Jun 28

Written by:
6/28/2008 11:14 PM 

Hercules Offshore, Inc. (HERO)

Hercules Offshore is a Houston based provider of services and equipment in the exploration and production of both oil and natural gas in shallow areas offshore. Deep off shore drilling are the buzzwords in politics but with energy the focus of investors and profits very tangible in oil production, HERO is at a 52 week high and positioned for more upward movement.

Earnings
    The company recently had a CEO resign and a new CEO in John Rynd take the reigns but this change in leadership hasn’t stopped the company from marching onward. The company has also seen their earnings expectations decreased but then rise steadily over the past 60 days. For the current year, analysts are now expecting earnings of $1.64 compared to $1.63 60 days ago. And the 21 analysts that follow the stock also expect earnings for next year to be $3.30 a share compared to their prior expectation of $2.91 a share two months ago.

Options
    Option traders are creating a lot of volume in the 40 and some volume in the 45 Call Strike options for the month of July. These options expire on the 18th of July which does not leave much time for the stock to reach these levels. But the bullish action in the options is encouraging in such a short timeframe.

The Trade
    You can definitely go long HERO at this time as a play on the price of oil continuing to increase over the next couple months. If there is a significant pull back in oil prices, you should re-evaluate your exposure to the commodity and leave your position in HERO with a loss if necessary.