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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Harold S. who wrote (33298)12/21/1998 6:56:00 PM
From: Gary Burton  Read Replies (1) of 95453
 
Harold--Anytime one invests in a cyclical business where total liabilities are 6 times book equity (after writing off goodwill), the risk of C11 is always there. For this reason, I wouldn't touch Helix simply because of the b/s leverage. FLC for example worries some as being too debt heavy and their total liabilities are 'only' 2.3x book equity. ---when I look at HLX/s b/s I see working capital of about $122mn but this includes a c/a of 106 in 'costs and estimated earnings in excess of billings on uncompleted contracts' offset by a c/l of 93 in 'billings in excess of costs and estimated earnings on uncompleted contracts' (I presume they are different contracts). Who has a clue whether the c/a ones are valid and will pay off? ---My suspicion is that the company is not at the moment in any great danger but I must tell you that if it were me I would take the capital loss on this one tomorrow and immediately turn around and buy another deeply depressed oil services stock with a better balance sheet. You take the tax loss on one but will likely get it back when the drilling cycle turns. Yes i know that the deeply depressed debt heavy ones snap back more than others but one can buy solid ones with much less risk that should at least double in 12months--PGO as just one comes to mind. there are many others, all with total liabilities much less than 6x equity!good luck
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