Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our unaudited consolidated financial statements and notes to unaudited consolidated financial statements in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto included in our Annual Report on Form 10-K as of and for the year ended December 31, 2014. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements. See “Forward Looking Statements” for additional discussion regarding risks associated with forward-looking statements. In this Quarterly Report on Form 10-Q, “company,” “we,” “us,” “our” or like terms refer to Hornbeck Offshore Services, Inc. and its subsidiaries, except as otherwise indicated. Please refer to Item 5—Other Information for a glossary of terms used throughout this Quarterly Report on Form 10-Q.

In this Quarterly Report on Form 10-Q, we rely on and refer to information regarding our industry from the BOEM, EIA and IHS-Petrodata, Inc. These organizations are not affiliated with us and are not aware of and have not consented to being named in this Quarterly Report on Form 10-Q. We believe this information is reliable. In addition, in many cases we have made statements in this Quarterly Report on Form 10-Q regarding our industry and our position in the industry based on our experience in the industry and our own evaluation of market conditions.

General

During the latter half of 2014 and in early 2015, oil prices have fallen precipitously from a prevailing price during most of 2014 of over $90 per barrel to a trading range of $45 to $60 per barrel. The drop in oil price appears to be due to surplus oil, driven in part by a significant rise in U.S. shale oil production as well as other previously unavailable sources of supply. In addition, economic weakness in many regions of the world, notably Europe and China, has reduced the previously expected oil consumption growth rate. As a result of the reduction in oil prices, oil companies have significantly reduced their capital spending budgets for 2015. Several major and independent oil companies with deepwater operations have announced capital spending reductions. We believe that the long-term nature of deepwater projects insulates them, somewhat, from a short-term fall in oil prices and that sanctioned or on-going projects will proceed. However, deepwater activities will be affected by lower prices, even if they are affected less than other activities. We have experienced requests by our deepwater customers for price reductions in order to help mitigate the impact that lower commodity prices are having and will continue to have on oil company operating results and cashflows. In addition, sustained low commodity prices may cause un-sanctioned projects to be delayed or canceled altogether, which could be manifested in less activity later, even if oil prices recover. We cannot predict whether, and to what extent, or when oil prices will improve. Many of our operations are in support of deepwater projects that are in their final stages or of projects that do not involve deepwater and are more susceptible to immediate wind-down. In addition, shelf drilling activity in the GoM has declined substantially. The lack of a shelf market has impacted us in two ways. First, our low-spec DP-1 vessels in the GoM principally support shelf activities. Second, in prior periods of market over capacity, high-spec equipment has been able to displace low-spec equipment working on the shelf. However, that alternative market has deteriorated considerably.

The rapid decline in global oil prices has created great uncertainty in the industry for all of our core markets in 2015. In the GoM, aggressive cost cutting measures employed by our customers and the increased supply of high-spec OSVs have placed pressure on dayrates across the entire fleet. We expect 37 high-spec OSVs to deliver into the domestic market during 2015, including six of our own. During the first quarter of 2015, there was an average of roughly 50 floating rigs available in the GoM, while an average of 42 were working. As of April 30, 2015, there were 48 rigs available and 40 were working. However, nine floating rigs have contracts that will expire during the remainder of 2015 and one is scheduled to leave the region. We do not

know whether the remaining eight rigs will receive contract renewals for operations in the GoM. We also expect seven new rigs to arrive in the GoM during 2015, all of which are contracted. We have recently observed that, following arrival in the GoM, it can take several months for a rig to commence work, and, therefore, we do not know the timing of when operations of newly arrived rigs will begin. Given these market conditions, we anticipate our average dayrates and utilization levels to be adversely affected compared to our 2013 and 2014 results.

In Mexico, while the energy reform continues to progress, questions remain on the timing of the incremental activity expected in the deepwater GoM given the current oil price environment. We will continue to explore opportunities to place additional vessels into Mexico to support Pemex in its ongoing shallow water activity.

In Brazil, lower oil prices combined with a significant corruption probe involving Petrobras and certain of its vendors have combined to create substantial uncertainty over the pace at which Petrobras can proceed with previously announced plans. The four vessels we currently have operating under long-term charter for Petrobras will end their initial term in the second half of 2015. It remains unclear whether Petrobras intends to open negotiations for extending the charters for those vessels or, given the current oil price environment, will choose to allow the contracts to expire.

During the fourth quarter of 2014, in recognition of these weak market conditions, we cold-stacked five 200 class OSVs and sold one such vessel. We have stacked two additional 200 class OSVs and eleven 240 class OSVs thus far in 2015. By stacking vessels, we expect to significantly reduce our cash outlays, however, we will also have fewer revenue-producing units in service that can potentially contribute to our results. We may choose to stack additional vessels if market conditions deteriorate further.

Contract Coverage

As of April 29, 2015, we had 36% of our new generation OSV vessel-days contracted for the remainder of 2015. Our forward OSV contract coverage for the fiscal year ending December 31, 2016 currently stands at 7%. MPSV contract coverage for the remainder of 2015 and for fiscal 2016 is currently 29% and 0%, respectively.

(1) Includes three vessels that are currently supporting the military.

(2) Excluded from this table are 13 new generation OSVs and one non-core conventional OSV that were stacked as of March 31, 2015 .

Critical Accounting Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP. In other circumstances, we are required to make estimates, judgments and assumptions that we believe are reasonable based on available information. We base our estimates and judgments on historical experience and various other factors that we believe are reasonable based upon the information available. 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, 2014 .

Results of Operations

The tables below set forth the average dayrates, utilization rates and effective dayrates for our new generation OSVs and the average number and size of vessels owned during the periods indicated. These vessels generate a substantial portion of our revenues and operating profit. Excluded from the OSV information below are the results of operations for our MPSVs, our shore-base facility, and vessel management services. The Company does not provide average or effective dayrates for its MPSVs. MPSV dayrates are impacted by highly variable customer-required cost-of-sales associated with ancillary equipment and services, such as ROVs, accommodation units and cranes, which are typically recovered through higher dayrates charged to the customer. Due to the fact that each of our MPSVs have a workload capacity and significantly higher income-generating potential than each of the Company’s new generation OSVs, the utilization and dayrate levels of our MPSVs can have a very large impact on our results of operations. For this reason, our consolidated operating results, on a period-to-period basis, are disproportionately impacted by the level of dayrates and utilization achieved by our five MPSVs.

Non-GAAP Financial Measures

We disclose and discuss EBITDA as a non-GAAP financial measure in our public releases, including quarterly earnings releases, investor conference calls and other filings with the Securities and Exchange Commission. We define EBITDA as earnings (net income) before interest, income taxes, depreciation and amortization. Our measure of EBITDA may not be comparable to similarly titled measures presented by other companies. Other companies may calculate EBITDA differently than we do, which may limit its usefulness as comparative measure.

We view EBITDA primarily as a liquidity measure and, as such, we believe that the GAAP financial measure most directly comparable to this measure is cash flows provided by operating activities. Because EBITDA is not a measure of financial performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

EBITDA is widely used by investors and other users of our financial statements as a supplemental financial measure that, when viewed with our GAAP results and the accompanying reconciliation, we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our ability to service debt, pay deferred taxes and fund drydocking charges and other maintenance capital expenditures. We also believe the disclosure of EBITDA helps investors meaningfully evaluate and compare our cash flow generating capacity from quarter to quarter and year to year.

EBITDA is also a financial metric used by management (i) as a supplemental internal measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; (ii) as a significant criteria for annual incentive cash compensation paid to our executive officers and bonuses paid to other shore-based employees; (iii) to compare to the EBITDA of other companies when evaluating potential acquisitions; and (iv) to assess our ability to service existing fixed charges and incur additional indebtedness.

The following table provides the detailed components of EBITDA from continuing operations as we define that term for the three months ended March 31, 2015 and 2014, respectively (in thousands):

The following table reconciles EBITDA from continuing operations to cash flows provided by operating activities for the three months ended March 31, 2015 and 2014, respectively (in thousands):

In addition, we also make certain adjustments to EBITDA for loss on early extinguishment of debt, stock-based compensation expense and interest income to compute ratios used in certain financial covenants of our revolving credit facility with various lenders. We believe that these ratios are a material component of certain financial covenants in such credit agreements and failure to comply with the financial covenants could result in the acceleration of indebtedness or the imposition of restrictions on our financial flexibility.

The following table provides certain detailed adjustments to EBITDA, as defined in our revolving credit facility, for the three months ended March 31, 2015 and 2014, respectively (in thousands):

Adjustments to EBITDA for Computation of Financial Ratios Used in Debt Covenants  

Set forth below are the material limitations associated with using EBITDA as a non-GAAP financial measure compared to cash flows provided by operating activities.

Management compensates for the above-described limitations in using EBITDA as a non-GAAP financial measure by only using EBITDA to supplement our GAAP results.

 

Summarized financial information for the three months ended March 31, 2015 and 2014 , respectively, is shown below in the following table (in thousands, except percentage changes):

Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014

Revenues . Revenues for the three months ended March 31, 2015 decreased by $2.0 million , or 1.4% , to $134.6 million compared to the same period in 2014 . Our weighted-average active operating fleet for the three months ended March 31, 2015 and 2014 was 57 and 58 vessels, respectively. The decrease in revenues was primarily due to soft spot market conditions in the GoM, which led to our decision to stack 18 OSVs on various dates in the fourth quarter of 2014 and thus far in 2015. For the three months ended March 31, 2015, we had an average of 9.5 vessels stacked compared to none in the prior-year quarter. This decrease in revenue was partially offset by $18.1 million in revenue earned from the full or partial-period contribution of 12 vessels that were placed in service since December 2013 under our fifth OSV newbuild program. Average new generation OSV dayrates were $26,705 for the first three months of 2015 compared to $26,237 for the same period in 2014 , an increase of $468 , or 1.8% . Our new generation OSV utilization was 64.7% for the first three months of 2015 compared to 75.3% for the same period in 2014 . This decrease in utilization is primarily due to soft market conditions for high-spec OSVs operating in the GoM spot market and the incremental vessels that were stacked during the current-year quarter. Our high-spec OSVs incurred 58 days of aggregate downtime for regulatory drydockings and were stacked for an aggregate of 266 days during the first quarter of 2015. Excluding stacked vessel days, our new generation OSV effective utilization was 76.6% and 75.3% for the same periods, respectively. Domestic revenues decreased $ 24.0 million from the year-ago period primarily due to lower dayrates earned by vessels operating in our fleet during the three months ended March 31, 2015 and March 31, 2014, respectively, and the stacking of vessels in late 2014 and early 2015. Foreign revenues increased $ 22.1 million primarily due to ten incremental vessels operating in foreign regions during the three months ended March 31, 2015 compared to the year-ago period. Foreign revenues for the first three months of 2015 comprised 30.9% of our total revenues compared to 14.3% for the year-ago period.

Operating Expenses. Operating expenses were $61.4 million , a decrease of $7.2 million , or 10.5%, for the three months ended March 31, 2015 compared to $68.6 million for the same period in 2014 . Operating expenses were driven lower by vessels that were idled or stacked since late 2014, which resulted in a substantial reduction in mariner headcount. This decrease was partially offset by $11.5 million of operating

costs related to the full or partial-period contribution from vessels added to our fleet since December 2013. Aggregate cash operating expenses for our vessels are projected to be in the approximate annual range of $253.0 million to $268.0 million for the year ending December 31, 2015 . The cash operating expense estimate above is exclusive of any additional repositioning expenses we may incur in connection with the potential relocation of more of our current spot vessels into international markets or back to the GoM from international markets, and any customer-required cost-of-sales related to future contract fixtures that are typically recovered through higher dayrates.

Depreciation and Amortization . Depreciation and amortization was $ 1.9 million , or 6.4% , lower for the three months ended March 31, 2015 compared to the same period in 2014 . Depreciation increased by $3.8 million primarily due to the contribution of 12 vessels that were placed in service on various dates since December 2013. The depreciation increase was more than offset by a decrease in amortization expense of $5.7 million, which was largely due to $4.3 million of incremental amortization recorded for the accelerated regulatory drydocking of vessels during the first three months of 2014. Depreciation and amortization expense is expected to continue to increase from current levels as the vessels under our current newbuild program are placed in service and when any newly constructed vessels undergo their initial 30-month and 60-month recertifications.

General and Administrative Expense . General and administrative, or G&A, expenses of $11.9 million , or 8.8% of revenues, was $1.8 million lower during the three months ended March 31, 2015 compared to the same period in 2014 . The decrease in G&A expense was primarily due to the cancellation of performance-based RSUs that did not achieve their performance vesting criteria, a reduction in bad debt reserves and lower shoreside compensation. Our G&A expenses are expected to be in the approximate annual range of $50.0 million to $55.0 million for the year ending December 31, 2015 . For future periods, we expect to remain within our historical range of G&A-to-revenue margins, as well as those of our domestic public OSV peer group.

Gain on Sale of Assets. During the first three months of 2015, we completed the sale of three 250EDF class OSVs, the HOS Arrowhead , the HOS Eagleview and the HOS Westwind , to the U.S. Navy for cash consideration of $114.0 million . The sale resulted in a pre-tax gain of approximately $33.1 million ($20.7 million after-tax or $0.57 per diluted share). There was no gain or loss on sale of assets in the same period in 2014.

Operating Income . Operating income increased by $41.9 million , or 167.6%, to $66.9 million during the three months ended March 31, 2015 compared to the same period in 2014 for the reasons discussed above. Operating income as a percentage of revenues was 49.7% for the three months ended March 31, 2015 compared to 18.3% for the same period in 2014 . Excluding the gain on sale of assets, our operating income for the first quarter of 2015 would have been $33.8 million, or 25.1% of revenues.

Interest Expense. Interest expense increased $3.0 million during the three months ended March 31, 2015 compared to the same period in 2014 , primarily due to our capitalizing a lower percentage of interest compared to the prior-year period. During the three months ended March 31, 2015 , we recorded $5.8 million of capitalized construction period interest, or roughly 36% of our total interest costs, compared to having capitalized $8.7 million, or roughly 55% of our total interest costs, for the year-ago period.

Interest Income . Interest income was $0.2 million during the three months ended March 31, 2015 , compared to $0.4 million for the three months ended March 31, 2014 . Our average cash balance decreased to $245.4 million for the three months ended March 31, 2015 compared to $391.8 million for the same period in 2014 . The average interest rate earned on our invested cash balances was 0.4% during the three months ended March 31, 2015 and 2014 , respectively. The decrease in average cash balance was primarily due to cash outflows associated with our fifth OSV newbuild program in 2014.

Income Tax Expense. Our effective tax rate was 37.4% and 37.2% for the three months ended March 31, 2015 and 2014 , respectively. During the three months ended March 31, 2015 , our income tax expense primarily consisted of deferred taxes. Our income tax rate differs from the federal statutory rate primarily due to expected state tax liabilities and items not deductible for federal income tax purposes.

Income from Continuing Operations . Operating performance increased by $24.5 million for reported income from continuing operations of $35.9 million for the three months ended March 31, 2015 compared to the same period during 2014. Excluding the gain on sale of assets, income from continuing operations would have been $15.2 million for the three months ended March 31, 2015 compared to $11.4 million for the same period in 2014. This increase in income from continuing operations for the three months ended March 31, 2015 was primarily due to a decrease in operating, G&A, and amortization expenses discussed above that were partially offset by lower revenues due to soft spot market conditions in the GoM.

Liquidity and Capital Resources

Our capital requirements have historically been financed with cash flows from operations, proceeds from issuances of our debt and common equity securities, borrowings under our credit facilities and cash received from the sale of assets. We require capital to fund on-going operations, remaining obligations under our expanded fifth OSV newbuild program, vessel recertifications, discretionary capital expenditures and debt service and may require capital to fund potential future vessel construction, retrofit or conversion projects, acquisitions or stock repurchases. The nature of our capital requirements and the types of our financing sources are not expected to change significantly for the remainder of 2015.

We have reviewed all of our debt agreements, as well as our liquidity position and projected future cash needs. Despite volatility in commodity markets, we remain confident in our current financial position, the strength of our balance sheet and the short- and long-term viability of our business model. To date, our liquidity has not been materially impacted and we do not expect that it will be materially impacted in the near future due to such volatility. Together with cash on-hand, we expect to generate sufficient cash flow from operations to cover all of our growth capital expenditures for the remaining eight HOSMAX vessels under construction, commercial-related capital expenditures, and all of our annually recurring cash debt service, maintenance capital expenditures and cash income taxes through the completion of the newbuild program, as well as discretionary share repurchases from time to time, without ever having to use our currently undrawn revolving credit facility. We have three tranches of funded unsecured debt outstanding that mature in fiscal years 2019, 2020, and 2021, respectively.

As of March 31, 2015 , we had total cash and cash equivalents of $ 279.5 million and a $300 million revolving credit facility, expandable up to $500 million, which is undrawn as of March 31, 2015 . We also expect to receive an additional $38.0 million in cash proceeds from the anticipated sale of the fourth 250EDF class OSV to the U.S. Navy during the third quarter of 2015.

On February 6, 2015, we amended and extended the maturity of our existing revolving credit facility to February 2020, provided that, if the 2019 convertible senior notes remain outstanding on March 1, 2019, the Company is required to maintain a specified minimum liquidity level until after the redemption or refinancing of the convertible senior notes, which mature on September 1, 2019. As of March 31, 2015 , we had posted letters of credit for $0.5 million and had $299.5 million of credit available under our revolving credit facility. The full undrawn credit amount of such facility is available for all uses of proceeds, including working capital, if necessary. However, the primary intended use of the facility is the potential future construction or acquisition of assets that generate additional EBITDA.

On October 28, 2014, our Board of Directors authorized us to repurchase up to $150 million in shares of our common stock from time to time, $25 million of which was used to buy-back 891,396 shares during the fourth quarter of 2014. There were no such repurchases during the three months ended March 31, 2015. Any future repurchases under this program will be funded from our cash on-hand, cash flow from operations and/or cash proceeds from the divestiture of non-core assets.

Although we expect to continue generating positive working capital through our operations, events beyond our control, such as a further significant decline in commodity prices, renewed regulatory-driven delays in the issuance of drilling plans and permits in the GoM, further declines in expenditures for exploration, development and production activity, any extended reduction in domestic consumption of refined petroleum products and other reasons discussed under the “Forward Looking Statements” on page ii and the Risk Factors stated in Item 1A of our Annual Report on Form 10-K, may affect our financial condition, results of operations or cash flows. Should such need for additional financing arise, we may not be able to access the capital markets on

attractive terms at that time or otherwise obtain sufficient capital to meet our maturing debt obligations or finance growth opportunities that may arise. We will continue to closely monitor our liquidity position, as well as the state of the global capital and credit markets.

Cash Flows

Operating Activities . We rely primarily on cash flows from operations to provide working capital for current and future operations. Cash flows from operating activities were $ 61.4 million for the three months ended March 31, 2015 and $ 36.7 million for the same period in 2014 . Operating cash flows for the first three months

of 2015 were favorably impacted by an increase in customer collections of outstanding accounts receivable balances combined with lower cash outflows for regulatory drydocking expenses compared to the year-ago period.

Investing Activities. Net cash provided by investing activities was $ 35.2 million for the three months ended March 31, 2015 compared to net cash used in investing activities of $ 129.2 million for the same period in 2014 . Cash provided during the first three months of 2015 resulted from the sale of three 250EDF class OSVs to the the U.S. Navy partially offset by construction costs incurred for our fifth OSV newbuild program. Cash used in 2014 primarily consisted of construction costs incurred for our fifth OSV newbuild program.

Financing Activities . Net cash used by financing activities was $ 2.0 million for the three months ended March 31, 2015 compared to cash provided by financing activities of $ 0.3 million for the same period in 2014 . Net cash used by financing activities for the three months ended March 31, 2015 primarily resulted from deferred financing costs related to the amendment and extension of our existing $300 million revolving credit facility. Net cash provided by financing activities for the three months ended March 31, 2014 primarily resulted from net proceeds from common shares issued pursuant to our employee stock-based incentive compensation plan.

Contractual Obligations

Debt

As of March 31, 2015, the Company had the following outstanding long-term debt (in thousands, except effective interest rate):

On February 6, 2015, we amended and extended our revolving credit facility to extend the maturity date, modify covenants and reduce the collateral coverage of such facility. The $300.0 million revolving credit facility remains undrawn as of April 20, 2015. With the revolving credit facility, we have the option of borrowing at a variable rate of interest equal to (i) London Interbank Offered Rate, or LIBOR, plus a margin of 2.0% to 3.0% or (ii) the greatest of the Prime Rate, the Federal Funds Effective Rate plus 1/2 of 1% or LIBOR, plus 1.0%; plus in each case an applicable margin. The applicable margin for each base rate is determined by a pricing grid, which is based on a new total debt-to-capitalization ratio, as defined in the credit agreement governing the revolving credit facility, as amended. The applicable LIBOR margin for the amended revolving credit facility ranges from 200 to 300 basis points. Unused commitment fees are payable quarterly at the annual rate of

37.5 to 50.0 basis points of the unused portion of the borrowing base of the new revolving credit facility, based on the defined total debt-to-capitalization ratio. For additional information with respect to our revolving credit facility, our 2020 senior notes, our 2021 senior notes and our 2019 convertible senior notes, please refer to Note 5 of our consolidated financial statements included herein.

The credit agreement governing the revolving credit facility and the indentures governing our 2020 and 2021 senior notes impose certain 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 dividend or other restricted payments. Based on our financial ratios for the three months ended March 31, 2015 , the full amount of the undrawn borrowing base under our revolving credit facility is available to us for all uses of proceeds, including working capital, if necessary. For the three months ended March 31, 2015 , we were in compliance with all of our debt covenants. We continuously review our debt covenants and report to our lenders our compliance with financial ratios on a quarterly basis. We also consider such covenants in evaluating transactions that will have an effect on our financial ratios.

Capital Expenditures and Related Commitments

The following table sets forth the amounts incurred for our fifth OSV newbuild program, before construction period interest, during the three months ended March 31, 2015 and since such program’s inception, respectively, as well as the estimated total project costs for our current expansion program (in millions):

The following table summarizes the costs incurred, prior to the allocation of construction period interest, for maintenance and other capital expenditures, for the three months ended March 31, 2015 and 2014, respectively, and a forecast for fiscal 2015 (in millions):

Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect its performance in the future. Forward-looking statements are all statements other than historical facts, such as statements regarding assumptions, expectations, beliefs and projections about future events or conditions. You can generally identify forward-looking statements by the appearance in such a statement of words like “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “remain,” “should,” “will” or other comparable words or the negative of such words. The accuracy of the Company’s assumptions, expectations, beliefs and projections depends on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company’s actual future results might differ from the forward-looking statements made in this Quarterly Report on Form 10-Q for a variety of reasons, including significant and sustained or additional declines in oil and natural gas prices; a sustained weakening of demand for the Company’s services; unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters or failures to finalize commitments to charter vessels; further reductions in capital spending budgets by customers; the inability to accurately predict vessel utilization levels and dayrates; fewer than anticipated deepwater and ultra-deepwater drilling units operating in the GoM or other regions where the Company operates; the effect of inconsistency by the United States government in the pace of issuing drilling permits and plan approvals in the GoM or other drilling regions; the Company’s inability to successfully complete the remainder of its current vessel newbuild program on-time and on-budget, which involves the construction and integration of highly complex vessels and systems; the inability to successfully market the vessels that the Company owns, is constructing, or might acquire; the inability of the Company to complete a sale to the U.S. Navy of one additional vessel or the government's cancellation or non-renewal of the operations and maintenance contracts for vessels; an oil spill or other significant event in the United States or another offshore drilling region that could have a broad impact on deepwater and other offshore energy exploration and production activities, such as the suspension of activities or significant regulatory responses; the imposition of laws or regulations that result in reduced exploration and production activities or that increase the Company’s operating costs or operating requirements; environmental litigation that impacts customer plans or projects; disputes with customers; bureaucratic, administrative or operating barriers that delay vessels chartered in foreign markets from going on-hire or result in contractual penalties or deductions imposed by foreign customers; industry risks; the impact stemming from the reduction of Petrobras' announced plans for or administrative barriers to exploration and production activities in Brazil; less than expected growth in Mexican offshore activities; age restrictions imposed on our vessels by PEMEX; unanticipated difficulty in effectively competing in or operating in international markets; less than anticipated subsea infrastructure and field development demand in the GoM and other markets; the level of fleet additions by the Company and its competitors that could result in over capacity in the markets in which the Company competes; economic and political risks; weather-related risks; the shortage of or the inability to attract and retain qualified personnel, as needed, including vessel personnel for active, and newly constructed vessels; regulatory risks; the repeal or administrative weakening of the Jones Act or changes in the interpretation of the Jones Act related to the U.S. citizenship qualification; drydocking delays and cost overruns and related risks; vessel accidents, pollution incidents or other events resulting in lost revenue, fines, penalties or other expenses that are unrecoverable from insurance policies or other third parties; unexpected litigation and insurance expenses; or fluctuations in foreign currency valuations compared to the U.S. dollar and risks associated with expanded foreign operations, such as non-compliance with or the unanticipated effect of tax laws, customs laws, immigration laws, or other legislation that result in higher than anticipated tax rates or other costs or the inability to repatriate foreign-sourced earnings and profits. In a

ddition, the Company’s future results may be impacted by adverse economic conditions, such as inflation, deflation, or lack of liquidity in the capital markets, that may negatively affect it or parties with whom it does business resulting in their non-payment or inability to perform obligations owed to the Company, such as the failure of customers to fulfill their contractual obligations or the failure by individual banks to provide funding under the Company’s credit agreement, if required. Further, the Company can give no assurance regarding when and to what extent it will effect share repurchases. Should one or more of the foregoing risks or uncertainties materialize in a way that negatively impacts the Company, or should the Company’s underlying assumptions prove incorrect, the Company’s actual results may vary materially from those anticipated in its forward-looking statements, and its business, financial condition and results of operations could be materially and adversely affected. Additional factors that you should consider are set forth in detail in the “Risk Factors” section of the Company's most recent Annual Report on Form 10-K as well as other filings the Company has made and will make with the Securities and Exchange Commission which, after their filing, can be found on the Company’s website, www.hornbeckoffshore.com.

Item 3—Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the market risk disclosures set forth in Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2014.

Item 4—Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.