Hercules set for 'mass layoffs'

Houston-based contract driller Hercules Offshore is laying off 324 people after weak market conditions forced the company to cold stack four jack-up rigs in the US Gulf of Mexico.

Luke Johnson

Hercules said in a "warn notice" filed with the Texas Workforce Commission, a labour regulator, that the layoff would commence on 31 December of this year.

"Hercules Offshore will be conducting mass layoffs of employees who work offshore in its Gulf of Mexico operations due to anticipated closure or 'cold-stacking' of four company rigs in the Gulf," the letter said.

Hercules reported in its third-quarter earnings release that it would be shutting down jack-ups Hercules 202, 204, 21 and 213 due to a softening domestic market and other challenges internationally. The move saddled Hercules with an associated $82.5 million non-cash impairment charge.

It expects the softness to persist at least until early next year. Hercules has already cold stacked six other rigs in the US Gulf, with another five ready stacked.

The company said it is trying to “better balance the market and support utilisation on our marketed rigs”. Capital One Southcoast analyst Luke Lemoine said that was the right move: “The overall market remains challenging… There's no point in driving down rates as lower rates won't generate incremental demand.”

The layoffs, meanwhile, affect workers who disembark for travel from several ports in Louisiana and from Galveston, Texas. Affected workers were notified last week.

Hercules said it expects the layoffs to be permanent and noted that there are no "bumping rights", which allow laid off workers with more seniority to take over jobs of less senior employees.

The company did not immediately respond to a request for further comment.