 May
24, 2007 UBS Global Oil and Gas Conference Filed by Hercules Offshore, Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: TODCO Commission File No.: 1-31983 |
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Forward-looking Statements This presentation will contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements, which include any statement that does not relate strictly to historical facts, use terms such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “plan,” “position,” “predict,” “project,” or “strategy” or the negative connotation or other variations of such terms or other similar terminology. In particular, statements, express or
implied, regarding future results of operations or ability to generate
revenues, income or cash flow or to make acquisitions are
forward-looking statements. These forward-looking statements include statements concerning estimated contract expiration dates, dayrates, estimated dates for completion
of repairs and upgrades and commencement dates of new contracts. Such
statements are subject to a number of risks, uncertainties and assumptions,
including without limitation, early termination by the customer pursuant to
the contract or otherwise, cancellation or completion of certain contracts earlier than expected, operational difficulties, increased or prolonged unrest in
Nigeria, shipyard and other delays and other factors described in the
Company’s annual report on Form 10-K and its most recent periodic
reports and other documents filed with the Securities and Exchange Commission, which are available free of charge at the SEC’s website at www.sec.gov or the company’s website at www.herculesoffshore.com. The Company cautions you that forward-looking
statements are not guarantees of future performance and that actual results
or developments may differ materially from those projected or implied in
these statements. |
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$9.2 $10.8 $13.9 $24.0 $29.1 $33.7 $42.9 $47.3 $46.8 $24.9 $26.3 $28.2 $24.0 $27.0 $42.6 $54.3 $67.4 $63.7 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q07 Liftboats Drilling $4.2 $4.6 $5.8 $11.7 $16.8 $20.7 $26.7 $24.5 21.7 $12.5 $12.6 $13.8 $11.3 $14.1 $26.8 $33.7 $44.0 40.2 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q07 Liftboats Drilling Hercules Offshore Overview Note: See Explanatory Information slide. Division Adjusted EBITDA does not include corporate
G&A and other income/expenses. Quarterly Revenue Quarterly Adjusted EBITDA ($ in millions) ($ in millions) Unique business mix within the oil services industry Tremendous growth since inception in mid 2004 Experienced management team Proven track record of strong return on capital and equity
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37% 37% 36% 28% 27% 24% 23% 19% 13% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% THE DO HERO ESV NE GSF RIG RDC PDE Industry Leading Returns On Equity Note: ROE = (Last Twelve Month Net Income) / (Average Shareholders Equity) Competitor ratios based on reported financials. Hercules continues to provide attractive returns in upper end of peer group 3/31/07 Last 12 Months Return on Equity |
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Pending TODCO Acquisition Highlights Consideration to TODCO shareholders Average per share: – 0.979 Hercules shares – $16.00 in cash Cash or stock election feature (subject to proration) Acquisition funded with existing cash on hand and a senior secured term loan facility Closing expected mid-2007 – Subject to: – HSR approval – Hercules and TODCO shareholder votes Post-transaction Board of Directors to include seven Hercules and three TODCO nominees |
     5 A Gulf of Mexico Leader. . . With Global Reach A New Leader in Jackup Drilling A Leader in Liftboats A Leader in Barge Drilling |
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Creates Shareholder Value in Near and Long-term Accretive to earnings and cash flow per share Opportunity to enhance future returns with lower cost of capital Potential for multiple expansion due to size and growth prospects 1Q’07 pro forma trailing 12 month revenue of $1.4 billion and EBITDA of $630 million Revenue (1) ($mm) EBITDA (1) ($mm) (1) PF HERO represents Hercules plus TODCO financials per SEC filings; no accounting
adjustments have been made. $223 $630 0 250 500 750 HERO PF HERO $399 $1,369 0 500 1,000 1,500 HERO PF HERO |
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Pro Forma Capital Structure as of 3/31/07 Total Debt/Total Capitalization Total Debt as a Multiple of LTM EBITDA (1) (1) For comparison purposes, EBITDA = Revenue – Operating Expenses – SG&A Competitor ratios based on 1Q07 reported earnings. 1.7x 1.6x 1.4x 0.9x 0.6x 0.5x 0.4x 1.6x 0.0x 0.4x 0.8x 1.2x 1.6x 2.0x RIG PF HERO PDE SPN RDC NE GSF DO Acquisition-related debt allows Hercules to optimize its capital structure
Enhanced credit quality due to increased scale and scope Term loan provides flexibility for rapid de-leveraging with significant expected free cash flow Successful track record of de-leveraging following acquisitions 48% 34% 34% 33% 21% 19% 18% 12% 0% 20% 40% 60% SPN PF HERO RIG PDE RDC NE DO GSF |
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Summary of Strategic Rationale Enhances position in Gulf of Mexico and increases operational flexibility Provides asset and geographic diversity Expands international footprint for future growth Creates larger, more diverse jackup fleet Timely combination in a fragmented jackup market Combines leaders in barge drilling and liftboats Potential to realize meaningful synergies – Economies of scale – Procurement of materials, insurance, employee benefits – Operational synergies and redundant public company expenses |
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Provides Asset Diversity 1Q 2007 Revenue Segmentation Analysis Pre-Transaction $110 MM Post-Transaction $352 MM GOM Contract Drilling 38% Domestic Liftboats 30% International Contract Drilling 19% International Liftboats 13% Domestic Liftboats 9% Inland Barge Drilling 18% International Contract Drilling 20% International Liftboats 4% GOM Contract Drilling 43% Delta Towing 6% |
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1Q 2007 Geographic Revenue Analysis Provides Geographic Diversity Pre-Transaction $110 MM Post-Transaction $352 MM We expect international contribution to represent a greater portion of our revenues in the future Middle East 6% US GOM 68% India 13% West Africa 13% US GOM, 58% Inland US, 18% Latin America, 13% West Africa, 5% India, 4% Middle East, 2% |
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A Global Footprint with Significant Expansion Potential Mexico Jackup Rigs 2 Platform Rig 1 West Africa Jackup Rig 1 Liftboats 17 Middle East Jackup Rig 1 Malaysia (1) Jackup Rig 1 U.S. Gulf Coast Inland Barges 27 Land Rigs (TX) 2 Trinidad Jackup Rig 1 Land Rig 1 (1) Pro forma for TODCO’s announced THE 208 relocation. (2) Includes Hercules Rig 26, marketing internationally. Brazil Jackup Rig 1 Venezuela Land Rigs 6 U.S. Gulf of Mexico Jackup Rigs 25 Submersible 3 Liftboats 47 India Jackup Rig 1 Global Summary Liftboats 64 Jackup Rigs 33 Inland Barges 27 Land Rigs 9 Submersible 3 Platform Rigs 1 (2) |
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44 43 40 33 27 25 24 20 16 13 11 10 9 0 5 10 15 20 25 30 35 40 45 ESV GSF NE PF HERO PDE RIG THE RDC NBR DO COSL Nat'lHERO Drilling 24 18 14 11 9 9 8 6 3 3 0 5 10 15 20 25 PF HERO THE ESV PDE DO NBR RDC HERO Blake GSF Fourth Largest Global Jackup Fleet Current Global Jackup Landscape Current Gulf of Mexico Jackup Landscape (1) Source: ODS-Petrodata (1) Excludes rigs that have announced mobilization out of the GOM, including Hercules Rig 26 and Pride Mississippi |
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A Leading Player in US Gulf Coast Inland Barge Rigs Note: GOM drilling barges only, excludes workover rigs Source: Company estimates based on public information. 27 14 4 3 2 2 0 5 10 15 20 25 30 PF HERO PKD Axxis NBR Tetra Coastal |
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A Leading Provider of Liftboat Services Current Gulf of Mexico Liftboat Landscape Current West Africa Liftboat Landscape Source: Company estimates based on public information. (1) Denotes cold-stacked or abandoned vessels. 47 27 15 6 6 4 3 3 2 1 0 10 20 30 40 50 HERO SPN Aries Montco OL Laredo AMC OMC Seahorse CS Liftboats 17 3 2 1 1 0 5 10 15 20 HERO Zumax (1) Zukus (1) NV De Brandt Shoreline |
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August 2005 Acquired the Whale Shark liftboat from CS Liftboats June 2005 Acquired Rig 16 from Transocean and 17 liftboats from Superior Energy October 2004 Acquired 22 liftboats from Global Industries August 2004 Acquired five jackup rigs from Parker Drilling Successful integration of 12 asset acquisitions since formation – Integrated several large fleets, operations and employees Opportunistic acquisition strategy Focus on return on capital employed Successful Acquisition Track Record February 2006 Acquired Rig 26 from Aries Offshore Partners Ltd. November 2005 Acquired seven liftboats from Danos & Curole September 2005 Acquired Rig 31 from Hydrocarbon Capital II LLC June 2006 Acquired six liftboats from Laborde Marine Lifts November 2006 Acquired eight liftboats and assumed rights to operate five additional liftboats from Halliburton January 2005 Acquired Rig 25 from Parker Drilling and Rig 30 from Porterhouse Offshore, L.P. March 2007 Entered into a definitive merger agreement to acquire TODCO |
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TODCO Transaction Consistent With Hercules’ Strategy Grow the Company – Merger expedites growth initiative – Utilize critical mass and financial strength to enhance future growth Quickly integrate and deploy newly acquired assets – Identify and implement operational best practices – Past successes of effectively integrating acquisitions Maintain Financial Discipline – Pro forma debt level of 1.6x LTM EBITDA is within industry range – Use significant expected free cash to de-lever Diversify asset base and geographic footprint – Leverage combined operational and management depth to continue and accelerate international expansion |
 Business Outlook |
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US Gulf of Mexico Shows Signs of Stabilizing Current GOM demand for 64 jackups against marketed supply of 73 jackups, leaving 9 rigs hot-stacked GOM dayrates have been steady for past few months Jackup Avail. Supply 0 20 40 60 80 100 120 140 160 $0 $20 $40 $60 $80 $100 $120 Contracted Stacked Ready Dayrate Contracted Dayrate GOM Jackup Supply and Demand Source: ODS-Petrodata, Jefferies & Company, company estimates Backlog Dayrate 53% reduction in supply Current GOM Jackup Backlog 0 50 100 150 200 250 300 $- $25 $50 $75 $100 $125 |
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0 100 200 300 400 500 600 $- $25 $50 $75 $100 $125 $150 $175 $200 International Jackup Demand Remains Strong International Jackup Supply and Demand Backlog Dayrate Jackup Avail. Supply 0 20 40 60 80 100 120 140 160 180 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Contracted Stacked Ready Dayrate Contracted Dayrate Current International Jackup Backlog International jackup utilization is still effectively at 100% and backlog is near
record highs Source: ODS-Petrodata, Jefferies & Company. West Africa 300’IC
dayrate used to approximate average market rates for worldwide jackup rigs. |
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Inland Barge Update Largest operator in US Gulf Coast – 74 total barges of which 22 are workover only – Of 52 drilling barges, TODCO owns 27, Parker owns 14 (79% of supply) TODCO holds excess supply with 17 operating and 10 cold stacked Average Backlog 59 days (1) TODCO fleet as of April 30, 2007 and Hercules estimates Latest Contracted Dayrates Marketed Rigs Working Rigs Avg High –Conventional <2000hp 1 1 32,000 $ 32,000 $ –Conventional 2000hp 2 2 35,000 35,000 –Conventional 3000hp 3 2 38,500 42,000 –Posted 2000hp 3 1 68,000 68,000 –Posted 3000hp 8 8 47,500 58,000 17 14 44,786 $ 51,286 $ (1) |
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Hercules’ Liftboat Fleet Starfish Class 140’ Liftboat Swordfish Class 200’ Liftboat (1) Within the liftboat industry, the terms leg-length and liftboat class are used
interchangeably. Note: Utilization is defined as the total number of operating days in the period as a percentage of the total
number of calendar days in the period our liftboats were actively marketed. Dayrates
include reimbursements from customers under relevant contracts. 70% Leg - Length / Liftboat Class (1) Number of Apr-06 Apr-07 Y-o-Y YTD 2007 (Feet) Vessels Dayrate Dayrate % Change Utilization Gulf of Mexico 260' 1 $29,512 $32,728 11% 93% 230' 3 $24,896 28,199 13% 44% 190-215' 6 18,913 22,110 17% 79% 170' 2 NA 20,061 NA 38% 140-150' 6 9,780 9,997 2% 79% 120-130' 14 7,323 8,643 18% 64% 105' 15 5,665 7,175 27% 66% Domestic Total 47 $10,617 $12,582 19% 67% West Africa All Vessels 17 $9,644 $11,065 15% 78% |
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Investment Highlights Successful History of Growth Leading Market Positions Diversification by Assets, Geography, and Customers Experienced Management Team Favorable Industry Fundamentals Industry Leading Returns |
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Explanatory Information Adjusted EBITDA is calculated as net income before interest expense, taxes, depreciation and amortization, gain on disposal of assets and loss on early retirement of debt. Adjusted EBITDA is included in this presentation because our management considers it an important supplemental measure of our performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, some of which present EBITDA and Adjusted EBITDA when reporting their results. We regularly evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates by using Adjusted EBITDA. In addition, we utilize Adjusted EBITDA in evaluating acquisition targets. Management also believes that Adjusted EBITDA is a useful tool for measuring our ability to meet our future debt service, capital expenditures and working capital requirements, and Adjusted EBITDA is commonly used by us and our investors to measure our ability to service indebtedness. Adjusted EBITDA is not a substitute for the GAAP measures of earnings or of cash flow and is not necessarily a measure of our ability to fund our cash needs. In addition, it should be noted that companies calculate EBITDA and Adjusted EBITDA differently and, therefore, Adjusted EBITDA as presented for us may not be comparable to EBITDA and Adjusted EBITDA reported by other companies. Adjusted EBITDA has material limitations as a performance measure because it excludes interest expense, taxes, depreciation and amortization, gain on disposal of assets and loss on early retirement of debt. The following tables reconcile Adjusted EBITDA with net income. Note: Reconciliations for Drilling and Liftboats do not include corporate adjustments.
EBITDA Reconciliation ($ in millions) Drilling Liftboats 1Q 05 2Q 05 Q3 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 1Q 05 2Q 05 Q3 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 Net Income $9.5 $7.6 $10.5 $0.5 $25.6 $15.6 $19.1 $27.2 $25.7 $2.5 $1.5 $2.5 ($1.6) $7.5 $9.3 $12.6 $12.7 $7.8 Plus: Interest Expense 1.8 1.8 1.9 1.5 1.3 1.4 1.7 2.3 1.4 0.5 0.6 0.9 0.8 0.7 0.8 0.9 1.4 0.8 Plus: Income Tax Expense – – – 6.9 15.1 7.5 10.5 10.0 9.3 – – – 8.9 4.4 5.5 7.6 4.7 5.3 Plus: Depreciation and Amortization 1.3 1.3 1.4 1.5 1.7 2.3 3.5 4.0 3.9 1.2 1.5 2.3 3.2 4.3 5.2 5.6 5.7 7.8 Plus: Loss on Early Retirement of Debt – 1.8 – 0.8 – – – – – – 0.9 – 0.5 – – – – – Less: Gain on Disposal of Assets – – – – 29.6 – 1.1 – – – – – – – – – – – Adjusted EBITDA $12.5 $12.6 $13.8 $11.3 $14.1 $26.8 $33.7 $43.5 $40.2 $4.2 $4.6 $5.8 $11.7 $16.8 $20.7 $26.7 $24.5 $21.7 |
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Explanatory Information (cont.) We have calculated pro forma EBITDA combining Hercules Offshore and TODCO. EBITDA is calculated as total revenues less direct operating expenses less general & administrative expenses not including depreciation and amortization. The pro forma represents Hercules plus TODCO financials per SEC filings. No accounting adjustments have been made. The following table calculates pro forma EBITDA. Pro forma HERO EBITDA Calculation ($ in millions) 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 LTM Hercules Revenue $56 $76 $97 $115 $110 $399 TODCO Revenue $184 $226 $242 $260 $242 $970 Pro forma Revenue $240 $302 $340 $375 $352 $1,369 Hercules Operating Expense $22 $26 $33 $43 $42 $144 TODCO Operating Expense $107 $141 $129 $133 $115 $518 Less: Pro forma Operating Expenses $129 $167 $162 $176 $156 $661 Hercules General & Administrative $7 $7 $7 $9 $9 $32 TODCO General & Administrative $10 $11 $11 $10 $13 $45 Less: Pro forma G&A Expenses $16 $17 $18 $20 $22 $77 Hercules EBITDA $28 $43 $57 $63 $60 $223 TODCO EBITDA $67 $75 $102 $117 $114 $408 PF HERO EBITDA $94 $118 $159 $179 $174 $630 |
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Explanatory Information (cont.) Last Twelve Months Return on Equity is calculated as Net Income divided by average
Shareholders Equity for the period. The following table calculates Last
Twelve Months Return on Equity for the period ending March 31, 2007. ($ in millions) 2006 Net Income 119 less: 1Q06 Net Income 31 plus: 1Q07 Net Income 33 3/31/07 LTM Net Income 121 3/31/07 Equity 431 3/31/06 Equity 248 Average Shareholders Equity 340 Return on Equity 36% Hercules Offshore 3/31/07 Last Twelve Months Return On Equity Calculation |
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Risk Factors Risks with respect to the combination of Hercules Offshore and TODCO, as well as other recent and future acquisitions, include the risk that we will not be able to close the transaction, as well as difficulties in the integration of the operations and personnel of the acquired company, diversion of management's attention away from other business concerns, and the assumption of any undisclosed or other liabilities of the acquired company. We expect to incur substantial transaction and merger related costs associated with completing the merger with TODCO, obtaining regulatory approvals, combining the operations of the two companies and achieving desired synergies. Additional unanticipated costs may be incurred in the integration of the businesses of Hercules Offshore and TODCO. Expected benefits of the merger may not be achieved in the near term, or at all. Hercules Offshore will have a significant amount of additional debt as a result of the merger. This debt will require us to use cash flow to repay indebtedness, may have a material adverse effect on our financial health, and may limit our future operations and ability to borrow additional funds. For additional information regarding the risks associated with the TODCO acquisition, please read the risk factors section in the joint proxy statement/prospectus included in Hercules registration statement in Form S-4 (No. 333-142314). |
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Important Information to be Filed In connection with the TODCO acquisition, Hercules Offshore has filed with the SEC a
registration statement on Form S-4 that contains a joint proxy
statement/prospectus. Investors and security holders of Hercules Offshore
and TODCO are urged to read the registration statement and definitive joint proxy statement/prospectus (if and when it becomes
available) and any other relevant documents filed with the SEC, as well as
any amendments or supplements to those documents, because they contain and
will contain important information about Hercules Offshore, TODCO and the merger. A definitive joint proxy statement/prospectus will be
sent to security holders of Hercules Offshore seeking their approval of the
issuance of shares of common stock in the acquisition. Investors and
security holders may obtain these documents free of charge at the SEC's
website at www.sec.gov. In addition, the documents filed with the SEC by
Hercules Offshore may be obtained free of charge from our website at
www.herculesoffshore.com or by calling our investor relations department at (713) 979-9300. The documents filed with the SEC by TODCO may be
obtained free of charge from TODCO's website at www.theoffshoredrillingcompany.com or by calling TODCO's investor relations department at (713) 278-6000. Investors and security holders are
urged to read the joint proxy statement/prospectus and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed merger. Hercules Offshore, TODCO and their respective directors, and executive officers may be
considered participants in the solicitation of proxies in connection with
the proposed transaction. Information about the participants in the
solicitation is set for in the registration statement on Form S-4 and
will be set forth in the joint proxy statement/prospectus when it becomes available. |
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