GasFrac -- The Latest View

Over the last few years, I have written many times about GasFrac Energy Services (GFS in Canada and GSFVF on the pink sheets). Last week saw the truly terrible quarterly report for the second quarter. Given the failure of the company to update its prior discussion of likely revenues for that quarter and the lack of a clear focus for the third and fourth quarters that seemed evident in the conference call, I had written that I was considering selling out of my positions. Since then, I have been asked a number of times what I decided to do. Here is the answer:

For the time being, I am holding with my GasFrac positions. There just are too many positives for this technology to abandon it because it seems that it does not have a management team capable of maximizing the results. In the long term, the merits of the GasFrac technology should prevail. Particularly since the propane field recovery system has now been put to use, the cost differential between the GasFrac system and regular hydrofracking is much less than it has been. The drought conditions in much of the USA also will push drillers to complete their wells using the waterless system from GasFrac. Even the recent recovery of natural gas prices bodes well for a possible increase in drilling.

I realize that I may be overly optimistic about the near term for this stock. I am certain, however, that if GasFrac gets the right breaks, it can start bringing in revenues quickly. Remember, without much more in the way of capex, GasFrac could reach a point where annual revenues hit about $700 million. That may be a pipe dream, but it does give some perspective as to where the stock could go. Indeed, if the company only gets to $400 million in the near term, it will justify a stock price which is many multiples of the current anemic level.

DISCLOSURE: I remain long GasFrac.