Storm Bites Tigershark

During the night of November 15, 2006, one of Hercules Offshore's 230-foot class liftboats, Tigershark, was damaged and set adrift during a storm off the coast of Louisiana. The crew was safely evacuated. We have located the liftboat afloat in the Gulf of Mexico, and we are in the process of securing the vessel. Although we have not been able to conduct a complete survey of the vessel in order to determine the extent of the damage to it, based on an initial visual inspection, the vessel's hull and topside equipment appear to be intact. Therefore, at this time we anticipate that the vessel will not be declared a constructive total loss under our insurance policies.

The total insured value of the vessel is $15 million, subject to customary deductibles and conditions. The carrying value of the vessel was approximately $14 million as of September 30, 2006. We also carry customary liability insurance covering certain other damages and losses. If the damage to the vessel or other loss exceeds the $1 million deductible, we believe that we have the right to make a claim against our insurers. For the nine months ended September 30, 2006, the Tigershark contributed less than 2% of our total revenue, operating income and net income.

If the vessel is not declared to be a constructive total loss and the full survey of the vessel confirms the results of the initial visual survey, we anticipate that the vessel will return to service in 2007.

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