Seahawk Files for Bankruptcy, Acquired by Hercules

Seahawk Drilling, a leading ‘jackup driller’ in the Gulf of Mexico for natural gas and oil, has filed for bankruptcy according to a Bloomberg article. The company will sell its assets to Hercules Offshore Inc., its long-time rival in the offshore drilling industry. Seahawk has listed assets valued at $500 million to $1 billion, as well as $500 million to $1 billion in debt in its bankruptcy papers. According to the agreement, Seahawk will receive $25 million as well as 22.3 million shares Hercules Offshore’s common stock.

The deal is still subject to court approval, but is likely to go through. The companies have sought expedited hearings to obtain approval as quickly as possible. According to the Wall Street Journal, this acquisition represents the second major union of U.S. oil rig contractors in the past week, just on the heels of Ensco PLC’s attainment of Pride International.

According to the same article, the main reason for Seahawk’s lowered rates of production are the direct result of the slowdown in the Gulf since the BP oil rig disaster this past year. Largely, production has been affected by the moratorium imposed by Interior Secretary Ken Salazar last spring. Despite the fact that this moratorium was repudiated by a federal judge in October, it has still significantly affected offshore drilling operations in the Gulf.

Interestingly, Michael Bromwich, the director of the Bureau of Ocean Energy Management, Regulation, and Enforcement has been quoted saying that the regulatory processes need to be reexamined. Since the October ruling, the government has begun to issue an increased amount of shallow-water drilling permits.

As a result, the Seahawk shares have fallen by 32 percent, and Hercules is now up by 4 cents. The acquisition makes Hercules the fourth biggest drilling company in terms of sheer numbers of rigs; however, this is not expected to be accurately represented in the market as ‘jackup drillers’ command a lower market value than deepwater rigs.  

Sources:

1.http://www.reuters.com/article/2011/02/12/seahawk-hercules-idUSL3E7DB22W20110212

2. http://www.bloomberg.com/news/2011-02-12/seahawk-drilling-files-for-bankruptcy-to-sell-assets-update1-.html

3.http://online.wsj.com/article/SB10001424052748704329104576138851833497500.html?mod=googlenews_wsj