##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
  For the
    fiscal year ended December 31, 2010
 Commission file
    number: 0-51582
  Hercules Offshore,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other jurisdiction
    of
    incorporation or organization)

56-2542838(I.R.S. Employer
    Identification No.)9 Greenway Plaza, Suite 2200
    Houston, Texas(Address of principal
    executive offices)

77046(Zip
    Code)   Registrants telephone number, including area code:
 (713) 350-5100
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, $0.01 par value per share

NASDAQ Global Select MarketRights to Purchase Preferred Stock

NASDAQ Global Select Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


17Item 1B.


Unresolved Staff Comments


32Item 2.


Properties


32Item 3.


Legal Proceedings


32Item 4.


Reserved


33PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


33Item 6.


Selected Financial Data


35Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


36Forward-Looking Statements


66Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


68Item 8.


Financial Statements and Supplementary Data


69Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


113Item 9A.


Controls and Procedures


113Item 9B.


Other Information


113PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


114Item 11.


Executive Compensation


114Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


114Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


114Item 14.


Principal Accountant Fees and Services


114PART IVItem 15.


Exhibits and Financial Statement Schedules


114EX-10.14EX-10.27EX-10.28EX-10.29EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1   2




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##### Table of Contents



PART I  Item 1.
    Business  In this Annual Report on
    Form 10-K,
    we refer to Hercules Offshore, Inc. and its subsidiaries as
    we, the Company or Hercules
    Offshore, unless the context clearly indicates otherwise.
    Hercules Offshore, Inc. is a Delaware corporation formed in July
    2004, with its principal executive offices located at 9 Greenway
    Plaza, Suite 2200, Houston, Texas 77046. Hercules
    Offshores telephone number at such address is
    (713) 350-5100
    and our Internet address is www.herculesoffshore.com.
  Overview
  Hercules 190 Hercules 254
    Domestic Offshore
  International Offshore
  Inland
  Domestic Liftboats
  International Liftboats
  Delta Towing
  Hull 109 Hull 110 MENAdrill Hercules 1 2  Hull 109
 3




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##### Table of Contents



Hull 110
    Investment
  Recent
    Developments
  Asset
    Purchase Agreement
  , Recent Developments
  Credit
    Agreement Amendment
  Liquidity and Capital
    Resources
  Our
    Fleet
     4




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##### Table of Contents



Jackup
    Drilling Rigs
       5




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##### Table of Contents



well-to-well
    Maximum/Year

Minimum

RatedBuilt/

Water Depth

DrillingRig Name

Type

Upgraded(c)

Rating

Depth(a)

Location

Status(b)(Feet)

(Feet)Hercules 85

ILS

1982


85/9


20,000

U.S. GOM

Cold StackedHercules 101

MC

1980


100/20


20,000

U.S. GOM

Cold StackedHercules 120

MC

1958


120/22


18,000

U.S. GOM

ContractedHercules 150

ILC

1979


150/10


20,000

U.S. GOM

ContractedHercules 152

MC

1980


150/22


20,000

U.S. GOM

Cold StackedHercules 153

MC

1980/2007


150/22


25,000

U.S. GOM

Cold StackedHercules 156

ILC

1983


150/14


20,000

Bahrain

Cold StackedHercules 170

ILC

1981/2006


170/16


16,000

Bahrain

Warm StackedHercules 173

MC

1971


173/22


15,000

U.S. GOM

ContractedHercules 185

ILC

1982/2009


150/20


20,000

Angola

ContractedHercules 200

MC

1979


200/23


20,000

U.S. GOM

ContractedHercules 201

MC

1981


200/23


20,000

U.S. GOM

Ready StackedHercules 202

MC

1981


200/23


20,000

U.S. GOM

ContractedHercules 203

MC

1982


200/23


20,000

U.S. GOM

Cold StackedHercules 204

MC

1981


200/23


20,000

U.S. GOM

ShipyardHercules 205

MC

1979/2003


200/23


20,000

U.S. GOM

ContractedHercules 206

MC

1980/2003


200/23


20,000

U.S. GOM

Cold StackedHercules 207

MC

1981


200/23


20,000

U.S. GOM

Cold StackedHercules 208(d)

MC

1980/2008


200/22


20,000

Malaysia

ContractedHercules 211

MC

1980


200/23


18,000(e)

U.S. GOM

Cold StackedHercules 250

MS

1974


250/24


20,000

U.S. GOM

Cold StackedHercules 251

MS

1978


250/24


20,000

U.S. GOM

Ready StackedHercules 252

MS

1978


250/24


20,000

U.S. GOM

Cold StackedHercules 253

MS

1982


250/24


20,000

U.S. GOM

ContractedHercules 257

MS

1979


250/24


20,000

U.S. GOM

Cold StackedHercules 258

MS

1979/2008


250/24


20,000

India

ContractedHercules 260

ILC

1979/2008


250/12


20,000

India

ContractedHercules 261

ILC

1979/2008


250/12


20,000

Saudi Arabia

ContractedHercules 262

ILC

1982/2008


250/12


20,000

Saudi Arabia

ContractedHercules 350

ILC

1982


350/16


25,000

U.S. GOM

Contracted     (a)
    
    Rated drilling depth means drilling depth stated by the
    manufacturer of the rig. Depending on deck space and other
    factors, a rig may not have the actual capacity to drill at the
    rated drilling depth.(b)
    
    Rigs designated as Contracted are under contract
    while rigs described as Ready Stacked are not under
    contract but generally are ready for service. Rigs described as
    Warm Stacked may have a reduced number of crew, but
    only require a full crew to be ready for service. Rigs described
    as Cold Stacked are not actively marketed, normally
    require the hiring of an entire crew and require a maintenance
    review and refurbishment before they can function as a drilling
    rig.(c)
    
    Dates shown are the original date the rig was built and the date
    of the most recent upgrade and/or major refurbishment, if any.(d)
    
    This rig is currently unable to operate in the U.S. Gulf of
    Mexico due to regulatory restrictions.(e)
    
    Rated workover depth. Hercules 211is currently
    configured for workover activity, which includes maintenance and
    repair or modification of wells that have already been drilled
    and completed to enhance or resume the wells production. 6




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##### Table of Contents



Other
    Drilling Rigs
        Maximum/Year

Minimum

RatedBuilt/

Water Depth

DrillingRig Name

Type

Upgraded(c)

Rating

Depth(a)

Location

Status(b)(Feet)

(Feet)Hercules 75


Sub


1983


85/14



25,000


U.S. GOM

Cold StackedHercules 77


Sub


1982/2007


85/14



30,000


U.S. GOM

Cold StackedHercules 78


Sub


1985/2007


85/14



30,000


U.S. GOM

Cold StackedPlatform 3


Plat


1993


N/A



25,000


Mexico

Contracted     (a)
    
    Rated drilling depth means drilling depth stated by the
    manufacturer of the rig. Depending on deck space and other
    factors, a rig may not have the actual capacity to drill at the
    rated drilling depth.(b)
    
    Rigs described as Cold Stacked are not actively
    marketed, normally require the hiring of an entire crew and
    require a maintenance review and refurbishment before they can
    function as a drilling rig while rigs described as
    Contracted are under contract.(c)
    
    Dates shown are the original date the rig was built and the date
    of the most recent upgrade and/or major refurbishment, if any.  Barge
    Drilling Rigs
   7




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##### Table of Contents



YearBuilt/

Horsepower

Rated DrillingRig Name

Type

Upgraded(c)

Rating

Depth(a)

Location

Status(b)(Feet)1

Conv.

1980

2,000

20,000

U.S. GOM

Cold Stacked9

Posted

1981

2,000

25,000

U.S. GOM

Cold Stacked11

Conv.

1982

3,000

30,000

U.S. GOM

Cold Stacked15

Conv.

1981

2,000

25,000

U.S. GOM

Cold Stacked17

Posted

1981

3,000

30,000

U.S. GOM

Ready Stacked19

Conv.

1974

1,000

14,000

U.S. GOM

Cold Stacked27

Posted

1979/2008

3,000

30,000

U.S. GOM

Cold Stacked28

Conv.

1980

3,000

30,000

U.S. GOM

Cold Stacked29

Conv.

1981

3,000

30,000

U.S. GOM

Cold Stacked41

Posted

1981

3,000

30,000

U.S. GOM

Contracted46

Posted

1979

3,000

30,000

U.S. GOM

Cold Stacked48

Posted

1982

3,000

30,000

U.S. GOM

Cold Stacked49

Posted

1980

3,000

30,000

U.S. GOM

Contracted52

Posted

1981

2,000

25,000

U.S. GOM

Cold Stacked55

Posted

1981

3,000

30,000

U.S. GOM

Cold Stacked57

Posted

1975

2,000

25,000

U.S. GOM

Cold Stacked64

Posted

1979

3,000

30,000

U.S. GOM

Cold Stacked     (a)
    
    Rated drilling depth means drilling depth stated by the
    manufacturer of the rig. Depending on deck space and other
    factors, a rig may not have the actual capacity to drill at the
    rated drilling depth.(b)
    
    Rigs designated as Contracted are under contract.
    Rigs described as Ready Stacked are not under
    contract but generally are ready for service. Rigs described as
    Cold Stacked are not actively marketed, normally
    require the hiring of an entire crew and require a maintenance
    review and refurbishment before they can function as a drilling
    rig.(c)
    
    Dates shown are the original date the rig was built and the date
    of the most recent upgrade and/or major refurbishment, if any.  Liftboats
    
    production platform construction, inspection, maintenance and
    removal;
    well intervention and workover;
    well plug and abandonment; and
    pipeline installation and maintenance.   8




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##### Table of Contents



YearBuilt/

Leg

Deck


Maximum



GrossLiftboat Name(1)

Upgraded(5)

Length

Area


Deck Load

Location

Tonnage(Feet)

(Square feet)


(Pounds)Whale Shark(4)

2005/2009

260


8,170


729,000

U.A.E.


1,142Tiger Shark(3)

2001

230


5,300


1,000,000

Nigeria


469Kingfish(3)

1996

229


5,000


500,000

U.S. GOM


188Man-O-War(3)

1996

229


5,000


500,000

U.S. GOM


188Wahoo(3)

1981

215


4,525


500,000

U.S. GOM


491Blue Shark(4)

1981

215


3,800


400,000

Nigeria


1,182Amberjack(4)

1981

205


3,800


500,000

U.A.E.


417Bullshark(3)

1998

200


7,000


1,000,000

U.S. GOM


859Creole Fish(3)

2001

200


5,000


798,000

Nigeria


192Cutlassfish(3)

2006

200


5,000


798,000

Nigeria


183Black Jack(4)

1997/2008

200


4,000


480,000

En route to Gabon


777Swordfish(3)

2000

190


4,000


700,000

U.S. GOM


189Mako(3)

2003

175


5,074


654,000

Nigeria


168Leatherjack(3)

1998

175


3,215


575,850

U.S. GOM


168Oilfish(4)

1996

170


3,200


590,000

Nigeria


495Manta Ray(3)

1981

150


2,400


200,000

U.S. GOM


194Seabass(3)

1983

150


2,600


200,000

U.S. GOM


186F.J. Leleux(2)

1981

150


2,600


200,000

Nigeria


407Black Marlin(4)

1984

150


2,600


200,000

Nigeria


407Hammerhead(3)

1980

145


1,648


150,000

U.S. GOM


178Pilotfish(4)

1990

145


2,400


175,000

Nigeria


292Rudderfish(4)

1991

145


3,000


100,000

Nigeria


309Blue Runner(3)

1980

140


3,400


300,000

U.S. GOM


174Starfish(3)

1978

140


2,266


150,000

U.S. GOM


99Rainbow Runner(3)

1981

140


3,400


300,000

U.S. GOM


174Pompano(3)

1981

130


1,864


100,000

U.S. GOM


196Sandshark(3)

1982

130


1,940


150,000

U.S. GOM


196Stingray(3)

1979

130


2,266


150,000

U.S. GOM


99Albacore(3)

1985

130


1,764


150,000

U.S. GOM


171Moray(3)

1980

130


1,824


130,000

U.S. GOM


178Skipfish(3)

1985

130


1,116


110,000

U.S. GOM


91Sailfish(3)

1982

130


1,764


137,500

U.S. GOM


179Mahi Mahi(3)

1980

130


1,710


142,000

U.S. GOM


99 9




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##### Table of Contents



YearBuilt/

Leg

Deck


Maximum



GrossLiftboat Name(1)

Upgraded(5)

Length

Area


Deck Load

Location

Tonnage(Feet)

(Square feet)


(Pounds)Triggerfish(3)

2001

130


2,400


150,000

U.S. GOM


195Scamp(4)

1984

130


2,400


150,000

Nigeria


195Rockfish(3)

1981

125


1,728


150,000

U.S. GOM


192Gar(3)

1978

120


2,100


150,000

U.S. GOM


98Grouper(3)

1979

120


2,100


150,000

U.S. GOM


97Sea Robin(3)

1984

120


1,507


110,000

U.S. GOM


98Tilapia(3)

1976

120


1,280


110,000

U.S. GOM


97Charlie Cobb(2)

1980

120


2,000


100,000

Nigeria


229Durwood Speed(2)

1979

120


2,000


100,000

Nigeria


210James Choat(2)

1980

120


2,000


100,000

Nigeria


210Solefish(4)

1978

120


2,000


100,000

Nigeria


229Tigerfish(4)

1980

120


2,000


100,000

Nigeria


210Zoal Albrecht(2)

1982

120


2,000


100,000

Nigeria


213Barracuda(3)

1979

105


1,648


110,000

U.S. GOM


93Carp(3)

1978

105


1,648


110,000

U.S. GOM


98Cobia(3)

1978

105


1,648


110,000

U.S. GOM


94Dolphin(3)

1980

105


1,648


110,000

U.S. GOM


97Herring(3)

1979

105


1,648


110,000

U.S. GOM


97Marlin(3)

1979

105


1,648


110,000

U.S. GOM


97Corina(3)

1974

105


953


100,000

U.S. GOM


98Pike(3)

1980

105


1,360


130,000

U.S. GOM


92Remora(3)

1976

105


1,179


100,000

U.S. GOM


94Wolffish(3)

1977

105


1,044


100,000

U.S. GOM


99Seabream(3)

1980

105


1,140


100,000

U.S. GOM


92Sea Trout(3)

1978

105


1,500


100,000

U.S. GOM


97Tarpon(3)

1979

105


1,648


110,000

U.S. GOM


97Palometa(3)

1972

105


780


100,000

U.S. GOM


99Jackfish(3)

1978

105


1,648


110,000

U.S. GOM


99Bonefish(4)

1978

105


1,344


90,000

Nigeria


97Croaker(4)

1976

105


1,344


72,000

Nigeria


82Gemfish(4)

1978

105


2,000


100,000

Nigeria


223Tapertail(4)

1979

105


1,392


110,000

Nigeria


100     (1)
    
    The Palometa, Wolffish, Skipfishand Croakerare
    currently cold-stacked. All other liftboats are either available
    or operating.(2)
    
    We operate these vessels; however, they are owned by a third
    party.(3)
    
    Pursuant to U.S. Coast Guard documentation, international
    regulatory bodies or
    non-U.S.
    Flag states may calculate gross tonnage differently than the
    U.S. Coast Guard.(4)
    
    Pursuant to the registry documents issued by the Republic of
    Panama.(5)
    
    Dates shown are the original date the vessel was built and the
    date of the most recent upgrade and/or major refurbishment, if
    any. 10




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##### Table of Contents



Competition
    Customers
    Year EndedDecember 31,2010


2009


2008Oil and Natural Gas Corporation Limited(a)


20
%


16
%


8
%Chevron Corporation(b)


17



14



12Saudi Aramco(a)


14



13



PEMEX Exploración y Producción (PEMEX)(a)


3



10



8     (a)
    
    Revenue included in our International Offshore segment.(b)
    
    Revenue included in our Domestic Offshore, Domestic Liftboats
    and International Liftboats segments.  Contracts
     11




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##### Table of Contents



Contract
    Backlog
    For the Years Ending December 31,Total


2011


2012


2013


2014


Thereafter(In thousands)Domestic Offshore

$
29,081


$
29,081


$



$



$



$
International Offshore


167,554



121,646



21,737



21,677



2,494



Inland


914



914















International Liftboats


14,566



14,566















Total

$
212,115


$
166,207


$
21,737


$
21,677


$
2,494


$
   Employees
      Insurance
   12




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Control-of-well
  knock-for-knock clean-up
  Regulation
   13




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14




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##### Table of Contents



vessel-to-vessel vessel-to-shore
    
    it is organized under the laws of the United States or a state;
    each of its president or other chief executive officer and the
    chairman of its board of directors is a U.S. citizen;
    no more than a minority of the number of its directors necessary
    to constitute a quorum for the transaction of business are
    non-U.S. citizens; and
    at least 75% of the interest and voting power in the corporation
    is held by U.S. citizens free of any trust, fiduciary
    arrangement or other agreement, arrangement or understanding
    whereby voting power may be exercised directly or indirectly by
    non-U.S. citizens.  non-U.S. citizens
   15




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##### Table of Contents



non-U.S. operations
   16




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##### Table of Contents



Available
    Information
  www.herculesoffshore.com Form 10-K, Form 10-Q, Form 8-K, www.sec.gov
  Segment
    and Geographic Information
    Item 1A.
    Risk
    Factors  New
    and proposed laws, regulations and requirements arising out of
    the Macondo well blowout incident could prevent or cause delays
    for our customers in obtaining approval to conduct drilling
    operations and lead to increased potential liability and costs
    for us and our customers, which could adversely impact our
    operations and profitability in the United States Gulf of
    Mexico.
    and/or
 17




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Our
    business depends on the level of activity in the oil and natural
    gas industry, which is significantly affected by volatile oil
    and natural gas prices.
    
    the demand for oil and natural gas in the United States and
    elsewhere;
    the cost of exploring for, developing, producing and delivering
    oil and natural gas, and the relative cost of onshore production
    or importation of natural gas;
    political, economic and weather conditions in the United States
    and elsewhere;
    imports of liquefied natural gas;
    advances in exploration, development and production technology;
    the ability of the Organization of Petroleum Exporting
    Countries, commonly called OPEC, to set and maintain
    oil production levels and pricing;
    the level of production in non-OPEC countries;
    domestic and international tax policies and governmental
    regulations;
    the development and exploitation of alternative fuels, and the
    competitive, social and political position of natural gas as a
    source of energy compared with other energy sources;
    the policies of various governments regarding exploration and
    development of their oil and natural gas reserves;
    the worldwide military and political environment and uncertainty
    or instability resulting from an escalation or additional
    outbreak of armed hostilities or other crises in the Middle
    East, North Africa, West Africa and other significant oil and
    natural gas producing regions; and
    acts of terrorism or piracy that affect oil and natural gas
    producing regions, especially in Nigeria, where armed conflict,
    civil unrest and acts of terrorism have recently increased.   18




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The
    offshore service industry is highly cyclical and is currently
    experiencing low demand and low dayrates. The volatility of the
    industry, coupled with our short-term contracts, has resulted
    and could continue to result in sharp declines in our
    profitability.
    We
    have a significant level of debt, and could incur additional
    debt in the future. Our debt could have significant consequences
    for our business and future prospects.
    
    we may not be able to obtain necessary financing in the future
    for working capital, capital expenditures, acquisitions, debt
    service requirements or other purposes and we may be required
    under the terms of our credit facility, as amended, to use the
    proceeds of any financing we obtain to repay or prepay existing
    debt;
    we will be required to dedicate a substantial portion of our
    cash flow from operations to payments of principal and interest
    on our debt;
    we may be exposed to risks inherent in interest rate
    fluctuations because 55 percent of our borrowings are at
    variable rates of interest, which will result in higher interest
    expense to the extent that we do not hedge such risk in the
    event of increases in interest rates;
    we could be more vulnerable during downturns in our business and
    be less able to take advantage of significant business
    opportunities and to react to changes in our business and in
    market or industry conditions; and
    we may have a competitive disadvantage relative to our
    competitors that have less debt.    If we
    are unable to comply with the restrictions and covenants in our
    credit agreement, there could be a default, which could result
    in an acceleration of repayment of funds that we have
    borrowed.
   19




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##### Table of Contents



Our
    Credit Agreement imposes significant additional costs and
    operating and financial restrictions on us, which may prevent us
    from capitalizing on business opportunities and taking certain
    actions.
    
    make certain types of loans and investments;
    pay dividends, redeem or repurchase stock, prepay, redeem or
    repurchase other debt or make other restricted payments;
    incur or guarantee additional indebtedness;
    use proceeds from asset sales, new indebtedness or equity
    issuances for general corporate purposes or investment into our
    current business;
    invest in certain new joint ventures;
    create or incur liens;
    place restrictions on our subsidiaries ability to make
    dividends or other payments to us;
    sell our assets or consolidate or merge with or into other
    companies;
    engage in transactions with affiliates; and
    enter into new lines of business.   20




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##### Table of Contents



Maintaining
    idle assets or the sale of assets below their then carrying
    value may cause us to experience losses and may result in
    impairment charges.
    Our
    industry is highly competitive, with intense price competition.
    Our inability to compete successfully may reduce our
    profitability.
      The
    continuing worldwide economic problems have materially reduced
    our revenue, profitability and cash flows.
    We may
    require additional capital in the future, which may not be
    available to us or may be at a cost which reduces our cash flow
    and profitability.
   21




---



##### Table of Contents



Asset
    sales are currently an important component of our business
    strategy for the purpose of reducing our debt. We may be unable
    to identify appropriate buyers with access to financing or to
    complete any sales on acceptable terms.
    Our
    contracts are generally short term, and we will experience
    reduced profitability if our customers reduce activity levels or
    terminate or seek to renegotiate our drilling or liftboat
    contracts or if we experience downtime, operational
    difficulties, or safety-related issues.
        An
    increase in supply of rigs or liftboats could adversely affect
    our financial condition and results of operations.
     22




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##### Table of Contents



Our
    business involves numerous operating hazards and exposure to
    extreme weather and climate risks, and our insurance may not be
    adequate to cover our losses.
        A
    significant portion of our business is conducted in
    shallow-water areas of the U.S. Gulf of Mexico. The mature
    nature of this region could result in less drilling activity in
    the area, thereby reducing demand for our
    services.
   23




---



##### Table of Contents



We can
    provide no assurance that our current backlog of contract
    drilling revenue will be ultimately realized.
    Our
    insurance coverage has become more expensive, may become
    unavailable in the future, and may be inadequate to cover our
    losses.
        Our
    customers may be unable or unwilling to indemnify
    us.
   24




---



##### Table of Contents



Our
    international operations are subject to additional political,
    economic, and other uncertainties not generally associated with
    domestic operations.
    
    political, social and economic instability, war and acts of
    terrorism;
    potential seizure, expropriation or nationalization of assets;
    damage to our equipment or violence directed at our employees,
    including kidnappings and piracy;
    increased operating costs;
    complications associated with repairing and replacing equipment
    in remote locations;
    repudiation, modification or renegotiation of contracts,
    disputes and legal proceedings in international jurisdictions;
    limitations on insurance coverage, such as war risk coverage in
    certain areas;
    import-export quotas;
    confiscatory taxation;
    work stoppages or strikes, particularly in the West African and
    Mexican labor environments;
    unexpected changes in regulatory requirements;
    wage and price controls;
    imposition of trade barriers;
    imposition or changes in enforcement of local content laws,
    particularly in West Africa where the legislatures are active in
    developing new legislation;
    restrictions on currency or capital repatriations;
    currency fluctuations and devaluations; and
    other forms of government regulation and economic conditions
    that are beyond our control.     25




---



##### Table of Contents



non-U.S. contract
    A
    small number of customers account for a significant portion of
    our revenue, and the loss of one or more of these customers
    could adversely affect our financial condition and results of
    operations.
    Our
    existing jackup rigs are at a relative disadvantage to higher
    specification rigs, which may be more likely to obtain contracts
    than lower specification jackup rigs such as ours.
   26




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##### Table of Contents



We may
    consider future acquisitions and may be unable to complete and
    finance future acquisitions on acceptable terms. In addition, we
    may fail to successfully integrate acquired assets or businesses
    we acquire or incorrectly predict operating
    results.
        
    the risk of incorrect assumptions regarding the future results
    of acquired operations or assets or expected cost reductions or
    other synergies expected to be realized as a result of acquiring
    operations or assets;
    the risk of failing to integrate the operations or management of
    any acquired operations or assets successfully and
    timely; and
    the risk of diversion of managements attention from
    existing operations or other priorities.      Failure
    to retain or attract skilled workers could hurt our
    operations.
   27




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##### Table of Contents



Governmental
    laws and regulations, including those related to climate and
    emissions of greenhouse gases, may add to our costs
    or limit drilling activity and liftboat
    operations.
      Compliance
    with or a breach of environmental laws can be costly and could
    limit our operations.
    We may
    not be able to maintain or replace our rigs and liftboats as
    they age.
    Our
    operating and maintenance costs with respect to our rigs include
    fixed costs that will not decline in proportion to decreases in
    dayrates.
   28




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##### Table of Contents



Upgrade,
    refurbishment and repair projects are subject to risks,
    including delays and cost overruns, which could have an adverse
    impact on our available cash resources and results of
    operations.
    
    unexpectedly long delivery times for, or shortages of, key
    equipment, parts and materials;
    shortages of skilled labor and other shipyard personnel
    necessary to perform the work;
    unforeseen increases in the cost of equipment, labor and raw
    materials, particularly steel;
    unforeseen design and engineering problems;
    latent damages to or deterioration of hull, equipment and
    machinery in excess of engineering estimates and assumptions;
    unanticipated actual or purported change orders;
    work stoppages;
    failure or delay of third-party service providers and labor
    disputes;
    disputes with shipyards and suppliers;
    delays and unexpected costs of incorporating parts and materials
    needed for the completion of projects;
    failure or delay in obtaining acceptance of the rig from our
    customer;
    financial or other difficulties at shipyards;
    adverse weather conditions; and
    inability or delay in obtaining customer acceptance or
    flag-state, classification society, certificate of inspection,
    or regulatory approvals.   29




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##### Table of Contents



We are
    subject to litigation that could have an adverse effect on
    us.
    Changes
    in effective tax rates, taxation of our foreign subsidiaries,
    limitations on utilization of our net operating losses or
    adverse outcomes resulting from examination of our tax returns
    could adversely affect our operating results and financial
    results.
      Our
    business would be adversely affected if we failed to comply with
    the provisions of U.S. law on coastwise trade, or if those
    provisions were modified, repealed or waived.
    U.S.-flag U.S.-flag
  Our
    liquidity depends upon cash on hand, cash from operations and
    availability under our revolving credit facility.
   30




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##### Table of Contents



We are
    a holding company, and we are dependent upon cash flow from
    subsidiaries to meet our obligations.
      We
    limit foreign ownership of our company, which may restrict
    investment in our common stock and could reduce the price of our
    common stock.
  non-United U.S.-flagged non-United States non-United
   31




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##### Table of Contents



We
    have no plans to pay regular dividends on our common stock, so
    investors in our common stock may not receive funds without
    selling their shares.
    Provisions in our charter documents, stockholder rights
    plan or Delaware law may inhibit a takeover, which could
    adversely affect the value of our common stock.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties        Item 3.
    Legal
    Proceedings     32




---



##### Table of Contents



Robert E. Aaron et al.  vs. Phillips 66 Company et
    al. Circuit Court, Second Judicial District, Jones County,
    Mississippi.
      Item 4.
    Reserved PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Quarterly
    Common Stock Prices and Dividend Policy
   33




---



##### Table of Contents



PriceHigh

Low2010Fourth Quarter

$
3.65


$
2.16Third Quarter


2.78



2.05Second Quarter


4.73



2.39First Quarter


5.85



3.51   PriceHigh

Low2009Fourth Quarter

$
6.60


$
4.21Third Quarter


7.28



3.02Second Quarter


5.64



1.54First Quarter


5.92



1.07     Issuer
    Purchases of Equity Securities
    TotalNumber of


MaximumShares


Number ofPurchased


Shares thatTotal





as Part of a


may yet beNumber of


Average


Publicly


PurchasedShares


Price Paid


Announced


Under thePeriod

Purchased(1)


per Share


Plan(2)


Plan(2)October 1 - 31, 2010


653


$
2.56



N/A



N/ANovember 1 - 30, 2010


133



2.93



N/A



N/ADecember 1 - 31, 2010










N/A



N/ATotal


786



2.63



N/A



N/A     (1)
    
    Represents the surrender of shares of our common stock to
    satisfy tax withholding obligations in connection with the
    vesting of restricted stock issued to employees under our
    stockholder-approved long-term incentive plan.(2)
    
    We did not have at any time during 2010, 2009 or 2008, and
    currently do not have, a share repurchase program in place. 34




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K Form 10-K Form 8-K Form 10-K,
      Year Ended

Year Ended

Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,

December 31,

December 31,2010(a)

2009(b)

2008(c)

2007

2006(In thousands, except per share data)Statement of Operations Data:Revenue

$
657,480


$
742,851


$
1,111,807


$
726,278


$
344,312Operating income (loss)


(145,160
)


(92,146
)


(1,120,913
)


225,642



158,057Income (loss) from continuing operations


(134,594
)


(90,149
)


(1,081,870
)


136,012



119,050Earnings (loss) per share from continuing operations:Basic

$
(1.17
)

$
(0.93
)

$
(12.25
)

$
2.31


$
3.80Diluted


(1.17
)


(0.93
)


(12.25
)


2.28



3.70Balance Sheet Data (as of end of period):Cash and cash equivalents

$
136,666


$
140,828


$
106,455


$
212,452


$
72,772Working capital


182,276



144,813



224,785



367,117



110,897Total assets


1,995,309



2,277,476



2,590,895



3,643,948



605,581Long-term debt, net of current portion


853,166



856,755



1,015,764



890,013



91,850Total stockholders equity


853,132



978,512



925,315



2,011,433



394,851Cash dividends per share


















     (a)
    
    Includes $125.1 million ($81.3 million, net of taxes
    or $0.71 per diluted share) in impairment of property and
    equipment charges.(b)
    
    Includes $26.9 million ($13.1 million, net of taxes or
    $0.13 per diluted share) of impairment charges related to the
    write-down of the Hercules 110to fair value less costs
    to sell during the second quarter of 2009. The sale of the rig
    was completed in August 2009. In addition, 2009 includes
    $31.6 million ($20.5 million, net of taxes or $0.21
    per diluted share) related to an allowance for doubtful accounts
    receivable of approximately $26.8 million, associated with
    a customer in our International Offshore segment, a non-cash
    charge of approximately $7.3 million to fully impair the
    related deferred mobilization 35




---



##### Table of Contents



and contract preparation costs, partially offset by a
    $2.5 million reduction in previously accrued contract
    related operating costs that are not expected to be settled if
    the receivable is not collected.(c)
    
    Includes $950.3 million ($950.3 million, net of taxes
    or $10.76 per diluted share) and $376.7 million
    ($236.7 million, net of taxes or $2.68 per diluted share)
    in impairment of goodwill and impairment of property and
    equipment charges, respectively.  Year Ended

Year Ended

Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,

December 31,

December 31,2010

2009

2008

2007

2006(In thousands)Other Financial Data:Net cash provided by (used in):Operating activities

$
24,420


$
137,861


$
269,727


$
175,741


$
124,241Investing activities


(21,306
)


(60,510
)


(515,787
)


(825,007
)


(149,983
)Financing activities


(7,276
)


(42,978
)


140,063



788,946



50,939Capital expenditures


22,018



76,141



585,084
(a)


155,390



204,456Deferred drydocking expenditures


15,040



15,646



17,269



20,772



12,544     (a)
    
    Includes the purchase of Hercules 350, Hercules 262and Hercules 261as well as related equipment.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with the accompanying consolidated financial
    statements as of December 31, 2010 and 2009 and for the
    years ended December 31, 2010, 2009 and 2008 included in
    Item 8 of this annual report. The following discussion and
    analysis contains forward-looking statements that involve risks
    and uncertainties. Our actual results may differ materially from
    those anticipated in these forward-looking statements as a
    result of certain factors, including those set forth under
    Risk Factors in Item 1A and elsewhere in this
    annual report. See Forward-Looking Statements.
  OVERVIEW
  Hercules 190 Hercules 254
    Domestic Offshore
  International Offshore
 36




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##### Table of Contents



Inland
  Domestic Liftboats
  International Liftboats
  Delta Towing
  Hull 109 Hull 110 MENAdrill Hercules 1 2 Hull 109 Hull 110
         37




---



##### Table of Contents



RECENT
    DEVELOPMENTS
  Investment
        Alliance
    Agreement
   38




---



##### Table of Contents



Asset
    Purchase Agreement
        Credit
    Agreement Amendment
  Liquidity and Capital
    Resources
  RESULTS
    OF OPERATIONS
       39




---



##### Table of Contents



Year Ended December 31,2010


2009


2008(Dollars in thousands)Domestic Offshore:Number of rigs (as of end of period)


25



24



27Revenue

$
124,063


$
140,889


$
382,358Operating expenses


147,715



175,473



227,884Impairment of goodwill










507,194Impairment of property and equipment


84,744







174,613Depreciation and amortization expense


68,335



60,775



66,850General and administrative expenses


5,663



6,496



4,673Operating loss

$
(182,394
)

$
(101,855
)

$
(598,856
)International Offshore:Number of rigs (as of end of period)


9



10



12Revenue

$
291,516


$
393,797


$
327,983Operating expenses


130,460



169,418



147,899Impairment of goodwill










150,886Impairment of property and equipment


37,973



26,882



Depreciation and amortization expense


58,275



63,808



37,865General and administrative expenses


7,930



35,694



2,980Operating income (loss)

$
56,878


$
97,995


$
(11,647
)Inland:Number of barges (as of end of period)


17



17



27Revenue

$
21,922


$
19,794


$
162,487Operating expenses


27,702



44,593



125,656Impairment of goodwill










205,474Impairment of property and equipment










202,055Depreciation and amortization expense


23,516



32,465



43,107General and administrative expenses


(1,420
)


1,831



8,347Operating loss

$
(27,876
)

$
(59,095
)

$
(422,152
)Domestic Liftboats:Number of liftboats (as of end of period)


41



41



45Revenue

$
70,710


$
75,584


$
94,755Operating expenses


42,073



48,738



54,474Depreciation and amortization expense


14,698



20,267



21,317General and administrative expenses


1,850



2,039



2,386Operating income

$
12,089


$
4,540


$
16,578International Liftboats:Number of liftboats (as of end of period)


24



24



20Revenue

$
116,616


$
88,537


$
85,896Operating expenses


55,879



48,240



39,122Depreciation and amortization expense


17,711



12,880



9,912General and administrative expenses


5,815



4,990



5,990Operating income

$
37,211


$
22,427


$
30,872 40




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##### Table of Contents



Year Ended December 31,2010


2009


2008(Dollars in thousands)Delta Towing:Revenue

$
32,653


$
24,250


$
58,328Operating expenses


25,101



27,674



36,676Impairment of goodwill










86,733Impairment of property and equipment


2,419







Depreciation and amortization expense


5,471



7,917



10,926General and administrative expenses


1,395



1,336



4,058Operating loss

$
(1,733
)

$
(12,677
)

$
(80,065
)Total Company:Revenue

$
657,480


$
742,851


$
1,111,807Operating expenses


428,930



514,136



631,711Impairment of goodwill










950,287Impairment of property and equipment


125,136



26,882



376,668Depreciation and amortization expense


191,183



201,421



192,894General and administrative expenses


57,391



92,558



81,160Operating loss


(145,160
)


(92,146
)


(1,120,913
)Interest expense


(82,941
)


(77,986
)


(63,778
)Expense of credit agreement fees






(15,073
)


Gain on early retirement of debt, net






12,157



26,345Other, net


3,885



3,967



3,315Loss before income taxes


(224,216
)


(169,081
)


(1,155,031
)Income tax benefit


89,622



78,932



73,161Loss from continuing operations


(134,594
)


(90,149
)


(1,081,870
)Loss from discontinued operation, net of taxes






(1,585
)


(1,520
)Net loss

$
(134,594
)

$
(91,734
)

$
(1,083,390
)     Year Ended December 31, 2010AverageAverage

OperatingOperating

Available



Revenue

ExpenseDays

Days

Utilization(1)

per Day(2)

per Day(3)Domestic Offshore


3,321



4,086



81.3
%

$
37,357


$
36,151International Offshore


2,106



3,344



63.0
%


138,422



39,013Inland


986



1,095



90.0
%


22,233



25,299Domestic Liftboats


9,641



13,870



69.5
%


7,334



3,033International Liftboats


5,100



8,546



59.7
%


22,866



6,539   41




---



##### Table of Contents



Year Ended December 31, 2009AverageAverage

OperatingOperating

Available



Revenue

ExpenseDays

Days

Utilization(1)

per Day(2)

per Day(3)Domestic Offshore


2,676



4,544



58.9
%

$
52,649


$
38,616International Offshore


3,100



3,714



83.5
%


127,031



45,616Inland


651



1,578



41.3
%


30,406



28,259Domestic Liftboats


9,535



14,804



64.4
%


7,927



3,292International Liftboats


4,293



7,209



59.6
%


20,624



6,692   Year Ended December 31, 2008AverageAverage

OperatingOperating

Available



Revenue

ExpenseDays

Days

Utilization(1)

per Day(2)

per Day(3)Domestic Offshore


5,907



8,166



72.3
%

$
64,730


$
27,906International Offshore


2,753



3,005



91.6
%


119,137



49,218Inland


4,048



5,885



68.8
%


40,140



21,352Domestic Liftboats


10,343



15,785



65.5
%


9,161



3,451International Liftboats


5,028



6,501



77.3
%


17,084



6,018     (1)
    
    Utilization is defined as the total number of days our rigs or
    liftboats, as applicable, were under contract, known as
    operating days, in the period as a percentage of the total
    number of available days in the period. Days during which our
    rigs and liftboats were undergoing major refurbishments,
    upgrades or construction, and days during which our rigs and
    liftboats are cold-stacked, are not counted as available days.
    Days during which our liftboats are in the shipyard undergoing
    drydocking or inspection are considered available days for the
    purposes of calculating utilization.(2)
    
    Average revenue per rig or liftboat per day is defined as
    revenue earned by our rigs or liftboats, as applicable, in the
    period divided by the total number of operating days for our
    rigs or liftboats, as applicable, in the period. Included in
    International Offshore revenue is a total of $14.7 million,
    $16.3 million and $11.6 million related to
    amortization of deferred mobilization revenue and contract
    specific capital expenditures reimbursed by the customer for the
    years ended December 31, 2010, 2009 and 2008, respectively.(3)
    
    Average operating expense per rig or liftboat per day is defined
    as operating expenses, excluding depreciation and amortization,
    incurred by our rigs or liftboats, as applicable, in the period
    divided by the total number of available days in the period. We
    use available days to calculate average operating expense per
    rig or liftboat per day rather than operating days, which are
    used to calculate average revenue per rig or liftboat per day,
    because we incur operating expenses on our rigs and liftboats
    even when they are not under contract and earning a dayrate. In
    addition, the operating expenses we incur on our rigs and
    liftboats per day when they are not under contract are typically
    lower than the per day expenses we incur when they are under
    contract.  2010
    Compared to 2009
  Revenue
  Consolidated.
  Domestic Offshore.
 42




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##### Table of Contents



International Offshore. Hercules 156 Hercules
    170 Hercules 205 Hercules 206 Hercules 185 Hercules 260
  Inland.
  Domestic Liftboats.
  International Liftboats.
  Delta Towing.
  Operating
    Expenses
  Consolidated.
  Domestic Offshore. Hercules 155 Hercules 191 Hercules
    255
  International Offshore. Hercules 170 Hercules 205 Hercules 206
 43




---



##### Table of Contents



Hercules 185
  Inland.
  Domestic Liftboats.
  International Liftboats.
  Delta Towing.
  Impairment
    of Property and Equipment
  Hercules 110
  Depreciation
    and Amortization
   44




---



##### Table of Contents



General
    and Administrative Expenses
    Interest
    Expense
    Expense
    of Credit Agreement Fees
    Gain on
    Early Retirement of Debt, Net
    Income
    Tax Benefit
    2009
    Compared to 2008
  Revenue
  Consolidated.
  Domestic Offshore.
  International Offshore. Hercules 260 Hercules 258 Hercules 208 Hercules 261
 45




---



##### Table of Contents



Hercules 262 Hercules 156 Hercules 170 Hercules 206 Hercules 110 Hercules 205 Hercules
    185 Hercules 261 Hercules 208 Hercules 262 Hercules 205 Hercules
    206, Hercules 156 Hercules 185
  Inland.
  Domestic Liftboats.
  International Liftboats.
  Delta Towing.
  Operating
    Expenses
  Consolidated.
  Domestic Offshore.
  International Offshore. Hercules 156 Hercules 170 start-up Hercules 261 Hercules 262
 46




---



##### Table of Contents



Inland.
  Domestic Liftboats.
  International Liftboats. Whale Shark Amberjack
  Delta Towing.
  Impairment
    of Property and Equipment
  Hercules 110
  Depreciation
    and Amortization
  Hercules 260 Hercules 350 Hercules 208 Hercules 261 Hercules 262
  General
    and Administrative Expenses
   47




---



##### Table of Contents



Interest
    Expense
    Expense
    of Credit Agreement Fees
    Gain
    (Loss) on Early Retirement of Debt, Net
    Other
    Income
    Income
    Tax Benefit
    Non-GAAP Financial
    Measures
  General Rules Regarding Disclosure of
    Non-GAAP Financial Measures day-to-day
 48




---



##### Table of Contents



49




---



##### Table of Contents



For the Years Ended December 31,2010


2009


2008Operating Loss

$
(145,160
)

$
(92,146
)

$
(1,120,913
)Adjustments:Property and equipment impairment


125,136



26,882



376,668Goodwill impairment










950,287Executive separation and benefit related charges










7,468Total adjustments


125,136



26,882



1,334,423Adjusted Operating Income (Loss)

$
(20,024
)

$
(65,264
)

$
213,510Loss from Continuing Operations

$
(134,594
)

$
(90,149
)

$
(1,081,870
)Adjustments:Property and equipment impairment


125,136



26,882



376,668Goodwill impairment










950,287Executive separation and benefit related charges










7,468Gain on early retirement of debt, net






(12,157
)


(26,345
)Expense of credit agreement fees






15,073



Tax impact of adjustments


(43,883
)


(14,799
)


(133,331
)Total adjustments


81,253



14,999



1,174,747Adjusted Income (Loss) from Continuing Operations

$
(53,341
)

$
(75,150
)

$
92,877Diluted Loss per Share from Continuing Operations

$
(1.17
)

$
(0.93
)

$
(12.25
)Adjustments:Property and equipment impairment


1.09



0.28



4.26Goodwill impairment










10.76Executive separation and benefit related charges










0.08Gain on early retirement of debt, net






(0.13
)


(0.30
)Expense of credit agreement fees






0.16



Tax impact of adjustments


(0.38
)


(0.15
)


(1.51
)Total adjustments


0.71



0.16



13.29Adjusted Diluted Earnings (Loss) per Share from Continuing
    Operations

$
(0.46
)

$
(0.77
)

$
1.04Loss from Continuing Operations

$
(134,594
)

$
(90,149
)

$
(1,081,870
)Interest expense


82,941



77,986



63,778Income tax benefit


(89,622
)


(78,932
)


(73,161
)Depreciation and amortization


191,183



201,421



192,894EBITDA


49,908



110,326



(898,359
)Adjustments:Property and equipment impairment


125,136



26,882



376,668Goodwill impairment










950,287Executive separation and benefit related charges










7,468Gain on early retirement of debt, net






(12,157
)


(26,345
)Expense of credit agreement fees






15,073



Total adjustments


125,136



29,798



1,308,078Adjusted EBITDA

$
175,044


$
140,124


$
409,719  50




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##### Table of Contents



Critical
    Accounting Policies
      Cash
    and Cash Equivalents
    Property
    and Equipment
     51




---



##### Table of Contents



Hercules 110
   52




---



##### Table of Contents



Revenue
    Recognition
    Income
    Taxes
          Allowance
    for Doubtful Accounts
   53




---



##### Table of Contents



Deferred
    Charges
    Stock-Based
    Compensation
  Compensation  Stock Compensation
    OUTLOOK
  Offshore
       54




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##### Table of Contents



Liftboats
     55




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##### Table of Contents



LIQUIDITY
    AND CAPITAL RESOURCES
  Sources
    and Uses of Cash
    2010


2009Net Cash Provided by Operating Activities

$
24.4


$
137.9Net Cash Provided by (Used in) Investing Activities:Additions of Property and Equipment


(22.0
)


(76.1
)Deferred Drydocking Expenditures


(15.0
)


(15.6
)Proceeds from Sale of Assets, Net


23.2



25.8Insurance Proceeds Received






9.1Increase in Restricted Cash


(7.5
)


(3.7
)Total


(21.3
)


(60.5
)Net Cash Provided by (Used in) Financing Activities:Short-term Debt Repayments, Net






(2.5
)Long-term Debt Borrowings






292.1Long-term Debt Repayments


(7.7
)


(403.6
)Redemption of 3.375% Convertible Senior Notes






(6.1
)Common Stock Issuance






89.6Excess Tax Benefit from Stock-Based Arrangements


0.4



5.6Payment of Debt Issuance Costs






(18.1
)Total


(7.3
)


(43.0
)Net Increase (Decrease) in Cash and Cash Equivalents

$
(4.2
)

$
34.4   Sources
    of Liquidity and Financing Arrangements
   56




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##### Table of Contents



Cash
    Requirements and Contractual Obligations
  Debt
      July
    2009 Credit Amendment
     57




---



##### Table of Contents



Principal Amount Outstanding

Margin Applicable to:Less than or equal to:

Greater than:

Eurodollar Loans

ABR Loans$
882.00


$
684.25



6.50
%


5.50
%684.25



484.25



5.00
%


4.00
%484.25







4.00
%


3.00
%     
    Eliminate the requirement that we comply with the total leverage
    ratio financial covenant for the nine month period commencing
    October 1, 2009 and ending on June 30, 2010.
    Amend the maximum total leverage ratio that we must comply with.
    The total leverage ratio for any test period is calculated as
    the ratio of consolidated indebtedness on the test date to
    consolidated EBITDA for the trailing twelve months, all as
    defined in the Credit Agreement.
    Require us to maintain a minimum level of liquidity, measured as
    the amount of unrestricted cash and cash equivalents we have on
    hand and availability under the revolving credit facility, of
    (i) $100.0 million for the period between
    October 1, 2009 through December 31, 2010,
    (ii) $75.0 million during calendar year 2011 and
    (iii) $50.0 million thereafter. As of
    December 31, 2010, as calculated pursuant to our Credit
    Agreement, our total liquidity was $300.2 million.
    Revise the consolidated fixed charge coverage ratio definition
    and reduce the minimum fixed charge coverage ratio that we must
    maintain to the following schedule:  Fixed ChargePeriod

Coverage RatioJuly 1, 2009





December 31, 2011


1.00 to 1.00January 1, 2012





March 31, 2012


1.05 to 1.00April 1, 2012





June 30, 2012


1.10 to 1.00July 1, 2012 and thereafter








1.15 to 1.00   
    The consolidated fixed charge coverage ratio for any test period
    is defined as the sum of consolidated EBITDA for the test period
    plus an amount that may be added for the purpose of calculating
    the ratio for such test period, not to exceed
    $130.0 million in total during the term of the credit
    facility, to consolidated fixed charges for the test period
    adjusted by an amount not to exceed $110.0 million during
    the term of the credit facility to be deducted from capital
    expenditures, all as defined in the Credit Agreement. As of
    December 31, 2010, our fixed charge coverage ratio was 1.66
    to 1.00.  
    Require mandatory prepayments of debt outstanding under the
    Credit Agreement with 100% of excess cash flow as defined in the
    Credit Agreement for the fiscal year ending December 31,
    2009 and 50% of excess cash flow as defined in the Credit
    Agreement for the fiscal years ending December 31, 2010,
    2011 and 2012, and with proceeds from:  
    unsecured debt issuances, with the exception of refinancing;
    secured debt issuances;
    casualty events not used to repair damaged property;
    sales of assets in excess of $25 million annually; and
    unless we have achieved a specified leverage ratio, 50% of
    proceeds from equity issuances, excluding those for permitted
    acquisitions or to meet the minimum liquidity requirements. 58




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##### Table of Contents



March
    2011 Credit Amendment
    
    Allow for the use of cash to purchase assets from Seahawk
    Drilling, Inc. (Seahawk), to the extent set forth in
    our previously disclosed Asset Purchase Agreement with Seahawk;
    Exempt the pro forma treatment of historical results from the
    Seahawk assets with respect to the calculation of the financial
    covenants in the Credit Agreement;
    Increase our investment basket to $50 million from
    $25 million; and
    Revise the covenant threshold levels of the Total Leverage
    Ratio, as defined in the Credit Agreement, to the following
    schedule:  Amended Total

Amended TotalLeverage Ratio

Leverage Ratio(if Seahawk

(if SeahawkAcquisition has

Acquisition hasbeen

not beenconsummated

consummatedduring or prior to

during or prior toPrevious Total

the relevant Test

the relevant TestTest Date

Leverage Ratio

Period)

Period)September 30, 2010

8.00 to 1.00

No Change

No ChangeDecember 31, 2010

7.50 to 1.00

No Change

No ChangeMarch 31, 2011

7.00 to 1.00

No Change

No ChangeJune 30, 2011

6.75 to 1.00

No Change

No ChangeSeptember 30, 2011

6.00 to 1.00

7.50 to 1.00

7.50 to 1.00December 31, 2011

5.50 to 1.00

7.75 to 1.00

7.75 to 1.00March 31, 2012

5.25 to 1.00

7.50 to 1.00

7.75 to 1.00June 30, 2012

5.00 to 1.00

7.25 to 1.00

7.50 to 1.00September 30, 2012

4.75 to 1.00

6.75 to 1.00

7.00 to 1.00December 31, 2012

4.50 to 1.00

6.25 to 1.00

6.50 to 1.00March 31, 2013

4.25 to 1.00

6.00 to 1.00

6.25 to 1.00June 30, 2013

4.00 to 1.00

5.75 to 1.00

6.00 to 1.00   
    At December 31, 2010, our total leverage ratio was 5.06 to
    1.00.     59




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##### Table of Contents



360-day 30-day
 60




---



##### Table of Contents




    incur additional indebtedness or issue certain preferred stock;
    pay dividends or make other distributions;
    make other restricted payments or investments;
    sell assets;
    create liens;
    enter into agreements that restrict dividends and other payments
    by restricted subsidiaries;
    engage in transactions with our affiliates; and
    consolidate, merge or transfer all or substantially all of our
    assets.        Year

Optional Redemption Price2013


105.2500
%2014


102.6250
%2015


101.3125
%2016 and thereafter


100.0000
%    61




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##### Table of Contents



December 31, 2010

December 31, 2009Carrying

Fair

Carrying

FairValue

Value

Value

Value(In millions)Term Loan Facility, due July 2013

$
475.2


$
443.7


$
482.9


$
468.410.5% Senior Secured Notes, due October 2017


292.9



245.1



292.3



315.83.375% Convertible Senior Notes, due June 2038


86.5



69.1



83.1



76.87.375% Senior Notes, due April 2018


3.5



2.2



3.5



3.0  62




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##### Table of Contents



Control-of-well
  knock-for-knock clean-up
     63




---



##### Table of Contents



Common
    Stock Offering
    Capital
    Expenditures
            Contractual
    Obligations
   64




---



##### Table of Contents



Payments due by PeriodContractual Obligations and

Less than


1-3


4-5


After 5Contingent Commitments

1 Year


Years


Years


Years


Total(In thousands)Recorded Obligations:Long-term debt obligations

$
4,924


$
566,155


$



$
303,508


$
874,587Insurance notes payable


5,984















5,984Interest on debt and notes payable(c)


6,974















6,974Purchase obligations(a)


5,388















5,388Other


2,756















2,756Unrecorded Obligations(b):Interest on debt and notes payable(c)


59,012



111,945



63,518



63,647



298,122Bank guarantees


966















966Letters of credit


11,568















11,568Surety bonds


31,414















31,414Management compensation obligations


3,538



6,808











10,346Purchase obligations(a)


1,945















1,945Operating lease obligations


4,174



4,503



4,120



4,266



17,063Total contractual obligations

$
138,643


$
689,411


$
67,638


$
371,421


$
1,267,113     (a)
    
    A purchase obligation is defined as an agreement to
    purchase goods or services that is enforceable and legally
    binding on the company and that specifies all significant terms,
    including: fixed or minimum quantities to be purchased; fixed,
    minimum or variable price provisions; and the approximate timing
    of the transaction. These amounts are primarily comprised of
    open purchase order commitments to vendors and subcontractors.(b)
    
    Tax liabilities of $6.4 million have been excluded from the
    table above as a reasonably reliable estimate of the period of
    cash settlement cannot be made.(c)
    
    Estimated interest on our Term Loan Facility is based on
    3 month LIBOR reset quarterly and extrapolated from the
    forward curve dated as of the balance sheet date. There was
    $475.2 million outstanding under our Term Loan Facility as
    of December 31, 2010 and the interest estimates above
    assume the reduction in principal related to scheduled principal
    payments. The remaining interest estimates are based on the
    rates associated with the respective fixed rate instrument. In
    March 2011, we amended our credit agreement for our Term Loan
    Facility and Revolving Credit Facility. The portion of the
    estimated unrecorded interest for our Term Loan Facility in the
    previous table does not incorporate any changes related to the
    March 2011 amendment. The total estimated additional interest
    would be approximately $16.5 million over the remaining
    life of the debt based on 3 month LIBOR reset quarterly and
    extrapolated from the forward curve as of March 3, 2011.  Off-Balance
    Sheet Arrangements
  Guarantees
   65




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##### Table of Contents



Bank
    Guarantees, Letters of Credit and Surety Bonds
    Accounting
    Pronouncements
  Improving Disclosures
    about Fair Value Measurements 2010-06), 2010-06
 FORWARD-LOOKING
    STATEMENTS  Form 10-K
  
    our levels of indebtedness, covenant compliance and access to
    capital under current market conditions;
    our ability to enter into new contracts for our rigs and
    liftboats and future utilization rates and dayrates for the
    units;
    our ability to renew or extend our long-term international
    contracts, or enter into new contracts, at current dayrates when
    such contracts expire;
    demand for our rigs and our liftboats;
    activity levels of our customers and their expectations of
    future energy prices and ability to obtain drilling permits;
    sufficiency and availability of funds for required capital
    expenditures, working capital and debt service;
    levels of reserves for accounts receivable;
    success of our cost cutting measures and plans to dispose of
    certain assets;
    expected completion times for our refurbishment and upgrade
    projects; 66




---



##### Table of Contents




    our plans to increase international operations;
    expected useful lives of our rigs and liftboats;
    future capital expenditures and refurbishment, reactivation,
    transportation, repair and upgrade costs;
    our ability to effectively reactivate rigs that we have stacked;
    liabilities and restrictions under coastwise and other laws of
    the United States and regulations protecting the environment;
    expected outcomes of litigation, claims and disputes and their
    expected effects on our financial condition and results of
    operations; and
    expectations regarding offshore drilling activity and dayrates,
    market conditions, demand for our rigs and liftboats, our
    earnings, operating revenue, operating and maintenance expense,
    insurance coverage, insurance expense and deductibles, interest
    expense, debt levels and other matters with regard to outlook.    
    the ability of our customers in the U.S. Gulf of Mexico to
    obtain drilling permits;
    oil and natural gas prices and industry expectations about
    future prices;
    levels of oil and gas exploration and production spending;
    demand for and supply of offshore drilling rigs and liftboats;
    our ability to enter into and the terms of future contracts;
    the worldwide military and political environment, uncertainty or
    instability resulting from an escalation or additional outbreak
    of armed hostilities or other crises in the Middle East, North
    Africa, West Africa and other oil and natural gas producing
    regions or acts of terrorism or piracy;
    the impact of governmental laws and regulations, including new
    laws and regulations in the U.S. Gulf of Mexico arising out
    of the Macondo well blowout incident;
    the adequacy and costs of sources of credit and liquidity;
    uncertainties relating to the level of activity in offshore oil
    and natural gas exploration, development and production;
    competition and market conditions in the contract drilling and
    liftboat industries;
    the availability of skilled personnel in view of recent
    reductions in our personnel;
    labor relations and work stoppages, particularly in the West
    African and Mexican labor environments;
    operating hazards such as hurricanes, severe weather and seas,
    fires, cratering, blowouts, war, terrorism and cancellation or
    unavailability of insurance coverage or insufficient coverage;
    the effect of litigation and contingencies; and
    our inability to achieve our plans or carry out our strategy.   67




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Interest
    Rate Exposure
          December 31, 2010

December 31, 2009Carrying

Fair

Carrying

FairValue

Value

Value

Value(In millions)Term Loan Facility, due July 2013

$
475.2


$
443.7


$
482.9


$
468.410.5% Senior Secured Notes, due October 2017


292.9



245.1



292.3



315.83.375% Convertible Senior Notes, due June 2038


86.5



69.1



83.1



76.87.375% Senior Notes, due April 2018


3.5



2.2



3.5



3.0  68




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           14-1,
    ERNST &
    YOUNG LLP
    69




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 ERNST &
    YOUNG LLP
    70




---



##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2010


2009(In thousands, except par value)ASSETSCurrent Assets:Cash and Cash Equivalents

$
136,666


$
140,828Restricted Cash


11,128



3,658Accounts Receivable, Net of Allowance for Doubtful Accounts of
    $29,798 and $38,522 as of December 31, 2010 and 2009,
    respectively


143,796



133,662Prepaids


17,142



13,706Current Deferred Tax Asset


8,488



22,885Other


11,794



6,675329,014



321,414Property and Equipment, Net


1,634,542



1,923,603Other Assets, Net


31,753



32,459$
1,995,309


$
2,277,476LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Short-term Debt and Current Portion of Long-term Debt

$
4,924


$
4,952Insurance Notes Payable


5,984



5,484Accounts Payable


52,279



51,868Accrued Liabilities


59,861



67,773Interest Payable


6,974



6,624Taxes Payable






5,671Other Current Liabilities


16,716



34,229146,738



176,601Long-term Debt, Net of Current Portion


853,166



856,755Other Liabilities


6,716



19,809Deferred Income Taxes


135,557



245,799Commitments and ContingenciesStockholders Equity:Common Stock, $0.01 Par Value;
    200,000 Shares Authorized; 116,336 and
    116,154 Shares Issued, Respectively; 114,784 and
    114,650 Shares Outstanding, Respectively


1,163



1,162Capital in Excess of Par Value


1,924,659



1,921,037Treasury Stock, at Cost, 1,552 Shares and
    1,504 Shares, Respectively


(50,333
)


(50,151
)Accumulated Other Comprehensive Loss






(5,773
)Retained Deficit


(1,022,357
)


(887,763
)853,132



978,512$
1,995,309


$
2,277,476    71




---



##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2010


2009


2008(In thousands, except per share data)Revenue

$
657,480


$
742,851


$
1,111,807Costs and Expenses:Operating Expenses


428,930



514,136



631,711Impairment of Goodwill










950,287Impairment of Property and Equipment


125,136



26,882



376,668Depreciation and Amortization


191,183



201,421



192,894General and Administrative


57,391



92,558



81,160802,640



834,997



2,232,720Operating Loss


(145,160
)


(92,146
)


(1,120,913
)Other Income (Expense):Interest Expense


(82,941
)


(77,986
)


(63,778
)Expense of Credit Agreement Fees






(15,073
)


Gain on Early Retirement of Debt, Net






12,157



26,345Other, Net


3,885



3,967



3,315Loss Before Income Taxes


(224,216
)


(169,081
)


(1,155,031
)Income Tax Benefit


89,622



78,932



73,161Loss from Continuing Operations


(134,594
)


(90,149
)


(1,081,870
)Loss from Discontinued Operation,Net of Taxes






(1,585
)


(1,520
)Net Loss

$
(134,594
)

$
(91,734
)

$
(1,083,390
)Basic Loss Per Share:Loss from Continuing Operations

$
(1.17
)

$
(0.93
)

$
(12.25
)Loss from Discontinued Operation






(0.01
)


(0.01
)Net Loss

$
(1.17
)

$
(0.94
)

$
(12.26
)Diluted Loss Per Share:Loss from Continuing Operations

$
(1.17
)

$
(0.93
)

$
(12.25
)Loss from Discontinued Operation






(0.01
)


(0.01
)Net Loss

$
(1.17
)

$
(0.94
)

$
(12.26
)Weighted Average Shares Outstanding:Basic


114,753



97,114



88,351Diluted


114,753



97,114



88,351    72




---



##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  December 31, 2010


December 31, 2009


December 31, 2008Shares


Amount


Shares


Amount


Shares


Amount(In thousands)Common Stock:Balance at Beginning of Period


116,154


$
1,162



89,459


$
895



88,876


$
889Exercise of Stock Options


11















478



5Issuance of Common Stock, Net










26,569



266







Issuance of Restricted Stock


171



1



126



1



105



1Balance at End of Period


116,336



1,163



116,154



1,162



89,459



895Capital in Excess of Par Value:Balance at Beginning of Period






1,921,037







1,785,462







1,731,882Exercise of Stock Options






18















5,122Issuance of Common Stock, Net














122,762







Issuance of Restricted Stock






(1
)






(1
)






(1
)Compensation Expense Recognized






4,431







8,257







12,535Adjustment due to Convertible Debt Accounting Change (See
    Note 1)






















30,070Excess Tax Benefit (Deficit) From Stock-Based Arrangements, Net






(826
)






4,571







5,860Other














(14
)






(6
)Balance at End of Period






1,924,659







1,921,037







1,785,462Treasury Stock:Balance at Beginning of Period


(1,504
)


(50,151
)


(1,483
)


(50,081
)


(19
)


(582
)Repurchase of Common Stock


(48
)


(182
)


(21
)


(70
)


(1,464
)


(49,499
)Balance at End of Period


(1,552
)


(50,333
)


(1,504
)


(50,151
)


(1,483
)


(50,081
)Accumulated Other Comprehensive Loss:Balance at Beginning of Period






(5,773
)






(14,932
)






(8,117
)Change in Unrealized Gain (Loss) on Hedge Transactions, Net of
    Tax of $(3,108), $(4,932) and $3,669, Respectively






5,773







9,159







(6,815
)Balance at End of Period, Net of Tax of $0, $3,108 and $8,040,
    Respectively














(5,773
)






(14,932
)Retained Deficit:Balance at Beginning of Period






(887,763
)






(796,029
)






287,361Net Loss






(134,594
)






(91,734
)






(1,083,390
)Balance at End of Period






(1,022,357
)






(887,763
)






(796,029
)Total Stockholders Equity


114,784


$
853,132



114,650


$
978,512



87,976


$
925,315    73




---



##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE LOSS
  Year Ended December 31,2010


2009


2008(In thousands)Net Loss

$
(134,594
)

$
(91,734
)

$
(1,083,390
)Other Comprehensive Income (Loss):Changes Related to Hedge Transactions


5,773



9,159



(6,815
)Comprehensive Loss

$
(128,821
)

$
(82,575
)

$
(1,090,205
)    74




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2010


2009


2008(In thousands)Cash Flows from Operating Activities:Net Loss

$
(134,594
)

$
(91,734
)

$
(1,083,390
)Adjustments to Reconcile Net Loss to Net Cash Provided by
    Operating Activities:Depreciation and Amortization


191,183



201,421



192,918Stock-Based Compensation Expense


4,431



8,257



12,535Deferred Income Taxes


(98,468
)


(89,295
)


(118,685
)Provision for Doubtful Accounts Receivable


182



32,912



6,167Amortization of Original Issue Discount


4,078



4,120



4,292Amortization of Deferred Financing Fees


3,302



3,594



4,036Non-Cash Loss on Derivatives






1,429



Gain on Insurance Settlement






(8,700
)


Gain on Disposal of Assets


(14,345
)


(970
)


(3,029
)Expense of Credit Agreement Fees






15,073



Gain on Early Retirement of Debt, Net






(12,157
)


(26,345
)Impairment of Goodwill










950,287Impairment of Property and Equipment


125,136



26,882



376,668Excess Tax Benefit from Stock-Based Arrangements


(401
)


(5,629
)


(6,081
)(Increase) Decrease in Operating Assets -Accounts Receivable


(10,316
)


126,515



(78,510
)Prepaid Expenses and Other


22,193



39,487



52,795Increase (Decrease) in Operating Liabilities -Accounts Payable


411



(37,256
)


(5,482
)Insurance Notes Payable


(25,438
)


(28,966
)


(45,173
)Other Current Liabilities


(28,994
)


(35,281
)


17,125Other Liabilities


(13,940
)


(11,841
)


19,599Net Cash Provided by Operating Activities


24,420



137,861



269,727Cash Flows from Investing Activities:Acquisition of Assets










(320,839
)Additions of Property and Equipment


(22,018
)


(76,141
)


(264,245
)Deferred Drydocking Expenditures


(15,040
)


(15,646
)


(17,269
)Proceeds from Sale of Marketable Securities










39,300Insurance Proceeds Received






9,168



30,221Proceeds from Sale of Assets, Net


23,222



25,767



17,045Increase in Restricted Cash


(7,470
)


(3,658
)


Net Cash Used in Investing Activities


(21,306
)


(60,510
)


(515,787
)Cash Flows from Financing Activities:Short-term Debt Borrowings (Repayments), Net






(2,455
)


2,455Long-term Debt Borrowings






292,149



350,000Long-term Debt Repayments


(7,695
)


(403,648
)


(121,427
)Redemption of 3.375% Convertible Senior Notes






(6,099
)


(44,848
)Common Stock Issuance (Repurchase)






89,600



(49,228
)Excess Tax Benefit from Stock-Based Arrangements


401



5,629



6,081Payment of Debt Issuance Costs






(18,143
)


(8,097
)Other


18



(11
)


5,127Net Cash Provided by (Used in) Financing Activities


(7,276
)


(42,978
)


140,063Net Increase (Decrease) in Cash and Cash Equivalents


(4,162
)


34,373



(105,997
)Cash and Cash Equivalents at Beginning of Period


140,828



106,455



212,452Cash and Cash Equivalents at End of Period

$
136,666


$
140,828


$
106,455    75




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Nature of
    Business and Significant Accounting Policies  Organization
  Hercules 190 Hercules 254
  Hull 109 Hull 110 MENAdrill Hercules 1 2 Hull 109 Hull 110
  Adjustment
    for Retrospective Application of FSP APB
    14-1,
    Primarily Codified into Financial Accounting Standards
    Boards (FASB) Codification Topic
    470-20,
    Debt  Debt with Conversion and Other
    Options
  470-20, Debt  Debt with Conversion and Other Options
  Principles
    of Consolidation
    Common
    Stock Offering
   76




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Reclassifications
    Cash
    and Cash Equivalents
    Restricted
    Cash
    Revenue
    Recognition
    Year Ended December 31,2010

2009

2008Mobilization revenue deferred

$
600


$
12,180


$
33,727Mobilization expense deferred






3,468



7,490Mobilization revenue recognized


15,343



16,491



11,860Mobilization expense recognized(a)


1,979



6,514



5,550     (a)
    
    Includes a $2.6 million write-off of deferred mobilization
    costs in 2009 due to an impairment related to an international
    contract.   77




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Balance Sheet

As of December 31,Classification

2010

2009Assets:Deferred Operating Expenses-Current Portion

Other

$
1,824


$
1,092Deferred Operating Expenses-Non-Current Portion

Other Assets, Net


3,172



1,651Liabilities:Deferred Revenue-Current Portion

Other Current Liabilities


12,628



19,406Deferred Revenue-Non-Current Portion

Other Liabilities






12,628   Stock-Based
    Compensation
  Compensation  Stock Compensation
    Accounts
    Receivable and Allowance for Doubtful Accounts
    Prepaid
    Expenses
    Property
    and Equipment
   78




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        YearsDrilling rigs and marine equipment (salvage value of 10%)


15Drilling machinery and equipment


312Furniture and fixtures


3Computer equipment


37Automobiles and trucks


3          79




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Hercules 110
    Goodwill
   80




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Other
    Assets
      Income
    Taxes
       81




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Use of
    Estimates
    Fair
    Value of Financial Instruments
      December 31, 2010

December 31, 2009Carrying

Fair

Carrying

FairValue

Value

Value

Value(In millions)Term Loan Facility, due July 2013

$
475.2


$
443.7


$
482.9


$
468.410.5% Senior Secured Notes, due October 2017


292.9



245.1



292.3



315.83.375% Convertible Senior Notes, due June 2038


86.5



69.1



83.1



76.87.375% Senior Notes, due April 2018


3.5



2.2



3.5



3.0   Accounting
    Pronouncements
  2010-06, Improving Disclosures about Fair Value Measurements 2010-06
 82




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2.
    Property
    and Equipment, Net    December 31,2010


2009Drilling rigs and marine equipment

$
2,048,243


$
2,224,799Drilling machinery and equipment


74,762



80,185Leasehold improvements


10,555



11,209Automobiles and trucks


2,614



2,540Computer equipment


13,943



17,787Furniture and fixtures


990



1,553Total property and equipment, at cost


2,151,107



2,338,073Less accumulated depreciation


(516,565
)


(414,470
)Total property and equipment, net

$
1,634,542


$
1,923,603     3.
    Earnings
    Per Share    4.
    Asset
    Acquisitions  Hercules 350 Hercules 261 Hercules 262
 83




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Dispositions    Rig

Segment

Period of Sale

Proceeds


Gain/(Loss)2010:Various(a)

Inland

March 2010

$
2,200


$
1,753Various(a)

Inland

April 2010


800



410Hercules 191

Domestic Offshore

April 2010


5,000



3,067Hercules 255

Domestic Offshore

September 2010


5,000



3,180Hercules 155

Domestic Offshore

December 2010


4,800



3,969$
17,800


$
12,3792009:Hercules 100

Domestic Offshore

August 2009

$
2,000


$
295Hercules 110(b)

International Offshore

August 2009


10,000



Hercules 20

Inland

September 2009


200



139Hercules 21

Inland

November 2009


400



432$
12,600


$
8662008:Hercules 256

Domestic Offshore

May 2008

$
8,500


$
     (a)
    
    The Company entered into an agreement to sell six of its retired
    barges for $3.0 million. The sale of 3 barges closed in
    each of March and April 2010.(b)
    
    The Company realized approximately $26.9 million
    ($13.1 million, net of tax) of impairment charges related
    to the write-down of the Hercules 110to fair value less
    costs to sell during the second quarter of 2009 (See
    Note 12).  Hercules 190 Hercules 254 Hercules 190 Hercules 254
  6.
    Discontinued
    Operation   84




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2009


2008Revenue

$
240


$
1,818Loss Before Income Taxes

$
(2,440
)

$
(2,341
)Income Tax Benefit


855



821Loss from Discontinued Operation, Net of Taxes

$
(1,585
)

$
(1,520
)   7.
    Long-Term
    Incentive Awards  Stock-based
    Compensation
  Compensation  Stock Compensation
         85




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2010

2009

2008Dividend yield










Expected price volatility


45.8
%


45.0
%


40.8
%Risk-free interest rate


2.7
%


2.1
%


2.9
%Expected life of options (in years)


6.0



6.0



6.0Weighted-average fair value of options granted

$
1.67


$
0.75


$
6.35       Weighted-Weighted-


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicOptions

Shares


Price


Term


Value(In thousands)Outstanding at January 1, 2010


4,452,321


$
11.36



6.58


$
6,145Granted


1,375,000



3.75Exercised


(11,051
)


1.65Forfeited


(102,000
)


5.29Expired


(114,298
)


18.21Outstanding at December 31, 2010


5,599,972



9.48



6.44



3,393Vested or Expected to Vest at December 31, 2010


5,410,499



9.16



6.40



3,330Exercisable at December 31, 2010


2,909,706



14.39



4.51



1,285       Weighted-AverageRestricted


Grant DateStock


Fair ValueNon-Vested at January 1, 2010


349,077


$
25.15Granted


782,532



3.79Vested


(170,010
)


26.01Forfeited


(58,352
)


7.17Non-Vested at December 31, 2010


903,247



8.03    86




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Liability
    Retention Awards
            8.
    Accrued
    Liabilities    December 31,2010


2009Accrued Liabilities:Taxes other than Income

$
15,548


$
9,435Accrued Payroll and Employee Benefits


25,068



29,283Accrued Self-Insurance Claims


19,106



28,768Other


139



287$
59,861


$
67,773  87




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  9.
    Benefit
    Plans    10.
    Debt    December 31,


December 31,2010


2009Term Loan Facility, due July 2013

$
475,156


$
482,85210.5% Senior Secured Notes, due October 2017


292,935



292,2723.375% Convertible Senior Notes, due June 2038


86,488



83,0717.375% Senior Notes, due April 2018


3,511



3,512Total Debt


858,090



861,707Less Short-term Debt and Current Portion of Long-term Debt


4,924



4,952Total Long-term Debt, Net of Current Portion

$
853,166


$
856,755     2011

$
4,9242012


4,9242013


551,7962014


2015


Thereafter


296,446$
858,090   Senior
    secured Credit Agreement
   88




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    July
    2009 Credit Amendment
    Principal Amount Outstanding

Margin Applicable to:Less than or equal to:

Greater than:

Eurodollar Loans

ABR Loans$882.00


$
684.25



6.50%



5.50%684.25



484.25



5.00%



4.00%484.25







4.00%



3.00%     
    Eliminate the requirement that the Company comply with the total
    leverage ratio financial covenant for the nine month period
    commencing October 1, 2009 and ending on June 30, 2010.
    Amend the maximum total leverage ratio that the Company must
    comply with. The total leverage ratio for any test period is
    calculated as the ratio of consolidated indebtedness on the test
    date to consolidated EBITDA for the trailing twelve months, all
    as defined in the Credit Agreement.
    Require the Company to maintain a minimum level of liquidity,
    measured as the amount of unrestricted cash and cash equivalents
    on hand and availability under the revolving credit facility, of
    (i) $100.0 million for the period between
    October 1, 2009 through December 31, 2010,
    (ii) $75.0 million during calendar year 2011 and
    (iii) $50.0 million thereafter. As of
    December 31, 2010, as calculated pursuant to the Credit
    Agreement, the Companys total liquidity was
    $300.2 million.
    Revise the consolidated fixed charge coverage ratio definition
    and reduce the minimum fixed charge coverage ratio that the
    Company must maintain to the following schedule:  Fixed ChargePeriod

Coverage RatioJuly 1, 2009





December 31, 2011


1.00 to 1.00January 1, 2012





March 31, 2012


1.05 to 1.00April 1, 2012





June 30, 2012


1.10 to 1.00July 1, 2012 and thereafter








1.15 to 1.00  89




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  
    The consolidated fixed charge coverage ratio for any test period
    is defined as the sum of consolidated EBITDA for the test period
    plus an amount that may be added for the purpose of calculating
    the ratio for such test period, not to exceed
    $130.0 million in total during the term of the credit
    facility, to consolidated fixed charges for the test period
    adjusted by an amount not to exceed $110.0 million during
    the term of the credit facility to be deducted from capital
    expenditures, all as defined in the Credit Agreement. As of
    December 31, 2010, the Companys fixed charge coverage
    ratio was 1.66 to 1.00.  
    Require mandatory prepayments of debt outstanding under the
    Credit Agreement with 100% of excess cash flow as defined in the
    Credit Agreement for the fiscal year ending December 31,
    2009 and 50% of excess cash flow as defined in the Credit
    Agreement for the fiscal years ending December 31, 2010,
    2011 and 2012, and with proceeds from:  
    unsecured debt issuances, with the exception of refinancing;
    secured debt issuances;
    casualty events not used to repair damaged property;
    sales of assets in excess of $25 million annually; and
    unless the Company has achieved a specified leverage ratio, 50%
    of proceeds from equity issuances, excluding those for permitted
    acquisitions or to meet the minimum liquidity requirements.  March
    2011 Credit Amendment
    
    Allow for the use of cash to purchase assets from Seahawk
    Drilling, Inc. (Seahawk), to the extent set forth in
    the Companys previously disclosed Asset Purchase Agreement
    with Seahawk;
    Exempt the pro forma treatment of historical results from the
    Seahawk assets with respect to the calculation of the financial
    covenants in the Credit Agreement;
    Increase the Companys investment basket to
    $50 million from $25 million; and 90




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    Revise the covenant threshold levels of the Total Leverage
    Ratio, as defined in the Credit Agreement, to the following
    schedule:  Amended Total

Amended TotalLeverage Ratio

Leverage Ratio(If Seahawk

(If SeahawkAcquisition

Acquisitionhas been

has not beenconsummated

consummatedduring or prior to

during or prior toPrevious Total

the relevant Test

the relevant TestTest Date

Leverage Ratio

Period)

Period)September 30, 2010

8.00 to 1.00

No Change

No ChangeDecember 31, 2010

7.50 to 1.00

No Change

No ChangeMarch 31, 2011

7.00 to 1.00

No Change

No ChangeJune 30, 2011

6.75 to 1.00

No Change

No ChangeSeptember 30, 2011

6.00 to 1.00

7.50 to 1.00

7.50 to 1.00December 31, 2011

5.50 to 1.00

7.75 to 1.00

7.75 to 1.00March 31, 2012

5.25 to 1.00

7.50 to 1.00

7.75 to 1.00June 30, 2012

5.00 to 1.00

7.25 to 1.00

7.50 to 1.00September 30, 2012

4.75 to 1.00

6.75 to 1.00

7.00 to 1.00December 31, 2012

4.50 to 1.00

6.25 to 1.00

6.50 to 1.00March 31, 2013

4.25 to 1.00

6.00 to 1.00

6.25 to 1.00June 30, 2013

4.00 to 1.00

5.75 to 1.00

6.00 to 1.00   
    At December 31, 2010, the Companys total leverage
    ratio was 5.06 to 1.00.    Other
    Terms and Conditions
       91




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        10.5% senior
    secured notes due 2017
  360-day 30-day
   92




---



##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    incur additional indebtedness or issue certain preferred stock;
    pay dividends or make other distributions;
    make other restricted payments or investments;
    sell assets;
    create liens;
    enter into agreements that restrict dividends and other payments
    by restricted subsidiaries;
    engage in transactions with its affiliates; and
    consolidate, merge or transfer all or substantially all of its
    assets.        Year

Optional Redemption Price2013


105.2500
%2014


102.6250
%2015


101.3125
%2016 and thereafter


100.0000
%    93




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  3.375%
    convertible senior notes due 2038
      470-20, Debt  Debt with Conversion and Other Options
     94




---



##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    470-20 Debt  Debt with Conversion and Other Options
  Other
    debt
    11.
    Derivative
    Instruments and Hedging         95




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        December 31, 2009Balance Sheet

FairClassification

ValueDerivatives(a):Interest rate contracts:Other

$
Total Asset Derivatives

$
Other Current Liabilities

$
10,312Other Liabilities


Total Liability Derivatives

$
10,312
     (a)
    
    These interest rate contracts were designated as cash flow
    hedges through July 27, 2009.    Year Ended December 31,2010

2009

2008



2010

2009

2008



2010

2009

2008Derivatives(a)

I.

II.

III.

IV.

V.Interest rate contracts

$



$
(1,654
)

$
(11,849
)

Interest Expense

$
(8,881
)

$
(16,636
)

$
(7,745
)


Interest Expense


$
(264
)

$
(1,706
)

$
     (a)
    
    These interest rate contracts were designated as cash flow
    hedges through July 27, 2009.    I.
    Amount of Gain (Loss), Net of Taxes Recognized in Other
    Comprehensive Income (Loss) on Derivative (Effective Portion)II.
    Classification of Gain (Loss) Reclassified from Accumulated
    Other Comprehensive Income (Loss) into Income (Loss) (Effective
    Portion)III.
    Amount of Gain (Loss) Reclassified from Accumulated Other
    Comprehensive Income (Loss) into Income (Loss) (Effective
    Portion)IV.
    Classification of Gain (Loss) Recognized in Income (Loss) on
    Derivative 96




---



##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   V.
    Amount of Gain (Loss) Recognized in Income (Loss) on
    Derivative    Cumulative unrealized loss, net of tax of $4,371 as of
    December 31, 2007

$
(8,117
)Reclassification of losses into net income, net of tax of $2,711


5,034Other comprehensive losses, net of tax of $6,380


(11,849
)Cumulative unrealized loss, net of tax of $8,040, as of
    December 31, 2008

$
(14,932
)Reclassification of losses into net income, net of tax of $5,823


10,813Other comprehensive losses, net of tax of $891


(1,654
)Cumulative unrealized loss, net of tax of $3,108, as of
    December 31, 2009

$
(5,773
)Reclassification of losses into net income, net of tax of $3,108


5,773Cumulative unrealized loss, net of tax, as of December 31,
    2010

$
   12.
    Fair
    Value Measurements  820-10, Fair Value Measurements and Disclosures
  820-10, Fair Value Measurements and Disclosures
        2010-06
   97




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Total

Quoted Prices inFair Value

Active Markets for

Significant Other

SignificantMeasurement

Identical Asset or

Observable

UnobservableDecember 31,

Liability

Inputs

Inputs2009

(Level 1)

(Level 2)

(Level 3)Interest Rate Contracts

$
10,312


$



$
10,312


$
       Total

Quoted Prices in

SignificantFair Value

Active Markets for

Other

SignificantMeasurement

Identical Asset or

Observable

UnobservableDecember 31,

Liability

Inputs

Inputs

Total2010

(Level 1)

(Level 2)

(Level 3)

Gain (Loss)Property and Equipment, Net

$
27,848


$



$



$
27,848


$
(125,136
)     Total

Quoted Prices in

SignificantFair Value

Active Markets for

Other

SignificantMeasurement

Identical Asset or

Observable

UnobservableDecember 31,

Liability

Inputs

Inputs

Total2009

(Level 1)

(Level 2)

(Level 3)

Gain (Loss)Assets Held for Sale

$



$



$



$



$
(26,882
)   Hercules 110. Hercules 110
  13.
    Supplemental
    Cash Flow Information  Year Ended December 31,2010

2009

2008(In thousands)Cash paid during the period for:Interest, net of capitalized interest

$
76,993


$
62,297


$
55,865Income taxes


22,092



26,942



42,854      98




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  14.
    Concentration
    of Credit Risk      15.
    Sales to
    Major Customers    Year Ended December 31,2010

2009

2008Oil and Natural Gas Corporation Limited(a)


20
%


16
%


8
%Chevron Corporation(b)


17



14



12Saudi Aramco(a)


14



13



PEMEX Exploración y Producción (PEMEX)(a)


3



10



8     (a)
    
    Revenue included in the Companys International Offshore
    segment.(b)
    
    Revenue included in the Companys Domestic Offshore,
    Domestic Liftboats and International Liftboats segments.  16.
    Income
    Taxes    Year Ended December 31,2010


2009


2008United States

$
(318,476
)

$
(271,879
)

$
(1,267,606
)Foreign


94,260



102,798



112,575Total

$
(224,216
)

$
(169,081
)

$
(1,155,031
)  99




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2010


2009


2008Current-United
    States

$



$
(16,335
)

$
11,733Current-foreign


8,752



35,144



31,103Current-state


94



(9,302
)


1,867Current income tax provision


8,846



9,507



44,703Deferred-United
    States


(102,033
)


(80,458
)


(103,077
)Deferred-foreign


3,748



61



(5,683
)Deferred-state


(183
)


(8,042
)


(9,104
)Deferred income tax benefit


(98,468
)


(88,439
)


(117,864
)Total income tax benefit

$
(89,622
)

$
(78,932
)

$
(73,161
)     December 31,2010


2009Deferred tax assets:Net operating loss carryforward (Federal, State &
    Foreign)

$
144,720


$
108,307Credit carryforwards


14,711



14,677Accrued expenses


11,530



14,329Unearned income


1,296



3,417Intangibles


9,030



5,440Stock-Based Compensation


7,155



7,046Other






12,622Deferred tax assets


188,442



165,838Deferred tax liabilities:Fixed assets


(290,749
)


(369,639
)Convertible Notes


(7,586
)


(7,018
)Deferred expenses


(9,148
)


(7,602
)Other


(8,028
)


(4,493
)Deferred tax liabilities


(315,511
)


(388,752
)Net deferred tax liabilities

$
(127,069
)

$
(222,914
)  100




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2010


2009


2008Statutory rate


35.0
%


35.0
%


35.0
%Effect of:Impairment of Goodwill










(29.3
)State income taxes


0.1



8.7



0.7Taxes on foreign earnings at greater (lesser) than the U.S.
    statutory rate


7.6



3.8



(0.4
)Uncertain Tax Positions


2.2



(2.8
)


0.3Deemed Repatriation of foreign earnings


(3.6
)






Other


(1.3
)


2.0



Effective rate


40.0
%


46.7
%


6.3
%       Accounting for
    Uncertainty in Income Taxes, Income Taxes
   101




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2010


2009


2008Balance, beginning of period

$
13,529



13,476



Gross increases  tax positions in prior periods










8,009Gross decreases  tax positions in prior periods


(1,499
)






Gross increases  current period tax positions






141



5,467Settlements


(7,921
)


(88
)


Balance, end of period

$
4,109


$
13,529


$
13,476             17.
    Segments   102




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Domestic Offshore
  International Offshore
  Inland
  Domestic Liftboats
  International Liftboats
  Delta Towing
      Year Ended December 31, 2010


Year Ended December 31, 2009Income (Loss)


Depreciation





Income (Loss)


Depreciationfrom


and





from


andRevenue


Operations


Amortization


Revenue


Operations


AmortizationDomestic Offshore(a)

$
124,063


$
(182,394
)

$
68,335


$
140,889


$
(101,855
)

$
60,775International Offshore(b)


291,516



56,878



58,275



393,797



97,995



63,808Inland


21,922



(27,876
)


23,516



19,794



(59,095
)


32,465Domestic Liftboats


70,710



12,089



14,698



75,584



4,540



20,267International Liftboats


116,616



37,211



17,711



88,537



22,427



12,880Delta Towing(c)


32,653



(1,733
)


5,471



24,250



(12,677
)


7,917$
657,480


$
(105,825
)

$
188,006


$
742,851


$
(48,665
)

$
198,112Corporate






(39,335
)


3,177







(43,481
)


3,309Total Company

$
657,480


$
(145,160
)

$
191,183


$
742,851


$
(92,146
)

$
201,421  103




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (a)
    
    2010 Income (Loss) from Operations includes an impairment of
    property and equipment charge of $84.7 million.(b)
    
    2010 Income (Loss) from Operations includes an impairment of
    property and equipment charge of $38.0 million. 2009 Income
    (Loss) from Operations includes an impairment of property and
    equipment charge of $26.9 million as well as an allowance
    for doubtful accounts receivable of approximately
    $26.8 million, related to a customer in West Africa that
    was contracted to utilize one rig in its International Offshore
    segment, a non-cash charge of approximately $7.3 million to
    fully impair the related deferred mobilization and contract
    preparation costs, partially offset by a $2.5 million
    reduction in previously accrued contract related operating costs
    that are not expected to be settled if the receivable is not
    collected.(c)
    
    2010 Income (Loss) from Operations includes an impairment of
    property and equipment charge of $2.4 million.  Year Ended December 31, 2008Income (Loss)


Depreciationfrom


andRevenue


Operations


AmortizationDomestic Offshore(a)

$
382,358


$
(598,856
)

$
66,850International Offshore(b)


327,983



(11,647
)


37,865Inland(c)


162,487



(422,152
)


43,107Domestic Liftboats


94,755



16,578



21,317International Liftboats


85,896



30,872



9,912Delta Towing(d)


58,328



(80,065
)


10,926$
1,111,807


$
(1,065,270
)

$
189,977Corporate






(55,643
)


2,917Total Company

$
1,111,807


$
(1,120,913
)

$
192,894     (a)
    
    2008 Income (Loss) from Operations includes $507.2 million
    and $174.6 million in impairment of goodwill and impairment
    of property and equipment charges, respectively.(b)
    
    2008 Income (Loss) from Operations includes an impairment of
    goodwill charge of $150.9 million.(c)
    
    2008 Income (Loss) from Operations includes $205.5 million
    and $202.1 million in impairment of goodwill and impairment
    of property and equipment charges, respectively.(d)
    
    2008 Income (Loss) from Operations includes an impairment of
    goodwill charge of $86.7 million.  Total AssetsDecember 31,


December 31,2010


2009Domestic Offshore

$
772,950


$
870,723International Offshore


712,988



860,252Inland


136,229



160,354Domestic Liftboats


86,013



88,942International Liftboats


167,561



164,221Delta Towing


56,631



62,563Corporate


62,937



70,421Total Company

$
1,995,309


$
2,277,476  104




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Year Ended December 31,2010


2009


2008(a)Capital Expenditures and Deferred Drydocking Expenditures:Domestic Offshore

$
11,133


$
8,665


$
139,893International Offshore


6,469



46,246



390,732Inland


758



9,886



39,739Domestic Liftboats


9,987



11,025



12,362International Liftboats


7,470



15,717



8,302Delta Towing


927



248



4,125Corporate


314







7,200Total Company

$
37,058


$
91,787


$
602,353     (a)
    
    Includes the purchase of Hercules 350, Hercules 262and Hercules 261as well as related equipment (See
    Note 4).    Year Ended December 31,2010


2009


2008Operating Revenue:United States

$
248,234


$
258,868


$
697,930Saudi Arabia


103,712



109,256



371India


130,533



122,016



93,544Mexico


21,240



77,245



90,815Nigeria


97,163



75,016



83,141Malaysia


47,071



47,006



17,367Other(a)


9,527



53,444



128,639Total

$
657,480


$
742,851


$
1,111,807   As of December 31,2010


2009Long-Lived Assets:United States

$
971,640


$
1,122,294Saudi Arabia


289,125



311,365India


136,495



147,497Mexico


9,365



50,728Nigeria


106,565



115,656Malaysia


53,678



58,965Other(a)


99,427



149,557Total

$
1,666,295


$
1,956,062  105




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (a)
    
    Other represents countries in which we operate that individually
    had operating revenue or long-lived assets representing less
    than 4% of total operating revenue or total long-lived assets.  18.
    Commitments
    and Contingencies  Operating
    Leases
    Years Ended December 31,2011

$
4,1742012


2,4042013


2,0992014


2,0422015


2,078Thereafter


4,266Total

$
17,063     Legal
    Proceedings
  450-20, Contingencies  Loss Contingencies
      Robert E. Aaron et al. vs. Phillips 66 Company et al. Circuit
    Court, Second Judicial District, Jones County,
    Mississippi.
 106




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Insurance
       107




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Control-of-well
  knock-for-knock clean-up
    Surety
    Bonds, Bank Guarantees and Unsecured Letters of
    Credit
   108




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Sales
    Tax Audits
    19.
    Unaudited
    Interim Financial Data    Quarter EndedMarch 31


June 30


September 30


December 31(a)2010Revenue

$
150,849


$
165,895


$
168,484


$
172,252Operating Loss


(20,344
)


(5,574
)


(1,412
)


(117,830
)Net Loss

$
(15,956
)

$
(18,984
)

$
(15,061
)

$
(84,593
)Net Loss Per Share:Basic

$
(0.14
)

$
(0.17
)

$
(0.13
)

$
(0.74
)Diluted


(0.14
)


(0.17
)


(0.13
)


(0.74
)     (a)
    
    Includes $125.1 million in impairment of property and
    equipment charges (See Notes 1 and 12).  109




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Quarter EndedMarch 31


June 30(a)


September 30


December 31(b)2009Revenue

$
223,491


$
183,691


$
159,262


$
176,407Operating Income (Loss)


9,109



(25,829
)


(32,712
)


(42,714
)Loss from Continuing Operations


(4,511
)


(11,787
)


(46,970
)


(26,881
)Income (Loss) from Discontinued Operation, Net of Taxes


(433
)


(242
)


(1,290
)


380Net Loss

$
(4,944
)

$
(12,029
)

$
(48,260
)

$
(26,501
)Basic Loss Per Share:Loss from Continuing Operations

$
(0.05
)

$
(0.13
)

$
(0.48
)

$
(0.23
)Income (Loss) from Discontinued Operation


(0.01
)


(0.01
)


(0.02
)


Net Loss

$
(0.06
)

$
(0.14
)

$
(0.50
)

$
(0.23
)Diluted Loss Per Share:Loss from Continuing Operations

$
(0.05
)

$
(0.13
)

$
(0.48
)

$
(0.23
)Income (Loss) from Discontinued Operation


(0.01
)


(0.01
)


(0.02
)


Net Loss

$
(0.06
)

$
(0.14
)

$
(0.50
)

$
(0.23
)     (a)
    
    Includes approximately $26.9 million of impairment charges
    related to the write-down of Hercules 110to fair value
    less costs to sell during the second quarter of 2009 (See
    Notes 5 and 12). The sale was completed in August 2009.(b)
    
    Includes an allowance for doubtful accounts receivable of
    approximately $26.8 million as of December 31, 2009,
    related to a customer in West Africa that was contracted to
    utilize one rig in the Companys International Offshore
    segment, a non-cash charge of approximately $7.3 million to
    fully impair the related deferred mobilization and contract
    preparation costs, partially offset by a $2.5 million
    reduction in previously accrued contract related operating costs
    that are not expected to be settled if the receivable is not
    collected.  20.
    Related
    Parties    
    The Companys Chairman of the Board of Directors is a
    Senior Advisor to Lime Rock Partners, who owns a controlling
    interest in IDM Group, Ltd. (Cyprus) who purchased Louisiana
    Electric Rig Services, Inc., an equipment manufacturing and
    service company, and Southwest Oilfield Products, Inc., an
    oilfield equipment manufacturing company, in December 2008 and
    June 2008, respectively, and who holds an investment interest in
    Allis-Chalmers Energy Inc., an oilfield equipment and services
    company, and Tesco Corporation, an oilfield equipment and
    services company. In addition, the Chairman was a member of the
    Board of Directors for
    T-3 Energy
    Services, Inc., an oil field equipment and services company. 110




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    Another member of the Companys Board of Directors serves
    on the Board of Directors for Peregrine Oil & Gas LP,
    an exploration and production company, and is the Chairman of
    the Board for Carrizo Oil & Gas, Inc., an exploration
    and production company. In addition, another of the
    Companys directors serves on the Board of Directors for
    Carrizo Oil & Gas, Inc.
    Another member of the Companys Board of Directors serves
    as Chief Executive Officer and Chairman of Technip, a project
    management, engineering and construction company.
    A member of the Companys Board of Directors is a member of
    the Board of Directors of HCC Insurance Holdings, a specialty
    insurance group.
    The Company holds a three percent investment in each of
    Hall-Houston Exploration II, L.P. and
    Hall-Houston
    Exploration III, L.P., exploration and production funds.
    In January 2011, the Company paid $10 million to purchase
    5.0 million shares, an investment in approximately eight
    percent of the total outstanding equity of a new entity
    incorporated in Luxembourg, Discovery Offshore S.A.
    (Discovery Offshore). Two of the Companys
    officers are on the Board of Directors of Discovery Offshore.  21.
    Subsequent
    Events  Investment
       111




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##### Table of Contents



HERCULES
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Alliance
    Agreement
    Asset
    Purchase Agreement
        Credit
    Agreement Amendment
   112




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
      Managements
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f)
      Item 9B.
    Other
    Information   113




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##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Code of
    Business Conduct and Ethical Practices
  www.herculesoffshore.com. www.herculesoffshore.com
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Financial Statements
  Consolidated Financial Statement Schedule on
    page 119 of this Report.
  The Exhibits of the Company listed below in
    Item 15(b)
 114




---



##### Table of Contents



Exhibits
  ExhibitNumber



Description1
.1



Underwriting Agreement, dated September 24, 2009, by and
    between Hercules Offshore, Inc. and Morgan Stanley &
    Co. Incorporated and UBS Securities LLC, as representatives of
    the underwriters named in Schedule A thereto (incorporated
    by reference to Exhibit 1.1 to Hercules Current
    Report on
    Form 8-K
    dated September 30, 2009).2
.1



Asset Purchase Agreement, dated February 11, 2011, by and
    between Hercules Offshore, Inc., SD Drilling LLC and
    Seahawk Drilling, Inc., Seahawk Global Holdings LLC, Seahawk
    Mexico Holdings LLC, Seahawk Drilling Management LLC, Seahawk
    Drilling LLC, Seahawk Offshore Management LLC, Energy Supply
    International LLC and Seahawk Drilling USA, LLC (incorporated by
    reference to Exhibit 2.1 to Hercules Current Report
    on
    Form 8-K
    dated February 15, 2011 (File No. 0-51582)).2
.2



Plan of Conversion (incorporated by reference to
    Exhibit 2.1 to Hercules Registration Statement on
    Form S-1
    (Registration
    No. 333-126457),
    as amended (the
    S-1
    Registration Statement), originally filed on July 8,
    2005).2
.3



Amended and Restated Agreement and Plan of Merger, dated
    effective as of March 18, 2007, by and among Hercules, THE
    Hercules Offshore Drilling Company LLC and TODCO (incorporated
    by reference to Annex A to the Joint Proxy/Statement
    Prospectus included in Part I of Hercules
    Registration Statement on
    Form S-4
    (Registration
    No. 333-142314),
    as amended (the
    S-4
    Registration Statement), originally filed April 24,
    2007).3
.1



Certificate of Incorporation of Hercules (incorporated by
    reference to Exhibit 3.1 to Hercules Current Report
    on
    Form 8-K
    dated November 1, 2005 (File
    No. 0-51582)
    (the 2005
    Form 8-K)).3
.2



Amended and Restated Bylaws (effective December 31, 2009)
    (incorporated by reference to Exhibit 3.1 to Hercules
    Current Report on
    Form 8-K
    dated December 8, 2009).4
.1



Form of specimen common stock certificate (incorporated by
    reference to Exhibit 4.1 to the
    S-1
    Registration Statement).4
.2



Rights Agreement, dated as of October 31, 2005, between
    Hercules and American Stock Transfer &
    Trust Company, as rights agent (incorporated by reference
    to Exhibit 4.1 to the 2005
    Form 8-K).4
.3



Amendment No. 1 to Rights Agreement, dated as of
    February 1, 2008, between Hercules and American Stock
    Transfer & Trust Company, as rights agent.4
.4



Certificate of Designations of Series A Junior
    Participating Preferred Stock (incorporated by reference to
    Exhibit 4.2 to the 2005
    Form 8-K).4
.5



Credit Agreement dated as of July 11, 2007 among Hercules,
    as borrower, its subsidiaries party thereto, as guarantors, UBS
    AG, Stamford Branch, as issuing bank, administrative agent and
    collateral agent, Amegy Bank National Association and Comerica
    Bank, as co-syndication agents, Deutsche Bank AG Cayman Islands
    Branch and Jefferies Finance LLC, as co-documentation agents,
    and the lenders party thereto (incorporated by reference to
    Exhibit 10.1 to the Current Report on
    Form 8-K
    dated July 11, 2007 (File
    No. 0-51582)).
    Hercules and its subsidiaries are parties to several debt
    instruments that have not been filed with the SEC under which
    the total amount of securities authorized does not exceed 10% of
    the total assets of Hercules and its subsidiaries on a
    consolidated basis. Pursuant to paragraph 4(iii)(A) of
    Item 601(b) of
    Regulation S-K,
    Hercules agrees to furnish a copy of such instruments to the SEC
    upon request.4
.6



Indenture, dated as of June 3, 2008, by and between the
    Company and the Trustee (incorporated by reference to
    Exhibit 4.1 to Hercules Current Report on
    Form 8-K
    dated June 3, 2008 (File
    No. 0-51582)).4
.7



Form of Note (included in Exhibit 4.6).4
.8



Amendment No. 2 dated as of July 23, 2009, to the
    Credit Agreement dated July 11, 2007, among Hercules
    Offshore, Inc., as borrower, its subsidiaries party thereto, as
    guarantors, and UBS AG, Stamford Branch, as issuing bank,
    administrative agent and collateral agent, and the lenders party
    thereto (incorporated by reference to Exhibit 4.1 to
    Hercules Quarterly Report on
    Form 10-Q
    dated July 29, 2009). 115




---



##### Table of Contents



ExhibitNumber



Description4
.9



Indenture dated as of October 20, 2009, by and among
    Hercules Offshore, Inc., the Guarantors named therein and U.S.
    Bank National Association as Trustee and Collateral Agent
    (incorporated by reference to Exhibit 4.1 to Hercules
    Current Report on
    Form 8-K
    dated October 26, 2009).4
.10



Form of 10.50% Senior Secured Note due 2017 (included in
    Exhibit 4.9).4
.11



Security Agreement dated as of October 20, 2009, by and
    among Hercules Offshore, Inc. and the Guarantors party thereto
    and U.S. Bank National Association as Collateral Agent
    (incorporated by reference to Exhibit 4.3 to Hercules
    Current Report on
    Form 8-K
    dated October 26, 2009).4
.12



Registration Rights Agreement dated as of October 20, 2009,
    by and among Hercules Offshore, Inc., the Guarantors named
    therein and the Initial Purchasers party thereto (incorporated
    by reference to Exhibit 4.4 to Hercules Current
    Report on
    Form 8-K
    dated October 26, 2009).4
.13



Form of Indenture between Hercules and the trustee thereunder
    (the Senior Trustee) in respect of senior debt
    securities (incorporated by reference to Exhibit 4.7 to
    Hercules Registration Statement on
    Form S-3
    filed December 3, 2010).4
.14



Form of Indenture between Hercules and the trustee thereunder
    (the Subordinated Trustee) in respect of
    subordinated debt securities (incorporated by reference to
    Exhibit 4.8 to Hercules Registration Statement on
    Form S-3
    filed December 3, 2010).4
.15



Amendment No. 3 to Credit Agreement, dated as of
    March 3, 2011, by and among the Company, as borrower, its
    subsidiaries party thereto, as guarantors, the Issuing Banks (as
    defined in the Credit Agreement) party thereto, and UBS AG,
    Stamford Branch, as administrative agent for the Lenders and as
    collateral agent and instructing beneficiary under the Mortgage
    Trust Agreement (as defined in the Credit Agreement) for
    the Secured Parties (as defined in the Credit Agreement)
    (incorporated by reference to Exhibit 10.1 to
    Hercules Current Report on
    Form 8-K
    dated March 8, 2011) (File No. 0-51582).10
.1



Executive Employment Agreement dated as of December 15,
    2008, between Hercules and John T. Rynd (incorporated by
    reference to Exhibit 10.2 to the 2008
    Form 8-K).10
.2



Executive Employment Agreement dated as of June 20, 2008,
    between Hercules Offshore, Inc. and John T. Rynd (incorporated
    by reference to Exhibit 10.2 to Hercules Current
    Report on
    Form 8-K
    dated June 23, 2008 (File No. 0-51582)).10
.3



Employment Agreement, dated as of December 15, 2008, by and
    between Hercules and Lisa W. Rodriguez (incorporated by
    reference to Exhibit 10.3 to the 2008
    Form 8-K).10
.4



Executive Employment Agreement, dated December 15, 2008,
    between Hercules and James W. Noe (incorporated by reference to
    Exhibit 10.4 to the 2008
    Form 8-K).10
.5



Executive Employment Agreement, dated December 15, 2008,
    between Hercules and Terrell L. Carr (incorporated by reference
    to Exhibit 10.5 to the 2008
    Form 8-K).10
.6



Executive Employment Agreement, dated December 15, 2008,
    between Hercules and Todd Pellegrin (incorporated by reference
    to Exhibit 10.6 to the 2008
    Form 8-K).10
.7



Executive Employment Agreement, dated December 15, 2008,
    between Hercules and Troy L. Carson (incorporated by reference
    to Exhibit 10.7 to the 2008
    Form 8-K).10
.8



Executive Employment Agreement, dated December 15, 2008,
    between Hercules and Stephen M. Butz (incorporated by reference
    to Exhibit 10.1 to Hercules Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2010 (File
    No. 0-51582)).10
.9



Amendment to Executive Employment Agreement for Lisa W.
    Rodriguez, dated May 7, 2010 (incorporated by reference to
    Exhibit 10.2 to Hercules Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2010 (File
    No. 0-51582)).10
.10



Amendment to Executive Employment Agreement for Stephen M. Butz,
    dated May 7, 2010 (incorporated by reference to
    Exhibit 10.3 to Hercules Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2010 (File
    No. 0-51582)).10
.11



Amendment to Executive Employment Agreement for Troy L. Carson,
    dated May 7, 2010 (incorporated by reference to
    Exhibit 10.4 to Hercules Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2010 (File
    No. 0-51582)). 116




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##### Table of Contents



ExhibitNumber



Description10
.12



Expatriate Employment Agreement, dated November 1, 2006,
    between Hercules and Don P. Rodney (incorporated by reference to
    Exhibit 10.2 to Hercules Current Report on
    Form 8-K
    dated October 31, 2006 (File
    No. 0-51582)).10
.13



Extension Letter between Hercules and Don P. Rodney, dated
    December 31, 2008 (incorporated by reference to
    Exhibit 10.1 to Hercules Current Report on
    Form 8-K
    dated January 6, 2009 (File
    No. 0-51582)).*10
.14



Extension Letter between Hercules and Don P. Rodney, dated
    November 1, 2010.10
.15



Waiver of Executive Employment Agreement between the Company and
    John T. Rynd, dated April 27, 2009 (incorporated by
    reference to Exhibit 10.1 to Hercules Current Report
    on
    Form 8-K
    dated April 28, 2009).10
.16



Waiver of Executive Employment Agreement between the Company and
    Lisa W. Rodriguez, dated April 27, 2009 (incorporated by
    reference to Exhibit 10.2 to Hercules Current Report
    on
    Form 8-K
    dated April 28, 2009).10
.17



Waiver of Executive Employment Agreement between the Company and
    James W. Noe, dated April 27, 2009 (incorporated by
    reference to Exhibit 10.3 to Hercules Current Report
    on
    Form 8-K
    dated April 28, 2009).10
.18



Waiver of Executive Employment Agreement between the Company and
    Terrell L. Carr, dated April 27, 2009 (incorporated by
    reference to Exhibit 10.4 to Hercules Current Report
    on
    Form 8-K
    dated April 28, 2009).10
.19



Waiver of Executive Employment Agreement between the Company and
    Todd A. Pellegrin, dated April 27, 2009 (incorporated by
    reference to Exhibit 10.5 to Hercules Current Report
    on
    Form 8-K
    dated April 28, 2009).10
.20



Form of Indemnification Agreement (incorporated by reference to
    Exhibit 10.1 to Hercules Current Report on
    Form 8-K
    dated April 7, 2006 (File
    No. 0-51582)).10
.21



Amended and Restated Hercules Offshore 2004 Long-Term Incentive
    Plan (incorporated by reference to Annex E to the Joint
    Proxy Statement/Prospectus included in Part I of the
    S-4
    Registration Statement).10
.22



First Amendment to Hercules Offshore Inc. Amended and Restated
    2004 Long-Term Incentive Plan (incorporated by reference to
    Exhibit 10.4 to Hercules Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2008 (File
    No. 0-51582)).10
.23



Form of Stock Option Award Agreement (incorporated by reference
    to Exhibit 10.1 to Hercules Current Report on
    Form 8-K
    dated March 3, 2009).10
.24



Form of Stock Option Agreement.10
.25



Form of Restricted Stock Agreement for Employees and Consultants.10
.26



Form of Restricted Stock Agreement for Directors (incorporated
    by reference to Exhibit 10.14 to Hercules Annual
    Report on
    Form 10-K
    for the year ended December 31, 2006 (File
    No. 0-51582)).*10
.27



Performance Award Agreement, dated January 1, 2011, between
    Hercules and John T. Rynd.*10
.28



Performance Award Agreement, dated January 1, 2011, between
    Hercules and John T. Rynd.*10
.29



Special Retention Award Agreement, dated January 1, 2011,
    between Hercules and John T. Rynd.10
.30



Hercules Offshore, Inc. Amended and Restated Deferred
    Compensation Plan.10
.31



Registration Rights Agreement, dated as of July 8, 2005,
    between Hercules and the holders listed on the signature page
    thereto (incorporated by reference to Exhibit 10.9 to
    Hercules Annual Report on
    Form 10-K
    for the year ended December 31, 2005 (File
    No. 0-51582)).10
.32



Increase Joinder, dated as of April 28, 2008, among
    Hercules, as borrower, its subsidiaries party thereto, the
    incremental lenders and other lenders party thereto, and UBS AG
    Stamford Branch, as administrative agent for the lenders party
    thereto (incorporated by reference to Exhibit 10.1 to
    Hercules Current Report on
    Form 8-K
    dated April 30, 2008 (File
    No. 0-51582)). 117




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##### Table of Contents



ExhibitNumber



Description10
.33



Purchase Agreement, dated May 28, 2008, by and between the
    Company and Goldman, Sachs & Co., Banc of America
    Securities LLC and UBS Securities LLC, as representatives of the
    Initial Purchasers (incorporated by reference to
    Exhibit 10.1 to Hercules Current Report on
    Form 8-K
    dated June 3, 2008 (File No. 0-51582)).10
.34



Asset Purchase Agreement, dated April 3, 2006, by and
    between Hercules Liftboat Company, LLC and Laborde Marine Lifts,
    Inc. (incorporated by reference to Exhibit 10.1 to
    Hercules Current Report on
    Form 8-K
    dated April 3, 2006 (File
    No. 0-51582)).10
.35



Asset Purchase Agreement, dated as of August 23, 2006, by
    and among Hercules International Holdings, Ltd., Halliburton
    West Africa Ltd. and Halliburton Energy Services Nigeria Limited
    (incorporated by reference to Exhibit 10.1 to
    Hercules Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2006 (File
    No. 0-51582)).10
.36



First Amendment to Asset Purchase Agreement, dated as of
    November 1, 2006, by and among Hercules International
    Holdings, Ltd., Hercules Oilfield Services Ltd., Halliburton
    West Africa Ltd. and Halliburton Energy Services Nigeria Limited
    (incorporated by reference to Exhibit 10.2 to
    Hercules Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2006 (File
    No. 0-51582)).10
.37



Earnout Agreement, dated November 7, 2006, by and among
    Hercules Oilfield Services, Ltd., Halliburton West Africa Ltd.
    and Halliburton Energy Services Nigeria Limited (incorporated by
    reference to Exhibit 10.3 to Hercules Current Report
    on
    Form 8-K
    dated November 7, 2006 (File
    No. 0-51582)).10
.38



Basic Form of Exchange Agreement between the Company and certain
    holders of our 3.375% Convertible Senior Notes due 2038
    (incorporated by reference to Exhibit 10.1 to
    Hercules Current Report on
    Form 8-K
    dated June 18, 2009).10
.39



Purchase Agreement, dated October 8, 2009, by and among
    Hercules Offshore, Inc., the guarantors party thereto, UBS
    Securities LLC, Banc of America Securities LLC, Deutsche Bank
    Securities Inc. and Morgan Stanley & Co. Incorporated,
    as representatives of the initial purchasers named in
    Schedule I thereto (incorporated by reference to
    Exhibit 10.1 to Hercules Current Report on
    Form 8-K
    dated October 14, 2009).10
.40



Intercreditor Agreement dated as of October 20, 2009, among
    Hercules Offshore, Inc., the subsidiaries party thereto as
    guarantors, UBS AG, Stamford Branch, as Bank Collateral Agent
    and U.S. Bank National Association, as Notes Collateral Agent
    (incorporated by reference to Exhibit 10.1 to
    Hercules Current Report on
    Form 8-K
    dated October 26, 2009).*21
.1



Subsidiaries of Hercules.*23
.1



Consent of Ernst & Young LLP.*31
.1



Certification of Chief Executive Officer of Hercules pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*31
.2



Certification of Chief Financial Officer of Hercules pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*32
.1



Certification of the Chief Executive Officer and the Chief
    Financial Officer of Hercules pursuant to Section 901 of
    the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith.
    
    Compensatory plan, contract or arrangement.  Financial Statement Schedules
  Valuation and Qualifying Accounts and Allowances
 118




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##### Table of Contents



SCHEDULE II
    HERCULES OFFSHORE, INC. AND SUBSIDIARIES
    VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
    FOR THE THREE YEARS ENDED DECEMBER 31, 2010
  Balance at

Additions



Balance atBeginning

Charged to





End ofDescription

of Period

Expense, Net

Adjustments

Deductions

Period(In thousands)Year Ended December 31, 2010:Allowance for uncollectible accounts receivable

$
38,522


$
182


$



$
(8,906
)

$
29,798Year Ended December 31, 2009:Allowance for uncollectible accounts receivable

$
7,756


$
32,912


$
78


$
(2,224
)

$
38,522Year Ended December 31, 2008:Allowance for uncollectible accounts receivable

$
634


$
6,167


$
965


$
(10
)

$
7,756    119




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##### Table of Contents



SIGNATURES
      By:
    /s/  JOHN
    T. RYND  John T. Rynd
 Chief Executive Officer and President
    Signatures

Title/s/  John
    T. RyndJohn
    T. Rynd

Chief Executive Officer and President
    (Principal Executive Officer)/s/  Stephen
    M. ButzStephen
    M. Butz

Senior Vice President, Chief Financial Officer and Treasurer
    (Principal Financial Officer)/s/  Troy
    L. CarsonTroy
    L. Carson

Chief Accounting Officer
    (Principal Accounting Officer)/s/  Thomas
    R. Bates, Jr.Thomas
    R. Bates, Jr.

Chairman of the Board/s/  Thomas
    N. AmonettThomas
    N. Amonett

Director/s/  Suzanne
    V. BaerSuzanne
    V. Baer

Director/s/  Thomas
    M HamiltonThomas
    M Hamilton

Director/s/  Thomas
    J. MadonnaThomas
    J. Madonna

Director/s/  F.
    Gardner ParkerF.
    Gardner Parker

Director/s/  Thierry
    PilenkoThierry
    Pilenko

Director/s/  Steven
    A. WebsterSteven
    A. Webster

Director  120