Citi Reiterates a 'Sell' on Hercules Offshore (HERO); Raises Price Target & Estimates
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Citi reiterates a 'Sell' on Hercules Offshore Inc (Nasdaq: HERO), but raises price target from $1 to $2.60.
Citi analyst says, "Some signs of demand improvement in the US Gulf of Mexico have purportedly emerged but a meaningful recovery is not expected any time soon. Hurricane season is fast approaching and activity will likely take another leg down. In addition, natural gas prices remain highly depressed and drilling activity follows pricing on a three to six month lag...We are raising our multiples for the offshore drillers. Offshore drilling markets are moving from peak to mid-cycle conditions. We believe this warrants mid-cycle multiples across the sector. We now apply a 2.75x multiple to our forward-12-month cash flow estimate of $0.96/shr, up from 1.5x. The revised multiple generates a $2.60 target price, up from $1. We reiterate our Sell rating on HERO shares."
Hercules Offshore, Inc. (Hercules Offshore) provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry in the United States, Gulf of Mexico and internationally.
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