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ISSUER FREE WRITING PROSPECTUS
FILED PURSUANT TO RULE 433
REGISTRATION STATEMENT NO. 333-138475
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (date of earliest event reported): September 23, 2009
HERCULES OFFSHORE, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State of incorporation
or organization)
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0-51582
(Commission File Number)
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56-2542838
(IRS Employer
Identification No.) |
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9 GREENWAY PLAZA, SUITE 2200
HOUSTON, TEXAS
(Address of principal executive offices)
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77046
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Registrant’s telephone number, including area code: (713) 350-5100
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
HERCULES OFFSHORE, INC. (THE “COMPANY”) HAS FILED A REGISTRATION STATEMENT (INCLUDING A PROSPECTUS)
AND A PROSPECTUS SUPPLEMENT WITH THE SECURITIES EXCHANGE COMMISSION (“SEC”) FOR THE OFFERING TO
WHICH THIS COMMUNICATION RELATES. BEFORE YOU INVEST, YOU SHOULD READ THE REGISTRATION STATEMENT,
THE PROSPECTUS AND THE PROSPECTUS SUPPLEMENT AND THE OTHER DOCUMENTS THAT THE COMPANY HAS FILED
WITH THE SEC FOR MORE COMPLETE INFORMATION ABOUT THE COMPANY AND THIS OFFERING. YOU MAY OBTAIN
THESE DOCUMENTS BY VISITING INTERACTIVE DATA ELECTRONIC APPLICATIONS (IDEA) ON THE SEC WEB SITE AT
WWW.SEC.GOV OR BY ACCESSING THE COMPANY’S WEBSITE AT WWW.HERCULESOFFSHORE.COM UNDER “INVESTOR
INFORMATION — SEC FILINGS.” ALTERNATIVELY, THE COMPANY, ANY UNDERWRITER OR ANY DEALER
PARTICIPATING IN THE OFFERING WILL ARRANGE TO SEND YOU THE PROSPECTUS AND THE PROSPECTUS SUPPLEMENT
IF YOU REQUEST IT BY CONTACTING:
MORGAN STANLEY & CO.
ATTN: PROSPECTUS DEPARTMENT
180 VARICK STREET 2/F
NEW YORK, NEW YORK 10014
TELEPHONE: 888-827-7275 OR EMAIL PROSPECTUS@MORGANSTANLEY.COM
UBS INVESTMENT BANK
ATTN: PROSPECTUS DEPARTMENT
299 PARK AVENUE
NEW YORK, NEW YORK 10171
TELEPHONE: 888-827-7275
Item 8.01 Other Events.
On September 23, 2009, we issued a press release with an update on our current estimates for the
third quarter. A copy of our press release is filed as Exhibit 99.1 and incorporated herein by
reference.
Also on September 23, 2009, we issued a press release announcing a public offering (the “Offering”)
of our common stock, a copy of which is filed as Exhibit 99.2 and incorporated herein by reference.
Separately, on September 23, 2009, we filed a current report on Form 8-K with the Securities and
Exchange Commission (the “SEC”) for the purpose of updating the historical financial statements
included in our annual report on Form 10-K for the year ended December 31, 2008. This current
report was filed in order to reflect the new accounting standard that changes certain aspects of
accounting for convertible debt instruments (Financial Accounting Standards Board Staff Position
APB 14-1), which became effective on January 1, 2009 and applies to our outstanding convertible
notes issued in 2008. The historical financial statements have also been adjusted to reflect two
rigs as assets held for sale. The sale of these assets closed in August 2009. All of the updates
involved non-cash items.
In connection with the Offering, we filed a prospectus supplement (the “Prospectus Supplement”),
which relates to the shelf registration statement on Form S-3 previously filed with the SEC, which
was declared effective on March 12, 2009. The Prospectus Supplement contains certain information
which was not previously disclosed by the Company, which is summarized below and qualified in its
entirety by reference to the Prospectus Supplement filed with the SEC on the date hereof.
Summary of Information Included in the Prospectus Supplement
See “Forward-Looking Statements” in the Prospectus Supplement for additional cautionary language
regarding the uncertainty of forward-looking information.
Third
Quarter Update
We do not as a matter of course make public projections as to
future earnings or other results. However, in the context of
this offering our management has prepared the following third
quarter update. The prospective financial information presented
below was not prepared with a view toward complying with the
guidelines established by the American Institute of Certified
Public Accountants with respect to prospective financial
information, but, in the view of our management, was prepared on
a reasonable basis, reflects the best currently available
estimates and judgments, and presents, to the best of
management’s knowledge and belief, the expected course of
action and our expected future financial performance.
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The prospective financial information presented below is not a
guarantee that we will achieve any specific level of revenues,
operating costs or any other financial measure presented below.
Investors should not place undue reliance on the prospective
financial information presented below as actual results may vary
significantly. We are providing this information to help
investors understand our projected revenues and operating costs
for the third quarter. Our actual results are subject to change
and may vary significantly from the amounts or ranges indicated
in the prospective financial information presented below. Please
also read “Forward-Looking Statements” in this
prospectus supplement for additional cautionary language
regarding the uncertainty of forward-looking information.
Neither our independent registered public accountants, nor any
other independent registered public accountants, have compiled,
examined or performed any procedures with respect to the
prospective financial information contained herein, nor have
they expressed any opinion or any other form of assurance on
such information or its achievability, and assume no
responsibility for, and disclaim any association with, the
prospective financial information.
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Domestic Drilling Operational Update. The
bidding activity for our domestic offshore and inland businesses
has increased in September from the low in July as our customers
plan their post-hurricane season activity. Our average backlog
in Domestic Offshore increased to 83 days as of
September 22, 2009 from 24 days as of July 21,
2009. The active hurricane seasons of 2005 and 2008 have
increased the seasonality of our domestic offshore businesses,
as many of our customers reduce activity during hurricane
season, which is from June 1 through November 1.
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International Offshore Operational
Update. Early in the third quarter we completed
upgrades to Hercules 185 and it commenced its
18 month contract in Angola. We experienced unanticipated
downtime on both Hercules 208 and Hercules 260 for
28 and 52 days, respectively. Hercules 208 earned a
reduced dayrate and Hercules 260 was at zero dayrate
during the downtime. We estimate the downtime adversely impacted
third quarter revenue by approximately $12 million.
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Liftboat Operational Update. We intend to
mobilize the
230¢
class Tiger Shark, the
200¢
class Cutlassfish and Creole Fish and the
175¢
class Mako from the Gulf of Mexico to West Africa
where higher dayrates and longer term contracts are more
prevalent. The vessels are scheduled to depart the Gulf of
Mexico in early October and arrive in West Africa in late
October at a cost of approximately $6 million. If we do not
obtain signed contracts prior to the vessels’ departure,
these transportation costs will be expensed primarily in the
fourth quarter of 2009. The vessels will also undergo various
upgrades at an approximate cost of $2 million and are
expected to commence work between November 2009 and January 2010.
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Revenue and Cost Expectations. Although full
results for the third quarter are not yet available, based on
the results of July and August, excluding the impact of asset
sales, we are currently anticipating our revenue and operating
costs for the third quarter to be as follows:
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We currently anticipate third quarter revenues will be
approximately $155 million to $160 million.
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Domestic Offshore operating costs per day are expected to be
approximately $28,000 to $30,000 per day for marketed rigs and
$7,500 per day for cold stacked rigs. We therefore expect our
total Domestic Offshore operating costs to be approximately
$37 million to $39 million for the third quarter.
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International Offshore operating costs are expected to be
approximately $47 million to $48 million for the third
quarter, which reflects the costs associated with the
Hercules 185 commencing its contract in Angola early in
the third quarter.
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Inland operating costs per day are expected to be approximately
$15,000 to $18,000 per day for the three marketed rigs and
$3,000 per day for cold stacked rigs. We expect our total Inland
operating costs to be approximately $8 million for the
third quarter.
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Domestic Liftboat operating costs per day are expected to be
$3,400 to $3,700 per day, with total Domestic Liftboat operating
costs expected to be approximately $12 million to
$13 million.
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International Liftboat total operating costs are expected to be
approximately $13 million to $14 million, which
reflects the costs associated with the Whale Shark being
on contract in the Middle East.
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Delta Towing operating costs are expected to be approximately
$7 million to $8 million for the third quarter.
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Selling, general and administrative expenses are expected to be
approximately $15 million for the third quarter.
Depreciation and amortization are expected to be approximately
$52 million to $53 million in the third quarter.
Interest expense is expected to be approximately
$23 million, excluding the impact of the fair value of
hedging activity as further discussed below. Our effective tax
rate is expected to be approximately 40 percent.
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In connection with the capital structure improvement actions we
have taken, the third quarter will also reflect a net loss on
sale of assets of approximately $1 million and a
$15 million charge in connection with the credit facility
amendment as described below.
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Capital
Structure Improvement Actions
In addition to reducing our operating cost structure, we have
taken the following actions to strengthen our capital structure
and increase our financial flexibility:
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Sale of idle or non-core assets. In June 2009,
we entered into an agreement to sell our Hercules 100 and
Hercules 110 jackup drilling rigs for a total purchase
price of $12.0 million. The Hercules 100 was
classified as “retired” and was stacked in Sabine
Pass, Texas, and the Hercules 110 was cold stacked in
Trinidad. The sale of the Hercules 100 and Hercules
110 closed in August 2009. During 2009, we have also sold
$8.0 million of marine vessels owned by Delta Towing, LLC.
During the third quarter we repaid $16.1 million of our
term loan with asset sale proceeds and incurred a net loss on
sale of assets of $1.1 million. We have engaged a rig
broker to assist us in selling our assets classified as
“retired,” and have recently entered into an agreement
to sell two retired barge rigs for $0.6 million.
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Credit agreement amendment. In July 2009, we
amended our credit agreement to, among other things, eliminate
the requirement that we comply with the total leverage ratio
financial covenant for the nine month period commencing
October 1, 2009 and ending June 30, 2010, increase our
maximum total leverage ratio upon reinstatement, revise the
definition of fixed charge coverage ratio and reduce our minimum
fixed charge coverage ratio that we must maintain. In connection
with the amendment we expensed $15 million, of which
$11 million was a non-cash charge associated with the write
off of deferred debt issuance costs. The credit agreement
amendment provides us with additional flexibility to assist us
in managing the business through the current downturn.
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In connection with the inclusion of a LIBOR floor in the credit
agreement, the interest rate hedges that we had previously
entered into are no longer designated as hedges for accounting
purposes. This will require us to recognize a gain or loss on a
quarterly basis as we mark the financial instruments to fair
value.
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Convertible senior notes retirement. Since
December 2008, we have retired $154.1 million notional
amount of our convertible senior notes in exchange for
$50.9 million of cash and the issuance of
7,755,440 shares of our common stock. Approximately
$95.9 million of the convertible senior notes remain
outstanding.
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Potential refinancing of additional term loan
indebtedness. We are contemplating issuing,
subject to market conditions, additional debt securities in the
near future, the proceeds of which would be used to repay
additional indebtedness outstanding under our term loan facility.
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FORWARD-LOOKING
STATEMENTS
The statements in this filing, include “forward-looking
statements” within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of
historical fact, included in this prospectus supplement or the
documents we incorporate by reference, including statements that
address activities, events or developments that we intend,
contemplate, estimate, expect, project, believe or anticipate
will or may occur in the future, are forward-looking statements.
These include such matters as:
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our levels of indebtedness, covenant compliance and access to
capital under current market conditions;
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our ability to enter into new contracts for our rigs and
liftboats and future utilization rates and dayrates for the
units;
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our ability to renew or extend our long-term international
contracts, or enter into new contracts, when such contracts
expire;
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demand for our rigs and our liftboats;
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activity levels of our customers and their expectations of
future energy prices;
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sufficiency and availability of funds for required capital
expenditures, working capital and debt service;
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success of our cost cutting measures and plans to dispose of
certain assets;
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our ability to effectively reactivate rigs that we have recently
stacked;
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our plans to increase international operations, including how
successful we are in transporting and also obtaining contracts
for the four liftboats we plan to move from the Gulf of Mexico
to West Africa;
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expected useful lives of our rigs and liftboats;
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future capital expenditures and refurbishment, reactivation,
transportation, repair and upgrade costs;
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liabilities and restrictions under coastwise laws of the United
States and regulations protecting the environment;
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expected outcomes of litigation, claims and disputes and their
expected effects on our financial condition and results of
operations; and
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expectations regarding offshore drilling activity and dayrates,
market conditions, demand for our rigs and liftboats, operating
revenues, operating and maintenance expense, insurance coverage,
insurance expense and deductibles, interest expense, debt levels
and other matters with regard to outlook and future earnings.
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We have based these statements on our assumptions and analyses
in light of our experience and perception of historical trends,
current conditions, expected future developments and other
factors we believe are appropriate in the circumstances.
Forward-looking statements by their nature involve substantial
risks and uncertainties that could significantly affect expected
results, and actual future results could differ materially from
those described in such statements. Although it is not possible
to identify all factors, we continue to face many risks and
uncertainties. Among the factors that could cause actual future
results to differ materially are the risks and uncertainties
described under “Risk Factors” in our most recent
annual report on
Form 10-K
and quarterly reports on
Form 10-Q
and the following:
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oil and natural gas prices and industry expectations about
future prices;
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demand for offshore drilling rigs and liftboats;
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our ability to enter into and the terms of future contracts;
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the worldwide military and political environment and uncertainty
or instability resulting from an escalation or additional
outbreak of armed hostilities or other crises in the Middle
East, West Africa and other oil and natural gas producing
regions or acts of terrorism or piracy;
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the impact of governmental laws and regulations;
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the adequacy and costs of sources of credit and liquidity;
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uncertainties relating to the level of activity in offshore oil
and natural gas exploration, development and production;
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competition and market conditions in the contract drilling and
liftboat industries;
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the availability of skilled personnel in view of recent
reductions in our personnel;
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labor relations and work stoppages, particularly in the West
African and Mexican labor environments;
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operating hazards such as hurricanes, severe weather and seas,
fires, cratering, blowouts, war, terrorism and cancellation or
unavailability of insurance coverage, or insufficient insurance
coverage;
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the effect of litigation and contingencies; and
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our inability to achieve our plans or carry out our strategy.
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Many of these factors are beyond our ability to control or
predict. Any of these factors, or a combination of these
factors, could materially affect our future financial condition
or results of operations and the ultimate accuracy of the
forward-looking statements. These forward-looking statements are
not guarantees of our future performance, and our actual results
and future developments may differ materially from those
projected in the forward-looking statements. Management cautions
against putting undue reliance on forward-looking statements or
projecting any future results based on such statements or
present or prior earnings levels. In addition, each
forward-looking statement speaks only as of the date of the
particular statement, and we undertake no obligation to publicly
update or revise any forward-looking statements except as
required by applicable law.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Description |
99.1
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Press Release issued September 23, 2009 regarding third quarter update |
99.2
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Press Release issued September 23, 2009 regarding offering of common stock |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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HERCULES OFFSHORE, INC.
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| Date: September 23, 2009 |
By: |
/s/ James W. Noe
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James W. Noe |
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Senior Vice President, General Counsel, Chief
Compliance Officer and Secretary |
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8
Exhibit Index
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| Exhibit Number |
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Description |
99.1
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Press Release issued September 23, 2009 regarding third quarter update |
99.2
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Press Release issued September 23, 2009 regarding offering of common stock |
9
Exhibit 99.1
ISSUER FREE WRITING PROSPECTUS
FILED PURSUANT TO RULE 433
REGISTRATION STATEMENT NO. 333-138475
Hercules Offshore Provides Update on Third Quarter and Recent Developments
HOUSTON, September 23, 2009 — Hercules Offshore, Inc. (Nasdaq: HERO) provided an update on third
quarter activity and recent developments today in a filing with the U.S. Securities and Exchange
Commission (“SEC”). In the update, the company disclosed its anticipated financial performance for
the third quarter.
The company also filed a current report on Form 8-K with the SEC to update the historical financial
statements included in the company’s annual report on Form 10-K for the year ended December 31,
2008. This report was filed to reflect a new standard that changes certain aspects of accounting
for outstanding convertible debt instruments, Financial Accounting Standards Board Staff Position
APB 14-1 (“FSP 14-1”), which became effective on January 1, 2009 and applies to our outstanding
convertible notes issued in 2008. The historical financial statements were also adjusted to
reflect Hercules 100 and Hercules 110 as Assets Held for Sale, as these assets were sold in August
2009. All of these updates involved non-cash items.
HERCULES OFFSHORE, INC. (THE “COMPANY”) HAS FILED A REGISTRATION STATEMENT (INCLUDING A PROSPECTUS)
AND A PROSPECTUS SUPPLEMENT WITH THE SECURITIES EXCHANGE COMMISSION (“SEC”) FOR THE OFFERING TO
WHICH THIS COMMUNICATION RELATES. BEFORE YOU INVEST, YOU SHOULD READ THE REGISTRATION STATEMENT,
THE PROSPECTUS AND THE PROSPECTUS SUPPLEMENT AND THE OTHER DOCUMENTS THAT THE COMPANY HAS FILED
WITH THE SEC FOR MORE COMPLETE INFORMATION ABOUT THE COMPANY AND THIS OFFERING. YOU MAY OBTAIN
THESE DOCUMENTS BY VISITING INTERACTIVE DATA ELECTRONIC APPLICATIONS (IDEA) ON THE SEC WEB SITE AT
WWW.SEC.GOV OR BY ACCESSING THE COMPANY’S WEBSITE AT WWW.HERCULESOFFSHORE.COM UNDER “INVESTOR
INFORMATION — SEC FILINGS.” ALTERNATIVELY, THE COMPANY, ANY UNDERWRITER OR ANY DEALER
PARTICIPATING IN THE OFFERING WILL ARRANGE TO SEND YOU THE PROSPECTUS AND THE PROSPECTUS SUPPLEMENT
IF YOU REQUEST IT BY CONTACTING:
MORGAN STANLEY & CO.
ATTN: PROSPECTUS DEPARTMENT
180 VARICK STREET 2/F
NEW YORK, NEW YORK 10014
TELEPHONE: 888-827-7275 OR EMAIL PROSPECTUS@MORGANSTANLEY.COM
UBS INVESTMENT BANK
ATTN: PROSPECTUS DEPARTMENT
299 PARK AVENUE
NEW YORK, NEW YORK 10171
TELEPHONE: 888-827-7275
SOURCE: Hercules Offshore, Inc.
CONTACT:
Stephen M. Butz
Vice President Finance and Treasurer
713-350-8315
Craig M. Muirhead
Assistant Treasurer
713-350-8346
Exhibit 99.2
Hercules Offshore Announces Public Offering of Common Stock
HOUSTON, September 23, 2009 — Hercules Offshore, Inc. (Nasdaq: HERO) today announced its
intention, subject to market conditions, to publicly offer up to 17.5 million shares of common
stock in an underwritten public offering. The underwriters for the offering will also have the
option to purchase up to 2,625,000 additional shares of common stock on the same terms and
conditions to cover over-allotments, if any. The Company intends to use the net proceeds from the
offering, including any net proceeds from the underwriters’ exercise of their over-allotment
option, to repay a portion of the indebtedness outstanding under the Company’s term loan facility
and for general corporate purposes, which may in the future include repaying indebtedness, among
other things.
Morgan Stanley & Co. and UBS Investment Bank are serving as Joint Bookrunning Managers of the
offering. The offering is being made pursuant to an effective registration statement. A copy of
the preliminary prospectus supplement and related base prospectus for the offering may be obtained
on the Securities and Exchange Commission (“SEC”) website at www.sec.gov. Alternatively, the
underwriters will arrange to send you the preliminary prospectus supplement and related base
prospectus if you request them by contacting:
Morgan Stanley & Co.
Attn: Prospectus Department
180 Varick Street 2/F
New York, New York 10014
Telephone: 888-827-7275 or email prospectus@morganstanley.com
UBS Investment Bank
Attn: Prospectus Department
299 Park Avenue
New York, New York 10171
Telephone: 888-827-7275
This press release is neither an offer to sell nor a solicitation of an offer to buy any of the
securities referred to above. An offering of any such securities will be made only by means of a
prospectus supplement and related prospectus. Any such prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy, nor shall there be any sale of any such securities in
any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state or jurisdiction.
This press release includes forward-looking statements, which give Hercules’ current expectations
or forecasts of future events based on currently available information. Forward-looking statements
in this press release relate to, among other things, the closing of the offering and the use of
proceeds therefrom. Such statements are subject to a number of risks and uncertainties, including
those identified in “Item 1A. Risk Factors”