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November 11, 2005 Stock Pick: Superior Well Services, Inc. (SWSI)

Stock Price: $22.33

Superior Well Services, Inc. is an oilfield services company operating in many of the oil and natural gas producing regions of the United States. The Company provides a range of well site solutions to oil and natural gas companies, primarily technical pumping services and down-hole surveying services.

Superior Well Services is headquartered in one of the hottest natural gas markets in the United States within Indiana County Pennsylvania. The company had its IPO on July 29th of this year at $16.25, and since has risen to a high of $26.63 before settling at its current point. We have reason to believe that SWSI is relatively unknown when compared to other oil and natural gas operators.

Companies are beginning to have to drill more wells just to try to produce the same amount of oil and gas. This situation bodes well for Superior Well Services with its fleet of 288 heavy, industrial trucks providing services from boosting well production to monitoring wells to troubleshooting problems. The company's three engineer founders are replicating the model standard set by Halliburton. The founders worked for Halliburton for a combined 60 years.

The company offers the same service technology at a lower price. Net income for the second quarter was $2.6 million, adjusted for pro forma income tax expense. Revenue was $29.6 million. For the most recent quarter, revenue came in at a record $34.9 million. The company reported a net loss of $4.6 million; however, this was because of an $8.6 million non-cash adjustment to establish deferred taxes to create a better tax structure. We expect the company to return to profitability next quarter.

Speaking from experience of living in Indiana, PA where the company is headquarted, there are plenty of rural gas wells of which to service. This area is most likely the best to start from and expand outwards. The company has expanded outwards to first Alabama in 2000, then Oklahoma, and now into Utah. According to the CEO, Superior has only a 1% market share in the U.S. market within their space. There is much room to expand.

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