CES Energy Solutions Corp T.CEU

What happened??

[JTDOUBLE]

No dividends increase and increase drawing on credit line .. 

I am very disappointed here , it becomes the opposite of what most oil gas companies are doing increase dividends and pay debts ..

[zforzebra]

Yeah, I was too quick in thinking the quarter was great.  The top lines (revenue & earnings) looked great but deeper it has worrying signs. The RBC report uploaded by retiredcf pointed them out.  The drawing on credit line is worrisome (why borrow to expand business?  Other gas and oil companies are improve balance debt for the potential slow ahead.).  Als, RBC pointed out

[EstevanOutsider]

Not really man. CES Energy has a positive net working capital surplus to debt. They are "countercyclical" which means FCF improves as activity diminishes. So the adding working capital is what caused the debt to go up as activity levels have picked up. Q2 was expected to be weaker than Q1 for margins had anybody tuned into the RBC Energy conference or even the last Q1. Stock saw

[zforzebra]

I don't fully understand how their business is counter-cyclical?  I know their main business is drilling fluids. You need to borrow to buy base materials (debt goes up) when their are lots of orders.  You sell and generate cash flow. The only why this could be counter-cyclical is that there is a quite long lag between buy the base materials and the production&selling of

[Possibleidiot01]

This is not my field of expertise , so if anybody wants to correct me , feel free, but I think the answer here is you build up your inventory in anticipation of a business rush and then when business declines , you manage your inventory more tightly  and free up working capital . It's countercyclical as in the company generates more cash later in the cycle.

[savyinvestor333]

 It's called growing there Market Share.