In response to cycles in the industry, Basic Energy Services (ticker: BAS) has a formula that is proving out. With a presence in most major U.S. oil producing regions, Basic has built its business on well services during every stage of the well’s life.
Basic focuses on matching capital expenses to cash flow, protecting its market share, optimizing its work-force and cost structure, and protecting liquidity during down-cycles. When the industry is on the upswing, Basic invests in new equipment, expands into new markets, increases its market share, and creates new service offerings.
The company’s activity, as of Q3, 2016, was focused primarily in the Permian Basin—from which 46% of its revenue was sourced. Basic’s other major areas of activity include the Mid-Continent/Barnett/SCOOP, Rocky Mountain/Bakken/Niobrara, and the Gulf Coast/Eagle Ford.
Source: Basic Energy Services, 4Q16 Investor Presentation
Increased prices, activity
In Q1 of 2017, Basic benefitted from increased activity due to higher and more stable oil prices. The Permian Basin in Texas and STACK and SCOOP areas in Oklahoma were the locus of much increased activity, with that activity spreading into other basins as operations within those basins strengthened. Because of the rise in activity, Basic saw a first quarter revenue increase of 17%–larger than the expected 13-15% increase.
The largest revenue improvements were visible in Basic’s pumping and coiled tubing services. The pumping service generated 63% of the revenue and the coiled tubing services generated 18%. The remaining 19% of Basics revenue was attributed to tool rental. Approximately 80% of the revenue from the pumping services was related to fracturing activity—which gives an indication to the industry-wide focus on improved fracturing treatments.
Diversification in services
Basic has diversified its oilfield services in order to maintain a competitive edge in the oilfield service industry, to build convenience for its customers, and to create security in its revenue stream. Basic Energy Services supports operators with a suite of ‘must-haves’:
- Well Servicing,
- Fluid Services,
- Pumping Services,
- Rental/Fishing Tools,
- Contract Drilling,
- Directional Drilling, and
- Tubulars
Source: Basic Energy Services
Building horsepower potential
During Q1 of 2017, Basic added 74,000 hydraulic horsepower (hhp) worth of pumping pressure equipment. Basic paid $28.5 million for the equivalent 74,000 hhp and related equipment. The acquisition of this horsepower capability increased Basic’s fracturing horsepower to 431,650 hhp and its general horsepower capability to 517,445 hhp.
Basic Energy Services is presenting at EnerCom’s The Oil & Gas Conference® 22
Basic will be a presenting company at the upcoming EnerCom conference in Denver, Colorado—The Oil & Gas Conference® 22.
The conference is EnerCom’s 22nd Denver-based oil and gas focused investor conference, bringing together publicly traded E&Ps and oilfield service and technology companies with institutional investors. The conference will be at the Denver Downtown Westin Hotel, August 13-17, 2017. To register for The Oil & Gas Conference® 22 please visit the conference website.
