Shares of Expro Group Holdings (XPRO 1.00%) fell by as much as 19.6% in trading on Thursday after the drilling and well services company reported its third-quarter financial results. Shares closed the day down 17.4%.
Expro Group's earnings fall short
Revenue for the quarter was $370 million, down 7% sequentially, and the company swung from an $18.9 million profit a quarter ago to a loss of $6.2 million, or $0.13 per share.
On an adjusted basis, the loss was $0.06 per share, but that was still well below the $0.30 per share profit that analysts were expecting.
Management said weaker demand in the U.S. Gulf of Mexico and "structural challenges" for its tubular running services business led to those underwhelming results.
One-time challenge or long-term trend?
The tone from Expro management was bullish, given the long-term tailwinds for the energy sector. High demand and relatively high prices for oil and natural gas should mean more industry spending on services. But that hasn't materialized recently.
A newfound discipline among oil drilling companies is putting pressure on service companies that were expecting production would rise to meet demand. It now seems that may not happen quite as they hoped. Oil and natural gas companies are now happy to profit from their existing wells, and to be very cautious about exploring new areas given the tighter financing environment.
This could put pressure on Expro's revenues for quite a while, and a quarter like this can give investors pause. Until we see an uptick in demand for its services, I would be cautious about buying Expro's shares, because the upside that management sees may still be a ways off.