DMC Global (BOOM 60.61, +9.81, +19.31%) is booming higher today after it sharply raised
guidance for Q1 revenue to approx. $100 mln, up from prior guidance of $82-85
mln. BOOM is an industrial company that has two business segments:
DynaEnergetics (73% of 2018 revenue) and NobelClad (27% of revenue).
DynaEnergetics makes explosive components used by oil & gas exploration
companies for the perforation of oil & gas wells. NobelClad makes explosion-welded clad metal plates
for use in the construction of corrosion resistant industrial processing
The better-than-expected results in Q1 were mostly due to upside and strong sequential growth at the DynaEnergetics segment, which now is expected to report sales of approximately $80 mln, up from prior guidance of $64-67 mln. Sales at NobelClad are expected to be approximately $20 mln, above prior guidance of $18 mln.
BOOM says that, as Q1 progressed, DynaEnergetics saw a sharp increase in demand for its advanced well perforating systems. This growth coincided with improved industry conditions, including a 32% Q1 increase in US crude prices, and an upturn in domestic well completion activity. Overall, BOOM is encouraged by the strong start to 2019 at both of its business segments. BOOM did not provide full year guidance, but it will when it reports full Q1 results on April 25 after the close.
As you can see, demand for the majority of its products depends substantially on spending by oil & gas exploration companies. This upside guidance was nice to see as it follows a Q4 which saw soft oil prices and sluggish spending patterns from exploration companies.
An advantage for BOOM is that its DynaStage product is a unique system when compared to other pre-loaded perforating guns that recently have entered the market. A big difference is BOOM's safe initiating system, which combines a detonator, microelectronics, and an addressable switch, all in a compact, wireless unit that can be installed in seconds. Customers have reported significant improvements in well-site efficiency due to the simplicity of the arming and gun-string assembly process.
Also, because the system is intrinsically safe, customers can surface test the entire gun string, including all switches and detonators, before deploying the string down hole. This has enabled an industry-leading reliability rate that exceeds 99.9%. Looking ahead, DynaEnergetics recently completed successful field trials on its new DS Trinity system, which it sees as a key addition to the DynaStage family. The three shaped charges in DS Trinity are aligned on a single plane, and at 8-inches in length, the system is up to 3.5x shorter than conventional perforating guns. DynaEnergetics intends to release a 4-inch diameter version of DS Trinity in Q2, and a 3.5 inch diameter version shortly thereafter.
In sum, this is just one company, but it sounds like Q1 showed a significant bump in oil & gas exploration activity. We would look for strong reports as well from others that support oilfield service companies. After flat-lining for months, the stock has sprung to new 52-week highs as the oil & gas market has been heating up.
- OUR VIEW
- LEARNING CENTER