T-3 Energy Services, Inc. (Nasdaq: TTES)
Houston, Texas
http://www.t3energyservices.com
 
52-week low / high: $18.72 / $53.41
Shares Outstanding: 12.21 million
Market Capitalization: $546 million

Finding a company that is a diamond in the rough of today’s market can be difficult. Enter T-3 Energy Services, Inc. (Nasdaq: TTES). In the face of an ugly market marked by whipsaw volatility, the company’s technicals and fundamentals have held strong.

After the market peaked in October 2007 only to begin tumbling downward, T-3 Energy has since continued its assent upward and beaten the S&P 500 by 30%.

T-3 Energy manufactures and repairs equipment used in the drilling and completion of new and existing oil and gas wells, and for the production and transportation of oil and gas. The company has three product lines: pressure and flow control, wellhead and pipeline. Since 2003, T-3 Energy has introduced 86 new products.  It markets its products to drilling contractors, exploration and production companies and pipeline companies. Demand for its products stems from exploration and development activity levels, which in turn are directly related to current and anticipated oil and gas prices. As oil prices have sky rocketed and the crusade to quench America’s thirst for oil has ramped up, the small cap has continually seen robust revenues.

During the third quarter ended Sept. 30, 2007 (the latest quarter for which data was available), the Houston, Texas-based company saw revenues rise 20% to $53.2 million from $44.2 million for the same period in 2006, while revenues for the first nine months of 2007 increased 30% to $153.1 million from $117.9 million for the same period in 2006.

For the third quarter, net income shot up 34.5% to $7.22 million, or $0.58 per share, from $5.37, or $0.48 per share, that T-3 Energy recorded in 2006. For the nine months ended Sept. 30, 2007, the company reported net income of $19.96 million, or $1.68 per share, a 46.7% increase over the $13.61 million, or $1.25 per share earned in the first nine months of 2006.  

And those robust top and bottom lines don’t look like they’re materially retarding anytime soon.

Looking ahead, three analysts surveyed by Thomson Financial are projecting revenues to grow at a hefty clip of 42% in fiscal 2008, compared with competitors whose growth expectations are between 10% and 14% for 2008.

The factors behind that seemingly aggressive growth assumption are rooted in the company’s strategy. T-3 has begun to take steps to complement its organic growth by pursuing an acquisition strategy to broaden its markets and product offerings. In October of 2007, T-3 Energy acquired Energy Equipment Corporation and HP&T Products, Inc., which will expand the company’s product offerings for surface and subsea applications. Last month, the company also acquired Pinnacle Wellhead, Inc., expanding its services for wellhead production products. It opened a new wellhead service facility in Grand Junction, Colorado in January.

If there’s a recession in the future, the company should flourish because demand for energy isn’t vanishing anytime soon. A sluggish U.S. economy may cause oil prices to slide marginally, but not enough to materially knock down revenues. Economists from Bear Stearns are forecasting a decline in oil prices, but not lower than $75 per barrel. 

Bottom line: as the market thrashes about and the energy drought lives on, grab a straw and take a sip out of the oasis that is T-3 Energy.

Note: T-3 Energy Services, Inc. (Nasdaq: TTES) is on the “Watch List” of Growth Report, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, T-3 Energy displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Growth Report portfolio at a later date.

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