Hercules Offshore Increases Jackup Fleet
Hercules Offshore has signed a definitive purchase agreement on January 26, 2006 to acquire the rig ARIES (formerly the THE 154) from Aries Offshore Partners Ltd. for $20.1 million. The rig, a 150-foot independent leg jackup built by LeTourneau in 1979, has been cold-stacked for the past six years. The closing of the acquisition is expected to occur during February 2006. After closing, the rig will be renamed Hercules Rig 26, and the Company will begin a reactivation project that will include upgrades of the drilling equipment and living quarters capacity. Hercules expects the reactivation project to take up to one year and to cost approximately $20 million. Upon completion of the reactivation, the Company plans to deploy the rig in a suitable international market.
Randy Stilley, Chief Executive Officer and President of Hercules Offshore, noted today, "The acquisition of Rig 26 is consistent with our strategy of acquiring existing shallow water assets, and we are already in discussions with customers for possible contract opportunities for the unit outside the U.S. Gulf of Mexico."
Also, Hercules announced that on January 25, 2006 it entered into a Consent, Release, Waiver and Amendment (the "Amendment") to its Credit Agreement dated as of June 29, 2005. The Amendment provides for, among other things, the release of the guaranty, security agreement and vessel mortgages relating to Rig 16 and Rig 31, which have been transferred to one of Hercules' Cayman Island subsidiaries. The Amendment permits the Company to advance up to $20 million to its Cayman subsidiaries and permits the Company to invest an additional $25 million in its foreign subsidiaries.
The Amendment provides Hercules with additional flexibility in contracting Rig 16 and Rig 31 (and Rig 26 upon its activation) in markets outside the U.S. Steve Manz, Chief Financial Officer of Hercules, noted, "The establishment of our international subsidiaries and the restructuring of our Credit Agreement will help facilitate our efforts to expand Hercules international operations and provide Hercules with a structure that will enable us to compete more effectively outside the U.S."
In addition, on January 25, 2006, Hercules entered into a Second Amendment
to the Credit Agreement to extend the expiration date of the period during
which we must pay a 1% prepayment premium in connection with certain
prepayments of its term loans from June 29, 2006 to December 31, 2006.
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