Hercules Offshore Seeing Gas-to-Liquids Shift in Shallow Gulf

The onshore shift to oil and natural-gas liquids from natural gas has spilled over into the shallow waters of the U.S. Gulf of Mexico, Hercules Offshore Inc. (HERO) said today.

About 75 percent of the wells that Hercules rigs are drilling today are for oil or gas in the Gulf of Mexico, James Noe, senior vice president at Hercules said in an interview at CERAWeek, a Houston conference held by IHS Cambridge Energy Research Associates. Three years ago, 80 percent of the wells drilled were for gas.

Hercules, which is operating all 18 of its marketed rigs in the Gulf, is looking to fill “several hundred” job openings, he said. The company has as many as six of its 18 idled rigs that it’s constantly evaluating for possible new work.

“Demand for our services is at its highest level since 2008,” Noe said. “No one’s targeting natural gas offshore. Now we’re an oil and natural-gas-liquids-driven business.

The company, which has a total of 62 rigs in its global fleet, first saw the shift in the Gulf about 14 months ago, Noe said.

After companies such as Energy XXI Bermuda Ltd. (EXXS) and Apache Corp. (APA) made acquisitions in the shallow waters of the Gulf, more oil is being discovered as producers use new technology to reevaluate the properties, he said.

Hercules, which has 10 buy ratings from analysts, 6 holds and 6 sells, has fallen 12 percent over the past year.

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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