C&J Energy Services (Nasdaq:CJES) is the latest company in the oil service sector to go public, as this provider of hydraulic fracturing and other oil services seeks to raise capital during a time of strong demand for its offerings.
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C&J is offering 11.5 million shares of common stock in an initial public offering (IPO) at a price of $28 per share, with the company offering 4.75 million shares for sale and other shareholders offering the balance of 6.75 million shares. The company plans to use the net proceeds of the offering to pay down debt and fund the expansion of its oil service equipment. A range of oil services used in well completion and production enhancement are offered, including pressure pumping, hydraulic fracturing and coiled tubing operations.
C&J reported revenues of $244.2 million and net income of $32.3 million in 2010. This represented fairly rapid growth from 2008, when the company reported only $62.4 million in revenues. The first quarter of 2011 showed even further growth with reported revenues of $127.2 million, and net income of $29.1 million.
C&J Energy Services owns four hydraulic fracturing fleets with 142,000 total horsepower. The company has four other fleets under construction, and estimates that total horsepower will reach 270,000 by the end of 2012. C&J Energy Services also owns 14 coiled tubing units and 25 pressure pumping units. The company earned 80% of its revenues in the first quarter of 2011 from providing hydraulic fracturing services to operators trying to enhance production from wells drilled into formations with low permeability. Its four operating fleets are under term contracts with EXCO Resources (NYSE:XCO), EOG Resources (NYSE:EOG), Penn Virginia (NYSE:PVA) and Anadarko Petroleum (NYSE:APC). The company's fifth fleet, which is under construction, will be available in August 2011, and is under contract with Plains Exploration and Production (NYSE:PXP). The other three fleets are currently without contracts, and are set to be delivered before the end of 2012.
There is currently a shortage of hydraulic fracturing capacity in many oil and gas basins in the United States, as the rig count has risen over the last few years along with a shift towards horizontal drilling. If this trend continues, C&J Energy Services should have no problem finding work for its three new fleets over the next 12 months. Halliburton (NYSE:HAL) is one of the largest suppliers of hydraulic fracturing services, and confirmed this shortage during the company's earnings conference call held in July 2011.
The Bottom Line
C&J Energy Services offers hydraulic fracturing to a range of customers in some of the hottest oil plays in the United States. The company's new capacity, set to come to market over the next 18 months, should find eager customers due to current shortages in many basins. (For related reading, also check out Peak Oil: Problems And Possibilities.)
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