Seventy Seven Energy Inc. (NYSE:SSE)

CAPS Rating: 2 out of 5

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Member Avatar jed71 (99.86) Submitted: 11/4/2015 10:52:57 AM : Underperform Start Price: $1.45 SSE Score: +66.99

Another oilfield services company that is on the ropes. I know it’s hard to watch a stock drop from a high of $26 a share in mid-2014 all the way to just over a dollar now. Unfortunately, I’ve been on the losing end of that proposition a few times. A huge loss in invested capital, and those losses have a horrible impact on the mindset of shareholders.

This stock has dropped hard, very quickly and for very good reason. They just announced earnings, and wow, terrible results. Revenue has declined almost 60% year over year!! A few companies with very strong balance sheets might be able to survive a hit like this but I doubt this one does. Take a look at that debt - $1.6 BILLION!!!! And for such a small company with almost no revenue diversification. The GAAP loss has to have added additional pressure to their model, a net loss of ($48.5MM), or ($0.95) a share. The one silver lining I could find was the free cash flow. They are claiming in their press release to have a positive free cash flow of $42.9MM. You have to dig a little further, but upon further inspection, it seems the positive free cash flow is coming from asset sales. They have sold a subsidiary and its water hauling assets. You can make of this what you will, but on a run rate basis, I am struggling to believe they will be able to continue this positive free cash flow.

With ~$126.8MM remaining in cash, their demise will most likely not come soon. And I readily admit this one is very dangerous seeing how volatile the oil and gas sector has become. But with the debt, and the huge reduction in revenue, I find it difficult to believe they will ever gain firm footing.

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Member Avatar stocky5 (36.74) Submitted: 8/27/2015 7:37:19 AM : Outperform Start Price: $2.33 SSE Score: -81.66

Short selling positions will accelerate price movement upward.

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Member Avatar sebastianpurcell (< 20) Submitted: 10/20/2014 7:11:03 PM : Outperform Start Price: $15.73 SSE Score: -96.02

This is a wonderful spin, which was forced from CHK (since CHK needed the capital to pay down debt). It is presently depressed in price from a sector cyclical down-turn. Buying in now (or before the sector turns) should provide out-sized returns.

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Member Avatar leaderoftheback (45.83) Submitted: 7/15/2014 3:43:11 PM : Outperform Start Price: $25.17 SSE Score: -94.05

I own it from the spin-off, so for now, I'm keepin' it.

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