by Scott Rubin
Benzinga Staff Writer
Money managers who are looking for leveraged exposure to a recovery in the Gulf of Mexico deepwater drilling space have been reaching for shares of small-cap name Hornbeck Offshore Services (NYSE: HOS) in recent months. The stock hit a new 52-week high on Friday of $35.00 and continues to run after releasing a very bullish earnings report on Thursday morning. Over the last month, HOS shares have surged around 45% and are up better than 66% in 2011 compared to a loss for the S&P 500 of 1%.
The company is a play on the rebound in deepwater drilling services in the U.S. Gulf of Mexico. Hornbeck Offshore, through its subsidiaries, operates offshore supply vessels (OSVs), multi-purpose support vessels (MPSVs) and a shore-base facility to provide logistics support and specialty services to the offshore oil and gas exploration and production industry.
Hornbeck also operates ocean-going tugs and tank barges which provide transportation of petroleum products. In addition to the U.S. Gulf of Mexico, Hornbeck has operations in the northeastern United States, Puerto Rico, Latin American and the Middle East. The company currently has a market cap of $937 million and employs around 1,000 people. Hornbeck Offshore is located in Covington, Louisiana. In the fiscal third quarter, HOS reported a surprise profit of $0.10 per share versus Street consensus estimates of a $0.23 per share loss.
Revenues also beat Wall Street expectations. The company posted revenue of $105.8 million compared to analysts’ consensus estimates of $96.1 million. Hornbeck is currently capitalizing on improved fleet utilization and higher dayrates for its vessels in the wake of a rebound in deepwater drilling activity in the Gulf of Mexico, which had been severely scaled back after the Macondo oil spill in April 2010.
According to analysts at Jefferies (NYSE: JEF [FREE Stock Trend Analysis]), “the recovery appears underway with deepwater vessel supply/demand tightening and leading-edge rates for deepwater vessels heading back to 2008 peak/pre-Macondo levels.” The firm, however, currently has a Hold rating on the stock, believing that “the recovery is largely priced in following the approx. 70% increase” in HOS shares over the last couple of months. While an increase in vessel rates is expected to continue in 2012, higher costs could potentially offset some of the upside for HOS as management raised its cost guidance for Q4 during this week’s earnings call.
While maintaining their Hold rating on HOS, Jefferies did substantially boost their price target on the name from $27.00 to $38.00. The mean Wall Street price target for HOS is $33.00 with a high target of $39.00. Hornbeck trades at a forward P/E of 24.55 and at 7.9x Jefferies’ 2012 EV/EBITDA estimates. Book value per share is $30.81. Hornbeck trades at roughly a 14% EV/EBITDA premium to competitors GulfMark (NYSE: GLF) and Tidewater (NYSE: TDW).
Potential forward looking risks to HOS’ share price include Gulf of Mexico permitting delays, oil and gas prices and regulatory uncertainty in the GoM which still persists in the wake of the Macondo spill. Shares have traded in a range between $19.80 and $35.00 in 2011. The stock is trading above both its 50 and 200 day moving averages of $28.81, and $26.62, respectively. Given the sharp run up in the share price, a pullback to the 50-day would be an ideal entrance point for bullish investors.
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- Offshore Vessel Operators Suffer As Gulf Oil Output Sags (mb50.wordpress.com)
- Genesis Energy to Buy U.S. Gulf of Mexico Pipelines from Marathon (mb50.wordpress.com)
- USA: EMAS Wins Gulf of Mexico Subsea Contract from BP (mb50.wordpress.com)
- Gulf of Mexico: Vector Lands Cascade Chinook Field Job (mb50.wordpress.com)
- Hornbeck Offshore and Marine Spill Response Corporation Announce Long-term Contract in Gulf of Mexico (gcaptain.com)
ION Geophysical Corporation reported third quarter 2011 revenues of $115.7 million, compared to revenues of $121.6 million in the third quarter of 2010. Net income in the third quarter of 2011 was $8.7 million, or $0.06 per diluted share, compared to $11.9 million, or $0.08 per diluted share, in the third quarter of 2010.
ION Geophysical Corporation is a leading provider of geophysical technology, services, and solutions for the global oil & gas industry. ION’s offerings are designed to allow E&P operators to obtain higher resolution images of the subsurface to reduce the risk of exploration and reservoir development, and to enable seismic contractors to acquire geophysical data safely and efficiently.