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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: verticallimit who wrote (88439)	3/9/2001 10:00:22 AM
From: Big Dog	Read Replies (1) \| Respond to of 95453

From Dain on BJS: BJS:SB-Aggr;BJS NUMBERS TO GO UP WITH LATEST PRICE HIKE We are in a quandary with our earnings estimate on BJ Services. The earnings progression from the bottom of the cycle in 1999 is $0.11, $1.40, and $3.28 estimated for this year. Our FY2002 estimate of $4.23 does not take into account the 12% domestic price book increase instituted at the beginning of the month. Each percentage point of improved pricing increases the annualized earnings rate by approximately $0.10. But that would put our FY2002 estimate at approximately $5, and we are already one of the highest estimates on the street. At $5, the earnings growth would be almost 60%--that inherently feels too aggressive. But looking at the earnings growth over the past few years of the cyclical recovery, it seems imminently reasonable. This quandary is shared by most analysts and investors looking at the stock--knowing that EPS estimates are likely much too low and all the activity and pricing requirements to put those earnings to a higher level are intact. Analysts do not create reality but try to anticipate it. Regardless of consensus estimates today, the likely reality is that the 2002 estimates for BJ Services are likely too low by 20%-25%. That would imply that since most analysts and investors believe there is upside based on current estimates, the most realistic upside target is likely higher than just 20%- 25%. So one reality is that BJ Services has increased pricing again effective March 1, this time by 12%, which follows a 14% increase last October. This is not gouging, and no oil companies are revolting. It just gets BJ Services' pricing back to where it was in 1998, adjusted for inflation. But significant price hikes, in a relatively short period, demonstrate the critical need and increasing demand for the companies products and services. The other reality that does not get much attention is the international segment of the company. More than 40% of total revenues are non-U.S., and margins are approximately half of U.S. margins. At other cycle peaks, margins were even or higher versus domestic margins. A management focus over the past few years of economically penetrating markets is paying off with new and increased exposure in locations in the Middle East and West Africa, two very strong and improving areas of activity, and the North Sea, SE Asia, and the FSU. The company gives a laundry list of projects that capitalize on the company's strong fluid and equipment technologies that we believe are the industry's leaders. Over the past four years, the trend has developed that the revenue per job internationally has doubled as more and more technology and volume is thrown at problems. And a number of areas have opened up, developing natural gas resources previously flared or stranded, now used to free up oil for export and/or development of local power and industry. These are new international markets to accompany the return of activity in traditional markets Now that the major oil companies are much more likely to spend their budgets and increase international spending, BJ Services and other companies should start to see the benefit. BJ Services' cementing and stimulation businesses are early cycle plays in many respects and should see and early benefit to this ramp up in international spending. Utilization level of equipment are between 50%-65% depending on country location, and pricing really starts to accelerate as utilization hits and exceeds 80%. So we should see an early move in activity-driven revenue and incremental margin increase followed by much higher margin pricing improvements as activity continues up. Stock Opinion Our price target is $95 per share. Looking at the peer group's EV/EBITDA for 2001, the average is 12.8x, but that just reflects the current pricing of the peer group and indicates that BJS should be trading at a price of $88 per share. Looking at the 2000 captured valuations, and assuming those valuations on a trailing basis next year, a multiple of 15.5, generates a price target of $107. Our price target is an average of the two to reflect a conservative view for 2001 pricing. Company Description BJ Services Company is a leading provider of pressure pumping and other oilfield services to the petroleum industry.

To: verticallimit who wrote (88439)	3/9/2001 10:46:01 AM
From: Minos	Respond to of 95453

Got Profits...or is this just a head fake down. I'm holding my RIG for now..but I won't have much tolerance. Seems like it was much higher last time OSX was 140...yes? Fairly strong volume again this morning. Trend still seems up, bwdik. UFAB has not been fabulous lately...will this one close the gap? -Minos