Nuverra Environmental Solutions Inc (NYSE:NES) decided it was best not to wait until its scheduled earnings release on Aug. 8 to deliver the bad news. Instead, the company chose to preliminarily release second-quarter results and get all its bad news out in the open. Let’s break down the release to see if there is anything positive for investors.
Nuverra Environmental Solutions Inc (NYSE:NES) noted that several factors have been negatively affecting its business. The company pointed out that activity levels in some of the shale plays it operates in were below its internal forecasts because its customers worked at a slower pace than expected. It did allow that it sees some revenue being pushed into the second half of this year and even 2014.
One area that it was hit particularly hard was in its core Bakken operations. The region was really hurt by the weather in the quarter as high levels of snow and rain restricted vehicle access. In fact, April was the coldest month on record, while May was hit with record rainfall, which really constrained the construction of well sites.
With the Bakken being such a big part of its business, this hurt its overall results. However, there are some positive outlooks. Higher oil prices are encouraging its customers to increase capital budgets. For example, one of its top customers in the region, Whiting Petroleum Corp (NYSE:WLL), is adding $300 million to its capital budget to bring it up to $2.5 billion. More than half of that increase, or $161 million, is being earmarked for the Northern Rockies where the company is planning to spend $1.3 billion this year. It’s just one of many Bakken-focused producers adding capital to take advantage of higher oil prices.
The other big positive news is the recently signed contract with Halliburton Company (NYSE:HAL) regarding H2O Forward. The pilot project, which focuses on recycling produced water on site, could be a major driver of business for both companies. The partners could eventually take the show on the road and move into other high-growth shale plays like the Eagle Ford.
Speaking of the Eagle Ford, Nuverra Environmental Solutions Inc (NYSE:NES) isn’t having as much success in the play as it had hoped. Operational issues caused its business there to decline last quarter, which caused Nuverra to take swift action to bring in new management in an effort to remedy the situation. Nuverra really needs to fix its problems because the Eagle Ford represents a major opportunity because it’s one of the country’s fastest-growing shale plays.