The GasFrac conference Call
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GasFrac Energy Services Inc. held its quarterly conference call today.There was some key information put forward that investors should know.
First, in Canada, the company reconfirmed that it has sufficient backlogand interest so the all of its equipment sets will be fully utilizedthrough the end of 2011. Management was not asked about 2012, but theydid say that half of the sets could be fully booked as of today untilthe middle of 2012.
Second, in the USA (which really means Texas at this point) they havehad faster acceptance by the market than the company expected. Thereare 16 customers with wells to be completed who are already registeredfor work. There are an additional 14 customers who are awaitingproposals from the company for completion work. There are many morepotential customers who have expressed interest in the company. Gasfracis trying to get the widest possible usage in the fields that it istargeting rather than sticking with just one or two clients withmultiple wells. The additional equipment that will arrive in the fallwith allow for more concentration with particular customers.
Third, during the first quarter, the company had an average of less thantwo sets available for use due to the various safety restrictions thatresulted from the explosion in January and its aftermath. By the end ofMay, the company should have 6 sets of equipment in place andoperating. In August through November the additional four sets of the2011 capital program should come on line. These sets have a ratio of2.5 to 1 back end to front end. This will allow for better usage of thesets with less down time for parts of the equipment. The companyquantified this increased usage as follows: the capacity of oneequipment set will go from $50 million in 2010 to $65 million in 2012.Finally, management says that it expects to continue to grow thecapital equipment in 2012, but there have been no decisions as of yetwith regard to the size or speed of the increase or as to how it will befinanced.
Fourth, the propane recovery system prototype is almost complete. Fieldtrials of the equipment are scheduled to commence in June. Currentexpectations are that this new system will hit the market at thebeginning of 2012. GasFac has set up a separate division for thepropane recovery system. Management views it as a separate item fromthe well completion work.
Fifth, the listing on the TSX is moving ahead and should be achieved by the end of June.
Sixth, the patent process is continuing apace. Gasfrac expects toreceive patent approvals during the rest of the year for its remainingapplications in the USA.
All of these statements boil down to this: the growth story of thecompany hit a pothole in the road last January when the explosionoccurred. The company, however, has gotten past that blip with itsplans and prospects intact. Within the next year, absent a surpriseproblem, GasFrac should be a much larger, fast growing and highlyprofitable company. Think of it this way: In the first quarter of2012, Gasfrac should have the capacity to generate over six times therevenue that its capacity allowed for in the first quarter of 2011.There will be ten sets of equipment rather than two, and each of thesets in 2012 will be able to generate 30% more revenue ($65 million vs.$50 million).
The future for this stock seems bright indeed.
Disclosure: I remain long GasFrac stock with a substantial holding.