I am watching BAS very closely, for reasons that should be plain. I dug into the most reason filing and have a few observations.
BAS lost $0.45 per share in the most recent quarter ($0.56 per share after further impairment of goodwill), driven by business disruption for lower prices and extreme cold weather. However, this loss was driven entirely by write downs and does not appear to have consumed cash.
Without asset impairment BAS had earnings of $0.11 per share. As of right now BAS operations appear to be conserving cashflow well. The most recent quarter, expenses exceeded revenues by about $10 million. BAS has $59.5 million in depreciation and amortization, leading me to believe that BAS operations are still cash flow positive.
BAS is aggressively cutting into payroll, reducing employees by 10% in the most recent quarter. They are negotiating with their customers, offering concessions to defend business, and even managed to mildly grow revenues in the most recent quarter as a result.
I do not expect BAS to hold this performance. That is asking too much. They are currently expecting revenues to decline by 21% to 26% sequentially. That is an enormous drop and more losses should be expected.
For the moment, BAS is well capitalized. They have $80 million in cash and an addition $233 million in revolving credit.
It is my belief that BAS will weather the storm. I trust their management to make the right moves here; they have done so before so this is not new territory for them. They are watching cash flows closely and will keep expenses in or around those levels to preserve the business.
I believe that BAS will succeed in keeping cash burn to some level that staves off any insolvency concerns for some years, thereby allowing them to outlast the recent downturn in oil prices. I also believe that BAS has competitors that are in much worse position than BAS.
BAS will survive, and BAS will flourish in the aftermath of this oil industry crisis.If you enjoy the content at iBankCoin, please follow us on Twitter