Boom in Oil Rig Makeovers Could Benefit Small Cap Oilfield Stocks

As recently as Aug. 2 we covered small cap oilfield services stocks, fueled by a story in The Economist which characterized them as “the unsung workhorses of the oil industry.” But we’re back with them this week after catching a Wall Street Journal headline Sept. 11 “Rig-Fleet Makeovers Fuel a Boom” (http://online.wsj.com/article/SB10000872396390443589304577637231118149766.html?KEYWORDS=daniel+gilbert+national+oil-well+varco subscription needed).

The idea in August was that these small, agile oilfield services stocks were the ones doing the vast majority of

Oil platform workers photo courtesy of oilrigjobsinfo.com

exploration and extraction in the oil industry. Small caps came up with the technique called “directional drilling” that transformed the industry by allowing one rig to cover a lot more territory.

The Wall Street Journal story highlighted the idea that new safety rules, the rise of fracking and demand for “new drilling rigs and safety devices that can withstand harsh environments” have created work for companies that “make the equipment used in the booming businesses of deep-sea drilling and onshore hydraulic fracturing.” The added safety measures were prompted by the Deepwater Horizon spill in 2010.

Furthermore, according to the WSJ, this boom should have legs because “many rigs–both offshore and on land–are more than 30 years old and ill-suited for drilling in deep waters and shale formations, both technically challenging environments that are among the hottest places globally to explore for oil.”

In our search for small caps in this area, we kept coming back to the four companies we covered randomly a month ago. Let’s see how they have fared.

Houston-based Flotek Industries (NYSE: FTK, http://www.flotekind.com/) develops and supplies a portfolio of drilling and production related products and services to the energy and mining industries worldwide. FTK operates in three segments: Chemicals, Drilling and Artificial Lift. FTK closed Aug.1 at $9.71, down 6 cents for the day. It’s market cap was about $480 million. FTK closed Sept. 11 at $12, up three cents for the day and its market cap is now $596 million. Its 52-week trading range is still $3.89-$14.73.

Norwalk, CT-based Bolt Technology Corp. (Nasdaq: BOLT, http://www.bolt-technology.com/) operates in the offshore drilling segment. It manufactures and sells marine seismic data acquisition equipment and underwater robotic vehicles. In January 2011 Bolt purchase SeaBotix Inc. According to a Seeking Alpha story in early June, Bolt’s one year projected earnings per share growth rate is 43.28 percent. BOLT closed Aug. 1 at $14.45, down 10 cents for that day. It closed Sept. 11 at $14.90, no change for the day. Its market cap is about $126 million and Its 52-week trading range is still $9.56-$16.09. 

Houston-based Tesco Corporation (Nasdaq: TESO, http://www.tescocorp.com/) operates in four divisions serving drilling contractors and the oil and natural gas industry: Top Drives, Tubular Services, Casing Drilling and Reseach and Engineering. In October 2011 Tesco purchased Premiere Casing Services-Egypt SAE. It closed Aug. 1 at $11.31, down 28 cents for the day. TESO closed Sept. 11 at $10.39, up 16 cents for the day. Its 52-week trading range is now $9.73-$17.54.

The Woodlands, TX-based Newpark Resources Inc. (NYSE: NR, http://www.newpark.com/) provides products mainly to the oil and gas exploration industry. It operates in three segments: Fluid Systems and Engineering, Mats and Integrated Services, and Environmental Services. In April 2011 it acquired the drilling fluids and engineering services business from Rheochem PLC. Its 52-week trading range is $5.19 and $10.62. It closed Aug. 1 at $6.68, down 15 cents for the day. On Sept. 11 it closed at $7.67, up 10 cents for the day.

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