Cal Dive International (NYSE:DVR) may see less impact from the downturn in energy due to a boost in business related to repairing oil and gas infrastructure damaged by the recent hurricanes in the Gulf of Mexico. This will offset a decline in its pipeline laying and construction business.

Cal Dive International is the world's largest commercial diving company with a fleet of 31 ships. The company also owns 10 construction barges used to lay pipeline and conduct other offshore construction activities. The history of Cal Dive is a little confusing. The company was started in 1975 and operated under the name Cal Dive until early 2006, when the company decided to change its name to Helix Energy Solutions Group (Nasdaq:HLX). The reason given was that the company had diversified into more than a diving company, and the old name did not reflect that. In December 2006, Helix Energy Solutions did an initial public offering (IPO) of part of its Cal Dive subsidiary, and now owns 59% of the company.

The company's main competitor is Global Industries (Nasdaq:GLBL), which owns 27 vessels.

Cal Dive has attempted to diversify its business activities by performing work in what it calls the early, middle and late phase of a well.

Early Phase - After the initial discovery of a reservoir, the company will use its fleet of dive ships and barges to install and bury pipeline, and construct platforms. This type of work is approximately 50% of Cal Dive's revenue. This business is drill bit sensitive and will vary with the level of drilling activity.
Middle Phase - During the life of a well, Cal Dive will perform repair, maintenance and construction of the infrastructure.
Late Phase - Cal Dive provides plugging and abandonment of wells, and pipeline and platform removal. The middle and late phase businesses of Cal Dive are less sensitive to the drill bit and may hold up better during a downturn. (For further reading, check out our Oil And Gas Industry Primer.)

Future Strategy
The company had 29% of its revenue from international business in the nine months ending September 30, 2008, and it has set a goal in 2009 to increase this percentage. Cal Dive is targeting Southeast Asia, Australia, Mexico and the Middle East.

Financials
As of September 30, 2008, Cal Dive had $355 million drawn on its credit facility. $80 million of this debt was classified as current on its balance sheet. Its cash was negligible at $22 million. The company's backlog jumped to $506 million, which it attributed mostly to work to repair damage from the 2008 hurricane season.

Risks and Rewards
Due to the expense and complexity of offshore drilling, Cal Dive is dependent on several large customers for a significant portion of its revenues. In 2007, Chevron (NYSE:CVX) and Apache Corp. (NYSE:APA) were 15% and 10% of revenues, respectively.

Capital spending by exploration and production companies is expected to be down 20-30% in 2009, according to the latest surveys. This decline will negatively impact the revenues of Cal Dive. Offsetting this negative trend will be the added business that the company gets from a busy hurricane season, as the company derives work from repairing the damage done to platforms and pipelines. The two hurricanes that made landfall in 2008 damaged 99 platforms in the Gulf of Mexico according to Minerals Management Services (MMS) and Cal Dive.

Cal Dive may fare better than its peers during the downturn in energy due to its strong business related to repairing damage from hurricanes in the Gulf of Mexico. This will offset its other business, which is tied more directly to drilling.

Learn how to hedge against rising energy prices and diversify your portfolio in, ETFs Provide Easy Access To Energy Commodities and Fueling Futures In The Energy Market.

Related Articles
  1. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares 10-20 Year Treasury Bond

    Learn about the iShares 1-20 Year Treasury Bond ETF and its holdings, and understand why investors may be better served to look at other bond funds.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares Global Telecom

    Learn about the iShares Global Telecom exchange-traded fund, which invests in U.S. and foreign telecommunication companies with high dividend yields.
  4. Chart Advisor

    Gold Struggles to Climb Higher and May Fall Soon

    Traders will be watching the price of gold over the coming weeks. We'll take a look at how a couple major moving averages are suggesting that the next move could be lower.
  5. Mutual Funds & ETFs

    ETF Analysis: United States Brent Oil Fund

    Learn more about the United States Brent Oil exchange-traded fund, the characteristics of the fund and the suitability and recommendations of it.
  6. Mutual Funds & ETFs

    ETF Analysis: ProShares Ultra Bloomberg Crude Oil

    Find out more about the ProShares Ultra Bloomberg Crude Oil ETF, the characteristics of UCO and the suitability and recommendations of UCO for investors.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Hong Kong

    Learn about the iShares MSCI Hong Kong fund, which invests in various equities of companies listed on the Hong Kong Stock Exchange.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Growth

    Take a close look at the Vanguard Small-Cap Growth ETF, which focuses on domestic small-cap equities with a fundamental growth strategy.
  9. Mutual Funds & ETFs

    ETF Analysis: First Trust Dorsey Wright Focus 5

    Take a closer look at the First Trust Dorsey Wright Focus 5 ETF, a unique and innovative fund of funds based on momentum and relative strength.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares National AMT-Free Muni Bond

    Take an in-depth look at the iShares National AMT-Free Municipal Bond ETF, a highly diverse and very popular muni bond fund.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Derivative

    A security with a price that is dependent upon or derived from ...
  3. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  4. Inverse Transaction

    A transaction that can cancel out a forward contract that has ...
  5. Best To Deliver

    The security that is delivered by the short position holder in ...
  6. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!