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Basic Energy Sees Earnings Increase After Plumbing Two-Year Low

Basic Energy Services Inc., the provider of operations to the oil and gas industries, expects increased business from customers to boost earnings that are poised for the worst year since 2010.

More volume from existing customers as well as acquisitions and capital expenditures will help the Fort Worth, Texas-based company’s earnings increase in 2014, according to Chief Financial Officer Alan Krenek. The number of oil and gas rigs in the U.S. is up 0.7 percent from the end of last year, according to data released by Baker Hughes Inc.

“Based on customers’ announced plans for 2014 and discussions in the field with our customers, it appears that 2014 is going to be a better year than 2013,” Krenek said in a Dec. 5 telephone interview.

Adjusted earnings before interest, taxes, depreciation and amortization at Basic Energy were $225.4 million for the 12 months ended Sept. 30, down 36.9 percent from the same period a year earlier, according to data compiled by Bloomberg. It was $79.7 million for the year ended Sept. 30, 2010, according to regulatory filings.

Basic Energy paid $300,000 in August to increase the level of debt relative to Ebitda, or leverage, it’s permitted to have to 4.5 times from 4 times, according to Krenek. Standard & Poor’s expects that ratio to remain between 3.5 times and 4 times through 2014, according to an Aug. 29 rating report.

The company’s maximum leverage ratio, which is restricted by the agreement for its revolving line of credit, can’t exceed 4.25 times after March 31 and 4 times after Sept. 30, according to an Aug. 29 regulatory filing.

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