Hercules Offshore (HERO) is one of the primary beneficiaries of the long-term reduction in the supply of rigs in the U.S. Gulf of Mexico, coupled with an uptick in shallow-water activity after years of declining rig count, making the few companies that remain beneficiaries from the increased demand for their services, says John Keller, Vice President in Equity Research at Stephens Inc.
“Given the fact that the rig count has declined from roughly 140 10 or 12 years ago to roughly 40 rigs today, the supply is such that everyone who remains is in a pretty good position,” Keller said. “Hercules is the primary driller out there with about 50% market share, so they are the right player in the right market at the right time.”
Keller says the large exposure HERO has to the reinvigoration of the shallow-water U.S. Gulf of Mexico makes it a primary beneficiary, and he says the U.S. Gulf of Mexico, along with developments in Africa and Brazil, is one of the places that look to remain strong for companies like this.
“As you can see by the stock of late, HERO is a primary beneficiary of the shallow-water U.S. Gulf of Mexico reinvigoration,” Keller said. “You’ve seen some property transactions out there which have driven incremental interest and activity on the shelf.”
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