Our picks in the seismic sector continue to perform well, with Petroleum Geo-Services ASA (PGS) (NYSE: PGS) hitting a new yearly high today. Seitel, Inc. (SELA) will be out with earnings early this evening. I expect an excellent report and solid guidance.
Interestingly, Veritas DGC Inc. (VTS) had some interesting comments in their earnings release from about a week ago. Chairman and CEO Thierry Pilenko, commented:
"Increasing exploration activity combined with our typically strong second quarter provided the foundation for Veritas to achieve all-time quarterly records for revenue, pre-tax income and backlog. Our recent vintage multi-client seismic data continued to perform exceptionally well as our customers increasingly turn their interest to accessing the latest available information and technology in key basins of interest. Sustained reserves replacement concerns combined with strong worldwide demand for hydrocarbons is continuing to fuel a resurgence in exploration activity. This is creating robust market conditions for seismic information and services and extending our visibility well into fiscal year 2007."
The implication is that the seismic stocks in general should have excellent financial visibility for at least another year. This mitigates alot of the risk in these stocks and is the main reason we continue to hold on. The valuations of course are getting a bit high, but there are few places in the market where you can get this type of visibility and growth potential. The valuations can be justified, of course, if one expects oil to remain over $60 for quite some time. I´m especially bullish on SELA.ob at high oil prices, because of its leading position in the Canadian market, one of the hottest oil markets around.