Friday, October 19, 2012

Forbes: "The Contradictions Of Shale: Oversupplied Markets Make Gulf Of Mexico Sexy Again" ($CNRD)

From a Forbes article today,

"Paradoxically, as the shale revolution is putting pricing and margin pressure on oilfield services companies, it’s the much-maligned deepwater sector that is helping them offset that weakness. Both Schlumberger and Baker Hughes had good things to say of the Gulf of Mexico. Calling it 'the fastest growing deepwater market in the world,' Baker Hughes’ chief executive Martin Craighead said they are well positioned to derive growth from the Gulf of Mexico going forward."
Once again, this is something that should be bullish for Conrad. Given what we've seen from other inland barge names, that business segment should continue to be hot. And if the energy business is coming back (after two bad spells, 2008-2009 and 2010-2011), then the company will be firing on both cylinders. Because the energy business is higher profit margin, and because of operating leverage, I would expect profits to increase substantially if this thesis plays out.

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