The Microcap Speculator submits: I bought a little Petrol Industries (PTLD) today. Very small, thinly traded stocks like this usually trade in a pretty broad daily range. I like to place limit orders at the bottom of that range, even if it means I will get partial fills and will have to build a position over several days.
Petrol Industries used to be in the exploration & production business, but has recently restructured and now provides oilfield services in the Texas and Louisiana area. Here is management's description of the new focus:
"Petrol is in the process of expanding its equipment line with the acquisition of an additional drilling rig, pulling units, trucks and various downhole tools and parts. With the completion of the acquisition, Petrol Industries will be one of the largest contract service providers in the area.
Management was quoted as saying, "Due to the demand and higher energy prices, there is a severe shortage of oilfield equipment, pulling units and drilling rigs along with a lack of skilled labor. Many current lease owners lack the equipment and skilled professionals necessary to service their wells, therefore, are seeking independent contractors. Petrol Industries has had a reputation of having the expertise to handle such demands and the current market conditions are in a position to capitalize on it. By focusing on oilfield services, the Company is line to achieve a steady flow of revenue immediately."
Petrol just signed its first major services contract, which should pull in at least $2 million annually. That revenue is pretty significant, given that PTLD only has roughly 3.3 million shares outstanding (roughly 500,000 of which are restricted). Even better, in the same press release, management said the contract is only the first in a series to be announced.
This is obviously a risky stock. If Petrol Industries is not the smallest company I have ever owned, it is close. The new business is largely unproven, and I don't know for sure whether any of the company's assets took a hit from hurricane Katrina. Still, I think the risk/reward is favorable at these levels and can be reduced by accumulating it in a disciplined, patient manner.
Disclosure: I am long PTLD.OB. Not a recommendation to buy or sell any security -- for educational/informational use only.