Hornbeck Offshore Downgraded At Iberia Capital On Weak 2016 Environment

• Hornbeck Offshore Services, Inc. HOS shares have lost 47 percent year-to-date, and are trading close to the low end of their 52-week range of $13.11 - $33.54.
• Iberia Capital Partners’ Trey Stolz downgraded the rating on the company from Outperform to Sector Perform, while reducing the price target from $23.50 to $15.00.
• With expectations of the GOM OSV market remaining weak through 2016, the company has decided to stack an additional 12 vessels by yearend, Stolz said.

Analyst Trey Stolz mentioned that the GOM OSV market is currently soft and is likely to remain weak through 2016. Hornbeck Offshore has indicated that there is unlikely to be any noticeable improvement in the OSV market in the near- to medium-term, and believes that the market could decline further.

The company stacked 9 new-gen boats in 3Q. It has indicated that it may stack another 3 vessels in 4Q, taking the total stacked to 30 by yearend. This means that Hornbeck Offshore would have stacked half the new-gen OSV fleet, heading into 2016.

“Management believes the industry needs further stacking in a more aggressive manner to remove non-competitive equipment,” Stolz wrote, while adding, “Hornbeck does not anticipate stacking MPSVs, particularly the larger vessels, but management will be looking to reduce MPSV OpEx during the winter months.”

Hornbeck Offshore could not deliver any of the 3 OSVs it was supposed to during 3Q due to deficiencies at two of three shipyards. The company indicated that it may slip on delivering these three OSVs during 4Q as well.

Despite the prolonged downturn in the GOM OSV market, Stolz pointed out that the company has enough liquidity to last out. It has $302.6 mm in cash, an undrawn $300 mm revolving credit facility and no major debt maturities until 2019.