Global Industries, Ltd. (GLBL)

GLBL is a smaller offshore drilling company that is continuing to make a name for itself. What I like most about this company which made me buy it was the controls on debt and borrowing. They my lose some really big contracts due to borrowing limits but the controls they have in place keep them from getting out of control with too much debt. In addition, since they are many an offshore pipeline and paltform building company, continued hurricanes and exploration in the Gulf of Mexico will keep them busy as well as an expanding presence in other areas of the world, especially in areas that cater to the China and India region.

For reasons that I like McDermott (MDR), I like its competitor as well. GLBL doesn't have the market penetration that MDR does, but maybe that will make it try harder. It's trailing & forward P/Es are 12.6 & 15.3 (vs. 20.6 & 16.7 for MDR), while its PEG is 0.97 (vs. 1.16 for MDR; both of which are good numbers). GLBL is a little pricier than MDR when compared on a Price/Sales (2.4 vs 1.9) and EV/Revenue (2.1 vs 1.8) scales, but beats MDR on Price/Book (3.8 vs 15.1) and an important number, EnterpriseValue/EBITDA (7 vs. 14.5). The latter of these means that GLBL is spinning off more earnings for its EV than is MDR, a big plus. Indeed, if we look at GLBL's profit & operating margins, they are 18.6% and 25.3% (vs. MDR's 9.2% and 9.8%). If we look at RoA and RoE, we see GLBL has 20.5% & 35.9%, vs. MDR's 9.4% & 130.4%. Finally, two more pluses are that GLBL has a very low Debt/Equity ratio of 9% (note: MDR's has dropped from 70% to about 40%), and the percentage of shares owned by institutions is 59% (vs. MDR's 84%). Just looking at these numbers, I think GLBL should do as well as MDR for the next year or so. Lastly, it's got only 5 analysts following it (MDR has 7), and 3 of them have downgraded GLBL in the April/May timeframe. Time for some unanticipated growth now!

Global Industries Ltd. is a construction focused on the building of offshore oil rigs and pipelines. They are based in Louisiana and the bulk of their revenues come from the Gulf of Mexico, although they have seen an upswing in Latin American contracts lately, as well as jobs in West Africa, the Middle East, and Asia-Pacific. Sales have grown an average of 28.6% over the past three years, declining in the past year as hurricane repairs in the Gulf in 2006 temporarily inflated activity.

The stock took a serious hit recently as a poor quarter in which idle capacity (dry docking), weather, supplier delays, and apparent management shortcoming (admitted inexperience with how things work in a few international markets) combined to disappoint Wall Street. Of these, management's fumbling of permitting and registration seems to be the one true concern. The argument can be made that this is just a growing pain, but it will be something to watch.

Drydocking is mainly over for 2008, so activity should pick up in the second half of the year, so the current backlog of $416 million should just be a jumping off point. Adding to this, Mexican investment in offshore rigs also appears to be picking up. Global is purchasing three new ships so they can take on more jobs as they see solid demand for their services in the medium term.

The company is in the process of expanding and updating their fleet so that they can offer higher value services, so not only are they trying to expand geographically, they are moving up the value chain in their offerings. This provides nice growth prospects in a field that doesn't appear to be going anywhere any time soon (regardless of the thought that a recession is going to dramatically reduce the world's demand for oil, which it won't for long). However, these strategic adjustments also create uncertainty as these are new areas and management has already shown some shortcomings.

Despite this, I think the company has been overly abused by the market after its second quarter report, and I expect them to rebound nicely over the next several years (this is assuming the price of oil stays above $50).

All I can say about this little company in a sea of sharks is "IMPRESSIVE". This company continues to find contracts, although small; they keep the cash flow going. When the demand for oil rises again, they very well may become one of the sharks.
Insiders hold and are buying shares. Institutional investors have large holdings as well. Management is conservitive and shows a real desire to build shareholder value. The fundamentals of the company are solid.

I bought this stock @ $3.38 and I'm up 91.42%. It continues to get good press and find new contracts from seemingly nowhere.

GLBL is one of the up and coming leaders in an industry which will be in great demand for their innovative products and services for several years to come.

Demand for GLBL industries is strong and will continue to be.

This company is trading at very cheap levels. It is a cashcow... the risks are that employees decide to go work to other competitor... that's why investors demand a so high risk premium to hold this stock... but the estimated cash flow and current prices already discounted more than I need to run these risks.

This stock has been oversold. Beaten down too much, forward PE is now under 7. Big upside but little downside left at this price.

As the oil on land starts to dry up, we have seen that the industry is more than happy to drill into the ocean floor for hydrocarbons. There are many industries this supports. First are the deep specialization drillers. Oil shippers will also benefit, especially in this market of strength with respect to emerging markets using more oil. Oil service has also seen a large move upward, but one that seems to get left in the dark is Global Industries. Their stock has been almost cut in half since late last year and they look poised for a rebound. Global Industries specializes in the deep sea industry with respect to construction and repair, engineering, project management, pipeline construction and anything with respect to diving. Just look at the new find from PBR, which looks to be as big as the largest find that the Saudi's had. It is my guess we will find many more like this as we are able to drill farther away from shore. This will cause a chain affect which is already starting to happen. Many think that this is just like the other oil booms, where the market will come down and they will shut down many of these expensive rigs. The fact remains that their contracts are not cancelable; this is based on their reasoning for shutting down a location. If the rig is still pumping as much oil as it is suppose to by that contract they will continue. With respect to big finds, it is much more price effective to install a pipeline than to have the oil shipped to land.

Since deep sea technologies are relatively new, it can be expected that their will be tight supply with respect to services around them. Many of the oil service providers are well versed in the jackup market, but do not have the expertise of OII or Global. This will keep them busy as deep specialty floaters are built. The market already looks very tight through 2008 and the margins are currently spectacular. If there is a major hurricane the drillers will go down as they are self insured, but the service companies will have a ton of work to help them get back on line.

An example of some of Global's work is outside of India. The Bombay High and Heera Field shows the major pipeline that Global put in and the expertise they have. They constructed 47 pipelines at a distance of 223 kilometers. They also are present in the Middle East. This year they installed a complex array of pipelines through the UAE and Saudi Arabia. They also have signed a large deal with PBR to install a large pipeline and continued success seems to be in this area as Brazil continues to increase output on three new major finds. They have also been able to purchase and build four new vessels so they are able to expand in a growth fueled environment. The economics of a build these days are very tight and the first to get in will be the first to cash in. This bodes well for profits going forward as more deep sea finds are drilled.

When looking up this company, I did not truly understand how in depth their technology was. The new vessels they have been expanding with lowers robotic machines to lay pipe on the ocean floor. This is an arduous and time consuming process that only few know how and are capable of doing. In 20 years this will be common place and the companies that are first to get in, will benefit from long range growth. They also repair platforms that the pipeline is hooked to for stability. When storms roll through, Global is called to get the pipeline up and going as soon as possible to optimize profits.

To show how revenues can increase after a volatile hurricane market, we can look at revenues. In 2003 and 2004 they made about $430 million dollars. They increased revenue in 2005 to approximately $650 million. In 2006, they had their best year ever with constant work from the hurricanes and almost doubled their revenue. They are still growing well as revenue last year was $1 billion, which when compared to their work before the hurricanes makes 2008 look like they will have revenues close to that of 2006. EBITDA is also growing as 2004 had $60 million, 2005 $140 million, 2006 $350 million and last year $280 million. Net income and EBITDA looks to grow this year to a rate equal to 2006 also. At the end of last year, backlog was also at an all time high of $714 million. They also have an all time high of $800 million in cash with debt less than half that. They are also highly diversified with positions all over the world. Their percentage of work is 23% Latin America, 23% Gulf of Mexico, 19% West Africa, 18% Asian Pacific and 17% Middle East.

To help understand the type of growth we will experience going forward. From 2000-2005, world growth in oil equivalents is pushing demand. An example of this is Africa at 15%, Asia at 36%, and the Middle East at 26% growth over that time frame. Since most of this growth will be funded through reserves we see that GLBL has contracts mainly with national oil companies who currently have 78% of the worlds. This only benefits Global going forward as these companies expand production. All this with E and P rising at 10% a year. Deep water capital expenditures are also increasing dramatically. Most of this is in Africa and the Middle East and over fifty percent of this is spent on GLBL's specialties. Sub sea spending will be a huge increase this year and continue to rise through 2012. Look for this demand to continue going forward as we see amazing changes in the way we acquire oil. It is estimated the 35,000 miles of new flow lines will be placed by 2012. Maintenance also looks good as they currently service 6000 fixed platforms, 186 floating production platforms, 175000 km of pipelines, 3300 sub sea wells, 635 offshore drilling rigs, and all this with current infrastructure aging quickly. I think some money can be made on this company as they experienced a huge drop when revenues were a little light. Buy dips.

Cramer Pick 3-6-08

Oil & Gas Equip & svcs starting to pick up again. Schwab rates as B. Will give it a try.

The oil industry isn't disappearing anytime soon. Invest long term while the price is low and ride it to a double. Earnings per share have been positive and offset the slightly lower 2007 4Q profits. Buy and ride!

why all the insider ditching?

Testing out a portfolio of smallish-cap 5-star stocks found using the CAPS screener. All picks have at least 50 allstars backing them, which should be enough to minimize star rating fluctuations. It's only been about a week, and I expect a LOT of volatility, but I have high hopes for market beating performance. Time will tell...

Infrastucture stocks have been on the rise. Even though glbl in a north american company; compaired to its international pers it is trading a a discount. This company is worth much more. Buy now

Investments in infrastructure should pay off in the future. I like the growth strategy and looks undervalued below $16/share.

More and more resources will be put into oil exploration as oil supplies decrease (and oil prices increase).

Sell this stock when the world doesn't need any more oil.

When the market starts to shift, this will be a stock to watch. It has taken a horrible nose dive and with the new regime in office, oil will be back. Offshore drilling will be an answer. I'm more of an alternate energy advocate but this is the here and now. Alternate energy is the future. PLAN FOR THE NOW!

offshore drilling will be allowed in the U.S. This company stands to profit from more offshore drilling. I like the valuations.