Monday, Credit Suisse upgraded Hercules Offshore, Inc. (HERO) shares to Outperform from Neutral and increased its price target to $7 from $5. The brokerage narrowed its 2010 loss per share estimate to $0.50 from $0.57.
Analyst Jayaram upgraded the stock to reflect improving demand for GOM jackups and inland barges as well as some intriguing optionality associated with the company's liftboat segment. Demand for GOM jackups appears to have hit an inflection point, with the contracted rigcount up 5 rigs in the last 6 weeks, albeit from a small base. Meanwhile, the inland barge rigcount has increased by 8 rigs to 20.
The analyst noted that while the demand rebound is partially seasonal in nature given the near conclusion of hurricane season, anecdotal comments from drillers in third quarter of 2009 earnings season as well as a bounce in permits suggest further rigcount gains are likely, which should support a positive revaluation in HERO shares given the company's meaningful leverage to the GOM jackup and inland barge markets.
The analyst said that HERO recently mobilized 4 liftboats from the GOM to West Africa on speculation. The company has received a favorable 7-month fixture on 1 liftboat at a dayrate of $40 thousand and the analyst believes HERO could contract the remaining 3 liftboats in early first quarter of 2010 at dayrates in the $30 thousand to $40 thousand range, which should be positively viewed by the market.
The analyst added that through a combination of asset sales, a recent equity offering, and sharply reduced capex, HERO has reduced its net debt by $189 million since year-end, resulting in a net debt-to-total cap ratio of 38%. Importantly, HERO amended the covenants in its credit facility in July, which has eased going concern risk, and the company now believes it has enough financial flexibility to operate through the bottom of the cycle.
HERO is up $0.75 or 14.88% and trading at $5.79.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.