With oil prices soaring, investors are looking for the best oil stocks to invest in. With many names being thrown around among the investor community, US Well Services (NASDAQ: USWS) seems to stand out for a number of reasons. The company specializes in hydraulic fracturing services in unconventional oil and natural gas basins. Hydraulic fracturing help enhance the production of oil and natural gas from formations with low permeability and restricted flow of hydrocarbon which means there is a growing demand for USWS services. The company’s electric Clean Fleet® hydraulic fracturing fleets are among the most reliable and highest performing in the industry. Recently, the company announced a $25 million direct offering to raise capital. For this reason USWS stock had a 35% dip – however investors remain bullish on the company’s potential for growth in this oil market.
USWS Stock News
*Written October 14th
USWS has been pursuing collaborations in line with its mission to help oil producers reduce their carbon footprint which has become a growing trend among other companies in the industry. This means that the market for USWS’s products is growing as shown by the company’s recent partnerships.
Back in July USWS announced the deployment of an all-electric Clean Fleet® to work for Pioneer Natural Resources Company (NYSE: PXD). USWS also highlighted a collaboration with Seneca Resources Company, LLC and the production segment of National Fuel Gas Company (NYSE: NFG) on an upcoming field trial using USWS’ Clean Fleet®. This will be the first well fully using all-electric fracturing technology.
More collaborations are likely on their way as USWS is recognized as the market leader for low-cost, low-emission, completion services. The company’s attention to environmental, social and governance best practices has resulted in increased demand for its electric fleets. Now USWS is working to meet this demand with the next-generation of fracturing solutions.
The first 60,000 newbuild hydraulic horsepower Nyx Clean Fleet® are expected to be delivered Q1 of 2022. USWS is already in negotiations with multiple customers and expects to secure contracts for each new fleet prior to delivery.
With business booming, it’s no surprise that USWS’ financials reflect its growth. Bringing in $78.8 million in revenue in Q2 of 2021, the company has managed to increase its revenue by $2.2 million from the previous quarter. However, USWS issued $125.5 million in convertible senior notes to raise $86.5 million in gross cash proceeds to sustain its growth.
USWS has also reduced its senior secured term loan to only $201.4 million after paying off $44.9 million of the loan after the sale of 30% of its diesel pressure pumping assets. This was the result of USWS’s decision to cease all operations with its conventional diesel fleet, leaving the company with five all-electric fleets. After this fleet reduction, USWS expects to grow its operations to 9 electric fleets by the end of 2022.
But USWS also has some long-term growth catalysts in store. The company entered into a license agreement with ProFrac Manufacturing, LLC which provides ProFrac with a five-year option to purchase up to 20 licenses from USWS. These licenses would allow ProFac to build electric fleets using Clean Fleet® technology worth up to $165 million. USWS has already sold 3 licenses which generated $22.5 million in income and will continue to benefit from the agreement as more licenses are redeemed.
However, investors are most interested in USWS’ reverse share split – effective October 1st. The split allocates 1 post-split share for every 3.5 pre-split shares which has led to speculation that there could be a short squeeze in store. With many FinTwit influencers showcasing their support for USWS now by buying below the $3 mark, some investors are anticipating it will reach double-digits in a runup similar to CEI.
*updated March 10th
Delivering on its goal of reducing fracturing emissions, USWS has been on a roll – partnering with a number of companies using its Clean Fleet technology. Starting out, USWS announced the completion of an all-electric field trial for Northeast Natural Energy – which beat USWS own records as the team delivered an industry-leading low emission footprint.
Through Clean Fleet technology, USWS believes that it was able to reduce its fracturing emissions by 94%. Commenting on the results, CEO Joel Broussard said that he was “extremely proud of what we were able to accomplish”. Broussard added that the company is looking “forward to partnering with them again to deliver the lowest-emission, most efficient well completions in the industry.”
Following this success, USWS announced a contract with Callon Petroleum Company (NYSE: CPE) where the company will provide electric pressure pumping services for Callon’s subsidiaries in the Permian Basin and the Eagle Ford Shale for up to three years. USWS also entered into a contract with XCL Resources to provide electric pressure pumping services in the Uinta Basin using its newest fleet – the Nyx Clean Fleet. Optimistic about the new fleet’s potential, Broussard believes it will “deliver significant fuel cost savings along with industry leading reductions in noise pollution and greenhouse gas emissions”. USWS has since entered a new contract to provide Olympus Energy with electric pressure pumping services.
More recently, the company announced it has entered a contract with an undisclosed party that operates in the Appalachia. Pursuant to the terms of the 18 month contract, USWS is expected to deliver its new Nyx Clean Fleet by November 2022.
However, USWS caught investors by surprise when it announced a direct offering of 14 million shares for $1.763 per share on March 9th. The company expects to raise $25 million from the offering – with plans to use the proceeds to fund its capital expenditure. While the news of the direct offering led to a 37% drop in the PPS, many investors remain bullish on the potential of USWS stock.
If the company uses this funding to expand its fleet and explore other options that will help cut down on debt and secure even more options, then this offering will set USWS in a potentially lucrative new direction. Already, the company has repaid approximately $32.3 million of borrowings on senior secured term loan in Q3 as well as an additional $44.6 million in Q4 2021.
As is, USWS’ annual report has been released and considering the number of contracts signed could show significant growth. In terms of financials, the company’s Q3 report showed $56.5 million in revenues compared to $78.8 million in the previous quarter although revenue per fully-utilized fleet increased 13% sequentially. However, this is likely the result of the company’s decision to exit the diesel pressure pumping market to become the only publicly traded provider of electric pressure pumping services.
Although USWS reported a net loss of $9.6 million, it has shown significant progress from Q2 when the company showed a net loss of $17.7 million. Its annual report could also reflect forgiveness in full of its $10 million Paycheck Protection Program loan.
The company reported $47.5 million of total liquidity in September but much of this could go towards the purchase of four newbuild Nyx Clean Fleets® which are expected to have its first delivery later this quarter. All of USWS’ fleets operate on a 24-hour basis and have the ability to withstand the high utilization rates for more efficient operations. But this new fleet will be the latest generation of electric pressure pumping technology, and will provide optimal solutions for the industry.
Given the current oil market, USWS stock could recover from the offering dip. In the long-term this company shows a great deal of potential with a market cap of $67.7 million and float of only 28.18 million.
Media Sentiment
@BMoeKnows notes that the drop due to the direct offering was likely an overreaction
Investors like @KingShard1 have long-term conviction in USWS given its services
Technical Analysis
Currently at a dip, USWS is trading at $1.31 with main support at 1.19. It shows a weak resistance at 1.40 and a secondary resistance at 1.85. Accumulation has been on a steep downward trend but is seeing an uptick, and the MACD is bearish. At the same time, the RSI is at 42 indicating the stock is approaching oversold.
While the indicators are showing a bearish reaction due to the offering, this could be a good entry point for bullish investors given USWS stock’s potential for a recovery in this oil market and its low float of only 28.18 million shares.
USWS Stock Forecast
With oil prices soaring, investing in companies in the industry seems straightforward. What makes USWS stand out is its status as a market leader for low-cost, low-emission, completion services. Companies with USWS’ environmental perspective are very popular at the moment and its strong fundamentals are a good long-term sign for the company. USWS stock could recover soon as the company’s fundamentals speak for themselves.
If you have questions about USWS stock and where it could be heading next feel free to reach out to us in our free alerts room!
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