Thursday, February 15, 2007

Baker Hughes Stock Option Confusion

Baker Hughes Incorporated (NYSE:BHI) reported much improved financial results. After swallowing substantial settlements with SEC and Justice Q4 earnings were $1.02 @ share compared to $0.75 for last years comparable. Good work.

The stock has been volatile with some signs of recent resurgence. The stock is capable of sharp sell offs presumably as it trades as a proxy for oil futures.

The current winter drilling season in North America is almost over. But Chad C. Deaton, Baker Hughes chairman and chief executive officer offered this comment in the press release

“With several weeks remaining in the North American winter, the near term activity outlook for gas-directed drilling remains uncertain. We are encouraged by recent strong withdrawals from gas storage and remain convinced that the rebalancing of the North American natural gas market, if required, can happen relatively quickly."

Basically the boss is issuing warning orders to investors to buckle up and not lose faith. The stock will run fast when it turns. But look at insider trading as reported by yahoo finance. No insider purchases in the past six months. There have been a large number of bizarre looking non open market dispositions in the past two months. The dispositions dating back to Jan 25, 2007 are nickel and dime but wide spread.

In the two month time frame immediately preceding a large number of non open market acquisitions also occurred in substantial quantities. Almost certainly some mechanism relating to stock option grants kicked in (I hope). The question becomes are insiders really buying and hiding behind legalisms? If so whats with all the dispositions? Strange case of painting the tape while we all worry about how cold it is.