Seahawk Drilling to sell assets to Hercules Offshore in Chapter 11 sale

Back in November 2010, Seahawk Drilling, Inc. (Nasdaq: HAWK) said it was seeking "strategic alternative." It said then that its liquidity and revenue generation had been hit by "the dramatic slow-down in the issuing of shallow water drilling permits in the U.S. Gulf of Mexico following the Macondo well blowout."

Seahawk was spun off from Pride International in August 2009 taking with it 20 mat-supported jack-up rigs operating in the Gulf of Mexico.

This past Friday, Seahawk announced that Hercules Offshore, Inc. (Nasdaq: HERO) is acquiring substantially all of Seahawk's assets in a transaction valued at approximately $105 million.

Total consideration is comprised of 22.3 million Hercules shares plus sufficient cash to retire indebtedness of approximately $25.0 million, and working capital liabilities subject to closing adjustments. At the February 10, 2011 closing price of $3.62 per share, the value of the transaction is $105 million.

Seahawk's Chief Executive Officer, Randy Stilley, stated, "After a thorough and disciplined process, an independent committee of Seahawk's directors and its full Board of Directors determined that an asset sale to Hercules provides the highest level of value to Seahawk's stakeholders."

Stilley continued, "The transaction with Hercules creates a company with a larger, more diverse fleet, broader customer relationships and greater operational flexibility. In addition to increased economies of scale, combining the fleets will provide for substantial cost savings through the elimination of overhead and duplicative public company expenses."

The asset sale will be implemented through a Chapter 11 bankruptcy filing in which Seahawk will seek expedited hearings to obtain Court approval. Both companies expect to obtain regulatory clearance under the Hart-Scott-Rodino Antitrust Act and close the transaction in the second quarter of 2011.

Seahawk says it expects no impact on its operations and that it will continue to perform work for its customers without interruption. Seahawk expects that full payment of all funded debt and trade payables will be made. Additionally, Seahawk expects to pay all vendors for goods and services provided after the filing.

"The filing permits us to effectuate the sale in an efficient manner, allowing us to address legacy liabilities inherited from Pride International, Inc. as part of the August 2009 spin-off, and ensure we continue to operate our business as usual as we proceed with the sale process," Mr. Stilley said.

Additionally, Seahawk has obtained a $35 million debtor-in-possession credit facility to support its business and liquidity needs from the D. E. Shaw group's direct capital unit.

"It is anticipated that Seahawk will have sufficient resources to continue serving our customers and we foresee no impact on operations during this process," Mr. Stilley said. "As always, our focus is on maintaining the highest quality of service and safety in our daily operations, meeting all customer needs. We will keep employees and creditors informed throughout the process."

Mr. Stilley said: "I think it is important to note that Seahawk was forced to seek strategic alternatives only after an unprecedented decline in the issuance of offshore drilling permits following the Macondo blowout. The decision by regulators to arbitrarily construct unnecessary barriers to obtaining permits they had traditionally authorized has had an adverse impact not only on Seahawk, but on the sector as a whole."

Seahawk has retained the investment bank of Simmons & Company International, financial advisor Alvarez & Marsal, and the law firm of Fulbright & Jaworski L.L.P. to support the transaction.

February 14, 2011