ENSV Stock Rockets: Is Enservco a Good Investment?

By Duncan Ferris

Share:

With its share price up by more than 600% in the last month its clear that many investors are excited about Enservco Corp (NYSEAMERICAN: ENSV). But is ENSV stock worth your time?

Enservco Corp (NYSEAMERICAN: ENSV) shares have rocketed up by almost 50% in early trading on Thursday amid excitement that it can capitalise on high demand for US oil. In the last month, the company’s shares have shot up by a staggering 651.67%.

But is ENSV stock a good investment?

What is Enservco?

Enservco Corporation was incorporated in 1980 and is headquartered in Longmont, Colorado. The company uses several subsidiaries to provide well enhancement and fluid management services to the onshore oil and natural gas industry in the United States.

The company owns and operates a fleet of approximately 338 specialized trucks, trailers, frac tanks, and other well-site related equipment. It operates in the eastern United States region, the Rocky Mountain region and the Central United States region.

Why is Enservco’s share price up?

The main drivers behind the company’s recent share price explosion is the rise in oil prices.

Prices have been pushed higher initially by increased demand from people returning to normal routines after the pandemic, but also because of the impact on supply from the conflict between Russia and Ukraine and the huge demand for US-produced oil.

This comes after the Biden administration announced a ban on Russian oil earlier in the week. This is fantastic news for a company like Enservco, which is fully based and operated in the United States.

With domestic drillers set to roar into action to meet this sky-high demand for American oil, which has left some investors positive that the business could be poised for a busy and successful period. 

Enservco Financial Overview

P/BV: 5.3

P/S: 2.53

P/E (TTM): 3.28

Market Cap: $48.25m

Cash and Cash Equivalents: $1.67m

Total Current Liabilities: $4.49m

Total Liabilities: $19.04m

Enservco’s Q3 Earnings

In its most recent earnings report back in November, ENSV reported 73% growth in revenue as it benefited from higher commodity prices and steady recovery from the impact of the pandemic.

The company’s executive chairman, Rich Murphy, commented:

“Rig counts and wells drilled in the third quarter increased by double digits on both a year-over-year and sequential quarter basis, and these favorable tailwinds should help position us to sustain our revenue momentum during our fourth and first quarter heating season.”

With increased demand for US oil, the business is well-placed to continue this positive momentum through the fourth quarter and beyond.

Tied to Demand

The value of the company as an investment is intrinsically linked to oil demand and perceived future demand. If anything happens to compromise this demand, such as a sudden dropping of the ban on Russian oil in the US, then Enservco immediately looks less attractive.

Right now, such a situation seems unlikely as all sides and observers in the Ukraine conflict appear resolute.

However, Russian President Vladimir Putin is already admitting that Western sanctions are causing problems in the country and diplomats from Ukraine and Russia are continuing to meet in cagey diplomatic talks. Even so, it is difficult to see an eventuality where sanctions are lifted from Russia in the immediate future.

Russia is not the only source of oil though. The intergovernmental organization OPEC, which is comprised of 13 oil-rich nations across the Middle East, Africa and South America, have a huge influence on oil prices.

While some members have made noises about plugging the gap left by bans on Russian oil, the organisation appears likely to keep supply tight in the near future so they can capitalise on high prices.

Is Enservco a Good Investment?

If its positive momentum continued in its fourth quarter results (due 22 March) then the company could be excellently positioned. However, if Russian oil imports are suddenly back on the table of if OPEC unleashes their enormous supplies then we could see Enservco’s share price falling back.

As things stand, there’s no question that the company is in a strong position, but that doesn’t mean snapping up shares is a great idea. Enservco’s share price has already jumped by an enormous amount over the last month, so even if it does perform well amid the Russian oil ban its success might be more than priced in.

As such, US oil producers and services firms, like US Well Services (NASDAQ: USWS), have been extremely volatile in reaction to the crisis. As such, an investment now while the excitement is in full swing might be dangerous.

Share:

In this article:

Topics:
Energy Equipment and Services
Oil and Gas Equipment and Services
Industries:
Energy

Author: Duncan Ferris

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Duncan Ferris does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Duncan Ferris has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

Sign up for VTM Updates

Form submitted successfully!

VTM Exclusive Reports

Crypto Corner

Learn your NFTs from your BTCs