The conference call for GasFrac Energy Services (GFS in Canada and GSFVF on the pink sheets) just ended. It provided more story for those of you who like story stocks. On the other hand, if you were looking for more visibility on future earnings and revenues, you would have been disappointed. Indeed, reading between the lines, it seems to me that the numbers for the current quarter (first quarter of 2012) will not be that good, and it may be the second half of this year until things look up. Of course, since management refused to give out any details regarding the current quarter, that interpretation is open to question.
Here is the good stuff first:
1) The CEO gave a very detailed outline of where the company is going. the focus has been on gathering data which allow the company to show potential customers the different operating results obtained from wells fracked by GasFrac compared to those fracked with the standard hydrofracking methods. Zeke Zerengue said on the call that the GasFrac results are the first ones he has seen during his thirty plus year career in the industry that show such a marked advantage over rivals. According to the company, it now has all of the data that it needs to do this selling and it will be moving aggresively to market its services to more customers.
The CEO also gave an analysis that explained where the various sets of equipment would be located in the next months. It seemed that he gave locations for six sets even though the company has 8 sets, but the explanation was fuzzy enough that maybe all of the sets were included.
2) Management made clear that there is no plan for further capital expenditures above those already committed. They seem to be digesting waht they already have rather than biting off more.
On the down side:
1) Management confirmed that from December through February, there was a slowdown in bookings in the USA since the potential customers were mostly reviewing the results from the first wells fracked for them by GasFrac. These are "starting to pick up" according to the company.
2) In response to direct questions, management would not give any sort of indication about the prospects for the first quarter results even though that quarter is close to 90% completed. This is certainly not unheard of as many companies do not give such guidance. On the other hand, given where we are at the moment, some sort of indication could have been offered without putting out formal numbers.
3) There seems clearly to be a problem with the propane recovery unit. There was some fuzzy words offered that it may need to be redesigned.
Overall, one thing came through very clearly: the company now has a CEO with a gameplan for growth. That plan is detailed and seems reasonable. While the prospects for the next quarter or two are less rosy than I previously believed, the longer term prospects actually look brighter. We should see a number of additional long term contracts obtained by the company over the next few months.
DISCLOSURE: I remain long GasFrac stock
2 comments:
Disappointment-- delivery & utilization of ordered spreads/sets.
With the last 2 sets delivering in the 2nd 1/4, The revenue stream will not meet with substantial utilization till the results of the 3rd 1/4, which is Oct 2012.
The delays of the remaining 4 sets, handcuffed the revenue generation!!!
Mention of Utica was a plus to me. Very oily and NG "liquidy" as I understand it, so theoretically customers not effected by the ultra low "dry" NG price. I'm not clear on who besides CHK is working there though, and I believe I read CHK has developed its own Fracking "division."
Note the Republican Ohio governor has responded to the earthquake issues around the waste water injection wells near Youngstown in ways you might not expect, which may play to Gasfrac's advantage.
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