Shallow water offshore driller Hercules Offshore (NASDAQ: HERO ) reported a big rise in first-quarer earnings this morning, but the market hasn't rewarded the stock in early trading. Shares are down about 2.5% as of 10:30 a.m. First-quarter revenue jumped 38% to $256.7 million but income from continuing operations fell by more than 50% to $19.9 million, or $0.12 per share, in the first quarter.
Four new rigs in the international market helped drive the quarter's revenue growth, and operating income nearly tripled as a result. But Hercules reported a $15.2 million loss on extinguishment of debt, which isn't bad long-term, and didn't have a $39.0 million income tax benefit like it did a year ago, which is why bottom-line results were down.
The good news for long-term earnings is that average dayrates were up across the board, something we haven't seen recently in the shallow water market. Management is bullish on that trend continuing on high activity around the world.
Results fell slightly below expectations today, which is why Hercules Offshore's stock is down slightly, but investors should really be taking a longer-term view. The fundamental business is getting stronger and shares are trading at just 8 times this year's expected earnings. That's a good value in a growing offshore drilling market.
3 stock picks poised to pop as America drills for more oil
Hercules Offshore isn't the only company experiencing strong demand in energy. Record oil and natural gas production is revolutionizing the United States' energy position and finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, The Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.