Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Basic Energy Services, Inc's (NYSE:BAS) stock surged on Friday morning, and by mid-morning the stock was up as much as 13%. Fueling the surge was the company's better than expected first-quarter results, which were less awful than analysts expected, as it beat their estimates by a penny.
So what: For the glass-half-empty types, the quarter was just atrocious. Basic Energy Services' revenue declined 35% to $261.7 million, which was $8 million less than analysts were expecting. However, on an adjusted basis, which accounts for the sale of Basic's barge rig operations last March, revenue only declined 21%. This was due to reduced activity levels and pricing pressures.
This decline resulted in a net loss of $32.6 million, or $0.81 per share. That was much deeper than the $3.3 million, or $0.08 per share, loss the company experienced in the first quarter of 2014. However, it still was a penny better than analysts had feared.
In addition, there were some other positive notes in the report, which is why investors are sending the stock higher. Basic noted that the decline in oil and gas activity level began to moderate in March and the company has started to see some flattening of utilization levels. Basic also amended its credit facility, which should provide it with ample liquidity to ride out the current storm. Its focus for the year will be on generating free cash flow and maintaining its liquidity.
Now what: While Basic Energy Services isn't yet calling a bottom in the market, it does appear that the slowdown in activity is, well, slowing down. Furthermore, the company is focusing its efforts on staying afloat so that it can survive the downturn in order to participate when conditions improve. Investors see this as a sign that the worst just might be over.