James Altucher Bullish on Bronco Drilling (BRNC)

James Altucher is looking for a way to play weakness in the Oil sector and is reporting in the Wall Street Journal that Bronco Drilling

is the way to go. He noted that, “With all of the various issues in the Gulf of Mexico since the Deepwater Horizon explosion and virtual ban on domestic offshore drilling, it’s a good time to look at the land drillers on both on the natural gas and oil fronts.” He said that Bronco Drilling is “dirt cheap” on a relative peer basis, saying that it is sitting near all-time lows due to a botched takeover with Allis-Chalmers Energy (

). They had valued the stock at $18 per share. The merger was broken when Wexford Capital, which owns 10%+ of BRNC, made the case for the company being worth $30; this was able to stem the merger. Altucher noted, “After peaking in July of 2008, the domestic rig market has been in a 2-year bear market. However, recent data out of Schlumberger’s

domestic rig count has showed a steady increase in domestic M-I rigs – a notable increase from 1,300 in January to just under 1,800 now.” “With issues in the Gulf of Mexico, and a virtual freeze with offshore drilling, domestic day-rates for oil and natural gas providers are going to spike. Even assuming $4 natural gas and $15,000 day rates, Bronco Drilling EBITDA could be $50 million in 2011 on the low end, valuing the company anywhere from $300million to $500 million.” Interesting to note: Carlos Slim personally owns 15% of the company, and has a joint venture with Carso Infraestructura y Construccion to provide oil and gas drilling and work-over services in Mexico and Latin America through a wholly-owned subsidiary. Bronco Drilling is higher by 6.89%, currently trading at $3.88.