Business trends in the USA for GasFrac Energy Services Inc.

After all the recent news from GasFrac Energy Services, Inc. (GSF:CA and GFSVF on the Pink Sheets), I received a question from Stan in New Jersey who asks the following: "I'm new to the stock but heard they're having a hard time breaking into the US drilling market for their fracing services. But, the conference call said differently. What's your take on that?" Because the company has made clear that an ever increasing part of their business will come from the USA, I think it worthwhile to set forth a response.

First of all, let's look at the facts.

1)Aside from some sporadic work in the past, the company began full time work in the USA during this year.
2)Right now, GasFrac has two sets of equipment in this country. More equipment will be arriving from the end of this quarter to the end of the first quarter of 2012, although the exact number of sets has not been disclosed.
3)Revenue in the American market was about half a million dollars in May of 2011. During the third quarter, that revenue rose to $12.6 million for an average of 4.2 million dollars per month. In October alone, US revenue was $12.9 million. This is more than the entire third quarter total.
4)GasFrac has said that full use of a set of equipment in the USA would result in about $75 million of revenue per year which comes to $6.25 million per month. Since GasFrac had two sets in use in the USA in October, that means that the total revenue of $12.9 million is more than the expected full use total previously announced. In other words, in October, both GasFrac sets of equipment were not only hitting the figure for full employment, they were actually beating that figure.
5)In the conference call, management said that it was working on long term contracts for the US market.
6)We also learned that the new President and CEO of the company is going to be located in the USA.

So what does all this mean?

First, GasFrac is may have taken some months to gain acceptance from US E&P companies, but that problem has been overcome. The equipment in the USA was working full time in October and one cannot do better than that.

Second, once the company says that it is concentrating on long term contracts in the USA, it has to mean that there are already companies with whom GasFrac is negotiating. If there were none, then management would have violated the securities laws against manipulating the market.

Third, the contacts of the new officers should help GasFrac get even wider acceptance in the USA. Indeed, the fact that Zeke Zeringue will have his office in the USA also tells us that GasFrac is prospering in the American market.

In summary, no one other than the company knows how well it is being accepted in the American market. However, the data released with the earnings and conference call all points to a very successful entry into the USA.

Disclosure: I remain long GasFrac. It is one of the largest holdings in my accounts.