This company is very heavily burdened with debt. Compare the debt to equity ratios of strong companies in the sector, and you will see that KEG is a very risky play right now. If the price of oil stays down, or goes further down, companies with low cash, which KEG has, and high debt, could end up in the dumper.
KEG's receivables are growing at a frightening pace. They aren't getting paid on time. Their cash is down fro a year ago, and is not much more than their accounts currently payable. Debt is almost 4 times equity. Compare with Rowan, where the equity exceeds debt.
Compare the graphs. Stronger stocks have bottomed above or at previous six-month lows. KEG has gone way below previous support levels. Buy strong companies, and make a bundle when this sector rises. Weak companies may no longer be around.
RDC is a much better buy than KEG, with much less risk.
You seem to know your stuff about evaluating companies, especially o & g companies. Will you please give me take on MHR. This a much smaller company than RDC but I feel it has the same potential. I understand if you don't look into it, but maybe you could in the Christmas spririt. Long on RDC and quite possibly MHR.
Still 7 days of tax selling left, but RDC showed a nice reversal today from the last 2 days of battering. Might this be the final bottom? My guess is that 1998 will mark the bottom (due to tax selling) and we should see a nice recovery in oil related stocks in January/February as oil fundamentals get better. Its only a matter of time.
I am sure there are a lot of people on this board who know a lot more than I, but I'll be happy to tell you what I see.
In my opinion, MHR is worse condition than KEG. Low cash, receivables growing, very high debt to equity ratio. Unlike KEG, which has shown positive earnings until now, MHR has lost money for seven straight quarters. With low cash, they have been forced to sell preferred stock, which will dilute earnings for the common stock holders. If things don't improve quickly, the company could fail. Not a sensible investment, at this time. Simply stated, these weaker companies may not survive the oil glut.
The three companies I currently hold are RDC, FGI, and PGO. Of these, PGO is probably the strongest potential performer, but, being a Norwegian company, it is subject to the current downtrend in the Norwegian stock market. PGO has had excellent growth in earnings, even in the current oil market. They do underwater seismic exploration, etc. FGI builds deep-water drilling rigs, and has a strong balance sheet and income statement, as well as a good backlog of work. Look at and compare the financials of these companies, and you will see which are the really strong ones. Those are the companies that will benefit from failure of weaker companies. Just for comparison, while MHR has been selling preferred stock, FGI has completed a one-year, million-share, stock buy-back program, and started another! A lot of companies declare a buy-back, to get their stock to go up, then never buy a share.
Of the three I hold, I regard RDC as the weakest, primarily because they are in the jack-up rig business. There is a lot of competition in that area, and some weak performers that may go under and flood the market with used rigs. A lot of jack-up rigs are not in use, currently. On the other hand, Rowan has the airline in Alaska, which is doing well, and profits from low fuel prices. A nifty hedge! I say RDC is the weakest, but I am happy that I own it, and wish I had more money to invest in it!
This sector has a ton of potential, if you select the right companies.