GasFrac -- the explosion and its aftermath

A week ago, GasFrac Energy Services (GFS:CA or GFS.V) announced that it had experienced an explosion and fire on one of its work sites. As a result, on Monday, the stock tanked in Canda. I used that as a buying opportunity and doubled my holdings with an average price of 9.72 Canadian. At the end of the week, GaFrac announced that it had determined that the cause of the explosion had been a leak and that it was working to remedy the potential for a repeat of the problem. Before that announcement, I sold the newly acquired stock for a gain of about 55 cents per share, and I returned to my basic position in the stock. As far as i can tell, the explosion is a one time unfortunate event that has no lasting impact on the stock or the company.

The question now to be considered is whether it is time to buy this stock if one has not yet invested or will there be a further dip which will present a buying opportunity. The best way to answer this question is to consider why one would buy GasFrac at this point. The short answer is that the stock is a play on three major trends. First, the gasfrac process is one of those used to complete horizontal wells drilled in shale. given the increasing prices for energy and the discovery of a great number of shale deposits amenable to horizontal drilling, gasFrac should benefit in a major way over the next few years. Second, gasFrac benefits from the current noise being made by the anti-hydraulic fracturing crowd. For example, at the recent innauguration of Pennsylvania's new governor, there was a noisy demonstration by the opponents of hydraulic fracturing. While governor Corbett is unlikely to kowtow to these folks (he rightfully views development of the Marcellus Shale as too important for PA), the pressure from the ecologists is likely to help gasFrac in a major way as well. Third, the gasFrac process results in higher production from a well than hydraulic completion. As understanding of this fact becomes more widespread, there are likely to be more and more wells completed using the LPG process by gasfrac. In short, GasFrac is likely to do quite well over the next few years.

So this leads to my answer. In my opinion, gasFrac at the current price is a good investment. I cannot tell you if there will be dips down fifty cents below the current price or not. That is a question that no one can resonably answer. All I can say is that if you buy it now, I believe that you will still see a 50% increase in the stock within a year.