My neighbor works at MDTotco, a division of
VARCO, and I bought some of the stock because they seem
to have good indicators (beside PE, etc) - can't
hire enough people fast enough, growing, expanding the
plant, my neighbor is working mondo overtime because of
backlog, etc. I think they'll outweather the storm and go
back up just as fast as they came down.
If I was hearing correctly this morning, VRC got
a real good mention by the guest host on CNBC.
I will be doing some DD on this
stock. Hope I don't miss out on a buy
VRC may take a while to recover, but it will be a
big winner again. We will have to overcome the
traders who buy and sell large lots to eke out a fraction
of a point every time the price of oil moves up or
down ten cents (I suppose you can make a good living
at this if you can call the moves).
long term. Buy it and forget about it for a while; and
don't be tempted to bail out too soon either. It will
be a shame if VRC gets bought out (and I'm sure
there are lookers at these incredible prices) before it
BTW, similar issue arose w/respect to FGII and
one of its customers (although impact was less
clear). FGII also up big time (now over 15 from 10 and
Also agree that any turnaround in oil sector will be
much more apparent on flat or down market days. Still
one gets the sense that something may be happening.
I agree that the effects of this one cancellation
should be minimal, but it does point to a potential
problem. If others start to cancel, which as the 10-Q
points out - they can do, it could be a problem. The
backlog is definetly worth watching.
club owns VRC and this was part of our discussion this
past Thursday. So what did we decide to do? We bought
more. We were happy to buy more at under $10. In fact,
half of the group walked in the door with the same
As for VRC soaring today, well, everything is, not
just VRC or oil sector.
I incorrectly assumed you were referring to a
more recent press release or company release. 10Q
plays down effect of transaction and states that
deposit received should be sufficient to cover any of VRC
expenses. Additionally 10Q refers to backlog of
approximately $600 mill (large, by any standards, even taking
into account cancellation).
As we speak, VRC up
almost 1 point (over 10). Other oil sector stocks also
soaring today. Whether this coupled with gains from last
week is indicative of rebound in oil sector remains to
be seen. IMHO, will be more apparent when market is
flat or down, b/c then increase will be more easily
separated from general market.
I'm long on this stock. That has been documented
on previous postings. This comment comes from
On August 6 a customer announced
that it was terminating the construction of a deep
water drillship and had reached agreement with the oil
company for cancellation of its five-year drilling
contract. As a result, the customer cancelled orders
totaling approximately $38.3 million, which were included
in Varco's June 30 backlog. A significant portion of
the equipment was due to be shipped in the third and
fourth quarters of this year. Although the costs to
Varco of this cancellation have not yet been
ascertained, we believe that deposits received from the
customer will be sufficient to cover, or substantially
mitigate, those costs.
It does not say what
also indicated that while VRC had not ascertained
the costs, VRC believed that the deposits received
from this former client will be sufficient to cover or
substantially mitigate those costs. Also backlog was almost
$600 million. I agree with you that increase in price
of oil plus market sentiment will help backlog in
I believe in VRC in the long term
too. I just think that while VRC may dip lower, if
there is a REAL shift in sector sentiment (and there
have been signs that this might be coming), it will
likely double within the next 3-6 months instead of 12.
Even VRC at 18 or 19 is a far cry from its price of 33
back in April of this year, and the fundamentals in
either price of oil (oil was low back then too) or
backlog has not changed. I think the current price is an
overreaction to the sector sentiment, and a turnaround in such
sentiment could move VRC in the other direction at just as
fast a clip. This does not mean I'd recommend VRC for
the quick buck--just that I think this sector moves a
lot more quickly in each direction.
The company released it with the latest quarterly
report to the stock holders. Most of you are short-term
traders try to get a good buy...chasing the fast buck. Be
investors...trading takes you nowhere...better return in Las Vegas.
The loss in backlog should be the main concern but
most likely due to the big oils reducing their
expenditures. As the price of oil rises thru the winter we
should see a backlog pickup sometime in 1999...so the
drillers are unlikely to takeoff in the short-term. I see
a lower VRC than this price but a double by