After US production hit another all time high this week and we got a big bounce in Rig Count yet the stock was down (someone please explain to me how that could possibly make sense…I digress). The fact that many of these oil service names trade at such deep discounts to Book Value is beyond me. (AVE.V has a Tangible BV of 0.67/share and FMV adjusted BV of 1.02/share) Digging in;
 

BHI Rig Count

At the end of the day Aveda is a Rig mover, I don’t care about Brent/WTI/Canadian Western Select oil price and the relative pricing differences, I care about 1 number. BHI RIG COUNT. (Maybe a bit of a simplification but my point holds).

Rig Count Up 26 Rigs this week to 791. People don’t realize how far this number has bounced back and the runway it still has to move.
 
Take that 791 Rig Count number. YoY up 200 or 33.84%, QoQ up 53 or 7.18% with the rolling 1 and 3 month Rig Count Averages going positive for the last 5 weeks. This is the most rigs that was added in a single week since the week of January 27, 2017 or over a year ago!
 
We have such a long runway to keep adding rigs. We peaked the weak of October 10, 2014 at 1609 Rig Count which is 2x as many rigs as today.
 

Application for Aveda

In Q4 2017 Rig Count Averaged 743 Rigs which was up 57.69% YoY and for Q1 2018 Rig Count is already averaging 760 up 2.22% QoQ as the operating environment continues to improve.
 
Add to the Rig count growth, Ronnie and his team continue to scope of market share. Revenue/Rig Last 4 Qs (Q3-70,462 up 41.30%, Q2-72,521 up 171.55%, Q1-68,870 up 157.19%, Q4-66,656 up 116.23%).
 
If I only assume a continued increase of 10.21% growth in YoY Revenue/Rig that gets me to a revenue figure of 54.5M+ in Q4 revenues which is even above analyst’s consensus.
 
 
Greatest Value in the market today. As a result still my largest position.

I will leave you with a fun fact, Aveda through the first 9 months has put up revenue growth YoY of 250% when Rig Count is up 72% over that same time period. So Aveda is growing 3.5x the sector growth rate. MARKET SHARE GAINS!!!


LONG