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What Factors Are Affecting Basic Energy Services?

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Basic Energy Services’ revenue growth by segments

Now, let’s look at Basic Energy Services’ (BAS) segment-by-segment performance. The company’s Completion & Remedial Services segment accounted for 44% its 1Q17 revenue. Revenue in this segment more than doubled in 1Q17 compared to 1Q16. Compared to 4Q16, the segment witnessed a 36% rise in revenue in 1Q17. 

On the other hand, the Fluid Services segment saw unchanged revenue in 1Q17 compared to 1Q16. The Fluid Services segment made up 28% of BAS’s 1Q17 revenue.

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Peer comparison

In comparison, Schlumberger’s (SLB) revenue rose 6% in 1Q17 over 1Q16, while Halliburton’s (HAL) revenue rose ~2% during the same period. Read the latest on Schlumberger in Market Realist’s What the Market Is Indicating about Schlumberger Stock. From 1Q16 to 1Q17, Nabors Industries’ (NBR) revenue fell ~6%.

HAL makes up 0.19% of the SPDR S&P 500 ETF (SPY). SPY tracks the price and yield performance of the S&P 500 Index (SPX-INDEX). The energy sector makes up 6.3% of SPX-INDEX, which has risen 6% year-to-date (or YTD), compared to the 23% fall in BAS’s stock price YTD.

Positive factors affecting BAS’s performance

  • Improved crude oil prices led to higher upstream well completion activity, benefiting BAS’s Completion & Remedial Services segment.
  • Pricing improved.
  • Disposal utilization improved, and skim oil sales were higher in the Fluid Services segment.
  • Two rigs were activated in 1Q17.
  • Although BAS’s operated rig count remained unchanged in 1Q17, its rig hours rose 45% over 1Q16.
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Negative factors affecting BAS’s performance

  • The amount of fluid service trucks fell 5% in 1Q17 over 1Q16.
  • Rig utilization was lower in 1Q17 compared to 4Q16.

BAS’s drivers

In February 2017, Basic Energy Services announced that it would add 74,000 of frac hydraulic horse power (or HHP) in 1Q17. This HHP is expected to be operational in May 2017. 

On March 31, 2017, BAS had 444,000 HHP, unchanged from 4Q16 and 1Q17. Higher frac capacity with improved pricing is expected to benefit BAS’s operating margin in 1Q17.

Next, we’ll discuss Basic Energy Services’ operating income in the above-mentioned segments and what’s affecting the company’s net income.

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