Internal Support Leads To Upgrade On Basic Energy Services

• Basic Energy Services, Inc BAS shares have been on a downtrend for the past six months, losing more than 40 percent since March 3.
• Wunderlich analyst Jason A Wangler upgraded the rating for the company from Sell to Hold, while maintaining a price target of $4.
• Basic Energy continues to forge ahead in a difficult OFS space, Wangler said, while adding that insider buying would provide support to the shares at the current levels.

Analyst Jason Wangler said that Basic Energy’s 3Q15 guidance of higher sequential revenue was surprising. Although it appeared possible for June, it seemed tough in July/August.

The 50 percent drop in Basic Energy’s stock since its 2Q15 results reflects this concern, Wangler mentioned. The recent substantial insider buying by the company’s directors, its chairman and CEO was a bullish sign for the company.

“We still need to see a better macro to bounce off of this bottom but it's good to see management getting involved at these levels,” the Wunderlich report stated.

Pointing out that Basic Energy’s financial position was adequate to allow the company to continue operating, Wangler wrote, “BAS still has over $200 million in liquidity, already made a good deal with its banks as far as its credit facility, and should still generate cash flow even in a tough market.”

Basic Energy’s $250 million agreement with Quantum Energy Partners is expected to be an important tool in the M&A space, the report added.