Executives of Omni Energy Services presented at the annual Morgan Keegan Energy Conference on Monday. A provider of seismic drilling, permitting, and survey services to geophysical companies operating onshore along the Gulf of Mexico, the company is expanding its land-based drilling offerings via acquisition. But is management up to the task of executing on this growth strategy?
In January, Omni acquired B.E.G. Liquid Mud Services, which adds the supply of drilling fluids, chemicals, storage, mixing and fluid pumping services to its drilling-support business. In addition, the purchase expands the company's geographical footprint into the northern regions of the Barnett Shale Region, located in Texas.
Management experience is critical to the successful integration of any acquisition. In the last 15 months, Omni purchased an aggregate $67 million in operating assets, straining an already leveraged balance sheet. As of the first quarter, the company held just $7 million in cash and had a working capital deficit of $8 million. Omni's free cash flow for the quarter was negative $2.3 million, and total debt to stockholder equity stood at 80 percent.Why the fuss with all these mind-blurring numbers?
Omni likes to impress with numbers. At the Morgan Keegan meeting, the company emphasized that its management team was "led by a deep bench of oilfield veterans averaging 31 years in the industry."
For example, Chief Executive Jim Eckert, 58, CFO Ron Mogel, 56, and Godfrey Brasseaux, Operations - Land Rental Manager, 60, have a respective 36 years, 35 years, and 43 years of "relevant years of experience." But does it make sense to consider someone's first job at the tender age of 17 (in the case of Brasseaux) or 21 (in the case of Mogel) as part of their "invaluable experience?"
Besides, some of these executives have one foot out the door. Eckert graduated from the University of Southern Mississippi in 1971 and began his career in the seismic business shortly thereafter, according to his biography. Hmm. He plans on retiring June 30. Ron Mogel joined Omni as CFO in January. Looking at his background, he first became a CPA in 1979.
What will happen to that deep bench of experience when Brasseaux hits retirement age?