Anyone know about this comapny: 3-D Geophysical
Nice write in thestreetdotcon's $10 store:
By Mavis Scanlon
Staff Reporter
2/20/98 7:41 PM ET
Enhance shareholder value.
Those are the words shareholders like to hear, especially from a company with a
stock trading barely above its 1996 initial public offering price. Such is the case at
3-D Geophysical (TDGO:Nasdaq), a land-based seismic contractor for the oil
industry.
3-D looked like a winner after its IPO, with its price climbing to more than 12 from
7 1/2. But then the company crashed. It missed earnings estimates, had trouble
integrating geographically diverse divisions, ran into trouble with its international
operations and its chief executive departed. Its stock plunged to about 4 last July.
Now, however, the company is using those magic words.
"The way for this business to grow is to either buy or merge with someone of our
size or find a good CEO," says Joel Friedman, 3-D's chairman. Friedman adds
that some possibilities on the merger front could be announced soon.
In addition, the company's base business looks solid.
Seeing this, some investors are buying.
Money manager Wellington Management boosted its holdings to 891,000
shares as of Feb. 10, from the 684,000 it held at the end of September, according
to filings with the Securities and Exchange Commission. The new position is
7.7% of 3-D's outstanding stock.
Another big holder is Heartland Advisors, which owns more than 10% of 3-D's
shares. Adam France, Heartland's energy analyst, likes 3-D's geographical
diversification. With operations stretching from Alaska to Latin America, 3-D can
move equipment between markets, eliminating the downtime due to weather that
is a problem in the seismic industry.
"I think they've got things moving in the right direction," France says. "You can
bet that we were big buyers when they were throwing the stock away at 4."
So far this year 3-D is the strongest performer on a percentage-gain basis in the
seismic niche of the oil service sector, gaining more than 17%, compared with an
11% loss for the Oil Service Index.
Year-to-date comparison of 3-D Geophysical (TDGO)
with the Oil Service Index (OSX)
(There is a graph here. thestreet.com )
3-D's stock closed at 7 3/4 Friday, up 5/16. Its price-to-sales ratio is barely above
1. Value investors shoot for stocks with figures under 1.
There will be "a lot of focus on the company meeting or exceeding earnings,"
says Jim Wicklund, who follows the 3-D for Dain Rauscher, which co-managed
3-D's IPO. "We know they completed enough work" to meet the fourth-quarter
First Call consensus estimate of 8 cents a share, Wicklund continued, but the
time between completion of work and payment on a contract can stretch to a few
months.
Analysts expect 3-D to earn 49 cents a share next year, more than five times the
projected 8 cents a share for 1997. The company is expected to report earnings
on March 6.
Complicating matters, however, is the search for a new CEO. 3-D hasn't had one
for nearly eight months, and analysts and investors want to know when it will hire
one. Friedman says the company is close. But he adds that the company is
keeping itself open to any deal that will increase shareholder value.
3-D was born of the merger of four regional land seismic contractors, which
operated primarily in Mexico, the Appalachian Basin, Texas and California, and
Alaska and the Rockies. A fifth company, in Canada, was added in early 1997.
These companies formed one of the largest operators in the small universe of
land-based seismic contractors.
By interpreting seismic data -- the computer-aided enhancement of recorded
sound-wave echoes -- oil companies determine the most likely places to drill for
oil. Conversely, the data also tell a company where not to drill, saving time and
bundles of money. In the past this information could be viewed on a single plane,
or in two dimensions, but technological advances in recent years now allow for
three-dimensional or multiple-plane viewing of this data.
Along with a few companies that are closely held, 3-D is situated among a group
of small-cap land seismic firms such as Dawson Geophysical (DWSN:Nasdaq)
and Eagle Geophysical (EGEO:Nasdaq), which bring in revenue of around $100
million.
Friedman, the chairman and acting CEO of 3-D since Richard Davis left last
summer, concedes that the company has had a spotty record from an earnings
standpoint, "but we've got a lot of potential," he says.
Indeed, 3-D has contracts with some major operators, including British
Petroleum (BP:NYSE ADR) and Forcenergy (FEN:NYSE) in Alaska, Shell
Canada (SHC:Toronto) in Canada, and Pemex, the state-owned Mexican oil
company.
Still, Friedman realizes 3-D needs more. "Basically we could be better
competitors if we were bigger," he says. |
