|
Proprietary Data Insights Financial Pros’ Top Oil & Gas Equipment & Services Stock Searches in the Last Month
|
|||||||||||||||||||||
The Tiny Oil Services Company Fin Pros Are Going Bananas Over
|
|
Most investment managers and financial pros aren’t investing or trading in penny stocks (those under $5.00 a share). Yet, Tetra Technologies grabbed an enormous amount of search volume from financial pros in the oil services industry. At first glance, we couldn’t understand why. But as we dug deeper, the answer became clear. TTI’s Business At the forefront of the energy sector, TTI has carved a niche for itself with comprehensive energy solutions tailored for the oil and gas industry. The company prides itself on its robust product line, including market-leading clear brine fluids and additives. During the drilling process, fluid lubricates the drill bit, stabilizes the wellbore, controls pressures, and facilitates the removal of drill cuttings. After drilling, when a well is being completed or undergoing workover operations—which are procedures to stimulate production—completion fluids help to prepare the well for extraction. This accounts for 48.5% of the company’s total revenues. Its Water & Flowback Services (51.5% of total revenues) manages the water used in fracking, treating and recycling it post-use, and monitors water output during production, ensuring safe and efficient water use in oil and gas extraction.
Source: TTI Investor Relations Seeing the change in energy needs, TTI is transforming itself from an oil & gas services company to a more rounded energy services company.
Source: TTI Investor Relations The company’s latest collaboration with Saltwex to develop its brine unit could change the face of the company. TTI owns 40,000 acres of brine leases that could source up to 5.25 million tons of bromine and 234,000 tons of lithium carbonate equivalent, with the first batches available as early as 2026. Financials
Source: Stock Analysis TTI’s revenues swing around as demand for drilling operations waxes and wanes. Revenues decreased substantially in 2016, bottoming out in 2020 at roughly 33% of 2015’s revenue. Today, sales are about half of what they were in 2015. However, gross, operating, and profit margins have expanded nicely, while free cash flow turned positive this year after a two-year hiatus. Interestingly, the company brought down its long-term debt from $853 million in 2015 to $150 million in 2021, where it’s stayed since. But it was the company’s latest quarterly earnings that got all the attention. Although EPS and revenues missed estimates, sales were up 16.8% compared to the prior year, while management forecast another 20% growth for the next 12 months. This came on the heels of a recent company presentation that highlighted the massive EBITDA expansion potential for its new markets:
Source: TTI Investor Relations Valuation
Source: Seeking Alpha TTI doesn’t come across as a cheap stock trading at 18.2x earnings and 13.4x cash. The bigger players, Haliburton (HAL) and Schlumberger (SLB), trade at 13.4x and 20.0x earnings and 11.2x and 15.5x cash, respectively. ProPetro (PUMP) is the cheapest all around and even trades at 2.7x forward cash flow, which seems remarkably cheap. However, CAPEX typically eats up all the cash and then some. Growth
Source: Seeking Alpha TTI’s growth was awesome after the pandemic, but only because it had hit basement revenue levels. Looking forward, its revenue growth sits in the middle of the group. And given the uncertainty around crude oil needs over the next few years, it’s tough to gauge whether the 20.1% forward estimate is accurate. Profitability
Source: Seeking Alpha What surprised us the most was TTI’s low EBIT and net income margins relative to its peers. Although 3/5 of the tickers had negative free cash flow, only TTI and PetroPump had net income margins below 10%. Our Opinion 5/10 While TTI may become a completely different company in a few years, it’s not there now. And we don’t see the demand for new oil drilling sites increasing. That puts a lot of pressure on revenues, which, although up YoY, are down substantially from a decade ago. Frankly, this just isn’t an industry we like at the moment, and would only be interested when something gets too cheap to ignore. |
|
News & Insights |
Just Spilled
|
|
Want to get content like this directly to your inbox? |