January 10, 2008: Complete Production Services, a dry hole?

Complete Production Services (CPX), which went public in the spring of 2006 is dirt cheap or a mess. The analysts can't seem to make up their collective minds. Split almost evenly between "like it or hate it" this company continues to defy consensus.

CPX is a leading provider of specialized oil and gas services and equipment in North America (Canada, U.S and Mexico) that allows customers to develop hydrocarbon reserves, reduce operating costs and enhance oil and gas production. Complete Production Services focuses on basins within North America that have the most attractive long-term potential for growth according to their public relations brochures. The company operates from regionally managed field service facilities throughout Western Canada, the U.S. Rocky Mountains, Texas, Oklahoma, Louisiana and Mexico. Custom solutions to specific extraction and maintenance needs appear to be a strength of CPX.

A veritable shopping mall of hydrocarbon production services, this company features twenty-two service provider companies. Some are Basin Tool, Bell Supply, Bell Tubuler,Mercer Well Services, Shale Tank Services, Western Bentonite Mud Company, Hyland Enterprises, Monument Well Service, Leed Energy Service, Big Mac Tank Trucks, RigMovers, Stride Well Service and SRI-Roustabout Speciality Inc. These and other companies in their domain handle intervention strategies, downhole and wellsite services and fluid handling. One would think that this company would be a resoundind success story given the price and profit margins of hydrocarbon enterprises and specifically, the allure of domestic natural gas. This is not the case with CPX.

The shares of Complete Production Services have lagged almost all other companies in its universe. In fact, as of this writing the stock trades under $16.00 a share, from a high of $27.34 last year. Some analysts had this as a $34.00 stock when oil was under $50.00/barrel.Almost half of the analysts covering this security like it. Credit Suisse First Boston has called CPX significantly undervalued for a long time.

My view is that Complete Production Services is a company offering too many weak revenue services and needs to focus on the more profitable aspects of their holdings.Management appears to be long on promises and weak on delivering the goods to shareholders who are not receiving appropriate shareholder value from the present structure and execution of this quite heavily debted production service octopus.

Investors may want to keep an eye on this company. Even though it's stock performance has been pathetic, the sector it occupies and the possibility of getting the company to perform for the benefit of its shareholders is reason enough to keep it in mind for the future.

DISCLOSURE: I admit to owning CPX in my Speculative Portfolio. And I am stubborn enough to hold it, at least for a while longer.