Basic Energy Services’ Important Drivers in 2Q17
Basic Energy’s bankruptcy case
On October 25, 2016, Basic Energy Services (BAS) filed for bankruptcy after persistently weak performance because the energy market was gripped with pricing weakness. On December 23, 2016, Basic Energy Services completed a debt restructuring and recapitalization plan, following its emergence from bankruptcy. Read more in Market Realist’s Can Basic Energy Services Bounce Back after Bankruptcy?.
We’ll now look into Basic Energy Services’ segment performance. The Completion and Remedial Services segment accounted for 50% of BAS’s 2Q17 revenues. Revenues rose the most (up 33.5%) in 2Q17 over a quarter ago. This segment’s profit as a percentage of revenues improved to 24% in 2Q17 from 16% in 1Q17.
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The Well Servicing segment saw 9% revenue growth in 2Q17 over 1Q17. Its segment profit margin also improved to 21% in 2Q17 from 16% a quarter ago. Basic Energy Services is 2.0% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). XES fell 27% compared to a 50% decline in BAS’s stock price from December 30, 2016, to September 22, 2017.
Factors affecting BAS’s performance
- improved pricing in the Completion and Remedial Services segment (better pricing reduced inventories of drilled but uncompleted or DUC wells)
- a higher rig utilization rate in the Well Servicing segment
- 5% higher revenue per rig hour in the Well Servicing segment
- 14% higher revenue per day in the Contract Drilling segment
Revenue comparison with peers
Compared to BAS’s 78% revenue rise in 2Q17 over 2Q16, Schlumberger’s (SLB) revenues rose 4% in 2Q17 over 2Q16 while Halliburton’s (HAL) revenues rose ~29% during the same period. Read our latest analysis of Halliburton in Market Realist’s Will the International Slowdown Hurt Halliburton in 2017? From 2Q16 to 2Q17, Nabors Industries’ (NBR) revenues rose ~10%. HAL is 0.18% of SPDR S&P 500 ETF (SPY). The S&P 500 Index (SPX-INDEX) rose 11% year-to-date versus a 50% fall in BAS’s stock price.
Next, we’ll discuss Basic Energy Services’ capex and free cash flows.