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

To: articwarrior who wrote (31804)	11/14/1998 2:39:00 PM
From: jbe	Read Replies (3) \| Respond to of 95453

I like any oil service stocks that have a debt of 10% or under. How many fit this description? Not many. I ran a Telescan search, to identify oil service companies that have 1) an EPS increase over the past year, and 2) a debt/equity ratio of under 10%. Here they are: I0 (2.6) VRC (3.4) MRL (0.0) UFAB (0.6) DWSN (0.0) SCSWF (0.7) TDW (2.8) SDC (0.0) BTJ (0.0) CDIS (0.0) GIFI (0.0) SCSAY (0.0) HP (3.5) RES (1.0) Interest coverage is another way of estimating how much leeway companies have. Don't have numbers for all of the above, but here is the ranking of those for which I do have the numbers: MRL (277.7) UFAB (105.8) IO (62.3) VRC (39.1) DWSN (36.3) TDW (18.4) SCSWF (5.3) Free cashflow is another measure of a company's ability to live on its fat in hard times. Only the following of the companies listed above have positive FREE cashflow (foreign companies excluded because financial reporting on them does not supply numbers): TDW (3.3) BTJ (0.7) GIFI (0.6) MRL (0.5) VRC (0.4) IO (0.4) SDC (0.3) RES (0.2) HP (0.2) CDIS (0.2) Of course, good balance sheets do not necessarily make for great stock prices. :-(( I must confess that yesterday I finally broke down and sold my shares in GIFI and RES. I needed some big losses for 1998 income tax write-offs, and those companies obliged me by providing them. Still holding on to TDW, though, in the stubborn belief that virtue OUGHT to be rewarded (even though it rarely is). jbe

To: articwarrior who wrote (31804)	11/14/1998 4:57:00 PM
From: jbe	Read Replies (1) \| Respond to of 95453

Additions/corrections to list of low-debt companies. There are a number of low-debt (under 10%) oil service companies that are expected to show a strong EPS increase next year, even though their EPS this year was down. They are: MIND (0.0 debt) EPS, from -16.1 this year, to projected +40.5 next GEL (6.9) From -21.8 to +28.1 WG (2.0) From -?? to +155.2 TESOF (0.00) From -39.6 to +109.0 However, it seems to me that two of these companies -- MIND and WG -- might do well to take on some more debt. They both have very negative free cashflow. That is especially true of MIND, with a number of -5.2 (which puts it in the second percentile of all companies. As for the low-debt companies on my earlier list, I regret to report that growth rates for all of them are projected to be considerably lower next fiscal year. The most dramatic reversal of fortunes is predicted for SDC (down from +141.4 this year to -14.9 next year) and VRC (down from +62.5 to -10.8). :-(( jbe

To: articwarrior who wrote (31804)	11/14/1998 7:38:00 PM
From: jbe	Read Replies (3) \| Respond to of 95453

Uh, arctic, when was the last time you checked out KEG's debt ratio? A whopping 71%? Afraid it's more like a whopping 258%!! And KEG has very negative free cashflow as well (-1.5%). I always look at debt/equity and FCFlow together, because they offset one another. It's no big deal if you have negative free cashflow but low debt, because you can always borrow to cover your free cashflow needs. It's no big deal if you have high debt but lots of free cashflow, because you can use that cash to pay off the debt. But if you have high debt AND no free cashflow, AND the hard times come -- look out below! At the moment, analysts are projecting an EPS increase for KEG next year, while projections for most other countries are down. So that's to the good (for KEG, that is). However, looked at in the light of just the numbers on debt, free cashflow, and EPS projections, the future of some companies in the oil patch looks TRULY horrible. For example: Parker Drilling EPS current fiscal year: +60% EPS projected next fiscal year: -80.4% Debt/equity: 166.8% Free Cashflow: -1.0 Hvide Marine EPS current fiscal year: -17% EPS projected next fiscal year: -38.2% Debt/equity: 250.3% Free Cashflow: -2.9 TIMBER-R-R-R-R-R! Not necessarily, though. The market does not seem to care about such numbers. (What does it care about, anyway?) Incidentally, for the record. In my last two posts, the phrase "EPS this year" meant EPS back a year from today. Current fiscal year numbers are different -- and lower. Turns out, for example, that my virtuous TDW had growth rate decline this fiscal year, and the same is predicted for next fiscal year. :-(( But it has a lot of fat on its bones, and will probably still be around 100 years from now. And probably at the same price. <gg> jbe