Top Stocks: Boots & Coots IWC Inc. (WEL)
By: Smallcaps.us - Date: January 17, 2009
Introduction
The third and final stock in our "3 stocks for 2009"-series, is Boots & Coots International Well Control Inc. (WEL).
For many Smallcaps.us members, Boots & Coots is a familiar name as we featured it a first time in 2004 at $1.38. The first months after our recommendation, the stock drifted downwards, but later took off to reach $3.19 in August 2008. After the shares peaked at $3.19, they sharply declined, along with falling oil prices.
So we figured it was time to re-analyze the Company to find out if the decline is justified. What we discovered led to our low-risk stock for 2009!
The Company
Boots & Coots IWC is a well known provider of integrated pressure control services to onshore and offshore oil and gas exploration companies around the world. The company operates in two business segments: well intervention and response.
The well intervention segment consists of services that are designed to enhance production for oil and gas operators and to reduce the number and severity of critical events such as oil and gas well fires, blowouts or other incidences due to loss of control at the well.
The response segment consists of personnel, equipment and emergency services utilized during a critical well event. Boots & Coots has a long history in the oil and gas industry and is widely recognized for its emergency response services.
The company was founded in 1988 and is headquartered in Houston, Texas.
Financials
Early November 2008, Boots & Coots reported record revenues and ebitda for its third quarter and nine months ended September 30, 2008.
| Third Quarter 2008 | Third Quarter 2007 | Nine Months 2008 | Nine Months 2007 | |
| Revenues (000) | 56,452 | 24,973 | 153,371 | 69,184 |
| Earnings (000) | 5,448 | 1,331 | 16,678 | 2,069 |
| Earnings/Share | 0.07 | 0.02 | 0.21 | 0.03 |
| Shares_Outstanding | 78,859,000 | |||
In it's third quarter conference call, management indicated it didn't feel any major impact yet from worsening economic conditions.
New Contracts
In January, Boots & Coots announced two renewed contracts. The first is a renewed Safeguard contract with the Oil and Natural Gas Corporation of India (ONGC) for an additional five years. The contract is for training, inspection and blowout control for ONGC's 28 offshore rigs and 94 land rigs.
The second one is a renewed Safeguard contract in Africa, which substantially expands the scope of the company's existing prevention services over there. The contract is for a three year term, with an optional two year extension period and is valued at $58 million and includes $23 million in new Safeguard services.
Oil
It's obvious that WEL's shares declined because of economic conditions and falling oil prices and NOT because of bad results.
Now I have two questions for you. Do you think the economy is ever going to recover? And if it does, what do you think that's going to do with oil prices?
Let me tell you my opinion. Yes, the world economy is going get better again. It may take some time, and we may encounter a few bumps along the way, but it WILL recover. It always has. And as far as oil prices, when the industry picks up steam again, demand for commodities will rise as well, making oil more expensive.
Why do I like this stock?
- It's trading at a 3.93 P/E; (yes, you read that correctly)
- The Company's third quarter and nine months results were excellent;
- Management has indicated it currently doesn't feel much impact from economic conditions;
- The economy and oil prices will recover;
- WEL already announced two renewed contracts in 2009, indicating the world hasn't stopped producing oil;
- It has a good and well balanced management team that has earned its merits.
Those are enough arguments for me to make this my low-risk stock for 2009.
General information
| Market | NYSE Alternext |
| Symbol | WEL |
| Price | $1.14 |
| Contact | 7908 North Sam Houston Parkway West, 5th Floor - Houston, TX 77064 |
| Telephone | 281-931-8884 |
| Website | www.bncg.com |
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