Hercules Offshore, Inc. (NASDAQ:HERO)

This stock meets my criteria for a long-term buy: great management and a good price.

Day Rates again

As pointed out in the Fool article:
http://www.fool.com/investing/general/2007/03/19/a-nicely-rigged-drilling-combo.aspx?vstest=search_042607_linkdefault
... while most of the investment luster recently has been associated with the deep-water drillers, such as Transocean (NYSE: RIG) and Diamond Offshore (NYSE: DO), it seems to me that there is considerable value to be achieved through a combination of a pair of shallow-water drillers such as Hercules and TODCO.

I agree. It's got to be cheaper on all fronts to run a shallow-water operation rather than a deep-water one (think of the insurance if nothing else!).

Looking at the financial numbers on Yahoo Finance, I'm with you guys: what part of the picture are we missing, if anything? It seems too good to be true. Profit & operating margins of 35% and 45% respectively, RoA of 21%, RoE of 39%(!), a PEG ratio of only 0.18, and a fairly low Debt-to-Equity ratio of 25% (which I consider low for this capital-intensive industry; heck, I've got tenants that have higher Debt/Equity ratios!).

Hopefully, I've not missing something glaring (other than Murphy sitting there waiting for me to buy this stock, so he can kill it), because I'm putting in my order to buy some HERO tonight. The peak demand months of summer are fast approaching, and I think this will help buoy the oil-n-gas industry again, just as it has over the past 5 years for every summer.

Looking at their Edgar 8k filings for the last 3 months, there's more upside to be spotted. Check these utilization rates out:

January 2007:
http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001193125-07-035129&Type=HTML

February 2007:
http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001193125-07-055794&Type=HTML

March 2007:
http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001193125-07-081738&Type=HTML

In those reports, HERO shows their average utilization rate (near the bottom of each page) for the Gulf of Mexico as climbing, which I've repeated below:
MONTH/YEAR Average Utilization by Region
MONTH/YEAR Gulf/Mexico W.Africa TOTAL
Jan. 2007 62% 83% 67%
Feb. 2007 65% 73% 67%
Mar. 2007 69% 80% 72%

So, while West Africa has been a little irregular, it's still pulling about as much dough as the Gulf of Mexico. And the Gulf income is steadily increasing. And if that's not enough to get excited about, several of their ships are in drydock now being repaired (read the comments next to thee utilization rates on the webpages). This is why their utilization is not in the 85%-95% range, but they're gonna get there, and sooner rather than later. Most of the boats will be finished in April (indeed, some have already been finished in March). So, the income is only going to get better and better (barring any bad storms or over-rotation into/out-of drydock for unscheduled maintenance). Also, the 8K reports show me their biggest ship (a monster 260-footer) has had 100%, 100% and 74% utilization rates for the past 3 months, respectively. That's excellent, showing that they're focused on covering their largest bets, getting the most money out of the highest margin liftboat.

Finally, HERO has had positive earnings surprises for each of the last 4 quarters, as shown here:
http://finance.yahoo.com/q/ae?s=HERO
Hopefully more of that will continue as well.

Low PEG, leader in Gulf, great ROE. The NExt DWSN?
bought it at 29, sold at 53 in about 1 year

PE of 7, ROE 38%, Good Fundamantals, Management seems intelligent. Insiders are Buying around $27, Aquired Todco (THE) Now has a good hold on the market place in the Gulf of Mexico. Hercules trades at discounts ranging from 35% to 70% against its peers, its industry, its own five-year averages and the broader market, according to Thomson Financial. Additionally, the company's price/earnings growth, or PEG, ratio stands at close to a 90% discount to the S&P 500. (PEG measures how expensive a company's shares are relative to its growth prospects.)

One of the lowest PEG ratios I have ever seen.

low PE

HERO has acquired THE which I had owned because it is a great cash machine that was undervalued. Hero itself is a cash producing company that can only have ever a better balance sheet with the assets of THE added to it. In the long run the price of oil will stay high which will mean big profits for this company and an increased share price. Right now the P/E is very low which tells me with its profits and cash flow that it has a large upside comming.

This company has excellent earnings and should perform well after the merger with TODCO (THE).

Low PE of 7.2 curently and forward looking PE of 5.3. Price to Earnings ratio is only .16 indicating the stock price has a lot of catching up to do. The price to book ration is only 2.17. More than 8 analysts cover the company and they expect 13% sales growth in '08 and 40% earnings growth each year for the next 5 years. They just bought competitor TODCO with pocket change and have minimal debt. This is an aggresive value equity in a hot industry.

Now my HERO too. Picking up TODCO using pocket change and continued strength in day drilling rates sends this one straight up !

Good P/E compared to competition as well as PEG. Just aquired competitor

I own THE, which is being acquired by HERO. HERO is also cheap, PEG = 0.16. Now, that's a low PEG :)

Price = 25.39
Revenue = $345 million
ROA = 20
ROE = 39
PE = 7
PEG = 0.16

Overextended, will be hammered in a downturn in a cyclical industry.

Looks good...I'm thinking long term (a few years).

small cap growth, P/E is about 7, next 5 years projected growth rate is greater than 25%. It provides oil equipment which is fit as a defensive stock. Great adding to porfolio. Now the price is about 52 week low, must be outperform market!

A current P/E around 7, and a forward P/E around 5 shows a pretty good value. Coupling that with the fact that it has a very strong position in a niche market (offshore support services via liftboats), makes for a potentially explosive investment...not to mention the demand for energy shows little sign of waning.

All credit for identifying this sector must got to HistoricalPEguy, he's my pioneer here. And as most value investors, he's been a bit early so my unashamed follow-along behind him may put me at an unfair advantage. But others can always feel free to do the same regarding my picks.

The broad energy sector appears to finally be moving again. The still-ample liquidity in the market fueling--amongst other things--HUGE LBO's, makes me nervous about the somewhat intermediate to longer term. But in the more immediate future, one has to at least wonder when the take-over money will identify this undervalued sector.

performer going in right direction