C&J Energy Services Shares Plummet on Bearish Q3 Outlook

On Sep 30, oilfield services company C&J Energy Services, Ltd. CJES provided a bearish outlook for third-quarter 2015. Shares of the company plunged nearly 17% following the announcement.

C&J Energy Services expects third-quarter results to be below the guidance provided during the second quarter. This is due to the continued weakness in commodity prices, which reduced activity for the firm, especially in its hydraulic fracturing operations. Profitability is expected to be low despite the company's cost-cutting efforts during the first half of the year.

Moreover, contributions from the Well Support Services segment and coiled tubing operations within the Completions Services segment are expected to remain flat sequentially.

Third-quarter revenues are anticipated to fall about 15% sequentially compared with the prior guidance of a 5%–10% decline. Hydraulic fracturing revenues in the quarter are expected to plummet about 30% from the second-quarter results, higher than the 15%–25% decrease forecasted previously.

Nonetheless, the company continues to work on cost improvements. It has been undertaking various measures like stacking additional equipments and reducing headcount, among others.

Also, C&J Energy Services has renegotiated terms of its revolving credit facility. The company has reduced commitment to $400 million from the prior facility of $600 million on anticipations of sufficient liquidity. The reduced size would provide the company more flexibility in achieving a favorable environment with little to no immediate impact on current interest expenses.

At present, C&J Energy Services has $94 million drawn under the credit facility and $12.6 million worth letters of credit. The company also has $1.057 billion outstanding under a Term Loan B Facility.

Currently, C&J Energy Services carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the oil services space are CHC Group Ltd. HELI, Exterran Holdings, Inc. EXH and TETRA Technologies, Inc. TTI. All these stocks hold a Zacks Rank #2 (Buy).

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