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Gold/Mining/Energy : maverick (MAVK) -- Ignore unavailable to you. Want to Upgrade?

To: Steve Rolfe who wrote (165)	3/31/1998 2:01:00 PM
From: Andreas Samson	Read Replies (1) \| Respond to of 432

Drilling up, steel down = BUY Maverick's business is a simple one: It manufactures steel tubing for oil and gas exploration companies. Thus there are two main factors which impact profitability: 1) demand for product, i.e, increase or decrease in drilling activity; and, 2) the price of steel. As to the first factor, this is what the 10Q says: >>According to published industry reports, domestic drilling activity rose by 18% for the quarter ended December 31, 1997, as compared to the same quarter of the previous year. The Company believes that the domestic consumption of tubular goods per well drilled has increased proportionately. Natural gas drilling in the United States increased by 28% during the first quarter of fiscal 1998 as compared to the comparable period of fiscal 1997, and oil related drilling increased by 4%. The Company believes that gas and oil drilling increased in spite of gas and oil price decreases of 3% and 18%, respectively, as compared to the quarter ended December 31, 1997, due principally to lower finding and producing costs by end users. Notwithstanding declining oil prices during the first quarter of fiscal 1988, the trend in overall drilling continued upward, as drilling at the end of the quarter was 19% higher than the comparable period of the prior year and 1.4% higher than the quarter average.>> As to the second factor, the price of steel, let us again go to the 10Q: <<The Company's major supplier of steel announced two price decreases since mid-September which have reduced the Company's current replacement cost by $35 per ton. Based upon current inventory levels, the Company estimates that a substantial portion of these cost reductions will be reflected in cost of goods sold in the second quarter of fiscal 1998. The supply of steel is continuing to increase with four new steel mills having begun or are scheduled to begin production of 6.2 million tons of additional hot rolled steel in 1998. The Company anticipates that these additions have the potential to further lower the Company's purchase price of hot rolled steel in the future.'>>