GasFrac Energy Services (symbol GFS:CA or GSFVF.PK) had its conference call today. The information from the company makes a strong buy for this stock even more compelling. Here are the key points:
1) The company confirmed that it expects revenue in 2011 to rise to somewhere between double and triple the 2010 level. This is a great growth rate, but even more important is that the growth will accelerate through 2011. GasFrac finished 2010 with 3 sets of equipment that it was able to use with about 30% efficiency. This will rise to 6 sets by the end of April of 2011 and then to 10 sets by November of 2011. Further, because of changes in the mix of equipment, the expected efficiency of utilization should be up to 45-50% by the end of 2011. On this basis alone, the company will exit 2011 with something in the area of six times the revenue generating capacity with which it began the year.
2) The company is close to finalizing an LPG recovery system which will improve gross margins and generate further revenue. Once this is completed, GasFrac will have the only methodology that will be approved by the state of New York to provide completion services for drilling in that state.
3) The company has a large backlog and foresees no problems with keeping all of their equipment fully occupied for the foreseeable future.
4) The company has received its first international patents for its systems, and issuance of US and Canadian patents remain on course.
5) The company expects to begin trading on the TSX shortly.
6) Even with natural gas prices as low as they currently are, there is more than enough work on oil and liquid rich gas to keep GasFrac going full speed ahead.
It is not often that one sees a company growing at any speed like GasFrac. While there may be bumps in the road as GasFrac moves forward, right now, there seems to be a lot of open road ahead.
My 18 month target for the stock is 40.
NOTE: I strongly suggest that it is worth listening to the conference call.
Disclosure: I am long GasFrac stock and have recently added to the position when the price came down.
1 comment:
Thank you Jeff for detailed analysis of this results and conference call.
There has been lots of news coverage about ban on Hydraulic Frac process of Natural gas and ban by some states in Canada/USA.
Is GSFVF fracking technology is a solution to this problem or its part of the problem?
Thanks for your first forecast share price to $40 in 18 months I belive this is first ever forecast by any analyst on this stock and I appreciate your bold move.
I plan to add more as time comes.
Thanks and keep your writing.
Vraj
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