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Showing posts with label Hercules Offshore. Show all posts
Showing posts with label Hercules Offshore. Show all posts
Wednesday, February 13, 2013
Investopedia: Hercules Offshore Seeing Better Days In The Gulf
The energy exploration and production business in the Gulf of Mexico has
finally gotten back to something closer to normal, and that's good news
for Hercules Offshore (Nasdaq:HERO).
While the company's relatively low-spec rigs do limit the company's
earnings potential (and the multiple investors should pay), it's also
true that a rising tide lifts all boats and that the company is seeing
improving day rates and contract lengths. Investors should be cautious
about the run-up in energy services stocks, but Hercules could yet be a
name worth following.
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Wednesday, November 30, 2011
Investopedia: Seadrill - The Driller For Mad Dogs And Englishmen
Investors in stocks like Transocean (NYSE:RIG) or Diamond Offshore (NYSE:DO) might not be feeling the love yet, but the offshore drilling market is actually starting to get better. With a very modern fleet, aggressive leverage and a healthy dollop of devil-may-care operating philosophy, Seadrill (NYSE:SDRL) is ready for that turn. The question for investors, though, is whether they can handle the risk and valuation that comes with arguably the most aggressive player in a highly cyclical sector.
A Ho-Hum Third Quarter
The markets are still expecting the offshore drilling market to be more of a 2012 event, so Seadrill's third quarter earnings are not likely to be examined quite so closely. Revenue was okay, falling 4% from last year and rising 3% from the second quarter. Rates were not all that incredible this quarter, but utilization was quite good and the company is bringing more of its rigs under contract.
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A Ho-Hum Third Quarter
The markets are still expecting the offshore drilling market to be more of a 2012 event, so Seadrill's third quarter earnings are not likely to be examined quite so closely. Revenue was okay, falling 4% from last year and rising 3% from the second quarter. Rates were not all that incredible this quarter, but utilization was quite good and the company is bringing more of its rigs under contract.
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Monday, April 11, 2011
Investopedia: This HERO's Tale Unfortunately Common
Shares of offshore driller and liftboat operator Hercules Offshore (Nasdaq:HERO) took a beating on news that the company was under investigation by the U.S. government for possible violations of the Foreign Corrupt Practices Act. While history suggests that the actual punishments for the company (if it is in fact proven guilty) will not be crippling, the issue represents a distraction for management, a black hole for company resources that will now be directed towards legal matters and a significant embarrassment in a world that seems increasingly concerned about company conduct.
What HERO's tale highlights, though, is just how common this issue is among companies great and small in a variety of industries. It also raises a dilemma for investors - should companies toe a high moral line, even if their competitors do not (and lose business), or should companies be allowed to act according to the notion of, "When in Rome ..."?
Few Details at This Point
At this point, it is impossible to say what specific allegations are in play against Hercules Offshore, to say nothing of whether the company is actually guilty. The company does operate in overseas markets like Saudi Arabia, Malaysia, India, Mexico and Nigeria - and Nigeria in particular has long been a hotbed of corruption, especially so in the energy and energy services sectors.
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What HERO's tale highlights, though, is just how common this issue is among companies great and small in a variety of industries. It also raises a dilemma for investors - should companies toe a high moral line, even if their competitors do not (and lose business), or should companies be allowed to act according to the notion of, "When in Rome ..."?
Few Details at This Point
At this point, it is impossible to say what specific allegations are in play against Hercules Offshore, to say nothing of whether the company is actually guilty. The company does operate in overseas markets like Saudi Arabia, Malaysia, India, Mexico and Nigeria - and Nigeria in particular has long been a hotbed of corruption, especially so in the energy and energy services sectors.
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Thursday, March 3, 2011
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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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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Wednesday, March 2, 2011
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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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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Thursday, February 17, 2011
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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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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Wednesday, February 9, 2011
Investopedia: Ensco Digs Deep To Go Deep
Mergers and acquisitions seem to pick up when a market is just turning, so Monday's deal between Ensco (NYSE:ESV) and Pride (NYSE:PDE) may be a good sign that the offshore drilling market is about to enter another cyclical upswing. By the same token, it could just be a sign that Ensco realizes that its tough to get fair treatment from major integrated energy companies as a smaller company and that scale can produce some inherent advantages.
The Terms of the DealWith the deal announced Monday, Ensco will acquire Pride with a combination of cash and stock worth $41.60 per share. In addition to $15.60 in cash, Ensco will hand over 0.4778 shares of stock to complete the deal. That represents a 21% premium for Pride shareholders and a pretty healthy multiple for Pride relative to industry norms.
What the New Ensco will Look Like
When the deal is complete, Ensco will control 74 rigs, with 21 that function in deepwater and ultra-deepwater. That will make Ensco the second-largest deepwater player, second to Transocean (NYSE:RIG). Ensco will also have 47 jackups in the fleet, with 27 good for drilling in depths in excess of 300 feet.
It is not all about the number of rigs, though. While companies like Diamond Offshore (NYSE:DO), Noble (NYSE:NE) and Transocean may have been historically more focused on deepwater assets, the new Ensco will have a newer fleet. Newer matters - newer rigs are often more powerful and more technologically advanced, and can allow drillers to do more in less time and complete complex jobs that older rigs may not be able to handle. That, in turn, often spells better dayrates.
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The Terms of the DealWith the deal announced Monday, Ensco will acquire Pride with a combination of cash and stock worth $41.60 per share. In addition to $15.60 in cash, Ensco will hand over 0.4778 shares of stock to complete the deal. That represents a 21% premium for Pride shareholders and a pretty healthy multiple for Pride relative to industry norms.
What the New Ensco will Look Like
When the deal is complete, Ensco will control 74 rigs, with 21 that function in deepwater and ultra-deepwater. That will make Ensco the second-largest deepwater player, second to Transocean (NYSE:RIG). Ensco will also have 47 jackups in the fleet, with 27 good for drilling in depths in excess of 300 feet.
It is not all about the number of rigs, though. While companies like Diamond Offshore (NYSE:DO), Noble (NYSE:NE) and Transocean may have been historically more focused on deepwater assets, the new Ensco will have a newer fleet. Newer matters - newer rigs are often more powerful and more technologically advanced, and can allow drillers to do more in less time and complete complex jobs that older rigs may not be able to handle. That, in turn, often spells better dayrates.
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Wednesday, September 8, 2010
BP Quietly Hits A Grim Milestone
Lost amid the languid slide into the Labor Day weekend and the general Wall Street obsession with the next new thing, BP (NYSE:BP) quietly reached an unfortunate milestone last week. The large international energy giant announced that the company had spent $8 billion in direct costs tied to the Deepwater Horizon/Macondo disaster. These costs include the direct costs of addressing the spill, as well as various claims paid to date, but likely do not come close to the ultimate cost.
Better, But Not Over
It does appear that the worst is over for BP in terms of the actual well disaster. Oil is no longer leaking from the well (at least not in significant measurable quantities), the company has successfully cemented the well and Transocean's (NYSE:RIG) Development Driller II and III are on the job for the drilling of the relief well. In a relatively short time, then, the technical and engineering aspects of recovering from the disaster could be at a close.
That is not to say that this accident will not continue to haunt BP and the Gulf coast for years to come. The environmental impact is still very much unknown, though rather likely to be less severe than the radical predictions that it would devastate the area and its economy for decades. All the same, it seems like a virtual certainty that BP will continue to face new claims and will have to go to court with those claimants who refuse BP's settlement offers. (For related reading, check out The Great Oil Spill Of 2010.)
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Better, But Not Over
It does appear that the worst is over for BP in terms of the actual well disaster. Oil is no longer leaking from the well (at least not in significant measurable quantities), the company has successfully cemented the well and Transocean's (NYSE:RIG) Development Driller II and III are on the job for the drilling of the relief well. In a relatively short time, then, the technical and engineering aspects of recovering from the disaster could be at a close.
That is not to say that this accident will not continue to haunt BP and the Gulf coast for years to come. The environmental impact is still very much unknown, though rather likely to be less severe than the radical predictions that it would devastate the area and its economy for decades. All the same, it seems like a virtual certainty that BP will continue to face new claims and will have to go to court with those claimants who refuse BP's settlement offers. (For related reading, check out The Great Oil Spill Of 2010.)
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