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Price and Volume (1-year)
E is up 216% YoY, and is the best performing stock on our list of oilfield services companies. Gross margins are higher than the sector average, while debt/capital is lower
In 2024, we anticipate E’s revenue will grow by 23%, outpacing sector growth by 8 pp
Q2-2024 revenue was up 41% YoY (Q1-2024: 23% YoY), beating our estimate by 9%. Gross margins improved by 12 pp YoY, and were 3 pp higher than our estimate
G&A expenses were up 12% YoY, and 9% higher than our estimate, primarily driven by new hires supporting expansion and business growth
EPS turned positive, beating our estimate by 25%
In H1-2024, CAPEX increased 56% YoY to $10M, driven by heightened client demand necessitating new equipment purchases
Debt/capital remained relatively flat QoQ. Can raise up to $6M from in-the-money options and
Consensus oil price forecasts (near and long-term) are well above historic averages, implying a positive outlook for the oilfield services sector
E's revenue generally tracks changes in oil and gas prices, and sector CAPEX spending. Historically, a 1% increase in oil and gas prices, and CAPEX spending, has led to a 2.4% increase in E's revenue
Conversely, a 1% decrease in these factors has resulted in a 1.2% decline in E’s revenue
As Q2 revenue and gross margins were higher than expected, we are raising our 2024 and 2025 estimates
As a result, our DCF valuation increased from $2.44 to $2.62/share
Sector multiples are up 6% since our previous report in May 2024. E’s forward EV/Revenue and EV/EBITDA are 22% (previously 21%) higher than sector average
We believe E’s premium is justified, given its higher margins, lower debt/capital, and higher 2024 revenue growth estimate
As a result of our revised DCF valuation and updated sector multiples, our fair value estimate increased from $1.62 to $1.90/share
We are maintaining our BUY rating, and raising our fair value estimate from $1.62 to $1.90/share (the average of our DCF and comparables valuations). Upcoming catalyst includes revenue growth stemming from the deployment of newly acquired equipment.
We are maintaining our risk rating of 3 (Average)
We believe the company is exposed to the following key risks (not exhaustive):
