Three Things to Watch When Heckmann Corporation (HEK) Reports

Environmental solutions provider Heckmann Corporation (NYSE:HEK) is set to report earnings on May 8. This could very well be the company’s last report under the Heckmann name, as the company is planning to transform its brand into Nuverra Environmental Solutions pending a shareholder vote. While the name might be changing, the business of providing a full-cycle water solution to oil and gas producers is still in its early stages of growth. With that as a context, let’s take a look at what to expect from the company this quarter.

Inside the numbers
Analysts expect Heckmann Corporation (NYSE:HEK) to lose a penny a share in the quarter on revenue of $166.9 million. While that would represent positive momentum from the $0.03 loss in the year-ago quarter it would be taking a step back from the surprise gain the company reported last quarter. While hitting these numbers will be important to keep shares from slipping, forward guidance and future growth are what investors really need to watch.

Updates on its growth plan
Heckmann Corporation (NYSE:HEK) made a big splash last year by merging with Power Fuels to gain access to the Bakken. Not only did the deal expand the company’s footprint to cover nearly all the major shale plays, but it enabled founder Richard Heckmann to transition out of the CEO role and focus his attention on growing the business. It will be important to see what the company plans on doing next as it continues to expand its business. The company has a bold goal to deliver a billion dollars in annual revenue and its Richard Heckmann’s job to deliver on that promise.

Heckmann Corporation (NYSE:HEK) and his namesake company face a number of challenges as he looks to grow the business. Topping the list are financially strapped production companies that don’t want to spend extra for Heckmann Corporation (NYSE:HEK)’s premium services. Many operators are turning to drilling disposal wells instead of having produced water treated and recycled. SandRidge Energy Inc. (NYSE:SD) for example has spent more than half a billion to drill disposal wells to cut its costs in developing the Mississippi Lime formation. This has cut the company’s lease operating expense by $2 per produced barrel of water; it’s cut its trucked volumes from 6% to less than 2%.

Another area to watch is in competition from oil-field service companies like Halliburton Company (NYSE:HAL). The company’s new CleanWave water treatment service trucks could be game changing in that it is simply reusing produced water at other wells without trucking it away for treatment. If this technology is as good as Halliburton Company (NYSE:HAL) thinks it could be, it could cause big problems for Heckmann Corporation (NYSE:HEK)’s growth aspirations.