Seeking Alpha: Oceaneering Holding Up Better Than Most

It says a lot about Oceaneering (NYSE:OII) that the most credible debates about the company concern whether it will be able to maintain its dividends and share buybacks at the levels to which investors have become accustomed in recent years. Survival is not really up for debate with this leading deepwater support company and neither is an eventual return to growth unless you believe that offshore development is going to just (somehow) stop.

None of that should be taken to mean that Oceaneering's operating environment hasn't become more treacherous, nor that there won't be a serious drop in profits. Ironically, Oceaneering may actually see free cash flow improve as it cuts back on capex in an oversupplied market. The quality of this company is very well appreciated by the Street and it seldom trades at a big discount to its peers, but I do believe the Oceaneering shares are undervalued and offer a relatively uncommon buy-and-hold opportunity within energy. Investors looking to really maximize the bang for their buck would probably do better with lower-quality companies, but those ideas carry survival risks that aren't a concern here.

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Oceaneering Holding Up Better Than Most

Seeking Alpha: Helix Energy Solutions May Be More Volatile, But Still Valuable

A few months ago, there were some at least some analysts pointing to Helix Energy Services (NYSE:HLX) as a defensive option in energy services and a relative oasis given the company's leverage to life-of-field services and the presumed advantages of the company's purpose-built well intervention vessels. The 27% decline in the share price over the past year and one-third drop over the past six months tells you most of what you need to know about how well that thesis has played out.

Snark aside, I do think there are solid reasons to consider Helix today. There is a real risk that prospective (or even contracted) well intervention clients will opt instead to utilize already-contracted rigs for intervention work, and a lull in activity isn't helping the robotics business, but I believe the long-term outlook for well intervention here is solid. Should 2015 prove to be an aberration, I think these shares can move back into the $20's as the outlook for utilization and revenue improves.

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Helix Energy Solutions May Be More Volatile, But Still Valuable

Seeking Alpha: 2 More Positive Steps For Cameron International

It's only been about a month since Cameron International (NYSE:CAM) posted a generally solid set of quarterly results, but the company has kept busy in the meantime. A new alliance between the Cameron-Schlumberger (NYSE:SLB) OneSubsea joint venture and Helix Energy Solutions (NYSE:HLX) looks like a good long-term opportunity, while the sale of the centrifugal compression business to Ingersoll Rand (NYSE:IR) largely completes the company's restructuring efforts and should allow a near-total focus on operations, not to mention bringing in capital for more buybacks. I don't think Cameron is cheap today, but I do like these steps forward and believe the company is well-placed to take advantage of a long offshore cycle.

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2 More Positive Steps For Cameron International

Seeking Alpha: Oceaneering Seems A Little Underloved

This hasn't been a fun stretch for offshore energy service companies. Land-oriented service providers like Helmerich & Payne (HP) and Halliburton (HAL) have performed nicely so far this year, but the offshore companies like Oceaneering (OII), Tidewater (TDW), and Helix (HLX) have been left behind on worries that actual activity is going to underwhelm as large energy companies pay much greater attention to costs and free cash flow generation.

I think the details matter. I would be more nervous about owning shares in companies heavily leveraged to drilling activity and those dependent upon Brazil for a large share of revenue. I also have much less interest in the offshore construction and seismic spaces as a whole. But in the case of Oceaneering, I believe the Street is overlooking what should be a profitable multiyear opportunity in drilling support and vessel support.

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Oceaneering Seems A Little Underloved

Seeking Alpha: Aging Wells And Deepwater Expansion Bodes Well For Helix Energy Solutions

Investors haven't been too fond of offshore energy service plays over the last six months, with shares of companies like Oceaneering (OII), GulfMark (GLF), Tidewater (TDW), and Technip (OTCQX:TKPPY) all in the red. Against a peer group that has declined from around 5% to 20%, Helix Energy Solutions' (HLX) roughly 5% decline doesn't seem quite as bad. More importantly, the company's backlog continues to build and the company is likely looking at many years of well intervention deepwater support work. Helix looks about as undervalued as its peer group, but the company's more aggressive newbuild program and increasing acceptance of the company's well intervention approach could lead to outperformance.

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Aging Wells And Deepwater Expansion Bodes Well For Helix Energy Solutions

The Motley Fool: What Comes After “Great” for Oceaneering International?

The worst thing I can find to say about Oceaneering International (NYSE: OII  ) is that I think the company is on a beat-and-raise carousel that eventually has to end. Oceaneering has an excellent ROV fleet that is in position to take advantage of increasing deepwater drilling and production. The company also has a strong products and projects business that will extend the company's growth past the point where subsea hardware orders start to decline. The only problem is that the good times won't last forever, and I'm starting to worry that the Street is already applying peak multiples to the stock.

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What Comes After “Great” for Oceaneering International?

Seeking Alpha: Helix Offers An Interesting Risk-Reward Mix

As I've made my way through the energy services sector recently, I've noted a pretty fair number of stocks that look undervalued on the basis of improving offshore activity and expectations for a better 2014 in North America. Helix Energy Solutions (HLX) is an interesting case, though, as although the shares don't appear to be remarkably cheap today, the company's strong utilization and contract positions, coupled with the economics of the services it provides, may make this a pretty good balance of reward relative to risk.

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Helix Offers An Interesting Risk-Reward Mix

Investopedia: Oceaneering Is A Great Business, But How Much Are You Willing To Pay?

When it comes to equipment and services in the energy space, “strong market share” is usually pretty relative. In many markets, a company is doing very well if it can get 25% or one-third of a market to themselves, which makes Oceaneering International's (NYSE:OII) nearly 60% share of the deepwater rig support market pretty significant.

What's more, this is not just a “market share at any cost” story, as the company has a pretty remarkable record of consistent operating margin and ROIC performance despite the vagaries of the deepwater energy market. The problem for investors is in figuring out what constitutes a fair multiple for all of these positives.

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Investopedia: 2011 In Review - Energy Services Come Up Short

There's arguably no such thing as a dull year in energy. In 2011, oil prices broke out over $110 in the late spring, only to ultimately bottom out below $75 in mid-fall before recovering back in the $90s. Although natural gas prices did break above $5 early in the year, most of the year has seen a steady erosion in prices and is close to flirting with the $3 mark.

With the market apparently flooded with natural gas, it is perhaps no great surprise that energy service companies have not been so strong in 2011. Although overall activity has not dropped as much as in prior "bad years," Wall Street has nevertheless seen fit to move these stocks down by about 10% on a sector-wide average.

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http://stocks.investopedia.com/stock-analysis/2011/2011-In-Review-Energy-Services-Come-Up-Short-HOS-CLB-SLB-HAL-CAM-NOV-RIG1228.aspx

Investopedia: Noble's Permit No Giant Leap For Drillers

In what may pass for a step back toward normalcy, the U.S. government has given Noble Energy (NYSE:NBL) the go-ahead to resume offshore drilling in the Gulf of Mexico. While it seems likely that a lot will be made of this move, investors should remember that it isn't a straight line between this permit and "normal", even if the long-term result is almost certainly going to be a return to active drilling. 

What Noble Energy Can Do
Noble did not receive permission to sink a new well. Rather, the company was granted permission to resume work on a well in the Mississippi Canyon, some 70 or miles south of Louisiana. Work on this well had started a while back, but all drilling was stopped in the aftermath of the BP (NYSE:BP) Deepwater Horizon accident.

Now, though, Ensco (NYSE:ESV) can go ahead and drill the well. As part of this process, Noble/Ensco will be using a new underwater containment system developed by Helix Energy (NYSE:HLX). It is unclear at this point whether the inclusion of that system had any bearing on Noble getting permission to move forward, but it certainly seems like a good move to include a system that should help contain any spilled oil if another accident were to occur. 


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Investopedia: Hot Stocks To Start 2011

So far 2011 is off to a great start. 

Fears of a U.S. federal government shutdown? No problem. North Africa and the Mideast in an uproar? Not to worry. Rising inflation and decreasing fears about equities? It's all good.  

Not only have the markets climbed the wall of worry quite easily so far this year, they all appear to be using the same rope. The Dow Jones, S&P 500 and Nasdaq are all up about 5% so far this year. But as is always the case, markets operate like ducks on a pond - things seem quiet and steady on the surface, but there are a lot of little feet madly paddling away out of sight. With that in mind, let us look at some of the top performers in 2011.

Solar - The Sun Has Come Out Tomorrow
Solar carries the rap for being economical and attractive only because of heavy government subsidies - subsidies that will presumably go away in the newly frugal world of 2011. It's not bothering the stocks, though, as this sector is up more than 36% so far this year. While tiny solar companies have seen the sun shine, large players like Jinko (NYSE:JKS) and LDK (NYSE:LDK), with the former announcing a 23% sequential revenue jump in Monday's earnings report. (For more, see Top Solar Stocks To Watch.)


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Investopedia: Macando Takes Out Another Seabird

Given the scope and scale of the Macando explosion and oil spill disaster in the Gulf of Mexico, it is not at all surprising that it pushed a company out of business. Many people will be angry to learn, though, that it was not one of the prime culprits like BP (NYSE:BP) or Halliburton (NYSE:HAL) that was taken down by the disaster. Instead, a relative small offshore driller is the first to go. 

Seahawk Clipped
Seahawk Drilling (Nasdaq:HAWK) had the second-largest jackup fleet in the Gulf of Mexico, but not the staying power to surmount several fundamental problems with its business model. Spun out of Pride International (NYSE:PDE) in August of 2009, Seahawk had issues from the start.

Of the company's rigs, none were built later than 1982 and some were built in the 1970's. While 10 rigs were upgraded in 2002, the fact remains that this was an old and out-of-date fleet. Perhaps even more problematic, Seahawk was entirely dependent upon the Gulf of Mexico (a region seen as in decline) and hugely dependent on Pemex, Mexico's state oil company, as a customer. More than 70% of the company's revenue in 2009 came from Pemex and this is even more problematic considering that Pemex is not particularly well-run and that Seahawk had an ongoing tax dispute with the Mexican government. (For more, see A Primer On Offshore Drilling.)

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http://stocks.investopedia.com/stock-analysis/2011/Macando-Takes-Out-Another-Seabird-BP-HAL-HAWK-PDE-HERO-HLX-DVR0217.aspx

McDermott's New Life

For McDermott (NYSE: MDR), it is now all about energy. With the completion of the Babcock and Wilcox (NYSE: BWC) spinoff at the end of July, McDermott is now an EPCI (engineering, procurement, construction, installation) company with a laser focus on the upstream energy market. In particular, the new company focuses on offshore projects in the Middle East and Asia. If Apache (NYSE: APA), Chevron (NYSE: CVX) or OMV want to build a new offshore installation (whether a production rig, subsea field or floating production system), they hire a company like McDermott to build it. 

The First New Quarter In The Books
On the surface, this third quarter was not an auspicious beginning. Revenue dropped 28%, and operating income fell about 14%, though net income from continuing operations was actually up an encouraging 39%. Although there was weak order flow for the quarter, and the company's backlog declined on a sequential and year-over-year basis, McDermott has booked $1.2 billion in new orders for October.

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http://stocks.investopedia.com/stock-analysis/2010/McDermotts-New-Life-MDR-BWC-CVX-DVR-HLX-GLBL1110.aspx

Another Big Gulf Clean-Up Operation

It looks like the U.S. government is getting serious about cleaning up the Gulf of Mexico. In the wake of the BP (NYSE: BP) Macondo oil spill, the U.S. government has issued an order that will require energy companies to permanently decommission idle wells in the Gulf. Under the order, wells and platforms that have been idle for five or more years will have to be plugged and dismantled, and it would appear to include roughly 3,500 wells and 650 production platforms.

To a large extent, this move makes sense. The temporary plugs that are installed in idle wells do not last forever and can leak. Likewise, a platform can be vulnerable to severe events, like a hurricane. While severe damage is relatively rare (these platforms are built to withstand bad weather), it is nevertheless possible that a bad storm could wreck a platform and create both an oil spill risk and a hazard to navigation.

Major Gulf operators like Chevron (NYSE:CVX), ExxonMobil (NYSE:XOM), BP and Apache (NYSE:APA) could all be on the hook, as well as numerous tiny operators. Although it is not uncommon for operators to use temporary plugs for marginal wells (particularly when prices are low), this order would require permanent plugs that would not be removable later. Then again, given the high prices of the past five years, if a well has been idle for all of that time, it is not too likely that it would be coming back into significant production. (For related reading, see A Primer On Offshore Drilling.)

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http://stocks.investopedia.com/stock-analysis/2010/Another-Big-Gulf-Clean-Up-Operation-APA-CVX-TTI-SPN-DVR0917.aspx