A big U.S. order pushed up revenue and lowered losses for industrial pump-maker Divergent Energy Services Corp. But the company continues to face a fiercely competitive market along with other key challenges.<
DIVERGENT ENERGY SERVICES CORP. (symbol DVG on Toronto; www.divergentenergyservices.com) makes pumps for oil and natural gas exploration companies.
Divergent changed its name from Canadian Oilfield Solutions Corp. in June 2014.
The company’s pumps use a licensed technology that applies alternating electric current to magnets in order to drive a piston. As a result, Divergent’s products have fewer moving parts than conventional pumps. The company believes that this makes them cheaper to operate and maintain. It pays a Chinese company, Han’s Motor, for the right to use the technology. While the pumps are in use by oil firms in China, Divergent is the first to market them in North America.
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In the three months ended March 31, 2016, the company’s revenue jumped 55.0%, to $2.1 million from $1.4 million a year earlier. That was due to a big order in the U.S. Divergent’s losses dropped to $0.02 a share (or a total of $2.2 million) from $0.03 a share (or $2.4 million).
The company spent $178,000 (or 8.4% of its revenue) on research in the quarter, down 12.7% from $204,000 (14.9%) a year earlier.
Divergent will likely need to keep selling new shares at current low prices to fund its operations and service its long-term debt. As of March 31, 2016, that stood at $4.2 million—equal to 20% of the company’s market cap. It also held cash of $80,000.
The company needs a sustained rebound in oil prices to spur its sales and earnings. Its technology is unique, but that may make it harder to win contracts in an extremely competitive market. In addition, the stock is an inactive trader, which can increase its volatility, especially when the overall market is unsettled.
I would love to read more stories about companies that have a unique offering. I still think that provides an edge if the market can accept the changes the product brings.
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Thanks for the update. I was attracted to this company by its unique drills, but not enough to buy it.
I would love to read more stories about companies that have a unique offering. I still think that provides an edge if the market can accept the changes the product brings.