Hercules' Mighty Squeeze

We've seen some stunning reversals this week, Fools. From Las Vegas Sands (NYSE: LVS) to MF Global (NYSE: MF) to International Coal Group (NYSE: ICO), these share price pops would make Orville Redenbacher's bow tie spin.

Add Hercules Offshore (Nasdaq: HERO) to that list of leapers. Like the firms listed above, Hercules sports a moderate short interest. The company's third quarter report was far from fireworks-worthy, so the simple assessment that the company's not kaput seems to have been enough to drive a stampede of short covering. Shares finished the day up 34%.

Again, there was nothing to get too jazzed about in the report. Revenue came in higher than last year, but profits were pounded to a piddling $0.37 per share. Some of this was attributable to the Gulf hurricanes, so you can keep management's EBIG (earnings before Ike and Gustav) estimate of around $0.45 per share in the back of your mind. That said, if you're going to spin the positive impact of storm damage on future lifeboat activity, it doesn't seem fair to back out the storms' impact.

Hercules' comments regarding the drilling outlook hewed closely to what we've heard from still-seaworthy Noble (NYSE: NE) and Ensco International (NYSE: ESV). Management characterized the international market in particular as "still very robust." Like Ensco, Hercules has a handful of multi-year contracts kicking in next year, and these will help keep the company afloat as domestic spot rates deteriorate.

Once again, I must conclude that offshore drilling is not washed up. Hercules wouldn't necessarily be my driller of choice here -- frankly, it doesn't crack my top five -- but I see no reason to abandon ship at these (now slightly less) depressed prices.