Texcom Inc. (fka TEXC)

[Bobwins]

I am holding. I'm underwater about 40% but the future looks pretty bright. The second disposal well is due to be drilled this qtr so revs should flow for at least 1/2 the year.

I sent an email to Bob May today regarding water usage. I asked him if Texas municipalities restrict water usage, won't that hurt the water disposal business.

He agrees that long term, recycling will be the norm but said many drillers are reluctant to use recycled water without knowing for sure that the contaminants remaining the water won't react poorly with their completion fluids. We both agreed that there have been many recycling technologies touted but few/none that have show scalability and profits. So he thinks they still have a good future.

I also asked about the percentage of disposed water that comes from fracking fluids and produced water from production. He says it's about 50/50 so even if Texas requires recycling, they still have significant volumes of produced water that needs to be disposed.

He also informed me that they make a fair amount of revenue from skimming oil from the produced water. They store the water in tanks and periodically hire a vacuum company to skim the oil off the top of the tanks. Recently he said they sold 3,000barrels of oil from this process. That's $300K! He has to share 20% of the revs with the landowner but keeps 80%. He also said they are looking at more efficient means to separate the oil from the water.

I like this company going forward. They have better financing(saving 10% annual interest!!)and will be doubling disposal capacity by mid year. They were already profitable so other than a short term dip when Q4 comes out, I think 2013 should be a good year for Texcom. It's still illiquid so I rejected the idea of selling and buying back when Q4 is released. I'm sure they will try to put a positive spin on Q4.

CEO Bob May seems like a straight shooter. I talked to him last year and he told me his goal was to get the company refinanced. He accomplished that without a lot of dilution and seems to be the type of no nonsense CEO we like. He admits that while he has been on the hunt for refinancing, he hasn't spent much time and money on IR. Now that things are fundamentally improved, we should see more IR efforts in 2013.