UPDATE 3-Seahawk to seek bankruptcy protection, sell assets

Fri Feb 11, 2011 7:30pm EST

* Buyer Hercules to have world No. 4 fleet by rig numbers

* Slow permitting blamed for lack of work in U.S. Gulf

* Seahawk shares tumble 32 pct in after-hours trading (Adds Hercules fleet ranking, permit approvals, share moves)

SAN FRANCISCO, Feb 11 (Reuters) - Gulf of Mexico driller Seahawk Drilling Inc (HAWK.O) said it would file for bankruptcy protection and sell its 20 shallow-water rigs to bigger rival Hercules Offshore (HERO.O) for about $100 million.

Seahawk's shares fell 32 percent to $5.40 in after-hours trading on Nasdaq on Friday, while Hercules was up 4 cents at $3.66.

Seahawk, which had the Gulf of Mexico's second-largest fleet after Hercules, has been struggling with heavy losses due to the slow issuance of U.S. drilling permits following the massive BP Plc (BP.L) oil spill last April. [ID:nN07221472]

Seahawk's move on Friday comes hot on the heels of Ensco Plc's (ESV.N) $7.3 billion deal to buy former Seahawk parent Pride International Inc PDE.N to create the world's second-largest offshore oil and gas driller. [ID:nN07200008]

Hercules will issue 22.3 million shares and pay $25 million in cash for the 20 jackups and related assets. The sale will be implemented through a Chapter 11 bankruptcy filing in which Seahawk will seek expedited hearings to get court approval.

Seahawk said it would primarily use proceeds from the sale to pay off its debtor-in-possession loan, which it secured in connection with its bankruptcy filing to support the business.

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

Hercules, with 33 rigs of its own, will have the world's fourth-largest fleet by rig numbers, even if that will not be reflected in its market value because jackups command far lower rates than the deepwater rigs in which many rig operators are investing heavily.

Since June 8, 2010, 10 initial exploration plans have been submitted to the regulator, while one has been approved and seven are pending, according to U.S. Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) website.

Deepwater drillers also complain of slow permitting, though the head of the BOEM said on Friday there was not a big backlog of permits. [ID:nN11137839] (Reporting by Thyagaraju Adinarayan in Bangalore, with additional reporting by Braden Reddall; Editing by Don Sebastian and Richard Chang)

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