|Shares Out. (in M):||60||P/E||0||0|
|Market Cap (in $M):||600||P/FCF||6||0|
|Net Debt (in $M):||-12||EBIT||0||0|
USWS is a technology-oriented oilfield service company focused exclusively on hydraulic fracturing services for the oil and gas industry. USWS was founded in 2011 with an investment from Antero Resources (NYSE: AR) which remains a major customer of its fleet. Joel Broussard (Chairman and CEO) and Matt Bernard (CFO) raised $30 million of equity and $80 million of debt and became Board Members in 2012. Later, TCW led an $180m financing in 2014 and became the largest shareholder in USWS.
USWS is one of the first companies to develop and commercially deploy electric-powered hydraulic fracturing equipment. USWS’ patented Clean Fleet® technology which was developed in 2014 and is covered by 15 patents (64 pending) combines natural gas turbine generators with electric motors and existing industry equipment for hydraulic fracturing. The Clean Fleet reduces completion costs and offers significant fuel cost savings compared to diesel-powered pumps estimated at $13 million at current fuel prices.
The Clean Fleets also have much longer useful lives of 15-20 years vs. 6 years for diesel powered fleets and reduced repair and maintenance costs translating into better free cash flow conversion. The average cost of building a Clean Fleet is $60 million with a 3-year payback period.
Today, USWS operates 11 active fleets serving the Marcellus, Utica, Permian and Eagle Ford basins. Two electric fleets will be deployed in Q1 2019 under newly awarded contracts.
Financial Projections and Valuation
Conservatively assuming only 2 fleets are added in 2019 (vs. 6 projected by management), we get to a 2019 EBITDA of around $160 million which would imply shares are trading at 3.7x forward EBITDA and at at 20% forward FCF yield. We think the shares could be re-rated as industry sentiment improves with significant upside for the warrants.
Re rate to comps
Improved industry sentiment