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Helix: Bargain in Oil Services
02/25/2015 8:00 am EST
The plunge in oil prices has hit all energy companies hard. But while the havoc wreaked on some highly leveraged operators may be deserved, not all companies merit the drubbing they’ve suffered, argues Gregory Dorsey, contributing editor to The Complete Investor.
One such company is Helix Energy Solutions (HLX), with its specialized vessels and remotely operated vehicles. It generates most of its revenue from underwater well intervention services, largely centered on plugging and abandonment operations.
Indeed, the company is the global leader in de-commissioning offshore wells. And while weak oil prices may have producers postponing new projects, regulatory requirements on the timing of retiring old wells will keep Helix busy even as other oilfield service companies are contracting.
Helix’s ships operate more cost-effectively than conventional oil rigs, making them all the more attractive to producers hurt by depressed oil prices.
The company exited the oil and gas exploration and production business in 2013 and substantially reduced its outstanding debt, leaving it in good position to gain market share by investing in additional assets.
The upshot is that revenues for Helix should remain relatively steady this year at around $1.1 billion. Profits will probably decline just modestly, with per-share earnings of $1.70 expected.
Trading at about 10 times forecasted earnings and likely to grow by around 15% a year over the next several years, Helix is a bargain.
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