1 The Company
One oil service company has seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:
- The stock is purchased by three or more insiders within one month.
- The stock is sold by no insiders in the month of intensive purchasing.
- At least two purchasers increase their holdings by more than 10%.
Compressco Partners, L.P. (GSJK, Financial) provides compression-based production enhancement services for natural gas and oil exploration and production companies.
Common units outstanding (May 12, 2014) | 9,279,293 |
Subordinated units outstanding (May 12, 2014) | 6,273,970 |
Total number of units outstanding (May 12, 2014) | 15,553,263 |
Share price | $22.08 |
Market cap | $343.4 million |
Enterprise value | $365.7 million |
P/S | 2.9 |
P/E | 19.9 |
P/B | 2.1 |
Distribution | $1.81 per unit on an annualized basis |
Distribution yield | 8.2% |
Ticker | GSJK |
(Source: Investor presentation)
1.1 History
Compressco was formed in October 2008. The company had its initial public offering in June 2011.
1.2 Business Model
Compressco believes that the value, breadth and quality of services that the company provides to natural gas and oil producers gives it an advantage over its competitors who primarily provide only equipment and maintenance services without ongoing monitoring and optimization services.
(Source: Investor presentation)
2 Management
The President, Ronald Foster, has over 30 years of energy-related work experience that also includes positions with Wood Group, Halliburton and Dresser. Ronald Foster has served as President since October 31, 2008. Collectively, Compressco’s management team has over 125 years of industry experience.
2.1 Insider Ownership
Compressco’s directors and executive officers own 2.3% of the company.
Here is a table of Compressco’s insider activity during the last 30 days.
Name | Title | Trade Date | Shares Purchased | Public Offering | Current Ownership | Increase InShares |
Tetra Technologies (TTI) | 10% Owner | July 28 | 1,391,113 | Yes | 7,818,370 shares | +21.6% |
Bass Wallace | GC | July 25 | 2,000 | Yes | 7,000 shares | +40.0% |
James Larson | Director | July 25 | 1,000 | Yes | 16,083 shares | +6.6% |
There have been 1,394,113 shares purchased by insiders during the last 30 days. Two of these three insiders increased their holdings by more than 10%.
Here is a table of Compressco’s insider activity by calendar month.
Ă‚ | Insider buying / shares | Insider selling / shares |
July 2014 | 1,394,113 | 0 |
June 2014 | 0 | 0 |
May 2014 | 0 | 0 |
April 2014 | 0 | 0 |
March 2014 | 0 | 0 |
February 2014 | 0 | 0 |
January 2014 | 0 | 0 |
December 2013 | 0 | 0 |
November 2013 | 0 | 0 |
October 2013 | 0 | 0 |
September 2013 | 0 | 0 |
August 2013 | 0 | 0 |
July 2013 | 0 | 0 |
June 2013 | 0 | 0 |
May 2013 | 0 | 0 |
April 2013 | 0 | 0 |
March 2013 | 0 | 0 |
February 2013 | 0 | 0 |
January 2013 | 0 | 0 |
There have been 1,394,113 shares purchased and there have been zero shares sold by insiders since January 2013. The month of July 2014 has seen all of the insider buying.
2.2 Compensation
Here is a table of the management’s compensation during the last three years.
(Source: Annual report)
The management’s total compensation was highest in 2011.
3 Financial Summary
3.1 Current Situation
Compressco reported the first-quarter financial results on May 8 with the following highlights:
Revenue | $29.8 million |
Net income | $4.6 million |
Cash | $12.6 million |
Debt | $32.2 million |
(Source: Investor presentation)
The net income grew 1.8% compared to the first quarter of 2013.
On July 20 Compressco announced that it had entered into a definitive agreement to purchase all the outstanding shares of Compressor Systems for $825 million in cash.
To fund this acquisition, Compressco announced on July 24 the pricing of an underwritten public offering of 15,280,000 common units at a public offering price of $23.50 per unit and on July 29 Compressco announced that it had priced its previously announced private offering of $350 million in aggregate principal amount of senior notes.
3.2 Historical Developments
Here is a table of Compressco’s revenue and earnings since 2011.
Year | 2011 | 2012 | 2013 |
Revenue ($ millions) | 95.2 | 108.6 | 121.3 |
Net income / loss ($ millions) | +7.3 | +16.3 | +17.6 |
EPS | +0.45 | +1.04 | +1.11 |
The revenue has grown 27.4% since 2011.
4 Shares
Here is a table of Compressco’s number of shares since 2011.
Year | 2011 | 2012 | 2013 |
Number of units (millions) | 15.3 | 15.4 | 15.5 |
Compressco’s number of units have grown 1.3% since 2011, but revenue has grown 27.4%.
5 Outlook
Compressco’s second-quarter guidance is as follows:
Revenue | $31-$33 million |
Net income | $4.7-$5.1 million |
EBITDA | $9.0-$9.6 million |
Adjusted EBITDA | $10-$11 million |
(Source: Prospectus)
6 Risks
Compressco depends on domestic and international demand and production of natural gas, oil and natural gas liquids. Reduction in this demand or production could adversely affect the demand or the prices Compressco charges for its services and products.
7 Conclusion
There have been three different insiders buying Compressco and there have not been any insiders selling Compressco during the last 30 days. The three insiders purchased their shares at $23.50. I believe Compressco could be a good pick below $23.50 based on the intensive insider buying.
Disclosure: The author has no positions in any stocks mentioned.