Looking to pay off $10.4 million in secured debts, Varco International Inc. on Tuesday launched a long-planned $20-million offering of 10% convertible debentures.
Most firms in the oil services industry have been in a slump since 1984 and face the prospect of yet another poor year before there is enough new drilling to begin boosting sales and profits.
But T. Wayne Whipple, an oil service analyst with Merrill Lynch in New York, said he expects that Varco's debentures will sell well because the offer is being made when there is "a pretty good environment" for oil services companies' stock on Wall Street. Many analysts believe the recent rise in oil stock prices was caused by investors who believe that crude oil prices will rise above the $20-per-barrel mark within the next year.
Stock prices now have leveled off, but Whipple believes that a market exists for Varco's debt, even though sales of the Orange-headquartered company have been declining for several years.