UPDATE 2-Hercules posts Q3 loss, sees no near-term uptick

* Q3 adj. loss $0.38/shr vs est loss $0.35/shr * Q3 rev halves * Domestic offshore rev plunge 83 pct

* Shares down 7 pct (Adds analyst comments, conference call details)

By Thyagaraju Adinarayan

BANGALORE, Oct 28 (Reuters) - Drilling contractor Hercules Offshore Inc (HERO.O) reported wider-than-expected third-quarter loss, hurt by a plunge in utilization levels at its domestic offshore and inland segments, sending its shares down as much as 7 percent.

"While we are certainly not expecting a return to activity levels of 2007 or early 2008 over the short-term, we do feel confident that we have seen the bottom in terms of domestic levels," Chief Executive John Rynd said in a conference call with analysts.

The company said it was maintaining a measured outlook on international jackup markets and also said new build orders for delivery in 2011 and beyond will be cancelled or significantly delayed.

Barclays Capital analyst James West and Pritchard Capital analyst Brian Uhlmer said day rates had bottomed out in the third quarter, and they expect dayrates to be flat in the near-term with a rise in utilization levels.

However, analyst West does not expect the company to return to profitability in the near term.

Hercules also said it secured a two-well workout contract for its jack-up rig Hercules 156 in West Africa, which operations may commence as early as mid-November for about 30 to 40 days of work.

The company said capital expenditures and dry docking expenses for the fourth quarter will remain at the same low level as this quarter, about $15 million.

For the third quarter, loss from continuing operations was $47 million, or 48 cents a share, compared with a profit of $31.9 million, or 36 cents a share, a year-ago. Excluding items, the company posted a loss of 38 cents a share.

Revenue at Hercules -- also a provider of liftboat and inland barge services -- halved to $159.3 million, mainly hurt by a significant drop in revenue at its domestic offshore segment.

Analysts were expecting a loss of 35 cents a share, excluding one-time items, on revenue of $158.3 million, according to Thomson Reuters I/B/E/S.

For the latest quarter, domestic offshore segment revenue dropped 83 percent to $19 million, mainly hurt by lower utilization levels and average revenue per day.

Hercules said it has been cautious on the outlook for domestic drilling over the past year but said end of hurricane season could provide some demand in domestic drilling.

Hercules, which has an outstanding debt of about $862 million till the third-quarter, had said earlier this month it would raise $300 million by issuing senior notes to repay a portion of its debt. Shares of the Houston-based company were down more than 5 percent at $5.52 in Wednesday afternoon trade on Nasdaq. They touched a low of $5.42 earlier in the day. (Editing by Anil D'Silva)