Calfrac Well Services Ltd: Why its Q2 Results Were So Good

Calfrac Well Services Ltd. (TSX: CFW) saw its revenues double in the quarter while posting a positive adjusted EBITDA

SmallCapPower | July 28, 2017: Calfrac Well Services Ltd. (TSX: CFW) Wednesday reported outstanding second-quarter results with revenues doubling to $325.3 million from $150.6 million in prior year period. Consolidated revenue per fracturing job increased by 5% due primarily to the completion of larger jobs in the United States offset partially by job mix in Canada and Argentina. Pricing in Canada and the United States increased while pricing in Argentina and Russia was consistent with the second quarter of 2016.

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Calfrac Well Services posted a positive adjusted EBITDA of $39.9 million as compared with negative $14.1 million in the comparable period in 2016, due primarily to significantly higher utilization in the United States and Canada, partially offset by weaker results in Argentina due to lower utilization and higher labour costs.

Calfrac Well Services is one of the largest hydraulic fracturing, or fracking, companies in the world. The Company said its fracturing job count increased by 125% in the second quarter, mainly due to higher activity in Canada and the United States. Calfrac Well Services expects to continue to transition towards a “more sustainable business” environment for the pressure pumping industry, as its Q2 results saw it achieve “further pricing gains” in North America.

And, as a result of increased activity and demand for its equipment, Calfrac Well Services announced a further increase in its 2017 capital budget from $45.0 million to $65.0 million. The incremental capital expenditures will be focused largely on maintenance capital for a larger fleet of equipment operating in North America due to a higher number of fleet activations than were initially planned.

Shares of Calfrac Well Services have surged more than 50% during the past month to its current price of $3.50. In terms of valuation, Calfrac Well Services currently trades at price to TTM sales of 0.62x and price to book value of 0.98x.

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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