HORNBECK OFFSHORE SERVICES INC /LA - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _____ TO _____

COMMISSION FILE NUMBER 333-69826

HORNBECK OFFSHORE SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 72-1375844 4424
(State or other jurisdiction of (I.R.S. Employer Identification Number) (Primary Standard Industrial
incorporation or organization) Classification Code Number)

414 NORTH CAUSEWAY BLVD
MANDEVILLE, LA 70448

(Address of Principal Executive Offices) (Zip Code)

(985) 727-2000

(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]

The total number of shares of common stock, par value $.01 per share,
outstanding as of August 14, 2002 was 30,301,036.

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HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2002

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION..........................................................................................1
Item 1 - Financial Statements..................................................................................1
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................8
General .............................................................................................8
Critical Accounting Policies..........................................................................9
Results of Operations.................................................................................9
Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001........................10
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001............................12
Liquidity and Capital Resources......................................................................13
Contractual Obligations and Commercial Commitments...................................................15
Inflation............................................................................................15
Forward Looking Statements...........................................................................15
Item 3 - Quantitative and Qualitative Disclosures About Market Risk...........................................16

PART II - OTHER INFORMATION............................................................................................17
Item 1 - Legal Proceedings....................................................................................17
Item 2 - Changes in Securities and Use of Proceeds............................................................17
Item 3 - Defaults Upon Senior Securities......................................................................17
Item 4 - Submission of Matters to a Vote of Security Holders..................................................17
Item 5 - Other Information....................................................................................18
Recent Developments..................................................................................18
Item 6 - Exhibits and Reports on 8-K..........................................................................20

SIGNATURES ............................................................................................................22

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PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS AND SHARES IN THOUSANDS)

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

1

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)

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

2

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

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

3

HORNBECK OFFSHORE SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS AND SHARES IN THOUSANDS)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements do not include
certain information and note disclosures required by accounting principles
generally accepted in the United States. In the opinion of management, all
adjustments necessary for a fair presentation of the interim financial
statements have been included and consist only of normal recurring items. The
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Hornbeck Offshore Services, Inc. (formerly
known as HORNBECK-LEEVAC Marine Services, Inc.) and subsidiaries (the "Company")
Annual Report on Form 10-K for the year ended December 31, 2001. The interim
financial statements and notes are presented as permitted by instructions to
Form 10-Q and Article 10 of Regulation S-X. The results of operations for the
three and six month periods ended June 30, 2002 and 2001 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2002. Certain amounts reported in prior periods have been reclassified to
conform to the 2002 presentation.

2. RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standards Statement (SFAS) No. 142 "Goodwill and Other
Intangible Assets." Under SFAS 142, goodwill and indefinite-lived intangible
assets are no longer amortized but are reviewed for impairment annually, or more
frequently if circumstances indicate potential impairment. Separable intangible
assets that are not deemed to have an indefinite life will continue to be
amortized over their useful lives. For goodwill and indefinite-lived intangible
assets acquired prior to July 1, 2001, goodwill continued to be amortized
through 2001 at which time amortization ceased and a transitional goodwill
impairment test was performed. Any impairment charges resulting from the initial
application of the new rules will be classified as a cumulative change in
accounting principle. The initial transition evaluation was completed by June
30, 2002, which is within the six month transition period allowed by the new
standard. The Company's goodwill balances were determined not to be impaired.
Goodwill amortization for each of the years ended December 31, 2001, 2000 and
1999 was $126. The following table presents the Company's net income as reported
in the unaudited consolidated financial statements compared to that which would
have been reported had the Company adopted SFAS 142 as of January 1, 2001.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS 145 requires that gains or losses recorded from the
extinguishment of debt that do not meet the criteria of Accounting Principles
Board (APB) Opinion No. 30 should not be presented as extraordinary items. This
statement is effective for fiscal years beginning after May 15, 2002 as it
relates to the reissued FASB Statement No. 4, with earlier application
permitted. Any gain or loss on extinguishment of debt that was classified as an
extraordinary item in prior periods presented that does not meet the criteria in
APB 30 for classification as an extraordinary item should be reclassified. The
Company has elected not to adopt this statement early.

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3. LONG-TERM DEBT

On July 24, 2001, the Company issued $175,000 in principal amount of 10
5/8% Senior Notes (Senior Notes) and realized net proceeds of approximately
$165,000, a substantial portion of which was used to repay and fully extinguish
the then existing credit facilities. The Senior Notes mature on August 1, 2008
and require semi-annual interest payments at an annual rate of 10 5/8 percent on
February 1 and August 1 of each year until maturity, with the first payment due
on February 1, 2002. The effective interest rate on the Senior Notes is 11.18
percent. No principal payments are due until maturity. The Senior Notes are
unsecured senior obligations and rank equally in right of payment with other
existing and future senior indebtedness and senior in right of payment to any
subordinated indebtedness incurred by the Company in the future. The Senior
Notes are guaranteed by the Company's subsidiaries. The Company may, at its
option, redeem all or part of the Senior Notes from time to time at specified
redemption prices and subject to certain conditions required by the Indenture.
The Company is permitted under the terms of the Indenture to incur additional
indebtedness in the future, provided that certain financial conditions set forth
in the Indenture are satisfied by the Company. As of June 30, 2002, the Company
was permitted to incur a minimum of $25.0 million of additional indebtedness.

The Company has a $50,000 senior secured revolving line of credit (the
Revolver) that was effective December 31, 2001. The Company's borrowings under
this facility will initially be limited to $25,000 unless the Company has
obtained the lender's concurrence to borrow in excess of $25,000. The indenture
governing the Senior Notes requires the Company to meet a specified consolidated
interest coverage ratio test. The level of permitted borrowings under this
facility initially will be limited to $25,000 plus 15 percent of the increase in
the Company's consolidated net tangible assets over the consolidated net
tangible assets as of March 31, 2001 determined on a pro forma basis to reflect
the Spentonbush/Red Star Group acquisition. Unused commitment fees are payable
quarterly at the annual rate of three-eighths of one percent on the revolving
line of credit that expires December 31, 2004, under which it may draw to meet
short-term liquidity requirements or for other purposes. The Company believes
the line will be renewed at that time. Amounts drawn under the line are payable
upon demand. At June 30, 2002, there were no borrowings under the line.

The Company issued detachable warrants to purchase 11,905 shares of common
stock in connection with a previously maintained credit facility. The warrants
were assigned an estimated market value of $500 at issuance. The warrants for
the purchase of 10,500 shares of common stock were exercisable with an exercise
price of $1.68 per share. The remaining warrants became exercisable only upon
the occurrence of an event of default under the credit facility, the Company
filing for bankruptcy or if the indebtedness under the credit facility was not
discharged in full by June 5, 2003. All of the warrants issued in connection
with establishment of the credit facility provided the holders with a put option
whereby the holders had the right, if the Company's stock was not publicly
traded by June 5, 2003 to require the Company to repurchase the warrants at
their fair market value. According to EITF Issue 88-9, Accounting for Put
Warrants, issued by the Emerging Issues Task Force and supplemented by EITF
Issue 00-19, Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's own Stock, a company whose stock is not
publicly traded may elect to account for warrants that contain put options
either as a liability or as equity. As previously discussed, the Company
assigned a market value of $500 to the warrants at issuance based on the
relative fair value of the Facility C debt and the warrants. The $500 was
allocated to equity and the Company has been amortizing, through retained
earnings, the fair market value of the warrants through June 5, 2003, the first
date on which the put could have been exercised. The warrants were revalued each
period-end with changes in value accounted for prospectively. Had the Company
elected to account for the warrants as a liability rather than as equity, the
warrants would have been adjusted to their fair value at each period-end with
the fair value adjustment reported as a noncash adjustment to interest expense.
The Company has included this pro forma information in its consolidated
statements of operations. In the event of a completed and effective initial
public offering of the Company's stock, the Company's operating results would be
required to reflect the additional interest expense for each applicable period.
The Company repurchased and terminated all of the warrants for $14,500 in
October 2001. The repurchase of the warrants was funded by a private placement
of the Company's common stock for gross proceeds of $14,600. The remaining funds
were used for payment of expenses incurred in the offering.

5

Interest expense excludes capitalized interest of $1.2 million in the
second quarter of 2002, $0.8 million in the second quarter of 2001, $2.2 million
in the first six months of 2002 and $1.0 million in the first six months of
2001.

4. COMMITMENTS

In April 2002, the Company's Board of Directors approved the third
newbuild program for the Company to build eight deepwater offshore supply
vessels. On May 1, 2002 following a competitive bidding process, a definitive
agreement was signed with LEEVAC Industries, LLC for the construction of the
first four vessels of this program, each of which will be a 240' ED-class
vessel. LEEVAC Industries, LLC is affiliated with one of the Company's directors
who was also the former Chairman of the Board and Chief Executive Officer. The
contract provides for the delivery of all four vessels during 2003. Aggregate
construction costs for the first four vessels, before allocation of construction
period interest, are expected to be approximately $53.0 million. Construction
bids from shipyards for the last four vessels of this new build program are
currently being evaluated.

At June 30, 2002, the Company was also committed under a vessel
construction contract with another shipyard for the ongoing construction of two
265' class offshore supply vessels. At that date, the remaining amount expected
to be expended to complete construction under this contract was approximately $6
million to $7 million. We are currently in negotiations with the shipyard
regarding contractual liquidated damages relating to construction delays and
with respect to certain change orders.

The Company is obligated under the terms of both contracts to remit funds
to the shipyards based on vessel construction milestones, the timing of which
are subject to change during vessel construction.

5. SEGMENT INFORMATION

The Company provides marine transportation services through two business
segments. The Company operates newly constructed deepwater offshore supply
vessels primarily in the Gulf of Mexico through its offshore supply vessel
segment. The offshore supply vessels principally support offshore drilling and
production operations in the deepwater regions of the Gulf of Mexico by
transporting cargo to offshore drilling rigs and production facilities and
providing support for specialty services. The tug and tank barge segment
operates ocean-going tugs and tank barges in the northeastern United States and
in Puerto Rico. The ocean-going tugs and tank barges provide coastwise
transportation of refined and bunker grade petroleum products from one port to
another. The following table shows reportable segment information prepared on
the same basis as the Company's consolidated financial statements.

6

7

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following management's discussion and analysis should be read together
with our unaudited consolidated financial statements and notes to unaudited
consolidated financial statements and our Annual Report on Form 10-K for the
year ended December 31, 2001. In this Form 10-Q, "company," "we," "us" and "our"
refer to Hornbeck Offshore Services, Inc. and its subsidiaries, except as
otherwise indicated.

GENERAL

We own and operate deepwater offshore supply vessels (OSVs) in the Gulf of
Mexico and ocean-going tugs and tank barges in the northeastern United States,
primarily New York Harbor, and in Puerto Rico. We charter our OSVs on a dayrate
basis, under which the customer pays us a specified dollar amount for each day
during the term of the contract, pursuant to either fixed time charters or spot
market charters. A fixed time charter is a contract with a term of at least one
year in which the charterer obtains the right to direct the movements and
utilization of the vessel in exchange for payment of a specified dayrate,
generally paid monthly, but the vessel owner retains operational control over
the vessel. Typically, the owner fully equips the vessel and is responsible for
normal operating expenses, repairs, wages and insurance, while the charterer is
responsible for voyage expenses, such as fuel, port and stevedoring expenses.
Spot market charters in the OSV industry are generally time charter contracts
with either relatively short, indefinite terms or fixed terms of less than one
year. Generally, the vessel owner absorbs crew, insurance and repair and
maintenance costs in connection with operation of OSVs pursuant to spot market
charters and customers absorb other direct operating costs.

All of our OSVs are currently operating under time charters, including six
that are chartered under contracts with expiration dates ranging from April 2003
through November 2006. Our long-term contracts for our OSVs are consistent with
those used in the industry and are either fixed for a term of months or years or
are tied to the duration of a long-term contract for a drilling rig for which
the vessel provides services. These contracts generally contain, among others,
provisions governing insurance, reciprocal indemnifications, performance
requirements and, in certain instances, dayrate escalation terms and renewal
options.

While OSVs service existing oil and gas production platforms as well as
exploration and development activities, incremental OSV demand depends primarily
upon the level of drilling activity, which can be influenced by a number of
factors, including oil and natural gas prices and drilling budgets of
exploration and production companies. As a result, utilization and dayrates have
historically been tied to oil and natural gas prices and drilling activity,
although the greater investment of time and expense associated with deepwater
production and the consequent long-term nature of deepwater OSV contracts have
diminished the significance of this relationship.

Generally, we operate an ocean-going tug and tank barge together as a "tow"
to transport petroleum products between U.S. ports and along the coast of Puerto
Rico. We operate our tugs and tank barges under fixed time charters, spot market
charters, contracts of affreightment and consecutive voyage contracts. Spot
market charters in the tug and tank barge industry are generally single-voyage
contracts of affreightment or time charter contracts with terms of less than one
year. A consecutive voyage contract is a contract for the transportation of
cargo for a specified number of voyages between designated ports over a fixed
period of time under which we are paid based on the volume of products we
deliver per voyage. Under consecutive voyage contracts, in addition to earning
revenues for volumes delivered, we earn a standby hourly rate between charters.
One of our tank barges has been chartered to a third party under a bareboat
charter. A bareboat charter is a "net lease" in which the charterer takes full
operational control over the vessel for a specified period of time for a
specified daily rate that is generally paid monthly to the vessel owner. The
bareboat charterer is solely responsible for the operation and management of the
vessel and must provide its own crew and pay all operating and voyage expenses.

8

The primary drivers of demand for our tug and tank barge services are
population growth, the strength of the United States economy and changes in
weather patterns that affect consumption of heating oil and gasoline. The tug
and tank barge market, in general, is marked by steady demand over time. We
believe that demand for refined petroleum products and crude oil will remain
steady or gradually increase for the foreseeable future.

Our operating costs are primarily a function of fleet size and utilization
levels. The most significant direct operating costs are wages paid to vessel
crews, maintenance and repairs and marine insurance. Because most of these
expenses remain payable regardless of vessel utilization, our direct operating
costs as a percentage of revenues may fluctuate considerably with changes in
dayrates and utilization.

In addition to the operating costs described above, we incur fixed charges
related to the depreciation of our fleet and costs for routine drydock
inspections and maintenance and repairs necessary to ensure compliance with
applicable regulations and to maintain certifications for our vessels with the
U.S. Coast Guard and various classification societies. The aggregate number of
drydockings and other repairs undertaken in a given period determines the level
of maintenance and repair expenses and marine inspection amortization charges.
We generally capitalize costs incurred for drydock inspection and regulatory
compliance and amortize such costs over the period between such drydockings,
typically 30 or 60 months.

Applicable maritime regulations require us to drydock our vessels twice in
a five-year period for inspection and routine maintenance and repair. If we
undertake a large number of drydockings in a particular fiscal period,
comparative results may be affected.

CRITICAL ACCOUNTING POLICIES

This Management's Discussion and Analysis of Financial Condition and
Results of Operations discusses our unaudited consolidated financial statements
included in this Form 10-Q, which have been prepared in accordance with
accounting principles generally accepted in the United States. In many cases,
the accounting treatment of a particular transaction is specifically dictated by
generally accepted accounting principles. In other circumstances, we are
required to make estimates, judgments and assumptions that we believe are
reasonable based upon information available. We base our estimates and judgments
on historical experience and various other factors that we believe to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions and conditions. Our significant accounting
policies are discussed in Note 2 to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2001.
There were no significant changes to our critical accounting policies as
reported in our Form 10-K for the year ended December 31, 2001 during the six
months ended June 30, 2002, except as discussed below.

Effective January 1, 2002, we adopted SFAS 142 and accordingly, have ceased
to amortize goodwill in 2002. In April 2002, the FASB issued SFAS 145, which
requires that gains or losses recorded from the extinguishment of debt that do
not meet the criteria of APB Opinion No. 30 should not be presented as
extraordinary items. This statement is effective for fiscal years beginning
after May 15, 2002, with earlier application permitted. We have elected not to
adopt SFAS 145 early. (Refer to Note 2 in the Notes to our unaudited
consolidated financial statements in this Form 10-Q for further discussion of
these recent accounting pronouncements.)

RESULTS OF OPERATIONS

The table below sets forth, by segment, the average dayrates and
utilization rates for our vessels and the average number of vessels owned during
the periods indicated. These offshore supply vessels and tug and tank barges
generate substantially all of our revenues and operating profit.

9

(1) Utilization rates are average rates based on a 365-day year. Vessels are
considered utilized when they are generating revenues.

(2) Average dayrates represent average revenue per day, which includes charter
hire and brokerage revenue, based on the number of days during the period
that the offshore supply vessels generated revenue.

(3) Average dayrates represent average revenue per day, including time
charters, brokerage revenue, revenues generated on a per-barrel-transported
basis, demurrage, shipdocking and fuel surcharge revenue, based on the
number of days during the period that the tank barges generated revenue.
For purposes of brokerage arrangements, this calculation excludes that
portion of revenue that is equal to the cost of in-chartering third party
equipment paid by customers.

THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001

Revenues. Revenues were $21.3 million for the three months ended June 30,
2002, as compared to $15.3 million for the same period in 2001, an increase of
$6.0 million or 39.2 percent. This increase in revenue is primarily the result
of the increase in the size of our fleet since April 2001. Our operating fleet
grew from 18 vessels at the end of the first quarter 2001 to 40 vessels at the
end of the second quarter 2002. The additional revenues generated by the 22 new
vessels accounted for a $7.4 million increase in revenue which was offset by a
$1.4 million decrease in revenues from our 18 vessels that were in service
during each of the quarters ended June 30, 2002 and 2001.

Revenues from our offshore supply vessel segment totaled $10.3 million for
the three months ended June 30, 2002, compared to $8.2 million for the same
period in 2001, an increase of $2.1 million or 25.6 percent. The increase in
segment revenue is primarily due to the addition of four deepwater offshore
supply vessels since April 2001. Our utilization rate was 95.9 percent for the
three months ended June 30, 2002, which was slightly lower than the 99.0 percent
we achieved in the same period of 2001. Our offshore supply vessel average
dayrate remained relatively constant at $11,597 in the second quarter of 2002
compared to $11,848 in the same period of 2001, a decrease of $251 or 2.1
percent. Utilization and dayrates were down slightly from the prior year quarter
due to a combination of lower spot rates in the second quarter 2002 versus the
year-ago quarter, and more 200' class vessels operating under long term time
charter agreements in the second quarter 2001 compared to the second quarter
2002. Spot market contracts are more susceptible to fluctuations in utilization
and day rates, particularly in soft market conditions, which we are currently
experiencing.

Revenues from our tug and tank barge segment totaled $11.0 million for the
three months ended June 30, 2002 compared to $7.1 million for the same period in
2001, an increase of $3.9 million or 54.9 percent. The segment revenue increase
is primarily due to increased average barge size and the

10

revenues generated by nine tugs and nine tank barges acquired on May 31, 2001.
The acquisition increased average fleet capacity in barrels from 678,012 to
1,130,727. Revenues for the three months ended June 30, 2002 included $0.9
million that was equal to the cost of in-chartering third party equipment paid
by customers compared to $0.2 million in the prior year quarter. Our utilization
rate decreased to 73.9 percent for the three months ended June 30, 2002 compared
to 84.4 percent for the same period in 2001. The decrease in utilization was
primarily the result of a change in contract mix from time charters to contracts
of affreightment, greater drydocking and repair activities, and the continued
adverse impact of the warm winter season and weak economic conditions
experienced in the northeastern United States since the second quarter 2001. Our
average dayrate increased to $9,511 for the three months ended June 30, 2002
compared to $9,095 for the same period of 2001. The $416 increase in dayrates
since the second quarter of last year was driven primarily by long term
contracts executed during the third quarter of 2001 at higher than average
dayrates due to favorable market conditions existing at that time. .We expect
continued downward pressure on our tank barge utilization, and on our dayrates,
until the current high levels of fuel inventories are consumed and normal
seasonal patterns resume.

Operating Expense. Our operating expense, including depreciation and
amortization, increased to $10.9 million for the quarter ended June 30, 2002 as
compared to $6.4 million in the same period in 2001, an increase of $4.5 million
or 70.3 percent. The increase in operating expense resulted primarily from the
addition of 22 vessels to the offshore supply vessel and tank barge fleets since
April 2001.

Operating expense for our offshore supply vessel segment increased to $4.5
million in the second quarter of 2002 compared to $2.8 million in the same
period of 2001, an increase of $1.7 million or 60.7 percent. This increase was
primarily the result of the HOS Innovator, BJ Blue Ray, hos Dominator and HOS
Brimstone being in service for substantially more days during the second quarter
of 2002 compared to the second quarter of 2001. Daily operating costs per vessel
for the second quarter of 2002 increased over the same period of 2001, primarily
due to the higher costs of operating larger vessels, including increased manning
requirements.

Operating expense for our tug and tank barge segment was $6.3 million for
the three months ended June 30, 2002 compared to $3.7 million for the same
period of 2001, an increase of $2.6 million or 70.3 percent. The operating
expense increase is primarily the result of the addition of nine tugs and nine
tank barges on May 31, 2001. Operating expense for the second quarter of 2002
included $0.8 million of the cost of in-chartering third party equipment paid by
customers compared to $0.1 million in the year ago quarter. Daily operating
costs per vessel, excluding in-chartering expenses, for the second quarter of
2002 remained fairly consistent with the same period of 2001.

General and Administrative Expense. Second-quarter 2002 general and
administrative expenses of $2.2 million remained fairly constant with the $2.4
million reported in the 2001 quarter. We expect these costs to increase for the
remainder of 2002 to accommodate our continued growth and increased reporting
obligations under federal securities laws.

Interest Expense. Interest expense was $3.9 million for the second quarter
of 2002 compared to $1.7 million in the same period of 2001, an increase of $2.2
million or 129.4 percent. The increase in interest expense resulted from the
refinancing of our conventional floating rate debt through the issuance of
Senior Notes in July 2001 with a higher fixed rate, and a higher average balance
of debt outstanding in the 2002 period. This increase was offset in part by the
capitalization of interest costs relating to new construction of approximately
$1.2 million in the second quarter of 2002 compared to $0.8 million in the same
period of 2001. The increase in capitalized construction period interest is
primarily due to a higher effective interest rate and average balance of
construction in progress outstanding associated with the construction of seven
offshore supply vessels during the second quarter of 2002 compared to that of
five vessels under construction during the same period of 2001.

Interest Income. Interest income was $0.2 million for the second quarter of
2002 was relatively constant compared to $0.3 for the same period of 2001.

11

Income Tax Expense. Our effective tax rate for the three months ended June
30, 2002 and 2001 was 38.0 percent. Our income tax expense primarily consists of
deferred taxes due to our federal net operating loss carryforwards, which were
approximately $8.8 million as of December 31, 2001, and available through 2017
to offset future taxable income. Our income tax rate is higher than the federal
statutory rate due primarily to expected state tax liabilities and items not
deductible for federal income tax purposes.

SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001

Revenues. Revenues were $44.1 million for the six months ended June 30,
2002, compared to $25.7 million for the same period in 2001, an increase of
$18.4 million or 71.6 percent. This increase in revenue is primarily the result
of the increase in the size of our fleet since April 2001. Our operating fleet
grew from 18 vessels at the end of the fourth quarter 2000 to 40 vessels at the
end of the second quarter 2002. The additional revenues generated by the 22 new
vessels accounted for a $18.5 million increase in revenue which was offset by a
$0.1 million decrease in revenues from our 18 vessels that were in service
during each of the six months ended June 30, 2002 and 2001.

Revenues from our offshore supply vessel segment increased to $20.1 million
in the first six months of 2002 compared to $14.5 million in the first six
months of 2001, an increase of $5.6 million or 38.6 percent. Our utilization
rate was 95.9 percent for the first six months of 2002 compared to 98.8 percent
in the same period of 2001. The slight decrease in utilization was impacted by
having fewer long term contracts and more vessels operating in the spot market,
which is more susceptible to market fluctuations. Our offshore supply vessel
average dayrate was $11,795 for the first six months of 2002 compared to $11,044
for the same period in 2001, an increase of $751 or 6.8 percent. The increase in
average dayrates primarily reflects the addition of larger, newly constructed
240' and 265' class vessels, which typically experience higher dayrates than our
200' class vessels.

Revenues from our tug and tank barge segment totaled $24.0 million for the
first six months of 2002 compared to $11.2 million for the same period in 2001,
an increase of $12.8 million or 114.3 percent. The segment revenue increase is
primarily due to the acquisition of nine tugs and nine tank barges on May 31,
2001, which increased average fleet capacity in barrels from 564,834 to
1,130,727. Our utilization rate decreased to 80.4 percent for the first six
months of 2002 compared to 84.0 percent for the same period in 2001 primarily
due to a significant increase in vessels operating under contracts of
affreightment during the 2002 period, which was adversely impacted by the warm
winter season and weak economic conditions experienced in the northeastern
United States since the second quarter 2001. Our average dayrate increased to
$9,505 for the second quarter compared to $8,578 in the second quarter of 2001.
The increased dayrates were primarily driven by higher average barge capacities
available for the entire first six months of 2002 compared to one month during
the six months ended June 30, 2001 and long term contracts executed during the
third quarter of 2001 at higher than average dayrates due to favorable market
conditions existing at that time.

Operating Expense. Our operating expense, including depreciation and
amortization, increased to $21.4 million for the first six months of 2002
compared to $11.5 million in the same period in 2001, an increase of $9.9
million or 86.1 percent. The increase in operating expense is the result of more
vessels in service during the first six months of 2002 compared to the year ago
six month period.

Operating expense for our offshore supply vessel segment increased $3.0
million in the first six months of 2002 to $8.2 million compared to $5.2 million
at June 30, 2001. This increase was primarily the result of four new large
offshore supply vessels being in service for substantially more days during the
first six months of 2002 compared to the first six months of 2001. Daily
operating costs per vessel for the first six months of 2002 increased over the
same period of 2001, primarily due to the higher costs of operating larger
vessels, including increased manning requirements.

Operating expense for our tug and tank barge segment was $13.2 million for
the first six months of 2002 compared to $6.4 million for same period in 2001,
an increase of $6.8 million or 106.3 percent. The operating expense increase is
primarily the result of the addition of nine tugs and nine tank barges on May
31, 2001. Daily operating expenses per vessel in the tug and tank barge segment
remained fairly constant.

12

As discussed in Note 2 to the unaudited consolidated financial statements
contained herein, we adopted SFAS 142 effective January 1, 2002 and,
accordingly, we have ceased amortizing goodwill. Operating expenses for the
first six months of 2001 included goodwill amortization of $0.1 million.

General and Administrative Expense. Our general and administrative expense
was $5.1 million for the first six months of 2002 as compared to $3.7 million
for the same period of 2001, an increase of $1.4 million. This increase
primarily resulted from increased overhead relating to the nine tugs and nine
tank barges on May 31, 2001 and costs associated with reporting obligations
under federal securities laws that were incurred during 2002 but not in the
first six months of 2001.

Interest Expense. Interest expense was $7.8 million in the first six months
of 2002 compared to $3.2 million in the first six months of 2001, an increase of
$4.6 million or 143.8 percent. The increase in interest expense resulted from
the refinancing of the Company's conventional floating rate debt through the
issuance of Senior Notes in July 2001 with a higher fixed rate and average
balance of debt outstanding in the 2002 period. This increase was offset in part
by the capitalization of interest costs of $2.2 million and $1.0 million for the
six months ended June 30, 2002 and 2001, respectively. Higher capitalized
interest in 2002 was related to the construction in progress of seven offshore
supply vessels compared to the construction of six vessels in progress during
the 2001 period.

Interest Income. Interest income was $0.4 million in the first six months
of 2002 compared to $0.7 million in the first six months of 2001, a decrease of
$0.3 million or 42.9 percent. The decrease in interest income resulted from
substantially lower interest rates earned on cash balances invested during the
2002 period compared to the 2001 period.

Income Tax Expense: Our effective tax rate was 38.0 percent for the first
six months of 2002 and 2001. Our income tax rate is higher than the federal
statutory rate due primarily to expected state tax liabilities and items not
deductible for federal income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

We need capital to fund ongoing operations, capital expenditures for the
construction of new vessels, acquisitions and debt service. We have historically
financed our capital needs with cash flow from operations, issuances of equity
and debt securities, and borrowings under our credit facilities.

Net cash provided by operating activities was $15.3 million for the six
months ended June 30, 2002 compared to $9.8 million for the six months ended
June 30, 2001. Changes in cash flow from operating activities are principally
the result of higher income from operations after considering increases in
depreciation and amortization due to the significant expansion of our vessel
fleet, offset by changes in our net working capital.

Net cash used in investing activities was $31.5 million for the six months
ended June 30, 2002 compared to $56.9 million for the six months ended June 30,
2001. Net cash used in investing activities for each period included the cost of
new vessel construction and, for the period ended June 30, 2001, also included
the cost of the acquisition of tugs and tank barges from the Spentonbush/Redstar
Group, affiliates of Amerada Hess Corporation.

Net cash used in financing activities was $0.2 million for the six months
ended June 30, 2002 relating to the net issuance of additional common equity,
which was offset by payments on borrowings under debt agreements. For the six
months ended June 30, 2001, net cash provided by financing activities of $36.1
million included the proceeds from construction financing related to new
vessels.

We have a three-year senior secured revolving line of credit (the
"Revolver") with three banks for $50.0 million. Pursuant to the terms of the
Revolver, our borrowings under this facility will initially be limited to $25.0
million unless we have obtained the lender's concurrence to borrow in excess of
$25.0 million and are in compliance with the terms of the indenture governing
our senior notes with respect to the incurrence of additional indebtedness.
Borrowings under the Revolver accrue interest, at our option, at either (i) the
prime rate announced by Citibank, N.A. in New York, plus a margin of 0 percent
to 1

13

percent, or (ii) the London Interbank Offered Rate, plus a margin of 1.75
percent to 3.0 percent. We are also required to pay a commitment fee on
available but unused amounts ranging from 0.25 percent to 0.375 percent. The
interest rate margin and commitment fee are based on our leverage ratio, as
defined in the agreement governing the Revolver. We can use the amounts we draw
under the Revolver for working capital purposes, acquisitions and vessel
construction. The Revolver is collateralized by four of our offshore supply
vessels and four of our ocean-going tugs with an aggregate orderly liquidation
value of approximately $75.0 million. To date, we have made no drawings under
the Revolver.

At June 30, 2002, we had outstanding debt of $172.2 million, net of
original issue discount, under our 10 5/8% Senior Notes. Interest on the Senior
Notes is payable semi-annually each February 1 and August 1. The Senior Notes do
not require any payments of principal prior to their stated maturity on August
1, 2008, but pursuant to the indenture under which the Senior Notes are issued,
we are required to make offers to purchase the Senior Notes upon the occurrence
of certain events, such as asset sales or a change in control.

The agreement governing the Revolver and the indenture under which the
senior notes were issued impose operating and financial restrictions on us. Such
restrictions affect, and in many cases limit or prohibit, among other things,
our ability to incur additional indebtedness, make capital expenditures, redeem
equity, create liens, sell assets and make dividends or other payments.

As of June 30, 2002, we had cash of approximately $36.8 million and working
capital of approximately $31.9 million. During the six months ended June 30,
2002, we expended $26.6 million for new vessel construction. As of June 30,
2002, we were committed under vessel construction contracts to complete
construction of six offshore supply vessels, including the first four vessels of
our recently announced eight-vessel newbuild program. We are currently
evaluating construction bids from shipyards for the last four vessels of this
program. Aggregate construction costs for the first four vessels, before
allocation of construction period interest, are expected to be approximately
$53.0 million, including $4.6 million that was incurred with respect to such
vessels during the second quarter of 2002. As of June 30, 2002, the amount
expected to be expended to complete construction of the six vessels was
approximately $55.0 million, which becomes due at various dates through 2002 and
2003. In addition, we expect to expend approximately $8.0 million during 2002
for drydocking expenses related to recertification of vessels and other
maintenance capital expenditures. During the six months ended June 30, 2002, we
expended approximately $4.0 million for drydocking-related expenses for vessels,
of which $1.6 million was accounted for as deferred charges and $2.4 million
adjusted the basis of the vessels acquired from Spentonbush/Red Star Group .
Under our accounting policy, we generally capitalize drydocking expenditures
related to vessel recertification to deferred charges and amortize the amount
over 30 or 60 months. During the six months ended June 30, 2002, we also
expended approximately $0.2 million for miscellaneous other additions to
property, plant and equipment.

As of December 31, 2001, we had federal net operating loss carryforwards of
approximately $8.8 million available through 2017 to offset future taxable
income. In addition, we expect to generate federal tax benefits due to our use
of accelerated tax depreciation with respect to new vessels. Our use of these
net operating losses and additional tax benefits may be limited due to U.S. tax
laws. Based on the age and composition of our current fleet, however, we expect
to pay a lower than normal amount of federal income taxes over the next five
years.

We believe that cash on hand and cash generated from operations will
provide sufficient funds to complete construction of the six offshore supply
vessels currently under construction, including the first four vessels of our
newbuild program discussed above, and to satisfy debt service and working
capital requirements. Any excess funds will be available to finance our
strategy, which includes expanding our fleet through the construction or
acquisition of additional, or the retrofit of existing, offshore supply vessels,
tugs and tank barges as needed to take advantage of the strong demand for such
vessels. Depending on the market demand for offshore supply vessels, tugs and
tank barges and consolidation opportunities that may arise, we may require
additional debt or equity financing, including with respect to the last four
vessels of our newbuild program.

14

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table sets forth an aggregation of our contractual obligations and
commercial commitments as of June 30, 2002, in thousands of dollars.

CONTRACTUAL OBLIGATIONS

(1) Net of original issue discount of $2,805.

(2) The timing of the incurrence of these costs is subject to change among
periods based on the achievement of shipyard milestones, but the amounts are not
expected to change materially in the aggregate.

INFLATION

To date, general inflationary trends have not had a material effect on our
operating revenues or expenses.

FORWARD LOOKING STATEMENTS

We make forward-looking statements in this Form 10-Q, including certain
information set forth in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations." We have based these
forward-looking statements on our current views and assumptions about future
events and our future financial performance. You can generally identify
forward-looking statements by the appearance in such a statement of words like
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "plan," "potential," "predict," "project," "should" or "will" or other
comparable words or the negative of these words. When you consider our
forward-looking statements, you should keep in mind the risk factors we describe
and other cautionary statements we make in this Form 10-Q.

Among the risks, uncertainties and assumptions to which these
forward-looking statements may be subject are:

o changes in international economic and political conditions, and in
particular in oil and natural gas prices;

o our ability to manage costs effectively;

o our ability to finance our operations and construct new vessels on
acceptable terms;

o our ability to complete vessels under construction without significant
delays or cost overruns;

o the effects of competition;

o our ability to successfully integrate acquisitions;

15

o our ability to charter our vessels on acceptable terms;

o our ability to access the debt and equity markets to fund our capital
requirements, which may depend on general market conditions and our
financial condition at the time; and

o our success at managing these and other risks.

Our forward-looking statements are only predictions based on expectations
that we believe are reasonable. Actual events or results may differ materially
from those described in any forward-looking statement. We undertake no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. To the extent these
risks, uncertainties and assumptions give rise to events that vary from our
expectations, the forward-looking events discussed in this prospectus may not
occur.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have not entered into any derivative financial instrument transactions
to manage or reduce market risk or for speculative purposes.

We are subject to interest rate risk on its long-term fixed interest rate
senior notes. In general, the fair market value of debt with a fixed interest
rate will increase as interest rates fall. Conversely, the fair market value of
debt will decrease as interest rates rise. The $175.0 million senior notes
accrue interest at the rate of 10 5/8% per annum and mature on August 1, 2008.
There are no scheduled principal payments under the notes prior to the maturity
date.

Our operations are primarily conducted between U.S. ports, including along
the coast of Puerto Rico, and we have not historically been exposed to foreign
currency fluctuation. However, as we expand our operations to international
markets, we may become exposed to certain risks typically associated with
foreign currency fluctuation. We recently entered into fixed time charters for
two of our offshore supply vessels for service in Trinidad and Tobago. However,
such contracts are denominated and will be paid in U.S. Dollars.

16

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings, although we
may from time to time be subject to various legal proceedings and claims that
arise in the ordinary course of business.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

In May 2002, we issued 109,000 shares of our common stock to certain holders
of options granted under our Incentive Compensation Plan upon their exercise of
such options. The total amount of consideration we received for the issuance of
these shares was approximately $212,900. The issuance of these shares of our
common stock was exempt from registration under Rule 701 promulgated under the
Securities Act of 1933.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 28, 2002, we held our Annual Meeting of Stockholders. At the meeting,
Todd M. Hornbeck and Christian G. Vaccari were elected to serve on our board of
directors as Class III directors until our 2005 Annual Meeting of Stockholders
or until their successors shall have been duly elected and qualified. As to each
of the foregoing directors, the number of shares cast for or against their
election, as well as the number of abstentions, were as follows:

The other directors continuing in office after the meeting were Richard W.
Cryar, Larry D. Hornbeck, Bruce R. Hunt, Bernie W. Stewart and Andrew L. Waite.

Also at the annual meeting, our stockholders approved certain amendments to
our bylaws removing certain provisions which had been required by our former
lenders and warrantholders and which were no longer applicable. The number of
shares cast for or against these amendments to our bylaws, as well as the number
of abstentions, were as follows:

17

Our stockholders also approved at the annual meeting an amendment to our
certificate of incorporation changing our company name to Hornbeck Offshore
Services, Inc. from HORNBECK-LEEVAC Marine Services, Inc. The number of shares
cast for or against this amendment to our certificate of incorporation, as well
as the number of abstentions, were as follows:

Another amendment to our certificate of incorporation relating to foreign
ownership of our capital stock was also approved by our stockholders at the
annual meeting. The number of shares cast for or against this amendments to our
certificate of incorporation, as well as the number of abstentions, were as
follows:

Finally at the annual meeting, our stockholders authorized the board of
directors to select and appoint our independent public accountants and auditors
for the year ending December 31, 2002. The number of shares cast for or against
this matter, as well as the number of abstentions, were as follows:

ITEM 5 - OTHER INFORMATION

RECENT DEVELOPMENTS

Delivery of the HOS Brimstone and Signing of Fixed Time Charter

On June 13, 2002, we took delivery of the HOS Brimstone, a 265' class
offshore supply vessel. The HOS Brimstone was immediately employed under a fixed
time charter with one of our existing customers, a large international
exploration and production company to support its deepwater operations in the
Gulf of Mexico. The contract has an initial term expiring in April 2003, with
renewal options.

Change in Independent Public Accountants and Auditors

Effective June 24, 2002, we dismissed Arthur Andersen LLP as our independent
public accountants and auditors and engaged Ernst & Young LLP as our new
independent public accountants and auditors.

Filing of Form S-1 Registration Statement and Other Matters Relating to
Proposed Initial Public Offering

On July 22, 2002, we filed a registration statement with the Securities and
Exchange Commission relating to a proposed initial public offering of our common
stock, which has not yet been declared effective by the SEC. We are currently
monitoring market conditions and have not yet determined a specific timeframe
for when we plan to finalize the offering.

In connection with our proposed initial public offering, Christian G.
Vaccari, who currently serves on our board of directors as a Class III Director
and Richard W. Cryar, who currently serves on our board as a Class II Director,
have each tendered, and we have accepted, their resignations from our board of
directors, effective upon closing of the offering. In order to fill the
vacancies on our board that will result from Messrs. Vaccari's and Cryar's
resignations, Patricia B. Melcher, 42, and David A. Trice, 53, have been
appointed by our board to serve as a Class III and a Class II director,
respectively, effective upon completion of the offering.

18

Since 1997, Ms. Melcher has served as the President of Allegro Capital
Management, Inc., a privately owned investment company focused on private equity
investments in energy-related companies. In 1997, she helped found The Joy
School, a nonprofit school for children with learning disabilities. In 2002, she
was elected Board Chair of the school. From 1989 to 1994, she worked for SCF
Partners, L.P., an investment fund sponsor specializing in private equity
investments in oilfield service companies, and from 1995 to 1997, she served as
a board member and advisory board member of its general partner, L. E. Simmons &
Associates, Incorporated. From 1986 to 1989, Ms. Melcher worked for Simmons &
Company International, an investment banking firm serving the energy industry.

Mr. Trice has served as the President since May 1999, and the Chief
Executive Officer since February 2000, of Newfield Exploration Company
(NYSE:NFX), an independent oil and gas company engaged in the exploration,
development and acquisition of crude oil and natural gas properties. He has also
served as a director of Newfield Exploration since 2000. From May 1999 to
February 2000, he served as its Chief Operating Officer and from July 1997 to
May 1999, he served as its Vice President--Finance and International. Mr. Trice
served as the President, Chief Executive Officer and Director of the Huffco
Group from 1991 to May 1997.

Also in connection with our proposed initial public offering, on July 18,
2002, our board approved the form of a stockholder rights plan in anticipation
of declaring a dividend of one right for each outstanding share of our common
stock to stockholders of record on completion of the offering. Once a dividend
of the rights is declared, the rights will only become exercisable, and
transferable apart from our common stock, 10 business days following a public
announcement that a person or group has acquired beneficial ownership of, or has
commenced a tender or exchange offer for, 15 percent or more of our common
stock, which we refer to as a "Triggering Event." In connection with the
stockholder rights plan, a certain number of our authorized shares of preferred
stock will be designated "Series A Junior Participating Preferred Stock," which
we refer to as the "Series A Preferred Stock," and each right will initially
entitle the holder to purchase one one-hundredth of one share of such preferred
stock at a price to be determined, subject to adjustment. Upon a Triggering
Event, each holder of a right (other than the person who caused the Triggering
Event) will be entitled, instead, to receive upon exercise of each right a
number of shares of our common stock (or, in certain circumstances, cash,
property or other securities of us) having a current market price equal to twice
the exercise price for one one-hundredth of a share of Series A Preferred Stock.
Similarly, if after a Triggering Event we are acquired in a merger or other
business combination, or 50 percent or more of our assets or earning power are
sold or transferred, each right will entitle the holder thereof (other than the
person who caused the Triggering Event) to receive a number of shares of common
stock of the company acquiring us having a current market price equal to twice
the exercise price for one one-hundredth of a share of Series A Preferred Stock.
We may redeem the rights in whole, but not in part, at a redemption price of
$.01 per right at any time before the rights become exercisable. The rights will
expire 10 years from the record date to be set for the dividend of the rights.
Pursuant to the stockholder rights plan, all shares of our Series A Preferred
Stock, once established, will be reserved for issuance upon exercise of rights.

Expansion of OSV Operations into Trinidad

On July 22, 2002, we were awarded a contract with a major oil company
operating in Trinidad for two of our offshore supply vessels, the 200' class HOS
Thunderfoot and 240' class HOS Cornerstone. The fixed time charters will each
have an initial six-month term, with renewal options, and are expected to
commence in mid-August upon the vessels' mobilization to Trinidad.

Delivery of the HOS Stormridge and Signing of Fixed Time Charter

On August 11, 2002, we took delivery of the HOS Stormridge, a 265' class
offshore supply vessel. The HOS Stormridge was immediately employed under a
fixed time charter with a major oil company to support its deepwater operations
in the Gulf of Mexico. The contract has an initial three-month term, with
renewal options.

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ITEM 6 - EXHIBITS AND REPORTS ON 8-K

(a) EXHIBITS:

Exhibit
Number Description
------ -----------

3.1 Restated Certificate of Incorporation of the Company filed
with the Secretary of State of the State of Delaware on
December 13, 1997 (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-4 dated
September 21, 2001, Registration No. 333-69826).

3.2 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company filed with the Secretary of
State of the State of Delaware on December 1, 1999
(incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-4 dated September 21, 2001,
Registration No. 333-69826).

3.3 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company filed with the Secretary of
State of the State of Delaware on October 23, 2000
(incorporated by reference to Exhibit 3.3 to the Company's
Registration Statement on Form S-4 dated September 21, 2001,
Registration No. 333-69826).

3.4 Certificate of Correction to Certificate of Amendment of the
Restated Certificate of Incorporation of the Company filed
with the Secretary of State of the State of Delaware on
November 14, 2000 (incorporated by reference to Exhibit 3.4
of the Company's Registration Statement on Form S-4 dated
September 21, 2001, Registration No. 333-69826).

3.5 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company filed with the Secretary of
State of Delaware on May 29, 2002 (incorporated by reference
to Exhibit 3.5 to the Company's Registration Statement on
Form S-1 filed July 22, 2001, Registration No. 333-96833).

3.6 Second Restated Bylaws of the Company adopted October 4,
2000 (incorporated by reference to Exhibit 3.5 of the
Company's Registration Statement on Form S-4 dated September
21, 2001, Registration No. 333-69826).

3.7 Amendment to Second Restated Bylaws of the Company adopted
May 28, 2002 (incorporated by reference to Exhibit 3.8 to
the Company's Registration Statement on Form S-1 filed July
22, 2001, Registration No. 333-96833).

4.1 Indenture dated as of July 24, 2001 between Wells Fargo Bank
Minnesota, National Association (as Trustee) and the
Company, including table of contents and cross-reference
sheet (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-4 dated September
21, 2001, Registration No. 333-69826).

20

* Filed herewith.

(b) REPORTS ON FORM 8-K.

On June 26, 2002, we filed a report on Form 8-K announcing a change in our
independent public accountants and auditors.

On July 24, 2002, we filed a report on Form 8-K announcing that we filed
with the Securities and Exchange Commission a registration statement on Form S-1
relating to a proposed initial public offering of our common stock, which has
not yet been declared effective by the Commission.

21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Hornbeck Offshore Services, Inc.

Date: August 14, 2002 By: /s/ JAMES O. HARP, JR.
-------------------------------------------
James O. Harp, Jr.
Vice President and Chief Financial Officer

22

EXHIBIT INDEX

* Filed herewith.