Hercules Offshore’s (HEROQ) Q3 Earnings: What to Expect?

Oil and gas drilling contractor Hercules Offshore Inc. HEROQ is expected to release its third-quarter 2016 results on Thursday, Nov 3.

Factors to Consider This Quarter

Unlike the last quarter, in which oil advanced more than 26% sequentially to notch up the best quarterly percentage gain in seven years, the Jun-Sep 2016 period turned out to be a rather flat one with crude barely advancing. In fact, the West Texas Intermediate (WTI) crude futures during the third quarter hovered around the $45 per barrel mark, flat with the second quarter and down from $46.50 in the same period last year.

Therefore, producers are unlikely to revive spending on drilling activities that would spur rig count. This, in turn, will result in stagnant demand for oilfield equipments, thereby affecting Hercules Offshore’s revenues, earnings and cash flow.

Moreover, despite oil’s massive recovery since February, it’s still under $50 – about half the level of two years ago – and far below the breakeven price for many energy companies. In particular, deepwater/ultra-deepwater drilling – with its associated risks and steep costs – require far higher oil prices than what is prevailing currently. As a result, the struggling Hercules Offshore is expected to bear the brunt of narrow margins and a competitive price environment.

However, to a large extent, Hercules Offshore’s successful cost reduction initiatives are expected to cushion the results.

Other Stocks to Report Near-Term

Apart from Hercules Offshore, here are some other firms from the energy space that are expected to come out with third quarter earnings in the next few days:

Archrock Partners L.P. APLP, having a Zacks Rank #1 Strong Buy), is expected to release earnings results on Nov 1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Comstock Resources Inc. CRK, with a Zacks Rank #2 (Buy), is likely to release earnings on Nov 8.

CONE Midstream Partners L.P. CNNX, with a Zacks Rank #2, is likely to release earnings on Nov 4.

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