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Why Is Basic Energy Services’ Stock Price Bearish?

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Basic Energy Services versus peers and industry

Basic Energy Services (BAS) is oilfield equipment and services (or OFS) company operating in the United States, primarily in Texas, New Mexico, Oklahoma, Arkansas, Kansas, Louisiana, Wyoming, North Dakota, and the Rocky Mountain and Appalachian regions. 

Basic Energy also provides contract drilling services to upstream producers. On May 8, 2017, Basic Energy Services’ stock price was trading at $27.29, a fall of ~23% since the beginning of 2017. In this series, we’ll analyze why.

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Weatherford International (WFT), BAS’s larger market cap peer, has fallen 4% year-to-date (or YTD). The VanEck Vectors Oil Services ETF (OIH), an ETF tracking an index of 25 OFS companies, has fallen 19% YTD. Halliburton (HAL), BAS’s larger market cap peer, has also fallen 19% since the start of the year.

National Oilwell Varco (NOV) has fallen 10% YTD. Read Market Realist’s National Oilwell Varco: 1Q17 Earnings Overview for more information. The Dow Jones Industrial Average (DJIA-INDEX) has risen 6% YTD. The energy sector makes up 6.1% of the DJIA-INDEX.

What does BAS’s stock price movement tell us?

Since the beginning of 2017, Basic Energy Services’ stock price has been trending down, reflecting a fall in crude oil’s price. BAS’s revenue was resilient in the two quarters leading up to 1Q17, although it still fell considerably compared to 2014. From 1Q15 through 3Q16, BAS’s key fundamental metrics were sharply down as crude oil prices tumbled.

In December 2016, BAS emerged from bankruptcy. Later in this series, we’ll discuss some other key drivers of OFS stocks.

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Basic Energy Services’ moving averages

On May 8, Basic Energy Services’ stock price was trading ~16% below its 50-day moving average. Moving averages exhibit smoother trends following stock price movements. A 50-day moving average is a short-term moving average, while a 200-day moving average shows a long-term trend.

BAS’s stock price has been running below its short-term moving average since February 2017, signaling a short-term headwind to BAS’s stock price.

Series highlights

In this series, we’ll discuss Basic Energy Services’ top and bottom line growth, its industry indicators, and what lies ahead for the company after moving past its bankruptcy proceedings. We’ll start with its management’s comments in the next article.

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