Hercules sells four rigs as Gulf drilling work disappears

HOUSTON – Hercules Offshore says it sold four shallow-water drilling rigs that it had kept stacked for six years, scraping a sixth of its Gulf of Mexico fleet amid cheap oil prices.

This month’s rig sales come after the oil slump has taken a big toll on the Houston jackup rig contractor, which has cut 40 percent of its 1,800 employees in recent months. Its balance sheet has deteriorated, as well, as it had $1.2 billion in debt and just $218 million in cash at the end of March.

Hercules, which saw its shares trade for 84 cents Tuesday, has cold-stacked 11 of its 20 Gulf of Mexico rigs. Cold-stacked units are shut down and unmanned for long periods of time, and their operating costs drop from $40,000 to $2,000 a day, according to Hercules.

Only five of its rigs are currently working in the shallow waters of Gulf, with a few others stacked but ready for deployment, Hercules said in its monthly fleet update Tuesday.

The firm took a $117 million impairment charge in the first quarter after it cold-staked five rigs in the first three months of the year.

In a conference call with investors, Hercules CEO John Rynd said only 10 rigs under contract in the shallow waters of the Gulf out of the 19 that rig contractors are trying to rent out.

“The market is getting very competitive right now,” Rynd said. “There haven’t been many new jobs. There have been some extensions, but as far as incremental demand, it’s been almost over half of what it was last year, and you have about 180 jackups this year rolling off primary term with the contracts.”