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.
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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.
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.
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.
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.
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?)
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