Gasfrac Energy Services Inc., which has been attempting to muscle into the hydraulic fracturing (fracking) market with its waterless technology, hit some roadblocks in 2Q2012, in part because the pressure pumping market is bursting at the seams, company officials said Thursday.
The Calgary-based operator reported a net loss of C$16.9 million (minus 27 cents/share) in 2Q2012, more than twice the C$7.8 million (minus 13 cents) in losses reported in 2Q2011. Revenue increased 18% year/year to C$16.7 million from C$14.2 million.
Revenues were "significantly below our expectations for the quarter," said CEO Zeke Zeringue, but "we feel there were some positive inroads made that will help Gasfrac grow moving forward in 3Q2012 and 4Q2012."
Zeringue and his management team talked about the company's quarterly performance during a conference call. Gasfrac, which expanded into the United States last year, markets a proprietary waterless fracking stimulation system that uses gelled liquefied propane gas (LPG), which can be recycled (see NGI, Nov. 14, 2011).
"Similar to 2Q2011 we had an extended [winter ice] 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," the CEO said of the latest period. "We weren't able to recommence operations in parts of our Canadian operations until late July."
However, Gasfrac reported some successes in parts of Canada, as well as in the Niobrara formation's Wattenberg field in Colorado. Gasfrac completed a "substantial" project in July in the Wattenberg field, and "by all signs so far we are seeing very positive results," the CEO said. "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."
The company has to compete in a North American market that is saturated with water-based fracturing equipment and at a time when commodity prices have stagnated, Zeringue said. LPG is more expensive than water, but it can be recycled, which requires a bigger marketing effort, he said. And Gasfrac hasn't been able to go head-to-head against the big 24 hour/seven day-a-week operators.
The company has undertaken several initiatives to hire additional technical sales and engineering staff for the U.S., introduce new marketing materials, redefine many operational roles and duties, and hire seasoned hydraulic fracturing veterans to lead and its crews.
"We have made a significant commitment to our supply chain and logistics division in order to combat increased pricing pressure we are starting to see in the U.S.
Gasfrac plans to deploy its first "hybrid" spread of equipment for natural gas liquids production later this year, he said. The company also is working to expand its customer base in the Permian Basin, the Niobrara and the Utica Shale, said the CEO. In Canada Gasfrac has plans to build operations in the Cardium play, "with a particular focus on the Montney [shale] and Viking," he said. "That foundation is still in place and we are actively pursuing opportunities in those areas."
At the end of June Gasfrac "had sufficient staffing to man seven sets of equipment, as compared to staffing levels for four sets of equipment" at the end of June 2011.
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