Hornbeck Offshore Services (HOS, $22.72) released its first quarter 2015 results this week and, suffice to say, I like everything I see. An important aspect of my original thesis was that Hornbeck is able to scale down quickly and easily during downturns. Looking back on history is always tough, but it seemed management handled the last downturn very well. Now that we’re a couple quarters into this downturn I’m happy to say the business is looking well equipped to survive this one as well.
As of quarter end, Hornbeck has stacked 18 vessels which affects the company in numerous ways. First, their daily operating expenses are decreased. It costs roughly $500 per day to take a vessel out of service vs the $15,000 or so it takes to have one active. Drydocking expenses and maintenance capex are also delayed (not eliminated) while a ship is stacked. The ability to drastically cut expenses almost immediately during a downturn and then gradually ramp those expenses back up as oil recovers is a wonderful thing.
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