Omni Energy Services Corp. (OMNI), an oil and gas exploration company said last week it has plans to purchase Charles Holston Inc., an environmental services company, for $23 million. Omni will use cash and promissory notes for the purchase. The deal is expected to close in the first quarter of 2007.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2006_12_27_OMNI.mp3.
The services Charles Holston provides include the transportation of non-hazardous oil and gas drilling byproducts, site cleaning and waste disposal. Omni representatives say the environmental company’s pre-tax earnings will be around $5 million in 2006 on sales of $28 million.
James C. Eckert, OMNI’s CEO, made the public comment, “The proposed acquisition of CHI is an exciting continuation of OMNI’s execution of its business model to facilitate expansion of its core businesses through a combination of organic growth and strategic acquisitions.”
Eckert went on to say, “We believe the proposed acquisition of CHI will be immediately accretive to earnings, offer us further organic and strategic growth opportunities, and afford us synergies through consolidation of facilities and services. The CHI acquisition also brings an excellent management team with a well-seasoned employee base. We also believe the anticipated integration of CHI with our core environmental cleaning and equipment rental business units will continue to position each business segment with further growth and expansion opportunities. The continuing execution of OMNI’s business model to grow through a well orchestrated combination of organic growth and carefully planned acquisitions and integration should continue to translate into increased shareholder value.”
Awarded Three-Year Contract:
In a public statement OMNI announced 19 December Trussco, its environmental cleaning unit, was awarded a three-year contract by a major exploration and production company. The scope of the contract will include the cleaning of onshore and offshore tank and vessels along the American Gulf of Mexico coast.
Eckert commented on this news saying in a public statement, “We are very excited about the award of this new contract. As we extend our environmental cleaning operations from the offshore and dockside markets into available land-based oil and gas operations in Texas, Oklahoma and the Rocky Mountains, we hope to capitalize on Trussco’s success as a leading provider of environmental cleaning services for the oil and gas industry.”
Company Profile:
OMNI Energy Services Corp. operates an oilfield service company in the United States. Its two divisions are: Seismic Drilling and Environmental Services. The Seismic Drilling division works in marshy, swampy, shallow water, and contiguous dry land areas along the American Gulf Coast. The company owns and operates seismic drilling equipment to provide seismic drilling and related services.
The Environmental division provides offshore hazardous and non-hazardous oilfield waste management and environmental cleaning services. The company also has a fleet of revenue generating and oilfield related rental equipment. The company, formerly known as OMNI Drilling Corporation, was founded in 1987 and is headquartered in Carencro, Louisiana.
Competitors:
Competitors for OMNI include: Clean Harbors Inc. (CLHB), Petroleum Geo Services ASA (PGS), and Veritas DGC Inc. (VTS).
Potential Trade:
With the bullishness of oil and OMNI’s positioning, OMNI Energy Services is looking bullish and a covered calls strategy appears attractive. The following covered calls trade scenarios were discovered using PowerOptions’ powerful web based search tools. PowerOptions quickly provides the data needed to make clear and informed decisions.
| Covered Call — OMNI Energy Services Corp. (OMNI) $ 9.75 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Inch. |
% If Asgnd |
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| QOCAB | 07 JAN 10.00 | $0.55 | 5.60% | 6.00% | 8.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The OMNI covered call option provides excellent downside protection of 5.6%; especially considering the option is expiring in 24 calendar days. The potential profit on this trade if the stock remains unchanged is 6.00%. If the stock rises above its $10 strike price, the potential profit is 8.00%.
For more information about how to identify and research great option trades, visit the PowerOptions website. PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades and you will find the data you need to make quick, clear, and informed decisions. With PowerOptions tools, you can trade knowing you have found the best investment for your risk/reward profile. PowerOptions provides a toll-free number (1-877-992-7971) for customer support (PowerOptions’s customer support is second to none in the industry) for answering customer questions.
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[tags]Charles Holston, James C. Eckert, Trussco, Gulf of Mexico, Texas, Oklahoma, Rocky Mountains, United States, Carencro, Louisiana, CLHB, Clean Harbor Inc, OMNI, OMNI Energy Services Corp., VTS, Veritas DGC Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options[/tags]
Jim Mack
What happened with the December Jan 10 Covered Call OMNI trade recommendation? Is there a strategy for salvaging a covered call, or a Bull Call Spread?
admin Post author
Right now, OMNI has dropped from $9.75 to $8.00, but it appears to be going up from the recent decline. This decline had nothing to do with bad news on the stock, it simply followed the trend of oil as prices fell off due to the start of the mild winter and other factors.
Using the Position Analysis tool on PowerOptions, we see that the OMNI position currently has a loss of -13.6%. The Position Analysis tool gives us some Roll Out Opportunities that might yield a positive return:
Buy to close QOCAB JAN 10 call.
Sell to Open QOCEB MAY 10 call for $0.65.
This offers an adjusted net credit of $1.15 and a 16.3% return if assigned in May. There is a 47.8% theoretical probability that the stock will be assigned at May expiration.
-OR-
Buy to close the QOCAB JAN 10 call.
Sell to Open QOCHU AUG 7.5 call for $1.90.
This offers an adjusted net credit of $2.40 and a 2.0% return if assigned in August. There is a 66.4% theoretical probability that the stock will be assigned at August expiration.
If you feel that OMNI will not rise above $10.00 by May expiration, you benefit from the second roll out opportunity.
For the Bull Call Debit spread, it may be best to close the position now to minimize the losses that were taken. If you still feel bullish on OMNI, you could attempt to trade the February spread, or try to recoup the loss trading a different stock.