Despite strong trends in the shallow water drilling market, Hercules Offshore (UNKNOWN:HERO.DL) still reported a loss in the second quarter. Of course, that was partly due to the sale of the domestic liftboats and inland segment in July, which resulted in a $44.0 million loss from operations. At the end of the day, the company's shallow water business is improving, just not as well as many other parts of the offshore industry.

The numbers
Hercules's revenue jumped 37% in the quarter to $211.5 million, driven by both higher utilization and higher day rates. International offshore saw the biggest improvement with utilization up to 78.1% from 51.6% a year ago, and average revenue per day up from $91.4 million to $116.1 million.

Without the $44 million loss from discontinued operations the company would have made a $16.6 million profit, or about $0.10 per share. That's a big turnaround from a $55 million loss a year ago.

A challenge keeping up in drilling
The question for investors to consider is whether or not the strong trends will continue. Seadrill(NYSE:SDRL), Transocean (NYSE:RIG), and Noble (NYSE:NE) have seen improvements in shallow water as well, and it looks like industry trends will stay strong. But in the long term the drilling trends are working against Hercules.

Ultra-deepwater offshore drilling is where most of the major oil finds are now, and that's where Seadrill, Transocean, and Noble are putting most of their resources. Meanwhile, Hercules is stuck in shallow water where demand isn't high and drilling contracts are much shorter and more volatile.

While Hercules' management was touting visibility for most of its jack-up fleet into 2014, ultra-deepwater contracts extend into 2017 and beyond, even for rigs that aren't finished yet.

Better values out there
Hercules Offshore has generated $0.35 per share in earnings from continuing operations over the past six months. If that continues the stock would be reasonably priced at just over 10 times earnings, but there are better values in drilling.

Seadrill trades at 12 times forward earnings and pays an 8.4% dividend yield, Transocean is eight times forward estimates and pays a 4.7% dividend, and Noble is going for nine times forward estimates and pays a 2.6% dividend yield. Each of these three companies also has exposure to the growing and profitable ultra-deepwater market. Hercules is improving but these three companies still offer a better value to investors.