Hercules Buys More Shares in Discovery Offshore S.A.

Hercules Offshore, a drilling contractor based in the U.S. has  through a wholly owned subsidiary, agreed to purchase additional shares of Discovery Offshore S.A. (“Discovery”), increasing our total investment in Discovery to more than 50% of the outstanding shares.  In accordance with the Norwegian Securities Trading Act, Hercules will make a mandatory cash tender offer for all remaining outstanding shares of Discovery.
Also, Hercules agreed to sell substantially all of our Domestic Liftboat assets for net cash proceeds of approximately $54.0 million, subject to adjustment. Hercules will retain working capital which totals approximately $7.3 million as of May 31, 2013.

John T. Rynd, Chief Executive Officer and President of Hercules Offshore stated, “Discovery Offshore was conceived by us over two years ago as a way to enter into the high-specification jackup market. The two Discovery rigs are world-class assets with market leading capabilities that place them among the highest specification jackup rigs in the world. These rigs will significantly expand our service offerings to the most demanding drilling customers, and open new international markets that have growing needs for assets of this caliber. With construction of both Discovery rigs nearing completion, we feel conditions are right for us to acquire the entire entity. “

“The sale of our Domestic Liftboat business, along with our previously announced exit from the Inland barge segment, is part of our strategic efforts to concentrate our resources on more profitable markets with a positive longer-term outlook, such as our U.S. Gulf of Mexico and international drilling operations and our international liftboat business. While we believe that the international market outlook for liftboats is strong, we see better markets for our Company’s deployment of resources than the domestic liftboat market. Our exit of the Domestic Liftboat business also eliminates our Company’s foreign ownership restrictions arising from the operation of businesses subject to the Jones Act. The principals of All Coast are well known to us, and we expect that our customers will continue to receive the highest level of service. I want to thank everyone in our Domestic Liftboat segment for their dedication throughout the years, and am confident that the new owners are the right stewards of this business.

“With the addition of the Discovery rigs to our worldwide jackup fleet, and exit from the domestic liftboat and inland drilling segments, our Company will be transformed to a more focused provider of quality offshore services. Our fleet mix will include some of the newest and highest specification jackup rigs and liftboats currently on the market. This will provide greater visibility and a more evenly balanced revenue mix between domestic and international markets.”
Share Acquisition of Discovery Offshore
Hercules, through a wholly owned subsidiary, agreed to purchase additional shares of Discovery. These share purchases increase our total investment in Discovery to more than 50% of the outstanding shares of Discovery at a price of NOK 15.00 per share in direct transactions with certain selling shareholders. Our purchase of the shares triggers an obligation to make a mandatory offer for all of the outstanding shares in Discovery pursuant to Section 6-1 of the Norwegian Securities Trading Act (the “Offer”). This notification does not constitute an offer. The Offer will only be made on the basis of the offer document and can only be accepted pursuant to the terms of such document. Hercules, through a subsidiary of Hercules, will make the Offer within the time limit set out in the Norwegian Securities Trading Act. In the context of the Offer, the price of NOK 15.00 is the highest price paid or agreed to be paid by Hercules during the last six months.
The Offer will not be made in any jurisdiction in which the making of such offer would not be in compliance with the laws of such jurisdiction. The Offer will include U.S. shareholders in Discovery.
Hercules Offshore executives, Stephen M. Butz and James W. Noe, serve on the Board of Directors of Discovery.
Pareto Securities and Deutsche Bank Securities are acting as financial advisors to Hercules Offshore on this transaction.
Divestiture of Domestic Liftboat Segment
The Company announced that it has entered into an agreement with All Coast LLC for the sale of substantially all of its Domestic Liftboat assets, including 29 marketed liftboats, 10 cold-stacked liftboats, and related assets, for net cash proceeds of approximately $54.0 million, subject to adjustment. The Company will retain existing working capital within the Domestic Liftboat segment, which totals approximately $7.3 million as of May 31, 2013. Closing of the transaction is expected in early July 2013, subject to customary closing conditions, at which time the Company expects to record an impairment charge of approximately $4 million, subject to certain closing adjustments.