Don’t Let Europe Completely Out Of Your Sight

Life is great right now, what with endless stock market gains to be had, and the rich spoils of steak and lobster dinners to be enjoyed in celebration therein. It’s all gravy boats and paradise here in the United States.

But I would caution you to keep an eye on Europe, even as I have.

The latest growth reports coming from the troika were nothing less than abysmal, once again. This is what happens when you pretend like the nail lodged in your eye socket is nothing more than in need of good marketing and a little “confidence”.

The growth expectations of European leadership that seem to get published religiously ever six months are nothing short of a riot. If their word had any bearing on when economic growth in Europe will kick back off again, it never would have stopped. Think about that, for a minute.

Life is just great now, and I’m not going to stop tasting the champagne because of little things like looming global poverty. But somewhere in the back of your subconscious, reserve a little space for recollecting that millions of unemployed, twenty year old males is not a recipe for success. Crusades have been built out of less.

The trials of last week were grinding and I simply exhausted myself. While this week hasn’t set up much better, I think I can at least imagine the point where I will begin to see the light reflecting off the walls from the light coming in at the end of the tunnel.

So there’s that going for me…

I want to dig into CCJ’s numbers on here, as they were impressive and caught the intelligentsia off guard. Mind you they didn’t just beat the numbers. They beat the numbers by something so stupid, I dare not even write it down.

Speak the name Fukushima again; it won’t save your predictions.

There’s a clear trend setting up in my book; BAS, CCJ, NRP, HCLP…they all have something in common, besides the massive ramp ups in price. I like what I’m seeing here, and some of their better peers seem to be confirming it.

Yes oil is selling off hard. But oil was unduly expensive, wasn’t it? Because the price was flung up in response to those tired fears. The price falling is not a problem, it’s a blessing to companies that need to see activity pick up.

The extra hour of sleep did me well. I’m refreshed, at least for the moment. See you around.

I don’t have time to get into this. Suffice to say, I told you so.

CCJ stock is up over 6% so far.

I wish I had time to sit and talk. Sadly, I do not.

But sometime tonight, I want to see TSLA burning. Will I get my wish?

BAS is up 4% this morning after announcing earnings last night. The earnings themselves were unspectacular, but I think capital is beginning to catch on to the idea, judging by the gap up.

BAS has managed to close earnings losses by about half (so far) while keeping revenues approximately flat (-4% year over year), which in this environment with such steep competition for rig hours is an impressive feat.

The real story here is BAS’ cash position, which actually increased despite everything else. They now are sitting on $100 million, up from $96 million last quarter – and keep in mind that this time last year they were only sitting on $104 million.

The company has made a few big acquisitions over the last couple quarters, including a salt water disposal company last December. Total capital investment was $139.9 million for the last 12 months. During that same time, BAS’ long term debt increased by $82 million. So I think I can see clear value being created by the operation, the losses notwithstanding.

The real game BAS is playing here is best laid out by their CEO Roe Patterson (emphasis mine):

“With respect to acquisition opportunities, seller expectations still remain high. We expect valuations to come more into balance over the next two quarters so we will continue to conserve our liquidity until we see those opportunities. We currently anticipate spending about $165 million for capital expenditures in 2013, adding mainly higher margin rental equipment and salt water disposal wells, along with maintenance and sustaining capital.”

BAS is positioning themselves to buyout the competition at fire sale prices. That’s the real play. I first got on to this company, actually, when I was looking through the space for potential investments, and realized nobody had any cash on hand.

BAS was the first company, after checking a few dozen, that actually had suitable cash reserves.

The natural gas price collapse that occurred throughout 2011 (nice work, Aubrey…) struck the well services industry hard. I’d say BAS has a hunch a subset of their competitors might start to get in trouble here shortly – why else wait? It’s not like energy services firms (at least the publicly traded ones) are commanding high multiples these days.

The rig services guys are killing themselves right now to stay in business. This cut throat competition can’t hold up indefinitely. BAS has a mark of it falling through sometime in the next two quarters. That’s when they’ll make their big moves.

President Barrack Obama
13:00 pm Speaking from the Rose Garden

My fellow Americans,

My staff tell me that each of you should be smart enough to reach this conclusion on your own, and that I do not need to remark on it in such an obvious manner. However, these were the same people that told me they knew how to launch a website…(the President gives a light laugh)

Thank you, and bless America