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Gold/Mining/Energy : Trico Marine Services (TMAR) -- Ignore unavailable to you. Want to Upgrade?

To: JZGalt who wrote (447)	6/19/1998 2:59:00 PM
From: D.J.Smyth	Respond to of 1153

all the calls are $20 and above which will expire worthless today, there are only 124 total put contracts at $20 and above, so the normal method of calculating calls to puts does not apply especially at this price. something else is going on it appears. the mutual fund explanation holds credence for some of the selling. this company needs to support their shareholders, otherwise they are nothing more than...

To: JZGalt who wrote (447)	6/19/1998 5:45:00 PM
From: D.J.Smyth	Read Replies (3) \| Respond to of 1153

Galt, i do not know what these idiots (excuse the expression) are looking at. in re-reviewing the data, (a) TMAR has about 68 boats in operation. last quarter their utilization ratio was 70% due to dry docking of approximately 28%, so total utilization of boats available was nearly 100%. (b) 60% of their boats operate in the gulf, which amounts to about 40 boats. of those 40, only about 28 were being utilized in the gulf, the remainder being dry docked. (c) the number of boats available for use this quarter are up close to 34, 6 more than last quarter, or nearly a 25% increase in usage. so we have nearly a 25% increase in available boats, and a 15% decrease in day rates, the increase in the number of boats more than offsets the decrease in day rates. (d) day rates in the gulf are now averaging between $7200 to $8200 depending on the vessel. there are approximately 70 to 80 new vessels coming into the gulf over the next year which represents a 15% increase over the current boats that operate within the gulf. the replacement cost of the new vessels range from $6200 to $6800 since most of the vessels are new, this replacement cost does not include labor or fuel to run the vessels on a daily basis. So, these new vessels, to operate efficiently at break-even, must make, at least, $7000 to $7500 per day. If these new vessels can't make money in the gulf at current rates, they'll most likely go elsewhere where demand is strong. (e) utilization ratio of TRICOs other 40%, outside the gulf, is running at nearly 100% and is going "great" according to Green in IR (f) we will also have a decrease in their debt service for the latter part of the year which will have the affect of increasing earnings. all these factors add up to a decent quarter for the coming year. (g) even if the new vessels entering the gulf decrease TMAR's utilization ratio to 80%, demand is such around the globe that TMAR only needs to move the vessels elsewhere - no such market softening exists in the other major markets (i) four major oil finds have been recorded in the gulf in the past year and are currently being developed by the three major players - this should increase the need for boats and help lick up any excess supply (j) TMAR's contracts in the gulf are for the most part long term contracts (two years or longer) for supply. They've already recorded nearly 30% of their contracts for 1999 in the gulf which is considered generally high at this juncture. (k) the independent contracts or rig operators in the gulf are the operations that have a problem existing with $10 oil. independent contractors in the gulf make up about 30% of total operations. not all these operators will go broke at $10 oil as most have little to no debt. about 40% of the independents would have long term trouble (two years) surving with $10 oil, which amounts to 12% of the total operators in the gulf. the remaining operators are large oil companies which can, presumably survive as long as necessary at $10 oil given their process operatations. (l) day rates would need to drop to around $4500 to justify TMAR's current stock price. the probability of this ocurring is very slim. even if oil drops to around $10 and stays there for a year, the major operators in the gulf, including AMOCO, Texaco, and Chevron would see their earnings drop by, at most 20%, but not 50% as their current stock prices would suggest. there is a high probability that oil will stay in the range of $13 to $17 which will continue to keep the majority of their vessels busy. in conversations with TDW, they operate about 320 vessels in the gulf, representing 30% of their fleet. of 320, only 10% were drydocked last quarter. the number for drydock is expected to increase this quarter. if they drydock just 10% more (due to age and repair, since their vessels are considerably older than TMAR's), that is nearly another 20 vessels out of use for the gulf. who will pick up the slack? TMAR will certainly be there to do so. one other note: if day rates dropped to $4500 in the gulf, only one supplier would be able to financially handle this scenario, and that is Tidewater. but looking at it closer, Tidwater, over the next three years is looking at retiring 20% of their fleet in the gulf due to age, and this process will continue over the next ten years. Tidewater will not be able to operate its aging fleet at $4500 given current cost factors of the business. thus, a day rate this low would invariably cause increased demand for boats as supply would be extremely limited - NO ONE CAN OPERATE IN THE GULF PROFITABLY AT $4500 RELATIVE TO REPLACEMENT COSTS. IF THEY CAN'T OPERATE PROFITABLY, THEY WON'T OPERATE AT ALL - AND WHAT IS THE PROBABILITY OF THAT HAPPENING? NIL. what am I missing here?