DOW JONES NEWSWIRES
Hercules Offshore Inc. (HERO) unveiled plans to sell in a
private placement $500 million of debt and offer 20 million shares
of stock as the offshore-drilling company looks to repay all
outstanding debt under its existing term loan and fund a new rig
acquisition.
Shares were down 2.4% at $4.96 after hours. Since the close, the
stock was up 21% over the past three months.
Hercules, which has racked up more than three years of losses,
became the biggest rig contractor in the Gulf of Mexico's shallow
waters when it closed on a deal in April to acquire the rigs of
weakened rival Seahawk Drilling Inc.
It said Tuesday it agreed to buy the offshore-drilling rig Ocean
Columbia from a subsidiary of Diamond Offshore Drilling Inc. (DO)
for $40 million in cash. It also entered into a $106-million,
three-year drilling contract with Saudi Aramco for use of the
rig.
Hercules said it plans to spend an additional $45 million to
repair and upgrade the rig as well as move it from the Gulf of
Mexico to the Middle East. The company plans to acquire the rig in
May and start its contract with Saudi Aramco in November.
Hercules said it plans to sell 20 million shares, using 50% of
the proceeds to pay off a term loan facility. The rest will go
toward the Ocean Columbia acquisition, refurbishment and
relocation.
The company said it plans to sell up to $300 million in senior
secured notes due 2017 and $200 million in senior notes due 2019,
also to repay the term loan, and use the rest for general corporate
purposes, including the Ocean Columbia project.
In January, Standard & Poor's Ratings Services raised its
outlook on the company, saying it is benefiting from improving day
rates and utilization of its jack-up rigs in the Gulf of
Mexico.
-By Ben Fox Rubin, Dow Jones Newswires; 212-416-3108;
ben.rubin@dowjones.com