DEEP Sea IPO Hunting

With oil prices continuing higher and the majority of the earth’s elephant fields already discovered, the race is on to discover and exploit new energy sources. Industry analysts point to the tar sands of Canada and the fields of fertile America’s as likely alternatives to dwindling sources of traditional petroleum. In the short term, the combined efforts of these candidates and others such as biodiesel and liquid coal are only capable of slightly easing constraints on surging global demand. The reality is, we will need a unique combination of alternatives as well as new streams of traditional crude to sustain continued economic growth.

This is evidence in the International Energy Agency’s most recent monthly report, which points to data indicating an 80.5 million barrel crude inventory drop in February, which if verified would be the largest 2-quarter stock drop since 1999. The data also highlighted an astounding 12.3% increase in Chinese oil demand.

Undoubtedly, this means that “the majors” will continue to explore deeper into the Gulf of Mexico to exploit lucrative deposits.

What companies will benefit from this expansion? Aside from the drillers and producers; the service industry, in particular the providers of deep-sea construction and repair will reap profits as these operations continue to expand.

Below is an excerpt of Red Herring’s IPO analysis:

Superior Offshore International is a Lafayette, Louisiana-based provider of subsea construction and commercial diving services to the crude oil and natural gas exploration, production, gathering and transmission industries on the outer continental shelf of the Gulf of Mexico.

Superior Offshore International plans to price 8.67 million shares at $14 to $16 each to raise $310 million.

Formed in 1989, Superior Offshore International has about 550 employees.

For the year ending December 31, Superior reported revenues of $243.4 million vs. $82.8 million and net income of $48.5 million vs. $14 million for the same period a year ago.

The company intends to begin trading Friday under the ticker 'DEEP'

Even with an attractive balance sheet and impressive historical growth, the company faces inherent risks such as stringent competition from Halliburton and Nabors Industries, as well as its own inexperience within the deep water drilling industry. Risks included, the long term prospects of this company do poise an interesting play on the emerging deep water oil and natural gas industry.