Energy investors looking for a pure play on the growth of hydraulic fracturing might want to look at Frac Tech Services, a private operator that just filed for an initial public offering. (To learn more, see IPO Basics Tutorial.)

IN PICTURES: 5 Tips To Reading The Balance Sheet

Hydraulic fracturing is performed on shale and other unconventional wells to help stimulate production of oil and gas. Frac Tech Services owns 22 hydraulic fracturing units and the associated equipment used to perform these services on wells. The company reported a total of 875,500 horsepower as of December 2010.

Frac Tech Services estimates that exploration and production companies spent $16 billion on hydraulic fracturing operations in 2008 and $10.5 billion in 2009. The company expects 2010 spending to exceed the amount spent in 2008, and is looking for further increases in 2011.

The company is also vertically integrated and provided much of the proppant that the company uses in its operations.

Revenues and IPO
Frac Tech Services reported revenues of $806.1 million in the nine months ending 9/30/2010. The company has quadrupled its horsepower since 2006 and plans further increases in 2011. Frac Tech Services is adding 14 new fleets with aggregate horsepower of 455,000 by the end of 2011.

Frac Tech Services filed an S-1 on December 14, 2010 and intends to raise up to $690 million in the offering. The pricing of the IPO has not been set yet.

Large Customers
Since the large independent exploration and production companies tend to dominate land drilling in the United States, Frac Tech Services is dependent on several large customers for a significant part of its revenue. In the nine months ending September 30, 2010, Petrohawk Energy (NYSE:HK) accounted for 18.8% of total revenues. XTO Energy, which was bought by Exxon Mobil (NYSE:XOM), accounted for 13.4% of total revenues.

Frac Tech Services is partially owned by a subsidiary of Chesapeake Energy (NYSE:CHK). The company holds 25.8% of Frac Tech Services as of the filing date.

There are dozens of companies, both private and public, that offer hydraulic fracturing services to the exploration and production industry. In the public space, the three largest players in this business are Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI).

Frac Tech Services is major player in the high growth business of hydraulic fracturing, which is used to enable the potential of shale and other unconventional oil and gas formations. The company is heading to a public offering in 2011.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  2. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  3. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  4. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  5. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  6. Stock Analysis

    The 6 Biggest Russian Energy Companies

    Learn about the top energy companies in Russia, a country that holds some of the largest reserves of oil, natural gas and coal in the world.
  7. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  8. Stock Analysis

    The Biggest Risks of Investing in Netflix Stock

    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
  9. Mutual Funds & ETFs

    Top 3 Commodities Mutual Funds

    Get information about some of the most popular and best-performing mutual funds that are focused on commodity-related investments.
  10. Stock Analysis

    What Seagate Gains by Acquiring Dot Hill Systems

    Examine the Seagate acquisition of Dot Hill Systems, and learn what Seagate is looking to gain by acquiring Dot Hill's software technology.
  1. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  2. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  3. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  4. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  5. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  6. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!