Helix Energy: Zacks’ Bear of the Day Play

Helix Energy Solutions (HLXSnapshot Report) has seen its estimates decrease after they missed on both the top and bottom lines for Q4 14.  To make matters worse management eluded to negative revisions for their earnings consensus in 2015, stating that 2015 will be “well below 2014 EBITDA.”  The negative revisions are due to an adverse FX impact in 2015, above average dry docking, and sustained low oil prices.  All of which are creating strong headwinds for the company in the first half of 2015.

This Zacks Rank #5 (Strong Sell) stock is the leading marine contractor and operator of offshore oil and gas properties and production facilities.  The company seeks to align the interests of the producer and contractor by investing in mature offshore oil and gas properties, hub production facilities and proven underdeveloped reserve plays where Helix Energy Solutions adds value by deploying vessels from its diverse contracting fleet.

Helix Energy saw their margins and Well Intervention utilization decline; Well Intervention declined 67% in the fourth quarter, and margins dropped to 8.6% far below the trailing 4 quarter average of 35.7%.  Further, the companies Q4000 (Well Intervention vessel) was hit by a supply boat in Q4, which created a reduced day rate, and increased support costs for the company.  Further, Helix’s robotics margins suffered as well, dropping to 10% from 21.6% in Q3.

Estimates decreasing

The table below shows the historic and future EPS estimates for Helix Energy Solutions.

Estimates have decline over the past 30 days for Q1 15 and FY 15; Q1 15 dropped from $0.27 to $0.03, and FY 15 fell from $1.63 to $0.58.

Bottom Line

Helix Energy Solutions is facing a difficult first half of 2015 with low oil prices, and the decline of well intervention.  Given that management is expected to issue negative guidance in the near term, we should expect to see this stock under pressure for the next several weeks.

If you are inclined to invest in the Oil Field Services segment, you might want to look into Blueknight Energy (BKEPSnapshot Report) which holds a Zacks Rank #3 (Hold).  But be aware that the entire segment is under pressure, and it would be wise to just stay away from it for the near term.

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