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Strategies & Market Trends : YEEHAW CANDIDATES -- Ignore unavailable to you. Want to Upgrade?

To: Galirayo who wrote (6069)	12/8/2004 7:54:28 PM
From: Ken W	Read Replies (1) \| Respond to of 23958

Ray, Okay you asked for it buddy. Our business is primarily dependent on the level of oil and gas drilling activity worldwide, which, in turn, depends on the level of capital spending by major, independent, and state-owned exploration and production companies. This capital spending is driven by current prices for oil and gas and the perceived stability and sustainability of those prices. All of our business segments generally track the level of domestic and international drilling activity, however, their revenues, cash flows, and profitability follow the rig count at different stages within the market cycles. Drill pipe demand is also a function of customer inventory levels and typically lags changes in the worldwide rig count until customers no longer have sufficient inventory to sustain current and near-term expected future activity. Drill bit demand and our Drill Bits segment's earnings and cash flows have closely tracked the worldwide rig count. Results from our premium connections and accessories product lines in our Tubular Technology and Services segment predominately follow changes in North American offshore drilling, deep drilling, and natural gas drilling rig counts; but short-term demand is also affected by inventories held by oil country tubular goods (OCTG) distributors. Demand for other product lines in this segment can also follow the level of worldwide offshore drilling activity. Note: Rig count is key to the sucsess of their top line. Current PE is kind of high IMO to justify the present price. Interesting that BOA puts a 20 target on the stock just as it is trading in the low 20's...call me paranoid, but BOA wa most likely a seller today off the highs of 22...after all thier price target was posted on Nov. 30th. The company alludes to strong oil and gas prices for the last 3 Q's, but expect the next Q to be somewhat flat except for their drill bit (high margin) segment of the business. The reason for the "flat" statement is that the past prices of oil and gas have spurred a flurry of drilling (mostly saturated now) They do however expect demand for their products to be strong for the remainder of the year. BUT!! The costs of steel have gone up considerably over the past year too. They have to pay more for basic material to make the tubes and bits that the drillers buy from them...Sooooo "this factor could partialy offset some of our net profit predictions." "When forecasting our operations for the fourth quarter of 2004, we relied on various assumptions, including stable drilling activity, except for strong seasonal improvement in Canada. We also anticipated benefits from pricing increases implemented at our Drilling Products and Drill Bits segments earlier in the year. For our Tubular Technology segment, we believe distributors already hold low inventories and will not be able to follow their normal practice of seasonally reducing inventories of our products in the fourth quarter. Using these assumptions, we expect to earn between $0.17 and $0.20 per share during the fourth quarter of 2004" Note: Looking forward (on a PE valuation basis) Presently they are trading at a pretty high PE, the stock looks a bit pricey to me, considering they are trading at about 3x the present average S & P... Technically, stockcharts.com[m,a]daolyyay[pb50!b200][vc60][iUb14!Lp14,3,3]&pref=G stockcharts.com[m,a]waolyyay[pb50!b200][vc60][iUb14!Lp14,3,3]&pref=G Hmmmm, me thinks that 18 would be a safe bet. Interestingly the long term 200 period average is at 17.35 while a horizontal support spot is at 18...Also, note the big volume at about 11 bucks and then just about the same volume at 20....I have never, never trusted BOA!!! LOL All in all Ray the company does not look too bad, they have been thru a major switch from one focus to another, carefully selling off the old and paying just a hair more for the new segment of the business. So long as there is plenty of drilling going on, they will make money. By expanding from continental to international is a good move. They have survived the transition, held some cash and got hold of a higher margin product in the bits division. Personally, I think the stock is a little overvalued right now, but I'd gladly trade the stock on the TA side. Now, are'nt you glad you asked??? Ken