Monday turned out to be a nightmare for Basic Energy Services, Inc (NYSE:BAS) investors, after the oil and gas services company announced a restructuring support agreement (RSA) with debt holders as it prepares to file for bankruptcy. Under the terms of the RSA, the company must file chapter 11 cases to implement the Plan on or before October 25, 2016.
Basic Energy Services shares reacted to the news, dropping nearly 44% to $0.313 in pre-market trading.
Roe Patterson, Basic’s President and Chief Executive Officer, commented, “After careful consideration, we have taken this difficult but necessary step to secure a bright future for Basic Energy Services. This process is about fixing our capital structure for the long-term to benefit all of our stakeholders.
“The sharp and prolonged period of depressed commodity prices have created poor operating conditions in the field and significantly reduced our operating cash flow. The actions we have taken, combined with the support of our existing lenders, will help us strengthen our balance sheet and position Basic for a sustainable future to benefit from what we anticipate will be an eventual recovery in oil and natural gas prices.
“During this process, we anticipate meeting all of our ongoing obligations to suppliers, customers, employees, and others, as usual, and we will continue to provide our customers with dependable, high-quality services, which is the hallmark of our Company.
“The fundamentals of the business are strong and having access to new capital will enable us to strengthen our current business lines, grow organically as opportunities develop and participate in potential merger and acquisition activities in the future.”
On the ratings front, Basic Energy Services has been the subject of a number of recent research reports. In a report issued on August 8, BMO analyst Daniel Boyd reiterated a Hold rating on BAS. Separately, on July 29, Jefferies’ Brad Handler reiterated a Hold rating on the stock and has a price target of $1.50.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Daniel Boyd and Brad Handler have a total average return of 4.0% and -2.4% respectively. Boyd has a success rate of 70% and is ranked #1372 out of 4190 analysts, while Handler has a success rate of 49% and is ranked #3595.
Basic Energy Services, Inc. engages in the provision of well site services to oil and natural gas drilling and producing companies. The company operates its business through the following segments: Completion and Remedial Services, Fluid Services, Well Servicing, and Contract Drilling. The Completion and Remedial Services segment utilizes a fleet of pressure pumping units, an array of specialized rental equipment and fishing tools, coiled tubing units, snubbing units, thru-tubing, air compressor packages specially configured for underbalanced drilling operations, cased-hole wireline units and nitrogen units. The Fluid Services segment utilizes a fleet of trucks and related assets, including specialized tank trucks, storage tanks, water wells, disposal facilities, construction and other related equipment. The Well Servicing segment encompasses a full range of services performed with a mobile well servicing rig, including the installation and removal of downhole equipment and elimination of obstructions in the well bore to facilitate the flow of oil and natural gas. The Contract Drilling segment utilizes drilling rigs and associated equipment for drilling wells to a specified depth for customers on a contract basis. The company was founded in 1992 and is headquartered in Fort Worth, TX.