– Highly levered oilfield service company.
– Extreem optionality on rapidly improving US onshore oil services activity and pricing.
– Stock could be 7x by 2023.
– Gradually growing revenues and EBITDA are expected to lead to organic deleveraging and positive FCF by 2023.
– Limited capex needs going forward, with half of EBITDA expected to transalte into FCF.
– Revenue is highly correlated to industry activity.
– The E&P industry underinvested since 2014 and now needs to catch up with the demand.
– Peers in pressure pumping and rig segments (such as $HP, $PTEN, $NBR, $LBRT, and $NEX) tend to trade at 3x-5x EBITDA multiples.
– At a similar multiple and assuming FCF is used to deleverage, KLXE would be $35 stock.
Exp. gain: 7x to $35/share by 2023.
Full KLXE write-up (free guest account required):