Wachovia Downgrades Allis-Chalmers Energy (ALY) to Underperform; Risk/Reward From Recent Capital Restructuring
ALY Hot Sheet
Rating Summary:0 Buy, 2 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 7 | New: 23
Wachovia downgrades Allis-Chalmers Energy, Inc. (NYSE: ALY) to Underperform; Valuation Range: $1.75 to $2.
Wachovia analyst says, "We see up to 36% downside risk from current levels after updating our estimates to reflect ALY's recently completed capital restructuring, and weaker U.S. earnings power outlook (61% of 2008 EBITDA)...LRP Could, Eventually, Turn Sour Dilution Sweet…An energy-focused, private equity firm, LRP makes investments of $25-150MM; has $3.5B under management, and $3.0B in its fund family; and enjoys a positive reputation. Exited companies include Natco Group, Eastern Drilling, and NQL Energy Services, which were ultimately acquired by Cameron International, Seadrill, and National Oilwell Varco. We think LRP's involvement, while likely to take time to bear fruit (1-3 yrs?), has enhanced ALY's potential to create value, especially abroad...But, Medium-Term, We See More Pain. We're cutting our '10E EPS by $0.15 on the share issuance net of interest savings (-$0.04); and a weaker view for ALY's U.S. businesses (-$0.11), given the (1) evidence on the breadth/degree of the capacity glut; and (2) premature bottoming in the rig count (likely to preclude any pricing traction), both of which bode worst for low-end players like ALY."
To see more analyst ratings on ALY Click Here.
Allis-Chalmers Energy Inc. (Allis-Chalmers) provides services and equipment to oil and natural gas exploration and production companies throughout the United States, including Texas, Oklahoma, Louisiana, Arkansas, Pennsylvania, New Mexico, Colorado, offshore in the Gulf of Mexico, and internationally.
Wachovia analyst says, "We see up to 36% downside risk from current levels after updating our estimates to reflect ALY's recently completed capital restructuring, and weaker U.S. earnings power outlook (61% of 2008 EBITDA)...LRP Could, Eventually, Turn Sour Dilution Sweet…An energy-focused, private equity firm, LRP makes investments of $25-150MM; has $3.5B under management, and $3.0B in its fund family; and enjoys a positive reputation. Exited companies include Natco Group, Eastern Drilling, and NQL Energy Services, which were ultimately acquired by Cameron International, Seadrill, and National Oilwell Varco. We think LRP's involvement, while likely to take time to bear fruit (1-3 yrs?), has enhanced ALY's potential to create value, especially abroad...But, Medium-Term, We See More Pain. We're cutting our '10E EPS by $0.15 on the share issuance net of interest savings (-$0.04); and a weaker view for ALY's U.S. businesses (-$0.11), given the (1) evidence on the breadth/degree of the capacity glut; and (2) premature bottoming in the rig count (likely to preclude any pricing traction), both of which bode worst for low-end players like ALY."
To see more analyst ratings on ALY Click Here.
Allis-Chalmers Energy Inc. (Allis-Chalmers) provides services and equipment to oil and natural gas exploration and production companies throughout the United States, including Texas, Oklahoma, Louisiana, Arkansas, Pennsylvania, New Mexico, Colorado, offshore in the Gulf of Mexico, and internationally.
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