Heckmann: What Happens Next?

Aug.11.09 | About: Nuverra Environmental (NES)

About a month (3 weeks) has passed since we first mentioned this intriguing pick. I have not bought shares (up 13% since then).

One interesting note is that on Aug. 10th the board authorized they approved a 1-year extension of the Company’s discretionary equity buy-back plan and an expansion of the plan to include common stock. Under the broadened plan, the Company may purchase warrants and up to 20 million shares of common stock in open market and private transactions through December 31, 2010, at times and in amounts as management deems appropriate, subject to applicable securities laws. 20 million shares is 18% of the outstanding total as of 6/1/2009.

Heckmann said:

Mr. Richard J. Heckmann, Chairman and CEO of Heckmann Corporation, stated, “We have successfully closed both of our pending diversified water business transactions and are currently in the process of installing a 40-mile pipeline that will serve customers seeking to dispose of saltwater and frac fluid generated in oil and gas operations. Once this pipeline is operational by year-end, we expect a substantial contribution to revenue and earnings from our new subsidiary Heckmann Corp.

“We also made significant progress during the second quarter on our China business strategy,” Mr. Heckmann continued. “Renovation and installation of our bottled water and non-carbonated drink facility in Xi’an is nearing completion, which will significantly improve our capacity and utilization metrics as we service major contracts like Coca-Cola China as well as other recently established bottling and servicing contracts.

“We also bolstered the management team and continued optimizing the financial reporting structure in China as we prepare to fully participate in the growth and expansion that experts and economists are predicting for that region over the long term. At the same time, we recovered a portion of shares and warrants issued to former China Water insiders and are confident that we will fully execute this plan in due course. We expect to obtain a final determination on the purchase price allocation for our China Water acquisition during the current quarter. Our cash and investment balance remained essentially unchanged for the second quarter, and we maintained a strong balance sheet that holds approximately $298 million in cash and investments as of June 30 — ample resources to pursue our acquisition objectives, continue the optimization of current assets and maximize opportunities in our businesses as they unfold,” Mr. Heckmann concluded.

The business is tracking as one would like to see since Q1. It would appear the China water business, once they clear out the mess, has great potential with existing contracts and the expansion of the business with Coke China.

Greer exploration is a great little business that will just keep producing revenues as its services are essential to the industry it serves.

What remains to be seen is what happens next. The $298m cash on hand is essentially 75% of the companies current market cap and there still is zero debt. I like that a lot as it provides huge flexibility AND allows the company to make the right long term decisions with the pressure of creditors.

Still not 100% sold yet BUT I am becoming more interested. Will keep on it.

Heckmann 10Q Q2 2009




Disclosure: No position