I took a small dip into BAS today for $13.03. The earnings report came out and after glancing over the transcript of the call, I’m pleased with the management. They’re vigilant about maintaining cash flow positive operations. They’re controlling costs and margins. More importantly, they took advantage of the bloodbath that soaked through the industry last year, and dropped tens of billions on acquisitions.
Even after the acquisitions, they’re still easily the most cash rich company in the drilling and fluids space that I’ve come across so far. Feel free to chime in with other companies that are similar or better.
The company is steering carefully around their customers, and I think they’re doing a great job. Honestly, I believe the company could sell off again, especially if we get the market correction I’m looking for. But, I sold off some shares at $14, so adding a couple percent here won’t hurt me and locks in that opportunity.
I still have 30%+ in cash and hedging in SCO and EUO. If we get a deeper selloff, I can still take advantage of it. BAS is firmly on my radar.
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Feel free to chime in with other companies that are similar or better.
RES. BAS free cash flow is obscured by its acquisitions. If you include acquisition costs with CAPEX then BAS FCF is negative over the last five years. RES is nicely positive over the same period when using CF Ops – CAPEX – Acquisitions.
Since acquisitions are about the only source of growth for BAS then those costs need to be considered CAPEX and not regular investing activities.
Thanks for the recommendation, Po. I’ll have a look at RES
It’s not a recommendation for RES, just a name that has better CF and historically much better return on assets, equity, and capital than BAS.
RES had a shitty quarter so it got hammered after the earnings release. Also I don’t think they have a water handling business so it probably doesn’t fit your thesis.
Honestly I wouldn’t hang my investment thesis on water handling. It’s low margin, not many barriers to entry, etc. Any jackass can go out and buy a few water haulers and get started.
It’s probably not that easy as I’m sure you have to get all sorts of government waste hauling licenses, but overall it’s not like you need to invest a shit ton of capital in R&D or high-tech equipment. There’s a reason the likes of SLB, BHI, HAL don’t make this a big priority.