Basic Energy Services (BAS) Didn’t Really Lose Much Money

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BAS is up 12% right now following their earnings report. They lost a ton of money on paper and the market isn’t falling for it.

Basically, despite idling equipment and firing 20% of personnel, BAS wrote off more in depreciation than the same quarter a year ago. But properly stored and idle equipment isn’t really depreciating, is it? So there was about $20 million there over my fair guess for what the company’s actual depreciation probably looks like, best estimate. Then they wrote off another $5 million or so in non-cash items tucked into expenses for employee retention and such.

You pull out the write downs and the company lost may $0.19 per share, compared to a gain (after one time items) of $0.11 per share in Q4 of 2014.

Let’s look big picture here; the company saw revenues plummet 35%. I mean, Completion and Remedial Services alone plunged 45%. All of that cost me $0.19? (Cue crude jerking motion of the arm)

I don’t care. We’re fine here. Management knows what they are doing. The company just renegotiated their credit facility, lowering the issue amount by $50 million to $250 million outstanding in order to strip some undesirable covenants, but adding an accordion feature that can get them to +$50 million or $350 million total if it’s an emergency. They have headcounts under total control, and they are defending market share vigorously. They’ll get cash flows to balance in the next 6 months and we go forward from there.

I’m not worried about BAS. BAS’ competition should be panicked.

What A Wonderful Day

602 views

I am 70% long, and this is what my day looked like:

BAS +12.61%
CCJ +7.56%
HCLP +3.42%
ALDW +1.99%
VOC +1.76%
TIS +1.48%
OMAB +0.70%

It’s difficult to scoff at a day like that.

Yes I am still down from 2014. I have no desire to hide behind spin. 2014 was a horrible year. But as I said to those of you asking why I was still hanging around BAS, it was because BAS had 100% of upside…at least. And now here we are, closing in on $10 from $5.

I like all on the list. I’ve carefully vetted these positions and wouldn’t it be something if it was these same positions that ultimately redeemed me? I’m not wedded to the thought (for fear it will kill me) but it’s certainly quite possible.

Tumultuous Action In Oil Names

1,514 views

The inventory build in oil was about three times greater than what the market was expecting. Oil prices slid fast throughout the day and the sector by and large reversed the recent move. But going into the final hour of trading, there does seem to be some minor strength ticking up. BAS notably was flat just about an hour ago and could tread water some more.

My guess: oil returns sub $50 for a spell and weak players get slapped around some more until someone finally closes shop. The inventory builds are big but the overall market imbalance is much less so, in the grand scheme of things. US inventory is building rapidly but only partially due to overproduction. Recent currency moves have contributed to the problem by trapping US crude with uncompetitive manufacturing and refinery businesses behind an export barrier, which is why oil companies are banging the drum so loudly on crude export rules. My guess is that at least half the build is probably from dollar strength pricing US competition out of foreign goods markets.

There is no reason to think the Fed will just sit by while the US economy slides into a recession. They’ll have to defend the dollar at some point (or what do you call intentionally making it weaker anyway?). But in the meantime, things could get rough. Oil majors are only halfheartedly looking to fix the problem; they’d really like to gobble up all the small competition for pennies on the dollar first to keep their proven reserves stacked. So yeah this could get worse before it gets better.

Still, I’m thinking now is a perfectly good time to start building positions in known survivors. The majors themselves are cheap, given how huge they are and that they aren’t going anywhere. Everything that made oil majors a crappy investment when they had a premium attached makes them the perfect choice now that they’re going for no premium. If you pick the right foreign oil major, you can even get paid in non-dollars and – God help us when the Fed finally delivers a weaker dollar – make a second strong killing on the exchange back into the US.

It’s Shocking Because It’s Normal

1,652 views

Today BAS was up 4.5%. I’d normally be elated by this kind of action, but I am not.

Because last Wednesday BAS was 20% lower. And the week before that BAS was where it is today. And the week before that BAS was 20% lower.

In fact I’d say generally speaking that watching a stock ratchet between $5 and $8 is a generally tempestuous experience that does things to mans sanity. Dark things. Quiet things.

Dark, quiet things.

I want those dark things to be done to oil short sellers now. He says to himself, slowly rocking in his 9th floor prison.

BAS Earnings Breakdown

3,412 views

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.

BAS And VOC Ended The Day Higher

3,229 views

The title of this post more or less speaks for itself. We had a 7 million barrel inventory build, yet two positions most susceptible to that sort of thing recovered and wound higher anyway.

I fully understand the possible danger here, holding these oil names still even after the “joy” I experienced in the second half of last year. But in my estimation, there comes a point when men separate themselves from boys, and needless worrying is shown to be just that.

Humanity endures. And capitalism is to date the closest thing to humanity. You can pretend like the world is just going to sit tight and let calamity knowingly take hold. Or you can believe man will take the steps necessary to prevent such a thing.

In the early years after the depths of the Great Recession, I made some bets against humanity. I bet that oil would trade to $60 (it’s amusing seeing it happen now with me on the opposite side of the fence) and that there would be massive growth shocks. I lost then just as you’ll lose now.

Man endures. Job growth is coming back and early signs of life in wage growth are also creeping up. There are, as there have ever been, many many things that a man could concern himself with. Disease and pestilence, war and famine, corruption and malfeasance, natural disasters, savagery and every other possible thing in between.

But man endures still.

The most pressing problem for the US at the moment is the strength of the US dollar. This is why there is a $10 spread between WTI and Brent, and why US manufacturing is having some problems…because a strong dollar opens them to strong competition. Our manufacturing base has had an easy time of it lately.

But these are problems to be overcome and nothing more. Our trifles are the great boon of another. The oil will find its home. I am tired of these drab years and would very much welcome a return to the soaring spirits of the 90’s. Others are looking for a chance for optimism too. At the end of the day, many of our problems are just numbers on a page. And numbers on a page are hardly immutable.

No we shall overcome our problems.

And man will continue to endure.

Basic Energy Services (BAS) Didn’t Really Lose Much Money

415 views

BAS is up 12% right now following their earnings report. They lost a ton of money on paper and the market isn’t falling for it.

Basically, despite idling equipment and firing 20% of personnel, BAS wrote off more in depreciation than the same quarter a year ago. But properly stored and idle equipment isn’t really depreciating, is it? So there was about $20 million there over my fair guess for what the company’s actual depreciation probably looks like, best estimate. Then they wrote off another $5 million or so in non-cash items tucked into expenses for employee retention and such.

You pull out the write downs and the company lost may $0.19 per share, compared to a gain (after one time items) of $0.11 per share in Q4 of 2014.

Let’s look big picture here; the company saw revenues plummet 35%. I mean, Completion and Remedial Services alone plunged 45%. All of that cost me $0.19? (Cue crude jerking motion of the arm)

I don’t care. We’re fine here. Management knows what they are doing. The company just renegotiated their credit facility, lowering the issue amount by $50 million to $250 million outstanding in order to strip some undesirable covenants, but adding an accordion feature that can get them to +$50 million or $350 million total if it’s an emergency. They have headcounts under total control, and they are defending market share vigorously. They’ll get cash flows to balance in the next 6 months and we go forward from there.

I’m not worried about BAS. BAS’ competition should be panicked.

What A Wonderful Day

602 views

I am 70% long, and this is what my day looked like:

BAS +12.61%
CCJ +7.56%
HCLP +3.42%
ALDW +1.99%
VOC +1.76%
TIS +1.48%
OMAB +0.70%

It’s difficult to scoff at a day like that.

Yes I am still down from 2014. I have no desire to hide behind spin. 2014 was a horrible year. But as I said to those of you asking why I was still hanging around BAS, it was because BAS had 100% of upside…at least. And now here we are, closing in on $10 from $5.

I like all on the list. I’ve carefully vetted these positions and wouldn’t it be something if it was these same positions that ultimately redeemed me? I’m not wedded to the thought (for fear it will kill me) but it’s certainly quite possible.

Tumultuous Action In Oil Names

1,514 views

The inventory build in oil was about three times greater than what the market was expecting. Oil prices slid fast throughout the day and the sector by and large reversed the recent move. But going into the final hour of trading, there does seem to be some minor strength ticking up. BAS notably was flat just about an hour ago and could tread water some more.

My guess: oil returns sub $50 for a spell and weak players get slapped around some more until someone finally closes shop. The inventory builds are big but the overall market imbalance is much less so, in the grand scheme of things. US inventory is building rapidly but only partially due to overproduction. Recent currency moves have contributed to the problem by trapping US crude with uncompetitive manufacturing and refinery businesses behind an export barrier, which is why oil companies are banging the drum so loudly on crude export rules. My guess is that at least half the build is probably from dollar strength pricing US competition out of foreign goods markets.

There is no reason to think the Fed will just sit by while the US economy slides into a recession. They’ll have to defend the dollar at some point (or what do you call intentionally making it weaker anyway?). But in the meantime, things could get rough. Oil majors are only halfheartedly looking to fix the problem; they’d really like to gobble up all the small competition for pennies on the dollar first to keep their proven reserves stacked. So yeah this could get worse before it gets better.

Still, I’m thinking now is a perfectly good time to start building positions in known survivors. The majors themselves are cheap, given how huge they are and that they aren’t going anywhere. Everything that made oil majors a crappy investment when they had a premium attached makes them the perfect choice now that they’re going for no premium. If you pick the right foreign oil major, you can even get paid in non-dollars and – God help us when the Fed finally delivers a weaker dollar – make a second strong killing on the exchange back into the US.

It’s Shocking Because It’s Normal

1,652 views

Today BAS was up 4.5%. I’d normally be elated by this kind of action, but I am not.

Because last Wednesday BAS was 20% lower. And the week before that BAS was where it is today. And the week before that BAS was 20% lower.

In fact I’d say generally speaking that watching a stock ratchet between $5 and $8 is a generally tempestuous experience that does things to mans sanity. Dark things. Quiet things.

Dark, quiet things.

I want those dark things to be done to oil short sellers now. He says to himself, slowly rocking in his 9th floor prison.

BAS Earnings Breakdown

3,412 views

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.

BAS And VOC Ended The Day Higher

3,229 views

The title of this post more or less speaks for itself. We had a 7 million barrel inventory build, yet two positions most susceptible to that sort of thing recovered and wound higher anyway.

I fully understand the possible danger here, holding these oil names still even after the “joy” I experienced in the second half of last year. But in my estimation, there comes a point when men separate themselves from boys, and needless worrying is shown to be just that.

Humanity endures. And capitalism is to date the closest thing to humanity. You can pretend like the world is just going to sit tight and let calamity knowingly take hold. Or you can believe man will take the steps necessary to prevent such a thing.

In the early years after the depths of the Great Recession, I made some bets against humanity. I bet that oil would trade to $60 (it’s amusing seeing it happen now with me on the opposite side of the fence) and that there would be massive growth shocks. I lost then just as you’ll lose now.

Man endures. Job growth is coming back and early signs of life in wage growth are also creeping up. There are, as there have ever been, many many things that a man could concern himself with. Disease and pestilence, war and famine, corruption and malfeasance, natural disasters, savagery and every other possible thing in between.

But man endures still.

The most pressing problem for the US at the moment is the strength of the US dollar. This is why there is a $10 spread between WTI and Brent, and why US manufacturing is having some problems…because a strong dollar opens them to strong competition. Our manufacturing base has had an easy time of it lately.

But these are problems to be overcome and nothing more. Our trifles are the great boon of another. The oil will find its home. I am tired of these drab years and would very much welcome a return to the soaring spirits of the 90’s. Others are looking for a chance for optimism too. At the end of the day, many of our problems are just numbers on a page. And numbers on a page are hardly immutable.

No we shall overcome our problems.

And man will continue to endure.

Previous Posts by Mr. Cain Thaler