These 4 Offshore Service Stocks Continue to Make New Highs
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It seems as each new trading day passes, one of the four offshore service stocks discussed in this post make a new high. Demand is strong for companies that can service the growing offshore drilling activities in the Gulf of Mexico and around the world. There are few companies that have the specialized skills to meet this demand and that's why these four companies continue to perform well.
Oceaneering International (NYSE: OII) specializes in deepwater applications for the oil and gas industry. The company services this segment via remotely operated vehicles, built-to-order specialty subsea hardware, and deepwater intervention and manned diving services.
Oceaneering International just announced record first-quarter earnings. For the quarter, revenue came in at $718.6 million versus $594.9 million in the prior year. Net income was $74.8 million versus the prior year's $51.5 million. According to President & CEO, M. Kevin McEvoy:
Our outlook for the rest of this year remains very positive. Given this outlook and our first quarter earnings performance, we are raising our annual 2013 EPS guidance. Our new guidance range is $3.10 to $3.30, up from $3.00 to $3.25 previously.
Oceaneering International's core business is a niche market. The company practically invented the deepwater business for remotely operated vehicles (ROVs). Oceaneering International has been the leader in this segment for the past decade. These ROVs can handle technical tasks two miles below the ocean surface. By focusing on this niche, the company looks set to continue to grow as deepwater drilling continues.
Tidewater (NYSE: TDW) builds large offshore service vessels for oil and gas companies operating in deepwater. Tidewater created the “work boat” industry with its first vessel in 1956 that was tailor-made for the oil and gas industry. Today, its fleet operates in over 60 countries around the world. These vessels are used to transport crews and supplies, tow and anchor mobile rigs, assist in offshore construction projects, and offer marine support services.
Tidewater just posted revenue and earnings that blew away expectations. The company was able to do this without increasing the size of its fleet. Instead, vessel utilization and average day rates all increased. Day rates jumped from $14,140 a year ago to $16,378 this year. These factors contributed to the company's bottom line.
Tidewater continues to deliver for shareholders. This is the fourth straight quarter that the company blew away earnings estimates. The stock continues to perform well and the company just announced a $200 million share repurchase program.
Hornbeck Offshore Services (NYSE: HOS) is similar to Tidewater in that they too build offshore service vessels for the oil and gas industry. Hornbeck Offshore is also a leading transporter of petroleum products with their tug and tank barges. This segment primarily serves northeastern United States and Puerto Rico.
Hornbeck Offshore Services continues to perform well and continues to beat earnings expectations. Revenue in the first quarter came in 23% higher than a year ago at $147.5 million. The company has done a great job at controlling costs and growing revenue. With costs down, the company has been able to steadily increase profits.
As this trend continues, look for further gains in Hornbeck shares, especially as drilling in the Gulf of Mexico continues to pick up. Prior to the Deepwater Horizon accident in 2010, there were 33 rigs operating in the Gulf of Mexico. Expectations are there for more than 40 operating in the Gulf of Mexico by the end of this year.
GulfMark Offshore (NYSE: GLF) operates marine support vessels for the offshore oil and gas industry. The company is the largest operator in the North Sea and is expanding in Southeast Asia and in the Gulf of Mexico and Brazil.
GulfMark Offshore stumbled in Southeast Asia last year and revenue from the region was down as a result. This year, the company put in place new management and I see the region being a primary growth driver for the company. Offshore oil and gas development in Southeast Asia is one of the fastest-growing regions in the oil and gas sector. The company has a great position in the region. Management in the region just needs to execute.
GulfMark Offshore also has a great position in the North Sea as the largest operator for support vessels. The increase in drilling activity in the Gulf of Mexico will also benefit GulfMark Offshore. These factors will drive revenue and further stock gains.
The oil and gas industry will continue to invest in deepwater projects. Deepwater projects offer the highest reward for oil and gas companies looking to add to their reserves. The outlook for the rest of the year is positive for all four and look for new highs throughout the year.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Oceaneering International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!