Keane Group (NYSE:FRAC) share price soared 47% in the last eight months after bottoming around $12 a share at the end of the first quarter. The company’s stock is currently trading around $19 a share with a market capitalization of $2 billion. Keane, a diversified oilfield services company, offers hydraulic fracturing, wireline technologies, engineered solutions, and coiled tubing.
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The company’s business model is directly correlated to exploration & production (E&P) activities. After a long depression in oil markets, E&P activities started improving this year, supported by growth in oil prices. Oil prices hit a four-year high of $70 a share this week, while OPEC producers are likely to hold their production at the existing level to offer a further support to oil prices.
Improving oil prices are providing a strong support to the U.S. and Canadian oil producers, due to their higher break-even level. Therefore, increasing investments from E&P companies are driving a strong growth for the oilfield services companies. On the other hand, Keane is well set to capitalize on the improving demand, supported by its diversified product portfolio.
In the latest quarter, the company generated revenue growth of 308% over the past year quarter and its revenues increased 16% sequentially.
James Stewart, Chairman and Chief Executive Officer of Keane said, “Robust demand for our services, along with strong activity across our operational footprint, has allowed us to achieve full utilization on our fleet with the deployment of a 26th hydraulic fracturing fleet in early October 2017.”
Moreover, the company appears in a solid cash position to invest in growth opportunities. Keane recently announced to spend $115M to order three new fracking fleets, as they are expecting a robust demand in 2018, particularly from the Permian Basin.
The company has already deployed all idled fracking fleets last year and it is preparing to increase its hydraulic horsepower by 1.3M this year with the addition of three more fracking fleets. Therefore, the company is likely to generate further growth in its financial numbers, which will translate into gains for the share price.
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