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Long-term contracts are not volatile

To achieve profitability with deep water drilling, the average threshold for the price of oil is about $70 per barrel. We are below that price currently, but this does not impact the services companies as severly as one might expect. Helix is an oil services company that still gets the majority (67% cited in article) of its revenue from service contracts, many of which were entered into prior to the downturn. These contracts are long-term in nature and generate revenu for several years into the future. Therefore, the volatility in oil prices is not as important to them.

Helix is likely to evience a significant drop in new contracts, but will continue to receive payments on existing contracts. That said, the stock has lost 83% in the almost six months since September 2008, which may be contrued as a great discount.

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