In many instances, a company’s name can be a bit misleading. One assumes it does one thing from the name, while it may harbor other activities just under the surface. There can be many reasons for this but often they have to do with diversification within a cyclical industry.
Energy Services Corporation of America., an energy services company, works to provide a range of services to the electrical and pipeline industries. The company works across to United States but is primarily focused in West Virginia, Ohio, Kentucky and North Carolina.
Although most investors may have a certain perception of an energy services company and the functions that that they provide, there is a distinct difference where this company is concerned. The company finds a majority of its work in the repair and construction of intrastate and regional natural gas and oil pipelines in addition to electrical work for all sorts of differing applications. Substation construction, switchyard services, utility storage electrical work, waste water facilities, packaged buildings and a range of other electrical projects supplement the company’s revenues in more than just a cursory way and offer a nice cushion when the cyclical nature of energy markets move down. In this way, the company can maintain a somewhat more stable footing and offer the average investor some sort of stability in an otherwise, by nature, unstable marketplace.
The nature of the company’s revenue stream can be most closely aligned to that of a contractor. Payment is most often received on a completed contract or percentage completed basis. As such, accounting at any one point in the quarterly year is difficult. Due to reporting requirements, however, the first quarter did see a net income increase of approximately $3 million. If taken from a project’s on the schedule basis, this number is likely higher over time as one particular customer has several projects ready to go but is currently in a holding pattern.
As each of these projects comes on-line and is completed, future quarters will be able to book the revenue. Booked revenue or not, the pipeline system and storage facilities of the company’s oil and natural gas systems need to be maintained and add revenue. Energy Services Corporation is well positioned in several different ways and appears to be a long-term player with a stable and fairly consistent outlook.