Investors may soon have another oil services stock to choose from when playing the energy sector as Platinum Energy Solutions (NYSE:FRAC) gears up for an initial public offering (IPO). The company provides hydraulic fracturing, coiled tubing and other related services to exploration and production companies operating in the United States.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.


Description
Platinum Energy Solutions has one hydraulic fracturing fleet operating and another one set to start working in October 2011. The company's first fracturing fleet consists of 45,000 hydaulic horsepower (HHP), which started working in August for Petrohawk Energy in the Eagle Ford Shale. Petrohawk Energy was purchased by BHP Billiton (NYSE:BHP) in August 2011.

EnCana (NYSE:ECA) has leased the company's second fracturing fleet, which has a total capacity of 75,000 HHP. This fleet is set to start working in the Haynesville Shale this month.

Expansion
Platinum Energy Solutions also has some ambitious expansion plans to take advantage of the strong demand for fracturing services in North America. The company has a third fleet on order that will be delivered in November 2011, bringing its total capacity to 167,250 HHP.

Platinum Energy Solutions has two other fleets in the initial planning stages and expects these units to be delivered before the end of 2012. This would boost the company's total capacity to 257,250 HHP.

Coiled Tubing
Platinum Energy Solutions also provides coiled tubing services to operators in the United States. During this process, a truck-mounted flexible steel pipe is inserted into production tubing to perform services on an oil and gas well. The company plans to have 13 coiled tubing units in operation by the end of 2011.

Other Operators
Another oil services company that recently went public was C&J Energy Services (Nasdaq:CJES), which conducted an IPO in July 2011. The company, along with some selling stockholders, sold 13.225 million shares at $29 per share. Although demand for the offering was strong and oversubscribed, the stock sold off with the general market, falling approximately 50% before bouncing back with the most recent rally.

C&J Energy Services is in many of the same businesses as Platinum Energy Solutions, including hydraulic fracturing, coiled tubing and pressure pumping. The company has eight fracturing fleets either in service or under construction.

Merger Activity
Investors may need another oil service company, as the industry has seen some recent merger activity with Superior Energy Services (NYSE:SPN) and Complete Production Services (NYSE:CPX) agreeing to a $6.2 billion combination.

Superior Energy Services reported that 39% of its revenue in the 12-month period ending June 30, 2011, was leveraged to the North American land drilling cycle. The balance of the company's revenue comes from activity in the Gulf of Mexico and the international segment.

Complete Production Services reported that 31% of its revenue was generated from pressure pumping in the second quarter of 2011. The company has 13 fleets in operation in the United States.

The Bottom Line
The demand for hydraulic fracturing services by the oil and gas industry is intense, and Platinum Energy Solutions should see strong growth as the company's fleets come on line over the next year. The only risk that might disrupt this growth scenario is an renewed contraction in economic activity. (For additional reading, see What Determines Oil Prices?)

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

Related Articles
  1. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  2. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  3. Fundamental Analysis

    4 Predictions for Oil in 2016

    Learn four predictions for oil markets in 2016 including where prices are heading and the key fundamental factors driving the market.
  4. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  5. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  6. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  7. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  8. Stock Analysis

    The Biggest Risks of Investing in SandRidge Stock

    Learn about the significant risks of investing in SandRidge. Read how the company may not be able to service its substantial debt load.
  9. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
  10. Stock Analysis

    Analyzing Porter's Five Forces on Under Armour (UA)

    Learn about Under Armour and how it differentiates itself in the competitive athletic apparel industry in light of the Porter's Five Forces Model.
RELATED FAQS
  1. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  2. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  3. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  4. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  5. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
  6. What is the formula for calculating earnings per share (EPS)?

    Earnings per share (EPS) is the portion of a company’s profit that is allocated to each outstanding share of common stock, ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center