Tag: CJES

Market Position May 15, 2013

On By Jay UnniIn Investing, SpeculationLeave a comment

I have had some big successes in the market lately. The short yen position has been yielding truly incredible profits lately. Almost simultaneously, the long position in Tesla (TSLA) has nearly doubled. Nearly every day after the earnings announcement has given us a new breakout to higher prices. This signals that there is a big money position being established in the stock, or that short covering is occurring now. If the huge money behind these moves are capable of mobilizing so quickly to positive news, this signals to me that they will be equally quick to mobilize in reaction to negative news.

I am not sure how long this continuation move will last. Eventually there will be a pullback – that is almost certain. But I still suspect we are only in the early phases of this boom for Tesla. I expect Tesla to generate more buzz and excitement as the year goes on.

In addition, I re-established the position in 3D Systems (DDD), according to the logic outlined in my article. Events are playing out as I had expected, with upgrades in the stock, and higher prices. This lends credence to the idea that we experienced a test phase from January to March, and we are now in a phase 4 type boom. Therefore, there should be additional room to go with the DDD long.

C & J Energy  (CJES) continues to be a dead weight in both the portfolio. The bad news about the state of the hydraulic fracturing market is out, and I believe it has been priced in. I think we have put in a bottom in this range (~$18). I dont expect the stock to dip below $17 unless the market turns worse.

I expect the market to improve as the year goes on and higher natural gas prices lead to renewed excitement in dry gas plays.

I am working up a position in some dry gas E&P companies as we speak. I do not want to reveal names and tickers, as they are tiny companies, and I have to be very cautious to establish a position at the prices I would like. I have been able to find several that are trading well below book value currently, and I have reason to expect that the book value itself is artificially low, because it is based on a past price environment, where natural gas prices were much lower than today. I will write an article soon explaining the logic.

I am using my unleveraged portfolio to purchase the dry gas companies. I am selling off a previous purchase of Halliburton (HAL). Halliburton has also come to a fair valuation in the current environment. After the settlement of the Deepwater Horizon litigation, the shares have been relieved of the pressure that was depressing them. I suspect HAL will benefit if the activity in the North American gas market picks up, but I believe the benefit will be more pronounced in CJES, so I prefer an investment in the latter.

I also sold my shares in Petroleum Geo Services (PGSVY). It is a shame to sell off such a well run company, with such growth potential. It is still undervalued, and I expect that investors at these prices would do reasonably well holding this for the long term. 3D and 4D seismic technology is only becoming more and more important, and PGS has already accumulated the Multiclient studies for the vast offshore Africa fields. However, I think there are better opportunities, like BBBI.

I am slowly accumulating more shares of Birmingham Bloomfield Bancshares (BBBI). It is currently trading at a price to book of .5, and it seems to be generating earnings at a comparable pace to BNCCorp (BNCC). The deep discount offers a considerable margin of safety, and the growth, fueled by the automotive industry boom, is bound to continue for the foreseeable future.

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Rapid Repositioning

On By Jay UnniIn Investing, SpeculationLeave a comment

So I have not followed through on the moves suggested in my previous post; I have done things very differently.

The trading in Activision (ATVI) does not make any sense to me. In the wake of the Newtown shootings, Vice President Joe Biden has been spearheading an effort to reduce gun violence, and a discussion on gun violence in video games is in the agenda. Several media outlets specifically mentioned Call of Duty (Activision’s best selling game) when discussing the story.

This, to me, reads like negative news, which would affect perception negatively, and cause the stock to fall. However, last Friday, when the story was breaking, the stock popped instead.

I cannot find sufficient reason for why the perception would get so positive, save for perhaps the recognition of Call of Duty’s success by its infamy. I have not been enthused with the stock’s performance, and there is no blockbuster video game on the horizon. The two biggest drivers of revenue planned for this year are a Starcraft expansion and continued growth in Skylanders. A quick chart of Google trends confirms the idea that Skylanders was a huge seller this previous holiday season. The Starcraft expansion could be a hit or a miss. It is a huge question mark as to whether the Skylanders earnings boost is enough to counter the lack of other major titles during the holidays and the negative perceptions of gun violence. To avoid the uncertainty, and perhaps out of my own negative bias, I have sold the stock. It will remain to be seen whether this was the right decision or not.

There are many less risky plays. The oil price has resumed the upward climb as global demand revives from its dip. The place to be is, and has been, in international and deepwater projects. I still have no exposure to the emergence of African oil, and the ensuing consumer-products boom, which is unfortunate. I was expecting perception of African investments to grow positive throughout December and January, so I was originally planning on speculating in AFK (a broad Africa index), but the index has not performed well enough to suggest that perception is turning around. I will continue to monitor AFK, and look for more targeted ways of playing the African growth story.

C&J Energy (CJES) is now becoming dangerous. Though it remains VERY undervalued, the perception has gotten stronger against fracking. CJES has returned to the resistance point at $22-23, but I do not think it will break through. The anti-fracking movie “Promised Land” has come out, and though it has not been very successful, it should turn the perception even more negative, and depress the stock price. In addition, natural gas prices have not risen as fast or as far as I would have hoped to use up the spare fracturing fleet supply. The U.S. onshore activity (represented by the rig count) dropped throughout the 4th quarter, so I expect that competition was more fierce than the rest of 2012 for CJES’s fracturing services. So I have sold out a portion of the position.

I am unsure how much should be sold out, because 2013 will likely be a much better year for CJES. The natural gas price will probably continue to slowly rise, and oil and gas companies may begin to spend again on natural gas drilling. In addition, the price of oil is already much higher than it was during the 4th quarter, so demand for U.S. onshore oil will increase.

But the combination of a worsening perception for fracking and weak 4th quarter earnings will drive the stock down, so I must sell some of the position.

I have traded out the CJES shares for an investment in Core Labs (CLB). I respect the management of this company more than any other oil service company for their knowledge of and foresight in their industry. The company shifted to international and deepwater projects several quarters ago, so they are relatively immune to the poor 4th quarter earnings that I expect for most U.S. onshore oil service companies. While the profit margins at CJES have worsened, the profit margins at CLB have widened. CLB has a wide moat around its core analysis business, while CJES has a relatively small moat. CLB trades at $113, $2 less than what I sold it for a year ago, though the earnings have increased by 22.6%. It is one of the few companies I would buy at a P/E to growth ratio above 1 (it currently stands at 1.13), because of its excellent management, high profitability, and relative monopoly in the core analysis business.

I have invested in Corning (GLW), which is in the glass business. The TV industry has been experiencing a cyclical trough period as an after-effect of low employment. As employment picks up across the United States, the down-cycle in TV sales should end. In addition, I believe that new buyers of homes will also be likely to buy a new TV for their home. With the housing industry fully on the rebound, a pickup in the TV industry should be close behind.

LCD TV glass has been the most important driver of GLW’s earnings in the past, so the pickup in the industry should cause the fundamentals and perception to become more positive and lead to a stock price increase. As an added bonus, GLW has a near monopoly on smart phone and tablet glass, a segment which has been continually growing. The earnings for these devices is very small compared to TV glass (because of the size of the devices), but this segment should provide an additional earnings boost on top of the TV rebound.

GLW is currently trading at a cheap 9.23 Price/Earnings ratio. I think this is more than reasonable given the prospect of a TV industry rebound. I have invested a fairly large position (~10% of portfolio).

The speculation in 3D systems corporation (DDD) continues. I only wish I had more on the table. I am wary of adding to the position now, because there is really no telling when it will reverse. I will not be shy in shorting the stock when the reversal comes.

Disclosure: I am long CJES, CLB, GLW, DDD. I may sell shares of CJES in the next 72 hours.

Portfolio Review

On By Jay UnniIn Investing, Speculation1 Comment

BNCC is now up 150% after the announcement that the private offering – which was way below the intrinsic value of the bank – has been withdrawn. I will attribute the first 50% to skill (based on high earnings for BNCC), and the last 100% to luck.

I advise selling at least half at this point – there will be a lot of profit taking going on now, but the stock still has huge growth potential.

I need more powder to load up in case of a crash, so I may need to sell more. Also, GMCR looks extremely attractive here, so I think I will buy more for a fall rally.

My remaining position in IMAX is killing me; it was a mistake to retain half of my position after the Avengers premier. I should have sold it all. I am going to sell out of my position and purchase long-dated calls for January 2013 and January 2014 – yes, I may give up a substantial amount in case of a crash, but the reward:risk is probably around 3:1 for Jan 2013 $20 calls. (I think the stock could go as high as $26 after The Hobbit – which was the level of resistance in early March, and the calls cost $2 a piece.) For 2014, I’m not quite as sure,  but the theater base will be large enough that margins will have come up by then, and there are two knockout blockbusters in late 2013 – the sequels to The Hobbit and Hunger Games.

RLD looks good for the rest of the year. Exactly as the CEO had indicated, the capital expenditures have come down as the theater base has reached saturation, so free cash flow is positive for the first time in several years. This will translate into either decreased debt load or higher cash balances.
At a price/book ratio of ~3, we can’t expect rising cash balances, and thus increasing equity, to have a major effect on stock prices.

However, if management chooses to retire debt, we could get a small boost to the net income to help year-over-year comparisons.

The pre-tax income of RLD last quarter was $7624 k and the cost of interest was $313 k, so we could get a boost to pre-tax income of 4.1%, translating to a post-tax increase of 6.5%. (The post-tax increase is way higher, due to the insane tax rate of 60% that RLD voluntarily pays, instead of taking its deferred tax assets).

Management used the free cash flow last quarter mostly for cash reserves, but devoted about 10% of the free cash flow to paying down debt and buying back shares. If management continues to do more of the last two options with future cash flow, we could get a real impetus higher for the stock. I am all for free cash flow valuation, but the P/E ratio is really what attracts new investors to a stock.

My small position in GLW was most definitely entered prematurely, however, once we see signs of TV sales increasing, it will already be too late to enter the position. I will hold, but if I do not see signs of TV sales increasing this fall, I will sell before the spring.

CJES and HAL continue to dominate a large portion of my portfolio. With oil prices near $100 and rising, I cannot see a GOOD reason for the low prices on oil service names.

The reason for the initially depressed prices for the whole sector is low natural gas prices. However, the negative feedback of these prices has caused less natural gas production, and thus, prices for natural gas are rising. This rise in natural gas prices has still not filtered down to the oil service names in a major way. However, this trend will continue into the fall. The major impetus for this sector could come in the form of an unusually cold winter. Even in the absence of that, I do see an increase of at least 20% for the whole sector by next spring, however the boon of cold weather would take the sector up an additional 20-30%.

Halliburton has another factor of course – the continuing coverage of BP’s Macondo disaster. However, as the court proceedings go on, it seems more and more likely that HAL will not bear any of the liability for the disaster, and the blame will fall squarely on the shoulders of BP, or, possibly, Transocean. Perhaps this is my own biased way of reviewing the events, but until there is more clarity, I am content to hold HAL.

I still consider CJES to be my lowest risk position. The main risk is that of EPA regulations imposing more costs on hydraulic fracturing, however the combined upsides from the inevitable oil-shale trend and its incredibly low P/E ratio make it too good to pass up. The only other concern I could think of is that the company is too good to be true – I will have to do more investigation on the operations of the business in East Texas to assuage that concern.

I sold off GOOG a while ago for more cash. Though the stock has appreciated since, and still remains at a low P/E/Growth, I feel the market overall is getting overheated, and big-cap names like this will be most discounted if there is a sell-off in the S&P 500.

I still have the VIFL I bought at 4.50 and doubled up on at 5.20, so it’s up considerably. I held it too long, I should have sold at $7, but I deceived myself by looking for a wedge pattern to the upside. Now, I must move on and accept the fact that it is tying up far too much of my capital. It is still slightly undervalued with a PEG of .84 and a cash-backed out PEG of .70, and it has an attractive free cash flow yield, however it is not as undervalued as I would like it to be for a hold. I fear I must unload some shares, at a slightly decreased price in the low $6s. An opportunity for a higher price was lost, but if I translate this sale into a better idea, like GMCR or CJES, I think I will end up glad I did.

GMCR is still terribly undervalued here, with PEG of .50. Again, if a cold winter blows through, we could get a big coffee boost, but this is not something to be counted on. Without any winter effect, GMCR is an idea that has been proven in one geography – the Northeast – and is now spreading across the continent, locking in rapid earnings growth as it spreads. Starbucks has been clear in its plan to partner with, rather than compete against, GMCR, and this is perhaps the most important coffee brand.

I am not concerned about the patent expiration, because the only competitors to release on the Keurig platform are low cost store brands. Since GMCR has a high upfront cost and typically high K-cup costs, the customers already on the system are those with disposable income who are willing to spend for high-quality, branded coffee. I would only be concerned if a more premium brand, like Peet’s or Starbucks, decided to offer their own K-cups.

The SEC investigation is ongoing, and is the biggest risk with this investment. However, the potential reward is at least 100% from the $23-24 level. The risk is hard to quantify, but probably less than 60%, so I feel comfortable deploying up to 20% of capital, though I currently hold closer to 7% of my capital in GMCR.

That is everything I hold right now. The take-aways are: Load up on cash for a potential market crash, and sell off on the least undervalued options to move into the few incredible values out there.

Disclosure: I own shares of BNCC, GMCR, IMAX, HAL, CJES, GLW, and VIFL. I may purchase more shares of GMCR in the next 72 hours.

Update on Longs – Activision, RealD, IMAX, C&J Energy Services, Halliburton

On By Jay UnniIn InvestingLeave a comment

The market seems to be valuing many of the consumer discretionary stocks lower as participants suddenly remember the Europe situation, and begin to recognize the excesses of the first quarter bull market.

I will keep buying up shares of Activision (ATVI) as it drops below $12. It has been hovering near $12 since Monday. The market is incorrectly valuing how much money will come from Diablo 3 and the second Black Ops later this year. I had not anticipated how successful Skylanders would be. All this extra upside now adds encouragement to my original long case, thus, I am adding to the position.

Real D (RLD) is trading too low again. As its theaters approach maximum capacity in the U.S., its capital expenditures will begin decreasing and free cash flow will begin to increase. Its rate of capital expenditure has already begun to slow. Reflexivity is becoming less of a concern here because the share issuance is very little at these prices. They have been slowly wittling away cash balances, but these should begin to rise towards the end of 2012, when more big blockbusters come out.
My free cash is very limited right now, so I would wait until this becomes a better bargain. If RealD hits $10 a share, I would buy.

Imax will probably trade higher later in the year and later into 2012. Management is continually reassessing their maximum target number of screens – it currently sits at 1550, which is much higher than most analyst estimates – so these reassessments will keep raising the hopes for the future.
The bias is still negative, as analysts use last year’s income – depressed from the bad (horrible) movie slate – to value the company. The assumption is that IMAX is overvalued. However, with record numbers from Avengers, and an unexpected success with Hunger Games, the company is just beginning its run for this year. Later in the year, the Dark Knight will do extremely well, and hopefully Gelfond will recognize this in time to give it a longer run time (3 weeks or more). He is getting better about extending the run-period for the blockbusters and downplaying the movies bound to be less successful. Prometheus remains a big question mark, so my view is skeptical. Men In Black will likely do better. The Hobbit will do extremely well.
In a typical year for Imax, more than 60% of the revenues come from the top 5 movies. However, in this year, I expect the majority of revenue to come from the year’s 3 super-block busters – The Avengers, The Dark Knight, and The Hobbit.
Next year, there is another strong movie slate, with Star Trek and Man of Steel to start it off.
So I am still long. I had sold off half of my postion at $24.50 a share. The current price is below, but not enough to get me salivating again. As I said earlier, my free cash to invest is pretty low right now. I may reconsider as IMAX drops below $21.

Still, my largest position is in CJES. The drop in oil was expected, and the drop in the commodity is depressing CJES even after its announcement of earnings. I partially regret not buying as shares dipped into $16 territory again recently, but my long position is so large that I am beginning to question my own approach to risk management.

HAL remains a relatively minor position in the portfolio. The Macondo issue may prove to be bigger than I had initially realized – BP is aggressively pursuing Halliburton to push of blame for the spill. I don’t think they will have good grounds to force HAL to take on cleanup costs, but they may have grounds to pursue a suit related to a bad cement job. I do think, however, it is probable that the amount of the claims will be insubstantial compared to gigantic income of the company in the wake of the shale boom. I still believe that Halliburton remains the best positioned to take advantage of international shales. Others may disagree and point to Schlumberger as the leader internationally, and they may well be correct. However, my thesis rests on the valuation difference between Schlumberger and Halliburton remains so vast that it makes up for the cost of BP’s claims and the first-mover advantage that Schlumberger has.

 

Disclosure: long ATVI, RLD, IMAX, CJES, HAL

Overview, part 1

On By Jay UnniIn InvestingLeave a comment

My funds are up significantly to-date, but so is the market.

The market feels overheated, so I am cautious, and looking to reduce my exposure where I can. Any securities that I had been holding as value investments may be approaching correct valuation, so I am going to have to re-evaluate.

Core Labs (CLB) is a position that has been great for my portfolio. Up until now, there has been a two-fold case for the investment – the undervaluing of its shares, and its position as THE dominant player in reservoir analysis and management. In addition, its perforating products had been selling like hotcakes to many of the shale E&P companies. However, there is evidence that growth in the latter is slowing, and recent reports of drilling rigs being pulled from dry gas areas may negatively impact these products performance. Core’s management has even stated that they did not expect the past levels of growth in these products to be sustainable.

Core is also approaching a good valuation for the shares. I would place a good target price at $140/share. However, the whole oilfield sector is due for major appreciation, as geopolitical risks show no signs of cooling down, and oil prices continue to rise, and a rising tide tends to lift all ships. Core will likely appreciate along with the likes of Halliburton and C&J.

Can I still justify my investment in CLB, with HAL and CJES sitting at such ridiculously low valuations? Especially with C&J, the latest quarterly report has just confirmed the trend of earnings growth, and indicates a speeding up of growth, as three new fleets will be deployed in 2012. This is a 50% growth in its fracking business, which itself brings in over 80% of its revenues. C&J is also set to grow its coiled tubing business this year.

Further, C&J is a 100% liquids play now. They have moved their last fleet out of dry gas regions, and enter 2012 with all of their fleets in liquids rich regions. The only problem that seems to be occurring with the trend is a delay further upstream – there have been well delays because of constriction of supply in drilling rigs. When demand is outstripping supply, is that not a good thing?

With over 25% of my portfolio in this single stock, I am reluctant to commit to it further. Especially because its shares have appreciated so much since my initial buy-in – I feel I missed out, and now must wait.

This is probably foolish, but I should not ignore the effect of this emotion – does it have merit? If not, I can safely disregard it, hold my nose, and continue to load up.

But it is true – CJES does not represent the same value proposition that it once did. Buying it at $22 a share is much different than buying it at $17.

But how can I value this company properly? Because it is also a reflexive process – CJES is fueling its growth through share issuance – does my traditional value measurement even apply?

It has a 13.66% earnings yield, and a P/E of 7.32. From a return on my equity, it gives 64%, similar to its ROA of 42%, since it carries no debt. A price to free-cash-flow 4.83, almost all of which is used for the new fleets.

To value it from a PEG ratio, I expect anywhere from a 50%-100% earnings growth this year, which would translate to a PEG .14 to .07.

But can a GARP approach make sense here? There is a reflexive influence. It inflated the market cap by about 10% last year – this year we might expect something similar. If that were to occur, at today’s prices, CJES would still have a P/E of 8.05, still leaving significant margin for safety.

And the reflexive relationship may decrease over time – as CJES’s operating cash flow increases, it can increase the proportion of capital expenditures financed by operating cash flow and decrease the amount funded by share issuance.

Well, at least three questions remain –

1. At what price would I stop being a buyer?

2. At what price would I be a seller?

3. How much of my portfolio am I comfortable with allocating to this one stock?

1. I don’t have an exact answer, but I believe that a P/E of 10, it would cease to be such a screaming value. The stock does carry some risk – perhaps regulations, but more likely the ceasing of the trend, caused by decreasing oil prices (a resolution to the Iran crisis, Saudi Arabia flooding the market, or extensive oil finds outside of CJES’s core areas). The resolution of the Keystone pipeline could provide another risk to this stock, by flooding the United States with new, potentially cheaper, oil.
A P/E of 10 would give a top buying price of $30, which is still 36% higher than today’s price. Wow.

But that is my top purchase price. I get a feeling that buying at any price higher than $25 would not be prudent. If I want to allocate any more of my portfolio to this position, it should be at prices below this. If it so happens that I get a flood of capital after the stock has appreciated, I will have to evaluate the current market at that time – maybe there will be an abundance of great values by that point (i.e. maybe a crash will occur before then).

2. To gauge this, I would normally use the valuation of a current oil service major. But with much of the sector depressed, current valuations of BHI and HAL seem too low to correctly gauge. And SLB and CLB, with P/E’s of 22.6 and 32.9, respectively, are given high valuations because of competitive advantages that I don’t believe are present in CJES.
The growth rate will slow as the company’s installed base increases, at the same time that every other oil service major is increasing their installed base.

3. I would be comfortable below a max allocation of 50%. Anything more would be too much in one basket.

So that is an analysis of two of my holdings. Since CJES is below my stop-buying price, and provides significant upside from here, I am going to stick with it, and move over some funds from the hot CLB.

But what about the rest of my holdings? I want to make my allocation to CJES much closer to 50% than it is currently. I will have to do a follow up post on some other stocks that look less compelling that I am holding.

CJES – A Play on North American Unconventional Resource Exploration

On By Jay UnniIn InvestingLeave a comment

Overview

In combing through the IPO filings this year, I came across an interesting company that looks significantly undervalued: C&J Energy Services (CJES). This is an oil and gas services company that specializes in hydraulic fracturing, pressure pumping, and coiled tubing services, all of which are experiencing massive demand currently because of the interest in service intensive North American shale plays. For more information on why these services are in demand now, click here: http://www.pttc.org/aapg/lafollette.pdf

About a year ago, it was near impossible for E&P companies to get someone to fracture new wells in certain high demand plays like the Haynesville in Louisiana. But now, oil services companies are ramping up the available horsepower in their hydraulic fracturing fleets. This is spelling big growth numbers for the major players.

CJES attracted me because of its Trailing P/E of ~10, and its forward P/E of ~5. Further, it is trading at 42% below its IPO price, suggesting that it is well below proper valuation. I believe this is due to a mix of factors: the markets decreased demand for IPOs (almost all of which are down sharply), the recent downgrading of several onshore oil and gas service companies on concerns over the capital expenditure budgets of the major producers, and the recent drop in oil and natural gas prices. I think that all IPOs should not be traded similarly, so this cause is moot, the concern over capital expenditures is overdone, and oil prices have recovered substantially from their recent lows. The low natural gas prices are a cause for concern, but perhaps not as large as the market assumes. More on this in following paragraphs.

Business description

CJES has “fracking” fleets and coiled tubing units in the following areas: the Haynesville, the Eagle Ford, the Permian Basin, and the Granite Wash. Currently they have 172,000 horsepower available in 5 fracking fleets. They will get 2 more fleets in 2012, providing them with a total of 7 fleets and 270,000 horsepower. This is a 57% growth in available horsepower, and, if demand is sustained, should translate into large revenue growth numbers. CJES can adapt its fracking fleets to conventional, vertical wells, or unconventional, horizontal wells, utilizing one fracking fleet to handle either one horizontal well or two vertical wells at a time. This gives it greater flexibility in case the interest in horizontal drilling decreases, and greater utilization in areas where vertical drilling is used more, like the Permian Basin.

CJES also has 15 coiled tubing units, and 26 pressure pumps.

Since becoming public, their net profit margin is approaching the level that I really like: 20%. Of course, this is a very cyclic industry, depending on the forecast pricing for oil and gas. The financial strength of this company depends on the capital expenditure budgets of CJES’s major customers, which include: EOG Resources, EXCO Resources, Anadarko Petroleum, Plains Exploration, Penn Virginia, Petrohawk, El Paso, Apache and Chesapeake, along with some smaller players.

Risks

There are several major risks I see. One is that if all the major suppliers of hydraulic fracturing services are ramping up their fleets, we could actually run into a glut of supply in the next few years. To acquire the two new fracking fleets, CJES had to issue significant amounts of debt, and without revenue growth from those fleets, CJES will be hard-pressed to pay that off.
The new fracking fleets were not the only reason CJES issued new debt. CJES recently acquired Total, the manufacturer of almost all of CJES’s hydraulic fracturing pumps. This could be a great thing – the vertical integration can help reduce costs, increase maintenance efficiency, and provide opportunities for new growth in research and development of hydraulic pumping technology.  However, if demand falls, or if a supply glut is reached, this only means more debt that CJES is saddled with.

Demand for natural gas drilling is probably not sustainable with natural gas prices below $4. And, as you can see, the trend is clearly down:

These low natural gas prices are caused by over-production of natural gas from unconventional plays. I will write more on this situation in a later post.

However, CJES’s management has been shrewd enough to focus on liquids rich plays; three out of the four areas they are in are liquids rich: the Granite Wash, the Permian Basin, and the Eagle Ford. The demand for liquids is still high, because it is linked to oil prices, not gas prices. And with WTI prices creeping above $90 once again, this demand should be sustained for a while.

Conclusion

Unless the supply of fracking fleets and coiled tubing units outpaces the rising demand, I believe CJES will be able to pay down all its debt, and grow its earnings at phenomenal rates. This could be a huge gainer.

Disclosure: I have no position in any stock mentioned, but I may purchase a position in CJES in the next 7 days.