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 30, ~~2018~~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, 2018 was 37,595,348.~~

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, ~~2018~~2019

TABLE OF CONTENTS

Table of Contents

PART 1—I—FINANCIAL INFORMATION

Item 1—Financial Statements

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	September 30, 2018			December 31, 2017		September 30, 2019			December 31, 2018
	(Unaudited)					(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	108,066		$	186,849	$	136,401		$	224,936
Accounts receivable, net of allowance for doubtful accounts of $1,162 and $6,054, respectively	50,133			44,702
Restricted cash						227			—
Accounts receivable, net of allowance for doubtful accounts of $2,528 and $1,123, respectively						57,387			54,924
Other current assets	14,033			16,890		18,203			19,768
Total current assets	172,232			248,441		212,218			299,628
Property, plant and equipment, net	2,456,262			2,501,013		2,360,254			2,434,829
Restricted cash						56,223			—
Deferred charges, net	19,900			12,812		33,241			22,525
Right of use assets						23,237			—
Other assets	6,345			6,612		6,633			7,655
Total assets	$	2,654,739		$	2,768,878	$	2,691,806		$	2,764,637
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	22,545		$	16,196	$	32,621		$	26,826
Accrued interest	15,606			14,734		14,425			15,910
Accrued payroll and benefits	14,892			9,475		8,391			12,445
Current portion of long-term debt, net of original issue discount of $3,726 and deferred financing costs of $835	95,087			—
Current portion of long-term debt, net of original issue discount of $0 and $2,725 and deferred financing costs of $487 and $611, respectively						223,826			96,311
Lease liabilities						2,972			—
Other accrued liabilities	13,065			8,457		9,429			9,750
Total current liabilities	161,195			48,862		291,664			161,242
Long-term debt, including deferred gain of $16,655 and $18,911, and net of original issue discount of $1,058 and $7,862 and deferred financing costs of $6,773 and $10,134, respectively	989,088			1,080,826
Long-term debt, including deferred net gain of $33,373 and $15,845, and net of original issue discount of $3,310 and $3,013 and deferred financing costs of $10,906 and $6,149, respectively						1,040,392			1,123,625
Deferred tax liabilities, net	170,821			197,465		136,454			169,122
Lease liabilities						23,563			—
Other liabilities	3,736			3,801		1,839			2,722
Total liabilities	1,324,840			1,330,954		1,493,912			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; 37,595 and 37,144 shares issued and outstanding, respectively	376			371
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	761,385			760,278		765,661			761,834
Retained earnings	573,670			668,598		437,636			549,475
Accumulated other comprehensive income (loss)	(5,532		)	8,677
Accumulated other comprehensive loss						(5,783		)	(3,760		)
Total stockholders’ equity	1,329,899			1,437,924		1,197,894			1,307,926
Total liabilities and stockholders’ equity	$	2,654,739		$	2,768,878	$	2,691,806		$	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 September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
	(Unaudited)						(Unaudited)						(Unaudited)						(Unaudited)
Revenues:
Vessel revenues	$	49,401		$	45,637		$	132,016		$	110,825		$	43,683		$	49,401		$	136,192		$	132,016
Non-vessel revenues	9,067			8,029			26,470			24,346			9,147			9,067			27,519			26,470
	58,468			53,666			158,486			135,171			52,830			58,468			163,711			158,486
Costs and expenses:
Operating expenses	38,203			30,082			109,030			89,385			41,131			38,203			121,742			109,030
Depreciation	24,843			24,682			74,121			74,038			24,559			24,843			73,987			74,121
Amortization	2,725			2,473			6,973			9,463			4,033			2,725			11,373			6,973
General and administrative expenses	15,134			12,899			40,255			36,573			13,362			15,134			38,378			40,255
	80,905			70,136			230,379			209,459			83,085			80,905			245,480			230,379
Gain (loss) on sale of assets	25			(197		)	55			(178		)
Gain on sale of assets													7			25			62			55
Operating loss	(22,412		)	(16,667		)	(71,838		)	(74,466		)	(30,248		)	(22,412		)	(81,707		)	(71,838		)
Other income (expense):
Gain on early extinguishment of debt	—			—			—			15,478
Loss on early extinguishment of debt, net													—			—			(71		)	—
Interest income	531			447			1,693			1,312			1,314			531			3,349			1,693
Interest expense	(16,548		)	(11,956		)	(46,894		)	(39,194		)	(22,249		)	(16,548		)	(61,970		)	(46,894		)
Other income (expense), net	23			106			(41		)	(163		)	(268		)	23			(351		)	(41		)
	(15,994		)	(11,403		)	(45,242		)	(22,567		)	(21,203		)	(15,994		)	(59,043		)	(45,242		)
Loss before income taxes	(38,406		)	(28,070		)	(117,080		)	(97,033		)	(51,451		)	(38,406		)	(140,750		)	(117,080		)
Income tax benefit	(7,223		)	(9,120		)	(22,152		)	(30,696		)	(10,047		)	(7,223		)	(30,783		)	(22,152		)
Net loss	$	(31,183	)	$	(18,950	)	$	(94,928	)	$	(66,337	)	$	(41,404	)	$	(31,183	)	$	(109,967	)	$	(94,928	)
Loss per share:
Basic loss per common share	$	(0.83	)	$	(0.51	)	$	(2.53	)	$	(1.80	)	$	(1.09	)	$	(0.83	)	$	(2.90	)	$	(2.53	)
Diluted loss per common share	$	(0.83	)	$	(0.51	)	$	(2.53	)	$	(1.80	)	$	(1.09	)	$	(0.83	)	$	(2.90	)	$	(2.53	)
Weighted average basic shares outstanding	37,595			37,013			37,479			36,794			37,993			37,595			37,886			37,479
Weighted average diluted shares outstanding	37,595			37,013			37,479			36,794			37,993			37,595			37,886			37,479

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 September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
	(Unaudited)						(Unaudited)						(Unaudited)						(Unaudited)
Net loss	$	(31,183	)	$	(18,950	)	$	(94,928	)	$	(66,337	)	$	(41,404	)	$	(31,183	)	$	(109,967	)	$	(94,928	)
Other comprehensive income (loss):
Foreign currency translation income (loss)	(2,994		)	2,743			(14,209		)	1,536
Foreign currency translation loss													(5,647		)	(2,994		)	(3,895		)	(14,209		)
Total comprehensive loss	$	(34,177	)	$	(16,207	)	$	(109,137	)	$	(64,801	)	$	(47,051	)	$	(34,177	)	$	(113,862	)	$	(109,137	)

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,
2018 2017
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (94,928 ) $ (66,337 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation 74,121
74,038
Amortization 6,973
9,463
Stock-based compensation expense 8,922
5,740
Gain on early extinguishment of debt —
(15,478 )
Provision for bad debts 88
3,932
Deferred tax benefit (22,866 ) (33,766 )
Amortization of deferred financing costs 3,298
7,013
(Gain) loss on sale of assets (55 ) 178
Changes in operating assets and liabilities:
Accounts receivable (30,347 ) (23,898 )
Other current and long-term assets 3,060
4,062
Deferred drydocking charges (7,233 ) (6,950 )
Accounts payable 29,833
11,157
Accrued liabilities and other liabilities 2,487
2,697
Accrued interest 871
(1,054 )
Net cash used in operating activities (25,776 ) (29,203 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs incurred for acquisition of offshore supply vessels (40,868 ) —
Costs incurred for OSV newbuild program (3,670 ) (12,363 )
Net proceeds from sale of assets 82
34
Vessel capital expenditures (7,295 ) (1,299 )
Non-vessel capital expenditures (107 ) (1,468 )
Net cash used in investing activities (51,858 ) (15,096 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Credit Facility —
980
Repurchase of senior notes due 2020 —
(5,057 )
Repurchase of convertible notes —
(49,631 )
Deferred financing costs —
(5,636 )
Shares withheld for payment of employee withholding taxes (536 ) (575 )
Net cash proceeds from other shares issued 260
258
Net cash used in financing activities (276 ) (59,661 )
Effects of exchange rate changes on cash (873 ) (231 )
Net decrease in cash and cash equivalents (78,783 ) (104,191 )
Cash and cash equivalents at beginning of period 186,849
217,027
Cash and cash equivalents at end of period $ 108,066
$ 112,836
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:
Cash paid for interest $ 44,936
$ 40,028
Cash paid for income taxes $ 933
$ 1,044
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
Exchange of convertible notes for first-lien term loan $ —
$ 127,096



	Three Months Ended September 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 July 1, 2019	37,993		$	380	$	764,625	$	479,040		$	(136	)	$	1,243,909
Shares issued under employee benefit programs	—		—		—		—			—			—
Stock-based compensation expense	—		—		1,036		—			—			1,036
Net loss	—	��	—		—		(41,404		)	—			(41,404		)
Foreign currency translation loss	—		—		—		—			(5,647		)	(5,647		)
Balance at September 30, 2019	37,993		$	380	$	765,661	$	437,636		$	(5,783	)	$	1,197,894



	Nine Months Ended September 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	—	—		3,826		—			—			3,826
Net loss	—	—		—		(109,967		)	—			(109,967		)
Foreign currency translation loss	—	—		—		—			(3,895		)	(3,895		)
Balance at September 30, 2019	37,993	$	380	$	765,661	$	437,636		$	(5,783	)	$	1,197,894



	Three Months Ended September 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 July 1, 2018	37,595	$	376	$	760,942	$	604,853		$	(2,538	)	$	1,363,633
Shares issued under employee benefit programs	—	—		—		—			—			—
Stock-based compensation expense	—	—		443		—			—			443
Net loss	—	—		—		(31,183		)	—			(31,183		)
Foreign currency translation loss	—	—		—		—			(2,994		)	(2,994		)
Balance at September 30, 2018	37,595	$	376	$	761,385	$	573,670		$	(5,532	)	$	1,329,899



	Nine Months Ended September 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	—	—		1,384			—			—			1,384
Net loss	—	—		—			(94,928		)	—			(94,928		)
Foreign currency translation loss	—	—		—			—			(14,209		)	(14,209		)
Balance at September 30, 2018	37,595	$	376	$	761,385		$	573,670		$	(5,532	)	$	1,329,899

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)



	Nine Months Ended September 30,
	2019			2018
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(109,967	)	$	(94,928	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	73,987			74,121
Amortization	11,373			6,973
Stock-based compensation expense	2,535			8,922
Loss on early extinguishment of debt	71			—
Provision for bad debts	1,405			88
Deferred tax benefit	(31,637		)	(22,866		)
Amortization of deferred financing costs	99			3,298
Gain on sale of assets	(62		)	(55		)
Changes in operating assets and liabilities:
Accounts receivable	(4,677		)	(30,347		)
Other current and long-term assets	(655		)	3,060
Deferred drydocking charges	(23,000		)	(7,233		)
Accounts payable	6,539			29,833
Accrued liabilities and other liabilities	3,196			2,487
Accrued interest	(1,484		)	871
Net cash used in operating activities	(72,277		)	(25,776		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs incurred for acquisition of offshore supply vessels	—			(40,868		)
Costs incurred for OSV newbuild program	(2,165		)	(3,670		)
Net proceeds from sale of assets	68			82
Vessel capital expenditures	(1,436		)	(7,295		)
Non-vessel capital expenditures	(355		)	(107		)
Net cash used in investing activities	(3,888		)	(51,858		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from first-lien term loans	29,159			—
Repurchase of convertible notes	(73,076		)	—
Proceeds from senior credit facility	100,000			—
Payment of deferred financing costs	(11,891		)	—
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	44,318			(276		)
Effects of exchange rate changes on cash	(238		)	(873		)
Net decrease in cash, cash equivalents and restricted cash	(32,085		)	(78,783		)
Cash, cash equivalents and restricted cash at beginning of period	224,936			186,849
Cash, cash equivalents and restricted cash at end of period	$	192,851		$	108,066
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:
Cash paid for interest	$	63,318		$	44,936
Cash paid for income taxes	$	369		$	933
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, ~~2017.~~2018. The results of operations for the three and nine months ended September 30, ~~2018~~2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2018.~~2019.

The consolidated balance sheet at December 31, ~~2017~~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 reduced 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 efforts in connection with the refinancing of its 2020 senior notes. The closing of the $100 million senior credit facility in June 2019 was the latest step in that iterative process. Based on continuing discussions with existing and potential lenders, management is cautiously 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 in April 2020.

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



Standard	Description	Required Date of Adoption	Effect on the financial statements and other significant matters
Standards that have been adopted
~~ASU No. 2014-09, "Revenue from Contracts with Customers" (Topic 606)~~	This standard requires entities to recognize revenues in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 requires retrospective application.	~~January 1, 2018~~	This ASU replaces most existing revenue recognition guidance in U.S. GAAP. The Company adopted ASU 2014-09 on January 1, 2018 under the modified retrospective method. Based on the Company's review of its open revenue-related contracts on the date of adoption, it was determined that there was no cumulative effect of applying the new standard and therefore no adjustment to the opening retained earnings balance was needed as of January 1, 2018. See Note 3 - Revenues from Contracts with Customers for additional information.

~~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 adopted ASU No. 2017-01 on January 1, 2018 under the prospective application. This adoption had no impact on its consolidated financial statements.~~



~~Standards that have not been adopted~~
~~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	The Company ~~continues to evaluate the impact~~adopted this ~~new guidance will have on its consolidated financial statements.~~ASU effective January 1, 2019. See further discussion ~~below.~~below and in 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 ~~continues to evaluate the~~adopted ASU No. 2018-02 on January 1, 2019. This adoption had no material impact ~~this new guidance will have~~ 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 ~~believes that the implementation of this new guidance will not have a~~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.

ASC 842, Leases

~~Lessor Accounting~~

In July 2018, the Financial Accounting Standards Board, or FASB, issued ASU 2018-11 that allows for 1) a transition option that will allow companies to not apply the new lease standard in the comparative periods presented in their financial statements in the year of adoption and will allow the Company to continue to apply legacy guidance, ASC 840 ~~Leases~~, including its disclosure requirements, for comparative periods presented, and 2) an option for lessors to combine lease and non-lease components contained within the same agreement when certain criteria are met. The Company does not expect a change in the timing or amounts of revenues recognized upon the adoption of this standard.

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 ~~primary difference between current accounting standards and ASC 842 is~~Company adopted the ~~recognition of right-of-use assets and corresponding liabilities by lessees for those leases classified as operating leases under current accounting standards. The estimated impact~~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 ~~ASC based on the lease arrangements for~~

~~which the Company is the lessee as~~new standard, it recorded ROU assets of ~~September 30, 2018, will be an increase to assets and liabilities on the Company's financial statements to reflect the right-of-use assets~~$24.7 million and lease ~~obligations in a range from $25.0~~

~~million to $30.0~~liabilities of $27.7 million. The adoption of the ~~new~~ standard isdid not ~~expected to result in~~have an impact on the Company's equity and will not have a ~~change in~~material impact on the ~~amount~~Company's results of ~~lease expense currently being recognized.~~ operations and cash flows.

Lessor Accounting

3.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

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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 September 30, ~~2018,~~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 September 30, ~~2018,~~2019, the aggregate amount of the transaction price allocated to remaining performance obligations for such contracts was ~~$13.0~~$5.9 million, of which ~~$7.5~~$1.5 million and ~~$5.5~~$4.4 million are expected to be recognized in ~~2018~~2019 and ~~2019,~~2020, respectively. 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 nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company recognized revenues as follows (in thousands):


	Three Months Ended September 30,				Nine months ended September 30,				Three Months Ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Vessel revenues	$	49,401	$	45,637	$	132,016	$	110,825	$	43,683	$	49,401	$	136,192	$	132,016
Vessel management revenues	8,039		7,434		23,772		22,207		8,673		8,039		26,291		23,772
Shore-based facility revenues	1,028		595		2,698		2,139		474		1,028		1,228		2,698
	$	58,468	$	53,666	$	158,486	$	135,171	$	52,830	$	58,468	$	163,711	$	158,486

4.5. Loss ~~Per Share~~per share

Basic and Diluted 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 September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net loss	$	(31,183	)	$	(18,950	)	$	(94,928	)	$	(66,337	)	$	(41,404	)	$	(31,183	)	$	(109,967	)	$	(94,928	)
Weighted average number of shares of common stock outstanding	37,595			37,013			37,479			36,794			37,993			37,595			37,886			37,479
Add: Net effect of dilutive stock options and unvested restricted stock (1)(2)(3)	—			—			—			—			—			—			—			—
Weighted average number of dilutive shares of common stock outstanding	37,595			37,013			37,479			36,794			37,993			37,595			37,886			37,479
Loss per common share:
Basic loss per common share	$	(0.83	)	$	(0.51	)	$	(2.53	)	$	(1.80	)	$	(1.09	)	$	(0.83	)	$	(2.90	)	$	(2.53	)
Diluted loss per common share	$	(0.83	)	$	(0.51	)	$	(2.53	)	$	(1.80	)	$	(1.09	)	$	(0.83	)	$	(2.90	)	$	(2.53	)

(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 4,683 and 3,659 shares of common stock for the three and nine months ended September 30, 2019, respectively and 529 shares and 602 shares of common stock for the three and nine months ended September 30, 2018, ~~and 990 and 988 shares of common stock for the three and nine months ended September 30, 2017,~~ respectively.

(2)

For the nine months ended September 30, 2019 and 2018 and ~~2017,~~for the three months ended September 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. In September 2019, the Company repaid the remaining balance of the 2019 convertible senior notes in full upon their maturity. See Note 8 for further discussion. It iswas 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.

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(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 89 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 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. For the ~~purposes~~purpose of calculating the undiscounted cash flows, the Company grouped its vessels into two groups, OSVs and MPSVs, and used a probability-weighted undiscounted cash flow projection to test for recoverability. ~~After reviewing~~Included in the ~~results~~cash flow projections were assumptions related to the current mix of ~~this calculation,~~active and stacked vessels, the ~~Company determined that~~timing of stacked vessels returning to active status along with projected dayrates, operating expenses and overhead expenses related to 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.~~ groupings.

While the Company has not observed any new impairment indicators ~~the Company~~since 2016, it has reviewed and 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 results of these projections, which were last updated ~~projections,~~in 2019, the Company determined that each of its asset groups continue to have sufficient projected undiscounted cash flows to recover the remaining book value of the Company's long-lived assets within such group.

6.7. 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~~were all U.S.-flagged and are comprised of two 300 class OSVs and two 280 class OSVs. Subsequent to the acquisition, these four vessels have been foreign-flagged. 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.

710

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~~7. Long-Term~~8. Debt

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

September 30,
2018 December 31,
2017
5.875% senior notes due 2020, net of deferred financing costs of $1,387 and $2,061 $ 365,555
$ 364,881
5.000% senior notes due 2021, net of deferred financing costs of $2,415 and $3,142 447,585
446,858
1.500% convertible senior notes due 2019, net of original issue discount of $3,726 and $6,634 and deferred financing costs of $835 and $1,486 95,087
91,527
First-lien credit facility due 2023, including deferred gain of $16,655 and $18,911, and net of original issue discount of $1,058 and $1,228, and deferred financing costs of $2,971 and $3,445 175,948
177,560
1,084,175
1,080,826
Less current maturities (95,087 ) —
$ 989,088
$ 1,080,826



	September 30, 2019			December 31, 2018
5.875% senior notes due 2020, net of deferred financing costs of $487 and $1,162	$	223,826		$	365,780
5.000% senior notes due 2021, net of deferred financing costs of $1,446 and $2,173	448,554			447,827
1.500% convertible senior notes due 2019, net of original issue discount of $0 and $2,725 and deferred financing costs of $0 and $611	—			96,311
First-lien term loans due 2023, including deferred gain of $13,913 and $15,845, and net of original issue discount of $3,310 and $3,013, and deferred financing costs of $3,491 and $2,814	357,112			310,018
Second-lien term loans due 2025, including deferred gain of $19,460	140,695			—
Senior credit facility, net of deferred financing costs of $5,969	94,031			—
	1,264,218			1,219,936
Less current maturities	(223,826		)	(96,311		)
	$	1,040,392		$	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

First-lien credit facility due 2023 (1)

1,310

Variable

First-lien term loans due 2023

2,728

Variable (1)

Second-lien term loans due 2025

2,879

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

Senior credit facility

611

Monthly (2)


(1)	The interest rate on the ~~Credit Facility~~first-lien 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 30, ~~2018.~~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 September 30, 2019. Please see further discussion of the variable interest rate below.

~~First-Lien~~

Senior Credit Facility

~~The Company's $300~~On June 28, 2019, the Company entered into a $100.0 million ~~first-lien~~senior secured asset-based revolving credit facility, or ~~Credit Facility, matures~~the senior credit facility. The 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 by first-priority liens on receivables, certain restricted and unrestricted cash accounts 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 ~~June 2023 and currently provides for $136.7 million~~2022, whereas the restricted cash-backed tranche will mature in 2025. The receivables-backed tranche may be used, subject to the completion of additional available liquidity, $68.0 million of which is required to be drawn by December 31, 2018 with the remaining balance required to be drawn by September 1, 2019. The Company can use draws under the facilityapplicable eligibility review procedures, for working capital and general corporate purposes, including the ~~acquisition~~refinancing or repayment of ~~distressed assets~~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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Borrowings under the 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. Fifty percent of such loans available under the senior credit facility is 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.

On September 30, 2019, the Company's restricted cash balance under the senior credit facility was $56.2 million. The Company classifies cash as restricted when there are legal or contractual restrictions on its withdrawal or usage.

First-Lien Term Loans

On June 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 then outstanding notes, or the 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 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 First Lien Term Loan Agreement, including approximately $30.1 million in cash of new financing. On March 1, 2019, the 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 existing First Lien Term Loan Agreement.

The Company can use the amounts under the first-lien term loans for working capital and general corporate purposes, including 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 ~~Credit Facility is~~first-lien term loans are guaranteed by certain of the Company's domestic and foreign subsidiaries and are collateralized on a first-lien basis by 55certain deposit and securities accounts, 46 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 second-priority liens on receivables, certain ~~deposit~~unrestricted cash accounts and ~~securities accounts.~~ related assets that secure the senior credit facility on a first-lien basis.

Borrowings accrue interest, at the Company’s option, at ~~either~~ either:

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

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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, ~~an applicable~~for either (a), (b), or (c), a ~~margin.~~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.

OnSecond-Lien Term Loans

In February and March ~~27, 2018,~~2019, the Company ~~entered into~~completed two private offers and exchanged an ~~amendment~~aggregate of $142.6 million in face value of its 2020 senior 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 ~~its first-lien lenders~~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 $2.4 million ($1.9 million or $0.05 per diluted share after-tax) primarily related to ~~clarify various provisions in and made certain technical revisions to the Credit Facility, primarily dealing~~deal costs associated with the ~~administerial permissabilities regarding vessel reflagging transactions~~exchange. As contemplated by and ~~permitted acquisition indebtedness, among other matters.~~

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~~The~~provided for under the agreement governing the ~~Credit Facility~~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 domestic and foreign subsidiaries and are collateralized 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 on a first-lien basis and third priority liens on receivables, certain unrestricted cash accounts and related assets that secure the senior credit facility on a first-lien basis.

Convertible Note Repurchases and Repayment

During the nine months ended September 30, 2019, the Company completed a series of private transactions for the repurchase of $52.9 million 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 comprised of a $5.6 million gain on the repurchase, offset in part by the write-off of $2.0 million of original issue discount, deal costs and unamortized financing costs related to the notes repurchased.

On September 3, 2019, the Company repaid the remaining balance of $25.8 million in face value of its 2019 convertible senior notes in full upon their maturity, plus accrued and unpaid interest thereon, in accordance with the terms of the indenture governing such notes. The retirement of this debt was funded with cash on hand.

The agreements governing the 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.

The Company estimates the fair value of its 2020 senior notes, 2021 senior notes, ~~2019~~ ~~convertible senior notes~~the first-lien term loans and ~~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~~hierarchy. The interest rate on the senior credit facility is variable and the ~~Credit Facility.~~Company has concluded that face value approximates fair value of such facility as of September 30, 2019.

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


	September 30, 2018						December 31, 2017						September 30, 2019						December 31, 2018
	Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value
5.875% senior notes due 2020	$	366,942	$	365,555	$	285,297	$	366,942	$	364,881	$	244,714	$	224,313	$	223,826	$	126,131	$	366,942	$	365,780	$	191,727
5.000% senior notes due 2021	450,000		447,585		333,000		450,000		446,858		236,250		450,000		448,554		205,875		450,000		447,827		220,500
1.500% convertible senior notes due 2019	99,647		95,087		89,122		99,647		91,527		74,486		—		—		—		99,647		96,311		88,125
First-lien credit facility due 2023 (1)	163,322		175,948		162,407		163,322		177,560		162,505
First-lien term loans due 2023 (1)													350,000		357,112		343,875		300,000		310,018		295,875
Second-lien term loans due 2025 (2)													121,235		140,695		90,320		—		—		—
Senior credit facility (3)													100,000		94,031		100,000		—		—		—
	$	1,079,911	$	1,084,175	$	869,826	$	1,079,911	$	1,080,826	$	717,955	$	1,245,548	$	1,264,218	$	866,201	$	1,216,589	$	1,219,936	$	796,227


(1)	The carrying value of the ~~Credit Facility~~first-lien term loans due 2023 includes a deferred gain of ~~$16,655~~$13,913 less original issue discount and deferred financing costs of ~~$4,029.~~$6,801.


(2)	The carrying value of the second-lien term loans due 2025 includes a deferred gain of $19,460.


(3)	A portion of the senior credit facility matures in 2022 with the balance maturing in 2025.

Capitalized Interest

During the first quarter of 2018, the Company notified the shipyard that it was ~~terminating~~constructing the ~~construction contracts for~~remaining two vessels in the Company's fifth OSV newbuild ~~program. As a result,~~program that it was terminating the construction contracts for such vessels. The Company did not capitalize any of its interest costs during the ~~three~~nine months ended September 30, ~~2018.~~2019. Upon recommencement of construction of such vessels, the Company intends to resume capitalization of related interest ~~costs related thereto.~~costs. During the nine months ended September 30, 2018,, the Company capitalized approximately $2.3 million of interest costs related to the construction of vessels. ~~During the three and~~ ~~nine months ended September 30, 2017, the Company capitalized approximately $2.7 million and $7.6 million, respectively, of interest costs related to the construction of vessels.~~

8.9. 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 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 settlement modifications were completed, the Company has only 0.2 million awards 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 September 30, ~~2018,~~2019, taking into account the outstanding awards now anticipated to be stock-settled, the Company has ~~granted awards covering 4.68~~0.7 million shares of common stock available to be granted under such plan.

~~During the~~ ~~nine months ended September 30, 2018~~, the Company granted 1,527,102 time-based and 939,391 performance-based phantom restricted stock units. The phantom 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 unit agreements governing such awards. The actual number of performance-based shares that could be received by the award recipients can range from 0% to 150% of such awards granted depending on the Company's performance.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock

~~The fair value of~~During the ~~Company’s performance-based phantom restricted stock units, which is~~nine months ended September 30, 2019, 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.~~Company granted 2.4 million time-based PSUs. The compensation expense related to 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. All ~~phantom restricted stock units~~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 ~~phantom restricted stock units~~PSUs granted in ~~2018,~~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 months ended September 30, ~~2018~~2019, the Company issued ~~426,896~~292,715 shares of common stock due to vestings of restricted stock units and employee purchases under the Company's Employee Stock Purchase Plan.

Stock Appreciation Rights

During the nine months ended September 30, 2019, the Company granted 1.6 million SARs. The SARs vest and become exercisable in three equal annual installments on each of the 1st, 2nd and 3rd anniversaries of 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, 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 the modification date, the fair value for the outstanding SARs was $1.02 per share granted.

The following assumptions were used to value SARs on the modification date:



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,
2018 2017 2018 2017
Loss before income taxes $ 4,169
$ 2,726
$ 8,922
$ 5,740
Net loss $ 3,385
$ 1,840
$ 7,236
$ 3,924
Earnings per common share:
Basic earnings per common share $ 0.09
$ 0.05
$ 0.19
$ 0.11
Diluted earnings per common share $ 0.09
$ 0.05
$ 0.19
$ 0.11



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Loss before income taxes	$	876	$	4,169	$	2,535	$	8,922
Net loss	$	705	$	3,385	$	1,980	$	7,236
Loss per common share:
Basic loss per common share	$	0.02	$	0.09	$	0.05	$	0.19
Diluted loss per common share	$	0.02	$	0.09	$	0.05	$	0.19

9.10. 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 intends to work with~~vessels based on the ~~performance bond surety to find and contract with a shipyard~~shipyard's statements that ~~can finish construction and deliver such vessels.~~it would be more than one year late in the delivery of the vessels, among other reasons. 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.~~Louisiana, or the Gulf Island Litigation. The shipyard claims that the Company's termination was improper and that the shipyard should be permitted to complete construction of the vessels. Alternatively, the shipyard asserts that if the termination was proper, the Company would owe the shipyard compensation for unpaid work. The Company has responded to the suit and has alleged counter-claims. The Company intends to vigorously defend against the shipyard’s claims and considers them to be without ~~merit,~~merit. The shipyard has frustrated the Company's ability to complete the vessels at a replacement shipyard by asserting that it has possessory rights over the vessels. The Company disputes these asserted possessory rights and ~~will respond~~believes that the detention of the vessels, over which the Company has title, is wrongful. On November 5, 2019, the district court denied a preliminary motion for summary judgment to require the shipyard to release its possession of the vessels, which may delay further the ability to complete the vessels at a completion shipyard. Because of the shipyard's detention of the vessels, the timeframe in which the vessels can be completed at a replacement shipyard is also uncertain. The Company received performance bonds from sureties. The sureties have denied the Company's claim under the bonds, but did authorize 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 ~~lawsuit~~full amount of the performance bond. The Company rejected the sureties' conditional and non-conforming offer.

As of the date of termination of the construction contracts, these two remaining vessels, both of which are domestic 400 class MPSVs, were projected to be delivered in ~~due course.~~

the second and third quarters of 2019, respectively. These projected delivery dates were subsequently amended, for guidance purposes, to be the second and third quarters of 2020. Due to the continued uncertainty of the timing and location of future construction activities, the Company is now updating its forward guidance for the delivery dates related to these vessels to be the second and third quarters of 2021, 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. 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 ~~$2.0~~$22.9 million and ~~$58.9~~$35.8 million are currently expected to be incurred in ~~the remainder of 2018~~fiscal 2020 and fiscal ~~2019,~~2021, respectively. AsThe foregoing amounts do not reflect any potential additional payments to the shipyard in respect of the date of termination, these two remaining vessels, both of which are 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.aforementioned claim. From the inception of this program through September 30, ~~2018,~~2019, the Company had incurred ~~$1,274.1~~$1,276.3 million, or ~~95.4%~~95.6%, of total expected project costs.

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HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

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

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

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.

~~10. Other Accrued Liabilities~~

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

September 30, 2018 December 31, 2017
Accrued lease expense $ 5,344
$ 5,142
Deferred revenues 2,173
460
Other 5,548
2,855
Total $ 13,065
$ 8,457

11. Income Taxes

The Tax Cuts and Jobs Act, or the Act, was signed into law on December 22, 2017. The primary impact of this legislation was a reduction of the U.S. federal corporate tax rate from 35% to 21% generally effective January 1, 2018. As of December 31, 2017, the Company included in its income tax benefit rate a preliminary estimate related to executive compensation, alternative minimum tax refundable credits, taxation in its foreign jurisdictions, and re-measurement of its deferred taxes. As of September 30, 2018, the Company has not identified or recorded any revisions to its provisional amounts and has not completed its accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, the Company made reasonable estimates of the effects and recorded provisional amounts. The Company's provisional estimates on Global Intangible Low Taxed Income, Foreign Derived Intangible Income, Base Erosion and Anti-Abuse, and the IRC Section 163(j) interest limitation did not materially impact its effective tax benefit rate for the three months ended September 30, 2018. The Company will continue to refine its calculations as additional tax guidance becomes available and its internal analysis is completed. The accounting for the tax effects of the Act will be completed in 2018 as allowed under Staff Accounting Bulletin 118, which was issued by the Securities and Exchange Commission on December 22, 2017.

The effective tax benefit rate for the nine months ended September 30, 2019 and 2018 was 21.9% and ~~2017 was~~ 18.9% ~~and 31.6%~~, respectively. The ~~lower benefit~~Company's effective tax rate ~~for~~differs from the ~~period ended September 30, 2018 was primarily~~federal statutory rate due to the ~~reduction~~establishment of ~~the statutory corporate income tax rate from 35% to 21% resulting from the Act. In addition, the Company established~~ valuation allowances in ~~2017~~2019 and 2018 for state net operating loss, foreign tax credit carryforwards, and nondeductible interest based upon management's conclusion that it is more likely than not such losses and credits will not be realized by their expiration dates.

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

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

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

The following tables present the condensed consolidating balance sheets as of September 30, 2018 and December 31, 2017, the condensed consolidating statements of operations, the condensed consolidating statements of comprehensiveCompany's income ~~(loss) and condensed consolidating statements of cash flows~~tax benefit rate for the nine months ended September 30, 2019 was higher than the benefit rate from the nine months ended September 30, 2018, ~~and 2017, respectively, for the domestic subsidiaries~~because of the reversal of a portion of valuation allowances on state net operating loss carryforwards that the Company now believes will be utilized, due to state law changes in June 2019.

During the nine months ended September 30, 2019, the Company adopted ASU 2018-02 and has elected to reclassify the stranded income tax effects of the Tax Cuts and Jobs Act from accumulated comprehensive income to retained earnings. As a result, a reduction in retained earnings and an increase in accumulated other comprehensive income of $1.9 million was recorded in the nine months ended September 30, 2019.

12. Leases

The 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 lease when it is reasonably certain that ~~serve~~the Company will exercise the option. ROU assets and the corresponding lease liabilities are recorded at the commencement date based on the present value of 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 lease and the 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 ~~co-borrower and/or guarantors~~real estate taxes and maintenance expenses. These costs are expensed in the 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 $3.0 million of expense related to leases in general and administrative and operating expenses during the ~~Credit Facility, as well as~~nine months ended September 30, 2019. The expense recorded for short-term leases was $0.4 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 Credit Facility are 100% owned, directly or indirectly, by Hornbeck Offshore Services, Inc. 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, 2018
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 3
$ 103,966
$ 4,097
$ —
$ 108,066
Accounts receivable, net of allowance for doubtful accounts of $1,162 —
40,522
9,739
(128 ) 50,133
Other current assets 47
13,039
947
—
14,033
Total current assets 50
157,527
14,783
(128 ) 172,232
Property, plant and equipment, net —
2,264,250
192,012
—
2,456,262
Deferred charges, net —
18,354
1,546
—
19,900
Intercompany receivable 1,784,031
790,433
221,368
(2,795,832 ) —
Investment in subsidiaries 706,811
8,602
—
(715,413 ) —
Other assets —
5,821
524
—
6,345
Total assets $ 2,490,892
$ 3,244,987
$ 430,233
$ (3,511,373 ) $ 2,654,739
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 5
$ 21,263
$ 1,277
$ —
$ 22,545
Accrued interest 15,606
—
—
—
15,606
Accrued payroll and benefits —
14,345
547
—
14,892
Current portion of long-term debt, net of original issue discount of $3,726 and deferred financing costs of $835 95,087
—
—
—
95,087
Other accrued liabilities —
11,933
1,260
(128 ) 13,065
Total current liabilities 110,698
47,541
3,084
(128 ) 161,195
Long-term debt, including deferred gain of $16,655, and net of original issue discount of $1,058 and deferred financing costs of $6,773 989,088
—
—
—
989,088
Deferred tax liabilities, net —
169,926
895
—
170,821
Intercompany payables 55,674
2,273,678
475,082
(2,804,434 ) —
Other liabilities —
3,685
51
—
3,736
Total liabilities 1,155,460
2,494,830
479,112
(2,804,562 ) 1,324,840
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; 37,595 shares issued and outstanding 376
—
—
—
376
Additional paid-in capital 761,385
37,978
8,602
(46,580 ) 761,385
Retained earnings 573,671
712,179
(51,949 ) (660,231 ) 573,670
Accumulated other comprehensive loss —
—
(5,532 ) —
(5,532 )
Total stockholders’ equity 1,335,432
750,157
(48,879 ) (706,811 ) 1,329,899
Total liabilities and stockholders’ equity $ 2,490,892
$ 3,244,987
$ 430,233
$ (3,511,373 ) $ 2,654,739

~~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, 2017
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 4
$ 178,746
$ 8,099
$ —
$ 186,849
Accounts receivable, net of allowance for doubtful accounts of $6,054 —
40,407
4,295
—
44,702
Other current assets 29
16,051
810
—
16,890
Total current assets 33
235,204
13,204
—
248,441
Property, plant and equipment, net —
2,379,097
121,916
—
2,501,013
Deferred charges, net —
11,408
1,404
—
12,812
Intercompany receivable 1,778,711
648,920
39,445
(2,467,076 ) —
Investment in subsidiaries 790,734
8,602
—
(799,336 ) —
Other assets —
5,984
628
—
6,612
Total assets $ 2,569,478
$ 3,289,215
$ 176,597
$ (3,266,412 ) $ 2,768,878
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ —
$ 15,643
$ 553
$ —
$ 16,196
Accrued interest 14,734
—
—
—
14,734
Accrued payroll and benefits —
8,458
1,017
—
9,475
Other accrued liabilities —
8,129
328
—
8,457
Total current liabilities 14,734
32,230
1,898
—
48,862
Long-term debt, including deferred gain of $18,911, and net of original issue discount of $7,862 and deferred financing costs of $10,134 1,080,826
—
—
—
1,080,826
Deferred tax liabilities, net —
192,793
4,672
—
197,465
Intercompany payables 140,019
2,240,832
190,177
(2,571,028 ) —
Other liabilities —
3,802
(1 ) —
3,801
Total liabilities 1,235,579
2,469,657
196,746
(2,571,028 ) 1,330,954
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; 37,144 shares issued and outstanding 371
—
—
—
371
Additional paid-in capital 758,690
37,975
8,602
(44,989 ) 760,278
Retained earnings 574,838
781,583
(37,428 ) (650,395 ) 668,598
Accumulated other comprehensive income —
—
8,677
—
8,677
Total stockholders’ equity 1,333,899
819,558
(20,149 ) (695,384 ) 1,437,924
Total liabilities and stockholders’ equity $ 2,569,478
$ 3,289,215
$ 176,597
$ (3,266,412 ) $ 2,768,878

~~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, 2018
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Revenues $ —
$ 54,488
$ 3,489
$ 491
$ 58,468
Costs and expenses:
Operating expenses —
31,796
5,940
467
38,203
Depreciation —
22,793
2,050
—
24,843
Amortization —
2,340
385
—
2,725
General and administrative expenses 40
14,422
648
24
15,134
40
71,351
9,023
491
80,905
Gain on sale of assets —
18
7
—
25
Operating loss (40 ) (16,845 ) (5,527 ) —
(22,412 )
Other income (expense):
Interest income —
477
54
—
531
Interest expense (16,548 ) —
—
—
(16,548 )
Equity in earnings (losses) of consolidated subsidiaries (14,598 ) —
—
14,598
—
Other income (expense), net —
1,331
(1,308 ) —
23
(31,146 ) 1,808
(1,254 ) 14,598
(15,994 )
Income (loss) before income taxes (31,186 ) (15,037 ) (6,781 ) 14,598
(38,406 )
Income tax expense (benefit) —
(7,474 ) 251
—
(7,223 )
Net income (loss) $ (31,186 ) $ (7,563 ) $ (7,032 ) $ 14,598
$ (31,183 )

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

~~(In thousands)~~

Three Months Ended September 30, 2018
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Net income (loss) $ (31,186 ) $ (7,563 ) $ (7,032 ) $ 14,598
$ (31,183 )
Other comprehensive income:
Foreign currency translation loss —
—
(2,994 ) —
(2,994 )
Total comprehensive income (loss) $ (31,186 ) $ (7,563 ) $ (10,026 ) $ 14,598
$ (34,177 )

~~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, 2018
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Revenues $ —
$ 152,766
$ 5,286
$ 434
$ 158,486
Costs and expenses:
Operating expenses —
97,990
10,627
413
109,030
Depreciation —
68,973
5,148
—
74,121
Amortization —
6,078
895
—
6,973
General and administrative expenses 178
38,247
1,809
21
40,255
178
211,288
18,479
434
230,379
Gain on sale of assets —
48
7
—
55
Operating loss (178 ) (58,474 ) (13,186 ) —
(71,838 )
Other income (expense):
Interest income —
1,502
191
—
1,693
Interest expense (46,894 ) —
—
—
(46,894 )
Equity in earnings (losses) of consolidated subsidiaries (47,857 ) —
—
47,857
—
Other income (expense), net —
1,310
(1,351 ) —
(41 )
(94,751 ) 2,812
(1,160 ) 47,857
(45,242 )
Income (loss) before income taxes (94,929 ) (55,662 ) (14,346 ) 47,857
(117,080 )
Income tax expense (benefit) —
(22,328 ) 176
—
(22,152 )
Net income (loss) $ (94,929 ) $ (33,334 ) $ (14,522 ) $ 47,857
$ (94,928 )

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

~~(In thousands)~~

Nine Months Ended September 30, 2018
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
Net income (loss) $ (94,929 ) $ (33,334 ) $ (14,522 ) $ 47,857
$ (94,928 )
Other comprehensive income:
Foreign currency translation loss —
—
(14,209 ) —
(14,209 )
Total comprehensive income (loss) $ (94,929 ) $ (33,334 ) $ (28,731 ) $ 47,857
$ (109,137 )

~~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 (loss) on sale of assets —
(198 ) 1
—
(197 )
Operating loss —
(11,920 ) (4,747 ) —
(16,667 )
Other income (expense):
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 )

nine months ended September 30, 2019.

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~Condensed Consolidating Statement~~During the nine months ended September 30, 2019, the Company recorded operating cash outflows from operating leases of ~~Operations~~$2.7 million.

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

~~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, 2018
Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidating Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ 275
$ (24,070 ) $ (1,981 ) $ —
$ (25,776 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Costs incurred for acquisition of offshore supply vessels —
(40,868 ) —
—
(40,868 )
Costs incurred for OSV newbuild program —
(3,670 ) —
—
(3,670 )
Net proceeds from sale of assets —
75
7
—
82
Vessel capital expenditures —
(6,135 ) (1,160 ) —
(7,295 )
Non-vessel capital expenditures —
(112 ) 5
—
(107 )
Net cash used in investing activities —
(50,710 ) (1,148 ) —
(51,858 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares withheld for payment of employee withholding taxes (536 ) —
—
—
(536 )
Net cash proceeds from other shares issued 260
—
—
—
260
Net cash used in financing activities (276 ) —
—
—
(276 )
Effects of exchange rate changes on cash —
—
(873 ) —
(873 )
Net decrease in cash and cash equivalents (1 ) (74,780 ) (4,002 ) —
(78,783 )
Cash and cash equivalents at beginning of period 4
178,746
8,099
—
186,849
Cash and cash equivalents at end of period $ 3
$ 103,966
$ 4,097
$ —
$ 108,066
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:
Cash paid for interest $ 44,936
$ —
$ —
$ —
$ 44,936
Cash paid for income taxes $ —
$ 586
$ 347
$ —
$ 933

~~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 —
(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 Credit Facility 980
—
—
—
980
Repurchase of senior notes due 2020 (5,057 ) —
—
—
(5,057 )
Repurchase of convertible notes (49,631 ) —
—
—
(49,631 )
Deferred financing costs (5,636 ) —
—
—
(5,636 )
Shares withheld for payment of 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 DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
Exchange of convertible notes for first-lien term loan $ 127,096
$ —
$ —
$ —
$ 127,096



	Nine Months Ended September 30, 2019
Remainder of 2019	$	746
2020	3,073
2021	3,003
2022	3,065
2023	3,122
Thereafter	43,873
Total lease payments	56,882
Less: imputed interest	30,347
Total operating lease liabilities	$	26,535

Weighted-average remaining lease term (in years)	17.3
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, ~~2017.~~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

~~While~~During the third quarter of 2019, oil prices remained in a range of $50 to $60 per barrel for WTI and ~~Brent oil~~Brent. Crude prices ~~have stabilized in the $60 to $70 per barrel range, they~~ still remain below the average prevailing prices between 2005 and late 2014. The sustained decrease in oil prices since 2014 caused major, international and independent oil companies with deepwater operations to significantly reduce their offshore capital spending budgets for the 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 question facing the offshore oilfield-related industry is the duration of the current downturn in offshore activities. Our current view is that market conditions ~~will remain weak through the end of fiscal 2018. However, given sustained prices~~ in the ~~$60~~Greater GoM Operating Region have begun to ~~$70 per barrel range and lower exploration and development costs achieved by our customers, we believe that the necessary elements for improved~~rebound, however conditions in the third quarter of 2019 reflected little improvement and have not yet resulted in better utilization or pricing for our ~~market may be taking shape. While impossible to predict with assurance, this market~~active fleet of OSVs. In fact during the third quarter of 2019, utilization and effective dayrates for our OSVs worsened over the sequential and prior year quarters. Oil price improvement ~~may begin to take-hold by mid-2019. However, a loss of confidence~~appears unlikely in the ~~oil price recovery or an inability by our customers~~near-term due to ~~sustain cost improvements could derail or postpone a recovery.~~continued slower global demand and sustained over supply. Additionally, global economic uncertainty, driven by events such as a trade-war involving the United States and major trading partners, could ~~have a negative~~negatively impact on global economic ~~growth~~conditions or on oil markets.

~~While~~Against this backdrop, the primary challenge confronting us has been, and continues to be, the ability to repay our senior notes maturing in 2020 and 2021. The maturity of our 2020 senior notes falls within the twelve-month period following the issuance of our 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 revenues lost over an extended period of time. Even in light of our currently depressed operating levels, we believe cash generated from operations together with cash on hand and availability under the Credit Facility should be sufficientadequate liquidity to fund our operations ~~and commitments~~ through at least March ~~31,~~ 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 athe 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 ~~our remaining tranches of~~the 2020 senior notes and the 2021 senior notes ~~when~~as they mature in ~~fiscal years~~ 2020 and 2021, respectively. ~~The Credit Facility was the first step~~Recently, we have engaged in ~~addressing the maturities~~discussions with advisors to and members of an ad hoc group of holders of our ~~unsecured~~2020 and 2021 notes. ~~We remain fully cognizant~~These discussions, while positive, are preliminary and we cannot provide assurance that these discussions will result in an acceptable arrangement. As part of ~~the challenges currently facing the offshore oil~~our efforts to negotiate an arrangement with

holders of our 2020 and ~~gas industry~~2021 senior notes, we have established a Special Committee of our Board of Directors.

While third quarter 2019 market conditions remained soft and affected our utilization and pricing for OSVs, we continue to ~~review~~observe leading indicators that signal the potential for improved conditions - including larger offshore capital budget announcements by our ~~capital structure~~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 third 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, ~~three~~two high-spec OSVs have been delivered into the domestic market so far this year. We expect anone additional ~~five~~ high-spec ~~OSVs~~OSV to be delivered into domestic service ~~through 2019.~~in 2019 and one high-spec OSV to be delivered into domestic service in the first quarter of 2020. We do not

anticipate significant growth in the supply of high-spec U.S.-flagged OSVs beyond the currently anticipated level of ~~188~~179 of such vessels by the ~~end~~first quarter of ~~2019.~~ 2020. We continue to monitor the overhang of the dormant supply of stacked U.S.-flagged high-spec OSVs. There are approximately 75 stacked domestic vessels and all 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.

During the third quarter of ~~2018,~~2019, there was an average of ~~roughly 30 floating rigs available in the GoM, while an average of 18.4 were working. The average number of~~26.3 floating rigs working in the Greater GoM ~~has remained~~Operating Region. We see an additional one to two incremental floaters that will begin working in the ~~low-twenties~~Greater GoM Operating Region through the end of 2019. While we do not expect that all of these units will work at the same time or ~~below~~that all units currently working will continue to work; overall we view these developments as favorable for ~~nine consecutive quarters. As of October 31, 2018, there were 28 floating rigs available in the GoM, 18 of which were working. Based on recent discussions with customers and public announcements, we~~market conditions going forward. We believe that an incremental ten to twelve floating rigs will commence charters across our operating regions of the GoM, the Caribbean, Mexico, Brazil and the northern slope of South America through mid-2019. We believe thatthese improved regional demand drivers will ~~further tighten supply~~create increased opportunities for our fleet of ~~available, active, high-spec vessels. The GoM is one of the premier deepwater markets in the world and we are committed to supporting our customers in this market. We believe that once~~new generation OSVs. Once the current supply and demand fundamentals return to more normal conditions, our results from operations ~~will~~should improve. ~~Due~~

Unlike our OSVs, whose utilization is tied principally to ~~a seasonal increase in~~drilling activities, demand ~~we experienced improved market conditions~~ for our MPSVs ~~in the second quarter of 2018. Some of the charters for our MPSVs concluded during the third quarter, therefore, MPSV utilization was negatively impacted.~~is also driven by other offshore activities. These vessels are used for a wide variety of 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.

~~In recognition of these weak market conditions,~~Since October 1, 2014, we stacked OSVs and MPSVs on various ~~dates commencing on October 1, 2014.~~dates. As of September 30, ~~2018,~~2019, as well as October 30, 2019, we had 3935 OSVs and ~~one MPSV stacked. As of November 1, 2018 we had 38 OSVs and one MPSV~~two MPSVs stacked and such stacked vessels represent ~~53%~~50% of our fleetwide vessel headcount, and ~~35%~~37% of our total OSV and MPSV deadweight tonnage. The Company plans to reactivate one 265 class OSV during the fourth quarter of 2019 and one MPSV during the first quarter of 2020. 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.

Mexico and Brazil continue to comprise our two core international markets. In Mexico, the opening of its offshore energy prospects to international participants yielded exploratory success, which has spurred further investment in offshore opportunities there. 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 its offshore energy sector, and increasingly in deepwater prospects, we elected to ~~Mexican flag one~~Mexican-flag four HOSMAX 300 class ~~OSV along with a~~OSVs, two 280 class ~~and a~~ OSVs, two

240 class ~~OSV during~~OSVs and one MPSV since January 1, 2018. At present, our Mexican-flagged fleet is comprised of eight high-spec OSVs, five low-spec OSVs and one MPSV, which is the ~~nine months ended September 30, 2018. During October 2018,~~second largest concentration of vessels we ~~Mexican-flagged another 280 class OSV. The presidential election in~~have committed to any single national market. Mexico ~~may negatively impact the prospects for additional energy reform in Mexico or its attractiveness~~has undergone significant transformation as a ~~potential~~ market for offshore energy over the last several years. More recently, Mexico's newly elected president has announced an intention to roll-back some of the energy reforms that have created more opportunities for international ~~companies. However, we believe~~oil companies, 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 manner in which these policies develop. We have a long-standing relationship with Pemex as well as with the IOCs that ~~current investments will proceed.~~ have recently entered Mexico. We expect Mexico to continue to refine energy policies that are appropriate to its national objectives.

In Brazil, we presently own and operate one Brazilian-flagged high-spec OSV. We have flexibility under Brazilian law to import and flag into Brazilian registry an additional vessel of similar DWT. We also own and operate one Vanuatu-flagged MPSV currently working in Brazil as a flotel. Brazil is the single largest deepwater market in the world. Recent measures to expand the role of IOCs in its “pre-salt” prospects are ~~seeing modest increases~~taking hold and we believe Brazilian activity in the offshore ~~activity driven,~~energy space will be a significant contributor to the overall recovery in ~~part, by Brazil's further opening of its "pre-salt" prospects to international oil companies, many of which have shown significant interest in such prospects.~~global offshore E&P activities.

Our Vessels

All of our current vessels are qualified under the Jones Act to engage in U.S. coastwise trade, except for 1218 foreign-flagged new generation OSVs and two foreign-flagged MPSVs. As of September 30, ~~2018,~~2019, our 2731 active new generation OSVs, ~~seven~~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)	2120
Other U.S. coastlines ~~(1)~~(2)	95
	3025
Foreign
Other Latin America	12
~~Trinidad~~Caribbean	32
Brazil	12
Mexico	310
	816
Total Vessels ~~(2)~~(3)	3841


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


~~(2)~~	~~Excluded from this table are 39 new generation OSVs and one MPSV that were stacked as of September 30, 2018.~~

(1) Includes two owned vessels supporting the military.

(2) Includes one 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 September 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. We continually assess the carrying value of our vessels as discussed below.

Carrying Value of Vessels. We depreciate our OSVs and MPSVs over estimated useful lives of 25 years each. Salvage value for our new generation marine equipment is estimated to be 25% of the originally recorded cost for these asset types. In assigning depreciable lives to these assets, we have considered the effects of both physical deterioration largely caused by wear and tear due to operating use and other economic and regulatory factors that could impact commercial viability. To date, our experience confirms that these policies are reasonable, although there may be events or changes in circumstances in the future that indicate that recovery of the carrying amount of our vessels might not be possible.

We presently review the carrying values of our vessels for impairment using the following asset groups: OSVs and MPSVs. We believe that these two vessel groups are appropriate because our vessels are highly mobile among disparate geographies and are directed centrally from our headquarters. Our OSVs share multiple forms of direct and indirect common costs and are marketed on a portfolio basis as an integrated (multi-vessel) marine solution to our customers primarily supporting drilling and exploration activities in various deepwater and ultra-deepwater markets worldwide to our customers. We manage, market, operate and maintain our vessels in a unified manner because we are performing the same services to the same client group across the same geographic regions - i.e., primarily the transportation of the same fungible types of cargo. We believe that our unified approach to operating the vessels within each group is among the most important factors and strategic advantages that drive our customers to utilize our vessels, irrespective of the type or size of vessel that the customer requires on a given engagement. Therefore, management has concluded that the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities is at the OSV and MPSV groupings.

When analyzing asset groups for impairment, we consider both historical and projected operating cash flows, operating income, and EBITDA based on current operating environment and future conditions that we can reasonably anticipate, such as inflation or prospective wage costs. These projections are based on, but not limited to, job location, current and historical market dayrates included in recent sales proposals, utilization and contract coverage; along with anticipated market drivers, such as drilling rig movements, results of offshore lease sales and discussions with our customers regarding their ongoing drilling plans.

If events or changes in circumstances as set forth above were to indicate that the asset group’s carrying amount may not be recoverable over the vessels' useful lives for such groups, we would then be required to estimate the future undiscounted cash flows expected to result from the use of the asset group and its eventual disposition. If the sum of the expected future undiscounted cash flows was determined to be less than the carrying amount of the vessels, we would be required to reduce the carrying amount to fair value. Examples of events or changes in circumstances that could indicate that the recoverability of the carrying amount of our asset groups should be assessed might include a significant change in regulations such as OPA 90, a significant decrease in the market value of the asset group and current period operating or cash flow losses combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the asset group.

During the second quarter of 2016, we identified indicators of impairment relating to our vessels as a result of operating losses occurring for the first time in the our history due to the rapid decline in market conditions. In accordance with GAAP, we calculated the undiscounted cash flows using a probability weighted forecast for each of our asset groups over their respective remaining useful lives. Included in the cash flow projections were assumptions related to the current mix of active and stacked vessels, the estimated timing of stacked vessels returning to active status along with projected dayrates, operating expenses and overhead expenses related to each of the groupings. We view vessel stackings as a temporary status and a prudent business strategy. Stacking vessels does not imply that we have ceased marketing such vessels or intend to never reactivate such vessels when market conditions improve. In fact, we have unstacked vessels in recent quarters and will continue to do so as warranted. The total of the undiscounted cash flows was greater than the net book values of our asset groups and, therefore, we concluded that we did not have an impairment of

our long-lived assets as of June 30, 2016, and in such analysis, noted a significant cushion for each of our asset groups as a result of the long remaining useful lives of our vessels.

While we have not observed any new impairment indicators since the second quarter of 2016, each quarterly period, we assess whether there are any new indicators present and whether there have been any events or developments that would indicate that our most recent undiscounted cash flow analysis warrants being updated to reflect a change in inputs or assumptions. We have reviewed and updated, as necessary, the assumptions used in determining our undiscounted cash flow projections for each asset group to reflect current and projected market conditions, and also prepared and updated our sensitivity analysis relating to such assumptions. After reviewing the result of our most recent undiscounted cash flow projections, which were prepared in mid-2019, we have determined that each of our asset groups continues to have sufficient projected undiscounted cash flows to recover the remaining book value of our long-lived assets within such group. In the development of the undiscounted cash flows, in addition to the previously discussed considerations above and in light of current market conditions, we estimate the length of time it will take for the market to absorb our stacked vessels such that we can return those vessels to active status. Any significant revisions to this estimate would have the greatest impact in the development of the undiscounted cash flows. However, as part of our most recent analysis, we determined that if we extended the downturn (and, thus, the unstacking of vessels) by two years from the most recent estimate, this would reduce our undiscounted cash flows by less than 15%, still providing us with substantial excess undiscounted cash flow coverage of the assets’ net book values given the length of remaining useful lives for the assets. Further, we also perform a look-back analysis each quarter to compare our actual performance to that of our most recently prepared undiscounted cash flow analysis. In each case since June 2016, we have noted that our actual quarterly performance has outperformed the applicable estimated undiscounted cash flow calculations used in completing the latest impairment analysis for such comparable period. See Note 6 of our consolidated financial statements included herein for further discussion. We will continue to closely monitor market conditions and potential impairment indicators as long as this market downturn persists.

Our other 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, ~~2017~~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 September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Offshore Supply Vessels:
Average number of new generation OSVs (1)	66.0			62.0			64.0			62.0			66.0			66.0			66.0			64.0
Average number of active new generation OSVs (2)	26.3			19.0			22.4			19.6			31.0			26.3			30.3			22.4
Average new generation OSV fleet capacity (DWT)	238,783			220,172			229,260			220,172			238,845			238,783			238,845			229,260
Average new generation OSV capacity (DWT)	3,618			3,551			3,584			3,551			3,619			3,618			3,619			3,584
Average new generation OSV utilization rate (3)	26.1		%	26.3		%	24.7		%	22.8		%	23.4		%	26.1		%	29.4		%	24.7		%
Effective new generation OSV utilization rate (4)	65.4		%	85.8		%	70.5		%	71.9		%	49.9		%	65.4		%	63.9		%	70.5		%
Average new generation OSV dayrate (5)	$	19,446		$	18,483		$	19,097		$	20,709		$	19,750		$	19,446		$	18,600		$	19,097
Effective dayrate (6)	$	5,075		$	4,861		$	4,717		$	4,722		$	4,622		$	5,075		$	5,468		$	4,717


(1)	We owned 66 new generation OSVs as of September 30, ~~2018.~~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. and two MPSV newbuilds currently under construction.


(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 this 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 as a supplemental internal measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; to compare to the EBITDA of other companies when evaluating potential acquisitions; and 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 nine months ended September 30, 2019 and 2018, respectively (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
EBITDA Reconciliation to GAAP:
Net cash flows used in operating activities	$	(23,617	)	$	1,878		$	(72,277	)	$	(25,776	)
Cash paid for deferred drydocking charges	7,395			3,882			23,000			7,233
Cash paid for interest	24,131			10,724			63,318			40,028
Cash paid for (refunds of) taxes	391			283			369			933
Changes in working capital	(8,027		)	(7,405		)	(7,230		)	(4,248		)
Stock-based compensation expense	(876		)	(4,169		)	(2,535		)	(8,922		)
Loss on early extinguishment of debt, net	—			—			(71		)	—
Gain (loss) on sale of assets	7			25			62			55
Changes in other, net	(1,328		)	(39		)	(1,405		)	(88		)
EBITDA	$	(1,924	)	$	5,179		$	3,231		$	9,215

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

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Components of EBITDA:
Net loss $ (31,183 ) $ (18,950 ) $ (94,928 ) $ (66,337 )
Interest, net
Debt obligations 16,548
11,956
46,894
39,194
Interest income (531 ) (447 ) (1,693 ) (1,312 )
Total interest, net 16,017
11,509
45,201
37,882
Income tax benefit (7,223 ) (9,120 ) (22,152 ) (30,696 )
Depreciation 24,843
24,682
74,121
74,038
Amortization 2,725
2,473
6,973
9,463
EBITDA $ 5,179
$ 10,594
$ 9,215
$ 24,350

~~The following table reconciles EBITDA to cash flows provided by operating activities for the three and nine months ended September 30, 2018 and 2017, respectively (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
EBITDA Reconciliation to GAAP:
EBITDA $ 5,179
$ 10,594
$ 9,215
$ 24,350
Cash paid for deferred drydocking charges (3,882 ) (995 ) (7,233 ) (6,950 )
Cash paid for interest (10,724 ) (13,829 ) (40,028 ) (40,028 )
Cash paid for taxes (283 ) (334 ) (933 ) (1,044 )
Changes in working capital 7,405
(3,336 ) 4,248
97
Stock-based compensation expense 4,169
2,726
8,922
5,740
Gain on early extinguishment of debt —
—
—
(15,478 )
Gain (loss) on sale of assets (25 ) 197
(55 ) 178
Changes in other, net 39
(100 ) 88
3,932
Net cash flows provided by (used in) operating activities $ 1,878
$ (5,077 ) $ (25,776 ) $ (29,203 )



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Components of EBITDA:
Net loss	$	(41,404	)	$	(31,183	)	$	(109,967	)	$	(94,928	)
Interest, net
Debt obligations	22,249			16,548			61,970			46,894
Interest income	(1,314		)	(531		)	(3,349		)	(1,693		)
Total interest, net	20,935			16,017			58,621			45,201
Income tax benefit	(10,047		)	(7,223		)	(30,783		)	(22,152		)
Depreciation	24,559			24,843			73,987			74,121
Amortization	4,033			2,725			11,373			6,973
EBITDA	$	(1,924	)	$	5,179		$	3,231		$	9,215

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, 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 Credit Facility,~~we define that term, for the three and nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Gain on early extinguishment of debt	$	—	$	—	$	—	$	15,478
Loss on early extinguishment of debt, net									$	—	$	—	$	71	$	—
Stock-based compensation expense	4,169		2,726		8,922		5,740		876		4,169		2,535		8,922
Interest income	531		447		1,693		1,312		1,314		531		3,349		1,693

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 30, ~~2018~~2019 and ~~2017~~2018, respectively, is shown below in the following table (in thousands, except percentage changes):


	Three Months Ended September 30,						Increase (Decrease)						Three Months Ended September 30,						Increase (Decrease)
	2018			2017			$ Change			% Change			2019			2018			$ Change			% Change
Revenues:
Vessel revenues
Domestic	$	36,238		$	29,788		$	6,450		21.7		%	$	24,965		$	36,238		$	(11,273	)	(31.1	)	%
Foreign	13,163			15,849			(2,686		)	(16.9	)	%	18,718			13,163			5,555			42.2		%
	49,401			45,637			3,764			8.2		%	43,683			49,401			(5,718		)	(11.6	)	%
Non-vessel revenues	9,067			8,029			1,038			12.9		%	9,147			9,067			80			0.9		%
	58,468			53,666			4,802			8.9		%	52,830			58,468			(5,638		)	(9.6	)	%
Operating expenses	38,203			30,082			8,121			27.0		%	41,131			38,203			2,928			7.7		%
Depreciation and amortization	27,568			27,155			413			1.5		%	28,592			27,568			1,024			3.7		%
General and administrative expenses	15,134			12,899			2,235			17.3		%	13,362			15,134			(1,772		)	(11.7	)	%
	80,905			70,136			10,769			15.4		%	83,085			80,905			2,180			2.7		%
Gain (loss) on sale of assets	25			(197		)	222			>(100.0)		%
Gain on sale of assets													7			25			(18		)	(72.0	)	%
Operating loss	(22,412		)	(16,667		)	(5,745		)	34.5		%	(30,248		)	(22,412		)	(7,836		)	35.0		%
Interest expense	16,548			11,956			4,592			38.4		%	22,249			16,548			5,701			34.5		%
Interest income	531			447			84			18.8		%	1,314			531			783			>100.0		%
Income tax benefit	(7,223		)	(9,120		)	1,897			(20.8	)	%	(10,047		)	(7,223		)	(2,824		)	39.1		%
Net loss	$	(31,183	)	$	(18,950	)	$	(12,233	)	64.6		%	$	(41,404	)	$	(31,183	)	$	(10,221	)	32.8		%

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

Revenues. Revenues for the three months ended September 30, ~~2018 increased~~2019 decreased by ~~$4.8~~$5.6 million, or ~~8.9%~~9.6%, to ~~$58.5~~$52.8 million compared to the same period in ~~2017~~2018. Our weighted-average active operating fleet for the three months ended September 30, 2019 and 2018 was 37.0 and ~~2017 was~~ 33.3 ~~and 27.0~~ vessels, respectively.

Vessel revenues ~~increased $3.8~~decreased $5.7 million, or ~~8.2%~~11.6%, to ~~$49.4~~$43.7 million for the three months ended September 30, ~~2018~~2019 compared to ~~$45.6~~$49.4 million for the same period in ~~2017.~~2018. The ~~increase~~decrease in vessel revenues was primarily due to ~~revenue associated with the four vessels that were acquired in May 2018 and, to a lesser extent, increased revenues~~soft market conditions for our vessels. Revenues from ~~OSVs that were operating in~~ our MPSV fleet ~~during~~decreased $3.0 million, or 16.3%, for the three months ended September ~~2018 and 2017, respectively.~~30, 2019 compared to the prior-year period. For the three months ended September 30, ~~2018,~~2019, we had an average of ~~40.7~~37.0 vessels stacked compared to ~~43.0~~40.7 vessels stacked in the prior-year quarter. Average new generation OSV dayrates were ~~$19,446~~$19,750 for the third quarter of ~~2018~~2019 compared to ~~$18,483~~$19,446 for the same period in ~~2017.~~2018. Our new generation OSV utilization was ~~26.1%~~23.4% for the third quarter of ~~2018~~2019 compared to ~~26.3%~~26.1% for the same period in ~~2017.~~2018. Our new generation OSVs were stacked for an aggregate of ~~3,650~~3,220 days during the third quarter of ~~2018~~2019 compared to ~~3,956~~3,650 days for the same period in ~~2017.~~2018. Excluding stacked vessel days, our new generation OSV effective utilization was ~~65.4%~~49.9% and ~~85.8%~~65.4% for the same periods, respectively. Domestic vessel revenues ~~increased $6.5~~decreased $11.3 million from the year-ago quarter primarily due to ~~an increase in the number of~~soft market conditions for our vessels ~~operating in domestic waters~~ during the three months ended September 30, ~~2018.~~2019. Foreign vessel revenues ~~decreased~~increased $~~2.7~~5.6 million due to ~~lower revenue earned by our MPSVs~~an additional MPSV operating in a foreign ~~markets~~market during the three months ended September 30, ~~2018.~~2019. Foreign vessel revenues for the third quarter of ~~2018~~2019 comprised ~~26.6%~~42.8% of our total vessel revenues compared to ~~34.7%~~26.6% for the year-ago period.

Non-vessel revenues increased ~~$1.0~~$0.1 million, or ~~12.9%~~0.9%, to ~~$9.1~~$9.2 million for the three months ended September 30, ~~2018~~2019 compared to ~~$8.0~~$9.1 million for the same period in ~~2017.~~2018. This increase is primarily attributable to higher revenues earned from vessel management services during ~~2018~~2019 compared to the year-ago period.

Operating Expenses. Operating expenses were $~~38.2~~41.1 million, an increase of $~~8.1~~2.9 million, or ~~27.0%~~7.7%, for the three months ended September 30, ~~2018~~2019 compared to $~~30.1~~38.2 million for the same period in ~~2017~~2018. Operating expenses increased primarily due to a higher number of active vessels in our fleet during the three months ended September 30, ~~2018.~~2019. Aggregate cash operating expenses are projected to be in the approximate annual range of ~~$147.0~~$161.7 million to ~~$152.0~~$166.7 million for the year ending December 31, ~~2018~~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 ~~$27.6~~$28.6 million was ~~$0.4~~$1.0 million, or ~~1.5%~~3.7%, higher for the three months ended September 30, ~~2018~~2019 compared to the same period in ~~2017~~2018. Depreciation was in-line with the prior-year period. The increase in amortization expense of ~~$0.3~~$1.3 million was primarily due to costs associated with the ~~amortization~~initial special surveys for vessels that were placed in service under the Company's fifth OSV newbuild program and costs associated with the drydocking of ~~an intangible asset~~two vessels that ~~was included in the acquisition of four OSVs~~were acquired in the second quarter of 2018. Depreciation expense is expected to increase from current levels when 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 ~~$15.1~~$13.4 million was ~~$2.2~~$1.8 million ~~higher~~lower during the three months ended September 30, ~~2018~~2019 compared to the same period in ~~2017.~~2018. The ~~increase~~decrease was due to ~~higher~~lower long-term incentive compensation ~~and short-term incentive compensation expense.~~expense during the three months ended September 30, 2019. Long-term incentive compensation expense was higher in the prior-year quarter primarily due to a "mark to market" adjustment on cash-settled stock-based awards to reflect the increase in our stock price during such quarter. The majority of these cash-settled stock-based awards were modified to settle in stock during the second quarter of 2019 at a price that was lower than such awards were valued during the three months ended September 30, 2018. This favorable variance was partially offset by higher bad debt reserves.

Operating Loss. Operating loss increased by $~~5.7~~7.8 million to ~~$22.4~~$30.2 million during the three months ended September 30, ~~2018~~2019 compared to the same period in ~~2017~~2018 for the reasons discussed above. Operating loss as a percentage of revenues was ~~38.3%~~57.3% for the three months ended September 30, ~~2018~~2019 compared to ~~31.1%~~38.3% for the same period in ~~2017~~2018.

Interest Expense. Interest expense of ~~$16.5~~$22.2 million increased ~~$4.6~~$5.7 million during the three months ended September 30, ~~2018~~2019 compared to the same period in ~~2017~~2018 due to ~~lower capitalized interest. During~~additional interest expense associated with the issuance of additional first-lien and the second-lien term loans as well as the senior credit facility since the third quarter of ~~2018, we did not capitalize any construction period interest compared to $2.7 million, or roughly 18.4% of our total interest costs, for the year-ago period.~~2018.

Interest Income. Interest income was ~~$0.5~~$1.3 million during the three months ended September 30, ~~2018,~~2019, which was ~~in-line with~~$0.8 million higher than the same period in ~~2017.~~2018. Our average cash balance ~~decreased~~increased to ~~$115.9~~$211.0 million for the three months ended September 30, ~~2018~~2019 compared to ~~$122.5~~$115.9 million for the same period in ~~2017.~~2018. The average interest rate earned on our invested cash balances was ~~1.8%~~2.5% and ~~1.5%~~1.8% during the three months ended September 30, ~~2018~~2019 and ~~2017~~,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, the ~~acquisition~~$50 million expansion of ~~four OSVs from Aries Marine~~such term loans and ~~related entities during~~ the ~~second quarter of~~senior credit facility since September 30, 2018. These ~~outflows~~inflows were partially offset by ~~draws under~~the repurchases of our ~~$300 million first-lien credit facility, or Credit Facility.~~2019 convertible senior notes for cash during September 2019.

Income Tax Benefit. Our effective tax benefit rate was ~~18.8%~~19.5% and ~~32.5%~~18.8% for the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Our income tax benefit rate for the third quarter of ~~2018~~2019 was ~~less~~higher than the benefit rate from the third quarter of ~~2017~~2018 due to ~~the rate reduction contained in tax legislation that was enacted in December 2017. The primary impact of this legislation was the~~a reduction of ~~federal corporate income~~net operating loss carryforward valuation allowances due to state tax ~~rates from 35% to 21%, effective as~~law changes enacted during the second quarter of January 1, 2018. Additionally, the benefit rates for the current year period and prior year period include the impact of a valuation allowance for certain deferred tax assets that are not expected to be realized by their expiration dates.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 ~~$12.2~~$10.2 million for a reported net loss of ~~$31.2~~$41.4 million for the three months ended September 30, ~~2018~~2019 compared to a net loss of ~~$19.0~~$31.2 million for the same period during ~~2017.~~2018. This ~~increased~~

unfavorable variance in net loss was primarily driven by higher operating loss and interest expense ~~and~~partially offset by a ~~lower~~higher tax benefit rate in the three months ended September 30, ~~2018.~~

2019.

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


	Nine Months Ended September 30,						Increase (Decrease)						Nine Months Ended September 30,						Increase (Decrease)
	2018			2017			$ Change			% Change			2019			2018			$ Change			% Change
Revenues:
Vessel revenues
Domestic	$	104,998		$	84,355		$	20,643		24.5		%	$	78,624		$	104,998		$	(26,374	)	(25.1	)	%
Foreign	27,018			26,470			548			2.1		%	57,568			27,018			30,550			>100.0		%
	132,016			110,825			21,191			19.1		%	136,192			132,016			4,176			3.2		%
Non-vessel revenues	26,470			24,346			2,124			8.7		%	27,519			26,470			1,049			4.0		%
	158,486			135,171			23,315			17.2		%	163,711			158,486			5,225			3.3		%
Operating expenses	109,030			89,385			19,645			22.0		%	121,742			109,030			12,712			11.7		%
Depreciation and amortization	81,094			83,501			(2,407		)	(2.9	)	%	85,360			81,094			4,266			5.3		%
General and administrative expenses	40,255			36,573			3,682			10.1		%	38,378			40,255			(1,877		)	(4.7	)	%
	230,379			209,459			20,920			10.0		%	245,480			230,379			15,101			6.6		%
Gain (loss) on sale of assets	55			(178		)	233			(130.9	)	%
Gain on sale of assets													62			55			7			12.7		%
Operating loss	(71,838		)	(74,466		)	2,628			(3.5	)	%	(81,707		)	(71,838		)	(9,869		)	13.7		%
Gain on early extinguishment of debt	—			15,478			(15,478		)	100.0		%
Loss on early extinguishment of debt, net													(71		)	—			(71		)	(100.0	)	%
Interest expense	46,894			39,194			7,700			19.6		%	61,970			46,894			15,076			32.1		%
Interest income	1,693			1,312			381			29.0		%	3,349			1,693			1,656			97.8		%
Income tax benefit	(22,152		)	(30,696		)	8,544			(27.8	)	%	(30,783		)	(22,152		)	(8,631		)	39.0		%
Net loss	$	(94,928	)	$	(66,337	)	$	(28,591	)	43.1		%	$	(109,967	)	$	(94,928	)	$	(15,039	)	15.8		%

Nine Months Ended September 30, ~~2018~~2019 Compared to Nine Months Ended September 30, ~~2017~~2018

Revenues. Revenues for the nine months ended September 30, ~~2018~~2019 increased by ~~$23.3~~$5.2 million, or ~~17.2%~~3.3%, to ~~$158.5~~$163.7 million compared to the same period in ~~2017.~~2018. Our weighted-average active operating fleet for the nine months ended September 30, 2019 and 2018 was 36.2 and ~~2017 was~~ 29.8 ~~and 26.6~~ vessels, respectively.

Vessel revenues increased ~~$21.2~~$4.2 million, or ~~19.1%~~3.2%, to ~~$132.0~~$136.2 million for the nine months ended September 30, ~~2018~~2019 compared to ~~$110.8~~$132.0 million for the same period in ~~2017.~~2018. The increase in vessel revenues primarily resulted from improved market conditions for our ~~MPSVs~~OSVs and the addition of four OSVs to our operating fleet during the second quarter of ~~2018.~~2018 partially offset by soft market conditions for our MPSVs. Revenues from our MPSV fleet ~~increased $18.5~~decreased $11.9 million, or ~~59.3%~~23.9%, for the nine months ended September 30, ~~2018~~2019 compared to the prior-year period. The prior-year period was favorably impacted by 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 redelivery fee, vessel revenues for the nine months ended September 30, 2018 would have increased by $30.5 million, or 27.5% compared to the same period in 2017. For the nine months ended September 30, ~~2018,~~2019, we had an average of ~~42.2~~37.8 vessels stacked compared to an average of ~~43.4~~42.2 vessels stacked in the prior-year period. Average new generation OSV dayrates were ~~$19,097~~$18,600 for the first nine months of ~~2018~~2019 compared to ~~$20,709~~$19,097 for the same period in ~~2017,~~2018, a decrease of ~~$1,612,~~$497, or ~~7.8%~~2.6%. ~~Excluding the redelivery fee, average~~Our new generation OSV ~~dayrates would have been $18,276~~utilization was 29.4% for the first nine months of ~~2017. Our new generation OSV utilization was 24.7% for the first nine months of 2018~~2019 compared to ~~22.8%~~24.7% for the same period in ~~2017.~~2018. Our new generation OSVs incurred ~~249~~408 days of aggregate downtime for regulatory drydockings and were stacked for an aggregate of ~~11,355~~9,738 days during the first nine months of ~~2018.~~2019. Excluding stacked vessel days, our new generation OSV effective utilization was ~~70.5%~~63.9% and ~~71.9%~~70.5% during the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Domestic vessel revenues ~~increased $20.6~~decreased $26.4 million from the year-ago period primarily due to ~~higher dayrates~~lower revenue earned by our MPSVs operating domestically during the nine months ended September 30, ~~2018.~~2019. Foreign vessel

revenues increased ~~$0.5~~$30.6 million. The increase in foreign revenues is attributable to an average of 4.7 additional vessels working in foreign locations during the current-year period. Foreign vessel revenues for the first nine months of ~~2018~~2019 comprised ~~20.5%~~42.3% of our total vessel revenues compared to ~~23.9%~~20.5% for the year-ago period.

Non-vessel revenues increased ~~$2.1~~$1.0 million, or ~~8.7%~~4.0%, from the prior-year period. This increase is primarily attributable to higher revenues earned from vessel management services during the nine months ended September 30, ~~2018~~2019 compared to the year-ago period.

Operating Expenses. Operating expenses were ~~$109.0~~$121.7 million, an increase of ~~$19.6~~$12.7 million, or ~~22.0%~~11.7%, for the nine months ended September 30, ~~2018~~2019 compared to ~~$89.4~~$109.0 million for the same period in ~~2017~~2018. Operating expenses were higher due to an increased ~~activity from~~number of active vessels in our ~~MPSVs and OSVs along with vessels added to our active~~ fleet ~~since~~during the nine months ended September 30, ~~2017.~~2019.

Depreciation and Amortization. Depreciation and amortization expense of ~~$81.1~~$85.4 million was ~~$2.4~~$4.3 million, or ~~2.9%~~5.3%, ~~lower~~higher for the nine months ended September 30, ~~2018~~2019 compared to the same period in ~~2017.~~2018. Depreciation was in-line with the prior-year period. Amortization expense ~~decreased $2.5~~increased $4.4 million, ~~due to postponed recertifications for certain of our stacked OSVs. Amortization expense is expected to decrease further in~~which was driven higher mainly by costs associated with the ~~near term as a result of the deferral of regulatory recertification activities~~initial special surveys for vessels that ~~have been stacked. We expect~~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 ~~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.~~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 ~~$40.3~~$38.4 million was ~~$3.7~~$1.9 million ~~higher~~lower during the nine months ended September 30, ~~2018~~2019 compared to the same period in ~~2017~~2018. The ~~increase~~decrease in G&A expense was primarily attributable to ~~higher~~lower long-term incentive compensation expense ~~professional fees~~ and ~~short-term incentive compensation expense.~~legal fees. Long-term incentive compensation expense was ~~higher~~lower primarily due to a "mark to market" adjustment on cash-settled stock-based awards to reflect the increase in our stock price during the nine months ended September 30, 2018. The majority of these cash-settled stock-based awards were modified to settle in stock during the second quarter of 2019 at a price that was lower than such awards were valued during the prior-year period. These ~~unfavorable~~favorable variances were partially offset by ~~lower~~higher short-term incentive compensation expense and higher bad debt ~~reserves due to the unfavorable ruling in a bankruptcy proceeding related to a receivable from a former customer that was fully reserved during the first nine months of 2017.~~reserves.

Operating Loss. Operating loss ~~decreased~~increased by ~~$2.6~~$9.9 million to an operating loss of ~~$71.8~~$81.7 million during the nine months ended September 30, ~~2018~~2019 compared to the same period in ~~2017~~2018 for the reasons discussed above. Operating loss as a percentage of revenues was ~~45.3%~~49.9% for the nine months ended September 30, ~~2018~~2019 compared to ~~55.1%~~45.3% for the same period in ~~2017~~2018.

~~Gain~~Loss on Early Extinguishment of Debt, Net. ~~On June 15, 2017,~~During the nine months ended September 30, 2019, we ~~terminated~~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 ~~then-existing revolving credit facility~~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 ~~replaced it with~~record a loss on early extinguishment of debt of $3.7 million related to deal costs for the ~~Credit Facility. We concurrently~~exchanges. During the nine months ended September 30, 2019, we arranged for the repurchase of ~~$73.3~~$52.9 million of ~~the~~our outstanding 2019 convertible ~~senior notes and $8.1 million of the 2020~~ senior notes for an aggregate total of ~~$54.1~~$47.6 million of cash. We recorded a net gain on early extinguishment of debt of ~~approximately $15.5~~$3.6 million ($~~10.5~~2.9 million or ~~$0.29~~$0.08 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.~~these repurchases.

Interest Expense. Interest expense of ~~$46.9~~$62.0 million was ~~$7.7~~$15.1 million higher than the same period in ~~2017. During~~2018 due to incremental interest expense associated with the ~~nine months ended September 30, 2018, we recorded $2.3 million~~issuance of ~~capitalized construction period interest, or roughly 4.7%~~additional first-lien and the second-lien term loans as well as the senior credit facility since the third quarter of ~~our total interest costs, compared to having capitalized $7.6 million, or roughly 16.2% of our total interest costs, for the year-ago period.~~2018.

Interest Income. Interest income was ~~$1.7~~$3.3 million during the nine months ended September 30, ~~2018,~~2019, which was ~~$0.4~~$1.7 million higher than the same period in ~~2017.~~2018. Our average cash balance ~~decreased~~increased to ~~$153.7~~$191.9 million for the nine months ended September 30, ~~2018~~2019 compared to ~~$186.8~~$153.7 million for the same period in ~~2017~~.2018. The average interest rate earned on our invested cash balances was ~~1.5%~~2.3% and ~~0.9%~~1.5% during the nine months ended September 30, ~~2018~~2019 and ~~2017~~,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 as well as the senior credit facility since September 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 quarter of 2017 and the acquisition of four vessels during the second quarter of 2018. These outflows were partially offset by draws under our Credit Facility.~~nine months ended September 30, 2019.

Income Tax Benefit. Our effective tax benefit rate was ~~18.9%~~21.9% and ~~31.6%~~18.9% for the nine months ended September 30, ~~2018~~2019 and ~~2017~~2018, respectively. Our income tax benefit for the nine months ended September 30, ~~2018~~2019 was ~~less~~higher than the benefit rate from the nine months ended September 30, ~~2017~~2018 due to ~~the rate reduction contained in tax legislation that was enacted in December 2017. The primary impact of this legislation was the~~a reduction of ~~federal corporate income~~net operating loss carryforward valuation allowances due to state tax ~~rates from 35% to 21% effective as~~law changes enacted during the second quarter of January 1, 2018. Additionally, the benefit rates for the current year period and prior year period include the impact of a valuation allowance for certain deferred tax assets that are not expected to be realized by their expiration dates.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 ~~$28.6~~$15.0 million for a reported net loss of ~~$94.9~~$110.0 million for the nine months ended September 30, ~~2018~~2019 compared to a net loss of ~~$66.3~~$94.9 million for the same period during ~~2017. Excluding the gain on early extinguishment of debt,~~2018. This unfavorable variance in net loss ~~would have been $76.8 million~~was primarily driven by increased operating expenses for our vessels and interest expense, partially offset by increased revenue earned by such OSVs during the nine months ended September 30, 2017. This increased net loss, excluding the gain on early extinguishment of debt, was primarily driven by higher interest expense and a lower tax benefit rate in the nine months ended September 30, 2018.2019.

Liquidity and Capital Resources

As of September 30, 2019, we had total cash and cash equivalents of $136.4 million and restricted cash of $56.5 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 ~~a partially drawn $300~~$350 million ~~Credit Facility~~of first-lien term loans that ~~matures~~mature in June 2023 and ishave $121 million in second-lien term loans that mature in February 2025, which are all guaranteed by our significant domestic subsidiaries other than Hornbeck Offshore Services, LLC, which is the ~~Co-Borrower.~~Co-Borrower under the term loan agreements, and certain of our foreign subsidiaries. The ~~Credit Facility contains~~term loan agreements contain customary representations and warranties, covenants and events of default, but only one maintenance covenant, which is a $25 million minimum liquidity requirement. On June 28, 2019, we entered into a $100.0 million senior credit facility. The 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 Note 78 of the Notes to Consolidated Financial Statements for further discussion of ~~this~~the first-lien term loans, second-lien term loans and the senior 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 balance of ~~2018.~~2019.

We regularly review all of our debt agreements, including the ~~Credit Facility,~~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 volatility in commodity ~~markets,~~prices, we remain confident in the long-term viability of our business model upon 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 current depressed operating levels, cash generated from operations together with cash on-hand ~~and remaining undrawn availability under the Credit Facility~~ should be sufficient to fund our operations and commitments through at least March 31, 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~~two tranches of funded senior 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 athe 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~~our 2020 senior notes and ~~the~~ 2021 senior notes as they mature in fiscal years 2020 and 2021, respectively. We continue to

implement our on-going plan to address these maturities as they become due, including efforts in connection with the refinancing of our 2020 and 2021 senior notes. The ~~Credit Facility~~issuance of first-lien term loans and second-lien term loans were significant measures that enabled us to be in a position to repay the remaining balance of our 2019 convertible notes in full at maturity and significantly reduce the amount of face value outstanding of our 2020 senior notes from $367 million to $224 million. Our $100 million senior credit facility entered into in June 2019 was the ~~first~~latest step in ~~addressing~~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 ~~maturities~~actions of ~~our unsecured notes. Refinancing~~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. 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.

As of September 30, 2018, we had total liquidity (cash and credit availability) of $244.8 million, comprised of $108.1 million of cash and $136.7 million of availability under the Credit Facility. As of November 9, 2018, we are in compliance with all applicable covenants under our Credit Facility.

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 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 Greater GoM Operating Region, 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 Looking Statements" on page ii and "Item 1A—Risk 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 $~~25.8~~$72.3 million for the nine months ended September 30, ~~2018~~2019 compared to cash flows used in operating activities of $~~29.2~~$25.8 million for the same period in ~~2017.~~2018. Operating cash flows for the first nine months of ~~2018 continue to be~~2019 were unfavorably affected by weak market conditions for our vessels operating ~~worldwide.~~worldwide and higher cash outflows associated with the regulatory recertifications for our active vessels.

Investing Activities. Net cash used in investing activities was $~~51.9~~$3.9 million for the nine months ended September 30, ~~2018~~2019 compared to $~~15.1~~$51.9 million for the same period in ~~2017.~~2018. Cash used during the first nine months of 2019 consisted primarily of construction costs paid for our fifth OSV newbuild program, as well as capital improvements to our operating fleet. Cash used during the first nine months of 2018 consisted primarily of the purchase of four high-spec Jones Act-qualified OSVs and related equipment from Aries Marine Corporation. ~~Cash used during the first nine months of 2017 consisted primarily of construction costs paid for our fifth OSV newbuild program.~~

Financing Activities. Net cash ~~used in~~provided by financing activities was ~~$0.3~~$44.3 million for the nine months ended September 30, ~~2018~~2019 compared to ~~$59.7~~$0.3 million of net cash used in financing activities for the same period in ~~2017.~~2018. Net cash ~~used in~~provided by financing activities for the nine months ended September 30, ~~2018~~2019 resulted from ~~shares withheld for payment of taxes due to compensatory restricted stock unit vestings. Net cash used in financing activities for~~

net proceeds from the ~~nine months ended September 30, 2017 resulted from~~senior credit facility and the incremental first-lien term loans, partially offset by the repurchase of ~~a portion~~the remainder of the 2019 convertible senior notes ~~and the 2020 senior notes and related financing costs.~~on their due date.

Contractual Obligations

Debt

As of September 30, ~~2018,~~2019, the Company had the following outstanding 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 $1,387 (1) $ 365,555
6.08 % $ 10,779
April 1 and October 1
5.000% senior notes due 2021, net of deferred financing costs of $2,415 (1) 447,585
5.21 % 11,250
March 1 and September 1
1.500% convertible senior notes due 2019, net of original issue discount of $3,726 and deferred financing costs of $835 95,087
6.23 % 747
March 1 and September 1
Credit Facility due 2023, plus deferred gain of $16,655, net of original issue discount of $1,058 and deferred financing costs of $3,971 (2) 175,948
8.75 % 1,310
Variable
$ 1,084,175



	Total Debt		Effective Interest Rate		Cash Interest Payment		Payment Dates
5.875% senior notes due 2020, net of deferred financing costs of $487 (1)	$	223,826	6.08	%	$	6,589	April 1 and October 1
5.000% senior notes due 2021, net of deferred financing costs of $1,446 (1)	448,554		5.21	%	11,250		March 1 and September 1
First-lien term loans due 2023, plus deferred gain of $13,913, net of original issue discount of $3,310 and deferred financing costs of $3,491 (2)	357,112		9.05	%	2,728		Variable
Second-lien term loans due 2025, including deferred gain of $19,460	140,695		9.50	%	2,879		January 31, April 30, July 31, and October 31
Senior credit facility, net of deferred financing costs of $5,969 (3)	94,031		7.10	%	611		Monthly
	$	1,264,218


(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 ~~Credit Facility~~first-lien term loan is variable based on a base rate at the Company's ~~election.~~election, plus an applicable margin, which is currently 7.00%. 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 30, ~~2018.~~2019. Please see Note 78 for further discussion of the variable interest rate ~~included within~~applicable to the ~~Credit Facility.~~first-lien 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 September 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 Credit Facility~~our senior credit facility, our 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 months ended September 30, ~~2018,~~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 ~~Credit Facility lenders~~first-lien term loans and second-lien term loans our compliance with 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 transactions that will have an effect on our financial ratios.

Growth Capital Expenditures and Related Commitments

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 ~~$2.0~~$22.9 million and ~~$58.9~~$35.8 million are currently expected to be incurred in ~~the remainder of 2018~~fiscal 2020 and fiscal ~~2019,~~2021, 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. These projected delivery dates were subsequently amended, for guidance purposes, to be the second and third quarters of 2020. Due to the continued uncertainty of the timing and location of future construction activities, the Company is now updating its forward guidance for the delivery dates related to these vessels ~~are now projected~~ to be ~~delivered in~~ the second and third quarters of ~~2020,~~2021, respectively. ~~However,~~The Company has not revised its estimate of the cost to complete the vessels to reflect the disputed claims asserted by the shipyard.

In addition, the Company has not included any potential costs to complete the vessels in excess of the original contract price that may not be covered by surety bonds due to the sureties' denial of claims or for any other reasons. 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 September 30, ~~2018,~~2019, the Company had incurred ~~$1,274.1~~$1,276.3 million, or ~~95.4%~~95.6%, of total expected project costs. During the nine months ended September 30, ~~2018~~2019, the Company incurred ~~$1.4~~$2.2 million ~~in project cost.~~

~~On May 18, 2018,~~related to the ~~Company completed the acquisition~~construction of four high-spec Jones Act-qualified OSVs from Aries Marine Corporation and certain of its affiliates for $40.9 million in cash, inclusive of $4.3 million of related vessel equipment, a non-compete intangible asset, 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.~~

these vessels.

Maintenance and Other Capital Expenditures

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 months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and a forecast for the fiscal year ending December 31, ~~2018~~2019 (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,				Year Ended December 31,		Three Months Ended September 30,				Nine Months Ended September 30,				Year Ended December 31,
	2018		2017		2018		2017		2018		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)	$	3.9	$	1.0	$	7.3	$	7.0	$	17.2	$	7.4	$	3.9	$	23.0	$	7.3	$	33.4
Other vessel capital improvements (2)	1.7		0.6		5.8		0.9		7.6		0.2		1.7		1.2		5.8		2.1
	5.6		1.6		13.1		7.9		24.8		7.6		5.6		24.2		13.1		35.5
Other Capital Expenditures
Commercial-related capital expenditures (3)	0.1		0.2		5.5		0.4		5.8		—		0.1		0.2		5.5		2.3
Non-vessel related capital expenditures (4)	—		0.9		0.1		1.4		0.1		0.1		—		0.4		0.1		0.5
	0.1		1.1		5.6		1.8		5.9		0.1		0.1		0.6		5.6		2.8
Total	$	5.7	$	2.7	$	18.7	$	9.7	$	30.7	$	7.7	$	5.7	$	24.8	$	18.7	$	38.3


(1)	Deferred drydocking charges for ~~2018~~2019 include the projected recertification costs for 1318 OSVs and ~~three~~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 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; 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 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; continued ~~weak~~weakness in capital spending by customers on offshore exploration and development; the inability to accurately predict vessel utilization levels and dayrates; 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 final two vessels of its current vessel newbuild program on-budget, including any failure or refusal by the issuer of performance bonds to honor the bond contract or 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, including any that may occur due to the results of the pending mid-term U.S. congressional elections on November 6, 2018;~~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 or remaining on-hire; administrative, judicial or 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 or changes in law or governmental policy ~~due to~~in Mexico that restricts or slows the ~~results~~pace of further development of its offshore oilfields; changes in law or governmental policy or judicial action in Mexico affecting the ~~last presidential election; age~~Company's Mexican registration of vessels; administrative or other ~~restrictions imposed on the Company's 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 Greater GoM Operating Region and other markets affecting 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; 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; or 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 ~~existing 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 existing 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

There have been no 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, ~~2017.~~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 30, ~~2018~~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

~~In March 2018, we terminated two~~On January 22, 2016, the Company initiated an arbitration demand in accordance with the vessel construction ~~agreements~~agreement dated November 14, 2011 with VT Halter Marine, Inc., or Halter, to construct ten 300 class OSVs as part of the ~~shipyard constructing the two vessels remaining under our~~Company’s fifth OSV newbuild program. ~~We terminated~~On October 21, 2019, the arbitration panel awarded damages in the amount of $18.0 million related to the Company’s claims, offset by $2.1 million awarded to Halter for its counterclaims. Terms for the award require payment to be made within 60 days to avoid interest charges. Limited appeal rights are available to the parties.

During the first quarter of 2018, the Company notified Gulf Island Shipyards, LLC, or Gulf Island, 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 ~~several reasons, including but not limited to delay~~such vessels based on the shipyard's statements that it would be more than one year late in ~~construction and delivery.~~the delivery of the vessels, among other reasons. 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. Gulf Island claims that it has the right to complete the vessels or, alternatively, the Company owes Gulf Island compensation for unpaid work. The Company ~~intends~~disputes these claims and has asserted counter-claims against Gulf Island seeking to ~~vigorously defend~~recover liquidated and other damages. The Company has also sued for conversion, claiming that Gulf Island has wrongfully detained the ~~shipyard’s~~vessels in its possession, which has delayed the Company's ability to contract for their completion at a replacement shipyard. On November 5, 2019, the district court denied a preliminary motion for summary judgment to require the shipyard to release its possession of the vessels. The Company has also sued the sureties that issued performance bonds in respect of the shipbuilding contracts. The Company claims ~~considers them~~that the sureties wrongfully denied the Company's claims under the bonds and have refused to ~~be without merit, and will respond to~~perform their obligations under the ~~lawsuit~~bonds. The Company has also claimed that the sureties' conduct has been in ~~due course.~~bad faith.

Item 1A—Risk Factors

~~There were~~The Company conducts business with the United States government. The sustainability and growth of this non-oilfield service-offering is affected by the continued employment of certain personnel by the Company. Given the uncertainty surrounding the Company's financial condition, there is a possibility that the Company's government customers may perceive a risk that personnel considered by such customers to be critical may no ~~changes~~longer remain employed by the Company. Any action by the government in response to this perceived risk could adversely impact the ~~risk factors previously disclosed in~~Company's future business with the ~~Company’s Annual Report on Form 10-K for~~government, the ~~fiscal year ended December 31, 2017.~~growth of such business and any earnings and cash flows generated by such business.

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 1.500% convertible senior notes due 2019;

"2020 senior notes" or "2020 notes" means 5.875% senior notes due 2020;

"2021 senior notes" or "2021 notes" means 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 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 revenues. For purposes of vessel brokerage arrangements, this calculation excludes that portion of 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" 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;

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

"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 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;

“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 generation” means, when referring to OSVs, modern, deepwater-capable vessels 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;

“OPA 90” means the Oil Pollution Act of 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.;

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

“ROV” means a remotely operated vehicle;

“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; 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.~~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).

*3.5	—	Amendment No. 2 to Fourth Restated Bylaws of the Company adopted effective November 7, 2019.

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	—	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	—	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).

~~10.40~~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.~~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.




~~Exhibit~~ ~~Number~~		~~Description of Exhibit~~
*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 ~~9, 2018~~12, 2019		/s/ JAMES O. HARP, JR.
		James O. Harp, Jr.
		Executive Vice President and Chief Financial Officer

4551



	September 30, 2018		December 31, 2017
Accrued lease expense	$	5,344	$	5,142
Deferred revenues	2,173		460
Other	5,548		2,855
Total	$	13,065	$	8,457



	As of September 30, 2018
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	3	$	103,966	$	4,097		$	—		$	108,066
Accounts receivable, net of allowance for doubtful accounts of $1,162	—		40,522		9,739			(128		)	50,133
Other current assets	47		13,039		947			—			14,033
Total current assets	50		157,527		14,783			(128		)	172,232
Property, plant and equipment, net	—		2,264,250		192,012			—			2,456,262
Deferred charges, net	—		18,354		1,546			—			19,900
Intercompany receivable	1,784,031		790,433		221,368			(2,795,832		)	—
Investment in subsidiaries	706,811		8,602		—			(715,413		)	—
Other assets	—		5,821		524			—			6,345
Total assets	$	2,490,892	$	3,244,987	$	430,233		$	(3,511,373	)	$	2,654,739
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5	$	21,263	$	1,277		$	—		$	22,545
Accrued interest	15,606		—		—			—			15,606
Accrued payroll and benefits	—		14,345		547			—			14,892
Current portion of long-term debt, net of original issue discount of $3,726 and deferred financing costs of $835	95,087		—		—			—			95,087
Other accrued liabilities	—		11,933		1,260			(128		)	13,065
Total current liabilities	110,698		47,541		3,084			(128		)	161,195
Long-term debt, including deferred gain of $16,655, and net of original issue discount of $1,058 and deferred financing costs of $6,773	989,088		—		—			—			989,088
Deferred tax liabilities, net	—		169,926		895			—			170,821
Intercompany payables	55,674		2,273,678		475,082			(2,804,434		)	—
Other liabilities	—		3,685		51			—			3,736
Total liabilities	1,155,460		2,494,830		479,112			(2,804,562		)	1,324,840
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; 37,595 shares issued and outstanding	376		—		—			—			376
Additional paid-in capital	761,385		37,978		8,602			(46,580		)	761,385
Retained earnings	573,671		712,179		(51,949		)	(660,231		)	573,670
Accumulated other comprehensive loss	—		—		(5,532		)	—			(5,532		)
Total stockholders’ equity	1,335,432		750,157		(48,879		)	(706,811		)	1,329,899
Total liabilities and stockholders’ equity	$	2,490,892	$	3,244,987	$	430,233		$	(3,511,373	)	$	2,654,739



	As of December 31, 2017
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	4	$	178,746	$	8,099		$	—		$	186,849
Accounts receivable, net of allowance for doubtful accounts of $6,054	—		40,407		4,295			—			44,702
Other current assets	29		16,051		810			—			16,890
Total current assets	33		235,204		13,204			—			248,441
Property, plant and equipment, net	—		2,379,097		121,916			—			2,501,013
Deferred charges, net	—		11,408		1,404			—			12,812
Intercompany receivable	1,778,711		648,920		39,445			(2,467,076		)	—
Investment in subsidiaries	790,734		8,602		—			(799,336		)	—
Other assets	—		5,984		628			—			6,612
Total assets	$	2,569,478	$	3,289,215	$	176,597		$	(3,266,412	)	$	2,768,878
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	15,643	$	553		$	—		$	16,196
Accrued interest	14,734		—		—			—			14,734
Accrued payroll and benefits	—		8,458		1,017			—			9,475
Other accrued liabilities	—		8,129		328			—			8,457
Total current liabilities	14,734		32,230		1,898			—			48,862
Long-term debt, including deferred gain of $18,911, and net of original issue discount of $7,862 and deferred financing costs of $10,134	1,080,826		—		—			—			1,080,826
Deferred tax liabilities, net	—		192,793		4,672			—			197,465
Intercompany payables	140,019		2,240,832		190,177			(2,571,028		)	—
Other liabilities	—		3,802		(1		)	—			3,801
Total liabilities	1,235,579		2,469,657		196,746			(2,571,028		)	1,330,954
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; 37,144 shares issued and outstanding	371		—		—			—			371
Additional paid-in capital	758,690		37,975		8,602			(44,989		)	760,278
Retained earnings	574,838		781,583		(37,428		)	(650,395		)	668,598
Accumulated other comprehensive income	—		—		8,677			—			8,677
Total stockholders’ equity	1,333,899		819,558		(20,149		)	(695,384		)	1,437,924
Total liabilities and stockholders’ equity	$	2,569,478	$	3,289,215	$	176,597		$	(3,266,412	)	$	2,768,878



	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 (loss) on sale of assets	—			(198		)	1			—		(197		)
Operating loss	—			(11,920		)	(4,747		)	—		(16,667		)
Other income (expense):
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 (loss) 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 (losses) 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	)

Trading Symbol

Name of exchange on which registered

Outstanding at October 31, 2019

Common Stock, $0.01 par value

New York Stock Exchange