Basic Energy Services (NYSE:BAS) is an oil service company focused on the United States, with core operations in a domestic oil and gas basin, which has seen a surge of recent interest and activity from the industry.

TUTORIAL: Stock Basics

Permian Basin
Basic Energy Services has a significant presence in the Permian Basin in Texas, and the company has benefited from the rising rig count here over the last few years. Baker Hughes (NYSE:BHI) reported that 440 rigs were operating in this basin in the week ending June 11, up from around 300 rigs a year earlier.

Oil and gas operators have accelerated activity here because of the high price of oil and the availability of new technology to enable development. Public companies operating more than 20 rigs in the Permian Basin include Pioneer Natural Resources (NYSE:PXD) and Apache Corp. (NYSE:APA).

Basic Energy Services invested $65 million in capital to expand its operations in the Permian Basin during the first quarter of 2011. These funds were used for additional pressure pumping capacity, well servicing rigs, frac tanks and fluid service trucks.

Business Summary
Basic Energy Services reports results in four business segments - completion and remedial services, fluid services, well servicing and contract drilling.

Completion and Remedial Services
The completion and remedial services segment consists mostly of cementing, acidizing and fracturing services performed by the company's pressure-pumping units. The company focuses on lower-horsepower, single-truck operations in this area.

Basic Energy Services had 174,000 horsepower of pressure pumping capacity as of March 31. This was an increase from 142,000 horsepower at the end of 2010 and 140,000 horsepower a year earlier.

The company reported $97.5 million in revenues here in Q1 2011 and an operating margin of 44%.

Fluid Services
Basic Energy Services owns a fleet of more than 800 trucks that engage in the transportation, disposal and storage of fluids produced or needed during the drilling of oil and gas wells. The company also provides well site construction services including road and foundation construction.

The company operated an average of 838 fluid service trucks during June. This activity level was flat with May, although the company reported an increase in truck hours operated.

Basic Energy Services reported $72.3 million in revenues in fluid services in Q1 2011 and an operating margin of 33%.

Well Servicing
Basic Energy Services owns and operates a fleet of well servicing rigs that conducts maintenance, workover and recompletions on producing oil and gas wells. The company also provides plugging and abandonment services on wells that are no longer productive.

The company operated an average of 412 well servicing rigs in June for a utilization rate of 74%. This was a sequential increase from the 68% utilization reported in May.

Basic Energy Services reported an operating margin of 30%, on $69.1 million of well-servicing revenues in Q1 2011.

Contract Drilling
Contract drilling is the company's smallest business segment, and Basic Energy Services reported $7.1 million in revenues here in Q1 2011. The company reported a weighted average of six rigs operating during the quarter.

Although Basic Energy Services has benefited from the growth in activity in the Permian Basin, some indications suggest that activity may have reached a short-term peak. Well servicing and other related operations are very sensitive to oil prices, and the recent drop may have caused some operators to defer activity.

The Bottom Line
Basic Energy Services offers a range of oil services to operators in the United States, and the company has seen extra growth as it has core operations in the Permian Basin. (We look at three widely used valuation methods and figure out how companies justify spending. Check out An Introduction To Corporate Valuation Methods.)

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

Related Articles
  1. Stock Analysis

    Fortinet: A Great Play on Cybersecurity

    Discover how a healthy product mix, large-business deal growth and the boom of the cybersecurity industry are all driving Fortinet profits.
  2. Stock Analysis

    2 Catalysts Driving Intrexon to All-Time Highs

    Examine some of the main reasons for Intrexon stock tripling in price between 2014 and 2015, and consider the company's future prospects.
  3. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  4. Savings

    Do Natural Gas Prices Always Follow Oil Trends?

    Prices for oil and natural gas are highly correlated. But investors should be aware of different factors affecting the prices of these commodities.
  5. Charts & Patterns

    Understand How Square Works before the IPO

    Square is reported to have filed for an IPO. For interested investors wondering how the company makes money, Investopedia takes a look at its business.
  6. Technical Indicators

    4 Ways to Find a Penny Stock Worth Millions

    Thinking of trading in risky penny stocks? Use this checklist to find bargains, not scams.
  7. Professionals

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  8. Investing Basics

    Why do Debt to Equity Ratios Vary From Industry to Industry?

    Obtain a better understanding of the debt/equity ratio, and learn why this fundamental financial metric varies significantly between industries.
  9. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  10. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
  1. 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 >>
  2. 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 >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... 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!