Bullish Technicals Could Help This Stock Dwarf Recent 50% Gains Global demand for oil is strongly linked with economic performance. While 2013 U.S. economic growth is expected to be anemic, U.S. oil demand is expected to rise in 2013 from a 15year low. (Source: “U.S. Oil Demand Seen Rising in 2013 From 15Year Low,” Wall Street Journal, December 11, 2012, last accessed January 8, 2013.) And, thanks to oilrich shale formations and fracking, the International Energy Agency (IEA) expects the U.S. to tie Saudi Arabia as world leaders in oil production by 2017, surpassing Saudi Arabia by 2022. TETRA Technologies, Inc. (NYSE/TTI) is a diversified oil and gas services company that operates in three divisions: fluids, offshore, and product enhancement. The fluids unit aids in drilling activities. The offshore segment decommissions platforms and pipelines, and explores for oil and gas. In addition to production testing services for oil and gas operations, the product enhancement division also recycles oily residuals, a byproduct of refining and exploration. In April 2011, TETRA announced that it had streamlined its operations with the sale of essentially all of its subsidiary Maritech’s oil and gas properties for approximately $222 million. Divesting itself of Maritech allowed TETRA to reinvest in its growthoriented service businesses. (Source: “TETRA Technologies, Inc. Announces Strategic Transaction,” TETRA Technologies, Inc., April 7, 2011, last accessed January 8, 2013.) As a result, TETRA’s financial results are adjusted to exclude the impact of Maritech’s operations. On November 6, 2012, TETRA announced that consolidated thirdquarter revenue climbed 16.2% yearoveryear to $234 million. Thirdquarter net income from continuing operations was $7.7 million, or $0.10 per share, versus $1.4 million, or $0.02 per share, for the 2011 third quarter. Total gross profit was $50.9 million in the third quarter of 2012, versus $35.7 million in the third quarter of 2011. (Source: “TETRA Technologies, Inc. Announces Third Quarter 2012 Results,” TETRA Technologies, Inc., November 6, 2012, last accessed January 8, 2013.)
During the first seven months of 2012, TETRA successfully completed three acquisitions: Optima Solutions Holdings Limited, Eastern Reservoir Services, and Greywolf Production Systems. These three acquisitions have broadened the company’s well completion and production testing service capabilities, and they have significantly increased its geographic footprint, both domestically and internationally. During the third quarter, the company drew down approximately $57.0 million under its $278million revolving credit facility to fund a portion of the Greywolf acquisition and to cover general corporate expenses. As of the end of the third quarter, it had approximately $221 million of borrowing capacity still available. Total debt at the end of the third quarter was $353 million, versus $118 million at the end of fiscal 2011. A portion of the increase in debt during the third quarter was attributed to increased receivable balances associated with two major contracts. TETRA expects to receive these outstanding payments during the fourth quarter, which should offset the anticipated negative impact on its cash position.
Chart courtesy of www.StockCharts.com From August 2011 to December 2012, the moving average convergence/divergence (MACD) was trending higher, while the stock price was trending lower. This
formation of bearish convergence in the MACD suggests that the longterm downtrend in the stock price is weakening, and there may be a reversal of trend in place. Since the beginning of November 2012, the company’s share price has been bullish, climbing 52.0%. In early December, TETRA’s share price broke through a twoyear downtrend, a further bullish sentiment. In addition, it is the first time since August 2011 that the company’s share price has traded above the 200day moving average (MA). Furthermore, the company’s 50day MA is closing in on its 200day MA, which is another bullish indicator. A financially solid company with a great outlook, TETRA announced that third quarter revenues were up 16.2% yearoveryear to $234 million. Earnings per share (EPS) for the quarter were up 400% at $0.10. A streamlined company with improving operations, TETRA continues to be a great penny stock with excellent longterm growth potential.