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    Stock Alert for Hercules Offshore Inc. (HERO)

    Hercules Offshore Inc.  (HERO) is a provider of offshore contract drilling, liftboat and inland barge services with operations spanning the globe. It operates the fourth largest fleet of jackups in the world as well as the largest liftboat and inland barge fleets. The Company’s fleet is capable of performing services including oil and gas exploration and development drilling, well service, platform inspection, maintenance and decommissioning operations in shallow water markets.  As of July 2011, the Company operated a fleet of 49 jackup rigs, 17 barge rigs, 65 liftboats, two submersible rigs and one platform rig. HERO currently holds 17.5% of share capital in Discovery Offshore, a pure play, ultra-high specification jackup rig company.

    Share Statistics (26-Aug-11) FY2009 FY2010 % Chg Q22010 Q22011 % Chg
    Symbol HERO Revenue, $Mn 742.85 657.48 -11.5% 157.90 170.20 7.8%
    Current price $3.69 Gross marg. 30.8% 34.8% 13.0% 35.4% 32.8% -7.3%
    52wk Range: $2.05-$6.99 Oper. margin -22.1% -2.3%
    Avg Vol (3m): 3,752,020 Net margin -12.3% 20.5% -266.7% -12.0% -13.8% 15.0%
    Market Cap. 508.77M
    Shares Outstanding 137.88M EPS, $ -0.83 -0.46 -44.6% -0.16 -0.11 -31.3%

    Source:, SEC Filings.

    Investment Highlights

    Shares of HERO traded as much as 18% higher Friday on volume of about 5.8 million shares.  Over the past 52 weeks, the stock has traded between $2.05 and $6.99.

    Shares of the Houston, Texas-based oil rig operator real estate services company gained 11.18% in the last week, though the stock dropped 17.86% in the last 30 days. Shares have gained 70.37% year-to-date.

    The Company last month announced its earnings for the second quarter of 2011, posting a wider-than-expected loss despite higher revenue.

    HERO announced a loss from continuing operations of $14.3 million, or $(0.11) per diluted share, on revenue of $170.2 million for the second quarter 2011.  That compares to a loss from continuing operations of $18.4 million, or $(0.16) per diluted share, on revenue of $157.9 million for the second quarter 2010.

    Domestic Offshore revenue increased to $48.6 million in the second quarter 2011 from $34.1 million in the comparable period in 2010. This increase was mainly driven by the addition of the acquired rigs from Seahawk and higher average dayrates.

    International Offshore revenue declined to $70.0 million in the second quarter 2011 from $73.5 million in the second quarter 2010. The decrease in revenue primarily stems from contract expirations on the Hercules 258 and Hercules 260, which led the average revenue per day per rig to decline to $124,197 from $137,886 in the second quarter 2010.

    Inland revenue for the second quarter 2011 increased to $7.6 million from $5.2 million in the second quarter 2010, due to a 35% increase in average revenue per day per rig to $28,033 in the second quarter 2011 from $20,720 in the comparable 2010 period, coupled with an increase in utilization to 99.6%, from 91.6% in the same periods, respectively.

    Domestic Liftboats generated revenue of $16.9 million in the second quarter 2011 compared to $17.9 million in the second quarter 2010. The decline in revenue was due to a reduction in operating days to 2,100 in the second quarter 2011 from 2,503 in the prior year period. Partially offsetting lower operating days was an increase in average revenue per liftboat per day, which rose by 12% to $8,029 in the second quarter 2011 from $7,149 in the prior year period.

    International Liftboat revenue of $27.0 million in the second quarter 2011 was essentially flat with year ago levels. Utilization increased to 60.7% in the second quarter 2011 from 56.8% in the prior year period. This was partially offset by a decrease in average revenue per liftboat per day to $21,280 from $22,212 in the same periods, respectively.

    “We are starting to see solid indications of a healthy upturn in our Domestic Offshore segment, as customer demand is leading to higher dayrates and greater visibility in rig demand through year end. This comes at a time when we have completed our integration of 20 domestic jackup rigs opportunistically acquired from Seahawk Drilling in April 2011. We expect the positive momentum to continue,” CEO John T. Rynd said in the release.

    At June 30, 2011, HERO had unrestricted cash and cash equivalents totaling $117.8 million and unused capacity of $128.1 million under its revolving credit facility. As of June 30, 2011, the Company’s balance sheet reflects total debt of $844.0 million.


    Financial Strength (26-Aug-2011)




    S&P 500

    Quick Ratio (MRQ) 0.91 0.47 0.74
    Current Ratio (MRQ) 1.91 1.17 0.71 1.10
    LT Debt to Equity (MRQ) 88.86 28.93 14.06 112.76
    Total Debt to Equity (MRQ) 91.84 35.73 18.66 152.96
    Interest Coverage (TTM) -1.14 1,516.74 10.50 23.0

    Source:, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among 24 polled investment analysts. Against the Hercules Offshore Inc company.

    Analyst Detail






    No Opinion

    Latest 6 4 10 3 1 1
    4 weeks ago 6 3 9 5 1 1
    2 months ago 6 3 8 5 1 1
    3 months ago 6 3 8 5 1 1
    Last year 0 4 8 4 0 3

    The 19 analysts offering 12-month price targets for HERO have a median target of 6.00, with a high estimate of 9.00 and a low estimate of 3.00. The median estimate represents a 86.34% increase from the last price of 3.22.


    Consensus Estimates Analysis

    # of Estimates




    1 Year Ago

    SALES (in millions)
    Quarter Ending Sep-11 16 174.51 195.28 158.80 174.88
    Quarter Ending Dec-11 16 169.26 197.62 155.87 163.41
    Year Ending Dec-11 18 680.62 743.45 650.20 706.89
    Year Ending Dec-12 18 754.47 959.30 648.02 714.16
    EARNINGS (per share)
    Quarter Ending Sep-11 22 -0.13 -0.05 -0.21 -0.16
    Quarter Ending Dec-11 21 -0.17 -0.03 -0.24 -0.23
    Year Ending Dec-11 22 -0.53 -0.31 -0.69 -0.62
    Year Ending Dec-12 22 -0.42 0.30 -0.77 -0.76

    Technical Analysis


    HERO is within its Bollinger Bands. This is a normal condition suggesting that it is neither overbought nor oversold relative to the recent levels.

    HERO’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Aug26-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Transocean Ltd. RIG 52.84 16.90B 14.17 9.06 1.79 1.61
    Parker Drilling Co. PKD 5.22 606.27M 12.73 7.68 0.88 0.73
    Noble Energy Inc. NBL 81.66 14.41B 15.89 11.53 3.85 3.10
    Oil & Gas Drilling & Exploration Median       14.78 n/a 4.22 n/a
    Hercules Offshore Inc. HERO 3.68 507.39M n/a n/a 0.75 0.67

    Source: Thomson Financial

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