Hornbeck Offshore Lowers Q4 Guidance

Hornbeck Offshore Services, Inc. said that, after an initial review of operating results, it has revised its EBITDA and diluted earnings per share (EPS) guidance for the fourth quarter of 2006 and calendar 2006.

The Company now expects EBITDA for the fourth quarter of 2006 to range between $33.0 million and $34.0 million, down from $39.0 million to $41.0 million. Please refer to the attached data table and Note A for a definition and reconciliation of EBITDA guidance to its most directly comparable GAAP financial measure. The Company now expects EPS for the fourth quarter of 2006 to range between $0.61 and $0.63, down from $0.72 to $0.77. Included in fourth quarter 2006 results will be a $1.5 million ($1.0 million after-tax, or $0.04 per diluted share) gain on the sale of the ocean-going tug, Ponce Service. In recognition of its actual results for the first nine months of 2006 and its revised fourth quarter 2006 guidance above, the Company now expects EBITDA for the full calendar year 2006 to range between $151.3 million and $152.3 million and EPS to range between $2.74 and $2.77.

Todd Hornbeck, Chairman, President and CEO, stated, "On our last earnings call, we reported that market conditions for offshore supply vessels (OSVs) operating in the U.S. Gulf of Mexico (GoM) were getting choppy. However, during the latter half of the fourth quarter we experienced even more volatility than we expected. While our average OSV dayrates for the fourth quarter of 2006 were near the mid-point of our guidance range of $19,000 to $20,000, utilization for the quarter averaged in the mid-80s, resulting in utilization-adjusted, or effective, dayrates that were roughly $2,000 less than comparable third quarter 2006 dayrates for this segment. This unexpected dip in utilization was partially due to softer market demand and partially attributable to shipyard delays for regulatory drydockings and unscheduled repairs, as well as downtime related to the positioning and outfitting of one of our offshore supply vessels for specialty service. In addition, our operating results for the fourth quarter of 2006 were adversely impacted by an unexpected supplemental insurance premium in late November and costs related to a series of vessel incidents and related repairs that occurred during late November and December."

Mr. Hornbeck continued, "Over the last couple of months, we have observed several factors that have impacted our operating environment. OSV dayrate volatility has increased, shipyard delivery schedules for newbuilds and turnaround time for regulatory drydockings, repairs and maintenance remain uncertain and personnel and insurance costs continue to rise. From mid- November to mid-January, our utilization-adjusted, or effective, fleetwide OSV dayrates have fluctuated by as much as $3,000. Continued labor and material shortages in the shipyard community have contributed to chronic delays in shipyard activity, which has adversely affected our utilization and increased our recertification, repair and maintenance costs. In contemplation of the delivery of over 20 new vessels over the next several years, we continue to train additional mariners to ensure a qualified workforce to operate our rapidly growing fleet. While we still have much more data to analyze, we anticipate lowering our most recently reported calendar 2007 guidance on our fourth quarter 2006 earnings call in mid-February, possibly by as much as 15% to 20%.

"Notwithstanding these factors, we are confident that the fundamental drivers of our business model remain solid. We look forward to the incremental new OSV demand drivers that are expected to come on-line in the GoM throughout 2008 and beyond, concurrent with the planned deliveries of two MPSVs and thirteen 240 class new generation OSVs under our active newbuild and conversion programs that will more than double the deadweight capacity of our upstream fleet. In addition, we expect to deliver three 60,000-barrel double- hulled tank barges and four ocean-going tugs during 2007 that will increase the barrel-carrying capacity of our downstream fleet by about 30%," Mr. Hornbeck concluded.

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