Workers flush out water during a fracking operation at a natural gas well in Pleasant Valley, Pa. The procedure helps release natural gas from the rock layers by cracking the shale and sandstone formations using water and sand under intense pressure, allowing the captured gas to seep out.Robert Nickelsberg
Just two months ago, Poseidon Concepts Corp. was a billion-dollar company.
But that was before its shares plunged 62 per cent in mid-November, and before they lost over half of their remaining value on Thursday.
The latest news: the company, which specializes in 'frac fluid handling,' suspended its dividend, formed a special committee to address writing off some accounts receivable and shuffled both its management and board of directors.
Until November, Poseidon was in solid shape, paying out a monthly dividend of 9 cents per share, and its stock price held firm around $15 for much of 2012. However, investors quickly lost confidence when the company reported third quarter earnings in mid-November and management lowered its year-end guidance for earnings before interest, taxes, depreciation and amortization by one-third. There were also concerns about accounts receivables write-downs and major pricing declines.
Not only were these fears realized on Thursday, Poseidon now also faces a class action lawsuit that alleges management made statements that were materially false regarding the company's cash flows and financial position.
For now, Poseidon says the root of its problems is a weak business environment in which "exploration and development activity has slowed considerably." With less demand for Poseidon's services, the company is at war with its competitors to drum up business, and that's resulted in serious margin contraction.
But more news may be coming. The company set up a special committee "to review and address various issues arising from the recent write-off of certain accounts receivable and the evolving business plan" and once their work is complete we should find out if there there's anything other than the business environment that's hurting the company.
To help clean up the mess, Poseidon named Scott Dawson, its chair of the board of directors, as the company's new executive chairman in November. Mr. Dawson was previously president and CEO of Open Range Energy Corp., which was split into two separate companies, one of which was Poseidon.
Tim Kiladze