By: Dylan Sikes - AllPennyStocks.com News

Monday, August 24, 2015

Oil prices plunged to fresh lows on Monday amid concerns over a significant slowdown in demand due to weakness in China as well as Iran’s intensions to increase productions at any costs. Commodities, including oil, have seen a sharp pullback ever since China surprised the market by devaluing its currency. The devaluation has sparked concerns that the slowdown in China is worse than previously thought and this has forced the People’s Bank of China (PBoC) to take drastic measures.

Given that China is one of the biggest consumers of oil, the pullback in oil prices is understandable. The question though is whether the latest pullback will force further capex cuts from oil & gas companies. Since oil’s slide began last year, high cost North American producers have announced a significant reduction in capex. This has also had a negative impact on oil services providers. The latest pullback therefore would be a cause for concern among oil services providers.

This morning, one such oil services provider reported its financial results for the second quarter of 2015. Sylvan Lake, Canada-based Lonestar West Inc. (TSX-Venture:LSI), which provides services for drilling operations in Alberta, Saskatchewan, Manitoba, British Columbia, California, Oklahoma and Texas, reported an 11.4% increase in its revenue for the quarter ended June 30, 2015. The company’s revenue for the June quarter came in at $10.64 million.

LSI also managed to improve its margins in the June quarter. The company’s gross margin for the quarter improved from 18.2% to 18.7%. LSI’s normalized EBITDAC fell 27.7% to $584,432. On a per share basis, normalized EBITDAC fell 41.2% to $0.02.

LSI’s losses before taxes came in at $673,742, compared to losses before taxes of $176,993 reported for the same period in the previous year. Net loss for the quarter was $781,970, compared to a net loss of $132,744 reported for the same period in the previous year.

For the six-month period ended June 30, 2015, LSI reported revenue of $23.95 million, up 13.7% on a year-over-year basis.

James Horvath, President and CEO of Lodestar West, said that the company is pleased with the growth in both revenue and gross margin percentage, considering the depressed commodity prices in the second quarter of fiscal 2015. Horvath further said that LSI’s growth strategy in the U.S. has contributed to the increase in revenue, and the company will continue to focus on expanding these underserviced areas. Horvath noted that the company’s EBITDAC in the second quarter was adversely impacted by the depressed energy market along with bad debt expense recorded during that period.

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