Ha Ha Ha Ha...those sneaky bastards! They're reading me!
Anyway about Tesco (TEO-TSX) … I think this is a terrific company in transition. They’ve essentially redefined the way a drilling rig should operate and commanded a monopoly (80% market share) over land based top drive motors. Now they’re in the process of doing the same thing with casing drilling. About a month or so ago I listened in on their conference call and from what I can tell their expansion has to be one of the most shareholder friendly plans I’ve ever heard. The whole thing will be done without dilution, without additional debt and without a drain on their cash reserves which stands at about $32 million. It will be funded by internally by cash-flow, the sale of a property and by selling off 35 drilling rigs which will bring their fleet down to a more manageable 100 rigs. For 2003 they envision a 70% utilization rate, keeping in mind that they are an international company and 30% of the fleet, at any given time, is in transit.
As for the weakness in the stock price, my guess is the market for some reason thinks their business plan: 1) sucks 2) their technology sucks 3) last years 40% rig utilization is w-a-y below average, so everything about Tesco must suck.
Technically, there’s reason to like this stock … it pierced the lower Bollinger Bands without confirmation from the OBV indicator which has just crossed its 20 DMA – a nice negative divergence … we also got bullish crossover on the STO and volume is beginning to rise. Got any cash left?
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