Boots & Coots International Well Control (WEL – AMEX)

Dear Bottarelli Research Member,

This week we are going to keep it short and simple, as we’ve had plenty of great trades coming to fruition. But I can promise you, things are just heating up – so maintain all of your current small-cap positions.

Before I get started on today’s pick, I’d like to comment on the recent actions of the US dollar. In short, I’m not convinced that the falling dollar is good at all, and I would be using any bounces in the dollar to be loading up on the Canadian Energy trusts profiled in the alert titled “3 Canadian Energy Trusts” dated Friday, February 16^th, 2007. There has been much talk about these names being taken over by the private sector and moving to a different “tax friendly” place – possibly right here in the good old USA. The reason I like all of this talk is that it’ll push these babies higher, making them a great cushion against the falling dollar.

It’s truly hard for me to believe that the Canadian government would allow such a blunder. Why in the world would you tax companies that bring in huge amounts of cash – and in the process make the government money hand-over-fist? I urge you to take advantage of the three names that I profiled: Provident Energy Trust (PVX – NYSE), Canetic Resources Trust (CNE – NYSE), and Advantage Energy Income Fund (AAV – NYSE). Each trust will put nice yields into your pocket, as well as some nice and easy capitol gains into your account.

Now on to this week’s new play…

I’m going to give you a stock that I believe fits rather nicely in today’s oil-influenced market. What these guys do is truly amazing: Putting out and restoring oil well fires and other hazards. What really got me excited about this company was their latest earnings report. Holy smoke, talk about making some cash! I’ll leave all the financial specifics for Bryan to tell you, but this week’s play is a small company called Boots & Coots International Well Control (WEL – AMEX). The stock has been retracting here, and I want to take advantage of this momentary down move while we can. So let’s nibble away here under $2.50. Let me turn things over to Bryan and he’ll give you the full low-down on this unique pick.

Sincerely,

“2006 Was a True Milestone for Boots & Coots”

- Chief Executive Officer Jerry Winchester

As Mark mentioned above, Boots & Coots International Well Control provides a suite of damage-control services to onshore and offshore oil and gas exploration and development companies across the globe. In fact, they have operations in North and South America, North and West Africa, and the Middle East. The company has two primary business segments: Well Intervention and Well Response.

Well Intervention and Well Response offers well drilling, well completion, abandonment, risk assessment, loss mitigation, and engineering consultation services. It also includes specialized drill engineering and inspection services – as well as a “critical event response” segment which includes firefighting, crimping tools, and deluge safety systems. In short, these guys are the plankton of the oil industry – doing all of the little things and dirty work necessary to keep the world’s oil wells operational and out of harm’s way.

To give you an idea of just how prominent they are, Boots & Coots were the guys in Kuwait leading the effort to put out the hundreds of oil well fires set by Iraqi troops in the first Gulf War. This work cemented WEL’s reputation as the premiere oil well firefighting company in the world. They were also selected by the US Department of Defense for control and restoration of Iraq’s southern oilfields in March of 2003. Below is a photograph of WEL performing their duties in Iraq back in 2003.

So when it comes to servicing and repairing the world’s oil wells, WEL is the best that your investment dollars can buy. That’s why the shares are such a great buy for under $2.50 per share. And if you look at their latest earnings, the investment opportunity gets even better.

Boots & Coots just reported net income of $4.5 million ($0.07 per share) for the fourth quarter. Compare this to the net income of $1.2 million ($0.04 per share) they reported for the same period in 2005, and you can see that the company is starting to grow their income at a solid clip. For the full year (which ended December 31st, 2006), WEL reported net income of $11.8 million ($0.21 per share) compared to $1.9 million ($0.06 per share) in 2005. All you need to do is follow the income trends and you’ll see that this stock is about to explode. In fact, just listen to Chief Executive Officer Jerry Winchester:

“2006 was a true milestone for Boots & Coots. In 2005, our response business accounted for more than 50% of our revenue mix. In 2006 it accounted for less than 22%, thanks to our acquired hydraulic workover/snubbing services and our growing Safeguard business. In 2006 we exceeded $100 million in revenues on a pro forma basis. Pro forma revenues were $105.6 million, 52% higher than 2005 pro forma revenues, with Well Intervention growing 58% and Response growing 30%. Growth in both segments reflects our strategy of gaining a geographic presence and then expanding that presence with additional service offerings. Our successes in Algeria and more recently in Libya are both great examples of this strategy, and we plan to use those as blueprints to expand our presence in other countries as well as here at home.”

The reason we’re recommending the shares right now is because the second quarter is historically a strong quarter for WEL in the Gulf of Mexico. We expect that WEL will receive a higher degree of callout work in the following months – which will only help their numbers get better and better. So let’s use this week’s down-tick to add this growing company to our small-cap portfolio. After all, it only takes one oil well fire to pop this stock to the upside – and given the ongoing tensions in the Middle East, it’s sad to admit, but another flare-up could happen at anytime. Let’s buy and hold WEL at current levels ahead of the crowd.

PLAY: Buy shares of Boots & Coots International Well Control (WEL – AMEX) at or under $2.30, good for the week. To limit your risk, place a protective stop loss at $1.10.

Sincerely,