; Bullish Oil & Gas Juggernaut Breaks to the Upside
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Bullish Oil & Gas Juggernaut Breaks to the Upside


Bullish Oil & Gas Juggernaut Breaks to the UpsideBy 2017, the U.S. is expected to overtake Saudi Arabia as the world’s leading oil producer. Within 20 years, it is expected the U.S. will be self-sufficient when it comes to energy production. Aside from investing in pure play oil and gas companies, how can penny stock investors take advantage of this burgeoning growth? (Source: New York Times press release, “U.S. to Be World’s Top Oil Producer in 5 Years, Report Says,” November 12, 2012.

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									  Bullish Oil & Gas Juggernaut Breaks to the
                                              By   2017,   the   U.S.   is   expected   to   overtake 
                                              Saudi   Arabia   as   the   world’s   leading  oil 
                                              producer. Within 20 years, it is expected the 
                                              U.S.   will   be   self­sufficient   when   it   comes   to 
                                              energy   production.   Aside   from   investing   in 
                                              pure   play   oil   and   gas   companies,   how   can 
                                              penny stock investors take advantage of this 
                                              burgeoning growth? (Source:  New York Times 
                                              press   release,   “U.S.   to   Be   World’s   Top   Oil 
                                              Producer in 5 Years, Report Says,” November 
12, 2012.)
Hercules   Offshore,   Inc.   (NASDAQ/HERO)   provides   shallow­water   drilling   and 
marine   services   to   companies   involved   in   oil   and   natural   gas   exploration   and 
production worldwide. Based in Houston, Texas, the Hercules jackup rig fleet is the 
fourth­largest in the world, and the largest in the U.S. Gulf of Mexico. The firm also 
operates the largest lifeboat and inland barrage drilling fleet in the world.
Currently trading near $5.78, with an average three months’ volume of about 2.8 
million shares per day, almost 74% of Hercules is held by institutions, and 18.51% by 
insiders. The oil producer’s book value stands at $5.53.
On October 25, Hercules announced that third­quarter revenue was up 13.4% year­
over­year   at   $184.9   million.   The   company   reported   a   third­quarter   loss   of   $37.9 
million, or $0.24 per diluted share. In the third quarter of 2011, Hercules reported a 
loss of $17.0 million, or $0.12 per diluted share. (Source: Hercules Offshore, press 
release, “Hercules Offshore Announces  Third Quarter 2012 Results,” October 25, 
Even   though   the   oil   producer’s   third­quarter   2012   loss   increased   over   the   same 
prior­year period, it improved significantly quarter­over­quarter. During the second 
quarter of 2012, Hercules reported a loss of $55.1 million, or $0.35 per share.
In spite of previous losses, the industry has improved, and Hercules believes it is in 
a better position to take advantage of growing demand.
John   T.   Rynd,   President   and   CEO,   stated,   “Visibility   in   our   Domestic   Offshore 
segment   is   the   best   it   has   been   since   the   company’s   formation,   driven   by   solid 
demand and tight supply of jackup rigs in the U.S. Gulf of Mexico. We believe this 
positive momentum will continue through at least 2013, based on our discussions 
with customers, many of whom are seeking longer­term commitments than what we 
have traditionally seen in the U.S. Gulf of Mexico.”
In addition, the oil producer’ cash position has increased. In the first quarter of 
2012, Hercules held $178.3 million in cash and equivalents. At the end of third 
quarter, cash increased 54.4% to $275.5 million, or $1.71 cash per share.

                            Chart courtesy of www.StockCharts.com
In early 2012, Hercules was trading near $5.40, and as the losses piled up, it traded lower, 
hitting a low of $2.91 in June. Since then, Hercules has gained momentum to the upside. 
Recently, the stock broke above the highs that were placed earlier this year.
Currently, Hercules appears to be in a breakout mode, where resistance at $5.40 was taken 
out on heavy volume and increased momentum. The oil producer is also trading above its 
50­ and 200­day moving averages.
Looking from a fundamental and technical perspective, Hercules is a solid company with 
great potential. Recent price action suggests that the stock price might go higher. At the 
same time, investors should be cautious if the stock price goes below $5.40. If it occurs, then 
the breakout will become invalid.

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