It's been an up and down year for Hercules Offshore
The company is hoping that some recent moves will turn around those losses. In a recently announced share offering, the company said it will raise up to $117.3 million, which will be used to pay off short-term debt and acquire a new vessel. The acquisition of the rig Ocean Columbia from Diamond Offshore
Shallow water has been Hercules Offshore's biggest strategic weakness in the current market. While SeaDrill
The positive for Hercules Offshore is that utilization rates are rising and debt should be down after the recent share offering. But the rest of the operations concern me. The company generated just $52 million in operating cash last year and has $818.1 million of long-term cash. Either cash generation is going to need to improve or debt is going to have to come down to justify a $693.6 million market cap. An enterprise value 29 times bigger than operating cash flow simply isn't a good value in this market.
Right now I simply can't see Herclues Offshore as a buy over SeaDrill, Transocean, or Noble. All three are paying dividends and have exposure to the very profitable ultra-deepwater market. If utilization rates pick up and oil prices continue to rise, the story may change, but for now there are better options than Hercules Offshore.
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