HOS - Hornbeck Offshore Services Inc.
11/09/2026 | Press release | Distributed by Public on 11/09/2026 16:04
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
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 in conjunction with the information contained in the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q (this "Quarterly Report") and our audited financial statements and notes thereto for the year ended December 31, 2025.
On September 1, 2026, pursuant to and in accordance with the terms of the Merger Agreement, (i) Legacy Helix converted from a Minnesota corporation to a Delaware corporation; (ii) following such conversion, Parent Sub merged with and into Legacy Hornbeck, with Legacy Hornbeck surviving the First Company Merger as a wholly owned subsidiary of Legacy Helix; and (iii) one minute after the Effective Time, Legacy Hornbeck merged with and into Hercules Sub, with Hercules Sub surviving the Second Company Merger as a wholly owned subsidiary of Legacy Helix. The foregoing transactions are collectively referred to herein as "the Merger." Following the Merger, Legacy Helix was renamed "Hornbeck Offshore Services, Inc." The Company's common stock remains listed on the New York Stock Exchange, and its ticker symbol has changed from "HLX" to "HOS."
As a result of the Merger being accounted for as a reverse acquisition in accordance with U.S. GAAP, whereby Legacy Hornbeck was determined to be the accounting acquirer, the historical results presented in the condensed consolidated financial statements included in this Quarterly Report reflect the historical results of Legacy Hornbeck for all periods prior to the Merger and the results of the combined Company only for periods subsequent to the Closing Date. Accordingly, the current period results of Legacy Helix are included in the condensed consolidated financial statements only for the period from the Closing Date through September 30, 2026. The historical results and financial position of Legacy Helix prior to the Merger are not reflected in the condensed consolidated financial statements included in this Quarterly Report. As a result, the historical results presented herein do not reflect the results of the combined Company on a pro forma basis and are not necessarily indicative of the results that may be expected in future periods. See Note 3 to the condensed consolidated financial statements included in this Quarterly Report for further discussion of the accounting for the Merger as a business combination and reverse acquisition pursuant to ASC 805, Business Combinations.
Unless otherwise indicated, all foregoing references to "Hornbeck," "Company," "we," "us," and "our" are to Hornbeck Offshore Services, Inc. and its consolidated subsidiaries. References herein to "Legacy Helix" and "Legacy Hornbeck" are to Helix Energy Solutions Group, Inc. and Hornbeck Offshore Services, Inc., respectively, prior to the completion of the Merger.
Business Overview
Hornbeck Offshore Services, Inc. is a premier offshore marine services company, combining world-class vessels, subsea robotics, emerging technologies, engineering expertise and offshore execution capabilities into a single integrated platform supporting major and independent oil and gas companies, oilfield service companies, renewable energy developers, the U.S. military, and offshore engineering, procurement, construction and installation contractors. We operate our core business through three segments: (1) Marine Transportation & Specialty, (2) Subsea Services, and (3) Well Intervention. We help customers solve complex offshore challenges and deliver comprehensive, integrated solutions to a diversified range of deepwater and ultra-deepwater operations around the world, primarily in the Gulf of America, Latin America, the North Sea, West Africa and Asia Pacific.
With a diverse, technologically-advanced fleet of high-spec and ultra high-spec vessels and specialty assets, the combination of our marine transportation, subsea services and well intervention capabilities enables us to provide end-to-end integrated solutions throughout the entire life-of-field cycle for deepwater and ultra-deepwater offshore oilfield projects - spanning survey and exploration drilling support; subsea construction, installation and commissioning; inspection, repair and maintenance; production support; intervention and production enhancement; and decommissioning and abandonment activities. Additionally, our highly versatile fleet meets the growing offshore demands of several non-oilfield markets, such as offshore wind farm development, autonomous marine applications, defense and aerospace support.
Marine Transportation & Specialty
We provide transportation of equipment, materials and supplies to the offshore energy and defense industries through our Marine Transportation & Specialty segment. We also deliver a range of specialized services, including offshore accommodation and defense support. More recently, we have begun to provide vessels that are equipped with remote control/autonomous navigation technology to defense customers.
Our high spec and ultra high-spec OSVs are distinguished by industry-leading cargo and liquid mud capacities paired with advanced nautical technologies tailored for deepwater and ultra-deepwater operations. Complementing this, our accommodation vessel fleet provides a broad array of offshore housing and "walk-to-work" solutions - offering safe, dependable, and scalable options to serve the offshore wind and oilfield markets, along with other non-energy markets, such as HADR. Our specialty vessels further extend our capabilities providing customized marine solutions for the U.S. military, aerospace and telecommunications industries.
Subsea Services
Our service offerings to the offshore energy industry span a broad spectrum of deepwater and ultra-deepwater subsea services, encompassing subsea construction, trenching, IRM, survey, commissioning, field decommissioning and site clearance. Leveraging a versatile fleet of MPSVs, our Subsea Services segment deploys large subsea cranes with enhanced lifting capacities, seabed trenchers, cutting-edge robotics, and specialized tooling in support of complex offshore wind and oilfield projects.
We own and operate one of the largest fleets of subsea trenchers in the world. Our extensive knowledge of seabed soil conditions, combined with advanced technology and best practices honed in global markets, allow us to deliver tailored, high-performance solutions that address some of the most complex subsea challenges in the world.
Well Intervention
Our Well Intervention segment provides rigless production enhancement and decommissioning services to the offshore energy industry with a focus on deepwater production maximization and well abandonment.
Supported by our purpose-built well intervention vessels and subsea systems, our services provide a lower cost, higher efficiency with a reduced carbon footprint compared to rig-based intervention solutions. With work performed on over 2,000 subsea wells, our knowledge and experience in riser-based and riserless intervention offer customers a safe, reliable and economically advantageous solution to their deepwater intervention needs. We are the owner and operator of the largest fleet of intervention vessels in the world. We also provide access to designated vessels and equipment for emergency well containment response through the Helix Fast Response System, and own and operate a floating production unit providing oil and gas production processing services.
Vessel Fleet
As of September 30, 2026, we owned or operated a fleet of 89 offshore vessels comprised of the following:
| Business Segment |
Owned (1)
|
In-Chartered | Managed | Total | |||||||||||||||||||
| Marine Transportation & Specialty | 62 | - | 4 | 66 | |||||||||||||||||||
| Subsea Services | 10 | 5 | - | 15 | |||||||||||||||||||
| Well Intervention | 6 | 2 | - | 8 | |||||||||||||||||||
| Fleet Total | 78 | 7 | 4 | 89 | |||||||||||||||||||
(1) Included in our Subsea Services fleet are two U.S.-flagged, Jones Act-qualified MPSVs currently under construction.
Current Market Conditions and Outlook
During the third quarter of 2026, offshore energy markets continued to demonstrate generally constructive fundamentals, supported by ongoing investment in deepwater oil and gas development, subsea infrastructure and production-related activity. Industry data indicate that offshore market conditions improved from late-2025 levels, although activity and pricing trends continued to vary by geography and asset class.
Offshore project sanctioning remained active during 2026. Rystad Energy projected approximately $142 billion of global offshore upstream greenfield investment commitments for 2026, reflecting continued investment in offshore development activity. This level of project sanctioning, together with the existing base of producing offshore assets, supports prospective demand for marine transportation, subsea construction, robotics, well intervention and other life-of-field services.
Conditions in the OSV market remained generally favorable, particularly for high-spec and ultra high-spec vessels, such as ours, although market conditions varied across vessel classes and geographic regions. Industry commentary during the third quarter cited firm utilization and limited supply growth as continuing supportive factors for the OSV market. The limited addition of new vessel capacity following an extended period of low newbuild investment continues to constrain available supply in certain higher-specification vessel categories and cabotage-protected markets.
The outlook for subsea and other life-of-field services remains generally constructive. Based upon market research published by Rystad Energy, global subsea spending is expected to increase from approximately $38 billion in 2026 to approximately $49 billion in 2030, while spending associated with offshore well intervention is also expected to grow as operators seek to maintain production and optimize recovery from an expanding and aging installed base of offshore wells and subsea infrastructure. The same research anticipates that a substantial number of offshore wells will become inactive between 2026 and 2030, potentially supporting increased demand for late-life services including intervention and decommissioning.
The global offshore renewables market continues to develop, particularly in Europe and the Asia-Pacific region, supported by long-term renewable energy and energy security initiatives. Near-term market activity, particularly in Europe, has been affected by higher project costs, financing constraints, supply chain challenges and project delays. In the U.S., the offshore wind development market continues to face regulatory and policy uncertainty, which may result in project delays, cancellations or reduced development activity. These headwinds could lead to some softening in demand for offshore wind support services in the U.S. market. Despite these challenges, continued development of offshore wind projects is expected to provide opportunities for subsea construction, trenching, IRM and other subsea services.
The Company believes these market conditions provide a constructive backdrop for its diversified portfolio of offshore services. Despite these favorable industry conditions, the pace of offshore activity remains subject to commodity prices, customer capital allocation, project timing, geopolitical developments, regional supply and demand conditions and other macroeconomic factors. As a result, market conditions and utilization and pricing trends may vary materially among the Company's business segments, operating regions and service offerings.
Results of Operations
Our historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward, as a result of the Merger. Following mergers or acquisitions, our results of operations are affected by the results of the newly merged business or operations, the purchase accounting associated with the business combination, and expenditures made to integrate the newly combined business or operations. Due to the Merger and the resulting reverse acquisition accounting, the periods presented in our historical financial statements do not include the results of Legacy Helix prior to the Merger. Therefore, such periods may not be comparable to one another or current period results and our future results may differ materially. Current period results include the results of Legacy Hornbeck for the presented periods prior to the Merger and the results of the post-merger combined Company for the period following September 1, 2026. Certain amounts in the historical segment results of operations presented below have been reclassified to conform to the Company's current segment presentation following the Merger, including the realignment of certain vessels among the Company's operating segments. Such reclassifications further impact the comparability of the results for the periods presented.
The following table presents our consolidated revenue and operating income (loss) for the three and nine months ended September 30, 2026 and 2025 as follows (in thousands, except for %):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Vessel revenue | $ | 271,159 | $ | 186,445 | $ | 602,552 | $ | 507,582 | ||||||||||||||||||
| Non-vessel revenue | 22,182 | 12,671 | 46,764 | 37,963 | ||||||||||||||||||||||
| Total revenue | $ | 293,341 | $ | 199,116 | $ | 649,316 | $ | 545,545 | ||||||||||||||||||
| Operating income (loss) | $ | (59,748) | $ | 60,556 | $ | 639 | $ | 155,209 | ||||||||||||||||||
| Operating income (loss) % | (20.4) | % | 30.4 | % | 0.1 | % | 28.5 | % | ||||||||||||||||||
Marine Transportation & Specialty
The following table presents the revenue, profitability, and key operating statistics for our Marine Transportation & Specialty segment (in thousands, except for %, average vessel counts, utilization rates, number of days and amounts per day):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Marine Transportation | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Vessel revenue | $ | 141,223 | $ | 146,582 | $ | 415,525 | $ | 406,184 | ||||||||||||||||||
| Non-vessel revenue | 12,252 | 12,671 | 36,834 | 37,963 | ||||||||||||||||||||||
| Total revenue | $ | 153,475 | $ | 159,253 | $ | 452,359 | $ | 444,147 | ||||||||||||||||||
| Operating income | $ | 42,114 | $ | 60,902 | $ | 137,369 | $ | 165,397 | ||||||||||||||||||
| Operating income % | 27.4 | % | 38.2 | % | 30.4 | % | 37.2 | % | ||||||||||||||||||
|
Average number of vessels (1)
|
62.9 | 64.0 | 63.8 | 64.4 | ||||||||||||||||||||||
|
Average number of active vessels (2)
|
38.5 | 41.0 | 39.2 | 41.8 | ||||||||||||||||||||||
|
Average number of stacked vessels (3)
|
24.4 | 23.0 | 24.6 | 22.6 | ||||||||||||||||||||||
|
Average utilization rate (4)
|
47.0 | % | 52.3 | % | 46.9 | % | 49.0 | % | ||||||||||||||||||
|
Active utilization rate (5)
|
76.7 | % | 81.7 | % | 76.5 | % | 75.6 | % | ||||||||||||||||||
|
Average dayrate (6)
|
$ | 51,959 | $ | 47,593 | $ | 50,797 | $ | 47,144 | ||||||||||||||||||
|
Effective dayrate (7)
|
$ | 24,421 | $ | 24,891 | $ | 23,824 | $ | 23,101 | ||||||||||||||||||
| Operating expense: | ||||||||||||||||||||||||||
| Active vessel opex | $ | 75,840 | $ | 72,907 | $ | 212,917 | $ | 216,574 | ||||||||||||||||||
| Stacked vessel opex | 2,300 | 782 | 8,264 | 2,821 | ||||||||||||||||||||||
| Non-vessel opex | 8,334 | 6,916 | 24,236 | 22,417 | ||||||||||||||||||||||
| $ | 86,474 | $ | 80,605 | $ | 245,417 | $ | 241,812 | |||||||||||||||||||
|
Active vessel opex per vessel day (8)
|
$ | 21,412 | $ | 19,329 | $ | 19,896 | $ | 18,979 | ||||||||||||||||||
|
Stacked vessel opex per vessel day (9)
|
$ | 1,024 | $ | 370 | $ | 1,231 | $ | 457 | ||||||||||||||||||
|
Out-of-service time for vessel recertification activities (in days) (10)
|
15 | 164 | 381 | 562 | ||||||||||||||||||||||
(1) Represents the weighted-average number of vessels owned during the period, adjusted to reflect the date of acquisition or disposition of vessels. Excluded from this data are four non-owned vessels that we manage for the U.S. Navy.
(2) Represents the weighted-average number of vessels that are immediately available for service during each respective period, adjusted to reflect the date of stacking or reactivation of vessels.
(3) Represents the weighted-average number of vessels that are stacked during each respective period.
(4) Average utilization rates are weighted-average rates based on a 365-day year. Vessels are considered utilized when they are generating revenue.
(5) Active utilization rate is based on a denominator comprised only of vessel-days available for service by the active fleet, which excludes the impact of inactive or stacked vessel days.
(6) Average dayrates represent weighted-average revenue per day based on the number of days during the period that the vessels generated revenue.
(7) Effective dayrate represents the average dayrate multiplied by the average utilization rate.
(8) Computed as active vessel opex divided by the average number of active vessels divided by the applicable number of calendar days per period.
(9) Computed as stacked vessel opex divided by the average number of stacked vessels divided by the applicable number of calendar days per period.
(10) Represents the combined fleetwide total of days out of service for recertification activities.
Revenue
For the three months ended September 30, 2026, revenue for our Marine Transportation & Specialty segment decreased $5.8 million, or 3.6%, compared to the prior-year period. Vessel revenue for the three months ended September 30, 2026 and 2025 was $141.2 million and $146.6 million, respectively. The decrease in vessel revenue from the prior-year period was primarily due to fewer active vessels. Our weighted-average active operating fleet for the three months ended September 30, 2026 and 2025 was 38.5 and 41.0 vessels, respectively. Average vessel dayrates were up 9.2% to $51,959 for the three months ended September 30, 2026 compared to $47,593 for the same period in 2025. However, our active vessel utilization, which excludes stacked vessel days, totaled 76.7% for the current-year period, down 5.0% from 81.7% for the prior-year period. Our vessels incurred 15 days of aggregate downtime for regulatory drydockings and were stacked for an aggregate of 2,241 days during the three months ended September 30, 2026 compared to 164 and 2,116 days, respectively, for the same period in 2025. Our effective, or utilization-adjusted, vessel dayrates were slightly lower at $24,421 for the three months ended September 30, 2026 compared to $24,891 for the same period in 2025. Domestic revenue decreased by $5.2 million, or 4.6%, and foreign revenue decreased $0.6 million, or 1.4%, primarily due to lower vessel utilization and a slightly lower effective dayrate for our active vessels during the current-year period. Foreign revenue for the three months ended September 30, 2026 comprised 29.7% of our total revenue compared to 29.0% for the year-ago period.
For the nine months ended September 30, 2026, revenue for our Marine Transportation & Specialty segment increased $8.2 million, or 1.8%, compared to the prior-year period. Vessel revenue for the nine months ended September 30, 2026 and 2025 were $415.5 million and $406.2 million, respectively. This increase in vessel revenue was primarily due to higher average dayrates combined with slightly higher utilization for active vessels in the current-year period. Average vessel dayrates were $50,797 for the nine months ended September 30, 2026 compared to $47,144 for the same period in 2025. Excluding stacked vessel days, our active vessel utilization was 76.5% and 75.6% for the comparative periods, respectively. Our vessels incurred 381 days of aggregate downtime for regulatory drydockings and were stacked for an aggregate of 6,733 days during the nine months ended September 30, 2026 compared to 562 and 6,190 days, respectively, for the same period in 2025. Our effective vessel dayrates of $23,824 for the nine months ended September 30, 2026 were up slightly compared to $23,101 for the same period in 2025. Domestic revenue increased by $10.4 million, or 3.4%, from the year-ago period primarily due to improved market conditions for vessels operating domestically during the nine months ended September 30, 2026. Foreign revenue decreased $2.2 million, or 1.6%, primarily due to lower vessel utilization for our active vessels during the nine months ended September 30, 2026. Foreign revenue for the nine months ended September 30, 2026 comprised 30.3% of our total revenue compared to 31.4% for the prior-year period.
Operating Income
Operating income for the three months ended September 30, 2026 decreased $18.8 million compared to the prior-year period due to increases of $5.9 million in operating expense, $5.6 million in amortization expense and $2.2 million in depreciation expense, as well as a $5.8 million decrease in revenue. The increase in operating expense was primarily attributed to the reclassification of certain costs resulting from the realignment of vessels among the Company's operating segments due to the Merger, as well as the delivery of our C/SOV, the HOS Rocinante, in the fourth quarter of 2025 and higher employee-related expenses. The higher amortization expense in the current-year period was primarily due to vessels acquired subsequent to 2022 undergoing their first post-acquisition recertifications, as well as the overall rising costs of recertification drydockings. Depreciation expense increased due to the full period contribution of the HOS Rocinante.
Operating income for the nine months ended September 30, 2026, decreased $28.0 million compared to the prior-year period, primarily due to increases of $15.7 million in amortization expense, $6.4 million in depreciation expense and $3.6 million in operating expense, as well as a $9.3 million decrease in gains on asset sales, partially offset by an $8.2 million increase in revenue. Higher amortization expense in the current-year period was primarily due to vessels acquired subsequent to 2022 undergoing their first post-acquisition recertifications, as well as the overall rising costs of vessel recertification drydockings. Depreciation expense increased due to the full period contribution of the HOS Rocinante. The increase in operating expense was primarily attributed to the reclassification of certain costs resulting from the realignment of vessels among the Company's operating segments due to the Merger, as well as the full period expense contribution of the HOS Rocinante.
Subsea Services
The following table presents the revenue, profitability, and key operating statistics for our Subsea Services segment (in thousands, except for %, average vessel counts, utilization rate, number of days and amounts per day):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Subsea Services | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Vessel revenue | $ | 53,324 | $ | 39,863 | $ | 110,415 | $ | 101,398 | ||||||||||||||||||
| Non-vessel revenue | 5,036 | - | 5,036 | - | ||||||||||||||||||||||
| Total revenues | $ | 58,360 | $ | 39,863 | $ | 115,451 | $ | 101,398 | ||||||||||||||||||
| Operating income | $ | 18,101 | $ | 23,489 | $ | 38,161 | $ | 52,059 | ||||||||||||||||||
| Operating income % | 31.0 | % | 58.9 | % | 33.1 | % | 51.3 | % | ||||||||||||||||||
|
Average number of vessels (1)
|
9.0 | 7.0 | 7.7 | 7.0 | ||||||||||||||||||||||
|
Average number of active vessels (2)
|
9.0 | 7.0 | 7.7 | 7.0 | ||||||||||||||||||||||
|
Average utilization rate (3)
|
75.2 | % | 68.5 | % | 61.4 | % | 59.0 | % | ||||||||||||||||||
|
Average dayrate (4)
|
$ | 86,024 | $ | 90,411 | $ | 86,068 | $ | 89,941 | ||||||||||||||||||
|
Effective dayrate (5)
|
$ | 64,690 | $ | 61,932 | $ | 52,846 | $ | 53,065 | ||||||||||||||||||
| Operating expense: | ||||||||||||||||||||||||||
| Active vessel opex | $ | 29,430 | $ | 12,830 | $ | 60,394 | $ | 38,840 | ||||||||||||||||||
| Non-vessel opex | 2,680 | 2 | 2,715 | 17 | ||||||||||||||||||||||
| $ | 32,110 | $ | 12,832 | $ | 63,109 | $ | 38,857 | |||||||||||||||||||
|
Active vessel opex per vessel day (6)
|
$ | 35,716 | $ | 19,923 | $ | 28,883 | $ | 20,324 | ||||||||||||||||||
|
Out-of-service time for recertification activities (in days) (7)
|
- | 52 | 95 | 52 | ||||||||||||||||||||||
(1) Represents the weighted-average number of vessels owned or in-chartered during the period, adjusted to reflect the date of acquisition or disposition of vessels.
(2) Represents the weighted-average number of vessels that are immediately available for service during each respective period, adjusted to reflect the date of stacking or reactivation of vessels.
(3) Average utilization rates are weighted-average rates based on a 365-day year. Vessels are considered utilized when they are generating revenue.
(4) Average dayrates represent weighted-average revenue per day based on the number of days during the period that the vessels generated revenue.
(5) Effective dayrate represents the average dayrate multiplied by the average utilization rate.
(6) Computed as active vessel opex divided by the average number of active vessels divided by the applicable number of calendar days per period.
(7) Represents the combined fleetwide total days of out of service for recertification activities.
Revenue
Excluding the $24.2 million increase attributable to the Merger, revenue for the three and nine months ended September 30, 2026, decreased compared to the prior-year period, primarily due to lower utilization of the HOS Achiever that is being converted from flotel to a subsea construction vessel, which commenced in late 2025 and is expected to be completed in the fourth quarter of 2026.
Excluding revenue attributable to the Merger, vessel revenue of $34.2 million for the three months ended September 30, 2026 was down $5.7 million, or 14%, from $39.9 million for the prior-year period. Our effective, or utilization-adjusted, vessel dayrates were higher at $64,690 for the three months ended September 30, 2026 compared to $61,932 for the same period in 2025; however, excluding the impact of the Merger, our effective vessel day rates were lower at $45,496 for the three months ended September 30, 2026 which was primarily driven by the HOS Achiever conversion. Domestic revenue for the three months ended September 30, 2026 comprised 35.0% of our total revenue compared to 80.8% for the year-ago period. Foreign revenue for the three months ended September 30, 2026 comprised 65.0% of our total revenue compared to 19.2% for the year-ago period.
Excluding revenue attributable to the Merger, vessel revenue of $91.3 million for the nine months ended September 30, 2026 was down $10.1 million, or 10%, from $101.4 million for the prior-year period. Our effective, or utilization-adjusted, vessel dayrates were slightly lower at $52,846 for the nine months ended September 30, 2026 compared to $53,065 for the same period in 2025, which was primarily driven by the HOS Achiever conversion. Domestic vessel revenue decreased $17.9 million, or 22.6%, from the year-ago period primarily due to lower vessel utilization for our active vessels during the nine months ended September 30, 2026. Foreign vessel revenue increased $31.9 million, or 141.6%, primarily due to improved market conditions for vessels operating internationally during the nine months ended September 30, 2026. Domestic revenue for the nine months ended September 30, 2026 comprised 52.8% of our total vessel revenue compared to 77.8% for the prior-year period. Foreign revenue for the nine months ended September 30, 2026 comprised 47.2% of our total revenue compared to 22.2% for the prior-year period.
Non-vessel revenue of $5.0 million for the three and nine months ended September 30, 2026 was fully attributable to the Merger.
Operating Income
Operating income for the three months ended September 30, 2026, decreased $5.4 million compared to the prior-year period, primarily due to increases of $19.2 million in operating expenses, $1.7 million in amortization expense and $1.9 million in depreciation expense, partially offset by a $18.5 million increase in revenue. The reduction in operating income was primarily attributable to the conversion of the HOS Achiever.
Operating income for the nine months ended September 30, 2026, decreased $13.9 million compared to the prior-year period, primarily due to increases of $24.3 million in operating expenses, $0.8 million in amortization expense, and $1.9 million in depreciation expense, partially offset by a $14.1 million increase in revenue. The decrease in operating income was primarily attributable to the conversion of the HOS Achiever.
Well Intervention
The table below sets forth the revenue, profitability, and key operating statistics for the Well Intervention segment (in thousands, except for %, average vessel counts, utilization rate, number of days and amounts per day):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Well Intervention | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Vessel revenue | $ | 76,612 | $ | - | $ | 76,612 | $ | - | ||||||||||||||||||
| Non-vessel revenue | 1,388 | - | 1,388 | - | ||||||||||||||||||||||
| Total revenue | $ | 78,000 | $ | - | $ | 78,000 | $ | - | ||||||||||||||||||
| Operating income | $ | 26,022 | $ | - | $ | 26,022 | $ | - | ||||||||||||||||||
| Operating income % | 33.4 | % | - | % | 33.4 | % | - | % | ||||||||||||||||||
|
Average number of vessels (1)
|
2.6 | - | 0.9 | - | ||||||||||||||||||||||
|
Average number of active vessels (2)
|
2.6 | - | 0.9 | - | ||||||||||||||||||||||
|
Average utilization rate (3)
|
88.1 | % | - | % | 88.1 | % | - | % | ||||||||||||||||||
|
Average dayrate (4)
|
$ | 362,162 | $ | - | $ | 362,162 | $ | - | ||||||||||||||||||
|
Effective dayrate (5)
|
$ | 319,065 | $ | - | $ | 319,065 | $ | - | ||||||||||||||||||
| Operating expense: | ||||||||||||||||||||||||||
| Active vessel opex | $ | 43,791 | $ | - | $ | 43,791 | $ | - | ||||||||||||||||||
| Non-vessel opex | 527 | - | 527 | - | ||||||||||||||||||||||
| $ | 44,318 | $ | - | $ | 44,318 | $ | - | |||||||||||||||||||
|
Active vessel opex per vessel day (6)
|
$ | 182,461 | $ | - | $ | 182,461 | $ | - | ||||||||||||||||||
|
Out-of-service time for recertification activities (in days) (7)
|
- | - | - | - | ||||||||||||||||||||||
(1) Represents the weighted-average number of vessels owned or in-chartered during the period, adjusted to reflect the date of acquisition or disposition of vessels.
(2) Represents the weighted-average number of vessels that are immediately available for service during each respective period, adjusted to reflect the date of stacking or reactivation of vessels.
(3) Average utilization rates are weighted-average rates based on a 365-day year. Vessels are considered utilized when they are generating revenue.
(4) Average dayrates represent weighted-average revenue per day based on the number of days during the period that the vessels generated revenue.
(5) Effective dayrate represents the average dayrate multiplied by the average utilization rate.
(6) Computed as active vessel opex divided by the average number of active vessels divided by the applicable number of calendar days per period.
(7) Represents the combined fleetwide total days of out of service for recertification activities.
Revenue
The Well Intervention business was not part of the Company's historical results prior to the Merger. Following the Merger, the one month of operations from the Well Intervention segment contributed $76.6 million of vessel revenue and $1.4 million of non-vessel revenue to the consolidated results for the three and nine months ended September 30, 2026.
Operating Income
Following the Merger, the Well Intervention segment contributed $26.0 million of operating income to the consolidated results for the three and nine months ended September 30, 2026.
Unallocated Expense and Other
Our consolidated results also include revenue and expenses from our non-core operations, aggregated as Other in our segment reporting. The following table presents the aggregate revenue and profitability from our non-core operations, including production from our mature offshore oil and gas properties (in thousands, except for %):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Vessel revenue | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Non-vessel revenue | 3,506 | - | 3,506 | - | ||||||||||||||||||||||
| Total revenue | $ | 3,506 | $ | - | $ | 3,506 | $ | - | ||||||||||||||||||
| Operating income | $ | 585 | $ | - | $ | 582 | $ | - | ||||||||||||||||||
| Operating income % | 16.7 | % | - | % | 16.6 | % | - | % | ||||||||||||||||||
Our Unallocated Expense primarily consists of corporate costs and other items not directly associated with a specific business segment, including cash incentive and stock-based compensation plans, office lease expenses, and other corporate general and administrative expenses. The following table reflects the impact of Unallocated Expense on operating income (loss) for the periods presented (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Unallocated Expense | ||||||||||||||||||||||||||
| Operating expense | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| Depreciation expense | 175 | - | 175 | - | ||||||||||||||||||||||
| Amortization expense | 196 | - | 196 | - | ||||||||||||||||||||||
| General and administrative expense | 23,851 | 22,259 | 62,081 | 57,274 | ||||||||||||||||||||||
| Stock-based compensation expense | 43,368 | 1,737 | 47,618 | 5,190 | ||||||||||||||||||||||
| Merger and integration costs | 78,980 | - | 91,425 | - | ||||||||||||||||||||||
| Total costs and expenses | $ | 146,570 | $ | 23,996 | $ | 201,495 | $ | 62,464 | ||||||||||||||||||
| Gain on sale of assets | - | 161 | - | 217 | ||||||||||||||||||||||
| Operating loss | $ | (146,570) | $ | (23,835) | $ | (201,495) | $ | (62,247) | ||||||||||||||||||
Liquidity and Capital Resources
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 revolving credit and term loan agreements and cash received from the sale of assets. We require capital to fund on-going operations, remaining commitments under our on-going MPSV newbuild project, ROV purchases and vessel installations, vessel recertifications, discretionary capital expenditures and debt service and may require capital to fund potential future vessel construction, retrofit or conversion projects, acquisitions, dividends, equity repurchases or the retirement of debt. We believe that existing cash and cash equivalents, available borrowing capacity under our undrawn revolving credit facility and anticipated positive cash flows from operations will be sufficient to support working capital, maintenance, commercial and growth capital expenditures and other cash requirements for at least the next 12 months and, based on our current expectations, for the foreseeable future thereafter.
On March 4, 2026, we drew $25.0 million of cash borrowings under our revolving credit facility, which was repaid in full on September 8, 2026. We also expanded the borrowing capacity under such facility by $50.0 million to $125.0 million, effective upon the closing of the Merger on September 1, 2026. As of September 30, 2026, we had total cash and cash equivalents of $471.6 million, $1.6 million of restricted cash, and $125.0 million of undrawn borrowing capacity available under our First Lien Revolving Credit Facility, subject to the satisfaction of customary borrowing conditions, including pro forma compliance with financial covenants thereunder.
Cash Flows
The following summarizes our cash flows for the nine months ended September 30, 2026 and 2025.
Operating Activities. We rely primarily on cash flows from operations to provide working capital for current and future operations, to fund contract-specific cost of sales, payroll and incentive compensation for our vessel crews and shoreside employees, to supply, repair and maintain our vessels and equipment, to service our debt obligations, to pay taxes and to insure our assets. Net cash provided by operating activities typically fluctuates according to the level of market activity and demand for our vessels for each period. Net cash provided by (used in) operating activities was $(14.8) million and $97.0 million for the nine months ended September 30, 2026 and 2025, respectively. Operating cash flows for the first nine months of 2025 were favorably affected by an increase in vessel revenue. Operating cash flows for the first nine months of 2026 were unfavorably impacted by costs associated with the Merger.
Investing Activities. Net cash provided by (used in) investing activities was $560.2 million and $(78.2) million for the nine months ended September 30, 2026 and 2025, respectively. Cash used in investing activities during the nine months of 2025 was primarily attributable to growth and capital expenditures, partially offset by net proceeds from vessel sales. During the first nine months of 2026, investing cash flows were favorably impacted by cash acquired in the Merger, partially offset by costs related to our capital expenditure programs.
Financing Activities. Net cash provided by (used in) financing activities was $(125.8) million and $(4.0) million for the nine months ended September 30, 2026 and 2025, respectively. Cash used in financing activities during the first nine months of 2025 was primarily attributable to the financing costs incurred and principal payments on the Second Lien Term Loans due 2033 and tax payments made by the Company for employee taxes related to shares withheld from vested and net share-settled RSU awards. Cash used in financing activities during the first nine months of 2026 was primarily attributable to tax payments made by the Company for employee taxes related to shares withheld from stock awards settled in shares and cash settlement of equity awards as a result of the Merger.
Contracted Backlog
Our total contracted revenue backlog was $1.9 billion as of September 30, 2026. Such backlog included contracted revenue for multiple fiscal years spanning 2026 through 2031. The contractual revenue we ultimately receive may be lower than the contracted backlog due to a number of factors, including vessel downtime or suspension of operations. The actual dayrate may be lower than the contractual operating dayrate assumed in the contracted backlog described above because a down-time (such as waiting on weather) rate, repair rate, standby rate or force majeure rate may apply under certain circumstances. In certain contracts, the dayrate may be reduced to zero if, for example, repairs extend beyond a stated period of time. Our total contracted backlog includes only firm commitments and certain contracted option periods, which are represented by signed contracts or, in some cases, other definitive agreements awaiting contract execution.
Debt Agreements
As of September 30, 2026, we had the following outstanding debt (in thousands, except effective interest rate):
| Total Debt | Coupon Interest Rate | Cash Interest Payments | Payment Dates | ||||||||||||||||||||
| MARAD Debt due 2027, net discount of $5 | $ | 4,996 | 4.93 | % | $ | 83 | February 1 | ||||||||||||||||
| First Lien Revolving Credit Facility due 2029 | - | - | % | - |
Variable (based on interest election) (2)
|
||||||||||||||||||
| Senior Notes due 2029, net of debt premium of $12,253 | 312,253 | 9.75 | % | 14,625 | March 1 and September 1 | ||||||||||||||||||
|
Second Lien Term Loans due 2033, net of original issue discount of $5,009 and deferred financing costs of $1,692 (1)
|
418,910 | 9.25 | % | 3,196 | First day of each month | ||||||||||||||||||
| $ | 736,159 | ||||||||||||||||||||||
(1) During 2025, we were required to make monthly, interest-only payments under the Second Lien Term Loans due 2033. However, beginning January 1, 2026, monthly principal and interest payments commenced on the first day of each following month until a final balloon payment in the amount of all unpaid principal, accrued and unpaid interest becomes due on January 1, 2033.
(2) As of September 30, 2026, there were no revolving loan amounts outstanding under the First Lien Revolving Credit Facility. The First Lien Revolving Credit Facility is subject to an unused fee of 1.0% per annum, paid quarterly, as applicable.
As of September 30, 2026, we had $425.6 million of outstanding principal amount of second-lien term loans that bear interest at a fixed annual interest rate of 9.25% and mature in January 2033, or the Second Lien Term Loans due 2033. On March 4, 2026, we drew $25.0 million of cash borrowings under the First Lien Revolving Credit Facility due 2029. We repaid all outstanding borrowings under the facility on September 8, 2026. Effective September 1, 2026, pursuant to the First Incremental Facility Amendment, we increased the borrowing capacity under the facility from $75.0 million to $125.0 million. See Note 14 to our condensed consolidated financial statements for further discussion.
The First Lien Revolving Credit Facility and the Second Lien Term Loan Credit Agreement contain customary representations and warranties, covenants and events of default. The First Lien Revolving Credit Facility is subject to financial covenants that require Hercules Sub and certain of its subsidiaries to have (i) if any revolving loans or letters of credit are drawn (and, in the case of letters of credit, not reimbursed), a maximum revolving credit facility net leverage ratio (measured by Revolving Loans outstanding, net of unrestricted cash and cash equivalents of up to $25.0 million, to consolidated adjusted EBITDA) of no more than 1.00 to 1.00, (ii) minimum liquidity (measured by unrestricted cash and cash equivalents, together with undrawn revolving loan commitments) of $25.0 million, (iii) a collateral coverage ratio (measured by total first and second-lien debt outstanding) of no less than 1.50 to 1.00, and (iv) a revolving credit facility collateral coverage ratio (measured by total outstanding revolving loans, net of unrestricted cash and cash equivalents of up to $25.0 million) of no less than 3.00 to 1.00, in each case, tested as of the end of each fiscal quarter, beginning with the first full fiscal quarter ending after the facility closing date. However, failure to meet such financial covenants will not result in a default or event of default at any time when no revolving loans are outstanding and will instead prohibit Hercules Sub from borrowing any revolving loans under the First Lien Revolving Credit Facility until the financial covenants, together with other customary conditions precedent to borrowing, are satisfied. To the extent either of the collateral coverage ratio covenants under the First Lien Revolving Credit Facility is not met as of the end of any fiscal quarter, we will have the opportunity to cure such shortfall by making a mandatory prepayment of the revolving loans in an amount such that compliance with such covenants would be met on a pro forma basis following such prepayment prior to the occurrence of any default or event of default thereunder. The Second Lien Term Loans due 2033 have only one financial maintenance covenant, which is a $25.0 million minimum cash liquidity requirement (measured solely by unrestricted cash and cash equivalents, without credit for undrawn revolving commitments), tested as of the end of each fiscal quarter. The Second Lien Term Loans due 2033 are also subject to mandatory prepayment upon certain vessel dispositions and total losses and if the outstanding loans exceed 50% of the appraised value of the vessel collateral, and a change of control will result in an event of default unless the loans are repaid in full within five business days. The indenture governing the Senior Notes due 2029 contains customary covenants and events of default.
During the nine months ended and as of September 30, 2026, we were in compliance with all applicable financial covenants under our MARAD Debt, First Lien Revolving Credit Facility, the indenture governing the Senior Notes due 2029 and the Second Lien Term Loans due 2033.
We may, at our option, redeem the Senior Notes due 2029, in whole or in part, at the redemption prices (expressed as percentages of the principal amount to be redeemed) set forth below, based on redemption occurring on or after March 1 of the applicable year, plus any accrued and unpaid interest through, but not including, the redemption date.
| Year | Redemption Price | |||||||
| 2026 | 104.875 | % | ||||||
| 2027 | 102.438 | % | ||||||
| 2028 and thereafter | 100.000 | % | ||||||
Upon at least 30 days' prior notice, we may voluntarily prepay the Second Lien Term Loans due 2033, in whole or in part, at any time prior to maturity on any monthly payment date. We are permitted to partially prepay up to $100.0 million in the aggregate during the term of the Second Lien Term Loans due 2033. Any voluntary prepayment is subject to the prepayment price (expressed as percentages of the principal amount paid) set forth below, based on prepayment occurring on or prior to December 27 of the applicable year, plus any accrued and unpaid interest through, but not including, the payment date.
| Year | Prepayment Price | |||||||
| 2026 | 103.00 | % | ||||||
| 2027 | 102.00 | % | ||||||
| 2028 and thereafter | 101.00 | % | ||||||
Capital Expenditures and Related Commitments
The following table summarizes the capital expenditures incurred for the purposes set forth below for the three and nine months ended September 30, 2026 and 2025 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Capital Expenditures | |||||||||||||||||||||||
| Maintenance Capital Expenditures: | |||||||||||||||||||||||
| Deferred recertification costs | $ | 12,892 | $ | 15,141 | $ | 57,408 | $ | 47,853 | |||||||||||||||
| Maintenance capital improvements | 4,446 | 4,859 | 16,474 | 15,370 | |||||||||||||||||||
| 17,338 | 20,000 | 73,882 | 63,223 | ||||||||||||||||||||
|
Growth Capital Expenditures (1) (2)
|
34,998 | 5,883 | 40,996 | 34,771 | |||||||||||||||||||
|
Commercial Capital Expenditures (2)
|
7,649 | 19,474 | 20,056 | 33,789 | |||||||||||||||||||
| Non-vessel Capital Expenditures | 149 | 7,178 | 633 | 7,461 | |||||||||||||||||||
| 42,796 | 32,535 | 61,685 | 76,021 | ||||||||||||||||||||
| Total | $ | 60,134 | $ | 52,535 | $ | 135,567 | $ | 139,244 | |||||||||||||||
(1)Includes the purchase price of constructed or acquired vessels, plus the cost incurred to place such vessels into active service, as necessary.
(2)Amounts include associated capitalized interest, as applicable.
Maintenance Capital Expenditures
Maintenance capital expenditures consist of: (i) recertification costs, which are capitalized as deferred recertification costs; and (ii) maintenance capital improvements, which are capitalized as property, plant and equipment.
Our vessels and certain vessel-related equipment are required by regulation to be recertified after certain periods of time. These recertification costs are typically incurred while the vessel is in drydock where other routine repairs and maintenance are performed and, at times, major replacements and improvements are performed. We expense routine repairs and maintenance as they are incurred. We elect to defer and amortize recertification costs, or deferred drydocking charges, over the length of time that the recertification is expected to last, which is generally between 24 and 60 months. Deferred drydocking charges and equipment recertification costs vary year-to-year depending on the number of vessels or equipment with expiring certifications in a given year.
Maintenance capital improvements include major replacements of, or improvements to, vessel systems, structures and equipment to enhance operability or extend the vessel's useful life. The costs of such improvements are typically capitalized and depreciated over the vessel's remaining useful life. Variability in maintenance capital improvements year-to-year is primarily driven by the number of required recertification drydockings in a given year as we utilize the downtime during the planned shipyard event as an opportunity to complete the discretionary vessel improvements.
During the three and nine months ended September 30, 2026, we completed one and 13 vessel recertifications, respectively, with an average maintenance capital expenditure of approximately $4.9 million per vessel.
Growth Capital Expenditures
Growth capital expenditures are undertaken to expand our fleet of vessels through acquisition or newbuild construction. Growth capital expenditures typically include the purchase price of acquired vessels, as well as the costs incurred to ready such vessels for active service, and the construction costs of newbuild vessels, inclusive of capitalized interest.
MPSV Newbuild Construction
In October 2023, we entered into a final settlement of a dispute with the Surety and Gulf Island related to the construction of two MPSV newbuilds. Pursuant to the settlement agreement, Gulf Island released all claims asserted against us and we released our claims against Gulf Island and the Surety. Further, the Surety agreed to take over and complete the construction of the two U.S.-flagged, Jones Act-qualified, HOS 400 class MPSVs at a shipyard acceptable to us. In December 2023, Eastern Shipbuilding Group, Inc., or Eastern, was mutually selected by the parties and contracted by the Surety to complete the construction of the two MPSVs. We were obligated to pay only the remaining portion of the original shipyard contract price for the two MPSVs, which then-amounted to $53.8 million in the aggregate on the settlement date, but was subsequently reduced to $42.6 million for liquidated damages resulting from shipyard delays. The Surety is required to cure all defaults of Gulf Island and pay all completion costs in excess of the $42.6 million remaining original contract price, excluding approved change orders arising after the settlement date. There is no cap on the Surety's completion costs. As of September 30, 2026, we have fulfilled our $42.6 million contractual obligation and all remaining construction costs are being paid by the Surety to Eastern.
Following physical delivery by the shipyard, which is expected in 2027, each vessel will undergo crane and other system installations, which should make the first vessel available for commercial service in 2027 and the second vessel in early 2028. In addition to the previously paid $42.6 million contractual obligation, we also paid $34.9 million in the aggregate for outfitting, engineering, overhead and the post-delivery discretionary enhancements. As of September 30, 2026, we expect $74.4 million of total remaining cash outlays for the two vessels, excluding capitalized interest.
Commercial Capital Expenditures
Commercial capital expenditures represent vessel-related expenditures incurred to retrofit, convert or modify a vessel's systems, structures or equipment to enhance functional capabilities and improve marketability or to meet certain commercial requirements. Examples of commercial capital expenditures include the addition of cranes, ROVs, helidecks, living quarters, and other specialized vessel equipment. Recovery of the related costs are typically included in and offset, in whole or in part, by higher dayrates charged to customers in a lump-sum payment or over time. Commercial capital expenditures for improvements that are intended to be permanent to the vessel are typically capitalized and depreciated over the vessel's remaining useful life. Modifications or improvements of a temporary nature that are completed for a specific commercial contract are deferred as a direct contract cost and amortized over the term of such contract.
Newbuild ROV Systems
In August 2026, we entered into an agreement to purchase eight newbuild work-class ROV systems and related equipment for approximately $56.4 million as part of our strategy to convert or enhance certain of our MPSVs to include integrated ROV capabilities to support subsea service operations. Deliveries are expected to commence in the second quarter of 2027 and continue throughout 2027. Four of the ROV systems are designated for the Company's two MPSV newbuilds. As of September 30, 2026, the Company had incurred $0.4 million of costs related to the purchase of the ROV systems.
Non-Vessel Capital Expenditures
Non-vessel capital expenditures primarily relate to fixed asset additions or improvements related to our port facility, office locations, information technology, non-vessel property, plant and equipment or other shoreside support initiatives.
Contractual Obligations
The following table and notes set forth material contractual obligations associated with our existing debt agreements, non-cancellable in-charted vessel and other property and equipment leases, and vessel construction and conversion programs as of September 30, 2026 (in thousands). These amounts do not include expected capital spending or other related costs that were not contractually committed as of September 30, 2026.
| Total | Less than 1 Year | 1-3 Years | 3-5 Years | Thereafter | |||||||||||||||||||||||||
|
Crane purchase contracts(1)
|
$ | 19,984 | $ | 18,036 | $ | 1,948 | $ | - | $ | - | |||||||||||||||||||
|
ROV purchase contracts (2)
|
37,097 | 29,068 | 8,029 | - | - | ||||||||||||||||||||||||
| MARAD debt | 5,001 | 5,001 | - | - | - | ||||||||||||||||||||||||
|
First Lien Revolving Credit Facility (3)
|
- | - | - | - | - | ||||||||||||||||||||||||
| Senior Notes due 2029 | 300,000 | - | 300,000 | - | - | ||||||||||||||||||||||||
| Second Lien Term Loans due 2033 | 425,611 | 36,773 | 84,590 | 102,078 | 202,170 | ||||||||||||||||||||||||
| Interest payments | 243,815 | 67,686 | 107,179 | 48,173 | 20,777 | ||||||||||||||||||||||||
|
Non-cancellable leases (4)
|
688,546 | 172,678 | 292,821 | 194,357 | 28,690 | ||||||||||||||||||||||||
| Total | $ | 1,720,054 | $ | 329,242 | $ | 794,567 | $ | 344,608 | $ | 251,637 | |||||||||||||||||||
(1)Represents the Company's contractual agreement to purchase five active heave compensated knuckle boom cranes and four crane pedestals. The crane purchase agreement consists of two 400 MT cranes and three 100 MT cranes. Two 400 MT and two 100 MT cranes are designated for installation on the two MPSV newbuilds currently under construction, while the remaining 100 MT crane is intended for future installation on an existing vessel. Contractual amounts reflect the equipment acquisition costs covered under the purchase agreement and excludes currently non-contractually obligated costs, such as shipping and installation costs. See Capital Expenditures and Related Commitments-MPSV Newbuild Construction for further discussion related to the crane installation and expected costs related to the two MPSV newbuilds.
(2)Represents the Company's contractual agreement to purchase eight newbuild ROV systems to convert or enhance certain of the Company's MPSVs for subsea services.
(3)Excludes a quarterly unused fee of 1.0% per annum on the undrawn balance of our First Lien Revolving Credit Facility due 2029, which is currently $125.0 million.
(4)Operating leases include vessel charters and facility, vehicle and equipment leases, including commitments related to leases executed but not yet commenced. At September 30, 2026, our commitment related to long-term in-chartered vessel leases totaled approximately $623.0 million, of which $320.3 million was related to the non-lease (services) components that are not included in lease liabilities on the condensed consolidated balance sheet as of September 30, 2026.
Other Material Cash Requirements
We have decommissioning obligations associated with oil and gas properties in our non-core business included within Other in our reportable segment disclosures. Such obligations, which are presented on a discounted basis in our condensed consolidated balance sheets, approximate $71.7 million (undiscounted) for Thunder Hawk field oil presented in other liabilities and gas properties and $37.1 million (undiscounted) for Droshky field oil and gas properties presented in other current liabilities as of September 30, 2026. We are entitled to receive $30.0 million (undiscounted) from Marathon Oil Corporation as certain decommissioning obligations associated with the Droshky field oil and gas properties are fulfilled. See Note 15 to our condensed consolidated financial statements for further discussion related to these obligations.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP. In other circumstances, we are required to make estimates, judgments and assumptions that we believe are reasonable based upon 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. We believe the following significant accounting policies, discussed further in the notes to our consolidated financial statements, involve estimates that are inherently more subjective.
Revenue Recognition. The core services that we provide typically 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 and the use of vessel equipment, such as cranes, gangways, ROVs, trenching units, and well-intervention equipment, and (2) non-vessel services, such as renting ROVs or other subsea equipment to third parties, providing third-party vessel crewing and management services, and providing shore-based port facility services. Revenues associated with performance obligations satisfied over time are recognized on a daily basis throughout the contract period.
Typically, our application of ASC 606, Revenue from Contracts with Customers, does not require significant judgment as the vast majority of our contracts provide a specific daily rate as the transaction price for each day of service provided for our customers' benefit. Occasionally, we are required to apply judgment in the determination and allocation of the transaction price over the performance period of our vessel charters in circumstances when the contract contains multiple daily rates or includes a lump-sum payment from the customer for certain activities such as vessel mobilizations, demobilizations or modifications. Should our judgments and estimates regarding the transaction price, representing the amount of consideration to which we expect to be entitled for services transferred to the customer, and the performance period, representing the period over which our performance obligation will be satisfied, change during the term of a contract, it could have a material effect on our results of operations for the applicable periods. We have not recorded a material adjustment to revenues as a result of changes in our estimates and assumptions associated with customer contracts during the three or nine months ended September 30, 2026. Please see further discussion regarding revenues generated from contracts with customers in Note 4 to our condensed consolidated financial statements.
Stock-Based Compensation Expense. Stock-based compensation awards are accounted for in accordance with ASC 718, Compensation - Stock Compensation, which requires all share-based payments to our employees and directors to be recognized in the audited consolidated financial statements based on their fair values on the grant date. The fair value of the underlying common stock is based upon a valuation of our equity developed with the assistance of third-party valuation experts using a combination of income and market approaches as of the appropriate measurement date. We recognize compensation expense on a straight-line basis over the expected vesting period of stock-based awards that are ultimately expected to vest based on their estimated fair value on the grant date. Forfeitures are recognized during the period in which they actually occur. Please see further discussion regarding our stock-based compensation in Note 5 to our condensed consolidated financial statements.
Income Taxes. We follow accounting standards for income taxes that require the use of the liability method of accounting for deferred income taxes. Under this method, deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The assessment of the realization of deferred tax assets, particularly those related to NOL carryforwards and foreign tax credit, or FTC, carryforwards, is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities. We establish a valuation allowance when, based on the weight of all available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized. This assessment requires significant judgment and includes consideration of, among other factors, historical operating results and cumulative earnings or losses, expectations regarding future taxable income, the timing of the reversal of existing temporary differences, available tax planning strategies, and the carryforward periods and other limitations applicable to NOL and FTC carryforwards. With respect to FTC carryforwards, our assessment also considers the amount, timing, character and jurisdiction of future taxable income, including the availability of sufficient foreign-sourced taxable income necessary to utilize such credits. In assessing the need for valuation allowance, we generally place greater weight on objectively verifiable evidence, to the extent available, than on projections of future taxable income. Changes in our estimates of future taxable income or in other relevant facts and circumstances could result in changes to our valuation allowances and could materially affect our income tax provision in the period in which such changes occur.
We recognize the financial statement effects of uncertain tax positions when it is more likely than not, based on the technical merits, that the tax position will be sustained upon examination by the applicable authority. Tax benefits that meet the recognition threshold are measured as the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement. We account for any interest and penalties relating to uncertain tax positions in interest expense and general and administrative expense, respectively. We have made an accounting policy election to account for the tax effects of global intangible low-taxed income, or GILTI, as a period cost in the year in which the tax is incurred. Please see further discussion regarding income taxes in Note 6 to our condensed consolidated financial statements.
Legal Contingencies. We are involved in a variety of claims, lawsuits, investigations and proceedings, as described in Note 16 to our condensed consolidated financial statements. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We assess our potential liability by analyzing our litigation and regulatory matters using available information. We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies. Should developments in any of these matters cause a change in our determination such that we expect an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final adverse judgment or be settled for a significant amount, they could have a material adverse effect on our results of operations in the period or periods in which such change in determination, judgment or settlement occurs.
Recertification Costs. Our vessels and certain vessel-related equipment are required by regulation to be recertified after certain periods of time. These recertification costs are typically incurred while the vessel is in drydock where other routine repairs and maintenance are also performed and, at times, major replacements and improvements are performed. We expense routine repairs and maintenance as they are incurred. Recertification costs can be accounted for under U.S. GAAP in one of two ways: (1) defer and amortize or (2) expense as incurred. We defer and amortize recertification costs over the length of time that the recertification is expected to last, which is generally 24 to 36 months on average. Major replacements and improvements, which extend the asset's useful life or increase its functional operating capability, are capitalized and depreciated over the remaining useful life. Inherent in this process are judgments we make regarding whether the specific cost incurred is capitalizable and the period that the incurred cost will benefit.
Business Combinations and Goodwill. Pursuant to ASC 805, Business Combinations, we recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date. Goodwill represents the excess of purchase price paid by the Company over the fair market value of the net assets acquired. A bargain purchase occurs when the fair market value of net assets acquired is higher than the purchase price paid. Certain assumptions and estimates are employed in evaluating the fair value of assets acquired and liabilities assumed. These estimates may be affected by factors such as changing market conditions, technological advances or equipment obsolescence, and regulatory changes. Significant judgment is required in identifying and estimating the fair value of inventory, fixed assets and intangible assets. We typically utilize the independent valuation specialists to assist in our purchase accounting for significant acquisitions and the determination of the fair value of acquired assets.
Certain Relationships and Related Party Transactions
The following is a discussion of transactions between the Company and its executive officers, directors and stockholders beneficially owning more than 5% of our common stock. We believe that the terms of each of these transactions are at least as favorable as could have been obtained in similar transactions with unaffiliated third parties.
Officer and Director Indemnity Agreements
The Company has entered into a separate indemnity agreement with each of its officers and directors that provides, among other things, that the Company will indemnify such director, under the circumstances and to the extent provided in the agreement, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as an executive officer or director of the Company, and otherwise to the fullest extent permitted under Delaware law and the Company's amended and restated bylaws. These agreements are in addition to the indemnification provided to the Company's officers and directors under its amended and restated bylaws and in accordance with Delaware law.
Fourth Amended and Restated Trade Name and Trademark License Agreement
Pursuant to the Third Amended and Restated Trade Name and Trademark License Agreement, dated September 4, 2020, the Legacy Hornbeck was required to make an annual cash payment to HFR, LLC, a Texas limited liability company owned by Todd M. Hornbeck and Troy A. Hornbeck, of $1.0 million for use of the Hornbeck Brands. An additional fee was due upon Legacy Hornbeck achieving certain EBITDA thresholds. Todd M. Hornbeck serves as the Company's President and Chief Executive Officer. Troy A. Hornbeck is the brother of Todd M. Hornbeck and serves as the Company's Director of Vendor Relations. The Company made payments of $1.5 million and $2.5 million to HFR, LLC for the nine months ended September 30, 2025 and 2026, respectively, for licensing fees associated with the use of the Hornbeck Brands. The Company entered into a Fourth Amended and Restated Trade Name and Trademark License Agreement on the Closing Date eliminating the annual $1 million fee and EBITDA bonus in exchange for a single one-time payment of $17.4 million paid to HFR, LLC for the Company's exclusive use of the Hornbeck Brands. Unless terminated earlier, the agreement and the license granted thereunder will remain in effect until the later of (a) the seventh anniversary of the Closing Date and (b) the second anniversary of the date that Todd M. Hornbeck ceases to be employed as both President and Chief Executive Officer, except that his resignation as President while continuing to serve as Chief Executive Officer will not constitute a cessation of service for purposes of this provision.
Hornbeck Family Ranch Facility Use Agreement
On September 4, 2020, the Company entered into an Amended and Restated Facilities Use Agreement with Larry D. Hornbeck, father of Todd M. Hornbeck, related to the Company's use of the Hornbeck Family Ranch (the "Ranch"), located in Houston County, Texas, including access to a hunting lodge and 4,700 acres adjoining the lodge and related facilities.The Ranch and related facilities have been used for functions intended to foster client and vendor relations, management retreats, Board meetings and special Company promotional events. The Ranch also plays a vital role in the Company's business continuity plan in the event our corporate headquarters is impacted by a natural disaster. The Facilities Use Agreement provides that the Company will pay Mr. Larry Hornbeck an annual use fee and provides for an operating budget to reimburse Mr. Larry Hornbeck for certain variable costs related to the Company's use of the Ranch facilities and to replenish expendable goods used by Company invitees to the facilities. For 2026, the operating budget was set at $481,000, inclusive of an annual use fee of $150,000. The Facilities Use Agreement will remain in effect until December 31, 2026 unless it is terminated or extended by its terms.
Former Director and Customer Relationship
On October 1, 2022, a member of Legacy Hornbeck's Board of Directors assumed an officer role with an existing Legacy Hornbeck customer. In connection with the Merger, the individual ceased serving as a member of the Board of Directors effective September 1, 2026. For the nine months ended September 30, 2026 and 2025, the Company generated $33.6 million, or 5.2%, and $52.1 million, or 9.6%, of revenue, respectively, from contracts with such customer. The Company had outstanding accounts receivable from this customer totaling $5.6 million and $4.9 million as of September 30, 2026 and December 31, 2025, respectively.
Review, Approval or Ratification of Transactions with Related Persons.
We review any transaction in which the Company, a subsidiary of the Company, or our directors, executive officers or their immediate family members or any nominee for director or a holder of more than 5% of any class of our voting security are a participant and the amount of the transaction exceeds $120,000. Our General Counsel and Secretary is primarily responsible for the development and implementation of processes and controls to obtain information from directors and officers with respect to a related party transaction, including information provided to management in the annual director and officer questionnaires. The Company's practice when such matters have been disclosed has been to refer the matter for consideration and final determination by the audit committee or the independent directors of the Board of Directors, or both, which have considered the fairness of the transaction to the Company, as well as other factors bearing upon its appropriateness. In all such matters, any director having a conflicting interest abstains from voting on the matters.
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