"One of my favorite names has been Hercules Offshore. I started buying it in March a few days after the company announced its purchase of energy services rival Todco (NYSE: THE), as I expect the merger to work out very well.

"The deal is likely to be completed after shareholder meetings in July, and not long after that we're really going to see an upward reappraisal of HERO's earnings prospects and stock price.

"HERO itself was formed by a band of investment bankers a few years back to rationalize the jackup rig and lift boat business in the Gulf of Mexico. The Todco merger actually completes that goal, as you'll now have a single company dominating shallow-water drilling off the coast of Texas, Louisiana, and Mississippi.

"Day rates for jackup rigs in the Gulf of Mexico are running well below the $120,000 level seen in 2006 in the wake of Hurricane Katrina disruptions. But they do appear to have stabilized around $70,000, and management has told investors that they expect prices to drift back up toward the $100,000 level over the next year or two.

The bottom line is that you're going to have improved pricing and efficiency at a time when natural gas drilling prices are likely to begin to recover.

"And at the same time, there may be some sales of redundant assets that will boost the bottom line as well. My estimate for 2008 is $5.30. Put a very modest 11X multiple on that, and you get a 15-month target of $58, which is 75% above the current price."

See all 20 stocks the advisors picked for the second half of 2007.