Helix: A cheap, under the radar deepwater play
May 22, 2008
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RELATED TICKERS: HLX
It’s funny how one comes across investment ideas. I’m convinced that the more stuff one exposes themselves to in terms of television shows and reading, the more good ideas they come across (too bad its so darn time consuming). A couple of weeks ago I was watching Squawk Box on CNBC* and they had on David Einhorn to talk about his new book Fooling Some of the People All of the Time: A Long, Short Story (which looks very interesting btw).
I liked a lot of what he said about his investment philosophy and I made a mental note to take a look at Greenlight Capital’s (his hedge fund) holdings. When I did, one of the names jumped off of the screen at me, Helix Energy Solutions (HLX). It is a company that has popped up on my radar from time to time in the past, like on a Magic Formula screen, articles, etc…but I never really looked into it. Here we have a true value investor who is interested in this company, not just some oil bull so I decided to do some research on it.
Helix is basically an oil services company, but one with a twist. It not only provides deep and shallow water services E&P companies, it also actually has its own portfolio of E&P projects that focuses on purchasing and developing small oil and gas fields. Helix is particularly active in the deepwater sector. I have become increasingly enamored with deepwater plays over the past year as it has become clear to me that much of the low hanging fruit in terms of oil and gas has already been picked or is peaking and companies are going to have to go to more difficult places like deep in the ocean for oil and gas in the future. Plus, the current high price of oil actually makes deepwater drilling economical. So HLX and I got off on the right foot.
Helix’s services division is very diverse. Not only does it construct and cap wells, but it offers its clients the use of its submersible robots, divers, and ships. Its fleet of ships includes six “dynamically positioned” deepwater vessels that use thrusters and satellite positioning to perform a number of tasks less expensively for its clients than traditional drilling rigs.
In short, Helix is a company that is trading in one of the hottest sectors (deepwater) of one of the hottest industries (oil and gas), that has a P/E ratio of only 11. Helix was even cheaper a couple of weeks ago, but its first quarter results earnings were better than analysts’ estimates, besting its Q1 ’07 by over 31%.
I know that this write-up is rather thin, but I always get so excited about new ideas that I want to share them ASAP and my blackout period just ended a couple of days ago. I plan on writing more about Helix at a later date. As usual, right now I am running out of time. I have family coming in from out of town for the Memorial Day weekend.
For those of you who are interested, here is a link to the company’s latest investor presentations:
First Quarter 2008 Presentation
Howard Weil Presentation
I hope that all of my CAPS friends have a fun, safe long weekend.
Deej
Long HLX
*Squawk Box is one of the CNBC’s few watchable shows. I love Joe Kernen. I despise Kudlow and don’t really like Fast Money.
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