GASFRAC Energy Services Inc. has announced its second-quarter earnings and operations update.
Zeke Zeringue, CEO and President commented "Revenue increased 18% to $16.7mm versus $14.2mm in 2011 and while this is significantly below our expectations for the quarter, we feel there were some positive inroads made that will help GASFRAC grow moving forward in Q3 and Q4. Similar to Q2 2011 we had an extended breakup in Canada that was compounded by wet and rainy conditions preventing us from fulfilling our revenue targets for the latter part of the quarter. We weren't able to recommence operations in parts of our Canadian operations until late July. In the US, our major customer, BlackBrush, spent most of Q2 upgrading their field infrastructure and pipeline capacity in order to handle increased production that was created by implementing GASFRAC technology on their San Pedro ranch acreage. Other substantial revenue projects were pushed back to Q3 due to various factors that were out of GASFRAC's control.
We are happy to announce that one of those substantial projects was completed in July in the Niobrara Wattenberg field and by all signs so far we are seeing very positive results. Also on a positive note, several of our Canadian customers are seeing far superior results using GASFRAC and have committed additional stimulation programs in 2012. Of the 20 different customers we have completed stimulation treatments for in 2012, 13 have committed additional jobs in 2012 giving us a 65% customer retention rate in North America.
In addition, we plan to deploy our first "Hybrid" spread of equipment with new "Hybrid NGL's" during the fourth quarter. This will help our customers manage their third party costs while increasing our utilization."
The North American pressure pumping market has experienced a continued transition from natural gas based activity to activity driven by oil and liquids-rich basins. This change has resulted in decreased margins for natural gas related pressure pumping, particularly in the U.S. During the quarter, the US pressure pumping market continued to experience pricing pressures with real and anticipated excess capacity of pumping equipment and downward pressure on oil prices. While possible over supply of equipment remains a concern, recent adjustments to the capital spending budgets of oilfield service companies indicates that such potential oversupply may be mitigated over a shorter period than normal.
In our Canadian operations we have seen an increase in customer activity in the third quarter from customers that have previously worked with us. We expect growth in Canadian revenues in the third and fourth quarters of 2012 as weather conditions improve and projects recommence. We will continue to monitor the capital budgets and cash flows of the exploration & production companies in light of recent weaknesses in oil prices. We expect that many companies will construct capital budgets for 2013 within their cash flows rather than adding significantly to their debt positions. As such, both their outlook on commodity prices and realized prices will impact the extent of their capital expenditures in 2013. We expect that any reduction in capital spending by customers will result in pricing pressure as well as reduced activity levels. We also expect that adoption by new customers will be achieved during 2013 as more data becomes available and less robust commodity prices encourage use of more effective technologies.
In the U.S. we expect sequential growth in the third and fourth quarters of 2012 as work recommences with Blackbrush in the Eagle Ford and activity commences in the Niobrara. Our focus is on the Eagle Ford, Permian and Niobrara where we have demonstrated positive results with our technology. We recognize that the sales process for our service is technically intensive and have expanded our sales team in the USA adding two sales engineers and a senior fracturing engineer to address this technical focus.
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