Hercules Offshore (NASDAQ:HERO), with a market cap of $997
million, is poised for significant growth following the sale of its non-core
and low return assets. An increase in domestic offshore backlog, higher day
rates at the Gulf of Mexico, international expansion, including new contracts
for the Discovery rigs in 2014, will cause a significant growth of its top and
bottom line.
Hercules Offshore (HERO) is one of the leading providers of shallow-water
drilling and marine services to national, major integrated and independent
energy firms ranging from state-owned oil giant Saudi Aramco to the American
oil major Chevron. The company
boasts of the "third largest worldwide fleet" of jackup rigs and the
"largest international fleet" of lift-boats. Hercules has clearly
come a long way since its formation in 2004. This year, Hercules has upped its
stake in Discovery Offshore S.A, an
ultra-high-specification-jackup-drilling-rigs company which was formed by
Hercules a couple of years ago, from 32% last year to 100% by the end of
September 2013. Hercules currently has 18 rigs at the Gulf of Mexico which makes
Hercules one of the biggest suppliers in the region; but it is also eyeing
significant growth in international markets.
Hercules
has not posted an annual profit in the last five years while its top line
growth has been modest. Its shares have also underperformed this year. However,
all of that could change as the company is on track to post an annual profit in
2013, followed by a significant increase in revenues and income in 2014. This
turnaround could propel the company's stock which, so far, has largely been
ignored by equity analysts. With the new price target, I believe the company's
stock has a potential upside of more than 60%. So let's dig deeper.
The Acquisition
Through the Discovery acquisition mentioned in the introduction,
Hercules has added some new assets …. Read full article at Seeking Alpha
