Basic Energy Services price plunge attracts insider buying

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Shareholders of Basic Energy Services (BAS) recently saw that stock’s price cut by a third over two days. However, three company insiders viewed the drop as a buying opportunity, significantly increasing personal holdings via open market purchases.

On July 31, BAS announced a loss of $0.83 for the 2nd quarter of 2018. According to Zack’s, analysts were expecting a loss of $0.62. After closing at $11.28 before the quarterly report, the stock touched $7.43 two days later.

Basic Energy Services provides a range of well site services to oil and natural gas drilling and producing companies. BAS currently has a market cap of about $218 million.

Form 4 filings show that 3 BAS directors bought BAS stock near post-earnings lows on August 3.

Basic Energy Services (BAS) recent insider buying.

Filing Date Insider Title Transaction Trade Date Shares Bought Avg. Price  Total Owned % Change
03-Aug-2018 Kern James D. Director Purchase 03-Aug-2018 14,000 7.61 106,581 116%
03-Aug-2018 Quintana Julio M Director Purchase 03-Aug-2018 4,500 7.57   34,065 37%
03-Aug-2018 Jackson John Earl Director Purchase 03-Aug-2018 4,000 7.71    30,842 33%

Source: WhaleWisdom.com

Most notably, James D. Kern, a BAS director since 2016, spent $106,000 buying 14,000 of BAS, more than doubling his holdings. It is the largest insider purchase by Mr. Kern on file with the SEC.

Oil prices recently touched new three-year highs, as the U.S. experiences an oil & gas boom thanks in large part to fracking and shale oil extraction. In BAS’s 2nd quarter report, Roe Patterson, President and CEO, noted that “the well service industry is operating at virtually full utilization,” resulting in significantly higher rates for the oil service industry.

However, Patterson said that: “Some regions and business lines in which we operate have not made the type of recovery we had hoped for thus far in 2018.” In response, the company is “proactively embarking on a strategic realignment initiative with the objective of accelerating financial performance in all operating segments, primarily via relocation of assets to our most attractive markets where we possess the most scale.”

Apparently Wall Street has its doubts regarding the success of BAS’s strategic realignment.

Basic Energy Services Inc. was a high flier in the days before the oil price slump, trading as high as $16,000 per share in early 2015 on a split-adjusted basis. But in October of 2016, the company filed for bankruptcy. Upon emerging from Chapter 11 on December 27, 2016, BAS conducted a 1 for 570 reverse-split. For each 57,009 shares of BAS owned pre-split, a BAS shareholder received 100 shares. So, a 1000 share position pre-split, became about a 175 share position after the split. A company usually conducts a reverse-split because shares have fallen to a lower per-share price point than the company deems beneficial.

After the August 2018 drop, BAS is trading over 50% below its 200-day moving average and 30% below its 50-day moving average (purple line below). But with insiders offering a vote of confidence, buyers around $8.50 can expect a mean-reversion bounce at a minimum.  A turn-around in operational profitability in the months ahead could conceivably spark a return to 2018 price highs near $26 – 300% higher from here. Investors may want to place a stop below $7.


Source: Interactive Brokers