That's it, I sold all my drillers...
If you're wondering why, take a look at the crude price forecast from Noesis:
oil-gasoline.com
So does that mean I'm gone. Well, not quite. I think it's possible that dayrates have peaked, but there's a lot of E & P work to be done for many years. I suspect that the services offer the best risk/reward scenario with the present conditions. As long there's increasing demand for oil, there will be increasing demand for the services.
Oil looks grim but there's a lot of exploration occurring offshore and a robust land business based on gas. So who will benefit even with low commodity prices and declining dayrates? The company I chose is EVI. I think their future is great regardless of crude prices. Sure, they'll do better if oil goes up, but I don't see much downside in this company. As long as there's e & p activity they will benefit. Growth is very strong, its greater market cap will attract more institutions, management is excellent, and the technicals are superb. The two-year chart shows the type of base that often leads to a prolonged uptrend with pe expansion. Hey, I may be wrong, but I've definitely put my money where my mouth is.
I'm also keeping a decent position in VSEIF. This microcap trades at $7 with a pe of about 18. Their land-based operations are presently very busy doing seismic work for gas drilling in the US. For the winter months, they move seismic equiment up to Canada where they have their original operation and headquarters. Next month, they are expected to close on a buyout of a small marine seismic company. This will give them two small marine seismic vessels that specialize in work where the larger vessels simply can't fit, such as around platforms and rigs. These vessels are booked for many months in advance and will provide about $4M per year in net income. Total net income in the last 12 months was about $2M. Trailing twelve month earnings are .39. Earnings estimates for the fiscal year ending 9/98 are .71 and $1.05 for 9/99.
For similar reasons, I think there are excellent opportunities with companies that specialize in other areas that are not dependent on oil prices, such as fabrication and pipelaying.
Since this is a change in my outlook and strategy, I would appreciate any comments.
Thanks in advance,
OO7 |
