slightly offset by improvements in our international performance. Our domestic offshore segment recorded an operating loss of $1.9 million in the first quarter compared to operating income of $6.5 million in the fourth quarter as a result of the weakened conditions that persisted in the US Gulf of Mexico for most in the first quarter.

Our utilization was essentially flat at 55% versus 56% in the prior quarter, but average revenue per day per rig decreased by approximately $6,000 to $56,900 as the rigs rolled out contract to lower market rate.

We experienced a slight increase of approximately $450 in average operating cost per day, per rig in the domestic offshore segment to $23,900. This was due to having less warm stacked vessels. We did reduce our operating cost on our three remaining warm stacked rigs to $10,900 during the first quarter.

In our international offshore segment, operating income increased to $34.4 million from $24.6 million in the fourth quarter largely due to startup of Hercules 205. Our average revenue per day, per rig increased to $99,900 in the first quarter from $89,500 in the fourth quarter. Utilization increased to 92% and with the exception of Hercules 156, which was being mobilized from Brazil to West Africa, all of our available rigs were nearly fully utilized during the quarter.

International offshore operating cost were $22.8 million in the first quarter. This was well below our guidance of $32 million due to a combination of factors, including reduced cost during the transit time on Hercules 156 and during the standby time for Hercules 205, and a slightly delayed start up of Hercules 260.

Our Inland segment recorded an operating loss of $1.9 billion in the first quarter compared with operating income of $14.1 billion in the fourth quarter. Again, this was due to the soft market conditions domestically. Utilization declined to 61% from 72% in the fourth quarter and our average daily revenue per rig declined to $42,930 from $47,312 in the prior quarter. Our daily operating costs were approximately $20,600 and that was inline with our guidance.

Our domestic liftboat segment reported an operating loss of $4.6 million for the quarter compared to operating income of $10.9 million in the fourth quarter. As Randy explained unusually rough weather coupled with the addition of several new builds resulted in decrease in utilization to 38%, and a decline in average revenue per liftboat, per day of nearly $1,700. Average operating expense per liftboat per day was $3,300, which was just down slightly on a sequential basis.

Our international liftboat segment generated operating income of $8.1 million in the first quarter compared with operating income of $5.2 million in the fourth quarter. This was due to $1500 increase in average revenue per day and 17% declined in average operating expenses per day. The operating cost decline was a result of lower repairs and maintenance expense and lower labor related cost.

Utilization was 79% which is essentially flat with the previous quarter. As Randy mentioned our other segment reported an operating loss of $1.3 million, which reflect the effect of the soft domestic market condition on Delta Towing and the wind-down expense associated with the land rig.

General and administrative expenses were $16.4 million, slightly higher than our guidance of $15 million to $16 million per quarter, but we expect to reduce cost to the level of our guidance for the remaining quarters of 2008.

Depreciation and amortization for the first quarter decreased to $43.6 million from $45.5 million in the fourth quarter due to the sale of our land rigs at the end of the first quarter.

Now, I would like to provide some cost guidance for the remainder of 2008. First, we are moving our interest renewal to May 1st today and expect to achieve a premium reduction of approximately 15%, with an increase in annual aggregate wind/storm coverage from $150 million to $200 million. These savings are vacant to the discussion that I have on the segments.

We anticipate our daily operating cost for domestic offshore to be approximately $25,000 to $26,000 per day for the balance of 2008. We anticipate the cost to be on the lower end of the range in the second quarter and higher end of the range by year end.

In our international offshore segment, operating cost should increase to the $36 million range in the second quarter, $38 million in the third quarter and $43 million in the fourth quarter due to the startup of Hercules 260, 205, 300, and 261 as well as the amortization and mobilization expense related to Hercules 156 and 260.

In our Inland segment, we expect daily operating cost to remain in the $20,000 to $21,000 per day range throughout the remainder of 2008. In our domestic liftboat segment, our average daily operating cost for a liftboat should increase slightly going forward. But that is only due to the mixed shift resulting from the cold stacking of four of our smaller Liftboats. However, our nominal operating cost for the segment should decline slightly, in the second quarter as a result of these measures.

We expect daily operating cost in our international liftboat segment to return to the 5,500 dollar per day level in the second quarter due to the addition of the Black Jack and Whale Shark to our international fleet.

Depreciation and amortization expenses will ramp up sharply in the second quarter due to the reactivation of Hercules 260, and Hercules 208, and the Black Jack liftboat. It will increase again in the fourth quarter as the two recently acquired rigs go on contract in Saudi Arabia. We expect depreciation and amortization to range from $205 million to $215 million for the full year.

Based on the expected borrowing under our revolving credit facility in the second quarter for the purchase of the third rig and the subsequent repayment in the second half of 2008, we expect our interest expense to decline from the $15.5 million range in the second quarter down to $14 million in the fourth quarter.

Income taxes, we expect to remain in the mid 30% range for 2008. Cash taxes are still expected to be in the $30 million to $40 million range in 2008, as we bring through NOL. Before we begin our Q & A, I would also like to give us to you brief comments on our balance sheet.

As of March 31st we had cash and cash equivalents of approximately $35 million; total debt of $909 million and stock holders equity of just over $2 billion. Our net debt capitalization was 30%. Capital expenditures the first quarter was $280 million of which $230 million went to the purchase of Hercules 300 and Hercules 330. And $5.5 million went to the drydocking expenses for our liftboat segment.

The remaining $45 million in CapEx include maintenance capital expenditures as well as contract specific upgrades for a few of our international rigs as we mentioned earlier. We anticipate capital expenditures for the remaining quarters of 2008 to total approximately $175 million to $190 million, which includes contract specific upgrade.

In closing, while the first quarter was clearly not up to your or our expectations, we have excellent visibility of increased earnings and cash flow generation throughout the remainder of the year, due to the number of assets we are entering service internationally and ongoing recovery and the drilling activity in the US Gulf of Mexico.

Katie at this time I would like to open up the call for Q&A.

Question -And-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Arun Jayaram from Credit Suisse. Please proceed.

Arun Jayaram - Credit Suisse

Hey, good morning, Arun Jayaram, Credit Suisse. A quick question on the Whale Shark. Are there any additional costs associating that with moving this liftboat over to the Middle East?

John Rynd

No, real incremental costs; we basically got a free pass as we loaded on with the jackup rig.

Arun Jayaram - Credit Suisse

I got you.

John Rynd

And once we get there we will have costs associated with getting it up on contract, but as far as any recurred cost, no.

Arun Jayaram - Credit Suisse

Randy is this -- or John is the first Liftboat that you guys have operating in the Middle East and what kind of running room do you see in this market?

John Rynd

It will be our first entrée into that market and we think there is a lot of good running room. As I mentioned in my prepared comments as we take the second rig to the Middle East, we'll probably go along with another additional liftboat. We have been doing marketing there for the last six to eight months. We think there is work beyond the two and that's a potentially very strong growth market.

Arun Jayaram - Credit Suisse

Okay and my last question John, I was wondering if you could comment on obviously Global Santa Fe I think kept the rigs in pretty good shape, but could you remind us of the upgrade costs on those two rigs and what you're exactly doing to the rigs?

John Rynd

Yeah, the rig will be kind of in the mid-twenty range; it is our target and specifically it’s a quarters upgrade on the two. You enlarge your load tank capacity and then the rest of it basically is all kinds of contracts’ specific requirements to ramp those contracts.

There is very -- almost no work to be done to the existing rigs as far as repair and maintenance or upgrade outside the contracts specific work as the rigs were in excellent condition.

Arun Jayaram - Credit Suisse

I got you. Thanks a lot guys.

Operator

Your next question comes from the line of Jeff Tillery from Tudor Pickering. Please proceed.

Jeff Tillery - Tudor Pickering

Hi, good morning. Just wanted to follow up on the previous question on the Liftboats in the Middle East, could you talk a little bit about how you see pricing in that market and then additionally what type of assets are required. I know you are moving the 260 over there, what type, size, class, boat do you need for that market?

John Rynd

Well, I think you going to need the 200 plus market; you can probably get by some place with 175 but we're going to go in that range on the next move. And I think the range will be dependent on its broader term, anywhere from probably $32,000 to $42,000 per day range.

Jeff Tillery - Tudor Pickering

Thank you. And as your activity is rebounding quite strongly in the Gulf of Mexico in the last few weeks, you put quite a few rigs back to work, are you having any issues crewing those rigs or are you seeing anything operational that gives you concern?

John Rynd

No, we are not having trouble crewing them. When we went to the warm stack play we did not lay anybody off. We spread the people out either on the warm stack rigs getting their maintenance done or to the active rigs. So, we have a fairly good backlog to draw from, always key operating people are hard to come by. They'll take that the wrong way, but as far as we are struggling to command the rigs, no. And we are not seeing any startup issues, as I mentioned in my prepared comments. Our downtime continues to reduce, safety gets better, and consumer satisfaction is still very strong. So, being able to allocate the resources to the startups has been very beneficial.

Jeff Tillery - Tudor Pickering

And my last question is just on the Hercules 350. I think you guys did that rig in Mexico. What other reasons are you looking at for potentially moving that rig too?

Randy Stilley

I think we have to look in the ranges where we are operating in Mexico, West Africa, Middle East, and India.

Jeff Tillery - Tudor Pickering

Hi, thank you very much.

Operator

Your next question comes from the line of Pierre Conner from Capital One Southcoast. Please proceed.

Pierre Conner - Capital One Southcoast

Good morning gentlemen, nice topic, it seems, but on the Whale Shark. I am sorry to keep going back to this one. Is there a big difference in, what you would expect on a term contract and something on a spot basis, you get it -- you kind of look at both options, should we, in fact, vary much in a difference to the rates?

Randy Stilley

No, I think the rates are being fairly consistent either short or long.

Pierre Conner - Capital One Southcoast

Okay, so this is enough demand in both cases.

Randy Stilley

Yeah.

Pierre Conner - Capital One Southcoast

In Randy’s comments, he mentioned that new 10, excuse me, nine new build liftboats are coming in. I wondered if that is anticipating the four recent that [technical difficulty] or is that…?

Randy Stilley

That includes two of those. It does include the additional two liftboats.

Pierre Conner - Capital One Southcoast

Okay. You would -- John, ongoing this is more open ended. But any chance to get your thoughts on PEMEX [technical difficulty]

John Rynd

Well, we know its hard to get a good rate from them to be honest with you Pierre. In the [throes] there is uncertainty. We get a contract on the extension of Platform 3 that we really had not anticipated and with work from PEMEX should -- well probably as we finished these 300 day contract roll into another multi-year contract. They just came out for the bid against the [Noble fleet]. It looks like potentially in June we could come out with two incremental jackup tenders, one 250-foot IOC and one 350-IOC and that's about as clear of a picture we have right now.

Pierre Conner - Capital One Southcoast

Okay. Well. It's better than the most. I'll let someone else go. Thanks.

Operator

(Operator instructions). Your next question comes from the line of [Peters Santana] from Markston. Please proceed.

Peters Santana - Markston

Yeah. You guys mentioned quickly the April utilization across the board. Can you just go over them again because I missed them? Inland barges and domestic offshore?

Stephen Butz

Well, as of today in domestic offshore, we are at about 82% utilized and as John mentioned that's going up into the 90s over the next several weeks. For the inland barges we are at about 68% utilization today. Now in the liftboats we are -- domestic liftboats were in the low 60s and international liftboats are in the high 70s.

Peters Santana - Markston

And international offshore is a 100%.

Stephen Butz

Well several those rigs are being upgraded for contract. So really there is only one rig that's marketed; that isn't working right now and that's the rig in Trinidad that John mentioned we're going to cold stack.

Peters Santana - Markston

You said international liftboats is high 60s.

Stephen Butz

High 70s.

Peters Santana - Markston

Its all high 70s.

Lisa Rodriguez

Which is consistent with the first quarter and the fourth quarter.

Peters Santana - Markston

Okay. And then the third new rig that you've got, when do you expect to see the decision on a contract for that?

Randy Stilley

It will probably be late third, early fourth. But we would be kind of looking around right now unless something pops up that we are not aware but we are pursuing multiple opportunities or see multiple opportunities presenting themselves.

Peters Santana - Markston

In late third -- late third quarter or early fourth quarter it would be working or….

Randy Stilley

It's going to be working domestically at the end of this month. But as we work it on short-term contracts domestically we are actively pursuing opportunities internationally; those tend to have longer lead times. So if we get a nod sometime in the third quarter, early fourth quarter that's means we're on the pay roll somewhere internationally depending on where we go mid first to mid second quarter and it just depends on the project how much CapEx, shipyard time and things like that.

Peters Santana - Markston

Thank you.

Lisa Rodriguez

Thank you.

Operator

At this time I'm showing you have no further questions. I would like to now turn the call back over to management for closing remarks.

Stephen Butz

I just would like to thank everyone for joining our call and we look forward to visiting with you again next quarter. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today’s call. This concluded the call. You may now disconnect. Have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: [e-mail]. Thank you!