Global Economic Picture Slanted in Bolt Technology's Favor

by: Zachary Scheidt

Rising demand for oil and gas is not surprising anyone. But as the world population grows and a major portion of the population is brought into the industrialized age, the severity of the issue is becoming hard to imagine. The number of barrels of oil per capita used in the United States is many times higher than that of the population of China and India, and yet if those populations simply narrow the gap a small amount, it could place incredible stress on an already taxed infrastructure.

While many reputable companies are drilling for oil on both land and sea, new oil fields need to be found as it is becoming more and more difficult for supply to keep up with demand. While not actively involved in the drilling process, Bolt Technology (BTJ) has a key part in the process by selling seismic equipment to used to chart the ocean floor and determine where exploration should take place. The company is fairly small with only a $251m market cap, but it sells products to large exploration companies and has grown earnings at triple digits for the last 4 years.

Specifically, the company sells giant air guns that are towed behind exploration ships. The guns emit a percussion which sends sound waves off the floor of the ocean and the ship measures the return pattern which gives it a detailed picture of the ocean floor. BTJ sells each gun for a price between $7,000 and 26,000 depending on the specific model. While not broken out in its earnings release, sales from replacement parts make up a large portion of sales, giving the company a reliable income stream that is separate from their ability to sell new equipment. The company shipped 1,300 new “seismic energy sources” to 30 vessels last year.

In July, Bolt acquired a company called Real Time Systems (RTS) which helps customers synchronize up to 96 air guns towed behind a single exploration vessel. The hope is that this acquisition will allow the company to sell even more guns to existing customers who will then be able to make more efficient use of their ships. That would obviously increase the revenue stream from replacement costs from all the additional equipment out there. According to IBD, most seismic exploration ships are operating at full capacity, but there are more ships expected to come online in the near future.

A falling dollar should not be a significant problem for the company. Quite the opposite in fact because the majority of the company’s sales are to non-US customers. That allows the revenue stream to either be denominated in currencies that are stronger than BTJ’s home currency, or it makes its products more attractive to foreign customers who can buy dollars for their purchases at more attractive rates. With global currency rates in their favor, and energy prices continuing to rise, the global economic picture appears to be slanted in BTJ’s favor.

Disclosure: Author does not have a position in BTJ