The moment of truth is at hand. BAS releases 3Q earnings after the bell.

As an act of good faith and offering, I have released some of my precious cash reserves, adding !% of my portfolio to BAS at the price of $3.68 a share.

It’s hard to tell what is going to happen here. On the one hand, BAS’ operation is in turmoil, along with…everyone else in the sector. But surely worse than expected earnings will send BAS screaming to Goldman’s $2 target, ending life as we know it.

But know this; BAS has short interest nearing 50% of float. You had better pray your fellow short sellers are trading on insider scoops, because if BAS even halves the loss we are expecting then you are going to watch yourself incinerate while the hollow screams of your compatriots sound all around you.

I am waiting for BAS to match the estimated loss just because I cannot stand more disappointment – surprise me.

BAS is working to fence their operations by concentrating around still profitable locations, suffocating competition there, and idling pretty much everything else. But that is a volatile process, not accomplished quickly.

They have two things working for them.

The first is that, although they will still be taking write downs on their equipment, BAS no longer has to replace it at that value. So much of their operation has been shuttered, which leaves that equipment in storage; extending the lifespan on what’s left. And when the time to replace field equipment does come, you can bet they will not be buying it new. There will be many, many carcasses to pick off of for years to come. BAS management is already positioning to eat their dead competition… washing it down with the tears of executives long out of a position.

My guess is that if we adjust depreciation to more accurately reflect this, then BAS lost ($0.70) per share last quarter, not ($1.20). And I have a feeling that number will surprise downward.

The second is that BAS cleaned up a revolving credit line in the first six months, which ate up tens of millions. But that is done now so their debt payments should decline back to the $33 million in base interest, with the next expiration coming in 2019.

That should be good for another ($0.20) per share.

If BAS’ operation was even remotely stable in the past 3 months, then we should have a loss of ($0.50) per share, from that. BUT…let’s not be crazy here. Nothing is stable right now.

I’m going to have accounts receivable and cash levels pegged. I cannot tolerate much real cash getting lost and if receivables implode much more then I’ll have to rethink my faith. Accounts receivable declined by $121 million over the first six months of the year as customers dried up.

A hard estimate of the resulting decline of revenue that accompanies such an accounts receivable decline would say we can expect revenues to fall another 20%-30% from where they stood in June. But, are accounts receivables falling entirely because business is cancelled, or is BAS understanding of their clients trouble and agreeing to release them to a pay as you go approach? That could mute the blow if it is going on.

Altogether I am nervous. But if there is any justice in the world, by this time tomorrow I will be taking a victory stride over the gristly remains of short sellers.

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I’d like to hand some serious props to the market manipulators at Goldman Sachs The Street*. In case you missed it, GS published their top 19 positions to beat around like a domestic disturbance call at 2 am, and BAS made the cut. In fact they gave it spot 2 on the list.

What was the reason for singling out BAS – a stock which is already down 86% from its long gone highs of 2014 – over any of its other competitors?

*The good commenters of this site have justly pointed out that although The Street is piggybacking off of Goldman’s work, the Street themselves seem to be the source of the godlessness of reason that follows. In my raw hatred I missed that – but The Street should know better too. I hope for Goldman Sach’s sake that their reasoning is better than this.

The reasons given are pretty terrible. Let’s walk through them:

1) “The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 2076.9% when compared to the same quarter one year ago, falling from $2.44 million to -$48.30 million.”

Okay, first of all, I understand that business majors are business majors primarily because they can’t do math. I sat through the mandatory business statistics classes too as an undergraduate, ironically while taking real statistics classes at the same time. It’s like comparing brands of cigarettes with cigars – it just isn’t even the same league.

Here, GS The Street’s expert analytics is at play, taking $2.44 – (-$48.3) = $50.74 million. Then we divide this magnitude by $2.44 and WOALA! 2,077% decrease! That’s huge!

No. Just no.

So here’s a hypothetical. Suppose a similar company had been making $0 million in income, and then had a $1 million loss. Using this genius formula, that company would have lost INFINITY %. Is such a company worse or better off than BAS? I’d say it looks better to me.

Next consider a similar company that had $100 million in income prior…much more money than BAS. Now, suppose they lose the exact same amount of money as BAS – $48.3 million.

This second company GS The Street would say only experienced a 148.3% loss, despite being in the exact same situation as BAS.

Yes this seems like a useful metric.

You can’t freaking divide across zero, dingbats. Division in this fashion only makes sense when all the numbers are nicely contained in the set of positive real numbers. Goldman Sach’s The Street’s math tells us nothing.

2) “Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, BASIC ENERGY SERVICES INC’s return on equity significantly trails that of both the industry average and the S&P 500.”

Uh huh…because after your first encounter with numbers, I definitely believe that now…

3) “The gross profit margin for BASIC ENERGY SERVICES INC is rather low; currently it is at 20.98%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -24.37% is significantly below that of the industry average.”

Fair enough. Now go talk to a few of their competitors who have no more clients. Period. Because I’ve seen those. I imagine they would envy a low gross profit margin.

Incidentally, net profit margins are only negative because of depreciation of equipment. In this environment, how much of that do you think they’ll be needing to buy new for the foreseeable future?

4) “Net operating cash flow has significantly decreased to $22.34 million or 65.86% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm’s growth rate is much lower.”

And yet, management has pegged outgoing cash flow so that net cash remains stable. They even made an extra debt repayment to shore up their position. Provided they don’t make another, cash levels should increase. Which is all that matters at this point. You need to have money to play the game. Not better stats…poorly calculated.

5) “Although BAS’s debt-to-equity ratio of 3.42 is very high, it is currently less than that of the industry average. Even though the debt-to-equity ratio is weak, BAS’s quick ratio is somewhat strong at 1.46, demonstrating the ability to handle short-term liquidity needs.”

Just stop there. Then put this bullet point at the top, because it’s the only one that matters.

The game is chicken, gentlemen. Nobody cares how fast you were going once you’ve gone over the cliff…

But hey I hope their shorts can close out with this 10% spike lower. Thanks a lot for that. I’m almost tempted to buy, save that I think I have more than enough skin in this game already.

Aside from Goldman Sachs The Street (glory days obviously behind it), here’s an update from BAS management that perhaps explains why the most recent numbers have been so volatile.

“Recently, in a few selected markets, stimulation pricing has fallen to levels where cash margins at the field level do not support regular maintenance capital expenditures on equipment. In these instances, we have either temporarily stacked our equipment or relocated frac spreads to other markets.”

The company is refusing to play in environments where operation is equivalent to suicide. They are moving assets to respond to weak pricing, situating around a core business, and doing all they can to toe the line between maintaining clients and making enough cash to justify keeping the doors open.

But you don’t just pack up and move instantaneously. It takes time and so yes their operation is going to gyrate. If you’re a shareholder like I am, you’d better learn to live with it.

This is the second worst environment for oil we have seen in 100 years. The worst happened just five years ago. The company is doing great all things considered. I would be much more worried if I was anybody else.

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A cloudy day wafts across the window of the 9th Floor. The lingering smell of lunch sits in the air while the soft office sounds of my typing keep me company.

What is 15% to OMAB, I ask you?

15% is how much passenger growth OMAB had in September of 2015 over September 2014. The company was growing at a 17% clip. That has moderated 2% to a still impressive 15% annual growth rate.

After the second quarter, revenue growth stood at 36.41%. 19.74% of that was hiking sales prices, and the rest was volume of business.

The stock is in a state of permanent liftoff, and it’s one of the bright spots on my year.

OMAB strategically has two major things going for it. The first is a strong dollar which makes travel for nearby US residents much cheaper. And the second is ultra cheap fuel prices which are coming fast thanks to the crude implosion.

As it becomes more affordable for vacation travel, OMAB’s core business model is going to benefit directly.

I am waiting excitedly to hear how OMAB’s latest quarter shaped up. The company is on a tear.

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On Thursday evening, EMES withdrew distribution guidance. On Friday, shareholders were treated to a one day ~30% drawdown. HCLP and SLCA fell ~10% each, in sympathy pains. The whole sector was flayed.

The weekend has offered no respite, as HCLP and SLCA are both down another ~8% and EMES is off another ~12% on Monday.

Here’s a preview of what’s to come.

All three are going to slash their distributions. Of course they are…they’re yielding like 20% and it’s an industry freeze. They’ll walk it back to ~10% yield, those of us who’ve been here from the start will be back to what we were making two or three years ago, and all three companies will be better off for it.

Now things are getting out of hand. I cannot speak for SLCA or EMES, because I don’t own either. I never wanted to own either. But I do speak for HCLP when I say a great company is going for peanuts.

Now, I am not adding to my position. I restructured back in December, I ended up with about 1/2 my account in cash (after factoring in losses into this year) and it has been single handedly responsible for keeping me alive. My losses have been horrific; without that restructuring they would have ended me (and that is not an exaggeration).

So I’m not buying until the recovery is already well underway. If I had been so fortunate to be outside this fire, looking in, then I would be nibbling incrementally, every couple of weeks. But that is not a luxury I personally get to enjoy.

So far for the year, I’m down about 15% – that’s about 40% peak to trough if I’m counting from when this process all started a little over 12 months ago. I guess if I’m looking big picture, I’m fortunate that’s all that’s happened. There are people out there who have lost 70% because of this oil catastrophe.

For the moment, I am more than content to sit on lots of cash and wait this thing out. I’ve dug into my companies and am very confident they’re going to make it. But not everyone gets to say that.

There are vast expanses of the oil and gas industry that are about to be swallowed whole. We have a backwater culture that still crucifies people to thank for this.

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I bought Orchids Paper Products Company and Subsidiaries (TIS) earlier this year, back when I had just raised a large sum of cash and was looking for some new ideas to get away from the oil kill zone.

The company stood out as being a very solid business – good cash flow, strong sales, steady as she goes growth, boring business with few new competitors – you know, the kind of company that nobody wants to own.

Here, TIS is holding up very well, and I am quite surprised it is still down at $26 a share.

TIS is relatively small with only $210 million in assets, but it’s a good enough target for me. The shares are worth about $10.42 apiece by my estimation, and are currently going for $26. In the first six months of the year, we’ve seen a big increase in share value, even after issuing new shares, up from about $8.62 as of December 2014.

The companies operations are rewarding shareholders richly as of late. Net sales climbed 40% from the first six months of 2015 over the first six months of 2014. Basic income per share rose to $0.55, up from $0.40 period over period – 37.5% increase, matching the sales growth. Cash from operations is up 59.5%. It looks to me like this is real; not just a financial gimmick.

I had purchased this company in part because I saw an off radar business with solid fundamentals. But I also guessed that TIS would have the opportunity to make a lot of above average returns in the near future, thanks to all the meltdowns in South America leading to scarcity of basic paper products.

I still need to confirm where TIS is shipping product to, but even if that isn’t exactly what’s happened, I seem to be getting a pretty big payoff anyway. The company has a focus on US markets, but there is also some elusion to “Away From Home” sales, following the acquisition of Fabrica in Mexico. Regardless, TIS is growing at a 40% clip for the moment, and management seems eager to keep a fast tempo pace going.

It might be harder to materialize windfall gains than with a bigger company, since it’s unlikely institutional shareholders will come in and bid up the business. But that’s alright, I can get paid with distributions just fine.

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I took a 67% loss on VOC…(vomits)

This was on the books from last year, and I’ve held it now for about 12 months. I’m going to retain HCLP and BAS, but VOC was just too ugly to keep around right now.

I want the tax deductions this year, to start the clean up process. I like VOC but it’s an ugly pure play on oil prices. I would have thought buying this thing after a 50% drop was a pretty safe venture, but really who saw the extent of this fiasco in oil prices?

In November, I’ll take another look at VOC, after the write off is locked in.

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