The Run Continues In Hornbeck Offshore

Money managers who are looking for leveraged exposure to a recovery in the Gulf of Mexico deepwater drilling space have been reaching for shares of small-cap name Hornbeck Offshore Services

in recent months. The stock hit a new 52-week high on Friday of $35.00 and continues to run after releasing a very bullish earnings report on Thursday morning. Over the last month, HOS shares have surged around 45% and are up better than 66% in 2011 compared to a loss for the S&P 500 of 1%. The company is a play on the rebound in deepwater drilling services in the U.S. Gulf of Mexico. Hornbeck Offshore, through its subsidiaries, operates offshore supply vessels (OSVs), multi-purpose support vessels (MPSVs) and a shore-base facility to provide logistics support and specialty services to the offshore oil and gas exploration and production industry. Hornbeck also operates ocean-going tugs and tank barges which provide transportation of petroleum products. In addition to the U.S. Gulf of Mexico, Hornbeck has operations in the northeastern United States, Puerto Rico, Latin America and the Middle East. The company currently has a market cap of $937 million and employs around 1,000 people. Hornbeck Offshore is located in Covington, Louisiana. In the fiscal third quarter, HOS reported a surprise profit of $0.10 per share versus Street consensus estimates of a $0.23 per share loss. Revenues also beat Wall Street expectations. The company posted revenue of $105.8 million compared to analysts' consensus estimates of $96.1 million. Hornbeck is currently capitalizing on improved fleet utilization and higher dayrates for its vessels in the wake of a rebound in deepwater drilling activity in the Gulf of Mexico, which had been severely scaled back after the Macondo oil spill in April 2010. According to analysts at Jefferies

, "the recovery appears underway with deepwater vessel supply/demand tightening and leading-edge rates for deepwater vessels heading back to 2008 peak/pre-Macondo levels." The firm, however, currently has a Hold rating on the stock, believing that "the recovery is largely priced in following the approx. 70% increase" in HOS shares over the last couple of months. While an increase in vessel rates is expected to continue in 2012, higher costs could potentially offset some of the upside for HOS as management raised its cost guidance for Q4 during this week's earnings call. While maintaining their Hold rating on HOS, Jefferies did substantially boost their price target on the name from $27.00 to $38.00. The mean Wall Street price target for HOS is $33.00 with a high target of $39.00. Hornbeck trades at a forward P/E of 24.55 and at 7.9x Jefferies' 2012 EV/EBITDA estimates. Book value per share is $30.81. Hornbeck trades at roughly a 14% EV/EBITDA premium to competitors GulfMark

and Tidewater

. Potential forward looking risks to HOS' share price include Gulf of Mexico permitting delays, oil and gas prices and regulatory uncertainty in the GoM which still persists in the wake of the Macondo spill. Shares have traded in a range between $19.80 and $35.00 in 2011. The stock is trading above both its 50 and 200 day moving averages of $28.81, and $26.62, respectively. Given the sharp run up in the share price, a pullback to the 50-day would be an ideal entry point for bullish investors.