Benzinga  Apr 18  Comment 
NIKE, Inc. (NYSE: NKE) announced today that Washington County is the preferred site for its headquarters expansion and noted that the continued support and action by state and local governments will be required. As part of this project, Nike plans...


Houston, Texas-based W-H Energy Services, Inc. (WHQ) is a diversified oilfield services company that provides products and services for the drilling, completion, production, and maintenance of oil and natural gas wells. The company's customers include major and independent oil and natural gas companies, contract drillers, and other oilfield services companies. W-H Energy's core markets include the Gulf of Mexico (GoM) and the Gulf Coast regions of the U.S., the North Sea, Egypt, Saudi Arabia and a few other international regions.

The company divides its operations in two segments: drilling-related products and services (accounted for 63% of its 2006 revenue), and completion and workover-related products and services (35%). Drilling-related products and services include logging-while-drilling (LWD), measurement-while-drilling (MWD), rental tools, downhole drilling motors, and drilling fluids. Currently more than three-fourths of the drilling segment revenue is coming from the U.S., including the Gulf of Mexico, while the balance is from various international locations. Products and services for completion and workover activities include cased-hole wireline logging and perforating, polymers and specialty chemicals, and coiled tubing. The company's completion and workover products are primarily used in North America.

W-H Energy's operations in the onshore U.S. region have been the key driver of its impressive performance thus far in the current cycle. While there is still room for improvement in the company's onshore results through increased asset utilization and pricing gains, we are increasingly getting more optimistic of its offshore prospects, despite current sluggishness. We believe that the expansion of the roll out of a key technology offering over the coming months and the ongoing exit of majors from the shallow GoM have the potential of significantly enhancing W-H Energy's competitive position. This, we believe, will help it gain market share.

W-H Energy's strategic focus has all along been on gaining leading market positions in niche markets by offering technologically advanced and cost effective products and services. This is evident in the company's position in the LWD, MWD, and directional drilling markets. Over the last few years, W-H Energy has emerged as one of the few companies in the world with the technological capability to offer a full complement of LWD and MWD products and services. These tools provide real-time data about the physical properties of downhole formations, eliminating the need to halt the drilling process, as was the case with the traditional open-hole wireline logging system. By minimizing drilling rig downtime, LWD/MWD tools produce substantial cost savings, particularly on offshore jobs where drilling dayrates are very high.

A potentially high-impact offering is the company's 3-Dimensional Rotary Steerable (3DRS) line of tools under the PathMaker brand that it has already introduced in a 12.25-inch borehole size. W-H Energy made available, on a limited commercial basis, an 8.5-inch borehole unit early last year, with a full commercial roll out of the product in the first quarter of 2007. The company is currently in the process of developing other sizes of the product. These products are expected to start making a meaningful revenue contribution from the second half of this year. While the initial rollout was restricted to the GoM only, the product's full commercialization will make it available in the North Sea, Brazil, and the Middle East. We believe that the greater commercialization of the PathMaker products will improve the utilization of the company's LWD, MWD, and directional drilling services.

In addition to its drilling-related services, W-H Energy's completion and workover business generates steady earnings and is relatively less sensitive to rig counts. This gives the company's results stability during downturns in drilling activity levels. In addition, a key to the company is going to be its focus on exploiting new contracts in Saudi Arabia, which is expected to contribute significantly in the beginning of the next year. The company also emphasizes providing services and technology to the non-vertical drilling market where the outlook is very positive. We believe that W-H Energy shares represent an attractive investment opportunity, given its growth prospects and relatively diversified business mix.


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