HERO » Topics » OVERVIEW

These excerpts taken from the HERO 10-K filed Feb 26, 2009.
Overview
 
We provide shallow-water drilling and marine services to the oil and natural gas exploration and production industry globally. We provide these services to national oil and gas companies, major integrated energy companies and independent oil and natural gas operators.
 
We report our business activities in six business segments: (1) Domestic Offshore, (2) International Offshore, (3) Inland, (4) Domestic Liftboats, (5) International Liftboats and (6) Delta Towing.
 
In January 2009, we reclassified four of our cold-stacked jackup rigs located in the U.S. Gulf of Mexico and 10 of our cold-stacked inland barges as retired. These rigs would require extensive refurbishment and currently are not expected to re-enter active service. As of February 19, 2009, our business segments included the following:
 
Domestic Offshore — operates 20 jackup rigs and three submersible rigs in the U.S. Gulf of Mexico that can drill in maximum water depths ranging from 85 to 350 feet. Fourteen of the jackup rigs are either working on short-term contracts or available. One is in the shipyard for maintenance and five are cold-stacked. All three submersibles are cold-stacked.
 
International Offshore — operates 11 jackup rigs and one platform rig outside of the U.S. Gulf of Mexico. This segment operates two jackup rigs and one platform rig in Mexico and two jackup rigs in both Saudi Arabia and India. We have one jackup rig working offshore in Qatar and Malaysia and one rig in Gabon whose contract is being negotiated for early termination. In addition, this segment has one jackup rig currently undergoing an upgrade in Namibia and one jackup rig cold-stacked in Trinidad.
 
Inland — operates a fleet of 6 conventional and 11 posted barge rigs that operate inland in marshes, rivers, lakes and shallow bay or coastal waterways along the U.S. Gulf Coast. Eight of our inland barges are either operating on short-term contracts or available and nine are cold-stacked.
 
Domestic Liftboats — operates 45 liftboats in the U.S. Gulf of Mexico.
 
International Liftboats — operates 20 liftboats. Eighteen are operating offshore West Africa, including five liftboats owned by a third party. One liftboat is operating offshore Middle East. One liftboat is in a Middle Eastern shipyard undergoing refurbishment and it is being marketed in the Middle East region.
 
Delta Towing — our Delta Towing business operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew boats, 46 deck barges, 17 shale barges and four spud barges along and in the U.S. Gulf of Mexico and along the Southeastern coast. Currently, 24 crew boats, 13 inland tugs and seven offshore tugs are cold-stacked.
 
In January 2009, we entered into an agreement with Mosvold Middle East Jackup Ltd. whereby we will market, manage and operate two 300 foot, high-specification new-build jackup drilling rigs. The rigs, which have an independent leg cantilever design, are under construction in the Middle East and have expected delivery dates of December 2009 and April 2010. We will have worldwide, exclusive marketing rights, except in U.S. sanctioned countries. All operating and capital expenses incurred to operate the rig will be paid for or reimbursed by Mosvold Middle East Jackup Ltd. Upon commencement of a drilling contract, we will receive a commencement fee and an ongoing management fee for the remainder of the contract.


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Table of Contents

Overview
 
We provide shallow-water drilling and marine services to the oil and natural gas exploration and production industry globally. We provide these services to national oil and gas companies, major integrated energy companies and independent oil and natural gas operators.
 
We report our business activities in six business segments: (1) Domestic Offshore, (2) International Offshore, (3) Inland, (4) Domestic Liftboats, (5) International Liftboats and (6) Delta Towing.
 
In January 2009, we reclassified four of our cold-stacked jackup rigs located in the U.S. Gulf of Mexico and 10 of our cold-stacked inland barges as retired. These rigs would require extensive refurbishment and currently are not expected to re-enter active service. As of February 19, 2009, our business segments included the following:
 
Domestic Offshore — operates 20 jackup rigs and three submersible rigs in the U.S. Gulf of Mexico that can drill in maximum water depths ranging from 85 to 350 feet. Fourteen of the jackup rigs are either working on short-term contracts or available. One is in the shipyard for maintenance and five are cold-stacked. All three submersibles are cold-stacked.
 
International Offshore — operates 11 jackup rigs and one platform rig outside of the U.S. Gulf of Mexico. This segment operates two jackup rigs and one platform rig in Mexico and two jackup rigs in both Saudi Arabia and India. We have one jackup rig working offshore in Qatar and Malaysia and one rig in Gabon whose contract is being negotiated for early termination. In addition, this segment has one jackup rig currently undergoing an upgrade in Namibia and one jackup rig cold-stacked in Trinidad.
 
Inland — operates a fleet of 6 conventional and 11 posted barge rigs that operate inland in marshes, rivers, lakes and shallow bay or coastal waterways along the U.S. Gulf Coast. Eight of our inland barges are either operating on short-term contracts or available and nine are cold-stacked.
 
Domestic Liftboats — operates 45 liftboats in the U.S. Gulf of Mexico.
 
International Liftboats — operates 20 liftboats. Eighteen are operating offshore West Africa, including five liftboats owned by a third party. One liftboat is operating offshore Middle East. One liftboat is in a Middle Eastern shipyard undergoing refurbishment and it is being marketed in the Middle East region.
 
Delta Towing — our Delta Towing business operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew boats, 46 deck barges, 17 shale barges and four spud barges along and in the U.S. Gulf of Mexico and along the Southeastern coast. Currently, 24 crew boats, 13 inland tugs and seven offshore tugs are cold-stacked.
 
In January 2009, we entered into an agreement with Mosvold Middle East Jackup Ltd. whereby we will market, manage and operate two 300 foot, high-specification new-build jackup drilling rigs. The rigs, which have an independent leg cantilever design, are under construction in the Middle East and have expected delivery dates of December 2009 and April 2010. We will have worldwide, exclusive marketing rights, except in U.S. sanctioned countries. All operating and capital expenses incurred to operate the rig will be paid for or reimbursed by Mosvold Middle East Jackup Ltd. Upon commencement of a drilling contract, we will receive a commencement fee and an ongoing management fee for the remainder of the contract.


3


Table of Contents

Overview
 
We provide shallow-water drilling and marine services to the oil and natural gas exploration and production industry globally. We provide these services to national oil and gas companies, major integrated energy companies and independent oil and natural gas operators.
 
We report our business activities in six business segments: (1) Domestic Offshore, (2) International Offshore, (3) Inland, (4) Domestic Liftboats, (5) International Liftboats and (6) Delta Towing.
 
In January 2009, we reclassified four of our cold-stacked jackup rigs located in the U.S. Gulf of Mexico and 10 of our cold-stacked inland barges as retired. These rigs would require extensive refurbishment and currently are not expected to re-enter active service. As of February 19, 2009, our business segments included the following:
 
Domestic Offshore — operates 20 jackup rigs and three submersible rigs in the U.S. Gulf of Mexico that can drill in maximum water depths ranging from 85 to 350 feet. Fourteen of the jackup rigs are either working on short-term contracts or available. One is in the shipyard for maintenance and five are cold-stacked. All three submersibles are cold-stacked.
 
International Offshore — operates 11 jackup rigs and one platform rig outside of the U.S. Gulf of Mexico. This segment operates two jackup rigs and one platform rig in Mexico and two jackup rigs in both Saudi Arabia and India. We have one jackup rig working offshore in Qatar and Malaysia and one rig in Gabon whose contract is being negotiated for early termination. In addition, this segment has one jackup rig currently undergoing an upgrade in Namibia and one jackup rig cold-stacked in Trinidad.
 
Inland — operates a fleet of 6 conventional and 11 posted barge rigs that operate inland in marshes, rivers, lakes and shallow bay or coastal waterways along the U.S. Gulf Coast. Eight of our inland barges are either operating on short-term contracts or available and nine are cold-stacked.
 
Domestic Liftboats — operates 45 liftboats in the U.S. Gulf of Mexico.
 
International Liftboats — operates 20 liftboats. Eighteen are operating offshore West Africa, including five liftboats owned by a third party. One liftboat is operating offshore Middle East. One liftboat is in a Middle Eastern shipyard undergoing refurbishment and it is being marketed in the Middle East region.
 
Delta Towing — our Delta Towing business operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew boats, 46 deck barges, 17 shale barges and four spud barges along and in the U.S. Gulf of Mexico and along the Southeastern coast. Currently, 24 crew boats, 13 inland tugs and seven offshore tugs are cold-stacked.
 
In January 2009, we entered into an agreement with Mosvold Middle East Jackup Ltd. whereby we will market, manage and operate two 300 foot, high-specification new-build jackup drilling rigs. The rigs, which have an independent leg cantilever design, are under construction in the Middle East and have expected delivery dates of December 2009 and April 2010. We will have worldwide, exclusive marketing rights, except in U.S. sanctioned countries. All operating and capital expenses incurred to operate the rig will be paid for or reimbursed by Mosvold Middle East Jackup Ltd. Upon commencement of a drilling contract, we will receive a commencement fee and an ongoing management fee for the remainder of the contract.


3


Table of Contents

Overview


 



We provide shallow-water drilling and marine services to the oil
and natural gas exploration and production industry globally. We
provide these services to national oil and gas companies, major
integrated energy companies and independent oil and natural gas
operators.


 



We report our business activities in six business segments:
(1) Domestic Offshore, (2) International Offshore,
(3) Inland, (4) Domestic Liftboats,
(5) International Liftboats and (6) Delta Towing.


 



In January 2009, we reclassified four of our cold-stacked jackup
rigs located in the U.S. Gulf of Mexico and 10 of our
cold-stacked inland barges as retired. These rigs would require
extensive refurbishment and currently are not expected to
re-enter active service. As of February 19, 2009, our
business segments included the following:


 



Domestic Offshore — operates 20 jackup rigs and
three submersible rigs in the U.S. Gulf of Mexico that can
drill in maximum water depths ranging from 85 to 350 feet.
Fourteen of the jackup rigs are either working on short-term
contracts or available. One is in the shipyard for maintenance
and five are cold-stacked. All three submersibles are
cold-stacked.


 



International Offshore — operates 11 jackup
rigs and one platform rig outside of the U.S. Gulf of
Mexico. This segment operates two jackup rigs and one platform
rig in Mexico and two jackup rigs in both Saudi Arabia and
India. We have one jackup rig working offshore in Qatar and
Malaysia and one rig in Gabon whose contract is being negotiated
for early termination. In addition, this segment has one jackup
rig currently undergoing an upgrade in Namibia and one jackup
rig cold-stacked in Trinidad.


 



Inland — operates a fleet of 6 conventional and
11 posted barge rigs that operate inland in marshes, rivers,
lakes and shallow bay or coastal waterways along the
U.S. Gulf Coast. Eight of our inland barges are either
operating on short-term contracts or available and nine are
cold-stacked.


 



Domestic Liftboats — operates 45 liftboats in
the U.S. Gulf of Mexico.


 



International Liftboats — operates 20
liftboats. Eighteen are operating offshore West Africa,
including five liftboats owned by a third party. One liftboat is
operating offshore Middle East. One liftboat is in a Middle
Eastern shipyard undergoing refurbishment and it is being
marketed in the Middle East region.


 



Delta Towing — our Delta Towing business
operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew
boats, 46 deck barges, 17 shale barges and four spud barges
along and in the U.S. Gulf of Mexico and along the
Southeastern coast. Currently, 24 crew boats,
13 inland tugs and seven offshore tugs are cold-stacked.


 



In January 2009, we entered into an agreement with Mosvold
Middle East Jackup Ltd. whereby we will market, manage and
operate two 300 foot, high-specification new-build jackup
drilling rigs. The rigs, which have an independent leg
cantilever design, are under construction in the Middle East and
have expected delivery dates of December 2009 and April 2010. We
will have worldwide, exclusive marketing rights, except in
U.S. sanctioned countries. All operating and capital
expenses incurred to operate the rig will be paid for or
reimbursed by Mosvold Middle East Jackup Ltd. Upon commencement
of a drilling contract, we will receive a commencement fee and
an ongoing management fee for the remainder of the contract.





3





Table of Contents







Overview


 



We provide shallow-water drilling and marine services to the oil
and natural gas exploration and production industry globally. We
provide these services to national oil and gas companies, major
integrated energy companies and independent oil and natural gas
operators.


 



We report our business activities in six business segments:
(1) Domestic Offshore, (2) International Offshore,
(3) Inland, (4) Domestic Liftboats,
(5) International Liftboats and (6) Delta Towing.


 



In January 2009, we reclassified four of our cold-stacked jackup
rigs located in the U.S. Gulf of Mexico and 10 of our
cold-stacked inland barges as retired. These rigs would require
extensive refurbishment and currently are not expected to
re-enter active service. As of February 19, 2009, our
business segments included the following:


 



Domestic Offshore — operates 20 jackup rigs and
three submersible rigs in the U.S. Gulf of Mexico that can
drill in maximum water depths ranging from 85 to 350 feet.
Fourteen of the jackup rigs are either working on short-term
contracts or available. One is in the shipyard for maintenance
and five are cold-stacked. All three submersibles are
cold-stacked.


 



International Offshore — operates 11 jackup
rigs and one platform rig outside of the U.S. Gulf of
Mexico. This segment operates two jackup rigs and one platform
rig in Mexico and two jackup rigs in both Saudi Arabia and
India. We have one jackup rig working offshore in Qatar and
Malaysia and one rig in Gabon whose contract is being negotiated
for early termination. In addition, this segment has one jackup
rig currently undergoing an upgrade in Namibia and one jackup
rig cold-stacked in Trinidad.


 



Inland — operates a fleet of 6 conventional and
11 posted barge rigs that operate inland in marshes, rivers,
lakes and shallow bay or coastal waterways along the
U.S. Gulf Coast. Eight of our inland barges are either
operating on short-term contracts or available and nine are
cold-stacked.


 



Domestic Liftboats — operates 45 liftboats in
the U.S. Gulf of Mexico.


 



International Liftboats — operates 20
liftboats. Eighteen are operating offshore West Africa,
including five liftboats owned by a third party. One liftboat is
operating offshore Middle East. One liftboat is in a Middle
Eastern shipyard undergoing refurbishment and it is being
marketed in the Middle East region.


 



Delta Towing — our Delta Towing business
operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew
boats, 46 deck barges, 17 shale barges and four spud barges
along and in the U.S. Gulf of Mexico and along the
Southeastern coast. Currently, 24 crew boats,
13 inland tugs and seven offshore tugs are cold-stacked.


 



In January 2009, we entered into an agreement with Mosvold
Middle East Jackup Ltd. whereby we will market, manage and
operate two 300 foot, high-specification new-build jackup
drilling rigs. The rigs, which have an independent leg
cantilever design, are under construction in the Middle East and
have expected delivery dates of December 2009 and April 2010. We
will have worldwide, exclusive marketing rights, except in
U.S. sanctioned countries. All operating and capital
expenses incurred to operate the rig will be paid for or
reimbursed by Mosvold Middle East Jackup Ltd. Upon commencement
of a drilling contract, we will receive a commencement fee and
an ongoing management fee for the remainder of the contract.





3





Table of Contents







Overview


 



We provide shallow-water drilling and marine services to the oil
and natural gas exploration and production industry globally. We
provide these services to national oil and gas companies, major
integrated energy companies and independent oil and natural gas
operators.


 



We report our business activities in six business segments:
(1) Domestic Offshore, (2) International Offshore,
(3) Inland, (4) Domestic Liftboats,
(5) International Liftboats and (6) Delta Towing.


 



In January 2009, we reclassified four of our cold-stacked jackup
rigs located in the U.S. Gulf of Mexico and 10 of our
cold-stacked inland barges as retired. These rigs would require
extensive refurbishment and currently are not expected to
re-enter active service. As of February 19, 2009, our
business segments included the following:


 



Domestic Offshore — operates 20 jackup rigs and
three submersible rigs in the U.S. Gulf of Mexico that can
drill in maximum water depths ranging from 85 to 350 feet.
Fourteen of the jackup rigs are either working on short-term
contracts or available. One is in the shipyard for maintenance
and five are cold-stacked. All three submersibles are
cold-stacked.


 



International Offshore — operates 11 jackup
rigs and one platform rig outside of the U.S. Gulf of
Mexico. This segment operates two jackup rigs and one platform
rig in Mexico and two jackup rigs in both Saudi Arabia and
India. We have one jackup rig working offshore in Qatar and
Malaysia and one rig in Gabon whose contract is being negotiated
for early termination. In addition, this segment has one jackup
rig currently undergoing an upgrade in Namibia and one jackup
rig cold-stacked in Trinidad.


 



Inland — operates a fleet of 6 conventional and
11 posted barge rigs that operate inland in marshes, rivers,
lakes and shallow bay or coastal waterways along the
U.S. Gulf Coast. Eight of our inland barges are either
operating on short-term contracts or available and nine are
cold-stacked.


 



Domestic Liftboats — operates 45 liftboats in
the U.S. Gulf of Mexico.


 



International Liftboats — operates 20
liftboats. Eighteen are operating offshore West Africa,
including five liftboats owned by a third party. One liftboat is
operating offshore Middle East. One liftboat is in a Middle
Eastern shipyard undergoing refurbishment and it is being
marketed in the Middle East region.


 



Delta Towing — our Delta Towing business
operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew
boats, 46 deck barges, 17 shale barges and four spud barges
along and in the U.S. Gulf of Mexico and along the
Southeastern coast. Currently, 24 crew boats,
13 inland tugs and seven offshore tugs are cold-stacked.


 



In January 2009, we entered into an agreement with Mosvold
Middle East Jackup Ltd. whereby we will market, manage and
operate two 300 foot, high-specification new-build jackup
drilling rigs. The rigs, which have an independent leg
cantilever design, are under construction in the Middle East and
have expected delivery dates of December 2009 and April 2010. We
will have worldwide, exclusive marketing rights, except in
U.S. sanctioned countries. All operating and capital
expenses incurred to operate the rig will be paid for or
reimbursed by Mosvold Middle East Jackup Ltd. Upon commencement
of a drilling contract, we will receive a commencement fee and
an ongoing management fee for the remainder of the contract.





3





Table of Contents







OVERVIEW
 
We provide shallow-water drilling and marine services to the oil and natural gas exploration and production industry in the U.S. Gulf of Mexico and internationally. We provide these services to major integrated energy companies, independent oil and natural gas operators and national oil companies.
 
In July 2007, we completed the acquisition of TODCO for total consideration of approximately $2,397.8 million, consisting of $925.8 million in cash and 56.6 million shares of common stock. TODCO, a provider of contract drilling and marine services in the U.S. Gulf of Mexico and international markets, owned and operated 24 jackup rigs, 27 barge rigs, three submersible rigs, nine land rigs, one platform rig and a fleet of marine support vessels. The TODCO acquisition positioned us as a leading shallow-water drilling provider as well as expanded our international presence and diversified our fleet. In the first quarter of 2008, we furthered our strategic growth initiative by purchasing two jackup drilling rigs and related equipment for $220.0 million. In addition, during the second quarter of 2008, we purchased a third jackup rig and related equipment for $100.0 million.
 
We operate our business as six divisions: (1) Domestic Offshore, (2) International Offshore, (3) Inland, (4) Domestic Liftboats, (5) International Liftboats, and (6) Delta Towing. Previously, we reported an “Other” segment that included Delta Towing and the land rigs. The land rigs were sold in December 2007 and the results of the land rig operations are included in Discontinued Operation.
 
In January 2009, we reclassified four of our cold-stacked jackup rigs located in the U.S. Gulf of Mexico and 10 of our cold-stacked inland barges as retired. These rigs require extensive refurbishment and currently are not expected to re-enter active service. As of February 19, 2009, our business segments included the following:
 
Domestic Offshore — operates 20 jackup rigs and three submersible rigs in the U.S. Gulf of Mexico that can drill in maximum water depths ranging from 85 to 350 feet. Fourteen of the jackup rigs are either working on short-term contracts or available. One is in the shipyard for maintenance and five are cold-stacked. All three submersibles are cold-stacked.
 
International Offshore — operates 11 jackup rigs and one platform rig outside of the U.S. Gulf of Mexico. This segment operates two jackup rigs and one platform rig in Mexico and two jackup rigs in both Saudi Arabia and India. We have one jackup rig working offshore in Qatar and Malaysia and one rig in Gabon whose contract is being negotiated for early termination. In addition, this segment has one jackup rig currently undergoing an upgrade in Namibia and one jackup rig cold-stacked in Trinidad.
 
Inland — operates a fleet of 6 conventional and 11 posted barge rigs that operate inland in marshes, rivers, lakes and shallow bay or coastal waterways along the U.S. Gulf Coast. Eight of our inland barges are either operating on short-term contracts or available to be contracted and nine are cold-stacked.
 
Domestic Liftboats — operates 45 liftboats in the U.S. Gulf of Mexico.
 
International Liftboats — operates 20 liftboats. Eighteen are operating offshore West Africa, including five liftboats owned by a third party. One liftboat is operating offshore Middle East. One liftboat is in a Middle Eastern shipyard undergoing refurbishment and it is being marketed in the Middle East region.
 
Delta Towing — our Delta Towing business operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew boats, 46 deck barges, 17 shale barges and four spud barges along and in the U.S. Gulf of Mexico and along the Southeastern coast. Currently, 24 crew boats, 13 inland tugs and seven offshore tugs are cold-stacked.


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Our jackup and submersible rigs and our barge rigs are used primarily for exploration and development drilling in shallow waters. Under most of our contracts, we are paid a fixed daily rental rate called a “dayrate,” and we are required to pay all costs associated with our own crews as well as the upkeep and insurance of the rig and equipment.
 
Our liftboats are self-propelled, self-elevating vessels that support a broad range of offshore support services, including platform maintenance, platform construction, well intervention and decommissioning services throughout the life of an oil or natural gas well. Under most of our liftboat contracts, we are paid a fixed dayrate for the rental of the vessel, which typically includes the costs of a small crew of four to eight employees, and we also receive a variable rate for reimbursement of other operating costs such as catering, fuel, rental equipment and other items.
 
Our revenues are affected primarily by dayrates, fleet utilization, the number and type of units in our fleet and mobilization fees received from our customers. Utilization and dayrates, in turn, are influenced principally by the demand for rig and liftboat services from the exploration and production sectors of the oil and natural gas industry. Our contracts in the U.S. Gulf of Mexico tend to be short-term in nature and are heavily influenced by changes in the supply of units relative to the fluctuating expenditures for both drilling and production activity. Our international drilling contracts and some of our liftboat contracts in West Africa are longer term in nature.
 
Our operating costs are primarily a function of fleet configuration and utilization levels. The most significant direct operating costs for our Domestic Offshore, International Offshore and Inland segments are wages paid to crews, maintenance and repairs to the rigs, and insurance. These costs do not vary significantly whether the rig is operating under contract or idle, unless we believe that the rig is unlikely to work for a prolonged period of time, in which case we may decide to “cold-stack” or “warm-stack” the rig. Cold-stacking is a common term used to describe a rig that is expected to be idle for a protracted period and typically for which routine maintenance is suspended and the crews are either redeployed or laid-off. When a rig is cold-stacked, operating expenses for the rig are significantly reduced because the crew is smaller and maintenance activities are suspended. Placing rigs in service that have been cold-stacked typically requires a lengthy reactivation project that can involve significant expenditures and potentially additional regulatory review, particularly if the rig has been cold-stacked for a long period of time. Warm-stacking is a term used for a rig expected to be idle for a period of time that is not as prolonged as is the case with a cold-stacked rig. Maintenance is continued for warm-stacked rigs. Crews are reduced but a small crew is retained. Warm-stacked rigs generally can be reactivated in three to four weeks.
 
The most significant costs for our Domestic Liftboats and International Liftboats segments are the wages paid to crews and the amortization of regulatory drydocking costs. Unlike our Domestic Offshore, International Offshore and Inland segments, a significant portion of the expenses incurred with operating each liftboat are paid for or reimbursed by the customer under contractual terms and prices. This includes catering, fuel, oil, rental equipment, crane overtime and other items. We record reimbursements from customers as revenues and the related expenses as operating costs. Our liftboats are required to undergo regulatory inspections every year and to be drydocked two times every five years; the drydocking expenses and length of time in drydock vary depending on the condition of the vessel. All costs associated with regulatory inspections, including related drydocking costs, are deferred and amortized over a period of twelve months.
 
OVERVIEW
 
We provide shallow-water drilling and marine services to the oil and natural gas exploration and production industry in the U.S. Gulf of Mexico and internationally. We provide these services to major integrated energy companies, independent oil and natural gas operators and national oil companies.
 
In July 2007, we completed the acquisition of TODCO for total consideration of approximately $2,397.8 million, consisting of $925.8 million in cash and 56.6 million shares of common stock. TODCO, a provider of contract drilling and marine services in the U.S. Gulf of Mexico and international markets, owned and operated 24 jackup rigs, 27 barge rigs, three submersible rigs, nine land rigs, one platform rig and a fleet of marine support vessels. The TODCO acquisition positioned us as a leading shallow-water drilling provider as well as expanded our international presence and diversified our fleet. In the first quarter of 2008, we furthered our strategic growth initiative by purchasing two jackup drilling rigs and related equipment for $220.0 million. In addition, during the second quarter of 2008, we purchased a third jackup rig and related equipment for $100.0 million.
 
We operate our business as six divisions: (1) Domestic Offshore, (2) International Offshore, (3) Inland, (4) Domestic Liftboats, (5) International Liftboats, and (6) Delta Towing. Previously, we reported an “Other” segment that included Delta Towing and the land rigs. The land rigs were sold in December 2007 and the results of the land rig operations are included in Discontinued Operation.
 
In January 2009, we reclassified four of our cold-stacked jackup rigs located in the U.S. Gulf of Mexico and 10 of our cold-stacked inland barges as retired. These rigs require extensive refurbishment and currently are not expected to re-enter active service. As of February 19, 2009, our business segments included the following:
 
Domestic Offshore — operates 20 jackup rigs and three submersible rigs in the U.S. Gulf of Mexico that can drill in maximum water depths ranging from 85 to 350 feet. Fourteen of the jackup rigs are either working on short-term contracts or available. One is in the shipyard for maintenance and five are cold-stacked. All three submersibles are cold-stacked.
 
International Offshore — operates 11 jackup rigs and one platform rig outside of the U.S. Gulf of Mexico. This segment operates two jackup rigs and one platform rig in Mexico and two jackup rigs in both Saudi Arabia and India. We have one jackup rig working offshore in Qatar and Malaysia and one rig in Gabon whose contract is being negotiated for early termination. In addition, this segment has one jackup rig currently undergoing an upgrade in Namibia and one jackup rig cold-stacked in Trinidad.
 
Inland — operates a fleet of 6 conventional and 11 posted barge rigs that operate inland in marshes, rivers, lakes and shallow bay or coastal waterways along the U.S. Gulf Coast. Eight of our inland barges are either operating on short-term contracts or available to be contracted and nine are cold-stacked.
 
Domestic Liftboats — operates 45 liftboats in the U.S. Gulf of Mexico.
 
International Liftboats — operates 20 liftboats. Eighteen are operating offshore West Africa, including five liftboats owned by a third party. One liftboat is operating offshore Middle East. One liftboat is in a Middle Eastern shipyard undergoing refurbishment and it is being marketed in the Middle East region.
 
Delta Towing — our Delta Towing business operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew boats, 46 deck barges, 17 shale barges and four spud barges along and in the U.S. Gulf of Mexico and along the Southeastern coast. Currently, 24 crew boats, 13 inland tugs and seven offshore tugs are cold-stacked.


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Table of Contents

Our jackup and submersible rigs and our barge rigs are used primarily for exploration and development drilling in shallow waters. Under most of our contracts, we are paid a fixed daily rental rate called a “dayrate,” and we are required to pay all costs associated with our own crews as well as the upkeep and insurance of the rig and equipment.
 
Our liftboats are self-propelled, self-elevating vessels that support a broad range of offshore support services, including platform maintenance, platform construction, well intervention and decommissioning services throughout the life of an oil or natural gas well. Under most of our liftboat contracts, we are paid a fixed dayrate for the rental of the vessel, which typically includes the costs of a small crew of four to eight employees, and we also receive a variable rate for reimbursement of other operating costs such as catering, fuel, rental equipment and other items.
 
Our revenues are affected primarily by dayrates, fleet utilization, the number and type of units in our fleet and mobilization fees received from our customers. Utilization and dayrates, in turn, are influenced principally by the demand for rig and liftboat services from the exploration and production sectors of the oil and natural gas industry. Our contracts in the U.S. Gulf of Mexico tend to be short-term in nature and are heavily influenced by changes in the supply of units relative to the fluctuating expenditures for both drilling and production activity. Our international drilling contracts and some of our liftboat contracts in West Africa are longer term in nature.
 
Our operating costs are primarily a function of fleet configuration and utilization levels. The most significant direct operating costs for our Domestic Offshore, International Offshore and Inland segments are wages paid to crews, maintenance and repairs to the rigs, and insurance. These costs do not vary significantly whether the rig is operating under contract or idle, unless we believe that the rig is unlikely to work for a prolonged period of time, in which case we may decide to “cold-stack” or “warm-stack” the rig. Cold-stacking is a common term used to describe a rig that is expected to be idle for a protracted period and typically for which routine maintenance is suspended and the crews are either redeployed or laid-off. When a rig is cold-stacked, operating expenses for the rig are significantly reduced because the crew is smaller and maintenance activities are suspended. Placing rigs in service that have been cold-stacked typically requires a lengthy reactivation project that can involve significant expenditures and potentially additional regulatory review, particularly if the rig has been cold-stacked for a long period of time. Warm-stacking is a term used for a rig expected to be idle for a period of time that is not as prolonged as is the case with a cold-stacked rig. Maintenance is continued for warm-stacked rigs. Crews are reduced but a small crew is retained. Warm-stacked rigs generally can be reactivated in three to four weeks.
 
The most significant costs for our Domestic Liftboats and International Liftboats segments are the wages paid to crews and the amortization of regulatory drydocking costs. Unlike our Domestic Offshore, International Offshore and Inland segments, a significant portion of the expenses incurred with operating each liftboat are paid for or reimbursed by the customer under contractual terms and prices. This includes catering, fuel, oil, rental equipment, crane overtime and other items. We record reimbursements from customers as revenues and the related expenses as operating costs. Our liftboats are required to undergo regulatory inspections every year and to be drydocked two times every five years; the drydocking expenses and length of time in drydock vary depending on the condition of the vessel. All costs associated with regulatory inspections, including related drydocking costs, are deferred and amortized over a period of twelve months.
 
OVERVIEW
 
We provide shallow-water drilling and marine services to the oil and natural gas exploration and production industry in the U.S. Gulf of Mexico and internationally. We provide these services to major integrated energy companies, independent oil and natural gas operators and national oil companies.
 
In July 2007, we completed the acquisition of TODCO for total consideration of approximately $2,397.8 million, consisting of $925.8 million in cash and 56.6 million shares of common stock. TODCO, a provider of contract drilling and marine services in the U.S. Gulf of Mexico and international markets, owned and operated 24 jackup rigs, 27 barge rigs, three submersible rigs, nine land rigs, one platform rig and a fleet of marine support vessels. The TODCO acquisition positioned us as a leading shallow-water drilling provider as well as expanded our international presence and diversified our fleet. In the first quarter of 2008, we furthered our strategic growth initiative by purchasing two jackup drilling rigs and related equipment for $220.0 million. In addition, during the second quarter of 2008, we purchased a third jackup rig and related equipment for $100.0 million.
 
We operate our business as six divisions: (1) Domestic Offshore, (2) International Offshore, (3) Inland, (4) Domestic Liftboats, (5) International Liftboats, and (6) Delta Towing. Previously, we reported an “Other” segment that included Delta Towing and the land rigs. The land rigs were sold in December 2007 and the results of the land rig operations are included in Discontinued Operation.
 
In January 2009, we reclassified four of our cold-stacked jackup rigs located in the U.S. Gulf of Mexico and 10 of our cold-stacked inland barges as retired. These rigs require extensive refurbishment and currently are not expected to re-enter active service. As of February 19, 2009, our business segments included the following:
 
Domestic Offshore — operates 20 jackup rigs and three submersible rigs in the U.S. Gulf of Mexico that can drill in maximum water depths ranging from 85 to 350 feet. Fourteen of the jackup rigs are either working on short-term contracts or available. One is in the shipyard for maintenance and five are cold-stacked. All three submersibles are cold-stacked.
 
International Offshore — operates 11 jackup rigs and one platform rig outside of the U.S. Gulf of Mexico. This segment operates two jackup rigs and one platform rig in Mexico and two jackup rigs in both Saudi Arabia and India. We have one jackup rig working offshore in Qatar and Malaysia and one rig in Gabon whose contract is being negotiated for early termination. In addition, this segment has one jackup rig currently undergoing an upgrade in Namibia and one jackup rig cold-stacked in Trinidad.
 
Inland — operates a fleet of 6 conventional and 11 posted barge rigs that operate inland in marshes, rivers, lakes and shallow bay or coastal waterways along the U.S. Gulf Coast. Eight of our inland barges are either operating on short-term contracts or available to be contracted and nine are cold-stacked.
 
Domestic Liftboats — operates 45 liftboats in the U.S. Gulf of Mexico.
 
International Liftboats — operates 20 liftboats. Eighteen are operating offshore West Africa, including five liftboats owned by a third party. One liftboat is operating offshore Middle East. One liftboat is in a Middle Eastern shipyard undergoing refurbishment and it is being marketed in the Middle East region.
 
Delta Towing — our Delta Towing business operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew boats, 46 deck barges, 17 shale barges and four spud barges along and in the U.S. Gulf of Mexico and along the Southeastern coast. Currently, 24 crew boats, 13 inland tugs and seven offshore tugs are cold-stacked.


34


Table of Contents

Our jackup and submersible rigs and our barge rigs are used primarily for exploration and development drilling in shallow waters. Under most of our contracts, we are paid a fixed daily rental rate called a “dayrate,” and we are required to pay all costs associated with our own crews as well as the upkeep and insurance of the rig and equipment.
 
Our liftboats are self-propelled, self-elevating vessels that support a broad range of offshore support services, including platform maintenance, platform construction, well intervention and decommissioning services throughout the life of an oil or natural gas well. Under most of our liftboat contracts, we are paid a fixed dayrate for the rental of the vessel, which typically includes the costs of a small crew of four to eight employees, and we also receive a variable rate for reimbursement of other operating costs such as catering, fuel, rental equipment and other items.
 
Our revenues are affected primarily by dayrates, fleet utilization, the number and type of units in our fleet and mobilization fees received from our customers. Utilization and dayrates, in turn, are influenced principally by the demand for rig and liftboat services from the exploration and production sectors of the oil and natural gas industry. Our contracts in the U.S. Gulf of Mexico tend to be short-term in nature and are heavily influenced by changes in the supply of units relative to the fluctuating expenditures for both drilling and production activity. Our international drilling contracts and some of our liftboat contracts in West Africa are longer term in nature.
 
Our operating costs are primarily a function of fleet configuration and utilization levels. The most significant direct operating costs for our Domestic Offshore, International Offshore and Inland segments are wages paid to crews, maintenance and repairs to the rigs, and insurance. These costs do not vary significantly whether the rig is operating under contract or idle, unless we believe that the rig is unlikely to work for a prolonged period of time, in which case we may decide to “cold-stack” or “warm-stack” the rig. Cold-stacking is a common term used to describe a rig that is expected to be idle for a protracted period and typically for which routine maintenance is suspended and the crews are either redeployed or laid-off. When a rig is cold-stacked, operating expenses for the rig are significantly reduced because the crew is smaller and maintenance activities are suspended. Placing rigs in service that have been cold-stacked typically requires a lengthy reactivation project that can involve significant expenditures and potentially additional regulatory review, particularly if the rig has been cold-stacked for a long period of time. Warm-stacking is a term used for a rig expected to be idle for a period of time that is not as prolonged as is the case with a cold-stacked rig. Maintenance is continued for warm-stacked rigs. Crews are reduced but a small crew is retained. Warm-stacked rigs generally can be reactivated in three to four weeks.
 
The most significant costs for our Domestic Liftboats and International Liftboats segments are the wages paid to crews and the amortization of regulatory drydocking costs. Unlike our Domestic Offshore, International Offshore and Inland segments, a significant portion of the expenses incurred with operating each liftboat are paid for or reimbursed by the customer under contractual terms and prices. This includes catering, fuel, oil, rental equipment, crane overtime and other items. We record reimbursements from customers as revenues and the related expenses as operating costs. Our liftboats are required to undergo regulatory inspections every year and to be drydocked two times every five years; the drydocking expenses and length of time in drydock vary depending on the condition of the vessel. All costs associated with regulatory inspections, including related drydocking costs, are deferred and amortized over a period of twelve months.
 
OVERVIEW


 



We provide shallow-water drilling and marine services to the oil
and natural gas exploration and production industry in the
U.S. Gulf of Mexico and internationally. We provide these
services to major integrated energy companies, independent oil
and natural gas operators and national oil companies.


 



In July 2007, we completed the acquisition of TODCO for total
consideration of approximately $2,397.8 million, consisting
of $925.8 million in cash and 56.6 million shares of
common stock. TODCO, a provider of contract drilling and marine
services in the U.S. Gulf of Mexico and international
markets, owned and operated 24 jackup rigs, 27 barge rigs, three
submersible rigs, nine land rigs, one platform rig and a fleet
of marine support vessels. The TODCO acquisition positioned us
as a leading shallow-water drilling provider as well as expanded
our international presence and diversified our fleet. In the
first quarter of 2008, we furthered our strategic growth
initiative by purchasing two jackup drilling rigs and related
equipment for $220.0 million. In addition, during the
second quarter of 2008, we purchased a third jackup rig and
related equipment for $100.0 million.


 



We operate our business as six divisions: (1) Domestic
Offshore, (2) International Offshore, (3) Inland,
(4) Domestic Liftboats, (5) International Liftboats,
and (6) Delta Towing. Previously, we reported an
“Other” segment that included Delta Towing and the
land rigs. The land rigs were sold in December 2007 and the
results of the land rig operations are included in Discontinued
Operation.


 



In January 2009, we reclassified four of our cold-stacked jackup
rigs located in the U.S. Gulf of Mexico and 10 of our
cold-stacked inland barges as retired. These rigs require
extensive refurbishment and currently are not expected to
re-enter active service. As of February 19, 2009, our
business segments included the following:


 



Domestic Offshore — operates 20 jackup rigs and
three submersible rigs in the U.S. Gulf of Mexico that can
drill in maximum water depths ranging from 85 to 350 feet.
Fourteen of the jackup rigs are either working on short-term
contracts or available. One is in the shipyard for maintenance
and five are cold-stacked. All three submersibles are
cold-stacked.


 



International Offshore — operates 11 jackup
rigs and one platform rig outside of the U.S. Gulf of
Mexico. This segment operates two jackup rigs and one platform
rig in Mexico and two jackup rigs in both Saudi Arabia and
India. We have one jackup rig working offshore in Qatar and
Malaysia and one rig in Gabon whose contract is being negotiated
for early termination. In addition, this segment has one jackup
rig currently undergoing an upgrade in Namibia and one jackup
rig cold-stacked in Trinidad.


 



Inland — operates a fleet of 6 conventional and
11 posted barge rigs that operate inland in marshes, rivers,
lakes and shallow bay or coastal waterways along the
U.S. Gulf Coast. Eight of our inland barges are either
operating on short-term contracts or available to be contracted
and nine are cold-stacked.


 



Domestic Liftboats — operates 45 liftboats in
the U.S. Gulf of Mexico.


 



International Liftboats — operates 20
liftboats. Eighteen are operating offshore West Africa,
including five liftboats owned by a third party. One liftboat is
operating offshore Middle East. One liftboat is in a Middle
Eastern shipyard undergoing refurbishment and it is being
marketed in the Middle East region.


 



Delta Towing — our Delta Towing business
operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew
boats, 46 deck barges, 17 shale barges and four spud barges
along and in the U.S. Gulf of Mexico and along the
Southeastern coast. Currently, 24 crew boats,
13 inland tugs and seven offshore tugs are cold-stacked.





34





Table of Contents






Our jackup and submersible rigs and our barge rigs are used
primarily for exploration and development drilling in shallow
waters. Under most of our contracts, we are paid a fixed daily
rental rate called a “dayrate,” and we are required to
pay all costs associated with our own crews as well as the
upkeep and insurance of the rig and equipment.


 



Our liftboats are self-propelled, self-elevating vessels that
support a broad range of offshore support services, including
platform maintenance, platform construction, well intervention
and decommissioning services throughout the life of an oil or
natural gas well. Under most of our liftboat contracts, we are
paid a fixed dayrate for the rental of the vessel, which
typically includes the costs of a small crew of four to eight
employees, and we also receive a variable rate for reimbursement
of other operating costs such as catering, fuel, rental
equipment and other items.


 



Our revenues are affected primarily by dayrates, fleet
utilization, the number and type of units in our fleet and
mobilization fees received from our customers. Utilization and
dayrates, in turn, are influenced principally by the demand for
rig and liftboat services from the exploration and production
sectors of the oil and natural gas industry. Our contracts in
the U.S. Gulf of Mexico tend to be short-term in nature and
are heavily influenced by changes in the supply of units
relative to the fluctuating expenditures for both drilling and
production activity. Our international drilling contracts and
some of our liftboat contracts in West Africa are longer term in
nature.


 



Our operating costs are primarily a function of fleet
configuration and utilization levels. The most significant
direct operating costs for our Domestic Offshore, International
Offshore and Inland segments are wages paid to crews,
maintenance and repairs to the rigs, and insurance. These costs
do not vary significantly whether the rig is operating under
contract or idle, unless we believe that the rig is unlikely to
work for a prolonged period of time, in which case we may decide
to “cold-stack” or “warm-stack” the rig.
Cold-stacking is a common term used to describe a rig that is
expected to be idle for a protracted period and typically for
which routine maintenance is suspended and the crews are either
redeployed or laid-off. When a rig is cold-stacked, operating
expenses for the rig are significantly reduced because the crew
is smaller and maintenance activities are suspended. Placing
rigs in service that have been cold-stacked typically requires a
lengthy reactivation project that can involve significant
expenditures and potentially additional regulatory review,
particularly if the rig has been cold-stacked for a long period
of time. Warm-stacking is a term used for a rig expected to be
idle for a period of time that is not as prolonged as is the
case with a cold-stacked rig. Maintenance is continued for
warm-stacked rigs. Crews are reduced but a small crew is
retained. Warm-stacked rigs generally can be reactivated in
three to four weeks.


 



The most significant costs for our Domestic Liftboats and
International Liftboats segments are the wages paid to crews and
the amortization of regulatory drydocking costs. Unlike our
Domestic Offshore, International Offshore and Inland segments, a
significant portion of the expenses incurred with operating each
liftboat are paid for or reimbursed by the customer under
contractual terms and prices. This includes catering, fuel, oil,
rental equipment, crane overtime and other items. We record
reimbursements from customers as revenues and the related
expenses as operating costs. Our liftboats are required to
undergo regulatory inspections every year and to be drydocked
two times every five years; the drydocking expenses and length
of time in drydock vary depending on the condition of the
vessel. All costs associated with regulatory inspections,
including related drydocking costs, are deferred and amortized
over a period of twelve months.


 




OVERVIEW


 



We provide shallow-water drilling and marine services to the oil
and natural gas exploration and production industry in the
U.S. Gulf of Mexico and internationally. We provide these
services to major integrated energy companies, independent oil
and natural gas operators and national oil companies.


 



In July 2007, we completed the acquisition of TODCO for total
consideration of approximately $2,397.8 million, consisting
of $925.8 million in cash and 56.6 million shares of
common stock. TODCO, a provider of contract drilling and marine
services in the U.S. Gulf of Mexico and international
markets, owned and operated 24 jackup rigs, 27 barge rigs, three
submersible rigs, nine land rigs, one platform rig and a fleet
of marine support vessels. The TODCO acquisition positioned us
as a leading shallow-water drilling provider as well as expanded
our international presence and diversified our fleet. In the
first quarter of 2008, we furthered our strategic growth
initiative by purchasing two jackup drilling rigs and related
equipment for $220.0 million. In addition, during the
second quarter of 2008, we purchased a third jackup rig and
related equipment for $100.0 million.


 



We operate our business as six divisions: (1) Domestic
Offshore, (2) International Offshore, (3) Inland,
(4) Domestic Liftboats, (5) International Liftboats,
and (6) Delta Towing. Previously, we reported an
“Other” segment that included Delta Towing and the
land rigs. The land rigs were sold in December 2007 and the
results of the land rig operations are included in Discontinued
Operation.


 



In January 2009, we reclassified four of our cold-stacked jackup
rigs located in the U.S. Gulf of Mexico and 10 of our
cold-stacked inland barges as retired. These rigs require
extensive refurbishment and currently are not expected to
re-enter active service. As of February 19, 2009, our
business segments included the following:


 



Domestic Offshore — operates 20 jackup rigs and
three submersible rigs in the U.S. Gulf of Mexico that can
drill in maximum water depths ranging from 85 to 350 feet.
Fourteen of the jackup rigs are either working on short-term
contracts or available. One is in the shipyard for maintenance
and five are cold-stacked. All three submersibles are
cold-stacked.


 



International Offshore — operates 11 jackup
rigs and one platform rig outside of the U.S. Gulf of
Mexico. This segment operates two jackup rigs and one platform
rig in Mexico and two jackup rigs in both Saudi Arabia and
India. We have one jackup rig working offshore in Qatar and
Malaysia and one rig in Gabon whose contract is being negotiated
for early termination. In addition, this segment has one jackup
rig currently undergoing an upgrade in Namibia and one jackup
rig cold-stacked in Trinidad.


 



Inland — operates a fleet of 6 conventional and
11 posted barge rigs that operate inland in marshes, rivers,
lakes and shallow bay or coastal waterways along the
U.S. Gulf Coast. Eight of our inland barges are either
operating on short-term contracts or available to be contracted
and nine are cold-stacked.


 



Domestic Liftboats — operates 45 liftboats in
the U.S. Gulf of Mexico.


 



International Liftboats — operates 20
liftboats. Eighteen are operating offshore West Africa,
including five liftboats owned by a third party. One liftboat is
operating offshore Middle East. One liftboat is in a Middle
Eastern shipyard undergoing refurbishment and it is being
marketed in the Middle East region.


 



Delta Towing — our Delta Towing business
operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew
boats, 46 deck barges, 17 shale barges and four spud barges
along and in the U.S. Gulf of Mexico and along the
Southeastern coast. Currently, 24 crew boats,
13 inland tugs and seven offshore tugs are cold-stacked.





34





Table of Contents






Our jackup and submersible rigs and our barge rigs are used
primarily for exploration and development drilling in shallow
waters. Under most of our contracts, we are paid a fixed daily
rental rate called a “dayrate,” and we are required to
pay all costs associated with our own crews as well as the
upkeep and insurance of the rig and equipment.


 



Our liftboats are self-propelled, self-elevating vessels that
support a broad range of offshore support services, including
platform maintenance, platform construction, well intervention
and decommissioning services throughout the life of an oil or
natural gas well. Under most of our liftboat contracts, we are
paid a fixed dayrate for the rental of the vessel, which
typically includes the costs of a small crew of four to eight
employees, and we also receive a variable rate for reimbursement
of other operating costs such as catering, fuel, rental
equipment and other items.


 



Our revenues are affected primarily by dayrates, fleet
utilization, the number and type of units in our fleet and
mobilization fees received from our customers. Utilization and
dayrates, in turn, are influenced principally by the demand for
rig and liftboat services from the exploration and production
sectors of the oil and natural gas industry. Our contracts in
the U.S. Gulf of Mexico tend to be short-term in nature and
are heavily influenced by changes in the supply of units
relative to the fluctuating expenditures for both drilling and
production activity. Our international drilling contracts and
some of our liftboat contracts in West Africa are longer term in
nature.


 



Our operating costs are primarily a function of fleet
configuration and utilization levels. The most significant
direct operating costs for our Domestic Offshore, International
Offshore and Inland segments are wages paid to crews,
maintenance and repairs to the rigs, and insurance. These costs
do not vary significantly whether the rig is operating under
contract or idle, unless we believe that the rig is unlikely to
work for a prolonged period of time, in which case we may decide
to “cold-stack” or “warm-stack” the rig.
Cold-stacking is a common term used to describe a rig that is
expected to be idle for a protracted period and typically for
which routine maintenance is suspended and the crews are either
redeployed or laid-off. When a rig is cold-stacked, operating
expenses for the rig are significantly reduced because the crew
is smaller and maintenance activities are suspended. Placing
rigs in service that have been cold-stacked typically requires a
lengthy reactivation project that can involve significant
expenditures and potentially additional regulatory review,
particularly if the rig has been cold-stacked for a long period
of time. Warm-stacking is a term used for a rig expected to be
idle for a period of time that is not as prolonged as is the
case with a cold-stacked rig. Maintenance is continued for
warm-stacked rigs. Crews are reduced but a small crew is
retained. Warm-stacked rigs generally can be reactivated in
three to four weeks.


 



The most significant costs for our Domestic Liftboats and
International Liftboats segments are the wages paid to crews and
the amortization of regulatory drydocking costs. Unlike our
Domestic Offshore, International Offshore and Inland segments, a
significant portion of the expenses incurred with operating each
liftboat are paid for or reimbursed by the customer under
contractual terms and prices. This includes catering, fuel, oil,
rental equipment, crane overtime and other items. We record
reimbursements from customers as revenues and the related
expenses as operating costs. Our liftboats are required to
undergo regulatory inspections every year and to be drydocked
two times every five years; the drydocking expenses and length
of time in drydock vary depending on the condition of the
vessel. All costs associated with regulatory inspections,
including related drydocking costs, are deferred and amortized
over a period of twelve months.


 




OVERVIEW


 



We provide shallow-water drilling and marine services to the oil
and natural gas exploration and production industry in the
U.S. Gulf of Mexico and internationally. We provide these
services to major integrated energy companies, independent oil
and natural gas operators and national oil companies.


 



In July 2007, we completed the acquisition of TODCO for total
consideration of approximately $2,397.8 million, consisting
of $925.8 million in cash and 56.6 million shares of
common stock. TODCO, a provider of contract drilling and marine
services in the U.S. Gulf of Mexico and international
markets, owned and operated 24 jackup rigs, 27 barge rigs, three
submersible rigs, nine land rigs, one platform rig and a fleet
of marine support vessels. The TODCO acquisition positioned us
as a leading shallow-water drilling provider as well as expanded
our international presence and diversified our fleet. In the
first quarter of 2008, we furthered our strategic growth
initiative by purchasing two jackup drilling rigs and related
equipment for $220.0 million. In addition, during the
second quarter of 2008, we purchased a third jackup rig and
related equipment for $100.0 million.


 



We operate our business as six divisions: (1) Domestic
Offshore, (2) International Offshore, (3) Inland,
(4) Domestic Liftboats, (5) International Liftboats,
and (6) Delta Towing. Previously, we reported an
“Other” segment that included Delta Towing and the
land rigs. The land rigs were sold in December 2007 and the
results of the land rig operations are included in Discontinued
Operation.


 



In January 2009, we reclassified four of our cold-stacked jackup
rigs located in the U.S. Gulf of Mexico and 10 of our
cold-stacked inland barges as retired. These rigs require
extensive refurbishment and currently are not expected to
re-enter active service. As of February 19, 2009, our
business segments included the following:


 



Domestic Offshore — operates 20 jackup rigs and
three submersible rigs in the U.S. Gulf of Mexico that can
drill in maximum water depths ranging from 85 to 350 feet.
Fourteen of the jackup rigs are either working on short-term
contracts or available. One is in the shipyard for maintenance
and five are cold-stacked. All three submersibles are
cold-stacked.


 



International Offshore — operates 11 jackup
rigs and one platform rig outside of the U.S. Gulf of
Mexico. This segment operates two jackup rigs and one platform
rig in Mexico and two jackup rigs in both Saudi Arabia and
India. We have one jackup rig working offshore in Qatar and
Malaysia and one rig in Gabon whose contract is being negotiated
for early termination. In addition, this segment has one jackup
rig currently undergoing an upgrade in Namibia and one jackup
rig cold-stacked in Trinidad.


 



Inland — operates a fleet of 6 conventional and
11 posted barge rigs that operate inland in marshes, rivers,
lakes and shallow bay or coastal waterways along the
U.S. Gulf Coast. Eight of our inland barges are either
operating on short-term contracts or available to be contracted
and nine are cold-stacked.


 



Domestic Liftboats — operates 45 liftboats in
the U.S. Gulf of Mexico.


 



International Liftboats — operates 20
liftboats. Eighteen are operating offshore West Africa,
including five liftboats owned by a third party. One liftboat is
operating offshore Middle East. One liftboat is in a Middle
Eastern shipyard undergoing refurbishment and it is being
marketed in the Middle East region.


 



Delta Towing — our Delta Towing business
operates a fleet of 30 inland tugs, 16 offshore tugs, 34 crew
boats, 46 deck barges, 17 shale barges and four spud barges
along and in the U.S. Gulf of Mexico and along the
Southeastern coast. Currently, 24 crew boats,
13 inland tugs and seven offshore tugs are cold-stacked.





34





Table of Contents






Our jackup and submersible rigs and our barge rigs are used
primarily for exploration and development drilling in shallow
waters. Under most of our contracts, we are paid a fixed daily
rental rate called a “dayrate,” and we are required to
pay all costs associated with our own crews as well as the
upkeep and insurance of the rig and equipment.


 



Our liftboats are self-propelled, self-elevating vessels that
support a broad range of offshore support services, including
platform maintenance, platform construction, well intervention
and decommissioning services throughout the life of an oil or
natural gas well. Under most of our liftboat contracts, we are
paid a fixed dayrate for the rental of the vessel, which
typically includes the costs of a small crew of four to eight
employees, and we also receive a variable rate for reimbursement
of other operating costs such as catering, fuel, rental
equipment and other items.


 



Our revenues are affected primarily by dayrates, fleet
utilization, the number and type of units in our fleet and
mobilization fees received from our customers. Utilization and
dayrates, in turn, are influenced principally by the demand for
rig and liftboat services from the exploration and production
sectors of the oil and natural gas industry. Our contracts in
the U.S. Gulf of Mexico tend to be short-term in nature and
are heavily influenced by changes in the supply of units
relative to the fluctuating expenditures for both drilling and
production activity. Our international drilling contracts and
some of our liftboat contracts in West Africa are longer term in
nature.


 



Our operating costs are primarily a function of fleet
configuration and utilization levels. The most significant
direct operating costs for our Domestic Offshore, International
Offshore and Inland segments are wages paid to crews,
maintenance and repairs to the rigs, and insurance. These costs
do not vary significantly whether the rig is operating under
contract or idle, unless we believe that the rig is unlikely to
work for a prolonged period of time, in which case we may decide
to “cold-stack” or “warm-stack” the rig.
Cold-stacking is a common term used to describe a rig that is
expected to be idle for a protracted period and typically for
which routine maintenance is suspended and the crews are either
redeployed or laid-off. When a rig is cold-stacked, operating
expenses for the rig are significantly reduced because the crew
is smaller and maintenance activities are suspended. Placing
rigs in service that have been cold-stacked typically requires a
lengthy reactivation project that can involve significant
expenditures and potentially additional regulatory review,
particularly if the rig has been cold-stacked for a long period
of time. Warm-stacking is a term used for a rig expected to be
idle for a period of time that is not as prolonged as is the
case with a cold-stacked rig. Maintenance is continued for
warm-stacked rigs. Crews are reduced but a small crew is
retained. Warm-stacked rigs generally can be reactivated in
three to four weeks.


 



The most significant costs for our Domestic Liftboats and
International Liftboats segments are the wages paid to crews and
the amortization of regulatory drydocking costs. Unlike our
Domestic Offshore, International Offshore and Inland segments, a
significant portion of the expenses incurred with operating each
liftboat are paid for or reimbursed by the customer under
contractual terms and prices. This includes catering, fuel, oil,
rental equipment, crane overtime and other items. We record
reimbursements from customers as revenues and the related
expenses as operating costs. Our liftboats are required to
undergo regulatory inspections every year and to be drydocked
two times every five years; the drydocking expenses and length
of time in drydock vary depending on the condition of the
vessel. All costs associated with regulatory inspections,
including related drydocking costs, are deferred and amortized
over a period of twelve months.


 




EXCERPTS ON THIS PAGE:

10-K (12 sections)
Feb 26, 2009
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