Essential Energy Services Ltd T.ESN

Should have $0.12 cash per share by year end

[sculpin2]

From Raymond James

Essential Energy Services (ESN-T | $0.20 | Target: $0.25 | Market Perform) Essential has been relegated to the equity sidelines for the past two years and it's hard to envision that changing in a declining rig count market. Essential will be impacted by the slowdown in completions activities and, like the frackers, we expect ESN to have a fairly strong 1Q before seeing breakup-like conditions for the balance of the year and through 2021. We expect EBITDA in 2020 to fall to $7 mln from $16 mln in 2019, with run-rate EBITDA falling to just above zero by 3Q. The degree to which ESN can stay EBITDA positive will depend on its ability to cut costs in the coming quarters. ESN has very little debt. Essential had $6.8 mln in bank debt at the end of 2019 and $16.1 mln in capital leases. We expect a sizable working capital draw down in 2Q that will result in ESN having $16 mln in cash by the end of the year - estimated $0.12/sh. With no interest payments and minimal maintenance capital without higher activity levels, we expect ESN can maintain the net cash position through 2021 despite near-zero FCF.

[auburn2]

CET is trading at a steeper discount. I give no value to fixed assets in this environment. What I do is take current assets + right of use assets - all liabilities. I use right of use assets because companies like CET and ESN both have "lease liabilities" associated with those assets, so if we're including those liabilities we should include the associated assets as well. When I do