Bronco Drilling: Poised for Future Growth?

| About: Bronco Drilling (BRNC)
With oil on everyone’s mind right now, there aren't many stocks that will fly under the radar of most Wall Street participants.
However, there is one Oklahoma oil driller that still has plenty of room to run and recently closed out the fourth quarter with stellar numbers. Bronco Drilling (NASDAQ:BRNC) is a provider of contract land drilling and work-over services to oil and natural gas exploration and production companies throughout the United States and Mexico. More specifically, BRNC is mainly focused on the Bakken, Eagle Ford and Marcellus Shale territories. Currently, Bronco Drilling has 22 operating rigs, of which most are located in the Bakken Shale area.
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Utilization for the company's drilling fleet was 96% for the month of January compared to 96% for the month of December and 96% for the fourth quarter of 2010. The company had an average of 24 marketed drilling rigs in January compared to 24 in December and 24 for the fourth quarter of 2010. The average day-rate on operating drilling rigs as of January 31, 2011, was $17,529 compared to $17,362 as of December 31, 2010, and $17,296 for the fourth quarter of 2010.
CEO Frank Harrison recently commented on his most recent conference call that 90% of those rigs are solely leveraged to the oil/liquid plays. This is in part because of natural gas prices still being anemic and the industry trend toward more oil drilling over gas. Mr. Harrison said that “oil remains strong – perhaps too strong." There were five rigs operating in the Haynesville area but were recently moved out so that they could get to more oil/liquid plays. Also, Bronco Drilling has a future catalyst, which is the Stallion Series rig – a new generation rig implemented with all key technologies and drilling innovation. Bronco is set to deliver two of these Stallion rigs in the first and/or second quarter of 2011. With the cost around $1 million, Harrison feels that payback to the bottom line is very short.
Revenues for the fourth quarter of 2010 were $37.3 million compared to $34.8 million for the third quarter of 2010 and $15.9 million for the fourth quarter of 2009. Net loss for the fourth quarter of 2010 was $2.5 million compared to a net loss of $18.8 million for the previous quarter and a net loss of $6.1 million for the fourth quarter of 2009. Revenues for the year ended December 31, 2010, were $124.4 million compared to $102.9 million for the year ended 2009. Bronco Drilling generated Adjusted EBITDA of $19.0 million in 2010 compared to Adjusted EBITDA of $10.9 million for the previous year.

"I am very proud of the company's accomplishments in 2010. We were able to reduce our net debt position from $42.4 million to $0 by year-end all while increasing key metrics of revenue days and Adjusted EBITDA by 31% and 74%, respectively, over 2009. We believe the strong operating performance coupled with our healthy balance sheet provides us with a great deal of flexibility as we implement new growth strategies. We have made it a priority as we move forward with our growth plans to maximize the risk reward tradeoff in these projects. We believe this will create significant value for shareholders while maintaining a prudent financial risk profile," said Harrison.

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From a technical perspective, BRNC is currently at a 2.5 year high - $9.81. However, this breakout began around $7.00 and all of my indicators are showing signs of strengthening as accumulation and price action have been trending upward. I am looking for BRNC to test the $13.00 area over the next few months and believe that this Oklahoma driller is definitely poised for future growth.
Disclosure: I am long BRNC.