For at least the last three years, I have written periodically about GasFrac Energy Services, Inc. (GFS in Canada and GSFVF on the pink sheets). Tonight, GasFrac released its earnings report for the first quarter of 2013. Once again, the results were terrible.
Here are the highlights (although it is hard to call anything in that report a "highlight").
1. Revenue for the quarter was $31.5 million, down about 30% from last year's poor results.
2. Revenue in the United States was only $3 million compared to $10 million last year.
3. The company supposedly undertook a major cost cutting measure last fall. Despite that, the costs for the period were higher than the costs for the same period two years ago when revenues were essentially the same.
4. The company had said that the cost cutting was designed to enable GasFrac to break even with revenue of ten million dollars per month. The first quarter beat that minimum revenue by 5%, but the company still lost $7.8 million.
5. The report makes clear that the company has thrown in the towel on the cost cutting effort. It says that there will not be any major savings from here forward.
6. Nothing at all is said about the status of the search for a new CEO.
7. In what seems like the usual company style, there are a great many excuses why revenues were so light. Once again, weather, customer delays and "inertia" are blamed.
Overall, this is a terrible report.
That being said, I recommend holding the company's stock rather than selling for three reasons:
1. The stock is selling at such a low price already, that it does not have much lower that it can go.
2. The new Hybrid LPG methodology could be the game changer that the company seems to think it is. I would give them a chance to prove that.
3. During the quarter, we will have a chance to learn the identity of the new CEO. Even the GasFrac board cannot delay the search much longer. The right person could make a world of difference at GasFrac.
This really ought to be the last chance for GasFrac. Their technology remains truly impressive. The company just seems unable to translate it into profits.
Before concluding, I have to add this: GasFrac, even at this low price, is probably a bigger speculation than at any time I have been writing about it. It would be perfectly logical to sell the stock and move on. I choose not to do so.
DISCLOSURE: We remain long GasFrac.
Here are the highlights (although it is hard to call anything in that report a "highlight").
1. Revenue for the quarter was $31.5 million, down about 30% from last year's poor results.
2. Revenue in the United States was only $3 million compared to $10 million last year.
3. The company supposedly undertook a major cost cutting measure last fall. Despite that, the costs for the period were higher than the costs for the same period two years ago when revenues were essentially the same.
4. The company had said that the cost cutting was designed to enable GasFrac to break even with revenue of ten million dollars per month. The first quarter beat that minimum revenue by 5%, but the company still lost $7.8 million.
5. The report makes clear that the company has thrown in the towel on the cost cutting effort. It says that there will not be any major savings from here forward.
6. Nothing at all is said about the status of the search for a new CEO.
7. In what seems like the usual company style, there are a great many excuses why revenues were so light. Once again, weather, customer delays and "inertia" are blamed.
Overall, this is a terrible report.
That being said, I recommend holding the company's stock rather than selling for three reasons:
1. The stock is selling at such a low price already, that it does not have much lower that it can go.
2. The new Hybrid LPG methodology could be the game changer that the company seems to think it is. I would give them a chance to prove that.
3. During the quarter, we will have a chance to learn the identity of the new CEO. Even the GasFrac board cannot delay the search much longer. The right person could make a world of difference at GasFrac.
This really ought to be the last chance for GasFrac. Their technology remains truly impressive. The company just seems unable to translate it into profits.
Before concluding, I have to add this: GasFrac, even at this low price, is probably a bigger speculation than at any time I have been writing about it. It would be perfectly logical to sell the stock and move on. I choose not to do so.
DISCLOSURE: We remain long GasFrac.
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