Hercules Offshore Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Hercules Offshore (Nasdaq: HERO  ) shares jumped 10% in intraday trading on news that the Obama administration will lift the deepwater drilling ban.

So what: This is welcome news for drillers waiting for clarification on the ban. The news comes a month earlier than expected and has given drilling sector shares a boost.

Now what: Permitting may still take some time, but this is no doubt positive news for drilling companies. With the fog of regulation becoming clearer, it may be time to jump back into the drilling space. With Hercules down 50% in the past year, this could be just the news the company needs to get its stock back on track.

Interested in more info on Hercules Offshore? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool has a disclosure policy.


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  • Report this Comment On October 12, 2010, at 4:16 PM, HistoricalPEGuy wrote:

    In my opinion, HERO's pop has very little to do with the moratorium going away. First, HERO doesn’t really do deepwater drilling (there deepest rig only goes 350 feet). They are much more of a shallow water play. Companies like ESV, RIG, NE and DO have much more to gain than HERO. In addition, HERO had a ton of puts placed in the last couple of days – hedge funds betting on the volatility of HERO. Quite simply, this is a short squeeze sparked by positive news in the overall drilling space. If you believe an end to the band will increase demand and day-rates – bet on the true deepwater players.

  • Report this Comment On October 12, 2010, at 6:14 PM, Thaeger wrote:

    (tl;dr : Hercules has a fleet dedicated to servicing rigs, and recent regulations mean that, even if drilling went away completely, their fleet would still be gainfully employed over the next few years).

    "Starting Oct. 15, companies must permanently seal wells that haven't produced oil or gas in five years...Federal regulators estimate that throughout the Gulf there are some 3,500 non-producing wells and about 650 idle platforms whose owners must move to dismantle.

    ...And while the push to clear away so-called "idle iron" could run those owners billions of dollars in cleanup costs and future revenue from oil and gas that will be sealed in many of the unused wells, the effort may amount to a government-mandated work program for the relatively small firms that lease equipment and perform underwater plug and abandonment services.

    Hercules Offshore Inc. (HERO) Chairman John T. Rynd, speaking at the same New Orleans conference, said he expects increased demand for his company's fleet of 41 domestic liftboats, which can generate between $5,000 and $23,000 a day.

    Because there's always been plug and abandonment work, "this isn't just going to bust wide open," Rynd said. But the mandate will remove "volatility" from the business over the next few years. "

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