A Seismic Mapper On A RollBy
With oil prices skidding after OPEC's refusal to curb production, oil stocks have been in the dumps so far this year. So why is money manager Graham Tanaka loading up on shares of energy-related Seitel? The company develops proprietary seismic surveys and data, which it sells to oil and gas companies. The stock, now at 21, is "bound to hit the 50s in two years," insists Tanaka.
Indeed, the stock has been on quite a roll. It climbed from 8 in late September to 26 on Mar. 24. It has since slipped, following Seitel's disclosure that 21 corporate insiders would sell 536,065 common shares through the exercise of warrants and options.
But neither the dismal oil outlook nor insider selling have turned off Tanaka, president and chief investment officer of Tanaka Capital Management. He says "the seismic business is exploding--particularly the demand for Seitel's 2-D (two-dimensional) and 3-D seismic surveys." Demand for such surveys, which depict the earth's subsurface, now exceeds the industry's capacity to create data. Seitel has one of the largest U.S. seismic databases--more than 1 million miles.
Analyst Ronald Lewison of Kemper Securities notes that Seitel's move last year to go into partnership with 25 oil and gas companies in exploration and production "bears watching" because it could "dominate Seitel's cash flow, earnings, and assets."
For 1995, Tanaka sees robust earnings of $2 and cash flow of $6 a share, up from an estimated 1994 net of $1.15 and cash flow of $4.75. In 1993, Seitel earned 92 on cash flow of $3.71.
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