Saturday, June 27, 2009 6:39:41 PM EDT Offshore Supplies by James Brown Click here to email James Brown

Offshore Supply Vessels, Services & Shipping

HOS $21.20 +0.52 -- Hornbeck Offshore Services

Why We Like It:
I know the chart for HOS looks pretty bad. The stock has collapsed from $30.00 to $20.00 in three weeks. The oil service sector was hit pretty hard and HOS flushed out a lot of "weak hand" investors. The selling stalled with an almost perfect 50% retracement of its March-June rally, which just happened to coincide with round-number, psychological support near $20.00 and technical support at its 200-dma. We're long-term bullish on oil and thus we're long-term bullish on oil and oil service companies. Short-term could be a little challenging so we're putting our stop loss at $17.85. Our long-term target is $35.00.

Company Info:

We are a leading provider of technologically advanced, new generation OSVs serving the offshore oil and gas industry, primarily in the U.S. Gulf of Mexico and in select international markets. The focus of our OSV business is on complex exploration and production activities, which include deepwater, deep well and other logistically demanding projects. We are also a leading transporter of petroleum products through our tug and tank barge segment serving the energy industry, primarily in the northeastern United States and Puerto Rico (source: company press release or website)

Use the 2010 January calls (Entry point - now, at current levels)

BUY CALL 2010 JAN $20.00 strike (WVG-AD) current ask $4.90

-or-

BUY CALL 2010 JAN $25.00 strike (WVG-AE) current ask $2.70

Chart of HOS: