Editor's Note: This special edition of Bottom of the Barrel looks at a stock that's been the focal point of a lot of daytrading conversation as a result of the Iraqi conflict.

Boots & Coots

(WEL)

, a Houston-based energy services company, has become the darling of daytraders and war-watchers alike. Along with

Halliburton

(HAL) - Get Report

and

Superior Energy

(SPN)

, Boots & Coots has been selected to assist in the control of Iraqi oil-well fires.

Although some opportunists suggest that this dollar stock is selling at fire-sale prices, a closer look at the company indicates that it could just as easily go up in flames.

Bad Checks

Boots & Coots has a storied history of putting out well fires and helping companies around the world with critical well-control situations. Yet, before the war in Iraq, all investors could think about was the critical nature of Boots & Coots' financing.

As late as mid-February, the company updated investors on the fact that it's in default of lending covenants with its primary financier, Checkpoint Business. Boots & Coots is working with Checkpoint to cure the default, but there's no guarantee it will be able to do so before Checkpoint acts to protect its interests.

In fact, Checkpoint offered Boots & Coots an alternative to involuntary action: voluntary bankruptcy. "Boots & Coots announced today that Checkpoint had presented a proposal to restructure the Company to its board of directors," noted a Feb. 18 press release from Boots & Coots. "This proposal would involve a voluntary Chapter 11 bankruptcy filing by Boots & Coots and the cancellation of Boots & Coots common equity as part of the bankruptcy process."

Instead of working quickly to secure shareholders' interests, Boots & Coots allowed the issue to smolder. "The board of directors of Boots & Coots is considering the proposal from Checkpoint and possible alternatives to it, but has not made any decision about the proposal as of the date of this release," the company said.

In other words, as of mid-February, the management of the company was considering declaring its own stock -- then trading below a buck -- worthless. On Feb. 18, Boots & Coots shares closed at 34 cents. In fact, over the past year, the stock has traded as low as 6 cents as investors seemed convinced that all that was left was a final puff of smoke.

Saddam Rally?

Although the company continues to struggle financially, many speculators think the Iraqi war could bring Boots & Coots back to life. However, a closer look at the current situation may extinguish any hopes that this well-firefighting concern will be saved by its ability to put out oil-well fires.

Right now, there may be a few dozen fires in Iraqi oilfields. In contrast, there were nearly 700 oilfield fires in Kuwait during the first Gulf War. While Halliburton, the primary contractor for the firefighting job, is likely to assign much of the firefighting work to Boots & Coots, it isn't clear how much work there will be. Plus, although Boots & Coots provides other well-control services that could be used in Iraq, Halliburton probably won't give more work to Boots & Coots when its own Kellogg, Brown & Root subsidiary can provide many of the same services.

Additional fires may certainly happen, but with coalition forces quickly gaining control of oilfields, new fires would not likely be widespread. One possible service that Boots & Coots might be able to provide is helping to extinguish fires that may be set in oil canals around Baghdad. However, it's not clear what kind of role the company could play in a hostile environment.

Playing With Fire

There's little question that daytraders have tried to capitalize on the news flows and volatility in Boots & Coots. Just look at the volume: Before talk of the possible benefits from the war, a good day in Boots & Coots was 250,000 shares. Now, the average daily volume over the past year is reported at more than 14 million shares, which includes last Thursday, when the stock traded more than 127 million shares. Over the past 10 trading sessions, the stock has traded an average of 61 million shares -- not bad for a company with only 45 million shares outstanding.

Both longs and shorts have claimed to make profits from flipping the stock over and over. However, there aren't many stories from those who lost money in the same pursuit, although, according to my experience in the business, a situation like this yields far more losers than winners.

As I've said recently on

Columnist Conversation, this is a loser's game, except for the very few who have an incredible knack for this kind of speculative trading.

Even then, there are risks. After all, what value do you place on a stock when a company admits that the value it places on the equity could very well be zero?

It's good to remember what my mother once told me: "Those who play with fire eventually get burned."

I'll be back next week with a new entry in the Bottom of the Barrel.

For an explanation of our barrel rating system,

see our description.

Christopher S. Edmonds is vice president and director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to

Chris Edmonds.