UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019March 31, 2020
OR
 
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)
 
Securities registered pursuant to Section 12(b) of the Act:
ClassTrading SymbolName of exchange on which registered
NoneNoneNone
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  x    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  x    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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  x
 
Smaller reporting company x
   
  
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  x
The number of outstanding shares of Common Stock as of June 30, 2020 is 39,638,729 shares.
ClassTrading SymbolName of exchange on which registeredOutstanding at July 31, 2019
Common Stock, $0.01 par valueHOSNew York Stock Exchange37,993,329
 

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2019MARCH 31, 2020
TABLE OF CONTENTS
 
  
  
  
 


i


PART 1—I—FINANCIAL INFORMATION
Item 1—Financial Statements
HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
June 30,
2019
 December 31,
2018
March 31,
2020
 December 31,
2019
(Unaudited)(Unaudited)
ASSETS  
Current assets:      
Cash and cash equivalents$142,708
 $224,936
$58,958
 $121,490
Restricted cash44,226
 
Accounts receivable, net of allowance for doubtful accounts of $1,201 and $1,123, respectively60,336
 54,924
Accounts receivable, net of allowance for doubtful accounts of $4,008 and $3,987, respectively51,214
 66,995
Other current assets20,300
 19,768
25,993
 20,510
Total current assets267,570
 299,628
136,165
 208,995
Restricted cash14,470
 52,136
Property, plant and equipment, net2,389,787
 2,434,829
2,303,289
 2,342,763
Restricted cash56,017
 
Deferred charges, net28,199
 22,525
36,110
 35,915
Right of use assets23,761
 
23,120
 23,492
Other assets6,676
 7,655
7,105
 5,586
Total assets$2,772,010
 $2,764,637
$2,520,259
 $2,668,887
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable$26,343
 $26,826
$16,374
 $30,093
Accrued interest16,303
 15,910
25,743
 16,950
Accrued payroll and benefits9,453
 12,445
4,612
 11,980
Current portion of long-term debt, net of original issue discount of $177 and $2,725 and deferred financing costs of $772 and $611, respectively249,130
 96,311
Current portion of long-term debt, including deferred net gain of $30,051 and $31,718, net of original issue discount of $2,859 and $3,084, and deferred financing costs of $6,603 and $10,292, respectively1,216,137
 1,263,890
Lease liabilities1,741
 
2,738
 2,953
Other accrued liabilities8,842
 9,750
12,587
 11,618
Total current liabilities311,812
 161,242
1,278,191
 1,337,484
Long-term debt, including deferred net gain of $35,008 and $15,845, and net of original issue discount of $3,536 and $3,013 and deferred financing costs of $11,666 and $4,987, respectively1,041,041
 1,123,625
Deferred tax liabilities, net148,480
 169,122
116,560
 132,526
Lease liabilities25,238
 
24,207
 24,219
Other liabilities1,530
 2,722
1,514
 2,213
Total liabilities1,528,101
 1,456,711
1,420,472
 1,496,442
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; 37,993 and 37,701 shares issued and outstanding, respectively380
 377
Common stock: $0.01 par value; 100,000 shares authorized; 39,639 and 38,096 shares issued and outstanding, respectively396
 381
Additional paid-in-capital764,625
 761,834
767,367
 766,779
Retained earnings479,040
 549,475
350,584
 408,789
Accumulated other comprehensive loss(136) (3,760)(18,560) (3,504)
Total stockholders’ equity1,243,909
 1,307,926
1,099,787
 1,172,445
Total liabilities and stockholders’ equity$2,772,010
 $2,764,637
$2,520,259
 $2,668,887


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

1

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended  
 June 30,
 Six Months Ended 
 June 30,
Three Months Ended 
 March 31,
2019 2018 2019 20182020 2019
(Unaudited) (Unaudited)(Unaudited)
Revenues:          
Vessel revenues$47,257
 $49,481
 $92,509
 $82,615
$43,152
 $45,252
Non-vessel revenues9,588
 8,950
 18,372
 17,403
9,658
 8,784
56,845
 58,431
 110,881
 100,018
52,810
 54,036
Costs and expenses:          
Operating expenses40,217
 34,858
 80,611
 70,827
41,308
 40,394
Depreciation24,657
 24,630
 49,428
 49,278
24,305
 24,771
Amortization3,729
 2,256
 7,340
 4,248
4,810
 3,611
General and administrative expenses13,049
 12,246
 25,016
 25,121
31,160
 11,967
81,652

73,990

162,395

149,474
101,583

80,743
Gain (loss) on sale of assets29
 (13) 55
 30
Gain on sale of assets
 26
Operating loss(24,778) (15,572) (51,459) (49,426)(48,773) (26,681)
Other income (expense):          
Loss on early extinguishment of debt, net
 
 (71) 
(4,236) (71)
Interest income921
 519
 2,035
 1,163
646
 1,114
Interest expense(19,995) (16,401) (39,721) (30,346)(20,750) (19,726)
Other income (expense), net4
 (72) (83) (63)
Other expense(64) (87)
(19,070) (15,954) (37,840) (29,246)(24,404) (18,770)
Loss before income taxes(43,848) (31,526) (89,299) (78,672)(73,177) (45,451)
Income tax benefit(11,905) (6,438) (20,736) (14,929)(14,972) (8,831)
Net loss$(31,943) $(25,088) $(68,563) $(63,743)$(58,205) $(36,620)
Loss per share:          
Basic loss per common share$(0.84) $(0.67) $(1.81) $(1.70)$(1.50) $(0.97)
Diluted loss per common share$(0.84) $(0.67) $(1.81) $(1.70)$(1.50) $(0.97)
Weighted average basic shares outstanding37,876
 37,496
 37,832
 37,419
38,801
 37,788
Weighted average diluted shares outstanding37,876
 37,496
 37,832
 37,419
38,801
 37,788


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

2

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Three Months Ended  
 June 30,
 Six Months Ended 
 June 30,
Three Months Ended 
 March 31,
2019 2018 2019 20182020 2019
(Unaudited) (Unaudited)(Unaudited)
Net loss$(31,943) $(25,088) $(68,563) $(63,743)$(58,205) $(36,620)
Other comprehensive income (loss):          
Foreign currency translation income (loss)1,465
 (10,916) 1,752
 (11,216)(15,056) 287
Total comprehensive loss$(30,478) $(36,004) $(66,811) $(74,959)$(73,261) $(36,333)


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

3

Table of Contents

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)

(In thousands)

Three Months Ended June 30, 2019Three Months Ended March 31, 2020
Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Total
Stockholders
Equity
Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Total
Stockholders
Equity
Shares Amount Shares Amount 
Balance at April 1, 201937,875
 $379
 $761,988
 $510,983
 $(1,601) $1,271,749
Balance at January 1, 202038,096
 $381
 $766,779
 $408,789
 $(3,504) $1,172,445
Shares issued under employee benefit programs118
 1
 125
 
 
 126
1,543
 15
 (155) 
 
 (140)
Stock-based compensation expense
 
 2,512
 
 
 2,512

 
 743
 
 
 743
Net loss
 
 
 (31,943) 
 (31,943)
 
 
 (58,205) 
 (58,205)
Foreign currency translation income
 
 
 
 1,465
 1,465
Balance at June 30, 201937,993
 $380
 $764,625
 $479,040
 $(136) $1,243,909
Foreign currency translation loss
 
 
 
 (15,056) (15,056)
Balance at March 31, 202039,639
 $396
 $767,367
 $350,584
 $(18,560) $1,099,787


 Six Months Ended June 30, 2019
 Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Total
Stockholders
Equity
 Shares Amount 
Balance at January 1, 201937,700
 $377
 $761,834
 $549,475
 $(3,760) $1,307,926
Shares issued under employee benefit programs293
 3
 1
 
 
 4
Adoption of ASU 2018-02
 
 
 (1,872) 1,872
 
Stock-based compensation expense
 
 2,790
 
 
 2,790
Net loss
 
 
 (68,563) 
 (68,563)
Foreign currency translation income
 
 
 
 1,752
 1,752
Balance at June 30, 201937,993
 $380
 $764,625
 $479,040
 $(136) $1,243,909

 Three Months Ended June 30, 2018
 Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Total
Stockholders
Equity
 Shares Amount 
Balance at April 1, 201837,492
 $375
 $760,352
 $629,943
 $8,377
 $1,399,047
Shares issued under employee benefit programs103
 1
 259
 
 
 260
Stock-based compensation expense
 
 331
 
 
 331
Net loss
 
 
 (25,088) 
 (25,088)
Foreign currency translation loss
 
 
 
 (10,916) (10,916)
Balance at June 30, 201837,595
 $376
 $760,942
 $604,855
 $(2,539) $1,363,634

Six Months Ended June 30, 2018Three Months Ended March 31, 2019
Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Total
Stockholders
Equity
Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Total
Stockholders
Equity
Shares Amount Shares Amount 
Balance at January 1, 201837,144
 $371
 $760,278
 $668,598
 $8,677
 $1,437,924
Balance at January 1, 201937,700
 $377
 $761,834
 $549,475
 $(3,760) $1,307,926
Shares issued under employee benefit programs451
 5
 (277) 
 
 (272)175
 2
 (124) 
 
 (122)
Adoption of ASU 2018-02
 
 
 (1,872) 1,872
 
Stock-based compensation expense
 
 941
 
 
 941

 
 278
 
 
 278
Net loss
 
 
 (63,743) 
 (63,743)
 
 
 (36,620) 
 (36,620)
Foreign currency translation loss
 
 
 
 (11,216) (11,216)
Balance at June 30, 201837,595
 $376
 $760,942
 $604,855
 $(2,539) $1,363,634
Foreign currency translation income
 
 
 
 287
 287
Balance at March 31, 201937,875
 $379
 $761,988
 $510,983
 $(1,601) $1,271,749


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

4

Table of Contents


HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended 
 June 30,
Three Months Ended 
 March 31,
2019 20182020 2019
(Unaudited)(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss$(68,563) $(63,743)$(58,205) $(36,620)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation49,428
 49,278
24,305
 24,771
Amortization7,340
 4,248
4,810
 3,611
Stock-based compensation expense1,659
 4,753
745
 975
Loss on early extinguishment of debt71
 
Loss on early extinguishment of debt, net4,236
 71
Provision for bad debts78
 49
21
 204
Deferred tax benefit(21,100) (15,360)(11,965) (8,749)
Amortization of deferred financing costs169
 2,217
1,261
 1,836
Amortization of deferred gain(1,667) (1,355)
Gain on sale of assets(55) (30)
 (26)
Changes in operating assets and liabilities:      
Accounts receivable(5,371) (19,639)13,928
 (4,690)
Other current and long-term assets(1,052) 1,038
(7,320) (1,501)
Deferred drydocking charges(15,605) (3,351)(6,867) (9,300)
Accounts payable2,074
 9,427
(10,403) 4,476
Accrued liabilities and other liabilities1,872
 2,405
(7,413) 2,845
Accrued interest395
 1,055
8,794
 (2,691)
Net cash used in operating activities(48,660) (27,653)(45,740) (26,143)
CASH FLOWS FROM INVESTING ACTIVITIES:      
Costs incurred for acquisition of offshore supply vessels
 (40,868)
Costs incurred for OSV newbuild program(2,164) (2,757)
 (3)
Net proceeds from sale of assets61
 57

 26
Vessel capital expenditures(1,248) (5,482)(1,517) (522)
Non-vessel capital expenditures(276) (81)(38) (71)
Net cash used in investing activities(3,627) (49,131)(1,555) (570)
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from first-lien term loans29,159
 

 29,159
Repurchase of convertible notes(47,310) 

 (47,310)
Proceeds from Senior Credit Facility100,000
 
Redemption premium on senior credit facility(1,500) 
Payment of deferred financing costs(11,775) 
(81) (5,524)
Shares withheld for payment of employee withholding taxes
 (536)
Net cash proceeds from other shares issued126
 260
Net cash provided by (used in) financing activities70,200
 (276)
Repayment of senior credit facility(50,000) 
Net cash used in financing activities(51,581) (23,675)
Effects of exchange rate changes on cash102
 (724)(1,322) 6
Net increase (decrease) in cash, cash equivalents and restricted cash18,015
 (77,784)
Net decrease in cash, cash equivalents and restricted cash(100,198) (50,382)
Cash, cash equivalents and restricted cash at beginning of period224,936
 186,849
173,626
 224,936
Cash, cash equivalents and restricted cash at end of period$242,951
 $109,065
$73,428
 $174,554
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:      
Cash paid for interest$39,187
 $29,304
$11,749
 $19,507
Cash paid for (refunds of) income taxes$(22) $650
$288
 $(1,338)
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:      
Exchange of convertible notes for first-lien term loans$20,951
 $
$
 $20,951
Exchange of senior notes for second-lien term loans$142,629
 $
$
 $142,629


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

5

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, 2018.2019. The results of operations for the three and sixthree months ended June 30, 2019March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020.
The consolidated balance sheet at December 31, 20182019 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. Recent Developments
Joint Prepackaged Chapter 11 Plan of Reorganization

Effective April 13, 2020, the Company, on behalf of itself and certain of its subsidiaries, together with the Company, collectively, the Debtors, entered into a Restructuring Support Agreement, or the RSA, with secured lenders holding approximately 83% of the Company’s aggregate secured indebtedness and unsecured noteholders holding approximately 79% of the Company’s aggregate unsecured notes outstanding related to a balance sheet restructuring of the Company to be implemented through a voluntary prepackaged Chapter 11 case in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, or the Bankruptcy Court.

Despite the Company's extensive efforts to negotiate and launch, on February 14, 2020, an out-of-court debt-for-debt exchange transaction to address its outstanding 2020 senior notes and 2021 senior notes, it became evident in March 2020 that an in-court process would be necessary to maximize value for the Company and its post-emergence stakeholders while positioning it for long-term success. In March and April 2020, the Company experienced multiple events of defaults under the existing 2020 senior notes and 2021 senior notes, which included non-payment of principal and interest on the 2020 senior notes, nonpayment of interest on the 2021 senior notes and related cross-defaults. Cross-defaults were also triggered under the Company’s existing senior credit agreement, first lien term loan agreement and second lien term loan agreement. The Company, together with the administrative agents and certain of its lenders under its existing senior credit agreement, first lien term loan agreement and second lien term loan agreement, and certain holders of the Company’s 2020 senior notes and 2021 senior notes entered into separate forbearance agreements, which were subsequently extended to May 19, 2020 pursuant to which such lenders and noteholders agreed to forbear from exercising certain of their rights and remedies with respect to certain defaults by the Company.

On May 19, 2020, in accordance with the RSA, the Company sought voluntary relief under chapter 11 of the United States Bankruptcy Code, or the Chapter 11 Cases, in the Bankruptcy Court and filed a proposed joint prepackaged plan of reorganization, or the Plan.

On June 19, 2020, after a confirmation hearing, the Bankruptcy Court entered a confirmation order approving the Plan. The Plan will become effective after the conditions to its effectiveness have been satisfied.The effect of the Plan is to de-lever the Company’s balance sheet through a conversion into equity or warrants or both of 1) a portion of the $350 million in first-lien term loans that mature in June 2023; 2) $121 million in second-lien term loans that mature in February 2025; 3) $224 million outstanding under the Company's 2020 senior notes indenture, and; 4) $450 million outstanding under the Company's 2021 senior notes indenture. The holders of first-lien term loans will also receive their pro rata portion of the new second-lien term loans that will be issued as part of the Exit Financings, as defined below. All pre-petition equity interests in the Company will be cancelled, released, and extinguished on the effective date of the Plan, and will thereafter be of no further force or effect.

Holders of other claims will either receive payment in full in cash or otherwise have their rights reinstated under the Bankruptcy Code, or such claims will be cancelled, released, discharged, and extinguished or be given such other treatment as set forth in the Plan. In addition, upon emergence from the Chapter 11 Cases, pursuant to a rights offering of shares of the Company’s new common stock, or the Rights Offering, the Company will receive from certain pre-petition secured and unsecured creditors an equity investment of $100 million.Additionally, the Company will enter into a new first-lien term loan in an aggregate principal amount to be determined in accordance with the Plan and will have a maturity date on the fourth anniversary of the Closing date. The Company will also enter into a new second-lien term loan in an aggregate principal amount to be determined in accordance with the Plan and a maturity date of March 31, 2026, or together with the new first-lien term loans, the Exit Financings.

The Company anticipates emerging from the Chapter 11 Cases upon receipt of certain governmental approvals from U.S. and other governmental authorities. The Company expects to receive the required approvals promptly following the completion by such governmental authorities of their reviews. In addition, the Company will be required to finalize the terms of the Exit Financings prior to emergence.
DIP Credit Agreement

In connection with the filing of the Plan, on May 22, 2020, the Debtors entered into a debtor-in-possession credit agreement on the terms set forth in a Superpriority Debtor-in-Possession Term Loan Agreement, or the DIP Credit Agreement, by and among the Company, as Parent Borrower, Hornbeck Offshore Services, LLC, as Co-Borrower, the lenders party thereto, or the DIP Lenders, and Wilmington Trust, National Association, as Administrative Agent and Collateral Agent, pursuant to which, the DIP Lenders agreed to provide us with loans in an aggregate principal amount not to exceed $75 million that, among other things, was used to repay in full the remaining $50 million in loans outstanding under the Company's Senior Credit Agreement on May 22, 2020, and to finance the Company's ongoing general corporate needs during the course of the Chapter 11 Cases.

The maturity date of the DIP Credit Agreement is six months following the effective date of the DIP Credit Agreement. The DIP Credit Agreement contains customary events of default, including events related to the Chapter 11 Cases, the occurrence of which could result in the acceleration of the Company's obligation to repay the outstanding indebtedness under the DIP Credit Agreement. The Company's obligations under the DIP Credit Agreement are secured by a first priority security interest in, and lien on, substantially all of its present and after-acquired property (whether tangible, intangible, real, personal or mixed) and has been guaranteed by all of the Company’s material subsidiaries. As of June 30, 2020, the Company has $75 million outstanding under the DIP Credit Agreement.
Going Concern
Since the second half of 2014, the offshore oil service sector has experienced difficult operating conditions due to the decliningreduced 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.results for the last six years. There is significant uncertainty surrounding when and by how much oil prices will recover, and whether that recovery will result in increased demand for the Company's services. 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 of7, the Company’s 2020 senior notes now falls withinhad scheduled maturities in April 2020 and the twelve-month period followingCompany’s 2021 senior notes have scheduled maturities in March 2021. Despite the issuanceCompany's extensive efforts to negotiate and launch an out-of-court debt-for-debt exchange transaction, after the advent of these financial statementsthe COVID-19 pandemic and the oil price war in March 2020, it became evident that an in-court process would be necessary to maximize value for which the Company and its post-emergence stakeholders while positioning us for long-term success.
On May 19, 2020, the Company initiated the Chapter 11 Cases in the Bankruptcy Court and on June 19, 2020, the Bankruptcy Court issued a confirmation order approving the Plan. While the Company anticipates emerging from its Chapter 11 proceedings, which is requiredsubject to evaluateconsummation, as parta result of the defaults under its assessment of itscredit agreements and the uncertainties surrounding the Chapter 11 Cases, substantial doubt exists as to our ability to continue as a going concern. Management of the Company continues to believe it has adequate liquidity to fund its operations up until the maturity of the 2020 senior notes. However, absent the combination of a significant recovery of market conditions such that cash flow from operations were to increase materially from currently projected levels, coupled with the refinancing and/or further management of its funded debt obligations, the Company does not currently expect to have sufficient liquidity to repay the full amount of the 2020 senior notes and the 2021 senior notes as they mature in 2020 and 2021, respectively. Management continues to implement its on-going plan to address its maturities as they become due, including the refinancing of its 2020 senior notes. The recent closing of the $100 million Senior Credit Facility is the latest step in that iterative process. Based on continuing discussions with existing and potential lenders, management is optimistic that it will be able to successfully implement this plan. However, management recognizes that its plan depends on the actions of these third parties, including reaching an agreement with existing senior note holders and/or obtaining new sources of liquidity, and, therefore, the Company is unable at this time to conclude that such plan is reasonably certain of being achieved. Accordingly, given the uncertainty with respect to the Company’s ability to pay its 2020 senior notes in full as they become due, the Company acknowledges that substantial doubt exists regarding its ability to continue as a going concern. There can be no assurance that cash flows from operations will increase materially or that the Company will succeed in reaching agreements with its senior note holders or accessing new capital to pay the 2020 senior notes in full as they become due within the next twelve months.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these consolidated financial statements. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.

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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. 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 adopted this ASU effective January 1, 2019. See further discussion 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 adopted ASU No. 2018-02 on January 1, 2019. This adoption had no material impact on its consolidated financial statements.

ASU No. 2018-09, "Codification Improvements"

This standard provides clarification, corrects errors in and makes minor improvements to various ASC topics. Many of the amendments in this update have transition guidance with effective dates for annual periods beginning after December 15, 2018, and some amendments do not require transition guidance and are effective upon issuance of this update.

January 1, 2019

The Company adopted ASU No. 2018-09 on January 1, 2019. This adoption had no material impact on its consolidated financial statements.

ASU No. 2018-11, "Leases" (Topic 842): Targeted Improvements

This standard provides for the election of transition methods between the modified retrospective method and the optional transition relief method. The modified retrospective method is applied to all prior reporting periods presented with a cumulative-effect adjustment recorded in the earliest comparative period while the optional transition relief method is applied beginning in the period of adoption with a cumulative-effect adjustment recorded in such period. Also, this standard allows lessors to elect to not separate non-lease components from the associated lease components if certain criteria are met.

January 1, 2019

The Company adopted ASU No. 2018-11 on January 1, 2019. See further discussion below.



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, 20202023The Company believes that the implementation of this new guidance will not have a material impact on its consolidated financial statements.
ASU No. 2019-12, "Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes"This standard modifies ASC 740 to simplify the accounting for income taxes by removing certain exceptions. Early adoption is permitted.January 1, 2021The Company continues to evaluate the impact this new guidance will have on its consolidated financial statements.
ASU No. 2020-04, "Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting"The amendments in this update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.Effective upon issuance (March 12, 2020) and generally can be applied through December 31, 2022. The Company believes that the implementation of this new guidance will not have a material impact on its consolidated financial statements.
       

ASC 842, Leases

Lessee Accounting

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

The Company elected the package of practical expedients permitted under the transition guidance within the standard, which eliminates the reassessment of past leases, classification and initial direct costs. For leases with a term of twelve months or less, the Company has made a policy election in which the ROU asset and lease liability will not be recognized on its balance sheet.
As a result of the Company's adoption of this new standard, it recorded ROU assets of $24.7 million and lease liabilities of $27.7 million. The adoption of the standard did not have an impact on the Company's equity and will not have a material impact on the Company's results of operations and cash flows.

Lessor Accounting

Under ASU 2018-11, a lessor may elect to combine lease and non-lease components provided that the non-lease component(s) otherwise would be accounted for under the new revenue guidance in ASC 606 and both of the following conditions are met:
The timing and pattern of transfer for the lease component are the same as those for the non-lease components associated with that lease component.
The lease component, if accounted for separately, would be classified as an operating lease.
When the above conditions are met, the entity will need to assess predominance. If the non-lease components are predominant, the entity accounts for the combined component under ASC 606; otherwise, the entity accounts for the combined component under ASC 842.
After review of its revenue streams, the Company has concluded that the non-lease component of its revenue is predominant, and that both of the criteria above are met. Therefore, the Company has adopted the new transition options and combines lease and non-lease revenues. The Company recognizes revenue based on the non-lease component under ASC 606, as it has concluded that the non-lease component is the predominant component. The adoption of ASU 2018-11 on January 1, 2019 did not change the timing or amounts of revenues recognized by the Company.

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4. Revenues from Contracts with Customers

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

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A performance obligation under contracts with the Company's customers to render services is the unit of account under Topic 606. The Company accounts for services rendered separately if they are distinct and the service is separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered provided on its own or with other resources that are readily available to the customer. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
As of June 30, 2019,March 31, 2020, the Company has certain remaining performance obligations representing contracted vessel revenues for which work has not been performed and such contracts have an original expected duration of more than one year. As of June 30, 2019,March 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations for such contracts was $1.7$8.2 million, all of which is$5.7 million and $2.5 million are expected to be recognized in 2019.2020 and 2021, 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 six months ended June 30,March 31, 2020 and 2019, and 2018, the Company recognized revenues as follows (in thousands):
Three Months Ended June 30, Six months ended June 30,Three months ended March 31,
2019 2018 2019 20182020 2019
Vessel revenues$47,257
 $49,481
 $92,509
 $82,615
$43,152
 $45,252
Vessel management revenues9,143
 7,974
 17,619
 15,733
9,020
 8,475
Shore-based facility revenues445
 976
 753
 1,670
638
 309
$56,845
 $58,431
 $110,881
 $100,018
$52,810
 $54,036


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5. Loss 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  
 June 30,
 Six Months Ended 
 June 30,
Three Months Ended 
 March 31,
2019 2018 2019 20182020 2019
Net loss$(31,943) $(25,088) $(68,563) $(63,743)$(58,205) $(36,620)
Weighted average number of shares of common stock outstanding37,876
 37,496
 37,832
 37,419
38,801
 37,788
Add: Net effect of dilutive stock options and unvested restricted stock (1)(2)(3)
 
 
 

 
Weighted average number of dilutive shares of common stock outstanding37,876
 37,496
 37,832
 37,419
38,801
 37,788
Loss per common share:          
Basic loss per common share$(0.84) $(0.67) $(1.81) $(1.70)$(1.50) $(0.97)
Diluted loss per common share$(0.84) $(0.67) $(1.81) $(1.70)$(1.50) $(0.97)
 
(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 2,4396,186 shares and 2,195404 shares of common stock for the three and six months ended June 30,March 31, 2020 and 2019, and 529 shares and 639 shares of common stock for the three and six months ended June 30, 2018, respectively.
(2)For the sixthree months ended June 30,March 31, 2019, and 2018, the 2019 convertible senior notes issued in August 2012 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 7 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.
(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 98 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,three months ended March 31, 2020, the Company determined that it observed indicators of impairment related to its vessels. This was due to the rapid decline in the price of oil, which resulted from the rapid deterioration of its second quarter 2016 operating results, as well as the uncertainty regarding future market conditionsCOVID-19 closures combined with a significant increase in production and the related impactoil price war initiated by Saudi Arabia and Russia. The Company completed an undiscounted cash flow calculation on the Company's projected operating results.its vessels as of March 31, 2020. For the purpose of calculating the undiscounted cash flows, the Company grouped its vessels into two groups,asset groupings, OSVs and MPSVs, and used a probability-weightedMPSVs. The Company calculated the undiscounted cash flows using a probability weighted forecast for each of its asset groups over their respective remaining useful lives. Included in the cash flow projectionprojections were assumptions related to test for recoverability.the current mix of active and stacked vessels, the estimated timing of stacked vessels returning to active status along with projected dayrates, operating expenses, direct overhead expenses and deferred drydocking expenditures related to each of the groupings. The Company views vessel stackings as a temporary status and a prudent business strategy. Stacking vessels does not imply that it has ceased marketing such vessels or never intends to reactivate such vessels when market conditions improve. After reviewing the results of this calculation, the Company determined that each of its asset groups hadhas sufficient projected undiscounted cash flows to recover the remaining book value of the Company's long-lived assets within such groups. While the Company has not observed any new impairment indicators since 2016, the Company 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 updated projections, 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.
7. Acquisition of Vessels
On May 18, 2018, the Company completed the acquisition of four high-spec Jones Act-qualified OSVs and related equipment from Aries Marine Corporation and certain of its affiliates for $40.9 million in cash, inclusive of $4.0 million related to a non-compete intangible asset that is being amortized over the life of such asset, or two years. Also included in this transaction was the cost of fuel and lube inventory and transactions fees. The acquired vessels are all U.S.-flagged and are comprised of two 300 class OSVs and two 280 class OSVs. The Company determined that substantially all of the fair value of the assets acquired are concentrated in a group of similar identifiable assets and, therefore, has accounted for such transaction as an asset acquisition under ASU 2017-01.


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8.projected undiscounted cash flows to recover the remaining net book value of its long-lived assets within such group.
In the development of the undiscounted cash flows, in addition to the previously discussed considerations outlined above and in light of current market conditions, the Company estimates the length of time it will take for the market to absorb its stacked vessels such that it 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 the asset impairment analysis, the Company determined that if the downturn (and, thus, the unstacking of vessels) was extended by two years from the most recent estimate, this would reduce its undiscounted cash flows by less than 10%, 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.
7. Debt
In March 2020 and subsequently, the Company experienced multiple events of defaults under the existing 2020 senior notes and 2021 senior notes, which included non-payment of principal and interest on the 2020 senior notes, nonpayment of interest on the 2021 senior notes and related cross-defaults. Cross-defaults were also triggered under the Company’s existing senior credit agreement, first lien term loan agreement and second lien term loan agreement. The Company, together with the administrative agents and certain of its lenders under its existing senior credit agreement, first lien term loan agreement and second lien term loan agreement, and certain holders of the Company’s 2020 senior notes and 2021 senior notes entered into separate forbearance agreements, which were subsequently extended to May 19, 2020 pursuant to which such lenders and noteholders agreed to forbear from exercising certain of their rights and remedies with respect to certain defaults by the Company. On May 19, 2020, the Company sought voluntary relief under chapter 11 of the United States Bankruptcy Code, or the Chapter 11 Cases, in the Bankruptcy Court and filed a proposed joint prepackaged plan of reorganization, or the Plan. On June 19, 2020, after a confirmation hearing, the Bankruptcy Court entered a confirmation order approving the Plan.
As of the dates indicated, the Company had the following outstanding debt (in thousands):
 June 30,
2019
 December 31,
2018
5.875% senior notes due 2020, net of deferred financing costs of $712 and $1,162$223,601
 $365,780
5.000% senior notes due 2021, net of deferred financing costs of $1,688 and $2,173448,312
 447,827
1.500% convertible senior notes due 2019, net of original issue discount of $177 and $2,725 and deferred financing costs of $60 and $61125,529
 96,311
First-lien term loans due 2023, including deferred gain of $14,779 and $15,845, and net of original issue discount of $3,536 and $3,013, and deferred financing costs of $3,728 and $2,814357,515
 310,018
Second-lien term loans due 2025, including deferred gain of $20,229141,464
 
Senior Credit Facility, net of deferred financing costs of $6,25093,750
 
 1,290,171
 1,219,936
Less current maturities(249,130) (96,311)
 $1,041,041
 $1,123,625
 March 31,
2020
 December 31,
2019
5.875% senior notes due 2020, net of deferred financing costs of $37 and $262$224,276
 $224,051
5.000% senior notes due 2021, net of deferred financing costs of $961 and $1,203449,039
 448,797
First-lien term loans due 2023, including deferred gain of $12,158 and $13,040, and net of original issue discount of $2,859 and $3,084, and deferred financing costs of $3,019 and $3,256356,280
 356,700
Second-lien term loans due 2025, including deferred gain of $17,893 and $18,678139,128
 139,913
Senior credit facility, net of deferred financing costs of $2,586 and $5,57147,414
 94,429
 1,216,137
 1,263,890
Less current maturities1
(1,216,137) (1,263,890)
 $
 $
(1) On March 2, 2020, the Company did not make the interest payment on the 2021 senior notes that was due on such date. As a result of this and cross-default language in its other debt obligations, the Company has determined that all of its debt should be presented as current.

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The table below summarizes the Company's cash interest payments (in thousands):
Cash Interest Payments Payment DatesCash Interest Payments Payment Dates
5.875% senior notes due 2020$6,589
 April 1 and October 1$6,589
 April 1 and October 1
5.000% senior notes due 202111,250
 March 1 and September 111,250
(1)March 1 and September 1
1.500% convertible senior notes due 2019193
 Final payment on September 1, 2019
First-lien term loans due 20233,019
 Variable (1)2,679
 Variable Monthly (2)
Second-lien term loans due 20252,879
 January 31, April 30, July 31, and October 312,879
 January 31, April 30, July 31, and October 31
Senior Credit Facility637
 Monthly (2)
Senior credit facility283
 Variable Monthly (3)
 
(1)An interest payment on the 2021 senior notes in the amount of $11,250 was due on March 2, 2020, but the Company did not make such interest payment.
(2)The interest rate on the 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 June 30, 2019March 31, 2020 plus an applicable margin, which is currently 7.00%. Please see further discussion of the variable interest rate below.
(2)(3)The interest rate on the Senior Credit Facilitysenior credit facility is variable based on 30-day LIBOR plus a 5.00% margin. The amount reflected in this table is the monthly amount payable based on the 30-day LIBOR interest rate that was in effect on June 30, 2019.March 31, 2020. Please see further discussion of the variable interest rate below.

Senior Credit Facility
On June 28, 2019, the Company entered into a new $100.0 million senior secured asset-based revolving credit facility, or the senior credit facility, under a Senior Credit Facility. TheAgreement by and among the Company, as Borrower, certain of the Company’s subsidiaries, as guarantors, certain lenders, and CIT Northbridge Credit LLC, or CIT, as Administrative Agent and Collateral Agent for the lenders (as amended or otherwise modified from time to time, the Senior Credit Facility isAgreement). The senior credit facility was 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 issenior credit facility was secured by first-priority liens on receivables, certain restricted and unrestricted cash amountsaccounts and related assets. The Senior Credit Facility issenior credit facility was comprised of two tranches that will rebalancerebalanced each month based on the variable receivable-backed borrowing base. The unrestricted receivables-backed tranche willwas scheduled to mature in 2022, whereas the restricted cash-backed tranche willwas scheduled to mature in 2025. The receivables-backed tranche may be used,was available for use, subject to the completion of applicable eligibility review procedures, for working capital and general corporate purposes, including the refinancing or repayment of existing debt, subject to, among other things, compliance with certain requirements. The cash-backed tranche may,was permitted, over time, to rebalance to the receivables-backed tranche as eligible receivables increase and may be refinanced over time.

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increased. Borrowings under the Senior Credit Facility accruesenior credit facility accrued interest at a floating-rate LIBOR plus a fixed spread of 5.00% for the life of the facility. The
On February 29, 2020, the Company may, atmade a cash payment of $50 million out of its option from timerestricted cash to time, prepay loans under either tranchefully satisfy CIT’s share of the Senior Credit Facility. Fifty percent of such loans availableexisting obligations under the Senior Credit Facility is subjectAgreement. As a result, the Company recorded a $4.2 million loss on extinguishment of debt ($3.3 million or $0.09 per diluted share after-tax) due to a prepayment premium (i) at 103%the write-off of deferred issuance costs and redemption premium. On March 31, 2020, the principal amount repaid if such repayment occurs on or prior to June 28, 2020; (ii) at 102% of the principal amount repaid if such repayment occurs on or prior to June 28, 2021; (iii) at 101% of the principal amount repaid if such repayment occurs on or prior to December 28, 2021 and (iv) at 100% of the principal amount repaid if such repayment occurs after December 28, 2021, with such premiums subject to adjustments downward under certain circumstances. The other fifty percent of such loans may be repaid at any time without prepayment penalty.
As of June 30, 2019, the $100.0 million of loan proceeds fundedCompany's restricted cash balance under the Senior Credit Facility were presented as restricted cash on the balance sheet, pending completion of certain post-closing undertakings.senior credit facility was $14.5 million. The Company classifies cash as restricted when there are legal or contractual restrictions on its withdrawal or usage. On July 30, 2019,May 22, 2020, with proceeds from the Company metDIP Credit Agreement, the post-closing conditions precedent required by the Senior Credit Facility resulting in$44.0remaining $50 million of restricted cash related to the eligible receivables-backed tranchein principal amount of the Senior Credit Facility being transferred by the Agent to the Company's unrestricted cash account on July 31, 2019. On July 31, 2019, the Company's restricted cash balance under the Senior Credit Facilitysenior credit facility was reduced to $56.0 million.paid in full.
First-Lien Term Loans
On June 15, 2017, the Company entered into the first lienfirst-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

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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 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 46certain deposit and securities accounts, 45 domestic high-spec OSVs and MPSVs and nineten foreign high-spec OSVs, including a security interest in two pending MPSV newbuilds, and associated personalty, as well as byincluding liens on receivables, certain depositother unrestricted cash accounts and securities accounts.related assets that previously secured the senior credit facility on a first-lien basis.
Borrowings accrue interest, at the Company’s option, at either:
an adjusted London Interbank Offered Rate (subject to a 1.00% floor) plus (a) 6.00% during the first year of the first-lien term loans, (b) 6.50% during the second year of the first-lien term loans,

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(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
the greatest of (a) the prime rate announced by The Wall Street Journal, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%, and (c) the London Interbank Offered Rate plus, 1%, plus, for either (a), (b), or (c), a margin of (i) 5.00% during the first year of the 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.

Under the Company's confirmed plan, the first-lien term loans will be extinguished in exchange for equity of the reorganized Company and loans under a new second-lien term loan facility.
Second-Lien Term Loans
In February and March 2019, the Company completed two private offers and exchanged an 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 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 deal costs associated with the exchange.these exchanges. As contemplated by and provided for under the agreement governing the first-lien term loans, the second-lien term loans were made pursuant to a Second Lien Term Loan Agreement entered into by the Company, the Co-Borrower, the lenders party thereto and the Administrative Agent and Collateral Agent. The second-lien term loans have a maturity date of February 7, 2025 and bear interest at a fixed rate per annum of 9.50%. The second-lien term loans are guaranteed by certain of the Company’s present domestic subsidiaries and will be guaranteed by certain of the Company's future domesticforeign subsidiaries and are securedcollateralized 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.loans on a first-lien basis, including liens on receivables, certain unrestricted cash accounts and related assets that previously secured the senior credit facility on a first-lien basis.
Under the Company's confirmed plan, the second-lien term loans will be extinguished in exchange for equity of the reorganized Company.
Convertible Note Repurchases and Repayment
During the sixthree months ended June 30,March 31, 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.

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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.
2020 Senior Notes

On March 2, 2012, the Company issued $375.0 million in aggregate principal amount of 2020 senior notes, governed by an indenture, or the 2012 indenture. The net proceeds to the Company from the offering were approximately $367.4 million, net of transaction costs. The 2020 senior notes have a maturity date of April 1, 2020 and the effective interest rate is 6.08%. No principal payments were scheduled prior to maturity. The 2020 senior notes were issued under and are entitled to the benefits of the 2012 indenture. Concurrently with the closing of the First Lien Term Loan Agreement in 2017, the Company arranged for the repurchase of $8.1 million in face value of its outstanding 2020 senior notes. In February and March 2019, the Company exchanged $142.6 million in face value of its 2020 senior notes for second-lien term loans.
Under the Company's confirmed plan, the 2020 senior notes will be extinguished in exchange for equity of the reorganized Company.
2021 Senior Notes

On March 14, 2013, the Company issued $450.0 million in aggregate principal amount of 2021 senior notes, governed by an indenture, or the 2013 indenture. The net proceeds to the Company from the offering were approximately $442.4 million, net of transaction costs. The 2021 senior notes have a maturity date of March 1, 2021 and the effective interest rate is 5.21%. No principal payments are scheduled prior to maturity. The 2021 senior notes were issued under and are entitled to the benefits of the 2013 indenture.
Under the Company's confirmed plan, the 2021 senior notes will be extinguished in exchange for equity of the reorganized Company.
The 2020 senior notes and 2021 senior notes are senior unsecured obligations and rank equally in right of payment with other existing and future senior indebtedness and senior in right of payment to any subordinated indebtedness that may be incurred by the Company in the future. Hornbeck Offshore Services, Inc., as the parent company issuer of the 2020 senior notes and the 2021 senior notes, has no independent assets or operations other than its ownership interest in its subsidiaries and affiliates. There are no significant restrictions on the Company’s ability, or the ability of any guarantor, to obtain funds from its subsidiaries by such means as a dividend or loan under the terms of the indenture. The Company may, at its option, redeem all or part of the 2020 senior notes or 2021 senior notes from time to time at specified redemption prices and subject to certain conditions required by the indentures. The Company is permitted under the terms of the indentures to incur additional indebtedness in the future, provided that certain financial conditions set forth in the indentures are satisfied by the Company.

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The Company estimates the fair value of its 2020 senior notes, 2021 senior notes, the first-lien term loans and 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. The interest rate on the senior credit facility is variable and the Company has concluded that face value approximates fair value of such facility as of March 31, 2020.     As of the dates indicated below, the Company had the following face values, carrying values and fair values (in thousands):
 
March 31, 2020 (4)
 December 31, 2019
 Face Value Carrying Value Fair Value Face Value Carrying Value Fair Value
5.875% senior notes due 2020$224,313
 $224,276
 $21,310
 $224,313
 $224,051
 $69,503
5.000% senior notes due 2021450,000
 449,039
 36,000
 450,000
 448,797
 123,748
First-lien term loans due 2023 (1)350,000
 356,280
 296,625
 350,000
 356,700
 341,906
Second-lien term loans due 2025 (2)121,235
 139,128
 46,069
 121,235
 139,913
 66,073
Senior credit facility (3)50,000
 47,414
 50,000
 100,000
 94,429
 100,000
 $1,195,548
 $1,216,137
 $450,004
 $1,245,548
 $1,263,890
 $701,230
(1)The carrying value of the first-lien term loans due 2023 includes a deferred gain of $12,158 less original issue discount and deferred financing costs of $5,878.
(2)The carrying value of the second-lien term loans due 2025 includes a deferred gain of $17,893.
(3)A portion of the senior credit facility was scheduled to mature in 2022 with the balance scheduled to mature in 2025. On February 29, 2020, $50 million of the principal of the senior credit facility was repaid and on May 22, 2020, the remaining $50 million of principal of the senior credit facility was repaid, the latter from the proceeds of the DIP Credit Agreement.
(4)See Note 2 regarding the proposed impact of the Chapter 11 Cases on the Company's long-term debt including current maturities.

The agreements governing the first-lien term loans and the second-lien term loans, the Senior Credit Facilitysenior 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 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. The interest rate on the Senior Credit Facility is variable and the Company has concluded that face value approximates fair value of such facility as of June 30, 2019.

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As ofFor information concerning the dates indicated below, the Company had the following face values, carrying values and fair values (in thousands):
Superpriority Debtor-in-Possession Term Loan Agreement, see Note 2.
 June 30, 2019 December 31, 2018
 Face Value Carrying Value Fair Value Face Value Carrying Value Fair Value
5.875% senior notes due 2020$224,313
 $223,601
 $138,513
 $366,942
 $365,780
 $191,727
5.000% senior notes due 2021450,000
 448,312
 232,853
 450,000
 447,827
 220,500
1.500% convertible senior notes due 201925,766
 25,529
 23,318
 99,647
 96,311
 88,125
First-lien term loans due 2023 (1)350,000
 357,515
 353,500
 300,000
 310,018
 295,875
Second-lien term loans due 2025 (2)121,235
 141,464
 96,685
 
 
 
Senior Credit Facility100,000
 93,750
 100,000
 
 
 
 $1,271,314
 $1,290,171
 $944,869
 $1,216,589
 $1,219,936
 $796,227
(1)The carrying value of the first-lien term loans due 2023 includes a deferred gain of $14,779 less original issue discount and deferred financing costs of $7,264.
(2)The carrying value of the second-lien term loans due 2025 includes a deferred gain of $20,229.
Capitalized Interest
During the first quarter of 2018, the Company notified the shipyard that was constructing the remaining two vessels in the Company's fifth OSV newbuild program that it was terminating the construction contracts for such vessels. The Company did not capitalize any of its interest costs during the sixthree months ended June 30, 2019. Upon recommencement of construction of such vessels, the Company intends to resume capitalization of related interest costs. During the six months ended June 30, 2018, the Company capitalized approximately $2.3 million of interest costs related to the construction of vessels.March 31, 2020 and 2019, respectively.
9.8. 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 incentive compensation plan by 7.0 million. The Company’s stock-based incentive compensation plan now covers a maximum of 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 officers, other 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 thesecertain awards using available shares. Accordingly, the classification of and accounting for 5.1 million outstanding phantom stock units, or PSUs, and 1.6 million stock appreciation rights, or SARs, were modified from cash-settled to stock-settled during the second quarter of 2019. These outstanding awards were granted to Company executives in 2017, 2018 and 2019 and to non-executive employees in 2019. After these modifications were completed, the Company has only 0.2 million awards outstanding that will settle in cash on their respective vesting

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dates. The remaining vesting provisions of the modified awards were not impacted and, therefore, the Company determined the fair value of the awards on the date of the modification was the same as the date prior to the modification. There was no additional compensation expense recognized at the time of modification. As of June 30, 2019, the Company has 0.7March 31, 2020, there were 0.5 million shares available for future issuance to employees under the incentive compensation plan. The Company did not grant any new tranches of common stock available to be granted under such plan.

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Restricted Stock
stock-based incentive compensation awards during the three months ended March 31, 2020. During the sixthree months ended June 30, 2019, the Company granted 2.4 million time-based PSUs. The compensation expense related to time-based PSUs is amortized over a vesting period of up to three years 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 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 PSUs granted in 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 six months ended June 30, 2019,March 31, 2020, the Company issued 292,7151.5 million shares of common stock due to vestingsvesting of previously granted tranches of restricted stock. The issuance of shares of common stock unitsunder the incentive compensation plan was registered on Form S-8 with the Securities and employee purchasesExchange Commission. The registration was terminated by the Company on June 18, 2020.
Under the Plan, all of the outstanding awards under the Company's Employee Stock Purchase Plan.
Stock Appreciation Rights
Duringlong-term incentive compensation plan will be canceled, released and extinguished on the six months ended June 30, 2019, the Company granted 1.6 million SARs. The SARs vest and become exercisable in three equal annual installments on eacheffective date 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 June 30, 2019, the fair value for the outstanding SARs was $1.02 per share granted.
The following weighted average assumptions were used to value SARs:
Six Months Ended June 30,
2019
Expected volatility89.1%
Expected life6.0years
Risk-free interest rate1.9%
Expected dividend yield%
Plan.
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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Thefinancial impact of stock-based compensation expense chargesrelated to the Company’s incentive compensation plan on the Company’sits operating results are reflected in the table below (in thousands, except for per share data):
 Three Months Ended  
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
Loss before income taxes$684
 $1,885
 $1,659
 $4,753
Net loss$498
 $1,500
 $1,274
 $3,850
Loss per common share:       
Basic loss per common share$0.01
 $0.04
 $0.03
 $0.10
Diluted loss per common share$0.01
 $0.04
 $0.03
 $0.10
 Three Months Ended 
 March 31,
 2020 2019
Income before taxes$745
 $975
Net income$593
 $786
Earnings per common share:   
Basic$0.02
 $0.02
Diluted$0.02
 $0.02
10.9. Commitments and Contingencies
Vessel Construction
During the first quarter of 2018, the Company notified the shipyard that was constructing the remaining two vessels in the Company's fifth OSV newbuild program that it was terminating the construction contracts for such vessels. The Company has worked withvessels based on the performance bond surety and will select and contract with a shipyardshipyard'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, 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. The surety authorizedshipyard 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 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 with respect to the vessel construction contracts in dispute. 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 full amount of the performance bond. However, the surety's offer did not comply with the terms of the performance bond. Consequently, the Company considers the surety to be in default of their performance bonds for the foregoing and other reasons. The Company has initiated legal proceedings againstrejected the surety as a third-party claim in the Gulf Island Litigation.sureties' conditional and non-conforming offer.

As of the date of the contract termination, the two remaining vessels, both of which are domestic 400 class MPSVs, were projected to be delivered in the second and third quarters of 2019, respectively. Due to the uncertainty of the timing and location of future construction activities, in February 2019, the Company changed its forward guidance for the delivery dates related to these vessels to be the second and third quarters of 2020, respectively. However, the timing of the remaining construction draws remains subject to change commensurate with any further delays in the delivery dates of such vessels.
The cost of this nearly completed 24-vessel newbuild program, before construction period interest, is expected to be approximately $1,335.0 million, of which $20.5 million and $38.2 million are currently expected to be incurred in the remainder of 2019 and fiscal 2020, respectively. As ofMarch 2018, 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 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; and then later extended to be the second and third quarters of 2021. Due to the

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continued uncertainty of the timing and location of future construction activities, the Company has now updated its forward guidance for the delivery dates related to these vessels are now projected to be delivered in the second and third quarters of 2020,2022, 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 $22.9 million and $34.6 million is currently expected to be incurred in 2021 and 2022, respectively. The foregoing amounts do not reflect any potential additional payments to the shipyard in respect of the aforementioned disputed claim. From the inception of this program through June 30, 2019,March 31, 2020, the Company had incurred $1,276.3$1,277.5 million, or 95.6%95.7%, of total expected project costs.

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Contingencies
In the normal course of its business, the Company becomes involved in various claims and legal proceedings in which monetary damages are sought. It is management's opinion that the Company's liability, if any, under such claims or proceedings would not materially affect the Company's financial position or results of operations. The Company insures against losses relating to its vessels, pollution and third party liabilities, including claims by employees under Section 33 of the Merchant Marine Act of 1920, or the Jones Act. Third party liabilities and pollution claims that relate to vessel operations are covered by the Company’s entry in a mutual protection and indemnity association, or P&I Club, as well as by marine liability policies in excess of the P&I Club’s coverage. The Company provides reserves for any individual claim deductibles for which the Company remains responsible by using an estimation process that considers Company-specific and industry data, as well as management’s experience, assumptions and consultation with outside counsel. As additional information becomes available, the Company will assess the potential liability related to its pending claims and revise its estimates. Although historically revisions to such estimates have not been material, changes in estimates of the potential liability could materially impact the Company’s results of operations, financial position or cash flows.
11.10. Income Taxes
The effective tax benefit rate for the sixthree months ended June 30,March 31, 2020 and 2019 was 20.5% and 2018 was 23.2% and 19.0%19.4%, respectively. The Company's effective tax rate differs from the federal statutory rate due to the establishment of valuation allowances in 2019 and 2018 for state net operating losslosses, and foreign and other tax credit carryforwards, based upon management's conclusion that it is more likely than not such losses and credits will not be realized by their expiration dates. The Company's income tax benefit rate for the six months ended June 30, 2019 was higher than the benefit rate from the six months ended June 30, 2018, because of the reversal of a portion of valuation allowances on state net operating loss carryforwards that the Company now believes will be utilized, due to state law changes in June 2019.
During the six months ended June 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 six months ended June 30, 2019.
12.11. 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 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 real estate taxes and maintenance expenses. These costs are expensed in the period in which they are incurred. None of the Company's leases contain any residual value guarantees. The Company recorded $1.9$1.1 million of expense related to leases in general and administrative and operating expenses during each of the sixthree months ended June 30, 2019.March 31, 2020 and 2019, respectively. The expense recorded for short-term leases was $0.2 million and $0.1 million during the sixthree months ended June 30, 2019.March 31, 2020 and 2019, respectively.

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During the sixthree months ended June 30,March 31, 2020 and 2019, the Company recorded operating cash outflows from operating leases of $1.8 million.$0.8 million and $0.8 million, respectively.
Annual maturities of operating lease liabilities under non-cancelable leases with terms in excess of one year, as of June 30, 2019,March 31, 2020, are as follows (in thousands):
Six Months Ended 
 June 30, 2019
Three Months Ended 
 March 31, 2020
Remainder of 2019$1,529
20203,114
Remainder of 2020$2,118
20213,017
3,008
20223,065
3,083
20233,122
3,122
20242,744
Thereafter43,873
41,711
Total lease payments57,720
55,786
Less: imputed interest30,741
28,841
Total operating lease liabilities$26,979
$26,945
  
Weighted-average remaining lease term (in years)17.4
17.0
Weighted-average discount rate9.0%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, 2018.2019. 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
During the secondfirst quarter of 2019,2020, volatility in oil prices remained in a range of $50 to $60 per barrel forcontinued as WTI and $60Brent prices ranged from $15 to $70 per barrelbarrel. While we had expected generally improved market conditions to take hold during 2020, the outbreak and ensuing global pandemic related to COVID-19 silenced those expectations. A global decline in demand for Brent. Crudeoil resulting from COVID-19 economic closures combined with a temporary but significant increase in production and the related oil price war initiated by Saudi Arabia and Russia following the COVID-19 outbreak conspired to cause a collapse in oil prices still remain below the average prevailingduring April 2020 that was unprecedented. While oil prices between 2005have recovered somewhat since then, there remains a significant overhang in supply and late 2014.lingering weak demand on a global basis. The sustainedrecent 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 and gas, prolonging the industry downturn that has prevailed since 2015. Lesslate 2014. Reduced spending by our customers combined with athe already 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.
These factors ultimately resulted in our determination to seek bankruptcy protection on May 19, 2020. The principal question facing the offshore oilfield-relatedoilfield industry is the remaining duration of the current downturn in offshore activities. Our current view is that market conditions inThe lingering effects of the Greater GoM Operating Region have begunCOVID-19 pandemic are expected to rebound. However,continue to depress demand and the market recovery process is in the very early stages and has not yet resulted intiming of a significant improvement in utilization or pricing. The loss of confidence in an oil price recovery or an inability by our customers to sustain cost improvements could derail or postpone further the recovery. Additionally, global economic uncertainty, drivenrecovery is unclear. In addition, there can be no assurance regarding the production levels of oil and gas by events such as a trade-war involvingRussia, Saudi Arabia, and other oil producing countries and, therefore, the price of oil.

On May 19, 2020, we sought voluntary relief under chapter 11 of the United States Bankruptcy Code, or the Chapter 11 Cases in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division and major trading partners, could negatively impact global economicfiled a proposed joint prepackaged plan of reorganization, or the Plan. On June 19, 2020, after a confirmation hearing, the Bankruptcy Court entered a confirmation order approving the Plan. The Plan will become effective after the conditions or oil markets. Some analyststo its effectiveness have observed less demand growth than expected, which could result in a continuationbeen satisfied.The effect of the over supplyPlan is to de-lever our balance sheet through a conversion into equity or warrants or both of OSVs.
Against this backdrop,(i) a portion of the primary challenge confronting us has been, and continues to be, the ability to repay amounts maturing$350 million in 2020 and 2021first-lien term loans that mature in June 2023; (ii) $121 million in second-lien term loans that mature in February 2025; (iii) $224 million outstanding under our 2020 senior notes andindenture, and; (iv) $450 million outstanding under our 2021 senior notes.notes indenture. The maturityholders of our 2020 senior notes falls withinfirst-lien term loans will also receive their pro rata portion of the twelve-month period following the issuance of these financial statements, which we are required to evaluate

new second-lien term loans issued upon emergence as part of our assessmentthe Exit Financings. All pre-petition equity interests in the Company will be canceled, released, and extinguished on the effective date of the Company's ability to continue as a going concern. We continue to believe that we have adequate liquidity to fund our operations through at least March 2020. However, absent the combinationPlan, and will thereafter be 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/no further force or further managementeffect. See Note 2 of our funded debt obligations, we do not currently expect to have sufficient liquidity to repay the full amount of the 2020 senior notes and the 2021 senior notes as they mature in 2020 and 2021, respectively. We continue to implement our on-going plan to address these maturities as they become due, including the refinancing of our 2020 senior notes. Our recent closing of the $100 million Senior Credit Facility is the latest step in that iterative process. Based on continuing discussions with existing andconsolidated financial statements included herein for further discussion.

potential lenders, we are optimistic that we will be able to successfully implement this plan. However, we recognize that our plan depends on the actions of these third parties, including reaching an agreement with existing senior note holders and/or obtaining new sources of liquidity, and, therefore, we are unable at this time to conclude that such plan is reasonably certain of being achieved.
In June 2017, we issued first-lien term loans that provided us with liquidity and financial flexibility to engage in further liability management transactions. That transaction enabled us to reduce the outstanding amount due under our 2019 convertible senior notes to approximately $100 million from $300 million. During the first quarter oflate 2019, we further reduced the outstanding amount due under our 2019 convertible senior notes to approximately $26 million from $100 million through a series of open market repurchases totaling $53 million and a $21 million exchange for $20 million of first-lien term loans. We also availed ourselves of the flexibility under the indentures governing our 2020 senior notes and 2021 senior notes and the agreement governing our first-lien term loans to conduct an exchange of approximately $143 million of our 2020 senior notes for $121 million of second-lien term loans due in 2025. During the second quarter of 2019, we also arranged for $100 million of Senior Credit Facility loans secured by liens on receivables, certain restricted cash amounts and related assets. As of June 30, 2019, the $100 million of loan proceeds funded under the Senior Credit Facility were classified as restricted cash on the balance sheet, pending completion of certain post-closing undertakings. On July 30, 2019, we met certain post-closing conditions required by the Senior Credit Facility resulting in $44 million of restricted cash related to the eligible receivables-backed tranche of the Senior Credit Facility becoming unrestricted on July 31, 2019. On July 31, 2019, our non-current restricted cash balance under the Senior Credit Facility was reduced to $56 million. See Note 8 for further discussion. We have sufficient liquidity to satisfy the outstanding amount due under the 2019 convertible senior notes in September 2019. The reduction of the face amount of outstanding 2020 senior notes to $224 million in the first quarter of 2019 was a significant step towards being able to address that maturity in April 2020. Additional measures are being explored consistent with the indentures governing our 2020 senior notes and 2021 senior notes and under the agreements governing our first-lien term loans, second-lien term loans and Senior Credit Facility in order to further advance our efforts to satisfy the remaining 2020 senior notes. We believe that once we have fully addressed the 2020 maturity, improved market conditions expected to take hold during the remainder of 2019 and in fiscal 2020 will be a significant factor in addressing the $450 million in face value of senior notes maturing in March 2021.
While we are in the fifth year of a downturn in offshore exploration, development and production activities that has adversely affected demand for our vessels, we continue to observe a shift in sentiment underscoring our view that the early stages of a market recovery has begun to take hold. Leadingobserved leading indicators that we have observed includesignaled the potential for improved conditions -- including larger offshore capital budget announcements by our customers, a growth in the number of final investment decisions, or FIDs, made public by our customers for offshore projects, recently announced deepwater discoveries, a growing contract backlog announced by several drilling contractors and increased customer inquiries for our services, principally in the Greater GoM Operating Region. Most of these plans have not proceeded as anticipated in 2020. We now expect some to be cancelled altogether while others are being postponed. The duration of postponement is expected to be determined by the ability to operate during the COVID-19 pandemic and oil price recovery. We have experienced multiple charter cancellations and non-renewals.
During the secondfirst quarter of 2019,2020, we did not observe any noticeablesignificant change in the anticipated supply of high-spec U.S.-flagged OSVs. In the U.S. GoM, two high-spec OSVs have beenwere delivered by industry participants into the domestic market so far this year. We expect antwo additional three high-spec OSVs to be delivered by industry participants into domestic service in 2019.during the remainder of 2020. There were three high-spec, Jones-Act qualified OSVs under construction by industry participants on June 30, 2020 and as of that date there were no options to build additional high-spec Jones-Act qualified OSVs. We do not anticipate significant growth in the supply of high-spec U.S.-flagged OSVs beyond the currently anticipated level of 179178 of such vessels by the end of 2019.2020. We continue to monitor the overhang of the dormant supply of stacked U.S.-flagged high-spec OSVs. There are approximately 7795 stacked domestic vessels and all but one of these vessels will require intermediate or special surveys in order to return to service. We believe that the cost to industry participants to reactivate high-spec OSVs, including survey costs, crewing costs, training costs and unanticipated events, will range between $2 million and $5 million per vessel, on average. During the first half of 2020, we have observed an additional 23 high-spec OSVs go into stack, including six of our own.
In late July 2019,During the first quarter of 2020, there were 25was an average of 28.7 floating rigs working in the Greater GoM Operating Region. We see an additional five to six incremental floatersbelieve that will begin workingthe number of active drilling units in the Greater GoM Operating Region throughwill decline in 2020. As of June 30, 2020, there were 26 rigs available and 20 were working. During the endsecond half of 2019. While2020, we do not expect that all of these units will work at the same time or that all unitsactive floating rig count could drop to as low as 10 to 15.

currently working will continue to work; overall we view these developments as favorable for market conditions going forward. We believe that these improved regional demand drivers will create increased opportunities for our fleet of new generation OSVs. Once the current supply and demand fundamentals return to more normal conditions, our results from operations should improve.
Unlike our OSVs, whose utilization is tied principally to drilling activities, demand for our MPSVs is also driven by other types of 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,Project cancellations and delays have driven extremely weak utilization offor our MPSVs has been volatile. We expect to continue experiencing seasonal fluctuations, withduring 2020. While peak activity occurringnormally occurs in late spring through early fall, followed by softer demandwe see little evidence that MPSV utilization will improve seasonally during the winter months of each year.2020.
Since October 1, 2014, we stacked OSVs and MPSVs on various dates. As of March 31, 2020, we had 36 OSVs and one MPSV stacked. As of June 30, 2019, as well as July 31, 2019,2020, we had 3544 OSVs and two MPSVs stacked and such stacked vessels represent 50%62% of our fleetwide vessel headcount, and 37%49% of our total OSV and MPSV deadweight tonnage. We reactivated 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 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 fourfive HOSMAX 300 class OSVs, onethree 280 class OSV andOSVs, two 240 class OSVs duringand one MPSV since January 1, 2018. Three of our HOSMAX 300 OSVs that we placed into Mexican registry were acquired by us from Aries Marine in 2018. In the first quarter of 2019, we continued to increase our Mexican-flagged fleet by Mexican-flagging one MPSV.
At present, our Mexican-flagged fleet is comprised of seventen high-spec OSVs, five low-spec OSVs and one MPSV, which is the second largest concentration of vessels we have committed to aany single national market. Mexico has undergone significant transformation as a market for offshore energy over the last several years. Mexico'sIOCs appear to be proceeding with drilling plans in Mexico despite current industry conditions. While we have experienced some cancellations from drilling customers in Mexico, most of our customers appear to be proceeding with their plans. A significant factor affecting the health of the Mexican offshore market is the weakening financial condition of Pemex. While we are not currently working for Pemex directly, like many contractors, we work for customers who are working for Pemex. Offshore activity driven by Pemex is likely to decline as they have recently elected president has announced an intentiona suspension of contracts and have disclosed a significant level of financial distress that is impacting its ability to roll-backpay offshore contractors, many of which are our customers. We are affected by slow- or non-payment by some of the energy reformsthese customers that have created more opportunitiessignificant Pemex credit risk, thus, we may be unwilling to work for international oil companies, or IOCs,such customers due to operate in Mexico. The current administration appears to favor allowingtheir extensive 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 have recently entered Mexico. We expect Mexico to continue to refine energy policies that are appropriate to its national objectives.exposure.

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 oneIn 2019, our Vanuatu-flagged MPSV currently workingworked as a flotel in Brazil as a flotel.on an IOC project that ended in the first quarter of 2020. Brazil is the single largest deepwater market in the world. Recent measures to expand the role of IOCs in its “pre-salt” prospects are taking hold and we believe Brazilian activity in the offshore energy space will be a significant contributor to the overall recovery in global offshore E&P activities that we are beginning to see take hold in the second half of 2019.activities.

Our Vessels
All of our current vessels are qualified under the Jones Act to engage in U.S. coastwise trade, except for 1819 foreign-flagged new generation OSVs and two foreign-flagged MPSVs. As of JuneMarch 31, 2020, our 30 2019, our 31 active new generation OSVs, sixseven active MPSVs and four managed OSVs were operating in domestic and international areas as noted in the following table:
Operating Areas
Domestic 
GoM (1)22
Other U.S. coastlines (2)65
 2827
Foreign 
Other Latin America1
Brazil21
Mexico1112
 1314
Total Vessels (3)41
 
(1) Includes twoone owned vesselsvessel supporting the military.
(2) Includes twoone owned and four managed vessels supporting the military
(3) Excluded from this table are 3536 new generation OSVs and two MPSVsone MPSV that were stacked as of June 30, 2019.March 31, 2020.



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 each of our OSVs and MPSVs over estimated useful lives of 25 years. 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 either vessel group, 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 three months ended March 31, 2020, we observed indicators of impairment related to our vessels. This was due to the rapid decline in the price of oil, which resulted from COVID-19 closures combined with a significant increase in production and the oil price war initiated by Saudi Arabia and Russia. 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 direct 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, nor is it an indicator that we never intend to 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 each of our asset groups. Therefore, we concluded that we did not have an impairment of our long-lived assets as of March 31, 2020, and in such analysis, we noted a significant cushion for each of our asset groups as a result of the long remaining useful lives of our vessels.
In the development of the undiscounted cash flows, in addition to the previously discussed considerations outlined 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 10%, 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. 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 23 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20182019.


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-based port facility and vessel management services, including the four non-owned vessels managed for the U.S. Navy. The Company doesWe do not provide average or effective dayrates for itsour 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 sixseven active MPSVs.

Three Months Ended  
 June 30,
 Six Months Ended 
 June 30,
Three Months Ended 
 March 31,
2019 2018 2019 20182020 2019
Offshore Supply Vessels:          
Average number of new generation OSVs (1)66.0
 63.9
 66.0
 63.0
66.0
 66.0
Average number of active new generation OSVs (2)30.2
 22.7
 30.0
 20.4
31.8
 29.7
Average new generation OSV fleet capacity (DWT)238,845
 228,925
 238,845
 224,498
238,644
 238,845
Average new generation OSV capacity (DWT)3,619
 3,583
 3,619
 3,566
3,616
 3,619
Average new generation OSV utilization rate (3)32.3% 27.0% 32.4% 23.9%28.0% 32.5%
Effective new generation OSV utilization rate (4)70.4% 76.0% 71.3% 73.9%58.0% 72.1%
Average new generation OSV dayrate (5)$18,198
 $19,566
 $18,178
 $18,895
$18,203
 $18,156
Effective dayrate (6)$5,878
 $5,283
 $5,890
 $4,516
$5,097
 $5,901
 
(1)We owned 66 new generation OSVs as of June 30, 2019.March 31, 2020. Excluded from this data are eight MPSVs owned and operated by the Company as well asand four non-owned vessels managed for the U.S. Navy.
(2)In response to weak market conditions, we elected to stack certain of our 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 six months ended June 30, 2019 and 2018, respectively (in thousands):
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
EBITDA Reconciliation to GAAP:       
Net cash flows used in operating activities$(22,517) $(18,779) $(48,660) $(27,653)
Cash paid for deferred drydocking charges6,305
 1,381
 15,605
 3,351
Cash paid for interest19,680
 14,173
 39,187
 29,304
Cash paid for (refunds of) taxes1,316
 201
 (22) 650
Changes in working capital(646) 15,990
 797
 3,157
Stock-based compensation expense(684) (1,885) (1,659) (4,753)
Loss on early extinguishment of debt, net
 
 (71) 
Gain (loss) on sale of assets29
 (13) 55
 30
Changes in other, net129
 174
 (77) (49)
EBITDA$3,612
 $11,242
 $5,155
 $4,037
The following table provides the detailed components of EBITDA as we define that term for the three and six months ended June 30, 2019 and 2018, respectively (in thousands):
 Three Months Ended  
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
Components of EBITDA:       
Net loss$(31,943) $(25,088) $(68,563) $(63,743)
Interest, net       
Debt obligations19,995
 16,401
 39,721
 30,346
Interest income(921) (519) (2,035) (1,163)
Total interest, net19,074
 15,882
 37,686
 29,183
Income tax benefit(11,905) (6,438) (20,736) (14,929)
Depreciation24,657
 24,630
 49,428
 49,278
Amortization3,729
 2,256
 7,340
 4,248
EBITDA$3,612
 $11,242
 $5,155
 $4,037
In addition, we have also historically made certain adjustments, as applicable, to EBITDA for losses on early extinguishment of debt, stock-based compensation expense and interest income, to internally evaluate our performance based on the computation of ratios used in certain financial covenants of our credit agreements with various lenders, whenever applicable. We believe that such ratios can, at times, be material components of financial covenants and, when applicable, failure to comply with such covenants could result in the acceleration of indebtedness or the imposition of restrictions on our financial flexibility.
The following table provides certain detailed adjustments to EBITDA, as we define that term, for the three and six months ended June 30, 2019 and 2018, respectively (in thousands):
 Three Months Ended  
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
Loss on early extinguishment of debt, net$
 $
 $71
 $
Stock-based compensation expense4,169
 1,885
 1,659
 4,753
Interest income921
 519
 2,035
 1,163

Set forth below are the material limitations associated with using EBITDA as a non-GAAP financial measure compared to cash flows provided by operating activities.
EBITDA does not reflect the future capital expenditure requirements that may be necessary to replace our existing vessels as a result of normal wear and tear,
EBITDA does not reflect the interest, future principal payments and other financing-related charges necessary to service the debt that we have incurred in acquiring and constructing our vessels,
EBITDA does not reflect the deferred income taxes that we will eventually have to pay once we are no longer in an overall tax net operating loss carryforward position, as applicable, and
EBITDA does not reflect changes in our net working capital position.
Management compensates for the above-described limitations in using EBITDA as a non-GAAP financial measure by only using EBITDA to supplement our GAAP results.


Summarized financial information for the three months ended June 30, 2019March 31, 2020 and 20182019, respectively, is shown below in the following table (in thousands, except percentage changes):
Three Months Ended  
 June 30,
 Increase (Decrease) Three Months Ended 
 March 31,
 Increase (Decrease) 
2019 2018 
$
Change
 
%
Change
 2020 2019 
$
Change
 
%
Change
 
Revenues:                
Vessel revenues                
Domestic$26,531
 $43,536
 $(17,005) (39.1)%$28,379
 $27,128
 $1,251
 4.6
%
Foreign20,726
 5,945
 14,781
 >100.0
%14,773
 18,124
 (3,351) (18.5)%
47,257
 49,481
 (2,224) (4.5)%43,152
 45,252
 (2,100) (4.6)%
Non-vessel revenues9,588
 8,950
 638
 7.1
%9,658
 8,784
 874
 9.9
%
56,845
 58,431
 (1,586) (2.7)%52,810
 54,036
 (1,226) (2.3)%
Operating expenses40,217
 34,858
 5,359
 15.4
%41,308
 40,394
 914
 2.3
%
Depreciation and amortization28,386
 26,886
 1,500
 5.6
%29,115
 28,382
 733
 2.6
%
General and administrative expenses13,049
 12,246
 803
 6.6
%31,160
 11,967
 19,193
 >100.0
%
81,652

73,990

7,662
 10.4
%101,583
 80,743
 20,840
 25.8
%
Gain (loss) on sale of assets29
 (13) 42
 >(100.0)
%
Gain on sale of assets
 26
 (26) (100.0)%
Operating loss(24,778) (15,572) (9,206) 59.1
%(48,773) (26,681) (22,092) 82.8
%
Loss on early extinguishment of debt, net(4,236) (71) (4,165) >100.0
%
Interest expense19,995
 16,401
 3,594
 21.9
%(20,750) (19,726) (1,024) 5.2
%
Interest income921
 519
 402
 77.5
%646
 1,114
 (468) (42.0)%
Income tax benefit(11,905) (6,438) (5,467) 84.9
%(14,972) (8,831) (6,141) 69.5
%
Net loss$(31,943) $(25,088) $(6,855) 27.3
%$(58,205) $(36,620) $(21,585) 58.9
%
Three Months Ended June 30, 2019March 31, 2020 Compared to Three Months Ended June 30, 2018March 31, 2019
Revenues. Revenues for the three months ended June 30, 2019March 31, 2020 decreased by $1.6$1.2 million, or 2.7%2.3%, to $56.8$52.8 million compared to the same period in 2018.2019. Our weighted-average active operating fleet for the three months ended June 30,March 31, 2020 and 2019 was 38.6 and 2018 was 36.2 and 29.935.5 vessels, respectively. For the three months ended March 31, 2020, we had an average of 35.4 vessels stacked compared to an average of 38.5 vessels stacked in the prior-year period.
Vessel revenues decreased $2.2$2.1 million, or 4.5%4.6%, to $47.3$43.2 million for the three months ended June 30, 2019March 31, 2020 compared to $49.5$45.3 million for the same period in 2018.2019. The decrease in vessel revenues was primarily due to lower revenue earned by our MPSVs partially offset by higher revenues from our OSVs, including the full quarter contribution from four OSVs that were added to our operating fleet during the second quarter of 2018. Revenues from our MPSV fleet decreased $6.7 million, or 35.8%, for the three months ended June 30, 2019 compared to the prior-year period. For the three months ended June 30, 2019, we had an average of 37.8 vessels stacked compared to 42.0 vessels stacked in the prior-year quarter. Average new generation OSV dayrates were $18,198 for the second quarter of 2019 compared to $19,566 for the same period in 2018. Our new generation OSV utilization was 32.3% for the second quarter of 2019 compared to 27.0% for the same period in 2018. Our new generation OSVs were stacked for an aggregate of 3,255 days during the second quarter of 2019 compared to 3,749 days for the same period in 2018. Excluding stacked vessel days, our new generation OSV effective utilization was 70.4% and 76.0% for the same periods, respectively. Domestic vessel revenues decreased $17.0 million from the year-ago quarter primarily due to a greater number of OSVs working in foreign locations and, to a lesser extent, a decrease in the revenue from our MPSVs during the three months ended June 30, 2019. Foreign vessel revenues increased $14.8 million due to a higher number of vessels operating in foreign markets during the three months ended June 30, 2019. We operated an average of 5.7 additional OSVs and 0.7 additional MPSVs working in foreign locations during the current year quarter. Foreign vessel revenues for the second quarter of 2019 comprised 43.9% of our total vessel revenues compared to 12.0% for the year-ago period.

Non-vessel revenues increased $0.6 million, or 7.1%, to $9.6 million for the three months ended June 30, 2019 compared to $9.0 million for the same period in 2018. This increase is primarily attributable to higher revenues earned from vessel management services during 2019 compared to the year-ago period.
Operating Expenses. Operating expenses were $40.2 million, an increase of $5.4 million, or 15.4%, for the three months ended June 30, 2019 compared to $34.9 million for the same period in 2018. Operating expenses increased primarily due to a higher number of active vessels in our fleet during the three months ended June 30, 2019. Aggregate cash operating expenses are projected to be in the approximate annual range of $160.0 million to $170.0 million for the year ending December 31, 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 $28.4 million was $1.5 million, or 5.6%, higher for the three months ended June 30, 2019 compared to the same period in 2018. Depreciation was in-line with the prior-year period. The increase in amortization expense of $1.5 million was due to costs associated with the initial special surveys for vessels that were placed in service under the Company's fifth OSV newbuild program, costs associated with the drydocking of two vessels that were acquired in the second quarter of 2018 and the amortization of an intangible asset that was included with the acquisition of four OSVs in the second quarter of 2018. Depreciation expense is expected to increase from current levels when the two remaining vessels under our current newbuild program are placed in service. 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 $13.0 million was $0.8 million higher during the three months ended June 30, 2019 compared to the same period in 2018.
Operating Loss. Operating loss increased by $9.2 million to $24.8 million during the three months ended June 30, 2019 compared to the same period in 2018 for the reasons discussed above. Operating loss as a percentage of revenues was 43.6% for the three months ended June 30, 2019 compared to 26.7% for the same period in 2018.
Interest Expense. Interest expense of $20.0 million increased $3.6 million during the three months ended June 30, 2019 compared to the same period in 2018 due to additional interest expense associated with the issuance of additional first-lien and the second-lien term loans since the second quarter of 2018.
Interest Income. Interest income was $0.9 million during the three months ended June 30, 2019, which was $0.4 million higher than the same period in 2018. Our average cash balance increased to $156.0 million for the three months ended June 30, 2019 compared to $140.6 million for the same period in 2018. The average interest rate earned on our invested cash balances was 2.4% and 0.7% during the three months ended June 30, 2019 and 2018, respectively. The increase in average cash balance was primarily due to cash inflows associated with draws under our initial $300 million first-lien term loans and the $50 million expansion of such term loans since June 30, 2018. These inflows were partially offset by the repurchases of our 2019 convertible senior notes for cash during the first quarter of 2019.
Income Tax Benefit. Our effective tax benefit rate was 27.2% and 20.4% for the three months ended June 30, 2019 and 2018, respectively. Our income tax benefit rate for the second quarter of 2019 was higher than the benefit rate from the second quarter of 2018 due to a reduction of net operating loss carryforward valuation allowances due to state tax law changes enacted during the second quarter of 2019. Our income tax benefit primarily consisted of deferred taxes. Our income tax rate differs from the federal statutory rate primarily due to expected state tax liabilities and items not deductible for federal income tax purposes.
Net Loss. Net loss increased by $6.9 million for a reported net loss of $31.9 million for the three months ended June 30, 2019 compared to a net loss of $25.1 million for the same period during 2018. This unfavorable variance in net loss was primarily driven by higher operating loss and interest expense partially offset by a higher tax benefit rate in the three months ended June 30, 2019.

Summarized financial information for the six months ended June 30, 2019 and 2018, respectively, is shown below in the following table (in thousands, except percentage changes):
 Six Months Ended 
 June 30,
 Increase (Decrease) 
 2019 2018 
$
Change
 
%
Change
 
Revenues:        
    Vessel revenues        
Domestic$53,659
 $68,760
 $(15,101) (22.0)%
Foreign38,850
 13,855
 24,995
 >100.0
%
 92,509
 82,615
 9,894
 12.0
%
    Non-vessel revenues18,372
 17,403
 969
 5.6
%
 110,881
 100,018
 10,863
 10.9
%
Operating expenses80,611
 70,827
 9,784
 13.8
%
Depreciation and amortization56,768
 53,526
 3,242
 6.1
%
General and administrative expenses25,016
 25,121
 (105) (0.4)%
 162,395
 149,474
 12,921
 8.6
%
Gain on sale of assets55
 30
 25
 83.3
%
Operating loss(51,459) (49,426) (2,033) 4.1
%
Loss on early extinguishment of debt, net(71) 
 (71) 100.0
%
Interest expense39,721
 30,346
 9,375
 30.9
%
Interest income2,035
 1,163
 872
 75.0
%
Income tax benefit(20,736) (14,929) (5,807) 38.9
%
Net loss$(68,563) $(63,743) $(4,820) 7.6
%
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018
Revenues. Revenues for the six months ended June 30, 2019 increased by $10.9 million, or 10.9%, to $110.9 million compared to the same period in 2018. Our weighted-average active operating fleet for the six months ended June 30, 2019 and 2018 was 35.9 and 28.0 vessels, respectively.
Vessel revenues increased $9.9 million, or 12.0%, to $92.5 million for the six months ended June 30, 2019 compared to $82.6 million for the same period in 2018. The increase in vessel revenues primarily resulted from improvedsoft market conditions for our OSVs and the addition of four OSVs to our operating fleet during the second quarter of 2018 partially offset by softimproved market conditions for our MPSVs. Revenues from our MPSV fleet decreased $8.9increased $2.4 million, or 28.5%23.5%, for the sixthree months ended June 30, 2019March 31, 2020 compared to the prior-year period. For the six months ended June 30, 2019, we had an average of 38.1 vessels stacked compared to an average of 43.0 vessels stacked in the prior-year period. Average new generation OSV dayrates were $18,178$18,203 for the first sixthree months of 20192020 compared to $18,895$18,156 for the same period in 2018, a decrease of $717, or 3.8%.2019. Our new generation OSV utilization was 32.4%28.0% for the first sixthree months of 20192020 compared to 23.9%32.5% for the same period in 2018.2019. Our new generation OSVs incurred 259158 days of aggregate downtime for regulatory drydockings and were stacked for an aggregate of 6,5183,111 days during the first sixthree months of 2019.2020. Excluding stacked vessel days, our new generation OSV effective utilization was 71.3%58.0% and 73.9%72.1% during the sixthree months ended June 30,March 31, 2020 and 2019, and 2018, respectively. Domestic vessel revenues decreased $15.1increased $1.3 million from the year-ago period primarily due to lower revenue earned by our MPSVsfrom one MPSV operating domestically during the sixthree months ended June 30, 2019.March 31, 2020 compared to such vessel being stacked in the prior-year period. Foreign vessel revenues increased $25.0decreased $3.4 million. The increasedecrease in foreign revenuerevenues is attributable to an average of 6.8 additional3.8 fewer vessels working in foreign locations during the current yearcurrent-year period. Foreign vessel revenues for the first sixthree months of 20192020 comprised 42.0%34.2% of our total vessel revenues compared to 16.8%40.1% for the year-ago period.

Non-vessel revenues increased $1.0$0.9 million, or 5.6%9.9%, from the prior-year period. This increase is primarily attributable to higher revenues earned from vessel management services during the sixthree months ended June 30, 2019March 31, 2020 compared to the year-ago period.
Operating Expenses. Operating expenses were $80.6$41.3 million, an increase of $9.8$0.9 million, or 13.8%2.3%, for the sixthree months ended June 30, 2019March 31, 2020 compared to $70.8$40.4 million for the same period in 20182019. Operating expenses were higher due to a higheran increased number of active vessels in our fleet during the sixthree months ended June 30, 2019.March 31, 2020.
Depreciation and Amortization. Depreciation and amortization expense of $56.8$29.1 million was $3.2$0.7 million, or 6.1%2.6%, higher for the sixthree months ended June 30, 2019March 31, 2020 compared to the same period in 2018. Depreciation was in-line with the prior-year period.2019. Amortization expense increased $3.1$1.2 million, which was driven higher mainly by costs associated with the initial special surveys for vessels that were placed in service under the Company's fifth OSV newbuild program, costs associated with the drydocking of two vessels that were acquired in the second quarter of 2018 and the amortization of an intangible asset that was included with the acquisition of four OSVs in the second quarter of 2018.program.
General and Administrative Expense. G&A expense of $25.0$31.2 million was $0.1$19.2 million lowerhigher during the sixthree months ended June 30, 2019March 31, 2020 compared to the same period in 20182019. The increase in G&A expense was primarily attributable to professional fees related to our on-going balance sheet restructuring, higher short-term incentive compensation expense and an increase in bad debt reserves.
Operating Loss. Operating loss increased by $2.0$22.1 million to an operating loss of $51.5$48.8 million during the sixthree months ended June 30, 2019March 31, 2020 compared to the same period in 20182019 for the reasons discussed above. Operating loss as a percentage of revenues was 46.4%92.4% for the sixthree months ended June 30, 2019March 31, 2020 compared to 49.4% for the same period in 20182019.
Loss on Early Extinguishment of Debt, Net. During the sixthree months ended June 30,March 31, 2020, we repaid $50.0 million of the $100.0 million outstanding under our senior credit facility. As a result, we recorded a $4.2 million loss on extinguishment of debt ($3.3 million or $0.09 per diluted share after-tax) due to the write-off of deferred issuance costs and a redemption premium. During the three months ended March 31, 2019, we exchanged $142.6 million in face value of 2020 senior notes for $121.2 million of second-lien term loans and we exchanged $21.0 million in face value of our 2019 convertible senior notes for $19.9 million of first-lien term loans. In accordance with applicable accounting guidance, these debt-for-debt exchanges were accounted for as debt modifications, requiring the Company tothat we defer the gains on such exchanges and record a loss on early extinguishment of debt of $3.7 million related to deal costs for the exchanges. During the six months ended June 30, 2019, we arranged for the repurchase of $52.9 million of our outstanding 2019 convertible senior notes for an aggregate total of $47.6 million of cash. We recorded a net gain on early extinguishment of debt of $3.6 million ($2.9 million or $0.08 per diluted share after-tax) related to these repurchases.
Interest Expense. Interest expense of $39.7$20.8 million was $9.4$1.0 million higher than the same period in 20182019 due to additionalincremental interest expense associated with the issuance of additional first-lien and the second-lien term loans sinceduring the first quarter of 2019 and interest expense associated with the senior credit facility that was funded during the second quarter of 2018.2019.
Interest Income. Interest income was $2.0$0.6 million during the sixthree months ended June 30, 2019,March 31, 2020, which was $0.9$0.5 million higherlower than the same period in 2018.2019. Our average cash balance increaseddecreased to $180.6$150.5 million for the sixthree months ended June 30, 2019March 31, 2020 compared to $167.3$199.9 million for the same period in 2018.2019. The average interest rate earned on our invested cash balances was 2.3%1.7% and 1.4%2.3% during the sixthree months ended June 30,March 31, 2020 and 2019, and 2018, respectively. The increasedecrease in average cash balance was primarily due to cash inflowsoutflows associated with drawsthe repayment of $50.0 million under our initial $300 million first-lien term loans and the $50 million expansion of such term loans since June 30, 2018. These inflows were partially offset by the repurchases of our 2019 convertible senior notes for cash during the first quarter of 2019.credit facility.
Income Tax Benefit. Our effective tax benefit rate was 23.2%20.5% and 19.0%19.4% for the sixthree months ended June 30, 2019March 31, 2020 and 20182019, respectively. Our income tax benefit for the six months ended June 30, 2019 was higher than the benefit rate from the six months ended June 30, 2018 due to a reduction of net operating loss carryforward valuation allowances due to state tax law changes enacted during the second quarter of 2019. Our income tax benefit primarily consisted of deferred taxes. Ourtaxes and our income tax rate differs from the federal statutory rate primarily due to the establishment of valuation allowances for state net operating losses and foreign and other tax credit carryforwards, but also due to expected state tax liabilities and items not deductible for federal income tax purposes.
Net Loss. Net loss increased by $4.8$21.6 million for a reported net loss of $68.6$58.2 million for the sixthree months ended June 30, 2019March 31, 2020 compared to a net loss of $63.7$36.6 million for the same period during 2018.2019. This unfavorable variance in net loss was primarily driven by increased operatinggeneral and administrative expenses for our vessels andduring the three months ended March 31, 2020.

interest expense, partially offset by increased revenue earned by such OSVs during the six months ended June 30, 2019.
Liquidity and Capital Resources

Despite volatility in commodity 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 indirectly impacted by low oil and natural gas prices, which together with oil and natural gas being produced in greater volumes onshore, has unfavorably impacted the extent of offshore exploration and development activities, resulting in lower than normal cash flow from operations. The COVID-19 pandemic is expected to continue to depress demand and the timing of a global economic recovery is unclear. In addition, oil prices have been negatively impacted by the recent oil price war initiated by Russia and Saudi Arabia.
As of June 30, 2019,March 31, 2020, we had total cash and cash equivalents $142.7of $59.0 million and restricted cash of $100.2$14.5 million. On July 30, 2019, we met the post-closing conditions precedent required by the Senior Credit Facility resulting in $44.0 million of restricted cash related to the eligible receivables-backed tranche of the Senior Credit Facility being transferred by the Agent to our unrestricted cash account on July 31, 2019. On July 31, 2019, our restricted cash balance under the Senior Credit Facility was reduced to $56.0 million. Pro forma for this post-closing rebalancing, our total unrestricted cash balance as of June 30, 2019 would have been about $186.7 million. We are currently in compliance with all applicable covenants under our Senior Credit Facility, our term loan agreements and the indentures governing our senior notes.
We have $350 million of first-lien term loans that mature in June 2023 and have $121 million in second-lien term loans that mature in February 2025, which are all guaranteed by our significant domestic subsidiaries other than Hornbeck Offshore Services, LLC, which is the Co-Borrower under the term loan agreements, and certain of our foreign subsidiaries. The 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 new $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 8 of the Notes to Consolidated Financial Statements for further discussion of 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 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 repaymentservice and may require capital to fund potential future vessel construction, retrofit or conversion projects, acquisitions stock repurchases or the retirement of debt. The nature
In early 2020, we experienced multiple events of our capital requirements anddefaults under the types of our financing sources are not expected to change significantly for the balance of 2019.
We regularly review all of our debt agreements, including the 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, 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 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 tranches of funded unsecured debt outstanding that mature in fiscal years 2019, 2020 senior notes and 2021 respectively. However, absent the combinationsenior notes, which included non-payment of a significant recovery of market conditions such that cash flow from operations were to increase materially from currently projected levels coupled with the refinancing and/or further management of our funded debt obligations, we do not currently expect to have sufficient liquidity to repay the full amount ofprincipal and interest on the 2020 senior notes, andnonpayment of interest on the 2021 senior notes as they mature in fiscal years 2020 and 2021, respectively. The issuance of first-lienrelated cross-defaults. Cross-defaults were also triggered under our existing senior credit agreement, first lien term loansloan agreement and second-liensecond lien term loans were significant measures that have enabled us to be in a position to repay our 2019 convertible notes in fullloan agreement. We, together with the administrative agents and significantly reduce the sizecertain of the maturity oflenders under our 2020existing senior notes from $367 million to $224 million. Moreover, refinancing in the current climate is not likely to be achievable on terms that are in-line with our pre-downturn cost of debt capital. We remain fully cognizant of

the challenges currently facing the offshore oilcredit agreement, first lien term loan agreement and gas industrysecond lien term loan agreement, and are proactively taking steps to protect the business enterprise.
The maturity of our 2020 senior notes falls within the twelve-month period following the issuance of these financial statements, which we are required to evaluate as part of our assessmentcertain holders of the Company's ability to continue as a going concern. We continue to believe that we have adequate liquidity to fund our operations through at least March 2020. However, absent the combination of a significant recovery of market conditions such that cash flow from operations were to increase materially from currently projected levels, coupled with the refinancing and/or further management of our funded debt obligations, we do not currently expect to have sufficient liquidity to repay the full amount of theCompany’s 2020 senior notes and the 2021 senior notes as they mature inentered into separate forbearance agreements, which were subsequently extended to May 19, 2020, pursuant to which such lenders and noteholders agreed to forbear from exercising certain of their rights and remedies with respect to certain defaults by us.
Despite our extensive efforts to negotiate and launch, on February 14, 2020, an out-of-court debt-for-debt exchange transaction to address our outstanding 2020 senior notes and 2021 respectively. We continue to implement our on-going plan to address these maturities as they become due, includingsenior notes and such events of default, after the refinancing of its 2020 senior notes. Our recent closingadvent of the $100 million Senior Credit Facility isCOVID-19 pandemic and the latest stepoil price war in March 2020, it became evident that iterative process. Basedan in-court process would be necessary to maximize value for us and our post-emergence stakeholders while positioning us for long-term success. As a result of the commencement of the Chapter 11 Cases on continuing discussions with existing and potential lenders,May 19, 2020, we are optimistic that we will be ablehave been operating as a debtor-in-possession pursuant to successfully implement this plan. However, we recognize that our plan depends on the actions of these third parties, including reaching an agreement with existing senior note holders and/or obtaining new sources of liquidity, and, therefore, we are unable at this time to conclude that such plan is reasonablyauthority granted under the Bankruptcy Code. On June 19, 2020, after a confirmation hearing, the Bankruptcy Court entered a confirmation order approving the Plan. As a debtor-in-possession, certain of being achieved.
We may,our activities are subject to market conditionsreview and approval by the Bankruptcy Court. For additional information, see Note 2 to consolidated financial statements.
In connection with the filing of the Plan, on May 22, 2020, we entered into the DIP Credit Agreement, pursuant to which, certain lenders thereunder agreed to provide us with loans in an aggregate principal amount not to exceed $75 million that, among other things, was used to repay in full the $50 million in loans outstanding under our other strategic options, from timesenior credit agreement, and to time amend, extinguish or repurchase part orfinance our ongoing general corporate needs during the course of the Chapter 11 Cases.
As of June 30, 2020, we had total cash and cash equivalents of $89.6 million and restricted cash of $0.2 million.
The maturity date of the DIP Credit Agreement is six months following the effective date of the DIP Credit Agreement. The DIP Credit Agreement contains customary events of default, including events related to the Chapter 11 Cases, the occurrence of which could result in the acceleration of our obligation to repay the

outstanding indebtedness under the DIP Credit Agreement. Our obligations under the DIP Credit Agreement are secured by a first priority security interest in, and lien on, substantially all of our outstanding debt securitiespresent and after-acquired property (whether tangible, intangible, real, personal or exchange them for other debt or equity securities or loans. While wemixed) and has been guaranteed by our material subsidiaries.
We have an authorized share repurchase program, we currently intend, subject to market conditions, to prioritize our cash usage appropriatereceived fully committed subscriptions pursuant 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 GoM, declines in expenditures for offshore exploration, development and production activity, any extended reduction in domestic consumption of refined petroleum products and other reasons discussedequity Rights Offering contemplated under the "Forward Looking Statements" on page ii and "Item 1A—Risk Factors"Plan with respect to shares of our Annual Reportnew common stock, including under the Backstop Commitment Agreement. It is contemplated that the Rights Offering of $100 million will be closed 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 stateeffective date of the global capitalPlan. The Plan also provides for us to enter into certain Exit Financings upon emergence from the Chapter 11 Cases consisting of a first-lien senior secured term loan credit facility and a second-lien senior secured term loan credit markets. See further discussionfacility, each in the Contractual Obligations section below.an aggregate principal amount to be determined.
Cash Flows
Operating Activities. Historically, we have reliedWe rely primarily on cash flows from operations to provide working capital for current and future operations. Cash flowsNet cash used in operating activities were $48.7was $45.7 million for the sixthree months ended June 30, 2019March 31, 2020 compared to net cash flows used in operating activities of $27.7$26.1 million for the same period in 2018.2019. Operating cash flows for the first sixthree months of 2019 were2020 continue to be unfavorably affected by weak market conditions for our vessels operating worldwide and higher cash outflows associated with the regulatory recertifications for our active vessels.worldwide.
Investing Activities. Net cash used in investing activities was $3.6$1.6 million for the sixthree months ended June 30, 2019March 31, 2020 compared to $49.1$0.6 million for the same period in 2018.2019. Cash used during the first sixthree months of 2020 and 2019 consisted primarily of construction costs paid for our fifth OSV newbuild program, as well as capital improvements tofor active vessels operating in our operating fleet. Cash used during the first six months of 2018 consisted primarily of the purchase of four high-spec Jones Act-qualified OSVs and related equipment from Aries Marine Corporation.
Financing Activities. Net cash provided byused in financing activities was $70.2$51.6 million for the sixthree months ended June 30, 2019March 31, 2020 compared to $0.3$23.7 million netfor the same period in 2019. Net cash used in financing activities for the same period in 2018.three months ended March 31, 2020 resulted from the partial repayment of our senior credit facility. Net cash provided byused in financing activities for the sixthree months ended June 30,March 31, 2019 resulted from net proceeds from

the Senior Credit Facility and the incremental first-lien term loans partially offset by the repurchase of a portion of theour 2019 convertible senior notes.notes partially offset by net proceeds from the first-lien term loans.
Contractual Obligations
Debt
As of June 30, 2019, the CompanyMarch 31, 2020, we 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 $712 (1)$223,601
 6.08% $6,589
 April 1 and October 1
5.000% senior notes due 2021, net of deferred financing costs of $1,688 (1)448,312
 5.21% 11,250
 March 1 and September 1
1.500% convertible senior notes due 2019, net of original issue discount of $177 and deferred financing costs of $6025,529
 6.23% 193
 Final payment on September 1, 2019
First-lien term loans due 2023, plus deferred gain of $14,779, net of original issue discount of $3,536 and deferred financing costs of $3,728 (2)357,515
 9.41% 3,019
 Variable
Second-lien term loans due 2025, including deferred gain of $20,229141,464
 9.50% 2,879
 January 31, April 30, July 31, and October 31
Senior Credit Facility, net of deferred financing costs of $6,250 (3)93,750
 7.40% 637
 Monthly
 $1,290,171
 

    
 
Total Debt (4)
 Effective Interest Rate Cash Interest Payment Payment Dates
5.875% senior notes due 2020, net of deferred financing costs of $37 (1)$224,276
 6.08% $6,589
 April 1 and October 1
5.000% senior notes due 2021, net of deferred financing costs of $961 (1)449,039
 5.21% 11,250
 March 1 and September 1
First-lien term loans due 2023, plus deferred gain of $12,158, net of original issue discount of $2,859 and deferred financing costs of $3,019 (2)356,280
 8.88% 2,679
 Variable Monthly
Second-lien term loans due 2025, including deferred gain of $17,893139,128
 9.50% 2,879
 January 31, April 30, July 31, and October 31
Senior credit facility, net of deferred financing costs of $2,586 (3)47,414
 8.17% 283
 Variable Monthly
 $1,216,137
 

    
 
(1)The senior notes do not require any payments of principal prior to their stated maturity dates, but pursuant to the indentures under which the 2020 and 2021 senior notes were issued, we would be required to make offers to purchase such senior notes upon the occurrence of specified events, such as certain asset sales or a change in control.
(2)The interest rate on the first-lien term loan is variable based on a base rate at the Company's election, plus an applicable margin.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 June 30, 2019. Please see Note 8 for further discussion of the variable interest rateMarch 31, 2020 plus an applicable to the first-lien term loans.margin, which is currently 7.00%.
(3)The interest rate on the Senior Credit Facilitysenior credit facility is variable based on 30-day LIBOR interest rate plus a fixed margin of 5.00%. margin. The amount reflected in this table is the monthly amount payable based on the 30-day LIBOR interest rate that was in effect on June 30, 2019. Please see Note 8 for further discussionMarch 31, 2020.
(4)See Item 2 - General regarding the proposed impact of the variable interest rate applicable toChapter 11 Cases on the Senior Credit Facility.Company’s long-term debt including current maturities.

The credit agreements governing the Senior Credit Facility, theour senior credit facility, 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 sixthree months ended June 30, 2019,March 31, 2020, we were in compliance with all applicable financial covenants. We continuously reviewcovenants other than our debt covenantsMarch 2, 2020 nonpayment of interest on the 2021 senior notes, certain reporting obligations and report to the agents for the lenders of our 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.related cross-defaults.
Growth Capital Expenditures and Related Commitments
During the first quarter of 2018, the Companywe notified the shipyard that was constructing the remaining two vessels in the Company'sour fifth OSV newbuild program that it waswe were terminating the construction contracts for such vessels. The Company intends to work with the performance bond surety to select and contract with a mutually acceptable shipyard that can finish construction and deliver such vessels. On October 2, 2018, the original shipyard filed suit against the CompanySee additional discussion in the 22nd Judicial District CourtNote 9 of our consolidated financial statements included herein for the Parish of St. Tammany in the State of Louisiana, or the Gulf Island Litigation. The Company has responded to the suit and has alleged counter-claims. The Company intends to vigorously defend the shipyard’s claims and considers them to be without merit. The surety authorized the Company to select a completion yard and, subject to a reservation of rights, offered to fund the cost to complete the vessels in excess of the contract price of up to the full amount of the performance bond. However, the surety's did not comply with the terms of the performance bond. Consequently, the Company considers the surety to be in default of their performance bonds for the

foregoing and other reasons. The Company has initiated legal proceedings against the surety as a third-party claim in the Gulf Island Litigation.
The cost of this nearly completed 24-vessel newbuild program, before construction period interest, is expected to be approximately $1,335.0 million, of which $20.5 million and $38.2 million are currently expected to be incurred in the remainder of 2019 and fiscal 2020, respectively.further discussion. As of the date of termination,the contract terminations, 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; and then later extended to be the second and third quarters of 2021. Due to the continued uncertainty of the timing and location of future construction activities, we have updated our forward guidance for the delivery dates related to these vessels are now projected to be delivered in the second and third quarters of 2020,2022, respectively. However,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 $22.9 million and $34.6 million are currently expected to be incurred in fiscal 2021 and fiscal 2022, respectively. We have not revised our estimate of the cost to complete the vessels to reflect the disputed claims asserted by the shipyard. In addition, we have 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 June 30, 2019, the Company hadMarch 31, 2020, we have incurred $1,276.3construction costs of approximately $1,277.5 million, or 95.6%95.7%, of total expected project costs. During the six months ended June 30, 2019 the Company incurred $2.2 million related to the construction of 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 six months ended June 30,March 31, 2020 and 2019, and 2018, respectively and a forecast for the fiscal year ending December 31, 2019 (in millions):
Three Months Ended  
 June 30,
 Six Months Ended 
 June 30,
 
Year Ended
December 31,
Three Months Ended 
 March 31,
2019 2018 2019 2018 20192020 2019
Actual Actual Actual Actual ForecastActual Actual
Maintenance and Other Capital Expenditures:            
Maintenance Capital Expenditures            
Deferred drydocking charges (1)$6.3
 $1.4
 $15.6
 $3.4
 $30.6
$6.9
 $9.3
Other vessel capital improvements (2)(1)0.7
 1.5
 1.0
 4.1
 4.5
0.4
 0.3
7.0
 2.9
 16.6
 7.5
 35.1
7.3
 9.6
Other Capital Expenditures            
Commercial-related capital expenditures (3)
 4.1
 0.2
 5.4
 0.2
Non-vessel related capital expenditures (4)0.2
 0.1
 0.3
 0.1
 0.6
Commercial-related vessel improvements (2)1.1
 0.2
Miscellaneous non-vessel additions (3)
 0.1
0.2
 4.2
 0.5
 5.5
 0.8
1.1
 0.3
Total$7.2
 $7.1
 $17.1
 $13.0
 $35.9
$8.4
 $9.9
 

(1)Deferred drydocking charges for 2019 include the projected recertification costs for 15 OSVs and 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)(2)Commercial-related capital expenditures, including vessel improvements include items, such as the addition of cranes, ROVs, helidecks, living quarters, and other specialized vessel equipment, or the modification of vessel capacities or capabilities, such as DP upgrades and mid-body extensions, which costs are typically included in and offset, in whole or in part, by higher dayrates charged to customers; and commercial-related intangibles.customers.
(4)(3)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,” “would," 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 our ability to obtain the Bankruptcy Court’s approval with respect to post-confirmation motions or other requests made to the Bankruptcy Court in the Chapter 11 Cases; any delays in consummation of the Chapter 11 Cases; risks that our assumptions and analyses in the Plan are incorrect; our ability to comply with the covenants under our DIP Credit Agreement; the effects of the Chapter 11 Cases on our business and the interests of various constituents; the actions and decisions of creditors, regulators and other third parties that have an interest in the Chapter 11 Cases; restrictions imposed on us by the Bankruptcy Court; 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;services; 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 weakweakness 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 impact on the foregoing as a result of the COVID-19 pandemic and the recent oil price war initiated by Russia and Saudi Arabia; 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'sany cancellation or non-renewal by the government of the management, operations and maintenance contracts for non-owned vessels; an oil spill or other significant event in the United States or another offshore drilling region that could have a broad impact on deepwater and other offshore energy exploration and production activities, such as the suspension of activities or significant regulatory responses; the imposition of laws or regulations that result in reduced exploration and production activities or that increase the Company’s operating costs or operating requirements; environmental litigation that impacts customer plans or projects; disputes with customers; disputes with vendors; bureaucratic, administrative operating or 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 Mexico, Brazil or other foreign locations; disruption in the timing and/or extent of Mexican offshore activities or changes in law or governmental policy in Mexico that restricts or slows the pace of further development of its offshore oilfields; changes in law or governmental policy or judicial action in Mexico affecting the Company's Mexican registration of vessels there;vessels; administrative or other 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 by others 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-sourcedforeign sourced earnings and profits; the possibleextent of the pending loss or material limitation of the Company's tax net operating loss carryforwards and other tax attributes due to a change in control, as defined in Section 382 of the Internal Revenue Code; the inabilityour ability to successfully conclude negotiations of the Companynew first-lien and second-lien exit credit facilities to refinance or otherwise retire certain funded debt obligations that come duebe entered into in 2020 and 2021;connection with consummation of the Plan; 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 permissibilityimpact of “fresh-start” accounting, which will be applicable to the Company upon consummation of the exchange of 2020 senior notes for second-lien term loans due February 2025.Plan. In addition, the Company’s future results may be impacted by adverse economic conditions, such as inflation, deflation, 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 if and when required. 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.

The Company makes references to certain industry-related terms in this Quarterly Report on Form 10-Q. A glossary and definitions of such terms can be found in "Part II- Item 5-Other Information" on page 35.
Item 3—Quantitative and Qualitative Disclosures About Market Risk
There have been no material changesAs a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to the market risk disclosures set forth in Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2018.provide information under this Item.

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 June 30, 2019March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1—Legal Proceedings
None.There is no information required to be disclosed by this item.
Item 1A—Risk Factors
There wereis no changesinformation required to the risk factors previouslybe disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.by this item.
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds
None.There is no information required to be disclosed by this item.
Item 3—Defaults Upon Senior Securities
None.There is no information required to be disclosed by this item.
Item 4—Mine Safety Disclosures
None.There is no information required to be disclosed by this item.

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;
“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 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;
“Greater GoM Operating Region” means the U.S. Gulf of 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), 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;
"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
2.1
2.2
   
3.1
   
3.2
   
3.3
   
3.4
3.5
   
4.1
   
4.2
   
4.3
   
4.4
   
4.5
   
4.6
   

Exhibit
Number
Description of Exhibit
4.7

Exhibit
Number
Description of Exhibit
   
4.8
   
4.9
   
4.10
   
4.11
   
4.12
   
4.13
   
4.14
   
4.15
   
4.16
   
4.17
   
4.18
   

Exhibit
Number
Description of Exhibit
4.19

Exhibit
Number
Description of Exhibit
   
4.20
   
4.21
   
4.22
   
4.23
   
4.24
   
4.25
   
4.26
   
*4.27

   
*4.28

   
*4.29
10.1

Exhibit
Number
Description of Exhibit
10.2†
   
10.3†
10.4†
10.5†
10.6†
10.7†
10.8†
10.9†
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†

Exhibit
Number
Description of Exhibit
10.16†
10.17†
10.18†
10.19†
10.20†
10.21†
10.22
10.23†
10.24†
10.25†
10.26†
10.27†
10.28†
10.29
10.30

Exhibit
Number
Description of Exhibit
10.31
10.32†
10.33†
10.34†
10.35†
10.36

   

Exhibit
Number
Description of Exhibit
10.210.37
   
10.310.38
10.4†
10.5†
10.6†
10.7†
10.8†
10.9†
10.10†
10.11†
10.12†
10.13†
10.14†

Exhibit
Number
Description of Exhibit
10.15†
10.16†
10.17†
10.18†
10.19†
10.20†
10.21†
10.22†
10.23
10.24†
10.25†
10.26†
10.27†
10.28†
10.29†

Exhibit
Number
Description of Exhibit
10.30
10.31
10.32
10.33†
10.34†
10.35†
10.36†
10.37

10.38

10.39
   
10.4010.39
   
10.4110.40
   

Exhibit
Number
Description of Exhibit
10.4210.41
   
10.43†10.42†
   

10.44
Exhibit
Number
Description of Exhibit
10.43
   
10.4510.44
   
10.4610.45
   
10.4710.46
   
10.4810.47

   
10.4910.48

   
10.5010.49
   

Exhibit
Number
Description of Exhibit
10.5110.50

   
10.5210.51

   

10.53
Exhibit
Number
Description of Exhibit
10.52

   
*10.54†10.53†
10.54
10.55
10.56
10.57
   
*31.1
   
*31.2
   
*32.1
   
*32.2
   
*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: August 9, 2019July 29, 2020 /s/    JAMES O. HARP, JR.        
  James O. Harp, Jr.
  Executive Vice President and Chief Financial Officer

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