Tonight after the close of the market, GasFrac Energy Services (GFS in Canda and GSFVF on the pink sheets) will report its earning for the first quarter. We already know that the results will be extremely poor. The company preannounced a warning about this about a month ago. I wrote about this warning here. The question, of course, is now what to look in the next day. Here are the keys:
1) The earnings report itself is only important insofar as it confirms what was contained in the early April warning about revenues. Simply put, the actual revenues had better line up with what the company said in the warning. A major difference in revenues from the $45 million indicated in the warning is truly a bad sign. This is true no matter whether revenues miss or beat the projection given out a month ago. Indeed, a substantial variation in the revenues from the earlier projection would simply mean that GasFrac does not have a sufficient handle on its own activities to accurately tally up revenues for a closed quarter. I fully expect that the revenue will be as predicted.
2) The rest of the report is only important if it shows some problem developing during the quarter. Have expenses risen in some unexpected way? Is there a projected shortfall in cash flow that will require some additional fund raising for the company? Here too, the likelihood of something like this showing up is slim.
3) That takes us now to the key focus of the earnings report and the conference call which comes tomorrow: How have revenues come in during the first 40% of the current quarter, and are there any catalysts that the company can report to raise revenues for the rest of the year? Hopefully, the company will tell us about revenues for the first six weeks of this quarter in the report. If not, someone had better ask about this in the conference call. We truly need to know if things are turning around.
We also have to find out where things stand with the possibility of further long term contracts. The two in place seem to be running a lower than expected levels. We need to be told something about when and if others can be expected.
We also need some coherent explanation about where the focus of the marketing efforts are at the moment. Recent reports indicate that all of the new equipment is going to the US market. Why is that? Is the Canadian market soft? Is there demand in the USA? Indeed, is there some rationale for this move or is it just happening without there being many prospects of use for this equipment?
We need a longer term projection from the company as well on future revenues, future markets, and exactly when the company expects to start earning profits again.
As you can see from these questions, the future for GasFrac is very much up in the air. Investors have been dumping the stock for quite some time now; as I write this the price is below $4. A good report today could start us on the road back. A poor report would lead many other shareholders to sell. It is amazing that a company with such revolutionary technology would be struggling so to prosper, but it is. Tonight and tomorrow GasFrac has a final chance to redeem itself. Let's hope it manages to do so.
DISCLOSURE: I am still long GasFrac although I may sell depending on the contents of the earnings report and conference call.
4 comments:
I got into Gasfrac over a year ago with a substantial investment. I was impressed--I thought the management were real pros. I had to get out in June-July when I simply could not handle any more price declines and it became apparent that management was poor and worse--untrustworthy. I got back in for a modest amount in December because of the management change but got out again because of the stock price falling much more than the average energy services stock. It's a shame--it has enormous potential. But who knows when it will be realized?
Fortunately I used the funds from the sale of Gasfrac to buy into Open Range which evolved into Poseidon Concepts (POOSF.PK on the pink sheets). I am still way ahead (my adjusted purchase price is about $8.60, even after the drop from over 16 to under 12. The 1stQ earnings were released this evening, confirming the continued major growth and future prospects. Plus it is paying a 9% dividend with high probability for future increases. I urge you to consider it. Might ease the Gasfrac pain.
I really enjoy your blog. Keep up the good work!
Of the $35M in Canada, all but $9M was Husky leaving a really lousy YOY "growth" for the Canadian business.
So, what did you think of the CC?
Are you still long?
I wrote about the conference call at length. I am still long, but cautious.
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