Below is an interesting article out that talks about the cost of putting out the oil wells using WEL's estimates.
This last paragraph is the one that specifically mentions the cost:
"Boots & Coots is currently estimating that the work of extinguishing and repairing the seven wells in the area will take two to three weeks, which would put the cost in the range of $560,000 to $1.26 million, the Tribune reported."
Hmmm, so it looks like they're using the industry standard of $40,000-$60,000 per day for the whole combined team of workers (B&C have 11 people there out of a typical team of 25), unlike the $5 million per well figure thrown out by the "analyst" who has warrants and works out of his home. Since B&C is only doing part of it along with the Kuwaitis and others (Wild Well Control?), they'll get only a portion of that.
So, assuming the best case scenario where Saddam lights up every single Northern oil well and B&C gets all the revenue for a year of work at max price (this would be more than when 700 Kuwait wells were lit up), and assuming no days off at all, that would be 365 x $60,000 = $21,900,000. Add in $100,000 pay for idle time and you get an even $22 million. Even optimistically assuming half of that is pure profit, that would give WEL almost $11,000,000 toward the $15 million that they're in default on (and that number should be higher with accrued interest, especially a year down the road).
WEL would still have a negative book value, and since this revenue would be from a one-time event, they would likely still have to file bankruptcy. The current market cap of nearly $50 million (possibly much more if some of the many millions in options and warrants have been exercised) would be way too high even if they had this Iraq revenue every year.
In the worst case, no more oil well fires come up and WEL gets only less than a week of work, as some have estimated the remaining work would be done within a week, and WEL is only starting to do the work now. Also, they would only get about 1/3 of the revenue if that since the Kuwaitis have almost twice as many people working and have already done some of the work. So worst case = 1/3 * 6 days * $40,000 = $80,000 of revenue. After costs, they may make enough to pay for the interest on the loans for the few weeks they're in Iraq/Kuwait.
So it seems no matter what happens in Iraq, WEL is extremely overvalued and is likely to be forced into bankruptcy. No wonder that Danny Ray Clayton guy has been selling his shares like there's no tomorrow while saying to the press that WEL could get a lot more work in Iraq. It seems he's the only one of WEL's 12 oil well specialists that didn't go to Iraq, and he's spending his time pumping up the stock and dumping his shares. Apparently the other 8 employees (if they still have that many left) are office/admin/support staff.
Wow, after checking out the numbers, I'm glad I don't own this one any more. Good luck to eveyone still holding...
Aloha
Boots & Coots firefighters expected to take on Iraqi wells
Oil well firefighters from Houston-based Boots & Coots were expected to enter southern Iraq Wednesday to resume fighting fires in the giant Ramaila oil field where as many as seven oil wells had been burning, according to project manager Ray Rodon of Houston-based Kellogg Brown & Root.
Boots & Coots is working under a subcontract to KBR, which announced Monday that it had been awarded a contract by the U.S. Army Corps of Engineers to extinguish the fires and repair the wells. KBR is a division of Houston-based Halliburton Co.
Some media was reporting that only three wells were still burning on Wednesday afternoon.
A Boots & Coots team has been in Kuwait for 30 days but was ordered by the Pentagon not to divulge that fact, according to a report by the Chicago Tribune. Eleven members of that team will be the first U.S. firefighters to go to work in Iraq, the Tribune report said.
Kuwaiti firefighters had put out one oil well fire in the region before a sandstorm forced them to abandon the field. The storm was also holding back deployment of the Boots & Coots team.
Other media reported that firefighters from several U.S. oil services firms had already been fighting the fires along with the Kuwaitis before the storm and attacks by small bands of Iraqi resistance fighters forced them out.
A firefight between British forces and Iraqi fighters took place in the oil field over the weekend.
The area around the field is now secure and under the control of the 1st Marine Division, Danny Clayton, director of well control services for Boots & Coots, told the Tribune.
Clayton and Les Skinner, director of well control engineering for Houston-based Cudd Pressure Control, say the small number of wells on fire so far will mean the cost of extinguishing the fires and repairing the damage will be far less than it was after the 1991 Gulf War.
Boots & Coots is currently estimating that the work of extinguishing and repairing the seven wells in the area will take two to three weeks, which would put the cost in the range of $560,000 to $1.26 million, the Tribune reported.
© 2003 American City Business Journals Inc. |
