The GasFrac conference Call

GasFrac Energy Services Inc. held its quarterly conference call today. There was some key information put forward that investors should know.
First, in Canada, the company reconfirmed that it has sufficient backlog and interest so the all of its equipment sets will be fully utilized through the end of 2011. Management was not asked about 2012, but they did say that half of the sets could be fully booked as of today until the middle of 2012.

Second, in the USA (which really means Texas at this point) they have had faster acceptance by the market than the company expected. There are 16 customers with wells to be completed who are already registered for work. There are an additional 14 customers who are awaiting proposals from the company for completion work. There are many more potential customers who have expressed interest in the company. Gasfrac is trying to get the widest possible usage in the fields that it is targeting rather than sticking with just one or two clients with multiple wells. The additional equipment that will arrive in the fall with allow for more concentration with particular customers.

Third, during the first quarter, the company had an average of less than two sets available for use due to the various safety restrictions that resulted from the explosion in January and its aftermath. By the end of May, the company should have 6 sets of equipment in place and operating. In August through November the additional four sets of the 2011 capital program should come on line. These sets have a ratio of 2.5 to 1 back end to front end. This will allow for better usage of the sets with less down time for parts of the equipment. The company quantified this increased usage as follows: the capacity of one equipment set will go from $50 million in 2010 to $65 million in 2012. Finally, management says that it expects to continue to grow the capital equipment in 2012, but there have been no decisions as of yet with regard to the size or speed of the increase or as to how it will be financed.

Fourth, the propane recovery system prototype is almost complete. Field trials of the equipment are scheduled to commence in June. Current expectations are that this new system will hit the market at the beginning of 2012. GasFac has set up a separate division for the propane recovery system. Management views it as a separate item from the well completion work.

Fifth, the listing on the TSX is moving ahead and should be achieved by the end of June.

Sixth, the patent process is continuing apace. Gasfrac expects to receive patent approvals during the rest of the year for its remaining applications in the USA.

All of these statements boil down to this: the growth story of the company hit a pothole in the road last January when the explosion occurred. The company, however, has gotten past that blip with its plans and prospects intact. Within the next year, absent a surprise problem, GasFrac should be a much larger, fast growing and highly profitable company. Think of it this way: In the first quarter of 2012, Gasfrac should have the capacity to generate over six times the revenue that its capacity allowed for in the first quarter of 2011. There will be ten sets of equipment rather than two, and each of the sets in 2012 will be able to generate 30% more revenue ($65 million vs. $50 million).

The future for this stock seems bright indeed.
Disclosure: I remain long GasFrac stock with a substantial holding.