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Got back in in the $1.30's. Had sold all my remaining shares when it bounced to $2.20. So it dropped 40% from that 2.20,the merger has gone through somewhat improving the balance sheet, of crucial importance to me, Demers is gone,he seemed useless like a deer in the headlights after his dream of hordes of NG trucks didn't work out, and Nancy G. has always struck me as very competent and sharp.
The fact is the stock has had a lot of correlation with the price of oil and with the expanded portfolio and territory it may break some of that. As much as the price of gas and diesel hurt the stock, and lately it's a bit of a bad combo of NG having rallied a lot while the oil rally is fizzling, it doesn't change the fact that trucks will need to make tougher emissions standards and NG will be one of the easier ways. HPDI 2.0 sounds like it could be a big deal so I like the stock down here.
Getting back into big losers has not been a great strategy, I just think this merged company seems much better, and yes, even if it's still mostly status quo, I think the change in CEO is very positive.
When we were sitting at $1.40 it looked like an institution was accumulating,dept sitting on the bid with a huge amount of shares which did end up filling. I suspect a lot of Fuel Systems holders who didn't like the merger have been dumping their shares, depressing it back down here, hard to say, but this price seems too cheap.
Went through the CC transcript. Very uninspiring. A bunch of talk about the bad weather causing a big problem again but instead of saying there will be a rebound to normal levels (with good weather) we have this:
"We're not forecasting a rapid acceleration in Q2, but rather we're thinking Q2 as a transition into a stronger second half."
I really didn't hear anything particularly good. Usually I'd hear things and think there was a problem but they're on the verge of doing well. I didn't get that feeling. I'll be staying out of the stock. Maybe it will do well some day but from the start of Heckman to now the concept, the execution and of course the stock have not worked. I have no reason to think it's changed.
bailed recently. Finished getting out on the recent strength. I have some biotechs I love that got destroyed in this great rotation and didn't want to take a chance on a margin call.
I lost my confidence in NES a while ago when I began to be concerned the problem may have become the competition may be hurting them and squeezing margins. Wanted out before earnings anyway, I have too many stocks that blew up lately let alone the general biotech massacre.
Actually down about 5% AH
I would think the stock should be doing better given what's been going on with strong nat gas prices and oil headed higher. To me there's a simple question that will determine how well the stock does.
Are things OK and they just needed to straighten out some lingering execution problems or is there a far more serious problem going on where the competition with their different range of service offerings are being preferred over NES and NES is under pricing pressure and thus margin compression in trying to get new business.
I'll stick for now with the story they just need to straighten some things out for the moment and remain long but also remain concerned about the possibility of the later which would warrant a re-assessment.
awful lot of if's there, I'm long so hope it works out but while the main problem has been terrible execution I'm worried more about the competition and the margin pressure they may be causing. The stock also acts terribly. Exploding nat gas prices should have sent this way up but it seems like even over 5 bucks the best it can do now is pull the stock up a little while it's kicking and screaming.
That $13.30's area seems to be a good spot to buy. Made a second quick buy at that level but the move up was anemic so I just booked a a quick profit and left my main position intact.
Went ahead and added a bunch more at $13.34. That's about where it bottomed out last time it plunged to a new low. While I don't have a huge amount of confidence at this point I also haven't seen anything to go along with the short blogger's dire predictions and nat gas prices have remained well over $4. And Investor John if you're in the Haynesville that's not a good place to get a perspective on NES since they mostly pulled out of there a long time ago.
I know you are trying to make broader points but some seem a stretch to paint a bad picture. Where do those nat gas trucks go at night? I'd think they mostly all go to a central location near the area they're operating in so they can get refueled and where mechanics who know what they're doing can work on them. They're not going to Joe's Garage and Burger Joint to be worked on.
I do think if competition causes margins to be squeezed it will be a problem for NES but if they can improve operationally which I think they will do margins will be adequate.
was concerned today that the sharp drop might be related to the usual company specific concerns but now I see nat gas just plunged 5% all the way down to $4.02 due to forecasts for warmer, better weather. I'll consider sell-offs based on the price of nat gas a buying opportunity versus sell-offs based on concerns about financials and competition that haven't been fully put to bed yet.
Stock could easily double this year. It was in 4's before poor quarters and balance sheet issues. If can execute reasonably well now, numbers will look much better, a decent sale of TFI will clean up balance sheet and now nat gas well over 4 so should be plenty of activity. Doesn't need to do great to double, just execute decently and not fk up.
End of tax selling rally could be strong here. We'll see if continues as Jan effect.
added some more around $15.50 Looks like some last minute tax selling to me providing what hopefully will be a last chance bite of the apple before it starts recovering next year.
nat gas at 4.43,WTI crude sitting over $100. The wind is at their back now. Hope they execute for a change and not fk up again.
nat gas now $4.51 up another 10 cents. This has to be bullish for NES, dry gas activity should certainly increase or at least stabilize. Also WTI hanging in at $99.
nat gas at $4.35 now, this still acting like a turd. Cold weather isn't going to be around forever to support the nat gas price. Also it seems weather may again be a factor in Q4 as I thought I saw it mentioned by another company.
re "$281 million lawsuit verdict having impact on stock today."
I just looked up what you were referring to, that would be pretty pathetic if a traffic accident hurt the stock but that's a fortune of money and they weren't expecting it. It obviously would be material if they had to eventually pay all that and they put out the PR.
Looks like it will be tied up in appeals perhaps for a few years. Insurance only covered a small amount and they haven't reserved for the money. It seems when legacy Heckman legacy business is mentioned it's always bad news that follows:
The jury awarded $181 million in compensatory damages and $100 million in punitive damages. The accident occurred in May 2012 and involved a Heckmann Water Resources (CVR), Inc. truck and one other vehicle. No citations were issued against the subsidiary or its employees.
"We are disappointed by the actions of this Texas state court jury but remain confident in the judicial system at both the trial court and appellate court levels," said Mark Johnsrud, Chief Executive Officer. "While we are highly sympathetic to the deceased and his family for his unfortunate passing, we believe based on input from our legal advisors and consultants, both trial and appellate, that this recent award exceeds well-established judicial norms and precedent by a staggering margin. The verdict is subject to post-trial motions and has not yet been entered as a judgment. After conferring with our legal advisors, we believe we have meritorious grounds to seek reconsideration of the verdict and to appeal. We intend to file motions to reduce or overturn the award and otherwise to file for reconsideration of the case," Mr. Johnsrud added.
Based on the pre-award analysis of the case, Heckmann Water Resources (CVR), Inc.’s exposure in this matter was not expected to exceed its available insurance limits of $16 million. Although it continues to review the matter, the Company does not anticipate establishing an accounting reserve for the matter at this time.
The Dimmitt County jury verdict is against and limited to the Heckmann Water Resources (CVR), Inc. subsidiary, and any potential liability is limited to this subsidiary. Heckmann Water Resources (CVR), Inc. assets generated approximately 11% of the Company’s adjusted EBITDA for the nine months ended Sept. 30, 2013 and include fleet, real property and disposal wells in the Eagle Ford, Barnett, Permian, Mississippian Lime, Haynesville and Marcellus/Utica shale basins, excluding the Haynesville pipelines and the Marcellus treatment plant.
nat gas up to $4.17. Hope this will help the stock as it can desperately use some help.
I've got a decent size position that I've been adding to recently but to quote Warren Buffet is a little silly. I doubt he'd go near this stock with a 10 foot pole. This is not some company that's definitely going to be around a long time.
if things keep going badly they can violate debt covenants and end up potentially going bankrupt. I think they won't and this will go back up but right now this stock is a speculation on a company that is executing poorly quarter after quarter, has an ugly balance sheet and suddenly may be facing pricing pressures and thus margin pressure even before it's fully established itself.
Yes I like the stock down here but I'm under no illusions that one could lose everything on this one. My main regret at the moment is I didn't wait to add until we got closer to the end of the year as tax selling this year is ferocious given all the gains people have elsewhere.
nat gas popped to $4.14, finally back over $4. Hopefully that tailwind will hep but at the moment we also have the headwind of tax loss selling. I think having added more at $16.10 the other day after previously adding at $15.50 pre-split adjusted will work out but at the moment feels like catching a falling turd.
My point was on balance the RS is positive. By itself it's not a reason for institutions to rush in but some will consider it where they wouldn't if it was selling for a buck and change. If people want to dump for tax or other reasons the RS won't stop that and today they decided to dump. May be the credit issues with the possibility of a future debt downgrade etc.
re "Why do you see the R/S as a positive? They usually don't work out well for investors. Companies use them because they are most likely out of other options"
That's what most of us think and is usually true because most RSs are crummy microcaps that are dying. While NES by now may seem that way it never was that kind of stock or company, it's an oil service on the NYSE with an OK if diminished market cap and for the kind of institutions that go for that kind of stock the under $5 really is an issue in terms of discouraging investment or even checking it out.
More objectively I recall Credit Suisse thought a RS would be a positive when the stock was hanging around $4. So yes in the normal situation RSs are done by failing companies that want to stay listed but that just wasn't the situation when they authorized the RS. The fact that the stock price has cratered since then makes it obviously more compelling to do it now but it was already seen as a positive thing to do before that. With the averages near all-time highs a stock that have been hideous this year will at least get a look to see if it has potential and when institutions take a look they'll take a good look at NES with a 16 handle where they they'd just dismiss it with 1 handle.
added more at $16.10. I continue to see the RS as a positive and the sell-off today was excessive. My assumption is they will be able to sell TFI for a decent price and clean up the balance sheet.
I also think they will improve operationally but that is to be seen. A good question is how severe will tax selling be and is it better to wait till the end of the year if one wants to buy? I just think the stock is extremely cheap with the additional sell-off today and want to be fully in for now. Finally it's a big positive IMO that nat gas has popped up to $3.98 so would be good to get back over $4
I think the cold snap has a lot to do with the current pop in nat gas. Frankly if it goes up too high I don't think that would be great either, I think the best might be if we sit in the $4 to $5 range or even a little less for a very long time.
If it goes higher we have power plants using more coal until they're squeezed more by environmental regulations. We want to see this movement to a surface fuel in trucks and vehicles accelerate so we establish a solid demand. Also if it gets too expensive all these chemical and other plants that are on-shoring back to the US since they can use cheaper US nat gas as a raw material will think twice and also lobby hard to slow exporting.
As you note the export thing is a big deal will take a while. So I think if it stays around $4 we could have steady long term demand and also enough dry gas wells being fracked at that price that it helps NES and other servicers.
In terms of a surface fuel then the price of diesel and gasoline also a factor and right now everything's down with oil. It seems like walking a tightrope, almost feel like this is one place I'd go for some price fixing rather than the free market.
Nearly doubled my position at $1.55 this week after it plunged after running up to $1.88. Had added a little before that at $1.36 but only filled a little and that $1.55 looked like it may be the last chance to buy cheap. I think the RS will be a positive event and the stock has been beaten down way too far. The big event that will move this stock is the sale of TFI.
If it can get done reasonably quickly and they get decent money the stock should go way up. They get rid of what has become an a;batross around their neck and more importantly instantly clean up their balance sheet forever shutting up the alarmist critics. On the other hand if they have trouble selling it or settle for a crummy price that could keep the stock from moving.
Maybe as important as any of this stuff is nat gas now popped to $3.95 and may finally get back over $4. As I've noted before this stock has always had a high correlation with nat gas prices and please skip the usual someone chiming in that nat gas price doesn't matter because it's more oily now or their business isn't tied to the commodity.
I've gone through it plenty of times why higher nat gas prices are a strong tailwind for the stock and the analysts get it as well.
UPDATE 2-U.S. approves additional natgas exports from Freeport LNG
Fri, Nov 15 2013
WASHINGTON, Nov 15 (Reuters) - The U.S. Department of Energy said on Friday it conditionally approved more exports of liquefied natural gas from Freeport LNG in Texas, a move that could lead to increased shipments of the fuel in coming years.
The approval is the fifth by the U.S. government since 2011 to countries with which it does not have a free trade agreement.
Subject to final regulatory approval, the facility is conditionally authorized to export an additional 0.4 billion cubic feet per day (Bcf/d) for a total rate of up to 1.8 Bcf/d, for a period of 20 years, the DOE said.
The agency initially granted Freeport approval to export 1.4 Bcf/d of natural gas a day of LNG from this facility on May 17.
The oil industry's main trade group, the American Petroleum Institute, welcomed the announcement and urged Energy Secretary Ernest Moniz to approve more projects at a faster pace.
"LNG exports will significantly reduce our trade deficit, grow the economy and support thousands of U.S. jobs," said Erik Milito, the director of upstream and industry operations at the API.
While the U.S. natural gas boom has led to a long list of applications to export the fuel, the Obama administration is weighing how fast to roll out approvals in order to keep domestic gas prices in check. The last approval, on Sept. 11, was for Dominion Resources Inc in Cove Point Maryland.
Whitney Stanco, an energy policy analyst at Guggenheim Securities, said the announcement was in line with expectations.
She added that President Barack Obama's nominee to be Assistant Secretary of the section of the DOE that oversees LNG, told a Senate hearing on Thursday the agency had no plans to pause its economic impact studies.
Senator Ron Wyden, the chairman of the Senate energy and natural resources committee, welcomed the news with caution, but praised the energy department for "proceeding in a deliberative manner" and considering applications on a "case-by-case basis."
"It is imperative these potential exports not have a significant impact on domestic prices for families and manufacturers, and in turn harm America's energy security, growth and employment," said Wyden.
Some manufacturers are worried that excessive exports of natural gas could lead to higher fuel bills and make it harder to open new domestic businesses.
"The Department of Energy continues to rely on obsolete data and ill-defined standards to justify continued LNG exports," said Jennifer Diggins, chairwoman of America's Energy Advantage, a consortium of manufacturers and commodity producers.
"Unchecked LNG exports will threaten America's manufacturing renaissance, double or even triple prices for consumers, and negatively impact investment and job creation," she added.
The National Association of Manufacturers on the other hand praised the decision. "We believe principles of free trade and open markets should govern whether companies can move forward and construct LNG export terminals on U.S. soil," said Ross Eisenberg, a vice president of energy and resources policy at NAM, in a release.
re "any reason not to sell and book the tax loss for 2013? Anybody think there will be significant share price appreciation in the next 30 days? Could just buy it back mid-December if one feels there is still long term potential."
From just a mechanical sense it would make sense since tax selling is likely to get heavier from here to the end of the year. That said, I'm keeping my position and with the price so low I don't want be out if we get a good recovery. Sometimes trying to save a few bucks on taxes can end up costing many times that. If the stock has a good pop for any reason you need to be comfortable with missing a potential recovery by selling now. An obvious way of getting around that if you still like the stock is to double your position now and sell back the extra half after 31 days.
re "On last thing. Why do they still have that used motor oil business? That hasn't done anything but lose them money. I wish they'd sell that off too."
That was part of TFI, Thermo Fluids so that's going to go whenever they can sell TFI. I hope they can do it sooner rather than later and if they can get it done at an OK price I think the stock would bounce because it would clean up a lot of the balance sheet issues scaring people about debt covenants and big debt in general. It would take default or BK off the table assuming they still know how to move some water around.
LOL. Coach Holtz, you're 76, why would you want to be coaching again at your age?
It's that goddam Nuverra and that SOB Heckman.
business not picking up is not just an unexpected thing, it's a failure by management to execute. Otherwise you don't do a wholesale change of your executive team including firing your COO with 2 weeks notice. This competition issue they mentioned goes to the heart of their business model and if competitors are perceived as giving a better overall value selling them other things besides water services then NES's business model could be in danger.
This competition is squeezing NES's margins and is a threat that could sink the company. That said, I did try to add a big bunch at $1.36 as I don's think BK is anywhere nearby and they could turn around but was only able to fill 1K shares and didn't want to pay up higher.
While I'm not selling here I don't at all see this as a kitchen sink quarter where they've cleared all the crap out. They haven't solved their constant problems with execution and for the first time they talked about competition as a problem which could be deadly if companies aren't buying into their model as a one-stop water solutions etc, versus companies offering other profitable services as well and can thus undercut NES pricing.
Besides that they've resolved very little as we don't know if, when, and for how much they may sell TFI for and it's a bit scary they are making a connection with the money they are hoping to get from TFI sale to taking care debt and threatening debt covenants.
I usually can stay pretty mellow when one of my stocks blows up but this one was tough as I said and thought that sudden major reorganization canning your COO was screaming Q3 problems ahead but I thought the stock was already cheap and for some reason didn't go down on the announcement. My best guess is in the absence of further bad news we'll drift back up a bit here though we need a 20% pop just to get back to a 2 handle.
Needham cuts price target to $2.50 from $4
I don't know what some of you are smoking but it was a miserable quarter and it raised or reiterated a lot of troubling issues. First of all rev were $162M versus $177 est. Some items from the CC that weren't great:
Revenues in our Shale Solutions segment in the third quarter were essentially flat" Last quarter we heard a lot of excuses like weather and execution issues. As far as I know weather was mostly OK in Q3 and execution problems seem to have gotten worse.
"Some customers in the Bakken unexpectedly rotated to projects in areas where we were not working for them. Based on October indications, we believe this is transitory. We also had high personnel costs in the Bakken as we prepared for increased 2014 activities."
Unexpected to who? NES. They have to be on to of things and execute because there's a bunch of competition and so far they continue to execute poorly quarter after quarter including after we were told to expect improvement after the horrible Q2.
re "In other basins, low natural gas prices and excess capacity persisted, impacting results."
I keep pointing out these low nat gas prices will hurt the stock and earnings and they've only gone lower lately. Also can we stop with these multiple people here telling me nat gas price doesn't matter, they're mostly oil. It matters and it will continue to matter and it's an ongoing negative that they haven't been able to compensate for.
re "There were also lingering challenges in the Eagle Ford, where we are working to manage competitive pressures."
This disturbs me the most. Competitive pressure is a red flag to me, there are other companies like I think Key and others that also provide needed services that NES doesn't and there is a lot of competition even for the water services.Competitive pressures means they probably have to compete on price which hurts margins and can be a killer as well as competing for business. They have yet to prove they will be preferred provider for their services And why do we keep hearing about "lingering challenges" We hear each disappointing quarter about these and how they'll be remedied soon only to keep hearing about moe execution problems.
re "State regulations in North Dakota regarding managing and recycling saltwater to be used for hydraulic fracturing had to be rewritten because they were based on disposal and did not allow for the extended storage, recycling or reuse of saltwater. We expect to conduct our first H2O Forward frac during the first quarter of 2014."
Fine, they need lots of permits and also regulations changed. Did they just recently figure this out? Is this something they didn't know last quarter and could have mentioned? Again execution seems sup-optimal to say the laeast. A good management should have all these kind of issues worked out and planned well in advance, not acting like it's some unexpected excuse for not doing well.
re "We also are actively working to expand the array of services and are pursuing and researching solutions that we believe will enhance our value proposition to our customers in 2014 and beyond."
That statement bothers me because it gets back to whether they are at a disadvantage rather than an advantage by their tight focus on water and environmental solutions. If other companies can do much of what NES does and also supply some equipment and other needs that NES doesn't that raises questio of whether the business plan we all thought was great with its tight focus may not in fact be meeting the nees fo customers as well some other companies can. It is an issue that's been brought up by others and I've dismissed it but now I'm not so sure.
re "Even in some of the gas plays where drilling the activity has essentially been stagnant over the last 2 years, we are starting to see some increased activities. The use of new drilling and completion technologies are creating efficiencies for increased production, and operators are seeing positive returns even with natural gas prices at current levels. Additionally, many of our customers are raising capital primarily for drilling activities, all of which present opportunities for Nuverra."
OK, if they can make money in dry gas places with prices this low that would be a positive. We'll see.
re "A quick note on our 10-Q filing. We anticipate filing it before they open on Tuesday. We have a lot of disclosure we are working through this quarter, so we're taking a few extra days there."
I can't help but be a little worried about what those disclosures are that they may not have talked about and didn't let them file the Q sooner. Hopefully there's no new issue but a couple of unexpected words showing up in a Q that analysts don't like can be a big problem some times so again hope we're done with the bad news. Reported earnings sound hideous but it all depends on all these non-cash charges they're taking We may have to wait yet another quarter to see a cleaner, clearer picture that hopefully won't include further negatives.
re "we will be closely monitoring compliance with the minimum interest coverage ratio and maximum total leverage covenants at year end. We have proactively had discussions with our bank group on this, and may proactively seek a waiver of these covenants. We believe given where we are with the sale of TFI, which we currently anticipate will occur in the late first quarter or early second quarter of 2014, and the anticipation of a complete paydown of our revolving credit facility as a result, we will be in a position to have a proactive discussion with our bank group."
Now that I'm reading this it bothers me a little. The seeking alpha hit piece was a lot about covenants that might not be able to be met which could mean debt default. I thought is was all exaggerated crap but that line above sounds like they may be depending at least in part on the sale of TFI in order to take care of what's needed to make these covenants a non-issue and that sale right now is hypothetical, We don't know if when and for how much it will sell for, all they said is they think it will happen next year.
Now I see something else that seems worrisome.
re "Beginning this quarter, we have changed the method by which we provide guidance and business outlook, consistent with our focus on the long-term performance and direction of the business. Going forward, we will provide qualitative perspective and factors on our business segments in the overall market for our products and services. So when it says "Going forward, we will provide qualitative perspective and factors on our business segments in the overall market for our products and services".
that word qualitative instead of quantitative makes me wonder if they're saying they will not give out anymore the specific guidance they had been. When and company is doing well who cares, but when a company has problems you want to see exactly what is going on, not some qualitative description.
Then we have "Looking more specifically at the fourth quarter this year in Shale Solutions, we do not anticipate a material sequential change in business activity and further believe that given the general lack of urgency on customer spending, that the seasonal impact of the fourth quarter could be greater than normal. We also see continued challenges at TFI, coupled with regular Q4 seasonality in that business."
Sounds like they're saying expect Q4 to be crappy as well.
After going over everything again I think the stock will almost certainly be down Friday and down a lot and we're not going to just somehow finish back around 24.0How big would a decline will be we'll know soon. The quarter was terrible and the CC wasn't that great but they at least have some plans to stabilize and turn thing aroun so I'll just hold my shares and Looking more specifically at the fourth quarter this year in Shale Solutions, we do not anticipate a material sequential change in business activity and further believe that given the general lack of urgency on customer spending, that the seasonal impact of the fourth quarter could be greater than normal. We also see continued challenges at TFI, coupled with regular Q4 seasonality in that business.
re "Any other ray of hope from the conference call?"
Well if I recall correctly they did think things were looking a bit more positive in Oct than Sept and they thought next year activity would pick up again in the sector. I have to go back to the point of my earlier posts that I'm sure these anemic nat gas prices aren't helping.
But also on the negative side what perhaps bothered me the most was hearing about issues where they mentioned the word competition. This has always been a major potential threat and was brought up by the Fools and others that there are several other companies doing what NES is doing and that could cause margin pressure and obviously more competition to get deals signed.
Also as the big reorganization flagged they really sound pretty lousy in terms of execution, I mean they have a bunch of employees that have to move around here but they got to do new hires because they need to keep this other bunch in place in this other area and can't just move them so they're just spending a lot of money and wasted resources that I think could have been saved with better planning and execution.
I mean every quarter we hear about execution problems and it should be solved now, or a weather problem as an excuse. It reminded me of Gilda Radner playing Roseanne Roseannadanna on SNL (going way back now), and after she went through a list of horrible disgusting things in describing some event she'd always end up saying "it's always something." and unfortunately those are the words my synapses came up with listening to the CC. But I'm still holding and if you don't buy more these blow-ups are one unpleasant way to decrease the stock as a percent of your portfolio.
re " I cannot believe he would buy NES knowing what the quarter held. Makes no sense!"
That was always a dead wrong point with regard to the quarter. If he made the investment based on non-public info about the quarter he could end up in jail for insider trading. What the buy said to me was he absolutely thinks there wasn't any bankruptcy risk due to covenants or poor performance and it seemed he basically did it in response to the seeking alpha article dire claims and sell-off, it always meant absolutely nothing for Q3 and really couldn't without risking getting into trouble.
Very annoying. I thought and said the canning of the COO and reorganization was a huge red flag for the quarter and they might not bother to warn again but I got mesmerized by the stock holding up well despite it, and the fact it still looked very cheap and even with a disappointing quarter I thought any sell-off would be muted. Now it turns out we've plunged way below when that seeking alpha article hit and it turns out we are indeed hearing about maneuvers to make sure debt covenants will be met.
They should have worked on selling TFI a long time ago, analysts like Credit Suisse called for it. Still having major execution issues. This company has been a disaster and they're still dealing with some issues left over from Heckman's previous business, do I really need to hear China Water mentioned whether it's important or not?
I haven't heard anything terrible enough where I'd want to sell down here but certainly not adding either as I'm very extended in my investments elsewhere but unfortunately held off on selling some NES to compensate. If they can get an OK price for TFI and clean up the balance sheet and improve operationally which sounds doable, and get the reverse split behind us I guess the company and the stock could probably do OK. It also seems to me Dick Heckman has largely divorced himself from the process at least publicly. Frankly I didn't like it when they said the merger would ensure Johnsrud would be secure basically for life financially, would have rather have him hungry but that's beside the point.
I'll use the Henry Hub spot price so as not to get involved in different futures contracts and I think the futures have been similar. Also note the current price I'm giving is from 11/1 and we've dropped further since then. Anyway this is the comparison I think is important:
5/1 $4.31
11/1 3.57 (the latest futures contract is currently $3.48).
So if we just go with Henry Hub that's a 74 cent plunge or 17% in 6 months. That basically puts a big orange light on gas drilling and it's not only or mainly rigs but how many wells they're fracking which is what matters for NES.
Look, if we go back a while HEK was hit hard from the fall in NG back when you may recall they pulled mostly out of the Haynesville due to the plunge then in nat gas prices and redeployed. Yes they're servicing more oily areas now but again those oily areas stay fairly stable while it's nat gas activity that makes the difference on fracking activity because unlike oil decisions to drill and frack for NG really change with the price.
Also these companies are looking out to the future to make plans and sentiment is pretty bearish on dry gas prices and that also goes to an extent for nat gas liquids. If nat gas prices just get back over $4 where they were, this stock would go up due to a strong tailwind instead of a strong headwind.
Also with oil now also down below $94 it makes for bearish sentiment and hit's the stocks of servicers which includes NES.
We also see they've had problems operationally with recently getting rid of the COO and reorganizing management so hopefully they can turn thing positively but it's harder to do in a tough environment.
I'm long the stock, sold most around $2.98 when they warned last quarter and bought back below $2.20 after that SA hit article where I think the debt covenant and bankruptcy fears raised were not valid but I don't know how this quarter will be and they need to get to where they can do well operationally and of course for stockholders regardless of these fluctuations in energy prices.
To emphasize the point if what I'm reading is correct nat gas rig count is now down 15% YTD and after a slight 2 week uptick they were down again in the last BH weekly report. Sentiment has also turned further bearish on price as relatively mild weather is expected. Also WTI oil is down to $94, I think if it fell into the $80's we could see some oily activity weaken as well.
At the moment there's just not enough demand for gas to support aggressive new drilling/fracking without then increasing supply and thus depressing the price again. Maybe things will change when we're exporting but that's still way out in time as is truly major use as a surface transportation fuel. Anyway, these things can quickly change with a cold spell or a surprise low inventory report but it hasn't happened yet and the low nat gas price is definitely a headwind on an already depressed stock.
re "You need to know what you're talking about NES is not a play on nat. gas. it's a play on any and all drilling..."
It's one thing for you to be ignorant but it's annoying when you're aggressively ignorant in responding to my post. NES has always had a high correlation with nat gas prices. If oil doesn't fall a lot further then fracking in oily areas will remain relatively stable as they they still make a lot of money from liquidy areas.
It's natural gas areas that determine the marginal but significant changes in fracking activity because when prices get low they stop drilling for dry gas and when prices go up they expand drilling. In fact when nat gas prices went over $4 at the end of March NES also moved up over $4 ( no, I'm not saying the actual price of nat gas will equal the stock price of NES which is ridiculous), but if nat gas gets over $4 NES does a lot better, in fact gas prices plunged back down to around $3.40 now and NES is stuck at $2.40 and while the price of oil has a lot less effect on NES it is also a negative when it falls a lot like is currently happening. Some analyst reports in the past like Credit Suisse have even shown charts showing the high correlation between NES/HEK and natural gas prices.
nat gas plunges to $3.43. Not going to help the stock. Oil also down to $94
Market response to what seems very bad news encouraging. They even have a search now to fill another position so seems like doing lousy and in disarray but maybe benign market response saying it's about time they shook things up and they finally recognized the need. Heckmann must have been very unhappy and pushed this with the CEO on board.
Looking at the 8K this looks like a disaster:
On October 11, 2013, Nuverra Environmental Solutions, Inc. (the "Company") and Charles R. Gordon, mutually agreed that he will resign his positions as President and Chief Operating Officer of the Company, effective October 25, 2013. Mr. Gordon's departure is in connection with the Company's previously announced strategic rationalization of its Shale Solutions. In light of the leadership transition associated with such rationalization, Mr. Gordon will leave the Company and pursue an opportunity in an unrelated business. Mr. Gordon will continue in his positions and will be paid his current salary in accordance with the Company's normal payroll procedures through such date."
So you fire your President and COO and give two weeks notice and this is after you already posted an ugly last quarter
Another bad number and associated further sell-off just became much more likely now. You don't fire a guy and announce yet another big reorganization if things were going well. And then at the same time you mention your earnings date which sounds like they're setting investors up so if it's an ugly number they can refer to the restructuring they've already announced.
If they were doing much better things would have been done in the normal course of business with a long transition, not our key officer is leaving on two weeks notice to do something unrelated. It's hard for me to put a positive spin on this before we get earnings and another horrible quarter is now very possible. The only thing we haven't had yet is another warning so I hope we can avoid it and earnings won't be terrible.
Now in July with their Q2 earnings warning they noted "Operational issues in the Eagle Ford Shale area, a key 2013 growth area for the Company, caused business operations to decline sequentially. Nuverra has taken measures to remedy the situation by bringing in a new management team with significant industry experience and restructuring operations in the region."
So that means in the 3 months since they now decided it's not just an operational problem in the Eagle Ford but the whole operation guided by the COO/President was a problem and they're canning him and doing a complete reorganization. With this news I'm going to paste the MF article below which may provide some context. I'm worried now the buying back I did around $2.20 after having sold most at $2.98 on the earning warning may have been premature and also my faith that they can get this right and take advantage of the huge secular trend of fracking is beginning to fray. MF article below:
3 Reasons to Sell Nuverra Environmental Solutions
By Matthew DiLallo
Nuverra Environmental Solutions (NYSE: NES ) wants to clean up fracking -- or at least the water that producers use in the process. But Nuverra's business hasn't exactly cleaned up as of late: Its stock price has been trading in the low single digits. While I am a Nuverra investor and see plenty of reasons to buy shares, there are three areas investors want to watch. Continued deterioration in these three areas means that it will be time to dump shares of this water-waste management and oil-field service company.
Reason to sell No. 1: Debt gets worse
There have been a few negative articles of late that have called into question Nuverra's ability to stay solvent. Some had even suggested that Nuverra could be forced to declare bankruptcy as soon as next quarter. While there is reason to be concerned about the company's debt levels, Nuverra isn't going bankrupt anytime soon.
In fact, in an effort to quell investor's fears, the company recently proactively amended its $325 million bank credit facility to increase the permissible maximum total debt leverage ratio. This proactive move gives the company plenty of breathing room to fund its growth. That being said, its debt levels overall are an area of concern because it acts as a weight that could sink the company if its business turns south. Keep an eye on its debt levels: If its debt ratios continue to worsen, then it's probably time to cut Nuverra loose.
Reason to sell No. 2: Differentiation doesn't happen
Nuverra has a number of competitors both large and small that offer similar services. Not only that but many exploration and production companies have developed their own in-house solutions. Nuverra needs to prove that its pure play, full-cycle water solution is the better option. As the slide below shows, it has built up a solid asset base to pursue this strategy.
Source: Nuverra Environmental Solutions
The problem is that some of its competitors, such as Key Energy Services (NYSE: KEG ) and Basic Energy Services (NYSE: BAS ) , can offer a more robust set of products and services to customers than the more focused Nuverra Environmental Solutions, which really just handles water.
In the case of Key Energy Services, 17% of its revenue comes from fluids management while it also provides rig services, coiled tubing as well as fishing and rental tools. It's a much larger suite of services to serve producers through the life of the well. Further, Key Energy Services is quick to point out that there are relatively low barriers to entry to fluids management, which creates a fragmented market with lots of competition.
Basic Energy Services, like Key, also offers its customers a diverse array of services. In fact, fluid services is just over a quarter of its revenue. It gets 40% of its revenue from completion and remedial services with another 30% of its revenue from well servicing.
The key for Nuverra is that it needs to show a real value proposition from its focus on environmental solutions. This is the only way it can overcome its lack of diversity in other oil-field services that give its competitors the ability underprice Nuverra on fluids management as part of a broader package of services. If Nuverra's margins continue to erode because it can't differentiate its product, then it's time to let this stock go.
Reason to sell No. 3: Operational missteps continue
This has not been a good year for Nuverra. It has been plagued by the weather in both the Bakken and Marcellus. On top of that, once the weather cleared in the Marcellus, its business accelerated to the point where it couldn't handle the growth. It was forced to subcontract some of the work, which hit margins. Not only that, but it didn't have the right management team in place to execute in the Eagle Ford, which could cost it over the long term. These operational missteps and miscalculations really hurt the company this year.
On top of this both revenue and profits from fluid services are down across the industry. Both Key Energy Services and Basic Energy Services have seen a dip in revenue as competition remains fierce which is putting pressure on pricing. For Nuverra Environmental Solutions, this isn't the time to stumble because it doesn't have the same diversification as both Key or Basic to help make up the difference. If the operational missteps continue, then its time to send Nuverra packing.
Investor takeaway
Despite these challenges I really like Nuverra Environmental Solutions and think it can overcome and eventually outperform. I think its focus on being a full-cycle environmental-solutions provider as opposed to offering it as a one add-on like Key and Basic will win out over the long term as environmental solutions become a greater focus for energy companies. That being said, the company does have some issues it still needs to work through and if it is unable to, then it will be time to sell.