A huge upward move in the stock price has been put in motion and I sense that a powerful rally is in the making.
1. A higher price for oil persists. 2. Other low priced oil stocks have soared and are now in double digits. 3. Analysts are upgrading HERO and attaching ever higher Price Targets. 4. Consolidation in the Oil and Gas sector is taking place. Recently the buyouts of Allis Chalmers and Bronco Drilling come to mind. 5. Hercules Offshore stock is undervalued:
Hercules Offshore is trading for less than the acquired value of its assets. In other words, the book value of HERO's assets is higher than the current value of its assets. If demand for drilling equipment rises, then Hercules' balance sheet will look more attractive. Hercules recently acquired roughly $400 million of rigs from Seahawk Drilling for a bargain price of about $100 million. When HERO's balance sheet is updated, the stock will look even more undervalued, which will be reflected in its price-to-book ratio.