The ratings on Hornbeck Offshore Services Inc. reflect the company's participation in the cyclical and capital-intensive deepwater offshore supply vessel (OSV) market and the diversification provided by its tugboat and tank barge business. Solid, near-term fundamentals and contract support are providing good financial results and cash flow generation. However, high debt leverage, contract-renewal risk in 2003, and a speculative, new-vessel construction temper these strengths. Hornbeck's 10-vessel average fleet size, OSV fleet (12 vessels as of Sept. 30, 2002) enjoyed solid day rates and utilization through third-quarter 2002 (average utilization of 94% with $11,994 average day rates, when compared with 99% utilization and $11,575 day rates through Sept. 30, 2001). Utilization has dropped slightly from 2001 due to more vessels marketed
