Hercules Shares Jump As Analyst Upgrades Stock

NEW YORK (AP) — Shares of Hercules Offshore Inc. jumped on Monday as an analyst upgraded the offshore drilling services company, citing improving demand.

Hercules shares climbed 61 cents, or 12.3 percent, to $5.66 in midday trading.

Credit Suisse analyst Arun Jayaram upgraded Hercules to "Outperform" from "Neutral" and raised his price target to $7 from $5. He said Hercules is set to gain from rising demand for Gulf of Mexico jackup rigs and inland barges. The company's liftboat segment may also give the company a boost.

"Demand for Gulf of Mexico jackups appear to have hit an inflection point, with the contracted rig count up 5 rigs in the last 6 weeks," said Jayaram. "Meanwhile the inland barge rigcount has increased by 8 rigs to 20."

Jackup rigs are mobile offshore oil and gas drilling platforms. Inland barges operate in shallow waters.

Jayaram said the demand recovery is partly due to the end of hurricane season, but drawing from anecdotal comments from drillers in the third-quarter earnings season as well as a rise in permits, he expects further rig count gains. This plays in Hercules' favor, as the company is well positioned in the Gulf of Mexico's jackup and inland barge markets.

Further bolstering the company, activity among its liftboats has improved and Hercules' balance sheet risk has abated, Jayaram added.

A liftboat is a self-propelled vessel with legs that can be jacked down to anchor it and raise the hull above water for offshore construction work.