Hercules takes hit on Saudi rig contracts

HOUSTON, June 2 (UPI) -- After re-establishing ties with a Saudi oil company, U.S. company Hercules Offshore said it lowered its rates substantially for three rigs in question.

Hercules announced Monday that Saudi Aramco withdrew a February notice of termination for rig Hercules 261. At a time when oil prices were hovering at historic lows, Hercules in February said it was reconsidering the day rates for rig 261, Hercules 262 and Hercules 266 for the Saudi oil giant.

In a later, and separate, statement Monday, the rig company said Saudi Aramco reduced the day rates under the terms of its contracts with Hercules to $67,000 per day. Prior to Monday's announcement, Hercules listed 261 with a day rate of around $135,000. Rigs 262 and 266 had a combined average day rate of around $118,000.

"This adjustment, which approximates $13 million, will be recorded in the second quarter of 2015," Hercules said. "The company's financial statements as of and for the three months ended March 31, 2015, will not be affected by this concession."

Hercules said in its latest quarterly report it expected the demand for offshore rigs could remain lower for the year amid few signs of a recovery in the oil price market. Oil services company Baker Hughes said in a weekly report there were 1,202 rigs in service in the international market in April, down 4 percent from the previous month and 10 percent year-on-year.

A weak market for crude oil leaves energy companies with less cash to spend on exploration and production.

Hercules posted a first quarter net loss of $57.1 million, compared to net income of $19.9 million during the first quarter of 2014.