Hercules Offshore Reports a 4Q05 Net Loss

Hercules Offshore, Inc. (Nasdaq: HERO), reported a net loss of $2.2 million, or ($0.08) per diluted share, on operating revenues of $48.0 million for the fourth quarter of 2005, compared to net income of $5.9 million, or $0.40 per diluted share, on operating revenues of $23.3 million for the fourth quarter of 2004. The results for the fourth quarter of 2005 include a charge of $0.8 million, net of tax of $0.5 million, ($0.03 per diluted share) related to the early retirement of $45 million in debt, which was repaid with proceeds from the Company's initial public offering. The operating results for the fourth quarter were also impacted by a one-time deferred income tax charge of $12.1 million ($0.42 per diluted share) resulting from the Company's conversion from a limited liability company to a Delaware corporation on November 1, 2005 in conjunction with the Company's initial public offering. Excluding the effect of this item, net income was $9.9 million, or $0.34 per diluted share.

Net income for the year ended December 31, 2005 was $27.5 million, or $1.08 per diluted share, on operating revenues of $161.3 million. The results for 2005 also include a charge of $3.6 million, net of tax of $0.5 million, ($0.14 per diluted share) related to the early retirement of debt. Also included in the Company's 2005 results is a one-time deferred income tax charge of $12.1 million ($0.48 per diluted share) resulting from the Company's conversion from a limited liability company to a Delaware corporation on November 1, 2005 in conjunction with the Company's initial public offering. Excluding the effect of this item, net income was $39.6 million, or $1.56 per diluted share.

Randy Stilley, Chief Executive Officer and President of Hercules Offshore, Inc. commented: "We are obviously very pleased with the company's growth and results of operations in 2005. Our employees were the key to our success in 2005, which was a year filled with challenges posed by the hurricanes, the integration of seven asset acquisitions and the successful completion of our initial public offering. We will continue to pursue the same strategy of growth through acquisition and redeployment as market opportunities arise."

Contract Drilling Services Highlights

During the fourth quarter of 2005, revenues from Contract Drilling Services were $24.0 million, compared to revenues of $28.2 million in the third quarter of 2005 and $15.6 million in the fourth quarter of 2004. Operating income was $9.5 million in the fourth quarter of 2005 compared to $12.2 million in the third quarter of 2005 and $5.4 million in the fourth quarter of 2004. Revenues and operating income in the fourth quarter of 2005 were sequentially lower than the third quarter of 2005, due primarily to fewer operating days in the fourth quarter resulting from rigs damaged in hurricane Katrina. The Company is continuing the survey efforts on Rig 25 and expects to submit the final claim to underwriters in the first quarter of 2006. The average daily revenue per rig in the segment increased to $58,611 in the fourth quarter of 2005, compared to $49,471 in the third quarter of 2005 and $34,093 in the fourth quarter of 2004. Utilization for the company's drilling rigs decreased to 88.9% in the fourth quarter of 2005 from 95.5% in the third quarter of 2005 and 99.6% in the fourth quarter of 2004.

Marine Services Highlights

Marine Services revenues were $24.0 million in the fourth quarter of 2005, up from $13.9 million in the third quarter of 2005 and $7.7 million in the fourth quarter of 2004. Operating income increased to $8.6 million in the fourth quarter of 2005 from $3.4 million in the third quarter of 2005 and $2.0 million in the fourth quarter of 2004. The average daily revenue per liftboat increased to $8,010 in the fourth quarter of 2005 from $5,432 in the third quarter of 2005 and $5,720 in the fourth quarter of 2004. Utilization for the company's liftboats increased to 83.5% in the fourth quarter of 2005 from 79.7% in the third quarter of 2005 and 68.9% in the fourth quarter of 2004. The results of operations for Marine Services in the fourth quarter include the results from the liftboat assets acquired from Danos & Curole, which closed in November 2005.

Rig Acquisition

Hercules also announced the completion of the purchase of the jackup rig, the ARIES (formerly THE 154) on February 2, 2006 for $20.1 million. The ARIES is a 150' independent leg jackup built by LeTourneau in 1979, and has been cold stacked for the past six years. The rig will be renamed the Hercules Rig 26, and the Company will begin a reactivation project that it expects will take up to one year and cost approximately $20 million. Upon completion of the reactivation, the Company plans to deploy the rig in a suitable international market.

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