Resources, oil and gas services company, Titan Energy Services Ltd (ASX: TTN) has seen its share price slammed into the dirt, losing 67% to fall to 57 cents in early-afternoon trading.
Titan provides various services to the resources industry, including camp hire, transport and logistics, catering to those camps as well as oilfield and drilling services.
Showing how falling resource investment is continuing to impact on services companies, today Titan announced that two important camp contracts including water, waste and catering have not been renewed. The company also says that two significant tender decisions for its camp division have been deferred.
Titan says these factors will significantly impact short term results, and as a result the company has been forced to consider a further review of overhead costs and consolidation of support services.
The company says it now expects to report full year 2015 earnings before interest and tax (EBIT) of between $10 and $12 million. That's much lower than the $18.5 million reported in the 2014 financial year, and around 50% less than the company had predicted when it reported in early August.
But the news also has adverse consequences for other mining services companies, such as Monadelphous Group Limited (ASX: MND), ALS Limited (ASX: ALQ), MACA Limited (ASX: MLD), Ausdrill Ltd (ASX: ASL) and AJ Lucas Group Limited (ASX: AJL). Resource investment is still falling and has yet to hit rock-bottom.
While some companies are likely to come through unscathed, it's extremely difficult to pick the winners from the losers.
Investors should also be wary of these companies' stated book values. While many are trading below book value, anecdotal evidence suggests many companies are lucky to realise 20% of the value of their assets when selling, with others are unable to even give their equipment away.
Buyer beware.
