Boots & Coots International Well Control Inc.
Rating: Speculative Buy - 12 month price target = $2.50
WEL $1.82 — (AMEX) June 11, 2007
Total Revenues (Millions)/ Earnings (loss) per share;
FY (12/04) – 24.5 M / (0.04)
FY (12/05) – 29.5 M / 0.06
FY (12/06) – 97.3 M / 0.21
FY (12/07) E – 116 M / 0.44
52 - Week range: $1.50 - $2.99
Shares outstanding as of 12-06-07: 75 million
Approximate float: 63 million
Market Capitalization $139 million
Boots & Coots International Well Control, Inc. (Boots & Coots) provides a suite of integrated pressure control and related services to onshore and offshore oil and gas exploration and development companies in the USA and worldwide. Boots & Coots operates in two segments: Well Intervention and Response. The Company’s 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 losses of control at the well. The segment includes services performed by hydraulic workover and snubbing units that are used to enhance production of oil and gas wells. The Company’s Response segment consists of personnel, equipment and emergency services utilized during a critical well event.
Key Investment Considerations:
I am rating Boots and Coots (AMEX: WEL) with a Speculative Buy rating and a twelve-month price target of $2.50 per share based on currently being undervalued in the marketplace. Investor confidence has been recently hit by a poorly executed stock offering and a weak quarter (revenues and EPS similar to Q2 06. Despite this, Boots and Coots is set to earn 0.10-0.15 cents per share in ’07, valuing it in the $2.50range assuming a simple PE x 10 multiple. Readers should note that the company’s revenue stream from the response section of its business is notoriously volatile due to factors including changes in the volume and type of drilling and workover activity occurring in response to fluctuations in oil and natural gas prices. Wars, acts of terrorism and other unpredictable factors may also increase the need for such services from time to time.
Well Intervention: The Company’s Well Intervention segment consists of services that are designed to enhance production for oil and gas operators and to reduce risk of oil and gas well fires, blowouts, and other serious events. The Wellsure® Program involves and alliance between Boots & Coots, Global Special Risks, a leading international Managing General Agent, and Underwriters at Lloyd’s of London. The resulting product is a package that includes a full range of Boots & Coots’ well control prevention and post-response services as part of clients’ insurance package. The SafeGuard program includes risk assessment, contingency planning training and education in well management
Response: Company’s Response segment consists of personnel, equipment and emergency services utilized during a critical well event, including provision of firefighting pumps and hydraulic workover units for emergency well control situations. These services are designed to minimize response time and mitigate damage while maximizing safety.
International Expansion: At present, Boots & Coots has active operations in Algeria, Venezuela, India, Kazakhstan, Congo, Egypt, Libya and Dubai. The Company also has 88 WELLSURE® contracts, including 2 contracts in Argentina and 61 in Canada. The HWC acquisition (below) brings the company closer to itscustomers geographically. In addition to complementary locations in Algeria and Venezuela, they provide the company with a presence and on-site facilities in Houma, Louisiana, West Africa, Egypt and Dubai. Boots and Coots intend to be able to leverage this geographical presence and expand its Safeguard and risk management services into these markets.
Growth: The Company expects growth to continue in 2007 as a result of additional Safeguard work in Libya, prevention work in Indonesia, and additional hydraulic workover/snubbing units in Qatar, Saudi Arabia, and the Congo. Boots & Coots is negotiating a large snubbing services job in the Mideast and has been approached to deploy an additional unit in 2008. The Company's Safeguard and hydraulic workover business in Algeria grew significantly in 2006 to five-year contracts worth $35 million. Boots & Coots has been approached by a major oil and gas operator to form a joint venture that would supply all of that company's hydraulic workover/snubbing service needs in Algeria.
HWC Acquisition: The acquisition of HWC adds a group of core service capabilities to each company that are a critical offering to Boots and Coots customers. Boots and Coots utilize hydraulic workover / snubbing in a large percentage of well control jobs.
Company Overview:
Boots and Coots provide a suite of integrated pressure control and related services to onshore and offshore oil and gas exploration and development companies, principally in North America, South America, North Africa, West Africa, and the Middle East.
The Company's primary business objectives are to continue growing its revenue base, especially its Intervention segment, and to continue strengthening its balance sheet. The Company plans to reinvest its working capital in order to accomplish those objectives.
Boots and Coots experiences large fluctuations in revenues from these services. Well Intervention services provide a more stable revenue stream and the companies strategy has been, and continues to be, to expand these product and service offerings to mitigate the revenue and earnings volatility associated with critical well event services.
Company History and Ownership:
1978: Boots Hansen and Coots Matthews leave the Adair Company to form Boots & Coots.
1991: Iraqi solders ignite more than 700 oil wells as they retreat in defeat at the close of the Persian Gulf War. Over 30% of the fires are controlled by specialists from the Red Adair Company (who later formed International Well Control [IWC]) and Boots & Coots.
1994: Red Adair retires and sells his company to Global Industries. The senior mangement of the Red Adair Company leaves Global Industries and forms International Well Control.
1995: IWC and Halliburton Energy Services join forces to create the WellCall Alliance.
1997: International Well Control acquires Boots & Coots, reuniting the world's most experienced well control specialists and fire fighters.
On March 3, 2006, Boots and Coots acquired the hydraulic well control business (HWC) of Oil States International, Inc. by issuing approximately 26.5 million shares of common stock and subordinated promissory notes. Oil States International, Inc. subsequently sold 14.95 million shares of Boots and Coots common stock in April 2007 and now owns approximately 15% of the Company.
As of December 31, 2006, the executive officers and directors, which consist of nine individuals, collectively have a 3.7 percent beneficial ownership in the form of stocks and stock options.
Valuation: Outlook
Boots and Coots experienced a weak 07 Q1, with revenues and gross profit similar to what was obtained in Q2 06 (see below):
Rating: Speculative Buy - 12 month price target = $2.50
WEL $1.82 — (AMEX) June 11, 2007
Total Revenues (Millions)/ Earnings (loss) per share;
FY (12/04) – 24.5 M / (0.04)
FY (12/05) – 29.5 M / 0.06
FY (12/06) – 97.3 M / 0.21
FY (12/07) E – 116 M / 0.44
52 - Week range: $1.50 - $2.99
Shares outstanding as of 12-06-07: 75 million
Approximate float: 63 million
Market Capitalization $139 million
Boots & Coots International Well Control, Inc. (Boots & Coots) provides a suite of integrated pressure control and related services to onshore and offshore oil and gas exploration and development companies in the USA and worldwide. Boots & Coots operates in two segments: Well Intervention and Response. The Company’s 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 losses of control at the well. The segment includes services performed by hydraulic workover and snubbing units that are used to enhance production of oil and gas wells. The Company’s Response segment consists of personnel, equipment and emergency services utilized during a critical well event.
Key Investment Considerations:
I am rating Boots and Coots (AMEX: WEL) with a Speculative Buy rating and a twelve-month price target of $2.50 per share based on currently being undervalued in the marketplace. Investor confidence has been recently hit by a poorly executed stock offering and a weak quarter (revenues and EPS similar to Q2 06. Despite this, Boots and Coots is set to earn 0.10-0.15 cents per share in ’07, valuing it in the $2.50range assuming a simple PE x 10 multiple. Readers should note that the company’s revenue stream from the response section of its business is notoriously volatile due to factors including changes in the volume and type of drilling and workover activity occurring in response to fluctuations in oil and natural gas prices. Wars, acts of terrorism and other unpredictable factors may also increase the need for such services from time to time.
Well Intervention: The Company’s Well Intervention segment consists of services that are designed to enhance production for oil and gas operators and to reduce risk of oil and gas well fires, blowouts, and other serious events. The Wellsure® Program involves and alliance between Boots & Coots, Global Special Risks, a leading international Managing General Agent, and Underwriters at Lloyd’s of London. The resulting product is a package that includes a full range of Boots & Coots’ well control prevention and post-response services as part of clients’ insurance package. The SafeGuard program includes risk assessment, contingency planning training and education in well management
Response: Company’s Response segment consists of personnel, equipment and emergency services utilized during a critical well event, including provision of firefighting pumps and hydraulic workover units for emergency well control situations. These services are designed to minimize response time and mitigate damage while maximizing safety.
International Expansion: At present, Boots & Coots has active operations in Algeria, Venezuela, India, Kazakhstan, Congo, Egypt, Libya and Dubai. The Company also has 88 WELLSURE® contracts, including 2 contracts in Argentina and 61 in Canada. The HWC acquisition (below) brings the company closer to itscustomers geographically. In addition to complementary locations in Algeria and Venezuela, they provide the company with a presence and on-site facilities in Houma, Louisiana, West Africa, Egypt and Dubai. Boots and Coots intend to be able to leverage this geographical presence and expand its Safeguard and risk management services into these markets.
Growth: The Company expects growth to continue in 2007 as a result of additional Safeguard work in Libya, prevention work in Indonesia, and additional hydraulic workover/snubbing units in Qatar, Saudi Arabia, and the Congo. Boots & Coots is negotiating a large snubbing services job in the Mideast and has been approached to deploy an additional unit in 2008. The Company's Safeguard and hydraulic workover business in Algeria grew significantly in 2006 to five-year contracts worth $35 million. Boots & Coots has been approached by a major oil and gas operator to form a joint venture that would supply all of that company's hydraulic workover/snubbing service needs in Algeria.
HWC Acquisition: The acquisition of HWC adds a group of core service capabilities to each company that are a critical offering to Boots and Coots customers. Boots and Coots utilize hydraulic workover / snubbing in a large percentage of well control jobs.
Company Overview:
Boots and Coots provide a suite of integrated pressure control and related services to onshore and offshore oil and gas exploration and development companies, principally in North America, South America, North Africa, West Africa, and the Middle East.
The Company's primary business objectives are to continue growing its revenue base, especially its Intervention segment, and to continue strengthening its balance sheet. The Company plans to reinvest its working capital in order to accomplish those objectives.
Boots and Coots experiences large fluctuations in revenues from these services. Well Intervention services provide a more stable revenue stream and the companies strategy has been, and continues to be, to expand these product and service offerings to mitigate the revenue and earnings volatility associated with critical well event services.
Company History and Ownership:
1978: Boots Hansen and Coots Matthews leave the Adair Company to form Boots & Coots.
1991: Iraqi solders ignite more than 700 oil wells as they retreat in defeat at the close of the Persian Gulf War. Over 30% of the fires are controlled by specialists from the Red Adair Company (who later formed International Well Control [IWC]) and Boots & Coots.
1994: Red Adair retires and sells his company to Global Industries. The senior mangement of the Red Adair Company leaves Global Industries and forms International Well Control.
1995: IWC and Halliburton Energy Services join forces to create the WellCall Alliance.
1997: International Well Control acquires Boots & Coots, reuniting the world's most experienced well control specialists and fire fighters.
On March 3, 2006, Boots and Coots acquired the hydraulic well control business (HWC) of Oil States International, Inc. by issuing approximately 26.5 million shares of common stock and subordinated promissory notes. Oil States International, Inc. subsequently sold 14.95 million shares of Boots and Coots common stock in April 2007 and now owns approximately 15% of the Company.
As of December 31, 2006, the executive officers and directors, which consist of nine individuals, collectively have a 3.7 percent beneficial ownership in the form of stocks and stock options.
Valuation: Outlook
Boots and Coots experienced a weak 07 Q1, with revenues and gross profit similar to what was obtained in Q2 06 (see below):
Despite this, I am forecasting revenue of 104 Million and full EPS this year of 0.15 cents. The company has previously stated that the Well Intervention services segment for 2007 will generate approximately $95 million in revenues. Because of the highly unpredictable nature of the response business, the Company does not project results for this segment. However, using historical figures for the Response section of the business, Boots and Coots could easily surpass the 10M predicted in this model for 2007 (below);
Summary: I believe the Outlook for Boots and Coots are positive. With the companies stock offering and a weak quarter behind it, it is set to grow revenues and EPS via international expansion and integration of HWC. In the short term however, the stock may be continue to be subject to high volatility.
