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

To: mph who wrote (3043)	11/18/1997 1:51:00 AM
From: Michael Berkel	Read Replies (1) \| Respond to of 95453

BUY-Bayard Drilling (BDI) by P Engr the "guru" of AOL's Oil&Gas Message Board. Bayard Drilling came to the market on 11/5/97. Priced at 23, the stock opened at 28. Then, the overall market sell off extended into the oilfield service stocks and BDI has fallen to today's intra-day new low of 21.75 and closed unchanged at 22.5 for the day. Having 54 land rigs the company is the 5th largest land contractor in the U.S. Further, 38 of the rigs are capable of 15.000+ feet with 21 of them being SCRs. After the IPO, the current ratio is 4:1 and the company only has $12 mill. debt. With 18 million shares out, the market cap./rig is around $8 million/rig. I think that the stock is a $50-$60 stock over the next 1-2 years without even considering additional rig acquisitions (that are sure to come). The majority of the company's rigs are operating in Oklahoma where, although the dayrates are up around 50% over the past 18 months, they are nonetheless, substantially below the $9-10.000/day rates commanded for similar rigs in S. Texas and La..The average rates in Oklahoma are around $5500-$6000 (w/o fuel). The trend of dayrate increases first began 2-3 years ago in the offshore area. Then began moving onshore around 1 1/2 years ago and are rippling northward as the "invisible hand" of free market runs the course. Many rigs have left the Okla. market to chase the high dayrates in S. Texas and La., as the process goes - so goes the supply in the Okla. market--ensuring that Suply and Demand will come into balance in due time. (which I think is essentially today for all practical purposes). This means that, very shortly, Bayard's fleet will see dayrates marching towards the $9-10.000/day rates experienced in S. Texas. At this level, the EBITDA/rig will be roughly $1.25 million/year. Hence, the company will have an EBITDA of around $63 million or around $3.50/share. The present average market multiple for the group of land based drillers is around 40x's '97 EBITDA and around 12-14x's estimated 1999 figures. At 12-14 x's, we have a $42-$49 stock - without additional rig acquisitions. Carrying the thinking forward, dayrates will have to eventually get to around $15.000-$18.000/day for the type of rigs that BDI owns, to reach new replacement cost economics. At those rates, EBITDA will be around $2.5-$3 million/rig/year. Hence, at new replacement cost economics, EBITDA should approach around $164 million or around $9/share--which should translate into a stock price of around $108-$126/share!! I added more BDI today and plan to continue accumulating at these price levels. I think that there is very little downside risk and believe that the upside potential of a 5+ bagger exists with this one at these levels. All IMHO!! Enjoy the Move!! P Engr.