Superior Energy: Profit from the rise in prices at the gas pump

It doesn't take a Harvard mathematician or a Wall Street investment banker to realize we're in the era of high energy prices.

One way to compensate for the increased energy cost: consider an investment in an oil/oil services company whose fortunes are directly linked to the world's most vital commodity -- oil. With this in mind, Superior Energy is worth a review.

Superior Energy Services (NYSE: SPN) provides specialized oil field services to oil and gas companies operating in the Gulf of Mexico and on the Gulf Coast. The company also sells and rents oil/gas well drill equipment and tools on four continents.

In general, analysts like SPN's rental tools and intervention services businesses, and the fact that SPN's services help oil/gas companies maintain production during seasonal down periods, which anesthetizes SPN somewhat from commodity price volatility.

Further, international expansion opportunities are promising: analysts say additional SPN expansion abroad will lessen the earnings impact of a downturn in key Gulf of Mexico operations. The Reuters F2008/F2009 EPS consensus estimates for SPN are $4.09/$4.84.

The risks? Reduced demand for SPN's production-oriented services and/or a large, sustained decline in energy prices, particularly oil, would hurt SPN's results. Don't look for the latter anytime soon.

The First Call mean rating for SPN is: Buy. [5 firms.] Mean 2008 target: $60. [high: $66, low: $56.]

Stock Analysis: Superior Energy Services is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from SPN's shares. Sell/Stop Loss if you were to purchase shares in this company: $38.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.