If You Build Them, They Will Come

07/28/2006 12:00 am EST

Focus:

Nicholas Vardy

Editor, Bull Market Alert, The Alpha Investor Letter, and The Global Guru

While oil prices continue to dominate headlines, adding to the fortunes of the major oil companies, Global Bull Market Alert editor Nicholas Vardy sheds light on an unheralded sector of the booming oil industry and uncovers a profitable opportunity…

 

“Massive offshore oil rigs—almost mini cities, constantly buffeted by sea, winds and storms—make for some of the toughest work environments on planet earth. Just think what it takes to build them in the first place.

 

“Acergy (ACGY NASDAQ) does just that. A British firm with project management experience across the globe, Acergy builds and manages oil drilling and rig construction projects from the seabed to the surface. Think of the company as the "special forces" of the oil industry.

 

“Acergy is in the right business at the right time. The Oil & Gas Equipment and Services sector has been one of the hottest areas over the past year. The ExxonMobils and Chevrons of the world are the miners digging for the gold, or in this case, oil. Acergy not only provides the picks and shovels, but also builds the mine—and in regions where few dare to tread.

 

“It's no secret that oil majors are running out of oil. Consequently, they have to look in ever-more harsh and challenging—mostly offshore—environments. With a projected 185% increase in barrels of oil recovered from deepwater subsea markets—Acergy’s area of specialty—over the next few years, the company is set to benefit handsomely.

 

“Indeed, it already is. Acergy's recent numbers blew past market estimates. Revenue in Q1 jumped 55%. It earned $74 million, or 37 cents per share, compared with $10.8 million, or 6 cents per share, a year ago—a whopping 600%+ increase. Acergy's top line is also growing strongly, with the company now forecasting 2006 net operating revenues of $2.1 billion. The truth is, Acergy has more business than it can handle. Its backlog climbed more than 40% this year, including projects stretching to beyond 2010, with the likes of blue chip clients like Exxon Mobil and Chevron. And more than 70% of these contracts are $100+ million revenue projects.

 

“Acergy was just awarded a $125 million contract for a deepwater installation project in offshore Angola. And it can't even get started on that project until 2008. Usually, highly profitable businesses like Acergy's attract competition. But just as you can't replace the special forces with a batch of raw recruits, you can't replace Acergy's sophisticated project management experience overnight either. That means as long as the search for oil intensifies, Acergy's business will continue to grow by leaps and bounds. So buy Acergy at market today, and place your stop at $11.20. For even potentially bigger profits, buy the November $15 call options (.QLSKC)

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