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
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
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
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.