Sector Update: Energy

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Energy stocks were broadly higher Friday with the NYSE Energy Sector Index rising about 0.7% while shares of energy companies in the S&P 500 were up 0.8% as a group. Crude oil for July delivery was up 47 cents at $106.52 per barrel while July natural gas was down 4 cents to $4.54 per 1 million BTU.

In company news, Hercules Offshore Inc. ( HERO ) tumbled Friday after the oilfield services company said it was forced to terminate a drilling rig contract with Sonangol EP, costing the company an estimated $91.8 million, after executives at the Angolan state-owned energy concern failed to secure the necessary visas for HERO employees to work in the west African country.

According to HERO, Sonangol officials failed to accept any of at least three local representatives who met its international legal compliance standards and was required under terms of the company's contract with Sonangol. In anticipation of starting work under the contract, HERO in late April had moved its Hercules 267 rig from Gabon to the Angolan offshore, with the facility generating no revenue as the dispute over a local representative kept HERO workers from obtaining visas as well as delaying delivery of parts and other equipment needed to operate the drill rig.

Due to the failure of Sonangol officials to accept a local representative that meets the company's international legal compliance standards, the company has experienced delays in obtaining Angolan visas for required crewmembers and delays in importing required parts and equipment into Angola to support operations under the drilling contract for the Hercules 267 (the "Contract"). As a result of these delays, the Contract will be terminated. Pursuant to an agreement with the customer, the company will not have any contractual exposure to the customer as a result of the Contract termination.

In addition to cancelled Hercules 267 contract, HERO also voluntarily resigned a three-year contract award for its Hercules Triumph drill rig also in Angolan waters.

HERO shares recently were down 11.5% at $4.36 apiece, just 2 cents above its session low and falling to within 15 cents of its 52-week low of $4.21 a share. Over the past 12 months, the stock has declined a total of 31.6%.

In other sector news,

(+) ETE, (+2.9%) Terminates "high level" negotiations to merge with Targa Resources Corp ( TRGP ) and its Targa Resources Partners LP ( NGLS ) operating unit without an agreement. Both TRGP and NGLS shares fell sharply after their statement last night.

(-) EMES, (-10.96%) Prices secondary public offering of 3.52 mln equity units at $109.06 each. Selling unitholders include Superior Silica Resources, which cut its ownership by nearly 30% to 6.6 mln units, or about 27.8% of the company.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Commodities

Referenced Stocks: HERO , TRGP , NGLS

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