UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-32108

Hornbeck Offshore Services, Inc.

(Exact Name of Registrant as Specified in Its Charter)



Delaware		72-1375844
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

103 NORTHPARK BOULEVARD, SUITE 300

COVINGTON, LA 70433

(Address of Principal Executive Offices) (Zip Code)

(985) 727-2000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer ☐		Accelerated filer☒ ☐

Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~☒		Smaller reporting company ☐☒

		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~The total number of shares of common stock, par value $.01 per share, outstanding as of October 31, 2017 was 37,050,416.~~

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTER ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2019

TABLE OF CONTENTS

Table of Contents

PART 1—FINANCIAL INFORMATION

Item 1—Financial Statements

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	September 30, 2017		December 31, 2016		June 30, 2019			December 31, 2018
	(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	112,836	$	217,027	$	142,708		$	224,936
Accounts receivable, net of allowance for doubtful accounts of $6,052 and $2,120, respectively	50,229		36,550
Restricted cash					44,226			—
Accounts receivable, net of allowance for doubtful accounts of $1,201 and $1,123, respectively					60,336			54,924
Other current assets	13,152		16,978		20,300			19,768
Total current assets	176,217		270,555		267,570			299,628
Property, plant and equipment, net	2,522,042		2,578,388		2,389,787			2,434,829
Restricted cash					56,017			—
Deferred charges, net	12,760		19,077		28,199			22,525
Right of use assets					23,761			—
Other assets	10,169		10,255		6,676			7,655
Total assets	$	2,721,188	$	2,878,275	$	2,772,010		$	2,764,637
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,023	$	11,774	$	26,343		$	26,826
Accrued interest	13,709		14,763		16,303			15,910
Accrued payroll and benefits	9,275		8,596		9,453			12,445
Current portion of long-term debt, net of original issue discount of $177 and $2,725 and deferred financing costs of $772 and $611, respectively					249,130			96,311
Lease liabilities					1,741			—
Other accrued liabilities	10,756		10,010		8,842			9,750
Total current liabilities	48,763		45,143		311,812			161,242
Long-term debt, including deferred gain of $19,689 and $0, and net of original issue discount of $7,598 and $31,093 and deferred financing costs of $10,971 and $10,197, respectively	1,014,031		1,083,710
Long-term debt, including deferred net gain of $35,008 and $15,845, and net of original issue discount of $3,536 and $3,013 and deferred financing costs of $11,666 and $4,987, respectively					1,041,041			1,123,625
Deferred tax liabilities, net	308,717		343,020		148,480			169,122
Lease liabilities					25,238			—
Other liabilities	3,996		3,406		1,530			2,722
Total liabilities	1,375,507		1,475,279		1,528,101			1,456,711
Stockholders’ equity:
Preferred stock: $0.01 par value; 5,000 shares authorized; no shares issued and outstanding	—		—		—			—
Common stock: $0.01 par value; 100,000 shares authorized; 37,028 and 36,467 shares issued and outstanding, respectively	370		365
Common stock: $0.01 par value; 100,000 shares authorized; 37,993 and 37,701 shares issued and outstanding, respectively					380			377
Additional paid-in-capital	758,690		754,394		764,625			761,834
Retained earnings	574,840		637,992		479,040			549,475
Accumulated other comprehensive income	11,781		10,245
Accumulated other comprehensive loss					(136		)	(3,760		)
Total stockholders’ equity	1,345,681		1,402,996		1,243,909			1,307,926
Total liabilities and stockholders’ equity	$	2,721,188	$	2,878,275	$	2,772,010		$	2,764,637

The accompanying notes are an integral part of these consolidated statements.

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2019			2018			2019			2018
	(Unaudited)						(Unaudited)						(Unaudited)						(Unaudited)
Revenues:
Vessel revenues	$	45,637		$	43,670		$	110,825		$	157,170		$	47,257		$	49,481		$	92,509		$	82,615
Non-vessel revenues	8,029			8,257			24,346			25,250			9,588			8,950			18,372			17,403
	53,666			51,927			135,171			182,420			56,845			58,431			110,881			100,018
Costs and expenses:
Operating expenses	30,082			29,375			89,385			104,134			40,217			34,858			80,611			70,827
Depreciation	24,682			23,467			74,038			68,298			24,657			24,630			49,428			49,278
Amortization	2,473			4,580			9,463			16,675			3,729			2,256			7,340			4,248
General and administrative expenses	12,899			9,031			36,573			30,084			13,049			12,246			25,016			25,121
	70,136			66,453			209,459			219,191			81,652			73,990			162,395			149,474
Gain (loss) on sale of assets	(197		)	81			(178		)	36			29			(13		)	55			30
Operating loss	(16,667		)	(14,445		)	(74,466		)	(36,735		)	(24,778		)	(15,572		)	(51,459		)	(49,426		)
Other income (expense):
Gain on early extinguishment of debt	—			—			15,478			—
Loss on early extinguishment of debt, net													—			—			(71		)	—
Interest income	447			401			1,312			1,164			921			519			2,035			1,163
Interest expense	(11,956		)	(12,820		)	(39,194		)	(34,888		)	(19,995		)	(16,401		)	(39,721		)	(30,346		)
Other income (expense), net	106			1,592			(163		)	2,048			4			(72		)	(83		)	(63		)
	(11,403		)	(10,827		)	(22,567		)	(31,676		)	(19,070		)	(15,954		)	(37,840		)	(29,246		)
Loss before income taxes	(28,070		)	(25,272		)	(97,033		)	(68,411		)	(43,848		)	(31,526		)	(89,299		)	(78,672		)
Income tax benefit	(9,120		)	(8,769		)	(30,696		)	(23,808		)	(11,905		)	(6,438		)	(20,736		)	(14,929		)
Net loss	$	(18,950	)	$	(16,503	)	$	(66,337	)	$	(44,603	)	$	(31,943	)	$	(25,088	)	$	(68,563	)	$	(63,743	)
Loss per share:
Basic loss per common share	$	(0.51	)	$	(0.45	)	$	(1.80	)	$	(1.23	)	$	(0.84	)	$	(0.67	)	$	(1.81	)	$	(1.70	)
Diluted loss per common share	$	(0.51	)	$	(0.45	)	$	(1.80	)	$	(1.23	)	$	(0.84	)	$	(0.67	)	$	(1.81	)	$	(1.70	)
Weighted average basic shares outstanding	37,013			36,338			36,794			36,205			37,876			37,496			37,832			37,419
Weighted average diluted shares outstanding	37,013			36,338			36,794			36,205			37,876			37,496			37,832			37,419

The accompanying notes are an integral part of these consolidated statements.

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2019			2018			2019			2018
	(Unaudited)						(Unaudited)						(Unaudited)						(Unaudited)
Net loss	$	(18,950	)	$	(16,503	)	$	(66,337	)	$	(44,603	)	$	(31,943	)	$	(25,088	)	$	(68,563	)	$	(63,743	)
Other comprehensive income:
Other comprehensive income (loss):
Foreign currency translation income (loss)	2,743			(908		)	1,536			19,770			1,465			(10,916		)	1,752			(11,216		)
Total comprehensive loss	$	(16,207	)	$	(17,411	)	$	(64,801	)	$	(24,833	)	$	(30,478	)	$	(36,004	)	$	(66,811	)	$	(74,959	)

The accompanying notes are an integral part of these consolidated statements.

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands)

Nine Months Ended
September 30,
2017 2016
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (66,337 ) $ (44,603 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation 74,038
68,298
Amortization 9,463
16,675
Stock-based compensation expense 5,740
6,557
Gain on early extinguishment of debt (15,478 ) —
Provision for bad debts 3,932
(719 )
Deferred tax benefit (33,766 ) (21,097 )
Amortization of deferred financing costs and deferred gain 7,013
8,131
(Gain) loss on sale of assets 178
(36 )
Changes in operating assets and liabilities:
Accounts receivable (23,898 ) 50,321
Other current and long-term assets 4,062
591
Deferred drydocking charges (6,950 ) (3,214 )
Accounts payable 11,157
(8,406 )
Accrued liabilities and other liabilities 2,697
(14,073 )
Accrued interest (1,054 ) (1,264 )
Net cash provided by (used in) operating activities (29,203 ) 57,161
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs incurred for OSV newbuild program (12,363 ) (73,198 )
Net proceeds from sale of assets 34
506
Vessel capital expenditures (1,299 ) (18,706 )
Non-vessel capital expenditures (1,468 ) (414 )
Net cash used in investing activities (15,096 ) (91,812 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from first-lien credit facility 980
—
Repurchase of senior notes (5,057 ) —
Repurchase of convertible notes (49,631 ) —
Deferred financing costs (5,636 ) (1,102 )
Shares withheld for payment of employee withholding taxes (575 ) (450 )
Net cash proceeds from other shares issued 258
732
Net cash used in financing activities (59,661 ) (820 )
Effects of exchange rate changes on cash (231 ) 1,131
Net decrease in cash and cash equivalents (104,191 ) (34,340 )
Cash and cash equivalents at beginning of period 217,027
259,801
Cash and cash equivalents at end of period $ 112,836
$ 225,461
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:
Cash paid for interest $ 40,028
$ 38,871
Cash paid for income taxes $ 1,044
$ 2,688
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
Exchange of convertible notes for first-lien term loan $ 127,096
$ —



	Three Months Ended June 30, 2019
	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (loss)			Total Stockholders Equity
	Shares	Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (loss)			Total Stockholders Equity
Balance at April 1, 2019	37,875	$	379	$	761,988	$	510,983		$	(1,601	)	$	1,271,749
Shares issued under employee benefit programs	118	1		125		—			—			126
Stock-based compensation expense	—	—		2,512		—			—			2,512
Net loss	—	—		—		(31,943		)	—			(31,943		)
Foreign currency translation income	—	—		—		—			1,465			1,465
Balance at June 30, 2019	37,993	$	380	$	764,625	$	479,040		$	(136	)	$	1,243,909



	Six Months Ended June 30, 2019
	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (loss)			Total Stockholders Equity
	Shares	Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (loss)			Total Stockholders Equity
Balance at January 1, 2019	37,700	$	377	$	761,834	$	549,475		$	(3,760	)	$	1,307,926
Shares issued under employee benefit programs	293	3		1		—			—			4
Adoption of ASU 2018-02	—	—		—		(1,872		)	1,872			—
Stock-based compensation expense	—	—		2,790		—			—			2,790
Net loss	—	—		—		(68,563		)	—			(68,563		)
Foreign currency translation income	—	—		—		—			1,752			1,752
Balance at June 30, 2019	37,993	$	380	$	764,625	$	479,040		$	(136	)	$	1,243,909



	Three Months Ended June 30, 2018
	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (loss)			Total Stockholders Equity
	Shares	Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (loss)			Total Stockholders Equity
Balance at April 1, 2018	37,492	$	375	$	760,352	$	629,943		$	8,377		$	1,399,047
Shares issued under employee benefit programs	103	1		259		—			—			260
Stock-based compensation expense	—	—		331		—			—			331
Net loss	—	—		—		(25,088		)	—			(25,088		)
Foreign currency translation loss	—	—		—		—			(10,916		)	(10,916		)
Balance at June 30, 2018	37,595	$	376	$	760,942	$	604,855		$	(2,539	)	$	1,363,634



	Six Months Ended June 30, 2018
	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (loss)			Total Stockholders Equity
	Shares	Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (loss)			Total Stockholders Equity
Balance at January 1, 2018	37,144	$	371	$	760,278		$	668,598		$	8,677		$	1,437,924
Shares issued under employee benefit programs	451	5		(277		)	—			—			(272		)
Stock-based compensation expense	—	—		941			—			—			941
Net loss	—	—		—			(63,743		)	—			(63,743		)
Foreign currency translation loss	—	—		—			—			(11,216		)	(11,216		)
Balance at June 30, 2018	37,595	$	376	$	760,942		$	604,855		$	(2,539	)	$	1,363,634

The accompanying notes are an integral part of these consolidated statements.

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Six Months Ended June 30,
	2019			2018
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(68,563	)	$	(63,743	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	49,428			49,278
Amortization	7,340			4,248
Stock-based compensation expense	1,659			4,753
Loss on early extinguishment of debt	71			—
Provision for bad debts	78			49
Deferred tax benefit	(21,100		)	(15,360		)
Amortization of deferred financing costs	169			2,217
Gain on sale of assets	(55		)	(30		)
Changes in operating assets and liabilities:
Accounts receivable	(5,371		)	(19,639		)
Other current and long-term assets	(1,052		)	1,038
Deferred drydocking charges	(15,605		)	(3,351		)
Accounts payable	2,074			9,427
Accrued liabilities and other liabilities	1,872			2,405
Accrued interest	395			1,055
Net cash used in operating activities	(48,660		)	(27,653		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs incurred for acquisition of offshore supply vessels	—			(40,868		)
Costs incurred for OSV newbuild program	(2,164		)	(2,757		)
Net proceeds from sale of assets	61			57
Vessel capital expenditures	(1,248		)	(5,482		)
Non-vessel capital expenditures	(276		)	(81		)
Net cash used in investing activities	(3,627		)	(49,131		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from first-lien term loans	29,159			—
Repurchase of convertible notes	(47,310		)	—
Proceeds from Senior Credit Facility	100,000			—
Payment of deferred financing costs	(11,775		)	—
Shares withheld for payment of employee withholding taxes	—			(536		)
Net cash proceeds from other shares issued	126			260
Net cash provided by (used in) financing activities	70,200			(276		)
Effects of exchange rate changes on cash	102			(724		)
Net increase (decrease) in cash, cash equivalents and restricted cash	18,015			(77,784		)
Cash, cash equivalents and restricted cash at beginning of period	224,936			186,849
Cash, cash equivalents and restricted cash at end of period	$	242,951		$	109,065
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:
Cash paid for interest	$	39,187		$	29,304
Cash paid for (refunds of) income taxes	$	(22	)	$	650
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
Exchange of convertible notes for first-lien term loans	$	20,951		$	—
Exchange of senior notes for second-lien term loans	$	142,629		$	—

The accompanying notes are an integral part of these consolidated statements.

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited consolidated financial statements do not include certain information and footnote disclosures required by United States generally accepted accounting principles, or GAAP. The interim financial statements and notes are presented as permitted by instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments necessary for a fair presentation of the interim financial statements have been included and consist only of normal recurring items. The unaudited quarterly financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of Hornbeck Offshore Services, Inc. (together with its subsidiaries, the “Company”) for the year ended December 31, ~~2016.~~2018. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017. Certain reclassifications have been made to prior period results to conform to current year presentation.~~2019.

The consolidated balance sheet at December 31, ~~2016~~2018 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

2. Going Concern

Since the second half of 2014, the offshore oil service sector has experienced difficult operating conditions due to the declining price of oil. This low oil price environment caused many of the Company's customers to reduce their budgets for the worldwide exploration or production of oil. This reduced spending has negatively impacted the Company's financial results. As discussed in Note 8, the Company's 2020 senior notes and 2021 senior notes mature in April 2020 and March 2021, respectively. The maturity of the Company’s 2020 senior notes now falls within the twelve-month period following the issuance of these financial statements for which the Company is required to evaluate as part of its assessment of its ability to continue as a going concern. Management of the Company continues to believe it has adequate liquidity to fund its operations up until the maturity of the 2020 senior notes. However, absent the combination of a significant recovery of market conditions such that cash flow from operations were to increase materially from currently projected levels, coupled with the refinancing and/or further management of its funded debt obligations, the Company does not currently expect to have sufficient liquidity to repay the full amount of the 2020 senior notes and the 2021 senior notes as they mature in 2020 and 2021, respectively. Management continues to implement its on-going plan to address its maturities as they become due, including the refinancing of its 2020 senior notes. The recent closing of the $100 million Senior Credit Facility is the latest step in that iterative process. Based on continuing discussions with existing and potential lenders, management is optimistic that it will be able to successfully implement this plan. However, management recognizes that its plan depends on the actions of these third parties, including reaching an agreement with existing senior note holders and/or obtaining new sources of liquidity, and, therefore, the Company is unable at this time to conclude that such plan is reasonably certain of being achieved. Accordingly, given the uncertainty with respect to the Company’s ability to pay its 2020 senior notes in full as they become due, the Company acknowledges that substantial doubt exists regarding its ability to continue as a going concern. There can be no assurance that cash flows from operations will increase materially or that the Company will succeed in reaching agreements with its senior note holders or accessing new capital to pay the 2020 senior notes in full as they become due within the next twelve months.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these consolidated financial statements. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Recent Accounting Pronouncements

~~The following table provides a brief description of recent accounting pronouncements that could have a material effect on our financial statements:~~



Standard	Description	Required Date of Adoption	Effect on the financial statements and other significant matters
Standards that have been adopted

~~Accounting Standards Update (ASU)~~ASU No. ~~2016-09, "Compensation - Stock Compensation~~2016-02, "Leases" (Topic ~~718): Improvements to Employee Share-Based Payment Accounting"~~842)	This standard ~~simplifies several aspects~~requires lessees to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeitures and classification of related amounts within the statement of cash flows.commencement date. ASU 2016-02 requires a modified retrospective application. Early adoption is permitted.	January 1, ~~2017~~2019	The ~~adoption of~~Company adopted this ASU had the following impact on our consolidated financial statements: 1) The Company recorded a $3.2 million adjustment to equity to recognize excess tax deductions related to stock based compensation expense from prior years. The prior period presentation has not been restated. 2) The Company recorded $1.9 million of tax shortfalleffective January 1, 2019. See further discussion below and in its provision for income taxes rather than as a decrease to equity. The prior period presentation has not been restated. 3) The Company recorded $0.6 million related to employee withholding taxes paid as a financing activity in the nine months ended September 30, 2017. The prior year statement of cash flows was restated to reflect $0.5 million related to employee taxes paid. There was no impact on the calculation of earnings per share as all outstanding stock options were anti-dilutive at September 30, 2017. In addition, the Company has elected to continue estimating the forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period.footnote 12.

ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income"	This standard allows companies to reclassify items in accumulated other comprehensive income to retained earnings for stranded tax effects resulting from The Tax Cuts and Jobs Act.	January 1, 2019	The Company adopted ASU No. 2018-02 on January 1, 2019. This adoption had no material impact on its consolidated financial statements.

ASU No. 2018-09, "Codification Improvements"	This standard provides clarification, corrects errors in and makes minor improvements to various ASC topics. Many of the amendments in this update have transition guidance with effective dates for annual periods beginning after December 15, 2018, and some amendments do not require transition guidance and are effective upon issuance of this update.	January 1, 2019	The Company adopted ASU No. 2018-09 on January 1, 2019. This adoption had no material impact on its consolidated financial statements.

ASU No. 2018-11, "Leases" (Topic 842): Targeted Improvements	This standard provides for the election of transition methods between the modified retrospective method and the optional transition relief method. The modified retrospective method is applied to all prior reporting periods presented with a cumulative-effect adjustment recorded in the earliest comparative period while the optional transition relief method is applied beginning in the period of adoption with a cumulative-effect adjustment recorded in such period. Also, this standard allows lessors to elect to not separate non-lease components from the associated lease components if certain criteria are met.	January 1, 2019	The Company adopted ASU No. 2018-11 on January 1, 2019. See further discussion below.

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~~Standard~~			~~Description~~	~~Required Date of Adoption~~	~~Effect on the financial statements and other significant matters~~
Standards that have not been adopted
~~ASU No. 2017-04, "Simplifying the Accounting for Goodwill Impairment"~~	The standard removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 requires prospective application. Early adoption is permitted for any impairment tests performed after January 1, 2017.	~~January 1, 2020~~	~~The Company believes that the implementation of this new guidance will not have a material impact on its consolidated financial statements.~~
~~ASU No. 2017-01, "Business Combinations" (Topic 805): Clarifying the Definition of a Business~~	~~This standard provides guidance to assist entities with evaluating when a set of transferred assets and activities is a business. ASU 2017-01 requires prospective application.~~	~~January 1, 2018~~	~~The Company believes that the implementation of this new guidance will not have a material impact on its consolidated financial statements.~~
~~ASU No. 2016-16, "Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory"~~	The standard requires the recognition of the tax effects of an intra-entity asset transfer in the period in which the transfer takes place. The new guidance does not apply to intra-entity transfers of inventory. ASU No. 2016-16 requires a modified retrospective approach. Early adoption is permitted.	~~January 1, 2018~~	~~The Company is evaluating the effect of this new standard on its financial statements and related disclosures.~~

~~ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments"~~	The standard clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The new guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. ASU No. 2016-15 requires retrospective application. Early adoption is permitted.	~~January 1, 2018~~	~~The Company believes that the implementation of this new guidance will not have a material impact on its consolidated financial statements.~~

ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"	This standard requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-13 requires modified retrospective application. Early adoption is permitted.	January 1, 2020	The Company believes that the implementation of this new guidance will not have a material impact on its consolidated financial statements.

~~ASU No. 2016-02, "Leases" (Topic 842)~~	This standard requires lessees to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. ASU 2016-02 requires a modified retrospective application. Early adoption is permitted.	~~January 1, 2019~~	While the Company is continuing to evaluate the effect this new standard will have on its financial statements and related disclosures, it has identified long-term operating leases, which under the new standard, will be treated as capital leases on date of adoption.

ASC 842, Leases

Lessee Accounting

In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-02, Leases, which requires lessees to recognize a right-of-use, or ROU, asset and a lease obligation for all leases. This ASU became effective for the Company for its annual reporting period beginning January 1, 2019, including interim periods within that reporting period. The Company adopted the standard using a modified retrospective approach with the effective date of the standard as the date of initial application.

The Company elected the package of practical expedients permitted under the transition guidance within the standard, which eliminates the reassessment of past leases, classification and initial direct costs. For leases with a term of twelve months or less, the Company has made a policy election in which the ROU asset and lease liability will not be recognized on its balance sheet.

As a result of the Company's adoption of this new standard, it recorded ROU assets of $24.7 million and lease liabilities of $27.7 million. The adoption of the standard did not have an impact on the Company's equity and will not have a material impact on the Company's results of operations and cash flows.

Lessor Accounting

Under ASU 2018-11, a lessor may elect to combine lease and non-lease components provided that the non-lease component(s) otherwise would be accounted for under the new revenue guidance in ASC 606 and both of the following conditions are met:

The timing and pattern of transfer for the lease component are the same as those for the non-lease components associated with that lease component.

The lease component, if accounted for separately, would be classified as an operating lease.

When the above conditions are met, the entity will need to assess predominance. If the non-lease components are predominant, the entity accounts for the combined component under ASC 606; otherwise, the entity accounts for the combined component under ASC 842.

After review of its revenue streams, the Company has concluded that the non-lease component of its revenue is predominant, and that both of the criteria above are met. Therefore, the Company has adopted the new transition options and combines lease and non-lease revenues. The Company recognizes revenue based on the non-lease component under ASC 606, as it has concluded that the non-lease component is the predominant component. The adoption of ASU 2018-11 on January 1, 2019 did not change the timing or amounts of revenues recognized by the Company.

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4. Revenues from Contracts with Customers

Effective January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers, using the modified retrospective method. The adoption of this standard did not have a material impact on the Company's financial position or results of operations. Accordingly, the Company did not make an adjustment to the opening balance of retained earnings in order to account for the implementation of the new requirements of this standard, and it did not restate prior period information for the effects of the new standard.

The services that are provided by the Company represent a single performance obligation under our contracts that are satisfied at a point in time or over time. Revenues are earned primarily by (1) chartering the Company's vessels, including the operation of such vessels, (2) providing vessel management services to third party vessel owners, and (3) providing shore-based port facility services, including the rental of land. The services generating these revenue streams are provided to customers based upon contracts that include fixed or determinable prices and do not generally include right of return or other significant post-delivery obligations. The Company's vessel revenues, vessel management revenues and port facility revenues are recognized either at a point in time or over the passage of time when the customer has received or is receiving the benefit from the applicable service. Revenues are recognized when the performance obligations are satisfied in accordance with contractual terms and in an amount that reflects the consideration that the Company expects to be entitled to in exchange for the services rendered or rentals provided. Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Invoices are typically billed to our customers on a monthly basis and payment terms on customer invoices typically range 30 to 60 days.

A performance obligation under contracts with the Company's customers to render services is the unit of account under Topic 606. The Company accounts for services rendered separately if they are distinct and the service is separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered provided on its own or with other resources that are readily available to the customer. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

As of June 30, 2019, the Company has certain remaining performance obligations representing contracted vessel revenues for which work has not been performed and such contracts have an original expected duration of more than one year. As of June 30, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations for such contracts was $1.7 million, all of which is expected to be recognized in 2019. The Company has elected to apply the optional exemption for the disclosure of the remaining performance obligations for any of its revenue streams that are expected to have a duration of one year or less and, therefore, such amounts have not been disclosed.

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Disaggregation of Revenues

For the three and six months ended June 30, 2019 and 2018, the Company recognized revenues as follows (in thousands):



	Three Months Ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Vessel revenues	$	47,257	$	49,481	$	92,509	$	82,615
Vessel management revenues	9,143		7,974		17,619		15,733
Shore-based facility revenues	445		976		753		1,670
	$	56,845	$	58,431	$	110,881	$	100,018

3.5. Loss ~~Per Share~~per share

Basic loss per common share was calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share was calculated by dividing net loss by the weighted average number of common shares outstanding during the year plus the effect of dilutive stock options and restricted stock unit awards. When reporting a net loss, the Company uses weighted average basic shares outstanding to calculate diluted earnings per share. Weighted average number of common shares outstanding was calculated by using the sum of the shares determined on a daily basis divided by the number of days in the period.

The table below reconciles the Company’s loss per share (in thousands, except for per share data):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Net loss	$	(18,950	)	$	(16,503	)	$	(66,337	)	$	(44,603	)	$	(31,943	)	$	(25,088	)	$	(68,563	)	$	(63,743	)
Weighted average number of shares of common stock outstanding	37,013			36,338			36,794			36,205			37,876			37,496			37,832			37,419
Add: Net effect of dilutive stock options and unvested restricted stock (1)(2)(3)	—			—			—			—			—			—			—			—
Weighted average number of dilutive shares of common stock outstanding	37,013			36,338			36,794			36,205			37,876			37,496			37,832			37,419
Loss per common share:
Basic loss per common share	$	(0.51	)	$	(0.45	)	$	(1.80	)	$	(1.23	)	$	(0.84	)	$	(0.67	)	$	(1.81	)	$	(1.70	)
Diluted loss per common share	$	(0.51	)	$	(0.45	)	$	(1.80	)	$	(1.23	)	$	(0.84	)	$	(0.67	)	$	(1.81	)	$	(1.70	)

(1)

Due to a net loss, the Company excluded from the calculation of loss per share the effect of equity awards representing the rights to acquire ~~990~~2,439 and ~~988~~2,195 shares of common stock for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~988~~529 shares and ~~974~~639 shares of common stock for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2018, respectively.

(2)

For the ~~three and nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, the 2019 convertible senior notes were not dilutive, as the average price of the Company’s stock was less than the effective conversion price of such notes. It is the Company's stated intention to redeem the principal amount of its 2019 convertible senior notes in cash and the Company has used the treasury method for determining potential dilution in the diluted earnings per share computation.


(3)	Dilutive unvested restricted stock units are expected to fluctuate from quarter to quarter depending on the Company’s performance compared to a predetermined set of performance criteria. See Note 69 to these financial statements for further information regarding certain of the Company’s restricted stock grants.

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6. Property, Plant and Equipment

Asset Impairment Assessment

In accordance with ASC 360, the Company periodically reviews long-lived asset valuations when events or changes in circumstances indicate that an asset’s carrying value may not be recoverable. If indicators of impairment exist, the Company assesses the recoverability of its long-lived assets by comparing the projected future undiscounted cash flows associated with the related long-lived asset group over their remaining estimated useful lives. If the sum of the estimated undiscounted cash flows are less than the carrying amounts

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of the asset group, the assets are written down to their estimated fair values based on the expected discounted future cash flows or appraised values attributable to the assets. The future cash flows are subjective and are based on the Company’s current assumptions regarding future dayrates, utilization, operating expense, direct overhead, including G&A expense, and recertification costs that could differ from actual results.

During the second quarter of 2016, the Company determined that it observed indicators of impairment related to its vessels. This resulted from the rapid deterioration of its second quarter 2016 operating results, as well as the uncertainty regarding future market conditions and the related impact on the Company's projected operating results. ~~As a result,~~For the purpose of calculating the undiscounted cash flows, the Company ~~calculated the~~grouped its vessels into two groups, OSVs and MPSVs, and used a probability-weighted undiscounted cash ~~flows for its two vessel groups, OSVs and MPSVs,~~flow projection to test for recoverability. After reviewing the results of this calculation, the Company determined that each of its asset groups had sufficient projected undiscounted cash flows to recover the remaining book value of the Company's long-lived assets within such groups. While the Company has not observed any new impairment indicators since ~~the second quarter of~~ 2016, the Company ~~does review~~has reviewed and ~~update,~~updated, as necessary, the assumptions used in determining its undiscounted cash flow projections for each asset group to reflect current market conditions. After reviewing the ~~result~~results of these updated projections, the Company determined that each of its asset groups ~~has~~continue to have sufficient projected undiscounted cash flows to recover the remaining book value of the Company's long-lived assets within such group.

7. Acquisition of Vessels

On May 18, 2018, the Company completed the acquisition of four high-spec Jones Act-qualified OSVs and related equipment from Aries Marine Corporation and certain of its affiliates for $40.9 million in cash, inclusive of $4.0 million related to a non-compete intangible asset that is being amortized over the life of such asset, or two years. Also included in this transaction was the cost of fuel and lube inventory and transactions fees. The acquired vessels are all U.S.-flagged and are comprised of two 300 class OSVs and two 280 class OSVs. The Company determined that substantially all of the fair value of the assets acquired are concentrated in a group of similar identifiable assets and, therefore, has accounted for such transaction as an asset acquisition under ASU 2017-01.

~~5. Long-Term~~

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8. Debt

As of the dates indicated, the Company had the following outstanding ~~long-term~~ debt (in thousands):

September 30,
2017 December 31,
2016
5.875% senior notes due 2020, net of deferred financing costs of $2,286 and $3,025 $ 364,656
$ 371,975
5.000% senior notes due 2021, net of deferred financing costs of $3,384 and $4,111 446,616
445,889
1.500% convertible senior notes due 2019, net of original issue discount of $7,579 and $31,093 and deferred financing costs of $1,698 and $3,061 90,370
265,846
First-lien credit facility due 2023, including deferred gain of $19,689 and $0, and net of original issue discount of $19 and $0, and deferred financing costs of $3,603 and $0 112,389
—
$ 1,014,031
$ 1,083,710



	June 30, 2019			December 31, 2018
5.875% senior notes due 2020, net of deferred financing costs of $712 and $1,162	$	223,601		$	365,780
5.000% senior notes due 2021, net of deferred financing costs of $1,688 and $2,173	448,312			447,827
1.500% convertible senior notes due 2019, net of original issue discount of $177 and $2,725 and deferred financing costs of $60 and $611	25,529			96,311
First-lien term loans due 2023, including deferred gain of $14,779 and $15,845, and net of original issue discount of $3,536 and $3,013, and deferred financing costs of $3,728 and $2,814	357,515			310,018
Second-lien term loans due 2025, including deferred gain of $20,229	141,464			—
Senior Credit Facility, net of deferred financing costs of $6,250	93,750			—
	1,290,171			1,219,936
Less current maturities	(249,130		)	(96,311		)
	$	1,041,041		$	1,123,625

The table below summarizes the Company's cash interest payments (in thousands):

Cash Interest Payments

Payment Dates

Cash Interest Payments

Payment Dates

5.875% senior notes due 2020

10,779

April 1 and October 1

6,589

April 1 and October 1

5.000% senior notes due 2021

11,250

March 1 and September 1

11,250

March 1 and September 1

1.500% convertible senior notes due 2019

747

March 1 and September 1

193

Final payment on September 1, 2019

First-lien credit facility due 2023 (1)

581

Variable

First-lien term loans due 2023

3,019

Variable (1)

Second-lien term loans due 2025

2,879

January 31, April 30, July 31, and October 31

Senior Credit Facility

637

Monthly (2)

(1)

The interest rate on the first-lien ~~credit facility~~term loans is variable based on the Company's election. The amount reflected in this table is the monthly amount payable based on the 30-day LIBOR interest rate that was elected and in effect on ~~September~~June 30, ~~2017.~~2019 plus an applicable margin, which is currently 7.00%. Please see further discussion of the variable interest rate below.


(2)	The interest rate on the Senior Credit Facility is variable based on 30-day LIBOR plus a 5.00% margin. The amount reflected in this table is the monthly amount payable based on the 30-day LIBOR interest rate that was in effect on June 30, 2019. Please see further discussion of the variable interest rate below.

~~First-Lien~~

Senior Credit Facility

On June ~~15, 2017,~~28, 2019, the Company ~~closed on~~entered into a new ~~$300~~$100.0 million ~~first-lien delayed-draw term loan~~senior secured asset-based revolving credit facility, ~~by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, or HOS, as Co-Borrower, certain holders of the Company’s outstanding notes,~~ or the ~~Initial Lenders, and Wilmington Trust, National Association, as Administrative Agent and Collateral Agent for the lenders, or the New~~Senior Credit Facility. The ~~Company concurrently terminated its then-existing $200 million senior~~Senior Credit Facility is guaranteed by certain of the Company's domestic and foreign subsidiaries and contains customary representations and warranties, covenants and events of default. The fully-funded Senior Credit Facility is secured ~~revolving credit facility,~~by first-priority liens on receivables, certain restricted cash amounts and related assets. The Senior Credit Facility is comprised of two tranches that will rebalance each month based on the variable receivable-backed borrowing base. The unrestricted receivables-backed tranche will mature in 2022, whereas the restricted cash-backed tranche will mature in 2025. The receivables-backed tranche may be used, subject to the completion of applicable eligibility review procedures, for working capital and general corporate purposes, including the refinancing or repayment of existing debt, subject to, among other things, compliance with certain requirements. The cash-backed tranche may, over time, rebalance to the receivables-backed tranche as eligible receivables increase and may be refinanced over time.

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~~dated February 6, 2015 as subsequently amended, or~~Borrowings under the ~~Old~~Senior Credit Facility accrue interest at a floating-rate LIBOR plus a fixed spread of 5.00% for the life of the facility. The Company may, at its option from time to time, prepay loans under either tranche of the Senior Credit Facility. ~~The New~~Fifty percent of such loans available under the Senior Credit Facility is ~~guaranteed~~subject to a prepayment premium (i) at 103% of the principal amount repaid if such repayment occurs on or prior to June 28, 2020; (ii) at 102% of the principal amount repaid if such repayment occurs on or prior to June 28, 2021; (iii) at 101% of the principal amount repaid if such repayment occurs on or prior to December 28, 2021 and (iv) at 100% of the principal amount repaid if such repayment occurs after December 28, 2021, with such premiums subject to adjustments downward under certain circumstances. The other fifty percent of such loans may be repaid at any time without prepayment penalty.

As of June 30, 2019, the $100.0 million of loan proceeds funded under the Senior Credit Facility were presented as restricted cash on the balance sheet, pending completion of certain post-closing undertakings. The Company classifies cash as restricted when there are legal or contractual restrictions on its withdrawal or usage. On July 30, 2019, the Company met the post-closing conditions precedent required by the ~~Parent Borrower’s significant domestic subsidiaries other than HOS. The six-year term~~Senior Credit Facility resulting in$44.0 million of restricted cash related to the eligible receivables-backed tranche of the ~~New~~Senior Credit Facility ~~extended~~being transferred by the ~~February 2020 maturity that was applicable~~Agent to the Company's unrestricted cash account on July 31, 2019. On July 31, 2019, the Company's restricted cash balance under the ~~Old~~Senior Credit Facility was reduced to $56.0 million.

First-Lien Term Loans

On June ~~2023.~~

~~The New Credit Facility enhanced~~15, 2017, the Company entered into the first lien term loan agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the First Lien Term Loan Agreement), by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, or HOS, as Co-Borrower, certain holders of the Company’s ~~financial flexibility by (i) increasing liquidity from~~then outstanding notes, or the ~~then-applicable borrowing base~~First-Lien Initial Lenders, and Wilmington Trust, National Association, as Administrative Agent and Collateral Agent for the lenders that initially provided for $300 million of ~~$75.0~~first-lien delayed-draw term loans, or the first-lien term loans. On March 1, 2019, the Company entered into Incremental First Lien Term Loan Joinder Agreements with such parties, including certain existing as well as additional lenders, to borrow an additional $50.0 million of first-lien term loans, or the incremental first-lien term loans, under the ~~Old Credit Facility, (ii) extending~~First Lien Term Loan Agreement, including approximately $30.1 million in cash of new financing. On March 1, 2019, the ~~maturity date that existed~~Company exchanged approximately $21.0 million in face value of its 2019 convertible senior notes in a privately negotiated debt-for-debt exchange for the remaining approximately $19.9 million of incremental first-lien term loans. In accordance with applicable accounting guidance, this debt-for-debt exchange was accounted for as a debt modification. As a result, the Company recorded a loss on early extinguishment of debt of $1.3 million ($1.1 million or $0.03 per diluted share after-tax) due to deal costs associated with the exchange. The incremental first-lien term loans have the same terms applicable to the first-lien term loans originally issued under the ~~Old Credit Facility by over three years, and (iii) eliminating all of the~~ existing financial ratio maintenance covenants and the anti-cash hoarding provision of the Old Credit Facility. The New Credit Facility contains customary representations and warranties, covenants and events of default.First Lien Term Loan Agreement.

The Company can use the amounts ~~it draws~~ under the ~~New Credit Facility~~first-lien term loans for working capital and general corporate purposes, including ~~the acquisition of distressed assets~~acquisitions and/or the refinancing of existing debt, subject to, among other things, compliance with certain covenants requiring the Company to maintain access to liquidity (cash and credit availability) of $25.0 million at all times. The minimum liquidity level required for prepayment of the Company’s existing indebtedness and/or certain other restricted payments is $65.0 million.

The Company is required to draw on a cumulative basis (i) at least $68.0 million of the delayed-draw commitments under the New Credit Facility by December 31, 2017, (ii) at least $136.0 million of such commitments by December 31, 2018, and (iii) the full amount of the remaining $203.7 million of such commitments by September 1, 2019. The right to borrow any amount of the delayed-draw commitments not drawn by the respective minimum funding dates will be terminated.

~~The New Credit Facility is~~first-lien term loans are collateralized by 5146 domestic high-spec OSVs and MPSVs and nine foreign high-spec OSVs, including a security interest in two pending MPSV newbuilds, and associated personalty, as well as by certain deposit and securities accounts, or the Collateral. Subject to the foregoing and certain limitations, the Company’s other assets that do not arise from, are not required for use in connection with, and are not necessary for, the operation of mortgaged vessels are unencumbered by liens, including ten low-spec domestic OSVs and eleven foreign-flagged vessels.accounts.

Borrowings ~~under the New Credit Facility~~ accrue interest, at the Company’s option, at either:

an adjusted London Interbank Offered Rate (subject to a 1.00% floor) plus (a) 6.00% during the first year of the ~~New Credit Facility,~~first-lien term loans, (b) 6.50% during the second year of the ~~New Credit Facility, (c) 7.00% during the third year of the New Credit Facility, (d) 7.25% during the fourth year of the New Credit Facility, and (e) 7.50% thereafter; or~~

•

~~the greatest of (a) the prime rate announced by The Wall Street Journal, (b) the Federal Funds Effective Rate in effect on such day plus~~1/2 of 1%, and (c) the London Interbank Offered Rate plus, 1%, plus, for either (a), (b), or (c), a margin of (i) 5.00% during the first year of the New Credit Facility, (ii) 5.50% during the second year of the New Credit Facility, (iii) 6.00% during the third year of the New Credit Facility, (iv) 6.25% during the fourth year of the New Credit Facility, and (v) 6.50% thereafter.

~~The Company also has the option, exercisable anytime or from time-to-time during the six-year~~first-lien term of the loan, of paying interest on the New Credit Facility “in-kind” (accruing to the outstanding principal of the loan, or PIK Interest), subject to a 100 basis-point step-up in interest rate and a minimum 3% cash-pay coupon for so long as the Company elects to pay PIK Interest, subject to any and all debt incurrence and permitted lien restrictions then in effect under any outstanding loan agreements or bond indentures as of the time of such increase in principal.

The New Credit Facility may be prepaid at (i) 102% of the principal amount repaid if such repayment occurs on or prior to June 15, 2018, (ii) at 101% of the principal amount repaid if such repayment occurs after June 15, 2018 but on or prior to June 15, 2019, and (iii) at par of the principal repaid thereafter.loans,

912

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~~Upon closing~~(c) 7.00% during the ~~New Credit Facility, $95.3 million~~third year of ~~borrowings under~~the first-lien term loans, (d) 7.25% during the fourth year of the first-lien term loans, and (e) 7.50% thereafter; or

the greatest of (a) the prime rate announced by The Wall Street Journal, (b) the Federal Funds Effective Rate in effect on such ~~facility were~~day plus 1/2 of 1%, and (c) the London Interbank Offered Rate plus, 1%, plus, for either (a), (b), or (c), a margin of (i) 5.00% during the first year of the first-lien term loans, (ii) 5.50% during the second year of the first-lien term loans, (iii) 6.00% during the third year of the first-lien term loans, (iv) 6.25% during the fourth year of the first-lien term loans, and (v) 6.50% thereafter.

Second-Lien Term Loans

In February and March 2019, the Company completed two private offers and exchanged ~~for $127.1~~an aggregate of $142.6 million in face value of its ~~2019 convertible~~2020 senior ~~notes.~~notes for $121.2 million of second-lien term loans due 2025, or second-lien term loans, of the Company and the Co-Borrower. In accordance with applicable accounting guidance, this debt-for-debt exchange ~~has been~~was accounted for as a debt ~~modification, requiring~~modification. As a result, the Company recorded a loss on early extinguishment of debt of $2.4 million ($1.9 million or $0.05 per diluted share after-tax) primarily related to ~~defer~~deal costs associated with the ~~$31.8~~exchange. As contemplated by and provided for under the agreement governing the first-lien term loans, the second-lien term loans were made pursuant to a Second Lien Term Loan Agreement entered into by the Company, the Co-Borrower, the lenders party thereto and the Administrative Agent and Collateral Agent. The second-lien term loans have a maturity date of February 7, 2025 and bear interest at a fixed rate per annum of 9.50%. The second-lien term loans are guaranteed by certain of the Company’s present domestic subsidiaries and will be guaranteed by certain of the Company's future domestic subsidiaries and are secured on a second-lien basis, subject to certain permitted liens, by a second-priority interest in the same collateral securing the Company’s first-lien term loans.

Convertible Note Repurchases

During the six months ended June 30, 2019, the Company completed a series of private transactions for the repurchase of $52.9 million ~~gain. Such~~in face value of its outstanding 2019 convertible senior notes for an aggregate total of $47.6 million of cash. The Company recorded a gain on early extinguishment of debt of $3.6 million ($2.9 million or $0.08 per diluted share after-tax), which was ~~reduced~~comprised of a $5.6 million gain on the repurchase, offset in part by ~~$11.1~~the write-off of $2.0 million of original issue discount, ~~that was associated with~~deal costs and unamortized financing costs related to the ~~2019 convertible senior~~ notes ~~that were exchanged.~~ repurchased.

The ~~net credit of $20.7 million has been deferred and will be amortized prospectively as a yield adjustment to interest expense over the life of the New Credit Facility.~~

~~The agreement~~agreements governing the ~~New~~first-lien term loans and the second-lien term loans, the Senior Credit Facility and the indentures governing the Company's 2020 senior notes and 2021 senior notes impose certain restrictions on the Company. Such restrictions affect, and in many cases limit or prohibit, among other things, the Company's ability to incur additional indebtedness, make capital expenditures, redeem equity, create liens, sell assets and make dividend or other restricted payments.

~~Convertible Note and Senior Note Repurchases~~

Concurrently with the closing of the New Credit Facility, the Company arranged for the repurchase of $73.3 million of its outstanding 2019 convertible senior notes and $8.1 million of its outstanding 2020 senior notes for an aggregate total of $54.1 million of cash. The Company recorded a gain on early extinguishment of debt of $15.5 million ($10.5 million or $0.29 per diluted share after-tax), which was comprised of a $27.2 million gain on the repurchase of the 2019 convertible senior notes and the 2020 senior notes, offset in part by the write-off of $2.3 million in deal costs and unamortized financing costs related to the credit facilities and $9.4 million of original issue discount, deal costs and unamortized financing costs related to the notes repurchased.

The Company estimates the fair value of its 2020 senior notes, 2021 senior notes, 2019 convertible senior notes, the first-lien term loans and ~~New Credit Facility~~the second-lien term loans by primarily using quoted market prices. Given the observability of the inputs to these estimates, the Company has assigned a Level 2 of the three-level valuation ~~hierarchy for such outstanding notes.~~

~~As of~~hierarchy. The interest rate on the ~~dates indicated below,~~Senior Credit Facility is variable and the Company ~~had the following~~has concluded that face ~~values, carrying values and~~value approximates fair ~~values (in thousands):~~

September 30, 2017 December 31, 2016
Face Value Carrying Value Fair Value Face Value Carrying Value Fair Value
5.875% senior notes due 2020 $ 366,942
$ 364,656
$ 239,668
$ 375,000
$ 371,975
$ 270,938
5.000% senior notes due 2021 450,000
446,616
226,125
450,000
445,889
301,343
1.500% convertible senior notes due 2019 99,647
90,370
78,970
300,000
265,846
216,195
First-lien credit facility due 2023 (1) 96,322
112,389
96,201
—
—
—
$ 1,012,911
$ 1,014,031
$ 640,964
$ 1,125,000
$ 1,083,710
$ 788,476


~~(1)~~	~~The carrying value of the first-lien credit facility due 2023 includes a deferred gain of $19,689 less original issue discount and deferred financing costs of $3,622.~~

~~Capitalized Interest~~

~~During the three and~~ ~~nine months ended September~~value of such facility as of June 30, ~~2017~~2019.~~, the Company capitalized approximately $2.7 million and $7.6 million, respectively, of interest costs related to the construction of vessels. During the three and~~ ~~nine months ended September 30, 2016, the Company capitalized approximately $4.2 million and $14.3 million, respectively, of interest costs related to the construction of vessels.~~

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6.As of the dates indicated below, the Company had the following face values, carrying values and fair values (in thousands):



	June 30, 2019						December 31, 2018
	Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value
5.875% senior notes due 2020	$	224,313	$	223,601	$	138,513	$	366,942	$	365,780	$	191,727
5.000% senior notes due 2021	450,000		448,312		232,853		450,000		447,827		220,500
1.500% convertible senior notes due 2019	25,766		25,529		23,318		99,647		96,311		88,125
First-lien term loans due 2023 (1)	350,000		357,515		353,500		300,000		310,018		295,875
Second-lien term loans due 2025 (2)	121,235		141,464		96,685		—		—		—
Senior Credit Facility	100,000		93,750		100,000		—		—		—
	$	1,271,314	$	1,290,171	$	944,869	$	1,216,589	$	1,219,936	$	796,227


(1)	The carrying value of the first-lien term loans due 2023 includes a deferred gain of $14,779 less original issue discount and deferred financing costs of $7,264.


(2)	The carrying value of the second-lien term loans due 2025 includes a deferred gain of $20,229.

Capitalized Interest

During the first quarter of 2018, the Company notified the shipyard that was constructing the remaining two vessels in the Company's fifth OSV newbuild program that it was terminating the construction contracts for such vessels. The Company did not capitalize any of its interest costs during the six months ended June 30, 2019. Upon recommencement of construction of such vessels, the Company intends to resume capitalization of related interest costs. During the six months ended June 30, 2018, the Company capitalized approximately $2.3 million of interest costs related to the construction of vessels.

9. Incentive Compensation

Stock-Based Incentive Compensation Plan

On June 20, 2019, the Company received stockholder approval to increase the maximum number of shares available under its long-term compensation plan by 7.0 million. The Company’s stock-based incentive compensation plan now covers a maximum of ~~4.95~~11.95 million shares of common stock that allows the Company to grant restricted stock awards, restricted stock unit awards, or collectively restricted stock, stock options, stock appreciation rights and fully-vested common stock to employees and directors. As a result of ~~September 30,~~the approval to increase the number of shares available under this plan, the Company, which has the sole discretion in determining the method of settlement for awards granted under the plan, now has the ability and intent to settle these awards using available shares. Accordingly, the classification of and accounting for 5.1 million outstanding phantom stock units, or PSUs, and 1.6 million stock appreciation rights, or SARs, were modified from cash-settled to stock-settled during the second quarter of 2019. These outstanding awards were granted to Company executives in 2017, 2018 and 2019 and to non-executive employees in 2019. After these modifications were completed, the Company has ~~granted~~only 0.2 million awards ~~covering 4.86~~outstanding that will settle in cash on their respective vesting dates. The remaining vesting provisions of the modified awards were not impacted and, therefore, the Company determined the fair value of the awards on the date of the modification was the same as the date prior to the modification. There was no additional compensation expense recognized at the time of modification. As of June 30, 2019, the Company has 0.7 million shares of common stock available to be granted under such plan.

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HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019, the Company granted ~~phantom restricted stock units,~~2.4 million time-based ~~restricted stock units and fully-vested common stock as noted in the table below.~~



	~~Directors~~	~~Executive Officers~~	~~Certain Managers~~
~~Performance-based phantom restricted stock units~~		X
~~Time-based phantom restricted stock units~~		X	X
~~Time-based restricted stock units~~		X
~~Fully-vested common stock~~	X

The shares to be received under the performance-based phantom restricted stock units are calculated based on the Company's performance compared to two pre-determined criteria, as defined by the phantom restricted stock agreements governing such awards. The actual number of shares that could be received by the award recipients can range from 0% to 150% of the awards granted depending on the Company's performance. During the ~~nine months ended September 30, 2017, the Company granted 341,136 time-based restricted stock units, 394,027 time-based and 454,849 performance-based phantom restricted stock units and 246,999 shares of fully-vested common stock.~~

The fair value of the Company’s performance-based restricted stock units and performance-based phantom restricted stock units, which is the stock price on the date of grant, is applied to the total shares that are expected to fully vest and is amortized over the vesting period, which is generally ~~three~~ ~~years, based on the Company’s internal performance measured against the pre-determined criteria, as applicable.~~PSUs. The compensation expense related to time-based ~~restricted stock units and time-based phantom restricted stock units are~~PSUs is amortized over a vesting period of up to three years ~~as applicable,~~ and is determined based on the market price of the Company’s stock on the date of grant applied to the total shares that are expected to fully vest. ~~In addition, all phantom restricted stock units~~All PSUs that remain cash-settled are re-measured quarterly and classified as a liability, due to the originally intended settlement of these awards in cash. As a result of the stockholder approval to increase the number of shares available under its long-term incentive compensation plan, the Company now has the ability to settle certain previously granted PSUs in shares. As such, the value of these awards was determined on the modification date and such expense will not vary in future periods.

In addition to the ~~restricted stock units~~PSUs granted in ~~2017,~~2019, the Company granted performance-based and time-based restricted stock units and phantom restricted stock units in prior years. The PSUs granted in prior years to non-executive employees were not impacted by the June 2019 modification. During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019, the Company issued ~~561,466~~292,715 shares ~~in the aggregate,~~ of common stock due ~~to: 1)~~to vestings of restricted stock units 2)and employee purchases under the Company's Employee Stock Purchase ~~Plan~~Plan.

Stock Appreciation Rights

During the six months ended June 30, 2019, the Company granted 1.6 million SARs. The SARs vest and 3)become exercisable in three equal annual installments on each of the ~~issuance~~1st, 2nd and 3rd anniversaries of ~~fully-vested~~the grant date and have a ten-year life. The SARs represent the right to receive, upon exercise, a number of shares of Company common ~~stock.~~stock, cash, or a combination thereof, at the election of the Company, equal to the product of the aggregate number of shares of Company common stock with respect to which the SAR is exercised and the excess of the fair market value of a share of Company common stock as of the date of exercise over the grant price of $1.38.

On June 20, 2019, the Company determined that it would settle its outstanding SARs in equity rather than cash and such awards are now accounted for as stock settled SARs. All of the remaining vesting provisions of the SARs are unchanged. The Company estimated the fair value of each SAR on the modification date using the Black-Scholes option-pricing model. As of June 30, 2019, the fair value for the outstanding SARs was $1.02 per share granted.

The following weighted average assumptions were used to value SARs:



	Six Months Ended June 30,
	2019
Expected volatility	89.1	%
Expected life	6.0	years
Risk-free interest rate	1.9	%
Expected dividend yield	—	%

The risk-free interest rate used to value SARs is based on the U.S. Treasury yield curve in effect at the time of grant with maturity dates that coincide with the expected life of the SARs. The Company used the simplified method under GAAP to determine the expected life, since this is the first time the Company issued SARs. The Company's assumption for volatility is based on its historical volatility calculated on the grant date.

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HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The impact of stock-based compensation expense charges on the Company’s operating results are reflected in the table below (in thousands, except for per share data):

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Income before taxes $ 2,726
$ 2,341
$ 5,740
$ 6,557
Net income $ 1,840
$ 1,529
$ 3,924
$ 4,275
Earnings per common share:
Basic earnings per common share $ 0.05
$ 0.04
$ 0.11
$ 0.12
Diluted earnings per common share $ 0.05
$ 0.04
$ 0.11
$ 0.12



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Loss before income taxes	$	684	$	1,885	$	1,659	$	4,753
Net loss	$	498	$	1,500	$	1,274	$	3,850
Loss per common share:
Basic loss per common share	$	0.01	$	0.04	$	0.03	$	0.10
Diluted loss per common share	$	0.01	$	0.04	$	0.03	$	0.10

10. Commitments and Contingencies

Vessel Construction

During the first quarter of 2018, the Company notified the shipyard that was constructing the remaining two vessels in the Company's fifth OSV newbuild program that it was terminating the construction contracts for such vessels. The Company has worked with the performance bond surety and will select and contract with a shipyard that can finish construction and deliver such vessels. On October 2, 2018, the shipyard filed suit against the Company in the 22nd Judicial District Court for the Parish of St. Tammany in the State of Louisiana, or the Gulf Island Litigation. The Company has responded to the suit and has alleged counter-claims. The Company intends to vigorously defend the shipyard’s claims and considers them to be without merit. The surety authorized the Company to select a completion yard and, subject to a reservation of rights, offered to fund the cost to complete the vessels in excess of their contract price of up to the full amount of the performance bond. However, the surety's offer did not comply with the terms of the performance bond. Consequently, the Company considers the surety to be in default of their performance bonds for the foregoing and other reasons. The Company has initiated legal proceedings against the surety as a third-party claim in the Gulf Island Litigation.

As of the date of the contract termination, the two remaining vessels, both of which are domestic 400 class MPSVs, were projected to be delivered in the second and third quarters of 2019, respectively. Due to the uncertainty of the timing and location of future construction activities, in February 2019, the Company changed its forward guidance for the delivery dates related to these vessels to be the second and third quarters of 2020, respectively. However, the timing of the remaining construction draws remains subject to change commensurate with any further delays in the delivery dates of such vessels.

The cost of this nearly completed 24-vessel newbuild program, before construction period interest, is expected to be approximately $1,335.0 million, of which $20.5 million and $38.2 million are currently expected to be incurred in the remainder of 2019 and fiscal 2020, respectively. As of the date of termination, these two remaining vessels, both of which are domestic 400 class MPSVs, were projected to be delivered in the second and third quarters of 2019, respectively. Due to the uncertainty of the timing and location of future construction activities, these vessels are now projected to be delivered in the second and third quarters of 2020, respectively. However, the timing of the remaining construction draws remains subject to change commensurate with any potential further delays in the delivery dates of such vessels. From the inception of this program through June 30, 2019, the Company had incurred $1,276.3 million, or 95.6%, of total expected project costs.

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~~7. Commitments and Contingencies~~

~~Vessel Construction~~

The remaining two vessels under the Company's fifth OSV newbuild program are expected to be delivered in 2018. The aggregate cost of this nearly completed 24-vessel newbuild program, before construction period interest, is expected to be approximately $1,335.0 million, of which $4.8 million, and $60.7 million are expected to be incurred in the remainder of 2017 and fiscal 2018 respectively. From the inception of this program through September 30, 2017, the Company had incurred $1,269.5 million, or 95.1%, of total expected project costs.

Contingencies

In the normal course of its business, the Company becomes involved in various claims and legal proceedings in which monetary damages are sought. It is management's opinion that the Company's liability, if any, under such claims or proceedings would not materially affect the Company's financial position or results of operations. The Company insures against losses relating to its vessels, pollution and third party liabilities, including claims by employees under Section 33 of the Merchant Marine Act of 1920, or the Jones Act. Third party liabilities and pollution claims that relate to vessel operations are covered by the Company’s entry in a mutual protection and indemnity association, or P&I Club, as well as by marine liability policies in excess of the P&I Club’s coverage. The Company provides reserves for any individual claim deductibles for which the Company remains responsible by using an estimation process that considers Company-specific and industry data, as well as management’s experience, assumptions and consultation with outside counsel. As additional information becomes available, the Company will assess the potential liability related to its pending claims and revise its estimates. Although historically revisions to such estimates have not been material, changes in estimates of the potential liability could materially impact the Company’s results of operations, financial position or cash flows.

~~During 2013,~~

11. Income Taxes

The effective tax benefit rate for the six months ended June 30, 2019 and 2018 was 23.2% and 19.0%, respectively. The Company's effective tax rate differs from the federal statutory rate due to the establishment of valuation allowances in 2019 and 2018 for state net operating loss and foreign tax credit carryforwards based upon management's conclusion that it is more likely than not such losses and credits will not be realized by their expiration dates. The Company's income tax benefit rate for the six months ended June 30, 2019 was higher than the benefit rate from the six months ended June 30, 2018, because of the reversal of a portion of valuation allowances on state net operating loss carryforwards that the Company ~~commenced~~now believes will be utilized, due to state law changes in June 2019.

During the ~~process of assigning~~six months ended June 30, 2019, the ~~in-country vessel management services for its four vessels then operating in Brazil from a third-party provider~~Company adopted ASU 2018-02 and has elected to ~~a wholly-owned subsidiary~~reclassify the stranded income tax effects of the ~~Company.~~Tax Cuts and Jobs Act from accumulated comprehensive income to retained earnings. As a result, ~~this assignment has been interpreted by local authorities as~~ a ~~new importation~~reduction in retained earnings and an increase in accumulated other comprehensive income of these vessels resulting in an importation assessment. The Company disagrees with this interpretation. During the third quarter of 2015, the Brazilian court ruled in the Company's favor related to these claims and this decision$1.9 million was appealed by local authorities to another court. During the third quarter of 2017, the Brazilian court made a final ruling in the Company's favor relating to the importation of three of the vessels. As of September 30, 2017, no decision has been made on the fourth vessel which could result in an assessment ranging from $0.5 million to $1.0 million. This potential assessment has not been assessed or recorded in the Company's financial statements. While the Company cannot estimate the amounts or timing of the resolution of this matter, the Company believes that the outcome will not have a material impact on its liquidity or financial position.

~~During 2012, a customer, ATP Oil and Gas, Inc., initiated a reorganization proceeding under Chapter 11 of the United States Bankruptcy Code, which in~~six months ended June 2014 was converted to a Chapter 7 case. The Company believes its receivables from ATP, of $4.8 million, are secured under the Louisiana Oil Well Lien Act. A legal challenge related to the Company's liens was raised in the bankruptcy proceedings by parties whose interests are affected by the liens. The Company pursued this claim in Bankruptcy Court and during the first quarter of 2017 a district court judge ruled that the Company's claim is not secured. That ruling has been appealed by the Company. As a result of such ruling, the Company increased its reserve related to this receivable to $4.8 million.

~~Table of Contents~~

~~HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~8. Other Accrued Liabilities~~

~~Other accrued liabilities include the following (in thousands):~~

September 30, 2017 December 31, 2016
Accrued lease expense $ 5,049
$ 4,763
Deferred revenue 1,156
2,245
Other 4,551
3,002
Total $ 10,756
$ 10,010

30, 2019.

~~9. Condensed Consolidating Financial Statements of Guarantors~~12. Leases

The ~~following tables present~~Company determines if an agreement is a lease or contains a lease at inception. The lease term may include options to extend or terminate the ~~condensed consolidating balance sheets as of September 30, 2017 and December 31, 2016,~~lease when it is reasonably certain that the ~~condensed consolidating statements of operations~~Company will exercise the option. ROU assets and the ~~condensed consolidating statements~~corresponding lease liabilities are recorded at the commencement date based on the present value of ~~comprehensive income (loss)~~lease payments over the expected lease term. The Company uses its incremental borrowing rate, which would be the rate incurred to borrow on a collateralized basis over a similar term in a similar economic environment, to calculate the present value of lease payments.

The Company is obligated under certain operating leases for shore-based facilities, office space and temporary housing. Such leases will often include options to extend the ~~three and nine months ended September 30, 2017 and 2016~~lease and the ~~condensed consolidating statements of cash flows for~~Company will include option periods that, on commencement date, it is reasonably likely that it will exercise. Some leases may require variable lease payments such as real estate taxes and maintenance expenses. These costs are expensed in the ~~nine months ended September 30, 2017 and 2016, respectively, for the domestic subsidiaries of the Company that serve as co-borrower and/or guarantors~~period in which they are incurred. None of the Company's ~~2019 convertible senior notes, 2020 senior notes, 2021 senior notes~~leases contain any residual value guarantees. The Company recorded $1.9 million of expense related to leases in general and administrative and operating expenses during the ~~New Credit Facility and~~six months ended June 30, 2019. The expense recorded for short-term leases was $0.2 million during the financial results for the Company's subsidiaries that do not serve as guarantors. The co-borrower and/or guarantor subsidiaries of the 2019 convertible senior notes, 2020 senior notes, 2021 senior notes and the New Credit Facility are 100% owned by the Company. The guarantees are full and unconditional and joint and several. The non-guarantor subsidiaries of such notes include all of the Company's foreign subsidiaries.

~~Table of Contents~~

~~HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Condensed Consolidating Balance Sheet~~

~~(In thousands, except per share data)~~

As of September 30, 2017
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 22
$ 103,497
$ 9,317
$ —
$ 112,836
Accounts receivable, net of allowance for doubtful accounts of $6,052 —
45,983
4,331
(85 ) 50,229
Other current assets 45
12,228
879
—
13,152
Total current assets 67
161,708
14,527
(85 ) 176,217
Property, plant and equipment, net —
2,394,845
127,197
—
2,522,042
Deferred charges, net —
11,188
1,572
—
12,760
Intercompany receivable 1,715,528
644,733
41,814
�� (2,402,075 ) —
Investment in subsidiaries 684,734
8,602
—
(693,336 ) —
Other assets 1,743
6,096
2,330
—
10,169
Total assets $ 2,402,072
$ 3,227,172
$ 187,440
$ (3,095,496 ) $ 2,721,188
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ —
$ 13,861
$ 1,162
$ —
$ 15,023
Accrued interest 13,709
—
—
—
13,709
Accrued payroll and benefits —
8,732
543
—
9,275
Other accrued liabilities —
10,328
513
(85 ) 10,756
Total current liabilities 13,709
32,921
2,218
(85 ) 48,763
Long-term debt, including deferred gain of $19,689, and net of original issue discount of $7,598 and deferred financing costs of $10,971 1,014,031
—
—
—
1,014,031
Deferred tax liabilities, net —
302,373
6,344
—
308,717
Intercompany payables 40,432
2,176,490
193,755
(2,410,677 ) —
Other liabilities —
3,996
—
—
3,996
Total liabilities 1,068,172
2,515,780
202,317
(2,410,762 ) 1,375,507
Stockholders’ equity:
Preferred stock: $0.01 par value; 5,000 shares authorized; no shares issued and outstanding —
—
—
—
—
Common stock: $0.01 par value; 100,000 shares authorized; 37,028 shares issued and outstanding 370
—
—
—
370
Additional paid-in capital 758,693
37,977
8,600
(46,580 ) 758,690
Retained earnings 574,837
673,415
(35,258 ) (638,154 ) 574,840
Accumulated other comprehensive income —
—
11,781
—
11,781
Total stockholders’ equity 1,333,900
711,392
(14,877 ) (684,734 ) 1,345,681
Total liabilities and stockholders’ equity $ 2,402,072
$ 3,227,172
$ 187,440
$ (3,095,496 ) $ 2,721,188

~~Table of Contents~~

~~HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Condensed Consolidating Balance Sheet~~

~~(In thousands, except per share data)~~

As of December 31, 2016
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 9
$ 212,196
$ 4,822
$ —
$ 217,027
Accounts receivable, net of allowance for doubtful accounts of $2,120 —
30,846
5,704
—
36,550
Other current assets 15
16,176
787
—
16,978
Total current assets 24
259,218
11,313
—
270,555
Property, plant and equipment, net —
2,449,473
128,915
—
2,578,388
Deferred charges, net 2,581
15,724
772
—
19,077
Intercompany receivable 1,779,872
680,663
107,038
(2,567,573 ) —
Investment in subsidiaries 768,718
8,602
(4,283 ) (773,037 ) —
Other assets 1,744
6,239
2,272
—
10,255
Total assets $ 2,552,939
$ 3,419,919
$ 246,027
$ (3,340,610 ) $ 2,878,275
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ —
$ 11,325
$ 449
$ —
$ 11,774
Accrued interest 14,763
—
—
—
14,763
Accrued payroll and benefits —
8,104
492
—
8,596
Other accrued liabilities —
8,463
1,547
—
10,010
Total current liabilities 14,763
27,892
2,488
—
45,143
Long-term debt, net of original issue discount of $31,093 and deferred financing costs of $10,197 1,083,710
—
—
—
1,083,710
Deferred tax liabilities, net —
337,503
5,517
—
343,020
Intercompany payables 61,715
2,264,900
245,276
(2,571,891 ) —
Other liabilities —
3,416
(10 ) —
3,406
Total liabilities 1,160,188
2,633,711
253,271
(2,571,891 ) 1,475,279
Stockholders’ equity:
Preferred stock: $0.01 par value; 5,000 shares authorized; no shares issued and outstanding —
—
—
—
—
Common stock: $0.01 par value; 100,000 shares authorized; 36,467 shares issued and outstanding 365
—
—
—
365
Additional paid-in capital 754,394
37,978
4,319
(42,297 ) 754,394
Retained earnings 637,992
748,080
(21,658 ) (726,422 ) 637,992
Accumulated other comprehensive income —
150
10,095
—
10,245
Total stockholders’ equity 1,392,751
786,208
(7,244 ) (768,719 ) 1,402,996
Total liabilities and stockholders’ equity $ 2,552,939
$ 3,419,919
$ 246,027
$ (3,340,610 ) $ 2,878,275

~~Table of Contents~~

~~HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Condensed Consolidating Statement of Operations~~

~~(In thousands)~~

Three Months Ended September 30, 2017
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Revenues $ —
$ 53,564
$ 102
$ —
$ 53,666
Costs and expenses:
Operating expenses —
27,427
2,655
—
30,082
Depreciation —
23,355
1,327
—
24,682
Amortization —
2,245
228
—
2,473
General and administrative expenses —
12,259
640
—
12,899
—
65,286
4,850
—
70,136
Gain on sale of assets —
(198 ) 1
—
(197 )
Operating income (loss) —
(11,920 ) (4,747 ) —
(16,667 )
Other income (expense):
Gain on early extinguishment of debt —
—
—
—
—
Interest income —
351
96
—
447
Interest expense (11,956 ) —
—
—
(11,956 )
Equity in earnings (losses) of consolidated subsidiaries (6,994 ) —
—
6,994
—
Other income (expense), net —
(222 ) 328
—
106
(18,950 ) 129
424
6,994
(11,403 )
Income (loss) before income taxes (18,950 ) (11,791 ) (4,323 ) 6,994
(28,070 )
Income tax expense (benefit) —
(9,393 ) 273
—
(9,120 )
Net income (loss) $ (18,950 ) $ (2,398 ) $ (4,596 ) $ 6,994
$ (18,950 )

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~(In thousands)~~

Three Months Ended September 30, 2017
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Net income (loss) $ (18,950 ) $ (2,398 ) $ (4,596 ) $ 6,994
$ (18,950 )
Other comprehensive income:
Foreign currency translation gain —
—
2,743
—
2,743
Total comprehensive income (loss) $ (18,950 ) $ (2,398 ) $ (1,853 ) $ 6,994
$ (16,207 )

~~Table of Contents~~

~~HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Condensed Consolidating Statement of Operations~~

~~(In thousands)~~

Nine Months Ended September 30, 2017
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Revenues $ —
$ 123,611
$ 11,823
$ (263 ) $ 135,171
Costs and expenses:
Operating expenses —
80,293
9,359
(267 ) 89,385
Depreciation —
70,077
3,961
—
74,038
Amortization —
8,460
1,003
—
9,463
General and administrative expenses 110
34,579
1,891
(7 ) 36,573
110
193,409
16,214
(274 ) 209,459
Gain on sale of assets —
(180 ) 2
—
(178 )
Operating income (loss) (110 ) (69,978 ) (4,389 ) 11
(74,466 )
Other income (expense):
Gain on early extinguishment of debt 15,478
—
—
—
15,478
Interest income —
1,039
273
—
1,312
Interest expense (39,194 ) —
—
—
(39,194 )
Equity in earnings of consolidated subsidiaries (42,511 ) —
—
42,511
—
Other income (expense), net —
3,424
(3,576 ) (11 ) (163 )
(66,227 ) 4,463
(3,303 ) 42,500
(22,567 )
Income (loss) before income taxes (66,337 ) (65,515 ) (7,692 ) 42,511
(97,033 )
Income tax expense (benefit) —
(31,488 ) 792
—
(30,696 )
Net income (loss) $ (66,337 ) $ (34,027 ) $ (8,484 ) $ 42,511
$ (66,337 )

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~(In thousands)~~

Nine Months Ended September 30, 2017
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Net income (loss) $ (66,337 ) $ (34,027 ) $ (8,484 ) $ 42,511
$ (66,337 )
Other comprehensive income:
Foreign currency translation gain (loss) —
(149 ) 1,685
—
1,536
Total comprehensive income (loss) $ (66,337 ) $ (34,176 ) $ (6,799 ) $ 42,511
$ (64,801 )

six months ended June 30, 2019.

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~Condensed Consolidating Statement~~During the six months ended June 30, 2019, the Company recorded operating cash outflows from operating leases of ~~Operations~~$1.8 million.

~~(In~~Annual maturities of operating lease liabilities under non-cancelable leases with terms in excess of one year, as of June 30, 2019, are as follows (in thousands)

Three Months Ended September 30, 2016
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Revenues $ —
$ 50,798
$ 1,467
$ (338 ) $ 51,927
Costs and expenses:
Operating expenses —
26,282
3,414
(321 ) 29,375
Depreciation —
22,188
1,279
—
23,467
Amortization —
4,269
311
—
4,580
General and administrative expenses 36
7,542
1,468
(15 ) 9,031
36
60,281
6,472
(336 ) 66,453
Gain on sale of assets —
81
—
—
81
Operating loss (36 ) (9,402 ) (5,005 ) (2 ) (14,445 )
Other income (expense):
Interest income —
259
142
—
401
Interest expense (12,820 ) —
—
—
(12,820 )
Equity in earnings (losses) of consolidated subsidiaries (3,647 ) —
—
3,647
—
Other income (expense), net —
(790 ) 2,381
1
1,592
(16,467 ) (531 ) 2,523
3,648
(10,827 )
Income (loss) before income taxes (16,503 ) (9,933 ) (2,482 ) 3,646
(25,272 )
Income tax benefit —
(7,279 ) (1,490 ) —
(8,769 )
Net income (loss) $ (16,503 ) $ (2,654 ) $ (992 ) $ 3,646
$ (16,503 )

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~(In thousands)~~

Three Months Ended September 30, 2016
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Net income (loss) $ (16,503 ) $ (2,654 ) $ (992 ) $ 3,646
$ (16,503 )
Other comprehensive income:
Foreign currency translation loss —
(3 ) (905 ) —
(908 )
Total comprehensive income (loss) $ (16,503 ) $ (2,657 ) $ (1,897 ) $ 3,646
$ (17,411 )

~~Table of Contents~~

~~HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Condensed Consolidating Statement of Operations~~

~~(In thousands)~~

Nine Months Ended September 30, 2016
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Revenues $ —
$ 171,034
$ 9,386
$ 2,000
$ 182,420
Costs and expenses:
Operating expenses —
89,666
12,525
1,943
104,134
Depreciation —
65,040
3,258
—
68,298
Amortization —
15,671
1,004
—
16,675
General and administrative expenses 148
26,978
2,901
57
30,084
148
197,355
19,688
2,000
219,191
Gain on sale of assets —
36
—
—
36
Operating loss (148 ) (26,285 ) (10,302 ) —
(36,735 )
Other income (expense):
Interest income —
732
432
—
1,164
Interest expense (34,886 ) —
(2 ) —
(34,888 )
Equity in earnings (losses) of consolidated subsidiaries (9,655 ) —
—
9,655
—
Other income —
(560 ) 2,523
85
2,048
(44,541 ) 172
2,953
9,740
(31,676 )
Income (loss) before income taxes (44,689 ) (26,113 ) (7,349 ) 9,740
(68,411 )
Income tax benefit —
(22,803 ) (1,005 ) —
(23,808 )
Net income (loss) $ (44,689 ) $ (3,310 ) $ (6,344 ) $ 9,740
$ (44,603 )

~~Condensed Consolidating Statement of Comprehensive Income (Loss)~~

~~(In thousands)~~

Nine Months Ended September 30, 2016
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Net income (loss) $ (44,689 ) $ (3,310 ) $ (6,344 ) $ 9,740
$ (44,603 )
Other comprehensive income:
Foreign currency translation gain —
31
19,739
—
19,770
Total comprehensive income (loss) $ (44,689 ) $ (3,279 ) $ 13,395
$ 9,740
$ (24,833 )

~~Table of Contents~~

~~HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Condensed Consolidating Statement of Cash Flows~~

~~(In thousands)~~

Nine Months Ended September 30, 2017
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ 59,674
$ (93,378 ) $ 4,501
$ —
$ (29,203 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs incurred for OSV newbuild program #5 —
(12,755 ) 392
—
(12,363 )
Net proceeds from sale of assets —
33
1
—
34
Vessel capital expenditures —
(998 ) (301 ) —
(1,299 )
Non-vessel capital expenditures —
(1,451 ) (17 ) —
(1,468 )
Net cash provided by (used in) investing activities —
(15,171 ) 75
—
(15,096 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from first-lien credit facility 980
—
—
—
980
Repurchase of senior notes (5,057 ) —
—
—
(5,057 )
Repurchase of convertible notes (49,631 ) —
—
—
(49,631 )
Deferred financing costs (5,636 ) —
—
—
(5,636 )
Shares withheld for employee withholding taxes (575 ) —
—
—
(575 )
Net cash proceeds from other shares issued 258
—
—
—
258
Net cash used in financing activities (59,661 ) —
—
—
(59,661 )
Effects of exchange rate changes on cash —
(150 ) (81 ) —
(231 )
Net increase (decrease) in cash and cash equivalents 13
(108,699 ) 4,495
—
(104,191 )
Cash and cash equivalents at beginning of period 9
212,196
4,822
—
217,027
Cash and cash equivalents at end of period $ 22
$ 103,497
$ 9,317
$ —
$ 112,836
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:
Cash paid for interest $ 40,028
$ —
$ —
$ —
$ 40,028
Cash paid for income taxes $ —
$ 463
$ 581
$ —
$ 1,044
SUPPLEMENTAL DISCLOUSURES OF NON-CASH FINANCING ACTIVITIES:
Exchange of convertible notes for term loan $ 127,096
$ —
$ —
$ —
$ 127,096

~~Table of Contents~~

~~HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Condensed Consolidating Statement of Cash Flows~~

~~(In thousands)~~

Nine Months Ended September 30, 2016
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 827
$ 54,277
$ 2,057
$ —
$ 57,161
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs incurred for OSV newbuild program #5 —
(72,584 ) (614 ) —
(73,198 )
Net proceeds from sale of assets —
506
—
—
506
Vessel capital expenditures —
(18,282 ) (424 ) —
(18,706 )
Non-vessel capital expenditures —
(473 ) 59
—
(414 )
Net cash used in investing activities —
(90,833 ) (979 ) —
(91,812 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing costs (1,102 ) —
—
—
(1,102 )
Shares withheld for employee withholding taxes (450 ) —
—
—
(450 )
Net cash proceeds from other shares issued 732
—
—
—
732
Net cash provided by financing activities (820 ) —
—
—
(820 )
Effects of exchange rate changes on cash —
31
1,100
—
1,131
Net increase (decrease) in cash and cash equivalents 7
(36,525 ) 2,178
—
(34,340 )
Cash and cash equivalents at beginning of period 10
252,651
7,140
—
259,801
Cash and cash equivalents at end of period $ 17
$ 216,126
$ 9,318
$ —
$ 225,461
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:
Cash paid for interest $ 38,871
$ —
$ —
$ —
$ 38,871
Cash paid for income taxes $ —
$ 484
$ 2,204
$ —
$ 2,688



	Six Months Ended June 30, 2019
Remainder of 2019	$	1,529
2020	3,114
2021	3,017
2022	3,065
2023	3,122
Thereafter	43,873
Total lease payments	57,720
Less: imputed interest	30,741
Total operating lease liabilities	$	26,979

Weighted-average remaining lease term (in years)	17.4
Weighted-average discount rate	9.0		%

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our unaudited consolidated financial statements and notes to unaudited consolidated financial statements in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto included in our Annual Report on Form 10-K as of and for the year ended December 31, ~~2016.~~2018. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements. See “Forward Looking Statements” for additional discussion regarding risks associated with forward-looking statements. In this Quarterly Report on Form 10-Q, “company,” “we,” “us,” “our” or like terms refer to Hornbeck Offshore Services, Inc. and its subsidiaries, except as otherwise indicated. Please refer to Item 5—Other Information for a glossary of terms used throughout this Quarterly Report on Form 10-Q.

In this Quarterly Report on Form 10-Q, we rely on and refer to information regarding our industry from the BOEM, EIA and IHS-Petrodata, Inc. These organizations are not affiliated with us and are not aware of and have not consented to being named in this Quarterly Report on Form 10-Q. We believe this information is reliable. In addition, in many cases we have made statements in this Quarterly Report on Form 10-Q regarding our industry and our position in the industry based on our experience in the industry and our own evaluation of market conditions.

General

~~Oil~~During the second quarter of 2019, oil prices remained in a range of $50 to $60 per barrel for WTI and $60 to $70 per barrel for Brent. Crude prices still remain ~~at low levels compared to~~below the average prevailing prices ~~that prevailed~~ between 2005 and late 2014. ~~These lower~~The sustained decrease in oil prices ~~have~~since 2014 caused major, international and independent oil companies with deepwater operations to significantly reduce their offshore capital spending budgets ~~which are~~for the ~~principal demand drivers for our services.~~worldwide exploration or production of oil since 2015. Less spending by our customers combined with a global oversupply of OSVs for current market conditions, including high-spec OSVs in our core markets, have resulted in significant reductions in our dayrates and utilization.

The principal ~~issue~~question facing the offshore oilfield-related industry is the ~~ultimate~~ duration of the current ~~downturn. While~~downturn in offshore activities. Our current view is that market conditions in the Greater GoM Operating Region have begun to rebound. However, the market recovery process is in the very early stages and has not yet resulted in a significant improvement in utilization or pricing. The loss of confidence in an oil price recovery or an inability by our customers to sustain cost improvements could derail or postpone further the recovery. Additionally, global economic uncertainty, driven by events such as a trade-war involving the United States and major trading partners, could negatively impact global economic conditions or oil markets. Some analysts have observed less demand growth than expected, which could result in a continuation of the over supply of OSVs.

Against this backdrop, the primary challenge confronting us has been, and continues to be, the ability to repay amounts maturing in 2020 and 2021 under our 2020 senior notes and 2021 senior notes. The maturity of our 2020 senior notes falls within the twelve-month period following the issuance of these financial statements, which we are required to evaluate as part of our assessment of the Company's ability to continue as a going concern. We continue to believe that we have taken extensive measures to reduce costs, these reductions alone will not be sufficient to mitigate the full impact of revenue loss over an extended period of time. Even in light of our currently depressed operating levels, cash generated from operations together with cash on hand and availability under the New Credit Facility should be sufficientadequate liquidity to fund our operations ~~and commitments~~ through ~~the end of 2019.~~at least March 2020. However, absent the combination of a significant recovery of market conditions such that cash ~~flows~~flow from operations were to increase materially from currently projected levels, coupled with the refinancing and/or further management of our funded debt obligations, we do not currently expect to have sufficient liquidity to repay the full amount of the 2020 senior notes and the 2021 senior notes as they mature in 2020 and 2021, respectively. We continue to implement our ~~remaining tranches~~on-going plan to address these maturities as they become due, including the refinancing of our 2020 senior notes. Our recent closing of the $100 million Senior Credit Facility is the latest step in that iterative process. Based on continuing discussions with existing and

potential lenders, we are optimistic that we will be able to successfully implement this plan. However, we recognize that our plan depends on the actions of these third parties, including reaching an agreement with existing senior note holders and/or obtaining new sources of liquidity, and, therefore, we are unable at this time to conclude that such plan is reasonably certain of being achieved.

In June 2017, we issued first-lien term loans that provided us with liquidity and financial flexibility to engage in further liability management transactions. That transaction enabled us to reduce the outstanding amount due under our 2019 convertible senior notes to approximately $100 million from $300 million. During the first quarter of 2019, we further reduced the outstanding amount due under our 2019 convertible senior notes to approximately $26 million from $100 million through a series of open market repurchases totaling $53 million and a $21 million exchange for $20 million of first-lien term loans. We also availed ourselves of the flexibility under the indentures governing our 2020 senior notes and 2021 senior notes ~~when they mature~~and the agreement governing our first-lien term loans to conduct an exchange of approximately $143 million of our 2020 senior notes for $121 million of second-lien term loans due in ~~fiscal years 2020~~2025. During the second quarter of 2019, we also arranged for $100 million of Senior Credit Facility loans secured by liens on receivables, certain restricted cash amounts and ~~2021, respectively. The New~~related assets. As of June 30, 2019, the $100 million of loan proceeds funded under the Senior Credit Facility were classified as restricted cash on the balance sheet, pending completion of certain post-closing undertakings. On July 30, 2019, we met certain post-closing conditions required by the Senior Credit Facility resulting in $44 million of restricted cash related to the eligible receivables-backed tranche of the Senior Credit Facility becoming unrestricted on July 31, 2019. On July 31, 2019, our non-current restricted cash balance under the Senior Credit Facility was reduced to $56 million. See Note 8 for further discussion. We have sufficient liquidity to satisfy the outstanding amount due under the 2019 convertible senior notes in September 2019. The reduction of the face amount of outstanding 2020 senior notes to $224 million in the first quarter of 2019 was a significant step towards being able to address that maturity in April 2020. Additional measures are being explored consistent with the indentures governing our 2020 senior notes and 2021 senior notes and under the agreements governing our first-lien term loans, second-lien term loans and Senior Credit Facility in order to further advance our efforts to satisfy the remaining 2020 senior notes. We believe that once we have fully addressed the 2020 maturity, improved market conditions expected to take hold during the remainder of 2019 and in fiscal 2020 will be a significant factor in addressing the ~~maturities~~$450 million in face value of senior notes maturing in March 2021.

While we are in the fifth year of a downturn in offshore exploration, development and production activities that has adversely affected demand for our ~~unsecured notes. We remain fully cognizant of the challenges currently facing the offshore oil and gas industry and~~vessels, we continue to ~~review~~observe a shift in sentiment underscoring our view that the early stages of a market recovery has begun to take hold. Leading indicators that we have observed include larger offshore capital ~~structure~~budget announcements by our customers, a growth in the number of final investment decisions, or FIDs, made public by our customers for offshore projects, recently announced deepwater discoveries, a growing contract backlog announced by several drilling contractors and ~~assess~~increased customer inquiries for our ~~strategic options.~~

services, principally in the Greater GoM Operating Region. During the second quarter of 2019, we did not observe any noticeable change in the anticipated supply of high-spec U.S.-flagged OSVs. In the U.S. GoM, ~~four~~two high-spec OSVs have been delivered into the domestic market ~~during 2017.~~so far this year. We expect an additional ~~nine~~three high-spec OSVs to be delivered into domestic service ~~through 2018.~~in 2019. We do not anticipate significant growth in the supply of high-spec U.S.-flagged OSVs beyond the currently anticipated level of ~~199~~179 of such vessels by the end of ~~2018. During~~2019. We continue to monitor the ~~third quarter~~overhang of ~~2017,~~the dormant supply of stacked U.S.-flagged high-spec OSVs. There are approximately 77 stacked vessels and all but one of these vessels will require intermediate or special surveys in order to return to service. We believe that the cost to industry participants to reactivate high-spec OSVs, including survey costs, crewing costs, training costs and unanticipated events, will range between $2 million and $5 million per vessel, on average.

In late July 2019, there ~~was an average of roughly 32~~were 25 floating rigs ~~available~~working in the Greater GoM ~~while~~Operating Region. We see an ~~average of 20.6 were working. As of November 1, 2017, there were 32 rigs available and 21 were working. However, seven floating rigs have contracts~~additional five to six incremental floaters that will ~~expire during the remainder of 2017. We do not know whether the remaining rigs will receive contract renewals for operations~~begin working in the ~~GoM. We expect one new rig to arrive in~~Greater GoM Operating Region through the ~~GoM during the fourth quarter~~end of 2017 and another rig to arrive during the first quarter of 2018. We expect three rigs to depart from the GoM during the fourth quarter of 2017 and another rig to depart during the first quarter of 2018. Once a rig arrives in the GoM, it can take s

~~everal months to commence work and, therefore,~~2019. While we do not ~~know~~expect that all of these units will work at the ~~timing of when operations of newly arrived rigs will begin, if at all. Given these market conditions, we anticipate our average dayrates and utilization levels~~same time or that all units

currently working will continue to ~~be depressed~~work; overall we view these developments as favorable for ~~the foreseeable future. However, the GoM is one of the premier deepwater markets in the world and we are committed to supporting our customers in this market.~~market conditions going forward. We believe that ~~once~~these improved regional demand drivers will create increased opportunities for our fleet of new generation OSVs. Once the current supply and demand fundamentals return to more normal conditions, our results from operations ~~will~~should improve.

~~In recognition~~Unlike our OSVs, whose utilization is tied principally to drilling activities, demand for our MPSVs is also driven by other offshore activities. These vessels are used for a wide variety of ~~these weak market conditions,~~oilfield applications that are not necessarily related to drilling. Because of the need to continuously inspect, repair and maintain offshore infrastructure, our MPSVs have, at times, partially counter-acted weakness in overall drilling activities. However, we have not yet seen a significant pick up in the expansion of offshore infrastructure, such as the installation of new floating and subsea infrastructure and field development that more meaningfully drive MPSV utilization. Consequently, utilization of our MPSVs has been volatile. We expect to continue experiencing seasonal fluctuations, with peak activity occurring in late spring through early fall followed by softer demand during the winter months of each year.

Since October 1, 2014, we stacked OSVs and MPSVs on various ~~dates commencing on October 1, 2014.~~dates. As of ~~September~~June 30, ~~2017,~~2019, as well as July 31, 2019, we had 4435 OSVs ~~stacked. As of November 1, 2017, we had 43 OSVs stacked. These 43~~and two MPSVs stacked and such stacked vessels represent ~~61%~~50% of our fleetwide vessel headcount, and ~~44%~~37% of our total OSV and MPSV deadweight tonnage. We may consider stacking additional vessels or reactivating vessels as market conditions warrant. By stacking vessels, we have significantly reduced our on-going cash outlays and lowered our risk profile; however, we also have fewer revenue-producing units in service that can contribute to our results and produce cash flows to cover our fixed costs and commitments. While we may choose to stack additional vessels should market conditions warrant, our current expectation is to retain our active fleet in the market to accept contracts at the best available terms even if such contracts are below our breakeven cash cost of operations.

~~There have been five auctions completed since energy reform began~~In order to support customer requirements in Mexico, and based on our long-term view that Mexico will continue to invest directly or allow foreign investment in ~~2013, including~~its offshore energy sector, and increasingly in deepwater prospects, we elected to Mexican-flag four HOSMAX 300 class OSVs, one ~~deepwater~~280 class OSV and two ~~shallow water tenders. So far, these auctions~~240 class OSVs during 2018. Three of our HOSMAX 300 OSVs that we placed into Mexican registry were acquired by us from Aries Marine in 2018. In the first quarter of 2019, we continued to increase our Mexican-flagged fleet by Mexican-flagging one MPSV.

At present, our Mexican-flagged fleet is comprised of seven high-spec OSVs, five low-spec OSVs and one MPSV, which is the second largest concentration of vessels we have ~~yielded 39 contracts with forecasted investment~~committed to a single market. Mexico has undergone significant transformation as a market for offshore energy over ~~their lifetime~~the last several years. Mexico's recently elected president has announced an intention to roll-back some of ~~$48.8 billion. Despite current oil prices, eight of ten blocks were awarded to major and national~~the energy reforms that have created more opportunities for international oil companies, ~~during~~or IOCs, to operate in Mexico. The current administration appears to favor allowing Pemex, as opposed to IOCs, to unlock Mexico's offshore energy resources. We are monitoring the ~~first deepwater auction held~~manner in ~~December 2016. Capital investment commitments made by~~which these policies develop. We have a long-standing relationship with Pemex as well as with the winning bidders in the first deepwater auction totaled about $4.0 billion, however, questions remain on the timing of the incremental activity expected in the Mexican deepwater GoM as a result of this auction. The next deepwater lease auction is scheduled for January 2018 and is expected to be comprised of 30 blocks in four areas. As a result of leases awarded during the initial shallow water lease round in 2016, two operators announced major discoveries in mid-July 2017. We recently observed a dispute over resource ownership between the country of Mexico and the new international companiesIOCs that have ~~experienced recent drilling success in fields adjacent to PEMEX-owned fields. This dispute may slow down drilling plans until the ownership issue is resolved.~~recently entered Mexico. We ~~consider~~expect Mexico to ~~be a long-term market for our services, especially in light of energy reforms expected to be carried out there. We~~ continue to ~~explore opportunities~~refine energy policies that are appropriate to ~~place additional vessels into Mexico to support PEMEX in~~ its ~~ongoing shallow water activity and non-PEMEX customers in support of future shelf and deepwater activity there.~~national objectives.

In Brazil, ~~Petrobras has moved towards an "all~~we presently own and operate one Brazilian-flagged high-spec OSV. We have flexibility under Brazilian flag" vessel fleet, which has limited opportunities in Brazil for foreign-flagged vessels, except where highly specialized services are required. In January 2016, we placed one of our newbuild HOSMAX 310 class OSVslaw to import and flag into Brazilian registry an additional vessel of similar DWT. We also own and ~~have imported that vessel into Brazil. In October 2016,~~operate one Vanuatu-flagged MPSV currently working in Brazil ~~enacted new legislation that will allow international oil companies to participate~~ as ~~operators of pre-salt offshore developments, reversing~~ a ~~policy that reserved such properties to Petrobras, exclusively. By doing so,~~flotel. Brazil is the Brazilian government has created the possibility that foreign operators might spur additional exploration and development activity that has been dampened by low oil prices and Petrobras' difficulties. Recently, the Brazilian National Petroleum Agency conducted and announced the results of two bid rounds for production sharing in pre-salt areas. The outcome of this bidding process is viewed positively for growing the participation of international oil companiessingle largest deepwater market in the world. Recent measures to expand the role of IOCs in its “pre-salt” prospects are taking hold and we believe Brazilian activity in the offshore ~~sector, which is one~~energy space will be a significant contributor to the overall recovery in global offshore E&P activities that we are beginning to see take hold in the second half of ~~our core markets.~~2019.

Our Vessels

All of our current vessels are qualified under the Jones Act to engage in U.S. coastwise trade, except for ~~nine~~18 foreign-flagged new generation OSVs and two foreign-flagged MPSVs. As of ~~September~~June 30, ~~2017,~~2019, our 1831 active new generation OSVs, ~~eight~~six active MPSVs and four managed OSVs were operating in domestic and international areas as noted in the following table:

Operating Areas



Domestic
GoM (1)	1922
Other U.S. coastlines ~~(1)~~(2)	76
	2628
Foreign
Brazil	12
~~Middle East~~Mexico	1
~~Other Latin America~~	211
	413
Total Vessels ~~(2)~~(3)	3041


~~(1)~~	~~Includes three owned vessels and four managed vessels supporting the military.~~


~~(2)~~	~~Excluded from this table are 44 new generation OSVs that were stacked as of September 30, 2017.~~

(1) Includes two owned vessels supporting the military.

(2) Includes two owned and four managed vessels supporting the military

(3) Excluded from this table are 35 new generation OSVs and two MPSVs that were stacked as of June 30, 2019.

Critical Accounting Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP. In other circumstances, we are required to make estimates, judgments and assumptions that we believe are reasonable based on available information. We base our estimates and judgments on historical experience and various other factors that we believe are reasonable based upon the information available. Actual results may differ from these estimates under different assumptions and conditions. Our significant accounting policies and estimates are discussed in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations and in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018.

Results of Operations

The tables below set forth the average dayrates, utilization rates and effective dayrates for our owned new generation OSVs and the average number and size of vessels owned during the periods indicated. These vessels generate a substantial portion of our revenues and operating profit. Excluded from the OSV information below are the results of operations for our MPSVs, our ~~shore-base~~shore-based port facility and vessel management services, including the four non-owned vessels managed for the U.S. Navy. The Company does not provide average or effective dayrates for its MPSVs. MPSV dayrates are impacted by highly variable customer-required cost-of-sales associated with ancillary equipment and services, such as ROVs, accommodation units and cranes, which are typically recovered through higher dayrates charged to the customer. Due to the fact that each of our MPSVs have a workload capacity and significantly higher income generating potential than each of the Company’s new generation OSVs, the utilization and dayrate levels of our MPSVs can have a very large impact on our results of operations. For this reason, our consolidated operating results, on a period-to-period basis, are disproportionately impacted by the level of dayrates and utilization achieved by our ~~eight~~six active MPSVs.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Offshore Supply Vessels:
Average number of new generation OSVs (1)	62.0			62.0			62.0			61.9			66.0			63.9			66.0			63.0
Average number of active new generation OSVs (2)	19.0			17.9			19.6			22.0			30.2			22.7			30.0			20.4
Average new generation OSV fleet capacity (DWT)	220,172			221,629			220,172			220,885			238,845			228,925			238,845			224,498
Average new generation OSV capacity (DWT)	3,551			3,575			3,551			3,570			3,619			3,583			3,619			3,566
Average new generation OSV utilization rate (3)	26.3		%	22.0		%	22.8		%	27.0		%	32.3		%	27.0		%	32.4		%	23.9		%
Effective new generation OSV utilization rate (4)	85.8		%	76.3		%	71.9		%	76.0		%	70.4		%	76.0		%	71.3		%	73.9		%
Average new generation OSV dayrate (5)	$	18,483		$	25,639		$	20,709		$	25,488		$	18,198		$	19,566		$	18,178		$	18,895
Effective dayrate (6)	$	4,861		$	5,641		$	4,722		$	6,882		$	5,878		$	5,283		$	5,890		$	4,516


(1)	We owned 6266 new generation OSVs as of ~~September~~June 30, ~~2017.~~2019. Excluded from this data are eight MPSVs owned and operated by the Company as well as four non-owned vessels managed for the U.S. Navy.


(2)	In response to weak market conditions, we elected to stack certain new generation OSVs on various dates since October 1, 2014. Active new generation OSVs represent vessels that are immediately available for service during each respective period.


(3)	Utilization rates are average rates based on a 365-day year. Vessels are considered utilized when they are generating revenues.


(4)	Effective utilization rate is based on a denominator comprised only of vessel-days available for service by the active fleet, which excludes the impact of stacked vessel days.


(5)	Average new generation OSV dayrates represent average revenue per day, which includes charter hire, crewing services, and net brokerage revenues, based on the number of days during the period that the OSVs generated revenues.


(6)	Effective dayrate represents the average dayrate multiplied by the average utilization rate.

Non-GAAP Financial Measures

We disclose and discuss EBITDA as a non-GAAP financial measure in our public releases, including quarterly earnings releases, investor conference calls and other filings with the Securities and Exchange Commission. We define EBITDA as earnings (net income) before interest, income taxes, depreciation and amortization. Our measure of EBITDA may not be comparable to similarly titled measures presented by other companies. Other companies may calculate EBITDA differently than we do, which may limit its usefulness as a comparative measure.

We view EBITDA primarily as a liquidity measure and, as such, we believe that the GAAP financial measure most directly comparable to itthis measure is cash flows provided by operating activities. Because EBITDA is not a measure of financial performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

EBITDA is widely used by investors and other users of our financial statements as a supplemental financial measure that, when viewed with our GAAP results and the accompanying reconciliations, we believe EBITDA provides additional information that is useful to gain an understanding of the factors and trends affecting our ability to service debt, pay deferred taxes and fund drydocking charges and other maintenance capital expenditures. We also believe the disclosure of EBITDA helps investors meaningfully evaluate and compare our cash flow generating capacity from quarter to quarter and year to year.

EBITDA is also a financial metric used by management ~~(i)~~ as a supplemental internal measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; ~~(ii) as a significant criteria for annual incentive cash bonuses paid to our executive officers and other shore-based employees; (iii)~~ to compare to the EBITDA of other companies when evaluating potential acquisitions; and ~~(iv)~~ to assess our ability to service existing fixed charges and incur additional indebtedness.

The following table reconciles cash flows used in operating activities to EBITDA for the three and six months ended June 30, 2019 and 2018, respectively (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
EBITDA Reconciliation to GAAP:
Net cash flows used in operating activities	$	(22,517	)	$	(18,779	)	$	(48,660	)	$	(27,653	)
Cash paid for deferred drydocking charges	6,305			1,381			15,605			3,351
Cash paid for interest	19,680			14,173			39,187			29,304
Cash paid for (refunds of) taxes	1,316			201			(22		)	650
Changes in working capital	(646		)	15,990			797			3,157
Stock-based compensation expense	(684		)	(1,885		)	(1,659		)	(4,753		)
Loss on early extinguishment of debt, net	—			—			(71		)	—
Gain (loss) on sale of assets	29			(13		)	55			30
Changes in other, net	129			174			(77		)	(49		)
EBITDA	$	3,612		$	11,242		$	5,155		$	4,037

The following table provides the detailed components of EBITDA as we define that term for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Components of EBITDA:
Net loss $ (18,950 ) $ (16,503 ) $ (66,337 ) $ (44,603 )
Interest, net
Debt obligations 11,956
12,820
39,194
34,888
Interest income (447 ) (401 ) (1,312 ) (1,164 )
Total interest, net 11,509
12,419
37,882
33,724
Income tax benefit (9,120 ) (8,769 ) (30,696 ) (23,808 )
Depreciation 24,682
23,467
74,038
68,298
Amortization 2,473
4,580
9,463
16,675
EBITDA $ 10,594
$ 15,194
$ 24,350
$ 50,286

~~The following table reconciles EBITDA to cash flows provided by operating activities for the three and nine months ended September 30, 2017 and 2016, respectively (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
EBITDA Reconciliation to GAAP:
EBITDA $ 10,594
$ 15,194
$ 24,350
$ 50,286
Cash paid for deferred drydocking charges (995 ) (897 ) (6,950 ) (3,214 )
Cash paid for interest (13,829 ) (13,784 ) (40,028 ) (38,871 )
Cash paid for taxes (334 ) (446 ) (1,044 ) (2,688 )
Changes in working capital (3,336 ) 13,711
97
45,396
Stock-based compensation expense 2,726
2,341
5,740
6,557
Gain on early extinguishment of debt —
—
(15,478 ) —
(Gain) loss on sale of assets 197
(81 ) 178
(36 )
Changes in other, net (100 ) (1,573 ) 3,932
(719 )
Net cash flows provided by (used in) operating activities $ (5,077 ) $ 14,465
$ (29,203 ) $ 56,711



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Components of EBITDA:
Net loss	$	(31,943	)	$	(25,088	)	$	(68,563	)	$	(63,743	)
Interest, net
Debt obligations	19,995			16,401			39,721			30,346
Interest income	(921		)	(519		)	(2,035		)	(1,163		)
Total interest, net	19,074			15,882			37,686			29,183
Income tax benefit	(11,905		)	(6,438		)	(20,736		)	(14,929		)
Depreciation	24,657			24,630			49,428			49,278
Amortization	3,729			2,256			7,340			4,248
EBITDA	$	3,612		$	11,242		$	5,155		$	4,037

In addition, we have also historically made certain adjustments, as applicable, to EBITDA for losses on early extinguishment of debt, stock-based compensation expense and interest income, to internally evaluate our performance based on the computation of ratios used in certain financial covenants of our credit agreements with various ~~lenders.~~lenders, whenever applicable. We believe that such ratios can, at times, be material components of financial covenants and, when applicable, failure to comply with such covenants could result in the acceleration of indebtedness or the imposition of restrictions on our financial flexibility.

The following table provides certain detailed adjustments to EBITDA, as ~~defined in our first-lien credit facility,~~we define that term, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Gain on early extinguishment of debt	$	—	$	—	$	15,478	$	—
Loss on early extinguishment of debt, net									$	—	$	—	$	71	$	—
Stock-based compensation expense	2,726		2,341		5,740		6,557		4,169		1,885		1,659		4,753
Interest income	447		401		1,312		1,164		921		519		2,035		1,163

Set forth below are the material limitations associated with using EBITDA as a non-GAAP financial measure compared to cash flows provided by operating activities.

EBITDA does not reflect the future capital expenditure requirements that may be necessary to replace our existing vessels as a result of normal wear and tear,

EBITDA does not reflect the interest, future principal payments and other financing-related charges necessary to service the debt that we have incurred in acquiring and constructing our vessels,

EBITDA does not reflect the deferred income taxes that we will eventually have to pay once we are no longer in an overall tax net operating loss carryforward position, as applicable, and

EBITDA does not reflect changes in our net working capital position.

Management compensates for the above-described limitations in using EBITDA as a non-GAAP financial measure by only using EBITDA to supplement our GAAP results.

Summarized financial information for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018, respectively, is shown below in the following table (in thousands, except percentage changes):


	Three Months Ended September 30,						Increase (Decrease)						Three Months Ended June 30,						Increase (Decrease)
	2017			2016			$ Change			% Change			2019			2018			$ Change			% Change
Revenues:
Vessel revenues
Domestic	$	29,788		$	34,978		$	(5,190	)	(14.8	)	%	$	26,531		$	43,536		$	(17,005	)	(39.1	)	%
Foreign	15,849			8,692			7,157			82.3		%	20,726			5,945			14,781			>100.0		%
	45,637			43,670			1,967			4.5		%	47,257			49,481			(2,224		)	(4.5	)	%
Non-vessel revenues	8,029			8,257			(228		)	(2.8	)	%	9,588			8,950			638			7.1		%
	53,666			51,927			1,739			3.3		%	56,845			58,431			(1,586		)	(2.7	)	%
Operating expenses	30,082			29,375			707			2.4		%	40,217			34,858			5,359			15.4		%
Depreciation and amortization	27,155			28,047			(892		)	(3.2	)	%	28,386			26,886			1,500			5.6		%
General and administrative expenses	12,899			9,031			3,868			42.8		%	13,049			12,246			803			6.6		%
	70,136			66,453			3,683			5.5		%	81,652			73,990			7,662			10.4		%
Gain (loss) on sale of assets	(197		)	81			(278		)	100.0		%	29			(13		)	42			>(100.0)		%
Operating loss	(16,667		)	(14,445		)	(2,222		)	15.4		%	(24,778		)	(15,572		)	(9,206		)	59.1		%
Interest expense	11,956			12,820			(864		)	(6.7	)	%	19,995			16,401			3,594			21.9		%
Interest income	447			401			46			11.5		%	921			519			402			77.5		%
Income tax benefit	(9,120		)	(8,769		)	(351		)	4.0		%	(11,905		)	(6,438		)	(5,467		)	84.9		%
Net loss	$	(18,950	)	$	(16,503	)	$	(2,447	)	14.8		%	$	(31,943	)	$	(25,088	)	$	(6,855	)	27.3		%

Three Months Ended ~~September~~June 30, ~~2017~~2019 Compared to Three Months Ended ~~September~~June 30, ~~2016~~2018

Revenues. Revenues for the three months ended ~~September~~June 30, ~~2017 increased~~2019 decreased by ~~$1.7~~$1.6 million, or ~~3.3%~~2.7%, to ~~$53.7~~$56.8 million compared to the same period in ~~2016~~2018. Our weighted-average active operating fleet for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 was ~~27.0~~36.2 and ~~24.3~~29.9 vessels, respectively.

Vessel revenues ~~increased $2.0~~decreased $2.2 million, or 4.5%, to ~~$45.6~~$47.3 million for the three months ended ~~September~~June 30, ~~2017~~2019 compared to ~~$43.7~~$49.5 million for the same period in ~~2016.~~2018. The ~~increase~~decrease in vessel revenues was primarily due to ~~improved market conditions for~~lower revenue earned by our ~~MPSVs. Revenue~~MPSVs partially offset by higher revenues from our OSVs, including the full quarter contribution from four OSVs that were added to our operating fleet during the second quarter of ~~MPSVs increased by $6.4~~2018. Revenues from our MPSV fleet decreased $6.7 million, or ~~55.1%~~35.8%, for the three months ended June 30, 2019 compared to the same period in 2016. The increase was primarily attributable to a seasonal increase in demand for such vessels. These higher revenues were partially offset by weak market conditions worldwide and the repricing or stacking of four OSVs, which concluded long-term contracts that were working at dayrates above current market levels.prior-year period. For the three months ended ~~September~~June 30, ~~2017,~~2019, we had an average of ~~43.0~~37.8 vessels stacked compared to ~~44.1~~42.0 vessels stacked in the prior-year quarter. Average new generation OSV dayrates were ~~$18,483~~$18,198 for the ~~third~~second quarter of ~~2017~~2019 compared to ~~$25,639~~$19,566 for the same period in ~~2016.~~2018. Our new generation OSV utilization was ~~26.3%~~32.3% for the ~~third~~second quarter of ~~2017~~2019 compared to ~~22.0%~~27.0% for the same period in ~~2016.~~2018. Our new generation OSVs were stacked for an aggregate of ~~3,956~~3,255 days during the ~~third~~second quarter of ~~2017~~2019 compared to ~~4,060~~3,749 days for the same period in ~~2016.~~2018. Excluding stacked vessel days, our new generation OSV effective utilization was ~~85.8%~~70.4% and ~~76.3%~~76.0% for the same periods, respectively. Domestic vessel revenues decreased ~~$5.2~~$17.0 million from the year-ago quarter primarily due to ~~lower dayrates earned by~~a greater number of OSVs ~~operating~~working in foreign locations and, to a lesser extent, a decrease in the revenue from our ~~fleet~~MPSVs during the three months ended ~~September~~June 30, ~~2017.~~2019. Foreign vessel revenues increased $~~7.2~~14.8 million ~~primarily~~ due to ~~one MPSV working~~a higher number of vessels operating in a foreign ~~market~~markets during the three months ended ~~September~~June 30, ~~2017.~~2019. We operated an average of 5.7 additional OSVs and 0.7 additional MPSVs working in foreign locations during the current year quarter. Foreign vessel revenues for the ~~third~~second quarter of ~~2017~~2019 comprised ~~34.7%~~43.9% of our total vessel revenues compared to ~~19.9%~~12.0% for the year-ago period.

Non-vessel revenues ~~decreased $0.2~~increased $0.6 million, or ~~2.8%~~7.1%, to ~~$8.0~~$9.6 million for the three months ended ~~September~~June 30, ~~2017~~2019 compared to ~~$8.2~~$9.0 million for the same period in ~~2016.~~2018. This ~~decrease~~increase is primarily

attributable to ~~a decrease in shorebase activity driven by continued weak market conditions~~higher revenues earned from vessel management services during ~~2017~~2019 compared to the year-ago period.

Operating Expenses. Operating expenses were $~~30.1~~40.2 million, an increase of $~~0.7~~5.4 million, or ~~2.4%~~15.4%, for the three months ended ~~September~~June 30, ~~2017~~2019 compared to $~~29.4~~34.9 million for the same period in ~~2016~~2018. Operating expenses increased primarily due to a higher number of active vessels in our ~~fleet.~~fleet during the three months ended June 30, 2019. Aggregate cash operating expenses ~~for our vessels~~ are projected to be in the approximate annual range of ~~$119.4~~$160.0 million to ~~$124.4~~$170.0 million for the year ending December 31, ~~2017~~2019. Such cash operating expense estimate is exclusive of any additional repositioning expenses we may incur in connection with the potential relocation of more of our vessels into international markets or back to the GoM and any customer-required cost-of-sales related to future contract fixtures that are typically recovered through higher dayrates.

Depreciation and Amortization. Depreciation and amortization expense of ~~$27.2~~$28.4 million was ~~$0.9~~$1.5 million, or ~~3.2%~~5.6%, ~~lower~~higher for the three months ended ~~September~~June 30, ~~2017~~2019 compared to the same period in ~~2016~~2018. Depreciation ~~increased by $1.2~~was in-line with the prior-year period. The increase in amortization expense of $1.5 million ~~primarily~~was due to costs associated with the ~~addition of two~~initial special surveys for vessels that were placed in service under ~~our~~the Company's fifth OSV newbuild program, ~~since June 2016. The depreciation increase~~costs associated with the drydocking of two vessels that were acquired in the second quarter of 2018 and the amortization of an intangible asset that was ~~more than offset by a decrease~~included with the acquisition of four OSVs in ~~amortization expense~~the second quarter of ~~$2.1 million, which was mainly driven lower by postponed recertifications for certain of our stacked OSVs.~~2018. Depreciation expense is expected to increase from current levels aswhen the two remaining vessels under our current newbuild program are placed in service. ~~Amortization expense is expected to decrease as the result of the deferral of regulatory recertification activities for vessels that have been stacked.~~ We expect amortization expense to increase temporarily whenever market conditions warrant reactivation of currently stacked vessels, which will then require us to drydock such vessels, and thereafter to revert back to historical levels.

General and Administrative Expense. G&A expense of ~~$12.9~~$13.0 million was ~~$3.9~~$0.8 million higher during the three months ended ~~September~~June 30, ~~2017~~2019 compared to the same period in 2016. The increase in G&A expense was attributable to higher professional fees related to our on-going liability management activities, short-term incentive compensation, long-term incentive compensation and bad debt expense. Long-term incentive compensation was higher due to a "mark to market" adjustment on cash-settled awards to reflect the increase in our stock price during the three months ended September 30, 2017.2018.

Operating Loss. Operating loss increased by $~~2.2~~9.2 million to ~~$16.7~~$24.8 million during the three months ended ~~September~~June 30, ~~2017~~2019 compared to the same period in ~~2016~~2018 for the reasons discussed above. Operating loss as a percentage of revenues was ~~31.1%~~43.6% for the three months ended ~~September~~June 30, ~~2017~~2019 compared to ~~27.8%~~26.7% for the same period in ~~2016~~2018.

Interest Expense. Interest expense of ~~$12.0~~$20.0 million ~~decreased $0.9~~increased $3.6 million during the three months ended September 30, 2017 compared to the same period in 2016 due to the write-off of fees associated with the amendment to our revolving credit facility during the year-ago period and lower interest expense associated with the debt exchange and termination of the then-existing credit facility that was completed during the three months ended June 30, ~~2017. These favorable variances were partially offset by a decrease~~2019 compared to the same period in ~~capitalized~~2018 due to additional interest ~~during~~expense associated with the ~~three months ended September 30, 2017. We recorded $2.7 million~~issuance of ~~capitalized construction period interest, or roughly 18.4% of our total interest costs, for~~additional first-lien and the ~~third~~second-lien term loans since the second quarter of ~~2017 compared to $4.2 million, or roughly 24.7% of our total interest costs, for the year-ago period.~~2018.

Interest Income. Interest income was ~~$0.4~~$0.9 million during the three months ended ~~September~~June 30, ~~2017,~~2019, which was ~~flat compared to~~$0.4 million higher than the same period in ~~2016.~~2018. Our average cash balance ~~decreased~~increased to ~~$122.5~~$156.0 million for the three months ended ~~September~~June 30, ~~2017~~2019 compared to ~~$230.1~~$140.6 million for the same period in ~~2016.~~2018. The average interest rate earned on our invested cash balances was ~~1.5%~~2.4% and 0.7% during the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~,2018, respectively. The ~~decrease~~increase in average cash balance was primarily due to cash ~~outflows~~inflows associated with draws under our initial $300 million first-lien term loans and the ~~repurchase~~$50 million expansion of ~~a portion~~such term loans since June 30, 2018. These inflows were partially offset by the repurchases of our 2019 convertible senior notes ~~and 2020 senior notes~~for cash during the ~~second~~first quarter of ~~2017 and cash outflows associated with our fifth OSV newbuild program since September 30, 2016.~~2019.

Income Tax Benefit. Our effective tax benefit rate was ~~32.5%~~27.2% and ~~34.7%~~20.4% for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Our income tax benefit ~~primarily consisted~~rate for the second quarter of ~~deferred taxes. Our~~

~~income tax~~2019 was higher than the benefit rate ~~differs~~ from the ~~federal statutory rate primarily~~second quarter of 2018 due to ~~expected~~a reduction of net operating loss carryforward valuation allowances due to state tax ~~liabilities and items not deductible for federal income tax purposes.~~

~~Net Loss. Net loss increased by~~ ~~$2.4 million~~ for a reported net loss of $19.0 million for the three months ended September 30, 2017 compared to a net loss of $16.5 million for the same period during 2016. This year-over-year increase in net loss for the ~~third quarter of 2017~~ ~~was primarily driven by higher G&A expense discussed above.~~

~~Summarized financial information for the nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016, respectively, is shown below in the following table (in thousands, except percentage changes):~~

Nine Months Ended
September 30, Increase (Decrease)
2017 2016
$
Change

%
Change

Revenues:
Vessel revenues
Domestic $ 84,355
$ 127,102
$ (42,747 ) (33.6 ) %
Foreign 26,470
30,068
(3,598 ) (12.0 ) %
110,825
157,170
(46,345 ) (29.5 ) %
Non-vessel revenues 24,346
25,250
(904 ) (3.6 ) %
135,171
182,420
(47,249 ) (25.9 ) %
Operating expenses 89,385
104,134
(14,749 ) (14.2 ) %
Depreciation and amortization 83,501
84,973
(1,472 ) (1.7 ) %
General and administrative expenses 36,573
30,084
6,489
21.6
%
209,459
219,191
(9,732 ) (4.4 ) %
Gain (loss) on sale of assets (178 ) 36
(214 ) >(100.0)
%
Operating loss (74,466 ) (36,735 ) (37,731 ) >100.0
%
Gain on early extinguishment of debt 15,478
—
15,478
100.0
%
Interest expense 39,194
34,888
4,306
12.3
%
Interest income 1,312
1,164
148
12.7
%
Income tax benefit (30,696 ) (23,808 ) (6,888 ) 28.9
%
Net loss $ (66,337 ) $ (44,603 ) $ (21,734 ) 48.7
%

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Revenues. Revenues for the nine months ended September 30, 2017 decreased by $47.2 million, or 25.9%, to $135.2 million compared to the same period in~~ ~~2016. Our weighted-average active operating fleet for the nine months ended September 30, 2017 and 2016 was 26.6 and 28.1 vessels, respectively.~~

Vessel revenues decreased $46.3 million, or 29.5%, to $110.8 million for the nine months ended September 30, 2017 compared to $157.2 million for the same period in 2016. The decrease in vessel revenues primarily resulted from weak market conditions worldwide, which led to our decision to stack an average of 3.5 incremental vessels on various dates from December 31, 2015 through September 30, 2017. For the nine months ended September 30, 2017, we had an average of 43.4 vessels stacked compared to an average of 39.9 vessels stacked in the prior-year period. Revenue from our MPSV fleet decreased $9.7 million, or 23.6%, for the nine months ended September 30, 2017 compared to the prior-year period. Average new generation OSV dayrates were $20,709 for the first nine months of 2017 compared to $25,488 for the same period in 2016, a decrease of $4,779, or 18.8%. Our new generation OSV dayrate includes a redelivery fee related to the completion of a long-term contract for one of our OSVs that was recognized during the first nine months of 2017. Excluding such revenue, average new generation OSV dayrates would have been $18,276. Our new generation OSV utilization was 22.8% for the first nine months of 2017 compared to 27.0% for the same period in 2016. This decrease in utilization is primarily due to weak market conditions for high-spec OSVs operating in the GoM and the incremental vessels that were stacked during the current-year period. Our new generation OSVs incurred 139 days of aggregate downtime for regulatory drydockings and were stacked for an aggregate of 11,567 days during the first nine months of 2017. Excluding stacked vessel days, our new generation OSV effective utilization was 71.9% and 76.0% during the nine months ended September 30, 2017 and 2016, respectively. Domestic vessel revenues decreased $42.7 million from the year-ago period primarily due to lower dayrates earned by vessels operating in our fleet during the nine months ended September 30, 2017 and the stacking of vessels since December 2015. Foreign vessel revenues

decreased $3.6 million primarily due to lower dayrates earned by vessels working in foreign regions during the nine months ended September 30, 2017. Foreign vessel revenues for the first nine months of 2017 comprised 23.9% of our total vessel revenues compared to 19.1% for the year-ago period.

Non-vessel revenues decreased $0.9 million, or 3.6%, to $24.3 million for the nine months ended September 30, 2017 compared to $25.3 million for the same period in 2016. The decrease in non-vessel revenues is primarily attributable to a decrease in shorebase activity driven by continued weak market conditions during 2017 compared to the year-ago period.

~~Operating Expenses.~~ ~~Operating expenses were $89.4 million, a decrease of $14.7 million, or 14.2%, for the nine months ended September 30, 2017 compared to $104.1 million for the same period in~~ ~~2016~~. Operating expenses were primarily driven lower by vessels that were removed from our active fleet count through our stacking strategy since December 2015, which resulted in a substantial reduction in mariner headcount, mariner pay cuts and reductions in other operating expenses.

~~Depreciation and Amortization~~. Depreciation and amortization expense of $83.5 million was $1.5 million, or 1.7%, lower for the nine months ended September 30, 2017 compared to the same period in 2016. Depreciation increased by $5.7 million primarily due to the contribution of four vessels that were placed in service under our fifth OSV newbuild program since December 2015. The depreciation increase was more than offset by a decrease in amortization expense of $7.2 million, which was mainly driven by postponed recertifications for certain of our stacked OSVs. Amortization expense is expected to decrease further in the near term as a result of the deferral of regulatory recertification activities for vessels that have been stacked. We expect amortization expense to increase temporarily whenever market conditions warrant reactivation of currently stacked vessels, which will then require us to drydock such vessels, and thereafter to revert back to historical levels.

~~General and Administrative Expense. G&A expense of $36.6 million was $6.5 million higher during the nine months ended September 30, 2017 compared to the same period in~~ ~~2016~~. The increase in G&A expense was primarily attributable to additional bad debt reserves due to an unfavorable ruling in a bankruptcy proceeding related to a receivable from a former customer and, to a lesser extent, higher short-term incentive compensation expense and higher contract services for our on-going liability management activities. These unfavorable variances were partially offset by lower shoreside compensation expense due to workforce reductions that were implemented during fiscal 2016 and lower long-term incentive compensation expense attributable to a "mark-to-market" adjustment on cash settled awards to reflect the decline in our stock price during the first nine months of 2017.

~~Operating Loss~~. Operating loss increased by $37.7 million to an operating loss of $74.5 million during the nine months ended September 30, 2017 compared to the same period in 2016 for the reasons discussed above. Operating loss as a percentage of revenues was 55.1% for the nine months ended September 30, 2017 compared to 20.1% for the same period in ~~2016~~.

~~Gain on Early Extinguishment of Debt~~. On June 15, 2017, we terminated the Old Credit Facility and replaced it with the New Credit Facility. We concurrently arranged for the repurchase $73.3 million of the 2019 convertible senior notes and $8.1 million of the 2020 senior notes, for an aggregate total of $54.1 million of cash. We recorded a gain on early extinguishment of debt of approximately $15.5 million ($10.5 million or $0.29 per diluted share after-tax), which was comprised of a $27.2 million gain on the repurchase of the 2019 convertible notes and the 2020 senior notes, offset in part by the write-off of $2.3 million in deal costs and unamortized financing costs related to the credit facilities and $9.4 million of original issue discount, deal costs and unamortized financing costs related to the notes repurchased.

~~Interest Expense.~~ Interest expense of $39.2 million increased $4.3 million during the nine months ended September 30, 2017 compared to the same period in 2016, primarily due to capitalizing a lower percentage of interest compared to the prior-year period driven by a lower average construction work-in-progress balance in 2017 under our nearly completed newbuild program. During the nine months ended September 30, 2017, we recorded $7.6 million of capitalized construction period interest, or roughly 16.2% of our total interest costs, compared to having capitalized $14.3 million, or roughly 29.1% of our total interest costs, for the year-ago period.

~~Interest Income~~. Interest income was $1.3 million during the nine months ended September 30, 2017, which was $0.1 million higher compared to the same period in 2016. Our average cash balance decreased to $186.8 million for the nine months ended September 30, 2017 compared to $242.7 million for the same period in ~~2016. The average interest rate earned on our invested cash balances was 0.9% and 0.6% during the nine months ended September 30, 2017 and~~ ~~2016, respectively. The decrease in average cash balance was primarily due to cash outflows associated with the repurchase of a portion of our 2019 convertible senior notes and 2020 senior notes~~law changes enacted during the second quarter of ~~2017, cash outflows associated with our fifth OSV newbuild program and lower revenues earned by active vessels operating in our fleet during 2017 compared to the prior-year period.~~

~~Income Tax Benefit.~~ ~~Our effective tax benefit rate was 31.6% and 34.8% for the nine months ended September 30, 2017 and~~ ~~2016, respectively.~~2019. Our income tax benefit primarily consisted of deferred taxes. Our income tax rate differs from the federal statutory rate primarily due to expected state tax liabilities and items not deductible for federal income tax purposes. Our income tax benefit rate for the first nine months of 2017 was below our historical tax rate due to the adoption of a new accounting standard effective January 1, 2017, which requires the tax impact of stock-based compensation arrangements to be recorded as a discrete item within the provision for income taxes, whereas it was previously recorded in additional paid-in capital. This standard will cause volatility in our effective tax rates in the periods when outstanding stock options are exercised or restricted stock awards vest. In addition, our income tax benefit rate was also lower than the historical rate due to the recording of a valuation allowance of $0.9 million related to foreign tax credits expiring in 2020 and 2021, which was recorded during the nine months ended September 30, 2017.

Net Loss. Net loss increased by ~~$21.7~~$6.9 million for a reported net loss of ~~$66.3~~$31.9 million for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2019 compared to a net loss of ~~$44.6~~$25.1 million for the same period during ~~2016. Included~~2018. This unfavorable variance in net loss was primarily driven by higher operating loss and interest expense partially offset by a higher tax benefit rate in the three months ended June 30, 2019.

Summarized financial information for the six months ended June 30, 2019 and 2018, respectively, is shown below in the following table (in thousands, except percentage changes):



	Six Months Ended June 30,						Increase (Decrease)
	2019			2018			$ Change			% Change
Revenues:
Vessel revenues
Domestic	$	53,659		$	68,760		$	(15,101	)	(22.0	)	%
Foreign	38,850			13,855			24,995			>100.0		%
	92,509			82,615			9,894			12.0		%
Non-vessel revenues	18,372			17,403			969			5.6		%
	110,881			100,018			10,863			10.9		%
Operating expenses	80,611			70,827			9,784			13.8		%
Depreciation and amortization	56,768			53,526			3,242			6.1		%
General and administrative expenses	25,016			25,121			(105		)	(0.4	)	%
	162,395			149,474			12,921			8.6		%
Gain on sale of assets	55			30			25			83.3		%
Operating loss	(51,459		)	(49,426		)	(2,033		)	4.1		%
Loss on early extinguishment of debt, net	(71		)	—			(71		)	100.0		%
Interest expense	39,721			30,346			9,375			30.9		%
Interest income	2,035			1,163			872			75.0		%
Income tax benefit	(20,736		)	(14,929		)	(5,807		)	38.9		%
Net loss	$	(68,563	)	$	(63,743	)	$	(4,820	)	7.6		%

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Revenues. Revenues for the six months ended June 30, 2019 increased by $10.9 million, or 10.9%, to $110.9 million compared to the same period in 2018. Our weighted-average active operating fleet for the six months ended June 30, 2019 and 2018 was 35.9 and 28.0 vessels, respectively.

Vessel revenues increased $9.9 million, or 12.0%, to $92.5 million for the six months ended June 30, 2019 compared to $82.6 million for the same period in 2018. The increase in vessel revenues primarily resulted from improved market conditions for our OSVs and the addition of four OSVs to our operating fleet during the second quarter of 2018 partially offset by soft market conditions for our MPSVs. Revenues from our MPSV fleet decreased $8.9 million, or 28.5%, for the six months ended June 30, 2019 compared to the prior-year period. For the six months ended June 30, 2019, we had an average of 38.1 vessels stacked compared to an average of 43.0 vessels stacked in the prior-year period. Average new generation OSV dayrates were $18,178 for the first six months of 2019 compared to $18,895 for the same period in 2018, a ~~$15.5~~decrease of $717, or 3.8%. Our new generation OSV utilization was 32.4% for the first six months of 2019 compared to 23.9% for the same period in 2018. Our new generation OSVs incurred 259 days of aggregate downtime for regulatory drydockings and were stacked for an aggregate of 6,518 days during the first six months of 2019. Excluding stacked vessel days, our new generation OSV effective utilization was 71.3% and 73.9% during the six months ended June 30, 2019 and 2018, respectively. Domestic vessel revenues decreased $15.1 million ~~gain~~from the year-ago period primarily due to lower revenue earned by our MPSVs operating domestically during the six months ended June 30, 2019. Foreign vessel revenues increased $25.0 million. The increase in foreign revenue is attributable to an average of 6.8 additional vessels working in foreign locations during the current year period. Foreign vessel revenues for the first six months of 2019 comprised 42.0% of our total vessel revenues compared to 16.8% for the year-ago period.

Non-vessel revenues increased $1.0 million, or 5.6%, from the prior-year period. This increase is primarily attributable to higher revenues earned from vessel management services during the six months ended June 30, 2019 compared to the year-ago period.

Operating Expenses. Operating expenses were $80.6 million, an increase of $9.8 million, or 13.8%, for the six months ended June 30, 2019 compared to $70.8 million for the same period in 2018. Operating expenses were higher due to a higher number of active vessels in our fleet during the six months ended June 30, 2019.

Depreciation and Amortization. Depreciation and amortization expense of $56.8 million was $3.2 million, or 6.1%, higher for the six months ended June 30, 2019 compared to the same period in 2018. Depreciation was in-line with the prior-year period. Amortization expense increased $3.1 million, which was driven higher mainly by costs associated with the initial special surveys for vessels that were placed in service under the Company's fifth OSV newbuild program, costs associated with the drydocking of two vessels that were acquired in the second quarter of 2018 and the amortization of an intangible asset that was included with the acquisition of four OSVs in the second quarter of 2018.

General and Administrative Expense. G&A expense of $25.0 million was $0.1 million lower during the six months ended June 30, 2019 compared to the same period in 2018.

Operating Loss. Operating loss increased by $2.0 million to an operating loss of $51.5 million during the six months ended June 30, 2019 compared to the same period in 2018 for the reasons discussed above. Operating loss as a percentage of revenues was 46.4% for the six months ended June 30, 2019 compared to 49.4% for the same period in 2018.

Loss on Early Extinguishment of Debt, Net. During the six months ended June 30, 2019, we exchanged $142.6 million in face value of 2020 senior notes for $121.2 million of second-lien term loans and we exchanged $21.0 million in face value of our 2019 convertible senior notes for $19.9 million of first-lien term loans. In accordance with applicable accounting guidance, these debt-for-debt exchanges were accounted for as debt modifications, requiring the Company to defer the gains on such exchanges and record a loss on early extinguishment of ~~debt. Excluding~~debt of $3.7 million related to deal costs for the exchanges. During the six months ended June 30, 2019, we arranged for the repurchase of $52.9 million of our outstanding 2019 convertible senior notes for an aggregate total of $47.6 million of cash. We recorded a net gain on early extinguishment of debt of $3.6 million ($2.9 million or $0.08 per diluted share after-tax) related to these repurchases.

Interest Expense. Interest expense of $39.7 million was $9.4 million higher than the same period in 2018 due to additional interest expense associated with the issuance of additional first-lien and the second-lien term loans since the second quarter of 2018.

Interest Income. Interest income was $2.0 million during the six months ended June 30, 2019, which was $0.9 million higher than the same period in 2018. Our average cash balance increased to $180.6 million for the six months ended June 30, 2019 compared to $167.3 million for the same period in 2018. The average interest rate earned on our invested cash balances was 2.3% and 1.4% during the six months ended June 30, 2019 and 2018, respectively. The increase in average cash balance was primarily due to cash inflows associated with draws under our initial $300 million first-lien term loans and the $50 million expansion of such term loans since June 30, 2018. These inflows were partially offset by the repurchases of our 2019 convertible senior notes for cash during the first quarter of 2019.

Income Tax Benefit. Our effective tax benefit rate was 23.2% and 19.0% for the six months ended June 30, 2019 and 2018, respectively. Our income tax benefit for the six months ended June 30, 2019 was higher than the benefit rate from the six months ended June 30, 2018 due to a reduction of net operating loss carryforward valuation allowances due to state tax law changes enacted during the second quarter of 2019. Our income tax benefit primarily consisted of deferred taxes. Our income tax rate differs from the federal statutory rate primarily due to expected state tax liabilities and items not deductible for federal income tax purposes.

Net Loss. Net loss increased by $4.8 million for a reported net loss ~~would have been $76.8 million. This increased~~of $68.6 million for the six months ended June 30, 2019 compared to a net loss of $63.7 million for the ~~nine months ended September 30, 2017, excluding the gain on early extinguishment of debt,~~same period during 2018. This unfavorable variance in net loss was primarily driven by ~~lower revenues due to weak market conditions discussed above~~increased operating expenses for our vessels and

interest expense, partially offset by increased revenue earned by such OSVs during the ~~reduction of active vessels in our operating fleet.~~six months ended June 30, 2019.

Liquidity and Capital Resources

As of June 30, 2019, we had total cash and cash equivalents $142.7 million and restricted cash of $100.2 million. On ~~June 15, 2017,~~July 30, 2019, we ~~terminated~~met the ~~Old~~post-closing conditions precedent required by the Senior Credit Facility ~~and replaced it with~~resulting in $44.0 million of restricted cash related to the ~~New Credit Facility. The New~~eligible receivables-backed tranche of the Senior Credit Facility isbeing transferred by the Agent to our unrestricted cash account on July 31, 2019. On July 31, 2019, our restricted cash balance under the Senior Credit Facility was reduced to $56.0 million. Pro forma for this post-closing rebalancing, our total unrestricted cash balance as of June 30, 2019 would have been about $186.7 million. We are currently in compliance with all applicable covenants under our Senior Credit Facility, our term loan agreements and the indentures governing our senior notes.

We have $350 million of first-lien term loans that mature in June 2023 and have $121 million in second-lien term loans that mature in February 2025, which are all guaranteed by ~~the Parent Borrower's~~our significant domestic subsidiaries other than Hornbeck Offshore Services, LLC, which is the ~~Co-Borrower. The six-year term of the New Credit Facility extended the February 2020 maturity that was applicable~~Co-Borrower under the ~~Old Credit Facility to June 2023.~~

term loan agreements, and certain of our foreign subsidiaries. The New Credit Facility enhanced our financial flexibility by (i) increasing liquidity from the then applicable borrowing base of $75 million under the Old Credit Facility, (ii) extending the maturity date that existed under the Old Credit Facility by over three years,term loan agreements contain customary representations and ~~(iii) eliminating all of the existing financial ratio maintenance~~warranties, covenants and ~~the anti-cash hoarding provision~~events of ~~the Old~~default, but only one maintenance covenant, which is a $25 million minimum liquidity requirement. On June 28, 2019, we entered into a new $100.0 million Senior Credit Facility. The ~~New~~Senior Credit Facility is guaranteed by certain of our domestic and foreign subsidiaries and contains customary representations and warranties, covenants and events of default. See ~~footnote 5~~Note 8 of the Notes to Consolidated Financial Statements for further discussion of the ~~New~~first-lien term loans, second-lien term loans and the Senior Credit Facility.

~~As of~~ ~~September 30, 2017~~, we had total liquidity (cash and credit availability) of $316.5 million, comprised of $112.8 million of cash and $203.7 million of availability under the New Credit Facility. As of November 8, 2017, we are in compliance with all applicable covenants under our New Credit Facility.

Our capital requirements have historically been financed with cash flows from operations, proceeds from issuances of our debt and common equity securities, borrowings under our ~~credit facilities~~revolving and term loan agreements and cash received from the sale of assets. We require capital to fund on-going operations, remaining obligations under our ~~expanded~~ fifth OSV newbuild program, vessel recertifications, discretionary capital expenditures, debt service and debt ~~service~~repayment and may require capital to fund potential future vessel construction, retrofit or conversion projects, acquisitions, stock repurchases or the retirement of debt. The nature of our capital requirements and the types of our financing sources are not expected to change significantly for the ~~remainder~~balance of ~~2017 and into 2018.~~2019.

We ~~have reviewed~~regularly review all of our debt agreements, including the ~~New~~agreements governing the Senior Credit Facility, first-lien term loans and second-lien term loans, as well as our liquidity position and projected future cash needs. Despite ~~depressed oil and natural gas prices,~~volatility in commodity markets, we remain confident

in the long-term viability of our business model upon an improvement in market conditions. Since the fall of 2014, our liquidity has been impacted by low oil and natural gas prices, which together with oil and natural gas being produced in greater volumes onshore, has impacted the extent of offshore exploration and development activities, resulting in lower than normal cash flow from operations. However, we project that, even with the ~~currently~~current depressed operating levels, cash generated from operations together with cash on-hand ~~and availability under the New Credit Facility~~ should be sufficient to fund our operations and commitments through at least ~~December~~March 31, ~~2019.~~2020. We also believe that we will be able to fund all of the deferred maintenance capital expenditures that will be required upon reactivation of our stacked vessels when market conditions improve with existing sources of liquidity. We have three tranches of funded unsecured debt outstanding that mature in fiscal years 2019, 2020 and 2021, respectively. However, absent the combination of a significant recovery of market conditions such that cash flow from operations were to increase materially from currently projected levels coupled with the refinancing and/or further management of our funded debt obligations, we do not currently expect to have sufficient liquidity to repay the full amount of the 2020 senior notes and the 2021 senior notes as they mature in fiscal years 2020 and 2021, respectively. The ~~New Credit Facility was~~issuance of first-lien term loans and second-lien term loans were significant measures that have enabled us to be in a position to repay our 2019 convertible notes in full and significantly reduce the ~~first step in addressing~~size of the ~~maturities~~maturity of our ~~unsecured notes. Refinancing~~2020 senior notes from $367 million to $224 million. Moreover, refinancing in the current climate is not likely to be achievable on terms that are in-line with our ~~historic~~pre-downturn cost of debt capital. We remain fully cognizant of

the challenges currently facing the offshore oil and gas industry and are proactively taking steps to protect the business enterprise.

The maturity of our 2020 senior notes falls within the twelve-month period following the issuance of these financial statements, which we are required to evaluate as part of our assessment of the Company's ability to continue as a going concern. We continue to ~~review~~believe that we have adequate liquidity to fund our ~~capital structure~~operations through at least March 2020. However, absent the combination of a significant recovery of market conditions such that cash flow from operations were to increase materially from currently projected levels, coupled with the refinancing and/or further management of our funded debt obligations, we do not currently expect to have sufficient liquidity to repay the full amount of the 2020 senior notes and ~~assess~~the 2021 senior notes as they mature in 2020 and 2021, respectively. We continue to implement our on-going plan to address these maturities as they become due, including the refinancing of its 2020 senior notes. Our recent closing of the $100 million Senior Credit Facility is the latest step in that iterative process. Based on continuing discussions with existing and potential lenders, we are optimistic that we will be able to successfully implement this plan. However, we recognize that our plan depends on the actions of these third parties, including reaching an agreement with existing senior note holders and/or obtaining new sources of liquidity, and, therefore, we are unable at this time to conclude that such plan is reasonably certain of being achieved.

We may, subject to market conditions and our other strategic options, from time to time amend, extinguish or repurchase part or all of our outstanding debt securities or exchange them for other debt or equity securities or loans. While we have an authorized share repurchase program, we currently intend, subject to market conditions, to prioritize our cash usage appropriate to the current market cycle, our longer term commitments and our strategic ~~options.~~objectives.

Events beyond our control, such as sustained low prices for oil and natural gas, a further significant decline in such commodity prices, renewed regulatory-driven delays in the issuance of drilling plans and permits in the GoM, declines in expenditures for offshore exploration, development and production activity, any extended reduction in domestic consumption of refined petroleum products and other reasons discussed under the ~~“Forward~~"Forward Looking ~~Statements”~~Statements" on page ii and ~~the~~ "Item 1A—Risk ~~Factors stated in Item 1A~~Factors" of our Annual Report on Form 10-K, may affect our financial condition, results of operations or cash flows in the future. Should the need for additional financing arise, we may not be able to access the capital markets on attractive terms at that time or otherwise obtain sufficient capital to meet our maturing debt obligations or finance growth opportunities that may arise. We will continue to closely monitor our liquidity position, as well as the state of the global capital and credit markets. See further discussion in the Contractual Obligations section below.

Cash Flows

Operating Activities. Historically, we have relied primarily on cash flows from operations to provide working capital for current and future operations. Cash flows used in operating activities were $~~29.2~~$48.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 compared to cash flows ~~provided by~~used in operating activities of $~~57.2~~$27.7 million for the same period in ~~2016.~~2018. Operating cash flows for the first ~~nine~~six months of ~~2017~~2019 were unfavorably affected by weak market conditions for our vessels operating worldwide ~~which led to a decline in~~and higher cash outflows associated with the regulatory recertifications for our ~~weighted average~~ active ~~operating fleet from 28.1 to 26.6~~ vessels.

Investing Activities. Net cash used in investing activities was $~~15.1~~$3.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 compared to $~~91.8~~$49.1 million for the same period in ~~2016.~~2018. Cash used during the first ~~nine~~six months of ~~2017 and 2016~~2019 consisted primarily of construction costs paid for our fifth OSV newbuild ~~program.~~program, as well as capital improvements to our operating fleet. Cash used during the first six months of 2018 consisted primarily of the purchase of four high-spec Jones Act-qualified OSVs and related equipment from Aries Marine Corporation.

Financing Activities. Net cash ~~used in~~provided by financing activities was ~~$59.7~~$70.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 compared to ~~$0.8~~$0.3 million net cash used in financing activities for the same period in ~~2016.~~2018. Net cash ~~used in~~provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 resulted from net proceeds from

the Senior Credit Facility and the incremental first-lien term loans partially offset by the repurchase of a portion of the 2019 convertible senior notes and the 2020 senior notes and related financing costs. Net cash used in financing activities for the nine months ended September 30, 2016 consisted of deferred financing costs related to the amendments of our then-existing revolving credit facility partially offset by net proceeds from common shares issued pursuant to our employee stock-based incentive compensation plans.notes.

Contractual Obligations

Debt

As of ~~September~~June 30, ~~2017,~~2019, the Company had the following outstanding ~~long-term~~ debt (in thousands, except effective interest rate):

Total Debt Effective Interest Rate Cash Interest Payment Payment Dates
5.875% senior notes due 2020, net of deferred financing costs of $2,286 (1) $ 364,656
6.08 % $ 10,779
April 1 and October 1
5.000% senior notes due 2021, net of deferred financing costs of $3,384 (1) 446,616
5.21 % 11,250
March 1 and September 1
1.500% convertible senior notes due 2019, net of original issue discount of $7,579 and deferred financing costs of $1,698 90,370
6.23 % 747
March 1 and September 1
First-lien credit facility due 2023, plus deferred gain of $19,689, net of original issue discount of $19 and deferred financing costs of $3,603 (2) 112,389
7.24 % 581
Variable
$ 1,014,031



	Total Debt		Effective Interest Rate		Cash Interest Payment		Payment Dates
5.875% senior notes due 2020, net of deferred financing costs of $712 (1)	$	223,601	6.08	%	$	6,589	April 1 and October 1
5.000% senior notes due 2021, net of deferred financing costs of $1,688 (1)	448,312		5.21	%	11,250		March 1 and September 1
1.500% convertible senior notes due 2019, net of original issue discount of $177 and deferred financing costs of $60	25,529		6.23	%	193		Final payment on September 1, 2019
First-lien term loans due 2023, plus deferred gain of $14,779, net of original issue discount of $3,536 and deferred financing costs of $3,728 (2)	357,515		9.41	%	3,019		Variable
Second-lien term loans due 2025, including deferred gain of $20,229	141,464		9.50	%	2,879		January 31, April 30, July 31, and October 31
Senior Credit Facility, net of deferred financing costs of $6,250 (3)	93,750		7.40	%	637		Monthly
	$	1,290,171


(1)	The senior notes do not require any payments of principal prior to their stated maturity dates, but pursuant to the indentures under which the 2020 and 2021 senior notes were issued, we would be required to make offers to purchase such senior notes upon the occurrence of specified events, such as certain asset sales or a change in control.

(2)

The interest rate on the first-lien ~~credit facility~~term loan is variable based on a base rate at the Company's ~~election.~~election, plus an applicable margin. The amount reflected in this table is the monthly amount payable based on the 30-day LIBOR interest rate that was elected and in effect on ~~September~~June 30, ~~2017.~~2019. Please see ~~note 5~~Note 8 for further discussion of the variable interest rate ~~included within~~applicable to the first-lien ~~credit facility.~~term loans.


(3)	The interest rate on the Senior Credit Facility is variable based on 30-day LIBOR plus a fixed margin of 5.00%. The amount reflected in this table is the monthly amount payable based on the 30-day LIBOR interest rate that was in effect on June 30, 2019. Please see Note 8 for further discussion of the variable interest rate applicable to the Senior Credit Facility.

The credit ~~agreement~~agreements governing the ~~New~~Senior Credit Facility, the first-lien term loans and second-lien term loans and the indentures governing our 2020 and 2021 senior notes impose certain operating and financial restrictions on us. Such restrictions affect, and in many cases limit or prohibit, among other things, our ability to incur additional indebtedness, make capital expenditures, redeem equity, create liens, sell assets and pay dividends or make other restricted payments. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we were in compliance with all applicable financial covenants. We continuously review our debt covenants and report to the agents for the lenders of our ~~lenders~~first-lien term loans and second-lien term loans our compliance with ~~financial~~all applicable covenants on a quarterly basis and we report to the agent of our Senior Credit Facility our compliance with the applicable covenants on a monthly basis. We also consider such covenants in evaluating ~~proposed~~ transactions that will have an effect on our financial ratios.

Growth Capital Expenditures and Related Commitments

~~The following table sets forth~~During the ~~amounts incurred for our~~first quarter of 2018, the Company notified the shipyard that was constructing the remaining two vessels in the Company's fifth OSV newbuild program that it was terminating the construction contracts for such vessels. The Company intends to work with the performance bond surety to select and contract with a mutually acceptable shipyard that can finish construction and deliver such vessels. On October 2, 2018, the original shipyard filed suit against the Company in the 22nd Judicial District Court for the Parish of St. Tammany in the State of Louisiana, or the Gulf Island Litigation. The Company has responded to the suit and has alleged counter-claims. The Company intends to vigorously defend the shipyard’s claims and considers them to be without merit. The surety authorized the Company to select a completion yard and, subject to a reservation of rights, offered to fund the cost to complete the vessels in excess of the contract price of up to the full amount of the performance bond. However, the surety's did not comply with the terms of the performance bond. Consequently, the Company considers the surety to be in default of their performance bonds for the

foregoing and other reasons. The Company has initiated legal proceedings against the surety as a third-party claim in the Gulf Island Litigation.

The cost of this nearly completed 24-vessel newbuild program, before construction period interest, ~~during~~is expected to be approximately $1,335.0 million, of which $20.5 million and $38.2 million are currently expected to be incurred in the ~~nine~~remainder of 2019 and fiscal 2020, respectively. As of the date of termination, these two remaining vessels, both of which are domestic 400 class MPSVs, were projected to be delivered in the second and third quarters of 2019, respectively. Due to the uncertainty of the timing and location of future construction activities, these vessels are now projected to be delivered in the second and third quarters of 2020, respectively. However, the timing of these remaining construction draws remains subject to change commensurate with any potential further delays in the delivery dates of such vessels. From the inception of this program through June 30, 2019, the Company had incurred $1,276.3 million, or 95.6%, of total expected project costs. During the six months ended ~~September~~June 30, ~~2017~~2019 the Company incurred $2.2 million related to the construction of these vessels.

Maintenance and ~~since such program’s inception, as well as the estimated total project costs for such program (in millions):~~Other Capital Expenditures

Nine Months Ended
September 30, 2017
Incurred Since
Inception

Estimated
Program
Totals (1)

Projected
Delivery
Dates (1)
Growth Capital Expenditures:
OSV newbuild program #5 (2) $ 5.5
$ 1,269.5
$ 1,335.0
2Q2013-4Q2018

~~(1)~~

Estimated Program Totals and Projected Delivery Dates are based on internal estimates and are subject to change due to delays and possible cost overruns inherent in any large construction project, including, without limitations, shortages of equipment, lack of shipyard availability, unforeseen engineering problems, work stoppages, weather interference, unanticipated cost increases, the inability to obtain necessary certifications and approvals and shortages of materials, component equipment or skilled labor. All of the above historical and budgeted capital expenditure project amounts for our newbuild program represent estimated cash outlays and do not include any allocation of capitalized construction period interest. Actual and projected delivery dates correspond to the first and last vessels that are contracted with shipyards for construction and delivery under our currently active program, respectively.

~~(2)~~

Our fifth OSV newbuild program consists of vessel construction contracts with three domestic shipyards to build four 300 class OSVs, five 310 class OSVs, ten 320 class OSVs, three 310 class MPSVs and two 400 class MPSVs. As of November 1, 2017, we had placed 22 vessels in service under such program. The remaining two vessels under this 24-vessel domestic newbuild program are currently expected to be placed in service in the third and fourth quarters of 2018.

The following table summarizes the costs incurred, prior to the allocation of construction period interest, for the purposes set forth below for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and a forecast for the fiscal year ending December 31, ~~2017~~2019 (in millions):


	Three Months Ended September 30,					Nine Months Ended September 30,				Year Ended December 31,		Three Months Ended June 30,				Six Months Ended June 30,				Year Ended December 31,
	2017		2016			2017		2016		2017		2019		2018		2019		2018		2019
	Actual		Actual			Actual		Actual		Forecast		Actual		Actual		Actual		Actual		Forecast
Maintenance and Other Capital Expenditures:
Maintenance Capital Expenditures
Deferred drydocking charges (1)	$	1.0	$	0.9		$	7.0	$	3.2	$	9.2	$	6.3	$	1.4	$	15.6	$	3.4	$	30.6
Other vessel capital improvements (2)	0.6		(0.4		)	0.9		5.3		1.3		0.7		1.5		1.0		4.1		4.5
	1.6		0.5			7.9		8.5		10.5		7.0		2.9		16.6		7.5		35.1
Other Capital Expenditures
Commercial-related vessel improvements (3)	0.2		2.6			0.4		13.5		1.8
Miscellaneous non-vessel additions (4)	0.9		0.1			1.4		0.4		1.5
Commercial-related capital expenditures (3)												—		4.1		0.2		5.4		0.2
Non-vessel related capital expenditures (4)												0.2		0.1		0.3		0.1		0.6
	1.1		2.7			1.8		13.9		3.3		0.2		4.2		0.5		5.5		0.8
Total	$	2.7	$	3.2		$	9.7	$	22.4	$	13.8	$	7.2	$	7.1	$	17.1	$	13.0	$	35.9


(1)	Deferred drydocking charges for ~~2017~~2019 include the projected recertification costs for 1215 OSVs and ~~four~~five MPSVs.


(2)	Other vessel capital improvements include costs for discretionary vessel enhancements, which are typically incurred during a planned drydocking event to meet customer specifications.

(3)

Commercial-related capital expenditures, including vessel improvements ~~include items~~ such as the addition of cranes, ROVs, helidecks, living quarters and other specialized vessel equipment, or the modification of vessel capacities or capabilities, such as DP upgrades and mid-body extensions, which costs are typically included in and offset, in whole or in part, by higher dayrates charged to ~~customers.~~customers; and commercial-related intangibles.


(4)	Non-vessel related capital expenditures are primarily related to information technology and shoreside support initiatives.

Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect its performance in the future. Forward-looking statements are all statements other than historical facts, such as statements regarding assumptions, expectations, beliefs and projections about future events or conditions. You can generally identify forward-looking statements by the appearance in such a statement of words like “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “remain,” “should,” “will,” or other comparable words or the negative of such words. The accuracy of the Company’s assumptions, expectations, beliefs and projections depends on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company’s actual future results might differ from the forward-looking statements made in this Quarterly Report on Form 10-Q for a variety of reasons, including ~~sustained low or further declines~~impacts from changes in oil and natural gas prices in the U.S. and worldwide; continued weakness in demand and/or pricing for the Company’s services through and beyond the maturity of any of the Company's long-term debt; unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters, or vessel management contracts, or failures to finalize commitments to charter or manage vessels; ~~sustained or further reductions in~~continued weak capital spending ~~budgets~~ by ~~customers;~~customers on offshore exploration and development; the inability to accurately predict vessel utilization levels and dayrates; ~~fewer than anticipated~~sustained weakness in the number of deepwater and ultra-deepwater drilling units operating in the GoM or other regions where the Company operates; the ~~effect of inconsistency by the United States government in the pace of issuing drilling permits and plan approvals in the GoM or other drilling regions; the~~ Company’s inability to successfully complete the ~~remainder~~final two vessels of its current vessel newbuild program ~~on-time and~~ on-budget, ~~which involves~~including any failure or refusal by the ~~construction and integration~~issuer of ~~highly complex vessels and systems;~~performance bonds to cover cost overruns that may result at a completion shipyard; the inability to successfully market the vessels that the Company owns, is constructing or might acquire; the U.S. government's cancellation or non-renewal of the management, operations and maintenance contracts for non-owned vessels; an oil spill or other significant event in the United States or another offshore drilling region that could have a broad impact on deepwater and other offshore energy exploration and production activities, such as the suspension of activities or significant regulatory responses; the imposition of laws or regulations that result in reduced exploration and production activities or that increase the Company’s operating costs or operating requirements; environmental litigation that impacts customer plans or projects; disputes with customers; disputes with vendors; bureaucratic, administrative, operating or ~~operating~~court-imposed barriers that prevent or delay vessels in foreign markets from going ~~on-hire~~ or ~~result in contractual penalties~~remaining on-hire; administrative, judicial or ~~deductions imposed by foreign customers; the impact stemming from the reduction of Petrobras' announced plans for or administrative~~political barriers to exploration and production activities in ~~Brazil;~~Mexico, Brazil or other foreign locations; disruption in the timing and/or extent of Mexican offshore ~~activities; age~~activities or changes in law or governmental policy in Mexico that restricts or slows the pace of further development of its offshore oilfields; changes in law or governmental policy or judicial action in Mexico affecting the Company's Mexican registration of vessels there; administrative or other ~~restrictions imposed on our vessels by customers;~~legal changes in Mexican cabotage laws; other legal or administrative changes in Mexico that adversely impact planned or expected offshore energy development; unanticipated difficulty in effectively competing in or operating in international markets; less than anticipated subsea infrastructure and field development demand in the GoM and other markets affecting ~~our~~the Company's MPSVs; sustained vessel over capacity for existing demand levels in the markets in which the Company competes; economic and geopolitical risks; weather-related risks; upon a return to improved operating conditions, the shortage of or the inability to attract and retain qualified personnel, when needed, including vessel personnel for active vessels or vessels the Company may reactivate or acquire; any success in unionizing any of the Company's U.S. fleet personnel; regulatory risks; the repeal or administrative weakening of the Jones Act or adverse changes in the interpretation of the Jones ~~Act ;~~Act; drydocking delays and cost overruns and related risks; vessel accidents, pollution incidents or other events resulting in lost revenue, fines, penalties or other expenses that are unrecoverable from insurance

policies or other third parties; unexpected litigation and insurance expenses; other industry risks; fluctuations in foreign currency valuations compared to the U.S. dollar and risks associated with expanded foreign operations, such as non-compliance with or the unanticipated effect of tax laws,

customs laws, immigration laws, or other legislation that result in higher than anticipated tax rates or other costs; the inability to repatriate foreign-sourced earnings and profits; the possible loss or material limitation of the Company's tax net operating loss carryforwards and other attributes due to a change in control, as defined in Section 382 of the Internal Revenue Code; the inability of the Company to refinance or otherwise retire certain funded debt obligations that come due in ~~2019,~~ 2020 and 2021; or the potential for any impairment charges that could arise in the future and that would reduce the Company’s consolidated net tangible assets which, in turn, would further limit the Company’s ability to grant certain liens, make certain investments, and incur certain debt permitted under the Company’s senior notes indentures and term loan agreements; or an adverse decision in any potential dispute involving the ~~New Credit Facility.~~permissibility of the exchange of 2020 senior notes for second-lien term loans due February 2025. In addition, the Company’s future results may be impacted by adverse economic conditions, such as inflation, deflation, or lack of liquidity in the capital markets or an increase in interest rates, that may negatively affect it or parties with whom it does business resulting in their non-payment or inability to perform obligations owed to the Company, such as the failure of customers to fulfill their contractual obligations, ~~or the failure by individual lenders to provide funding under the Company’s New Credit Facility,~~ if and when required. ~~Further, the Company can give no assurance regarding when and to what extent it will effect common stock or note repurchases.~~ Should one or more of the foregoing risks or uncertainties materialize in a way that negatively impacts the Company, or should the Company’s underlying assumptions prove incorrect, the Company’s actual results may vary materially from those anticipated in its forward-looking statements, and its business, financial condition and results of operations could be materially and adversely affected and, if sufficiently severe, could result in noncompliance with certain covenants of the Company's existing indebtedness. Additional factors that you should consider are set forth in detail in the “Risk Factors” section of the Company's most recent Annual Report on Form 10-K as well as other filings the Company has made and will make with the Securities and Exchange Commission which, after their filing, can be found on the Company’s website, www.hornbeckoffshore.com.

Item 3—Quantitative and Qualitative Disclosures About Market Risk

~~Convertible Note Hedge and Warrant Transactions~~

In connection with a repurchase of $200,353,000 in principal amount of the 2019 convertible senior notes in June 2017, the Company and the applicable counterparties partially terminated at no cost to the Company the convertible note hedge call options and the warrant transactions entered into in August 2012 with each of Barclays Bank PLC, JPMorgan Chase Bank, National Association, London Branch and Wells Fargo Bank, National Association. The call options were ratably terminated based on the dollar amount of the 2019 convertible senior notes repurchased, and remaining call options cover, subject to customary anti-dilution adjustments, the number of shares underlying the 2019 convertible senior notes that remain outstanding at a strike price equal to the conversion price of such notes. Warrants with respect to 3,720,916 shares of our common stock at a strike price of $68.53 per share were terminated leaving a total of 1,850,625 warrants outstanding. For a form of each of the termination agreements described above, see Exhibits 4.21 and 4.22, respectively.

There have been no ~~other~~ material changes to the market risk disclosures set forth in Item 7A in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

Item 4—Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1—Legal Proceedings

None.

Item 1A—Risk Factors

There were no changes to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2018.

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3—Defaults Upon Senior Securities

None.

Item 4—Mine Safety Disclosures

None.

Item 5—Other Information

Glossary of Terms Currently Used in Our SEC Filings

"2019 convertible senior notes" or "2019 notes" means ~~the Company's~~ 1.500% convertible senior notes due 2019;

"2020 senior notes" or "2020 notes" means ~~the Company's~~ 5.875% senior notes due 2020;

"2021 senior notes" or "2021 notes" means ~~the Company's~~ 5.000% senior notes due 2021;

“AHTS” means anchor-handling towing supply;

“ASC” means Financial Accounting Standards Board Accounting Standards Codification;

“average dayrate” means, when referring to OSVs or MPSVs, average ~~revenue~~revenues per day, which includes charter hire, crewing services and net brokerage revenues, based on the number of days during the period that the OSVs or MPSVs, as applicable, generated ~~revenue.~~revenues. For purposes of vessel brokerage arrangements, this calculation excludes that portion of ~~revenue~~revenues that is equal to the cost of in-chartering third-party equipment paid by customers;

"BOEM" means the Bureau of Ocean Energy Management;

"BSEE" means the Bureau of Safety and Environmental Enforcement;

“"Brent" means sweet light crude oil that serves as a benchmark price for purchases of oil worldwide. This grade is extracted from the North Sea.

"cabotage ~~laws”~~laws" means laws pertaining to the privilege of operating vessels in the navigable waters of a nation;

“coastwise trade” means the transportation of merchandise or passengers by water, or by land and water, between points in the United States, either directly or via a foreign port;

~~"continental shelf" or "shelf" means offshore areas, generally less than 1,000' in depth;~~

“conventional” means, when referring to OSVs, vessels that are at least 30 years old, are generally less than 200’ in length or carry less than 1,500 deadweight tons of cargo when originally built and primarily operate, when active, on the continental shelf;

“deepwater” means offshore areas, generally 1,000’ to 5,000’ in depth;

~~“Deepwater Horizon incident” means the subsea blowout and resulting oil spill at the Macondo well site in the GoM in April 2010 and subsequent sinking of the Deepwater Horizon drilling rig;~~

“deep-well” means a well drilled to a true vertical depth of 15,000’ or greater, regardless of whether the well was drilled in the shallow water of the Outer Continental Shelf or in the deepwater or ultra-deepwater;

“DOI” means U.S. Department of the Interior and all its various sub-agencies, including effective October 1, 2011 the Bureau of Ocean Energy Management (“BOEM”), which handles offshore leasing, resource evaluation, review and administration of oil and gas exploration and development plans, renewable energy development, National Environmental Policy Act analysis and environmental studies, and the Bureau of Safety and Environmental Enforcement (“BSEE”), which is responsible for the safety and enforcement functions of offshore oil and gas operations, including the development and enforcement of safety and environmental regulations, permitting of offshore exploration, development and production activities, inspections, offshore regulatory programs, oil spill response and newly formed training and environmental compliance programs; BOEM and BSEE being successor entities to the Bureau of Ocean Energy Management, Regulation and Enforcement (“BOEMRE”), which effective June 2010 was the successor entity to the Minerals Management Service;

“domestic public company OSV peer group” includes ~~Gulfmark Offshore, Inc. (NYSE:GLF),~~ SEACOR Holdings Inc. (NYSE:CKH) and Tidewater Inc. (NYSE:TDW);

“DP-1”, “DP-2” and “DP-3” mean various classifications of dynamic positioning systems on new generation vessels to automatically maintain a vessel’s position and heading through anchor-less station-keeping;

“DWT” means deadweight tons;

“effective dayrate” means the average dayrate multiplied by the average utilization rate;

“EIA” means the U.S. Energy Information Administration;

"EPA" means United States Environmental Protection Agency;

“flotel” means on-vessel accommodations services, such as lodging, meals and office space;

~~“GAAP”~~"GAAP" means United States generally accepted accounting principles;

“~~GoM”~~Greater GoM Operating Region” means the U.S. Gulf of ~~Mexico;~~Mexico, the Mexican Gulf of Mexico, the Caribbean and the Northern Slope of South America, including Colombia, Venezuela, Suriname and Guyana, excluding Brazil;

~~"high-specification"~~“high-specification” or “high-spec” means, when referring to new generation OSVs, vessels with cargo-carrying capacity of greater than 2,500 DWT (i.e., 240 class OSV notations or higher), and dynamic-positioning systems with a DP-2 classification or higher; and, when referring to jack-up drilling rigs, rigs capable of working in 400-ft. of water depth or greater, with hook-load capacity of 2,000,000 lbs. or greater, with cantilever reach of 70-ft. or greater; and minimum quarters capacity of 150 berths or more and dynamic-positioning systems with a DP-2 classification or higher;

~~“IHS-CERA”~~"IHS-CERA" means the division of IHS Inc. focused on providing knowledge and independent analysis on energy markets, geopolitics, industry trends and strategy;

~~“IHS-Petrodata”~~"IHS-Petrodata" means the division of IHS Inc. focused on providing data, information, and market intelligence to the offshore energy industry;

“IRM” means inspection, repair and maintenance, also known as “IMR,” or inspection, maintenance and repair, depending on regional preference;

“Jones Act” means the U.S. cabotage ~~laws~~law known as the Merchant Marine Act of 1920, as amended;

“Jones Act-qualified” means, when referring to a vessel, a U.S.-flagged vessel qualified to engage in domestic coastwise trade under the Jones Act;

“long-term contract” means a time charter of one year or longer in ~~duration at inception;~~

"low-specification" or “low-spec” means, when referring to new generation OSVs, vessels with cargo-carrying capacity between 1,500 DWT and 2,500 DWT (i.e., 200 class OSV notations), or dynamic-positioning systems with a DP-1 classification or lower;duration;

“Macondo” means the well site location in the deepwater GoM where the Deepwater Horizon incident occurred as well as such incident itself;

“MPSV” means a multi-purpose support vessel;

“MSRC” means the Marine Spill Response Corporation;

"New Credit Facility" means a new $300 million first-lien delayed-draw term loan credit facility by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC as Co-Borrower, certain holders of the Company’s outstanding notes, or the Initial Lenders, and Wilmington Trust, National Association, as Administrative Agent and Collateral Agent for the lenders;

“new generation” means, when referring to OSVs, modern, deepwater-capable vessels ~~with cargo-carrying capacity greater than 1,500 DWT (i.e., 200 class OSV notations or higher) and dynamic-positioning systems with a DP-1 classification or higher,~~ subject to the regulations promulgated under the International Convention on Tonnage Measurement of Ships, 1969, which was adopted by the United States and made effective for all U.S.-flagged vessels in 1992 and foreign-flagged equivalent vessels;

~~"Old Credit Facility"~~“OPA 90” means the ~~Company’s $200 million previously existing senior secured revolving credit facility, dated as~~Oil Pollution Act of ~~February 6, 2015, as subsequently amended, with Wells Fargo Bank, National Association, as Administrative Agent, and the lenders party thereto;~~1990;

“OSV” means an offshore supply vessel, also known as a “PSV,” or platform supply vessel, depending on regional preference;

“PEMEX” means Petroleos Mexicanos;

“Petrobras” means Petroleo Brasileiro S.A.;

~~"phantom restricted stock units" means cash-settled restricted stock unit awards;~~

“public company OSV peer group” means SEACOR Marine Holdings Inc. (NYSE:~~CKH), GulfMark Offshore, Inc. (NYSE:GLF)~~SMHI), Tidewater Inc. (NYSE:TDW), ~~Farstad Shipping (NO:FAR),~~ Solstad Offshore (NO:SOFF)~~, Deep Sea Supply (NO:DESSC)~~, DOF ASA (NO:DOF), Siem Offshore (NO:SIOFF), Groupe Bourbon SA (GBB:FP), Havila Shipping ASA (NO:HAVI), and/or Eidesvik Offshore (NO:EIOF) ~~and/or Ezra Holdings Ltd (SI:EZRA)~~;

“ROV” means a remotely operated vehicle; ~~and~~

“U.S. GoM” means the U.S. Gulf of Mexico;

"USCG" means United States Coast Guard;

“ultra-deepwater” means offshore areas, generally more than 5,000’ in ~~depth.~~depth; and

“ultra high-specification” or “ultra high-spec” means, when referring to new generation OSVs, vessels with cargo-carrying capacity of greater than 5,000 DWT (i.e., 300 class OSV notations or higher), and dynamic-positioning systems with a DP-2 classification or higher;

"WTI" means a grade of crude oil used as a benchmark in domestic oil pricing. This grade is described as medium crude oil because of its relatively low density, and sweet because of its low sulfur content.

Item 6—Exhibits

Exhibit Index



Exhibit Number		Description of Exhibit

3.1	—	Second Restated Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended March 31, 2005).

3.2	—	Fourth Restated Bylaws of the Company adopted June 30, 2004 (incorporated by reference to Exhibit 3.3 to the Company’s Form 10-Q for the quarter ended June 30, 2004).

3.3	—	Amendment No. 1 to Fourth Restated Bylaws of the Company adopted June 21, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 27, 2012).

3.4	—	Amended and Restated Certificate of Designation of Series A Junior Participating Preferred Stock filed with the Secretary of State of the State of Delaware on July 2, 2013 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed July 3, 2013).

4.1	—	Specimen stock certificates for the Company’s common stock, $0.01 par value (for U.S. citizens and non-U.S. citizens) (incorporated by reference to Exhibit 4.4 to the Company’s Form 8-A/A filed July 3, 2013, Registration No. 001-32108).

4.2	—	Indenture, dated March 16, 2012 among Hornbeck Offshore Services, Inc., as issuer, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (including form of 5.875% Senior Notes due 2020) (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed March 21, 2012).

4.3	—	Indenture dated as of August 13, 2012 by and among Hornbeck Offshore Services, Inc., the guarantors named therein, and Wells Fargo Bank, National Association, as Trustee (including form of 1.500% Convertible Senior Notes due 2019) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.4	—	Confirmation of Base Call Option Transaction dated as of August 7, 2012 by and between Hornbeck Offshore Services, Inc. and Barclays Bank PLC (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.5	—	Confirmation of Base Call Option Transaction dated as of August 7, 2012 by and between Hornbeck Offshore Services, Inc. and JPMorgan Chase Bank, National Association, London Branch (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.6	—	Confirmation of Base Call Option Transaction dated as of August 7, 2012 by and between Hornbeck Offshore Services, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.7	—	Confirmation of Additional Base Call Option Transaction dated as of August 8, 2012 by and between Hornbeck Offshore Services, Inc. and Barclays Bank PLC (incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on August 13, 2012).



Exhibit Number		Description of Exhibit

4.8	—	Confirmation of Additional Base Call Option Transaction dated as of August 8, 2012 by and between Hornbeck Offshore Services, Inc. and JPMorgan Chase Bank, National Association, London Branch (incorporated by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.9	—	Confirmation of Additional Base Call Option Transaction dated as of August 8, 2012 by and between Hornbeck Offshore Services, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.10	—	Confirmation of Base Warrant dated as of August 7, 2012 by and between Hornbeck Offshore Services, Inc. and Barclays Bank PLC (incorporated by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.11	—	Confirmation of Base Warrant dated as of August 7, 2012 by and between Hornbeck Offshore Services, Inc. and JPMorgan Chase Bank, National Association, London Branch (incorporated by reference to Exhibit 4.9 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.12	—	Confirmation of Base Warrant dated as of August 7, 2012 by and between Hornbeck Offshore Services, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.10 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.13	—	Confirmation of Additional Warrants dated as of August 8, 2012 by and between Hornbeck Offshore Services, Inc. and Barclays Bank PLC (incorporated by reference to Exhibit 4.11 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.14	—	Confirmation of Additional Warrants dated as of August 8, 2012 by and between Hornbeck Offshore Services, Inc. and JPMorgan Chase Bank, National Association, London Branch (incorporated by reference to Exhibit 4.12 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.15	—	Confirmation of Additional Warrants dated as of August 8, 2012 by and between Hornbeck Offshore Services, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.13 to the Company’s Current Report on Form 8-K filed on August 13, 2012).

4.16	—	Indenture governing the 5.000% Notes, dated March 28, 2013 among Hornbeck Offshore Services, Inc., as issuer, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (including form of 5.000% Senior Notes due 2021) (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 28, 2013).

4.17	—	Rights Agreement dated as of July 1, 2013 between Hornbeck Offshore Services, Inc. and Computershare Inc., as Rights Agent, which includes as Exhibit A the Amended and Restated Certificate of Designation of Series A Preferred Stock, as Exhibit B the form of Right Certificate and as Exhibit C the form of Summary of Rights to Purchase Shares (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed July 3, 2013).

4.18	—	First Supplemental Indenture, dated October 6, 2015 among Hornbeck Offshore Services, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (to the indenture governing the 1.5% Convertible Senior Notes due 2019) (incorporated by reference to Exhibit 4.18 to the Company’s Form 10-Q for the period ended September 30, 2015).



~~Exhibit~~ ~~Number~~		~~Description of Exhibit~~

4.19	—	First Supplemental Indenture, dated October 6, 2015 among Hornbeck Offshore Services, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (to the indenture governing the 5.875% Senior Notes due 2020) (incorporated by reference to Exhibit 4.19 to the Company’s Form 10-Q for the period ended September 30, 2015).



Exhibit Number		Description of Exhibit

4.20	—	First Supplemental Indenture, dated October 6, 2015 among Hornbeck Offshore Services, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (to the indenture governing the 5.000% Senior Notes due 2021) (incorporated by reference to Exhibit 4.20 to the Company’s Form 10-Q for the period ended September 30, 2015).

4.21*4.21	—	Form of Call Option Termination Agreement dated as of June 2017 by and between Hornbeck Offshore Services, Inc. and the applicable ~~counterparty.~~counterparty (incorporated by reference to Exhibit 4.21 to the Company’s Form 10-Q for the period ended September 30, 2017).

4.22*4.22	—	Form of Warrant Termination Agreement dated as of June 2017 by and between Hornbeck Offshore Services, Inc. and the applicable ~~counterparty.~~ counterparty (incorporated by reference to Exhibit 4.22 to the Company’s Form 10-Q for the period ended September 30, 2017).

4.23	—	Second Supplemental Indenture, dated May 17, 2018 among Hornbeck Offshore Services, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (to the indenture governing the 1.5% convertible Senior Notes due 2019) (incorporated by reference to Exhibit 4.23 to the Company’s Form 10-Q for the period ended June 30, 2018).

4.24	—	Second Supplemental Indenture, dated May 17, 2018 among Hornbeck Offshore Services, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (to the indenture governing the 5.875% Senior Notes due 2020) (incorporated by reference to Exhibit 4.24 to the Company’s Form 10-Q for the period ended June 30, 2018).

4.25	—	Second Supplemental Indenture, dated May 17, 2018 among Hornbeck Offshore Services, Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (to the indenture governing the 5.000% Senior Notes due 2021) (incorporated by reference to Exhibit 4.25 to the Company’s Form 10-Q for the period ended June 30, 2018).

4.26	—	Instrument of Resignation, Appointment and Acceptance dated as of May 8, 2019 by and among the Company, Wells Fargo Bank, National Association, as resigning trustee, and Wilmington Trust, National Association, as successor trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed July 5, 2019).

*4.27	—	Third Supplemental Indenture, dated July 12, 2019 among Hornbeck OffshoreServices, Inc., the guarantors party thereto and Wells Fargo Bank, National Association,as trustee (to the indenture governing the 1.5% convertible Senior Notes due 2019).

*4.28	—	Third Supplemental Indenture, dated July 12, 2019 among Hornbeck Offshore Services, Inc., the guarantors party thereto and Wilmington Trust, National Association, as successor trustee (to the indenture governing the 5.875% Senior Notes due 2020).

*4.29	—	Third Supplemental Indenture, dated July 12, 2019 among Hornbeck Offshore Services, Inc., the guarantors party thereto and Wilmington Trust, National Association, as successor trustee (to the indenture governing the 5.000% Senior Notes due 2021).

10.1	—	First Lien Term Loan Agreement dated as of June 15, 2017 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Administrative Agent, Wilmington Trust, National Association, as Collateral Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 16, 2017).



Exhibit Number		Description of Exhibit

10.2	—	First Lien Guaranty and Collateral Agreement dated as of June 15, 2017 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Collateral Agent, and the obligors signatory thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 16, 2017).

10.3	—	First Amendment to First Lien Term Loan Agreement dated as of June 15, 2017 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Administrative Agent, Wilmington Trust, National Association, as Collateral Agent, and the lenders party thereto with accompanying Exhibit A (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 29, 2018).

10.4†	—	Hornbeck Offshore Services, Inc. Deferred Compensation Plan dated as of July 10, 2007 (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the period ended June 30, 2007).

10.5†	—	Second Amended and Restated Hornbeck Offshore Services, Inc. Incentive Compensation Plan, dated effective May 2, 2006 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 4, 2006).

10.6†	—	Amendment to the Second Amended and Restated Hornbeck Offshore Services, Inc. Incentive Compensation Plan, dated effective May 12, 2008 (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q for the period ended March 31, 2008).

10.7†	—	Second Amendment to the Second Amended and Restated Hornbeck Offshore Services, Inc. Incentive Compensation Plan, dated effective June 24, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 30, 2010).

10.8†	—	Amended and Restated Senior Employment Agreement dated May 7, 2007 by and between Todd M. Hornbeck and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the period ended March 31, 2007).

10.9†	—	Amended and Restated Employment Agreement dated May 7, 2007 by and between Carl G. Annessa and the Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the period ended March 31, 2007).

10.10†	—	Amended and Restated Employment Agreement dated May 7, 2007 by and between James O. Harp, Jr. and the Company (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the period ended March 31, 2007).

10.11†	—	Amendment to Amended and Restated Senior Employment Agreement dated effective May 12, 2008 by and between Todd M. Hornbeck and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the period ended March 31, 2008).

10.12†	—	Amendment to Amended and Restated Employment Agreement dated effective May 12, 2008 by and between Carl G. Annessa and the Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the period ended March 31, 2008).

10.13†	—	Amendment to Amended and Restated Employment Agreement dated effective May 12, 2008 by and between James O. Harp, Jr. and the Company (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the period ended March 31, 2008).

10.14†	—	Second Amendment to Amended and Restated Senior Employment Agreement dated effective December 31, 2009 by and between Todd M. Hornbeck and the Company (incorporated by reference to Exhibit 10.12 to the Company’s Form 10-K for the period ended December 31, 2009).



Exhibit Number		Description of Exhibit

10.15†	—	Second Amendment to Amended and Restated Employment Agreement dated effective December 31, 2009 by and between Carl G. Annessa and the Company (incorporated by reference to Exhibit 10.13 to the Company’s Form 10-K for the period ended December 31, 2009).

10.16†	—	Second Amendment to Amended and Restated Employment Agreement dated effective December 31, 2009 by and between James O. Harp, Jr. and the Company (incorporated by reference to Exhibit 10.14 to the Company’s Form 10-K for the period ended December 31, 2009).
10.17†	—	Employment Agreement dated effective January 1, 2011 by and between Samuel A. Giberga and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the period ended June 30, 2011).

10.18†	—	Change in Control Agreement dated effective August 5, 2008 by and between Samuel A. Giberga and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended June 30, 2008).

10.19†	—	Employment Agreement dated effective January 1, 2013 by and between John S. Cook and the Company (incorporated by reference to Exhibit 10.18 to the Company's Form 10-K for the period ended December 31, 2012).

10.20†	—	Change in Control Agreement dated effective August 5, 2008 by and between John S. Cook and the Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended June 30, 2008).

10.21†	—	Amendment to Change in Control Agreement dated effective December 31, 2009 by and between John S. Cook and the Company (incorporated by reference to Exhibit 10.19 to the Company’s Form 10-K for the period ended December 31, 2009).

10.22†	—	Amendment to Change in Control Agreement dated effective December 31, 2009 by and between Samuel A. Giberga and the Company (incorporated by reference to Exhibit 10.18 to the Company’s Form 10-K for the period ended December 31, 2009).

10.23	—	Form of Amended and Restated Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended June 30, 2009).

10.24†	—	Form of Restricted Stock Unit Agreement for Executive Officers (Time Vesting) (incorporated by reference to Exhibit 10.7 to the Company’s Form 10-Q for the quarter ended March 31, 2008).

10.25†	—	Form of Restricted Stock Unit Agreement for Non-Employee Directors (Time Vesting) (incorporated by reference to Exhibit 10.8 to the Company’s Form 10-Q for the quarter ended March 31, 2008).

10.26†	—	Form of Restricted Stock Unit Agreement for Executive Officers (Performance Based) (incorporated by reference to Exhibit 10.9 to the Company’s Form 10-Q for the quarter ended March 31, 2008).
10.27†	—	Form of Restricted Stock Unit Agreement for Executive Officers (Performance Based) (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2009).

10.28†	—	Form of Restricted Stock Unit Agreement for Executive Officers (Time Vesting) (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2009).

10.29†	—	Form of Restricted Stock Unit Agreement for Executive Officers (Performance Based) (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2010).



Exhibit Number		Description of Exhibit

10.30	—	Consulting Agreement dated February 14, 2012 by and between Hornbeck Offshore Services, Inc. and Larry D. Hornbeck (incorporated by reference to Exhibit 10.43 to the Company’s Form 10-K for the period ended December 31, 2011).

10.31	—	Amendment No. 3 to the Second Amended and Restated Hornbeck Offshore Services, Inc. Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 24, 2013).

10.32	—	Amended and Restated Indemnification Agreement effective as of May 7, 2015 by and among the Company, Hornbeck Family Ranch, LP, Larry D. Hornbeck and Joan M. Hornbeck (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2015).

10.33†	—	Fourth Amendment to the Second Amended and Restated Hornbeck Offshore Services, Inc. Incentive Compensation Plan, effective June 18, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 24, 2015).

10.34†	—	First Amendment to the Hornbeck Offshore Services, Inc. 2005 Employee Stock Purchase Plan, effective June 18, 2015 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 24, 2015).

10.35†	—	Form of Amended Appendix A to Employment Agreements for Executive Officers (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2016).

10.36†	—	Form of Amended Appendix A to Employment Agreements for Named Executive Officers, effective 2019 (incorporated by reference to Exhibit 10.40 to the Company’s Form 10-Q for the period ended March 31, 2019).

10.37	—	First Lien Term Loan Agreement dated as of June 15, 2017 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Administrative Agent, Wilmington Trust, National Association, as Collateral Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 16, 2017).

10.38	—	First Lien Guaranty and Collateral Agreement dated as of June 15, 2017 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Collateral Agent, and the obligors signatory thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 16, 2017).

10.39	—	First Amendment to First Lien Term Loan Agreement dated as of March 27, 2018 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Administrative Agent, Wilmington Trust, National Association, as Collateral Agent, and the lenders party thereto with accompanying Exhibit A (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 29, 2018).

10.40	—	Second Lien Term Loan Agreement dated as of February 7, 2019 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Administrative Agent, Wilmington Trust, National Association, as Collateral Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 8, 2019).

10.41	—	Second Lien Guaranty and Collateral Agreement dated as of February 7, 2019 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust National Association, as Collateral Agent, and the obligors signatory thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 8, 2019).



Exhibit Number		Description of Exhibit

10.42	—	Second Lien Intercreditor Agreement dated as of February 7, 2019 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, in various capacities, and the grantors party thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed February 8, 2019).

10.43†	—	Form of Stock Appreciation Rights Award Agreement for Executive Officers (Time Vesting) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 14, 2019).

10.44	—	Incremental First Lien Term Loan Joinder Agreement No. 1A dated March 1, 2019, by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Administrative Agent, and the Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 6, 2019).

10.45	—	Incremental First Lien Term Loan Joinder Agreement No. 1B dated March 1, 2019, by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Administrative Agent, and the Lenders party thereto (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on March 6, 2019).

10.46	—	Incremental First Lien Term Loan Joinder Agreement No. 1C dated March 1, 2019, by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Administrative Agent, and the Lenders party thereto (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on March 6, 2019).

10.47	—	Incremental Second Lien Term Loan Amendment No. 1 dated March 5, 2019, by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, Wilmington Trust, National Association, as Administrative Agent, and the Lenders party thereto (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on March 6, 2019).

10.48	—	Senior Credit Agreement dated as of June 28, 2019 by and among the Company, as Borrower, the obligors signatory thereto, CIT Northbridge Credit LLC, as Collateral Agent and Administrative Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 5, 2019).

10.49	—	Guaranty and Security Agreement dated as of June 28, 2019 by and among the Company, as Borrower, CIT Northbridge Credit LLC, as Agent, and the obligors signatory thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 5, 2019).

10.50	—	ABL/Term Intercreditor Agreement dated as of June 28, 2019 by and among the Company, as Parent Borrower, Wilmington Trust, National Association, as Initial Senior Term Collateral Agent and Initial Junior Term Collateral Agent, CIT Northbridge Credit LLC, as ABL Collateral Agent, and the grantors signatory thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 5, 2019).



Exhibit Number		Description of Exhibit
10.51	—	Amendment No. 2 to First Lien Term Loan Agreement dated as of June 28, 2019 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, the guarantors signatory thereto, Wilmington Trust, National Association, as Administrative Agent, Wilmington Trust, National Association, as Collateral Agent, and the lenders party thereto, with accompanying Exhibit A (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on July 5, 2019).

10.52	—	Supplement No. 2 to First Lien Term Guaranty and Collateral Agreement dated as of June 28, 2019 by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, the guarantors signatory thereto and Wilmington Trust, National Association, as Collateral Agent with accompanying Appendix A (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on July 5, 2019).

10.53	—	Conformed copy of First Lien Term Loan Agreement dated as of June 15, 2017, consolidating all amendments made by (i) Amendment No. 1 to First Lien Term Loan Agreement dated as of March 27, 2018 and (ii) Amendment No. 2 to First Lien Term Loan Agreement dated as of June 28, 2019. This conformed copy is being filed for ease of reference and is qualified in its entirety by reference to (i) and (ii), above (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on July 5, 2019).

*10.54†	—	Fifth Amendment to the Second Amended and Restated Hornbeck Offshore Services, Inc. Incentive Compensation Plan, effective June 20, 2019.

*31.1	—	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2	—	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*32.1	—	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*32.2	—	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*101	—	Interactive Data File
*
* Filed herewith.
†	Compensatory plan or arrangement under which executive officers or directors of the Company may participate.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.



		Hornbeck Offshore Services, Inc.

Date: ~~November 8, 2017~~August 9, 2019		/s/ JAMES O. HARP, JR.
		James O. Harp, Jr.
		Executive Vice President and Chief Financial Officer

4648



	September 30, 2017						December 31, 2016
	Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value
5.875% senior notes due 2020	$	366,942	$	364,656	$	239,668	$	375,000	$	371,975	$	270,938
5.000% senior notes due 2021	450,000		446,616		226,125		450,000		445,889		301,343
1.500% convertible senior notes due 2019	99,647		90,370		78,970		300,000		265,846		216,195
First-lien credit facility due 2023 (1)	96,322		112,389		96,201		—		—		—
	$	1,012,911	$	1,014,031	$	640,964	$	1,125,000	$	1,083,710	$	788,476



	September 30, 2017		December 31, 2016
Accrued lease expense	$	5,049	$	4,763
Deferred revenue	1,156		2,245
Other	4,551		3,002
Total	$	10,756	$	10,010



	As of September 30, 2017
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries				Consolidating			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	22	$	103,497	$	9,317			$	—		$	112,836
Accounts receivable, net of allowance for doubtful accounts of $6,052	—		45,983		4,331				(85		)	50,229
Other current assets	45		12,228		879				—			13,152
Total current assets	67		161,708		14,527				(85		)	176,217
Property, plant and equipment, net	—		2,394,845		127,197				—			2,522,042
Deferred charges, net	—		11,188		1,572				—			12,760
Intercompany receivable	1,715,528		644,733		41,814			��	(2,402,075		)	—
Investment in subsidiaries	684,734		8,602		—				(693,336		)	—
Other assets	1,743		6,096		2,330				—			10,169
Total assets	$	2,402,072	$	3,227,172	$	187,440			$	(3,095,496	)	$	2,721,188
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	13,861	$	1,162			$	—		$	15,023
Accrued interest	13,709		—		—				—			13,709
Accrued payroll and benefits	—		8,732		543				—			9,275
Other accrued liabilities	—		10,328		513				(85		)	10,756
Total current liabilities	13,709		32,921		2,218				(85		)	48,763
Long-term debt, including deferred gain of $19,689, and net of original issue discount of $7,598 and deferred financing costs of $10,971	1,014,031		—		—				—			1,014,031
Deferred tax liabilities, net	—		302,373		6,344				—			308,717
Intercompany payables	40,432		2,176,490		193,755				(2,410,677		)	—
Other liabilities	—		3,996		—				—			3,996
Total liabilities	1,068,172		2,515,780		202,317				(2,410,762		)	1,375,507
Stockholders’ equity:
Preferred stock: $0.01 par value; 5,000 shares authorized; no shares issued and outstanding	—		—		—				—			—
Common stock: $0.01 par value; 100,000 shares authorized; 37,028 shares issued and outstanding	370		—		—				—			370
Additional paid-in capital	758,693		37,977		8,600				(46,580		)	758,690
Retained earnings	574,837		673,415		(35,258		)		(638,154		)	574,840
Accumulated other comprehensive income	—		—		11,781				—			11,781
Total stockholders’ equity	1,333,900		711,392		(14,877		)		(684,734		)	1,345,681
Total liabilities and stockholders’ equity	$	2,402,072	$	3,227,172	$	187,440			$	(3,095,496	)	$	2,721,188



	As of December 31, 2016
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	9	$	212,196	$	4,822		$	—		$	217,027
Accounts receivable, net of allowance for doubtful accounts of $2,120	—		30,846		5,704			—			36,550
Other current assets	15		16,176		787			—			16,978
Total current assets	24		259,218		11,313			—			270,555
Property, plant and equipment, net	—		2,449,473		128,915			—			2,578,388
Deferred charges, net	2,581		15,724		772			—			19,077
Intercompany receivable	1,779,872		680,663		107,038			(2,567,573		)	—
Investment in subsidiaries	768,718		8,602		(4,283		)	(773,037		)	—
Other assets	1,744		6,239		2,272			—			10,255
Total assets	$	2,552,939	$	3,419,919	$	246,027		$	(3,340,610	)	$	2,878,275
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	11,325	$	449		$	—		$	11,774
Accrued interest	14,763		—		—			—			14,763
Accrued payroll and benefits	—		8,104		492			—			8,596
Other accrued liabilities	—		8,463		1,547			—			10,010
Total current liabilities	14,763		27,892		2,488			—			45,143
Long-term debt, net of original issue discount of $31,093 and deferred financing costs of $10,197	1,083,710		—		—			—			1,083,710
Deferred tax liabilities, net	—		337,503		5,517			—			343,020
Intercompany payables	61,715		2,264,900		245,276			(2,571,891		)	—
Other liabilities	—		3,416		(10		)	—			3,406
Total liabilities	1,160,188		2,633,711		253,271			(2,571,891		)	1,475,279
Stockholders’ equity:
Preferred stock: $0.01 par value; 5,000 shares authorized; no shares issued and outstanding	—		—		—			—			—
Common stock: $0.01 par value; 100,000 shares authorized; 36,467 shares issued and outstanding	365		—		—			—			365
Additional paid-in capital	754,394		37,978		4,319			(42,297		)	754,394
Retained earnings	637,992		748,080		(21,658		)	(726,422		)	637,992
Accumulated other comprehensive income	—		150		10,095			—			10,245
Total stockholders’ equity	1,392,751		786,208		(7,244		)	(768,719		)	1,402,996
Total liabilities and stockholders’ equity	$	2,552,939	$	3,419,919	$	246,027		$	(3,340,610	)	$	2,878,275



	Three Months Ended September 30, 2017
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating		Consolidated
Revenues	$	—		$	53,564		$	102		$	—	$	53,666
Costs and expenses:
Operating expenses	—			27,427			2,655			—		30,082
Depreciation	—			23,355			1,327			—		24,682
Amortization	—			2,245			228			—		2,473
General and administrative expenses	—			12,259			640			—		12,899
	—			65,286			4,850			—		70,136
Gain on sale of assets	—			(198		)	1			—		(197		)
Operating income (loss)	—			(11,920		)	(4,747		)	—		(16,667		)
Other income (expense):
Gain on early extinguishment of debt	—			—			—			—		—
Interest income	—			351			96			—		447
Interest expense	(11,956		)	—			—			—		(11,956		)
Equity in earnings (losses) of consolidated subsidiaries	(6,994		)	—			—			6,994		—
Other income (expense), net	—			(222		)	328			—		106
	(18,950		)	129			424			6,994		(11,403		)
Income (loss) before income taxes	(18,950		)	(11,791		)	(4,323		)	6,994		(28,070		)
Income tax expense (benefit)	—			(9,393		)	273			—		(9,120		)
Net income (loss)	$	(18,950	)	$	(2,398	)	$	(4,596	)	$	6,994	$	(18,950	)



	Nine Months Ended September 30, 2017
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating			Consolidated
Revenues	$	—		$	123,611		$	11,823		$	(263	)	$	135,171
Costs and expenses:
Operating expenses	—			80,293			9,359			(267		)	89,385
Depreciation	—			70,077			3,961			—			74,038
Amortization	—			8,460			1,003			—			9,463
General and administrative expenses	110			34,579			1,891			(7		)	36,573
	110			193,409			16,214			(274		)	209,459
Gain on sale of assets	—			(180		)	2			—			(178		)
Operating income (loss)	(110		)	(69,978		)	(4,389		)	11			(74,466		)
Other income (expense):
Gain on early extinguishment of debt	15,478			—			—			—			15,478
Interest income	—			1,039			273			—			1,312
Interest expense	(39,194		)	—			—			—			(39,194		)
Equity in earnings of consolidated subsidiaries	(42,511		)	—			—			42,511			—
Other income (expense), net	—			3,424			(3,576		)	(11		)	(163		)
	(66,227		)	4,463			(3,303		)	42,500			(22,567		)
Income (loss) before income taxes	(66,337		)	(65,515		)	(7,692		)	42,511			(97,033		)
Income tax expense (benefit)	—			(31,488		)	792			—			(30,696		)
Net income (loss)	$	(66,337	)	$	(34,027	)	$	(8,484	)	$	42,511		$	(66,337	)



	Three Months Ended September 30, 2016
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating			Consolidated
Revenues	$	—		$	50,798		$	1,467		$	(338	)	$	51,927
Costs and expenses:
Operating expenses	—			26,282			3,414			(321		)	29,375
Depreciation	—			22,188			1,279			—			23,467
Amortization	—			4,269			311			—			4,580
General and administrative expenses	36			7,542			1,468			(15		)	9,031
	36			60,281			6,472			(336		)	66,453
Gain on sale of assets	—			81			—			—			81
Operating loss	(36		)	(9,402		)	(5,005		)	(2		)	(14,445		)
Other income (expense):
Interest income	—			259			142			—			401
Interest expense	(12,820		)	—			—			—			(12,820		)
Equity in earnings (losses) of consolidated subsidiaries	(3,647		)	—			—			3,647			—
Other income (expense), net	—			(790		)	2,381			1			1,592
	(16,467		)	(531		)	2,523			3,648			(10,827		)
Income (loss) before income taxes	(16,503		)	(9,933		)	(2,482		)	3,646			(25,272		)
Income tax benefit	—			(7,279		)	(1,490		)	—			(8,769		)
Net income (loss)	$	(16,503	)	$	(2,654	)	$	(992	)	$	3,646		$	(16,503	)



	Nine Months Ended September 30, 2016
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating		Consolidated
Revenues	$	—		$	171,034		$	9,386		$	2,000	$	182,420
Costs and expenses:
Operating expenses	—			89,666			12,525			1,943		104,134
Depreciation	—			65,040			3,258			—		68,298
Amortization	—			15,671			1,004			—		16,675
General and administrative expenses	148			26,978			2,901			57		30,084
	148			197,355			19,688			2,000		219,191
Gain on sale of assets	—			36			—			—		36
Operating loss	(148		)	(26,285		)	(10,302		)	—		(36,735		)
Other income (expense):
Interest income	—			732			432			—		1,164
Interest expense	(34,886		)	—			(2		)	—		(34,888		)
Equity in earnings (losses) of consolidated subsidiaries	(9,655		)	—			—			9,655		—
Other income	—			(560		)	2,523			85		2,048
	(44,541		)	172			2,953			9,740		(31,676		)
Income (loss) before income taxes	(44,689		)	(26,113		)	(7,349		)	9,740		(68,411		)
Income tax benefit	—			(22,803		)	(1,005		)	—		(23,808		)
Net income (loss)	$	(44,689	)	$	(3,310	)	$	(6,344	)	$	9,740	$	(44,603	)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
EBITDA Reconciliation to GAAP:
EBITDA	$	10,594		$	15,194		$	24,350		$	50,286
Cash paid for deferred drydocking charges	(995		)	(897		)	(6,950		)	(3,214		)
Cash paid for interest	(13,829		)	(13,784		)	(40,028		)	(38,871		)
Cash paid for taxes	(334		)	(446		)	(1,044		)	(2,688		)
Changes in working capital	(3,336		)	13,711			97			45,396
Stock-based compensation expense	2,726			2,341			5,740			6,557
Gain on early extinguishment of debt	—			—			(15,478		)	—
(Gain) loss on sale of assets	197			(81		)	178			(36		)
Changes in other, net	(100		)	(1,573		)	3,932			(719		)
Net cash flows provided by (used in) operating activities	$	(5,077	)	$	14,465		$	(29,203	)	$	56,711



	Nine Months Ended September 30, 2017		Incurred Since Inception		Estimated Program Totals (1)		Projected Delivery Dates (1)
Growth Capital Expenditures:
OSV newbuild program #5 (2)	$	5.5	$	1,269.5	$	1,335.0	2Q2013-4Q2018

Trading Symbol

Name of exchange on which registered

Outstanding at July 31, 2019

Common Stock, $0.01 par value

New York Stock Exchange