Quintana Energy Services Inc. (NYSE: QES) (“QES” or the
“Company”) today reported financial and operating results for the
second quarter ended June 30, 2018.
Second Quarter 2018 Financial Highlights
Second quarter 2018 revenue grew 7.9% to $152.5 million, up from
$141.3 million in the first quarter of 2018. Second quarter 2018
net income was $2.1 million and Adjusted EBITDA was $17.9 million,
compared to a net loss of $16.4 million and Adjusted EBITDA of
$15.5 million for the first quarter of 2018. In the second quarter
of 2017, revenue was $108.5 million, net loss was $3.1 million and
Adjusted EBITDA was $11.7 million. See “Non-GAAP Financial
Measures” at the end of this release for a discussion of Adjusted
EBITDA and its reconciliation to the most directly comparable
financial measure calculated and presented in accordance with U.S.
generally accepted accounting principles (“GAAP”).
Rogers Herndon, QES’ President and Chief Executive Officer,
stated, “We entered the second quarter looking to increase
profitability through strong operational execution and higher
activity levels, and I am pleased to report we achieved both.
Compared to our first quarter results, consolidated revenue and
Adjusted EBITDA grew 7.9% and 15.5%, respectively. Two of our
segments demonstrated significant operating leverage during the
second quarter. Directional Drilling revenue grew 16.0% and
Adjusted EBITDA grew over 100.0%, primarily due to pricing and
utilization. Pressure Control revenue increased 14.3% and Adjusted
EBITDA grew approximately 51.4% as a result of improvements in
pricing, utilization, full quarter impact from large diameter
coiled tubing unit converted in Q1 and increased well control
activity during the quarter. Additionally, Pressure Pumping
deployed its fourth hydraulic fracturing fleet into service on
schedule and below budget in June 2018."
“We are excited about our future and believe we are well
positioned for continued growth. Operationally, we are in process
of converting two additional large diameter coiled tubing units by
the fourth quarter of this year and still plan to take delivery of
a new 2.625" coil unit in late Q3. In the meantime, we will
continue to focus on operational execution, build on the
diversification of our four operating platforms, actively manage
our capital expenditure allocation program, improve cash flows, and
leverage future acquisition opportunities,” added Herndon.
Business Segment Results
The following business segments comprise the Company’s primary
services: Directional Drilling, Pressure Pumping, Pressure Control
and Wireline.
Directional Drilling
The Directional Drilling segment provides the
highly-technical and essential services of guiding horizontal and
directional drilling operations for exploration and production
(“E&P”) companies. Revenue was $43.6 million in the second
quarter of 2018, up approximately 16.0% compared to revenue of
$37.6 million in the first quarter of 2018 and up 17.5% from the
second quarter of 2017. Second quarter 2018 Adjusted EBITDA was
$5.2 million, compared to Adjusted EBITDA of $2.6 million for the
first quarter of 2018. The sequential increases in revenue and
Adjusted EBITDA were primarily due to pricing and utilization. In
the second quarter of 2017, revenue was $37.1 million and Adjusted
EBITDA was $4.8 million.
Pressure Pumping
The Pressure Pumping segment primarily
provides hydraulic fracturing services to E&P companies.
Revenue for the segment grew 6.2% to $56.7 million in the second
quarter of 2018, up from $53.4 million in the first quarter of
2018. The sequential increase in revenue was primarily driven by
performing larger hydraulic fracturing stages for certain customers
during the second quarter of 2018 compared to the prior quarter.
Second quarter 2018 Adjusted EBITDA was $8.9 million, compared to
Adjusted EBITDA of $9.9 million for the first quarter of 2018. The
sequential decrease in Adjusted EBITDA was primarily due to a 13.0%
increase in direct operating expenses in the second quarter of 2018
compared to the prior quarter. In addition, revenue per cement job
decreased 16.8% in the second quarter of 2018 compared to the prior
quarter. In the second quarter of 2017, revenue was $37.7 million
and Adjusted EBITDA was $7.8 million.
Pressure Control
The Pressure Control segment consists of
coiled tubing, rig-assisted snubbing, nitrogen, and well control
services. Revenue for the segment grew approximately 14.3% to $32.0
million in the second quarter of 2018, up from $28.0 million in the
first quarter of 2018. Second quarter 2018 Adjusted EBITDA was $5.6
million, compared to Adjusted EBITDA of $3.7 million for the first
quarter of 2018. The sequential increases in revenue and Adjusted
EBITDA were primarily due to pricing, utilization and the addition
of a large diameter coiled tubing unit. In the second quarter of
2017, revenue was $22.3 million and Adjusted EBITDA was $1.9
million.
Wireline
The Wireline segment primarily provides
cased-hole wireline services to E&P companies. Revenue for the
segment decreased to $20.3 million in the second quarter of 2018
from $22.3 million in the first quarter of 2018. Second quarter
2018 Adjusted EBITDA was $0.8 million, compared to Adjusted EBITDA
of $2.6 million for the first quarter of 2018. The sequential
decreases in revenue and Adjusted EBITDA were primarily due to
timing and scheduling of certain projects during the quarter. In
the second quarter of 2017, revenue was $11.3 million and Adjusted
EBITDA was a loss of $0.7 million.
Other Financial Information
General and administrative ("G&A") expense for the second
quarter of 2018 was $22.5 million, compared to $29.9 million for
the first quarter of 2018 and $16.0 million for the second quarter
of 2017. The sequential decrease in G&A expenses was primarily
related to a non-cash stock compensation expense of approximately
$9.9 million in the first quarter of 2018, related to the IPO, that
did not reoccur.
Capital expenditures including deposits totaled $28.8 million
during the second quarter of 2018, compared to capital expenditures
of $12.4 million in the first quarter of 2018, and $4.5 million in
the second quarter of 2017. The increase in capital expenditures
was driven by the previously announced deployment of our fourth
hydraulic fracturing fleet.
Second quarter interest expense was $0.4 million, down from
$10.2 million in the first quarter and $2.8 million in the second
quarter of 2017. The second quarter decrease in interest expense
was primarily due to IPO financing costs of approximately $8.5
million to extinguish our former revolving credit facility and term
loan during the first quarter of 2018 and a lower debt outstanding
balance during the second quarter of 2018.
With the closing of the IPO subsequent to the end of the fiscal
year, the Company’s debt structure has improved meaningfully. QES
ended the second quarter of 2018 with a total debt balance of $31.0
million, $8.2 million of cash on hand, and $59.1 million of
net availability under its new senior secured asset-based revolving
credit facility.
Share Repurchase Plan
On August 8, 2018, QES’s Board of Directors approved a stock
repurchase program authorizing the repurchase, at the discretion of
senior management, of up to $6.0 million of the Company’s common
stock in open market transactions, subject to market conditions,
corporate, regulatory and other considerations. Repurchases may be
commenced or suspended at any time without notice. The program does
not obligate QES to purchase any particular number of shares of
common stock during any period or at all, and the program may be
modified or suspended at any time in the Company’s discretion.
Conference Call Information
QES has scheduled a conference call for 9:00 a.m. Central Time
(10:00 a.m. Eastern Time) on Thursday, August 8, 2018, to
review reported results. You may access the call by telephone at
1-201-389-0867 and asking for the QES 2018 Second Quarter
Conference Call. The webcast of the call may also be accessed
through the Investor Relations section of the Company’s website at
https://ir.quintanaenergyservices.com/ir-calendar. A replay of the
call can be accessed on the Company’s website for 90 days and will
be available by telephone through August 16, 2018, at (201)
612-7415, access code 13681322#.
About Quintana Energy Services
QES is a growth-oriented provider of diversified oilfield
services to leading onshore oil and natural gas exploration and
production companies operating in both conventional and
unconventional plays in all of the active major basins throughout
the U.S. QES’ primary services include: directional drilling,
pressure pumping, pressure control and wireline services. The
Company offers a complementary suite of products and services to a
broad customer base that is supported by in-house manufacturing,
repair and maintenance capabilities. More information is available
at www.quintanaenergyservices.com.
Forward-Looking Statements and Cautionary Statements
This news release (and any oral statements made regarding the
subjects of this release, including on the conference call
announced herein) contains certain statements and information that
may constitute “forward-looking statements.” All statements, other
than statements of historical fact, which address activities,
events or developments that we expect, believe or anticipate will
or may occur in the future are forward-looking statements. The
words “anticipate,” “believe,” “expect,” “plan,” “forecasts,”
“will,” “could,” “may,” and similar expressions that convey the
uncertainty of future events or outcomes, and the negative thereof,
are intended to identify forward-looking statements.
Forward-looking statements contained in this news release, which
are not generally historical in nature, include those that express
a belief, expectation or intention regarding our future activities,
plans and goals and our current expectations with respect to, among
other things: our operating cash flows, the availability of capital
and our liquidity; our future revenue, income and operating
performance; our ability to sustain and improve our utilization,
revenue and margins; our ability to maintain acceptable pricing for
our services; future capital expenditures; our ability to finance
equipment, working capital and capital expenditures; our ability to
execute our long-term growth strategy; our ability to successfully
develop our research and technology capabilities and implement
technological developments and enhancements; and the timing and
success of strategic initiatives and special projects.
Forward-looking statements are not assurances of future
performance and actual results could differ materially from our
historical experience and our present expectations or projections.
These forward-looking statements are based on management’s current
expectations and beliefs, forecasts for our existing operations,
experience, expectations and perception of historical trends,
current conditions, anticipated future developments and their
effect on us, and other factors believed to be appropriate.
Although management believes the expectations and assumptions
reflected in these forward-looking statements are reasonable as and
when made, no assurance can be given that these assumptions are
accurate or that any of these expectations will be achieved (in
full or at all). Our forward-looking statements involve significant
risks, contingencies and uncertainties, most of which are difficult
to predict and many of which are beyond our control. Known material
factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not
limited to, risks associated with the following: a decline in
demand for our services, including due to declining commodity
prices, overcapacity and other competitive factors affecting our
industry; the cyclical nature and volatility of the oil and gas
industry, which impacts the level of exploration, production and
development activity and spending patterns by E&P companies; a
decline in, or substantial volatility of, crude oil and gas
commodity prices, which generally leads to decreased spending by
our customers and negatively impacts drilling, completion and
production activity; and other risks and uncertainties listed in
our filings with the U.S. Securities and Exchange Commission,
including our Current Reports on Form 8-K that we file from time to
time, Quarterly Reports on Form 10-Q and Annual Report on Form
10-K. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
We undertake no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as
a result of new information, future events or otherwise, except as
required by law.
Quintana Energy Services Inc. Condensed
Consolidated Statements of Operations (in thousands of
dollars and units, except per share amounts) (Unaudited)
Three Months Ended
June 30, 2018 March 31, 2018
June 30, 2017 Revenues: $ 152,536 $ 141,268
$ 108,457
Costs and expenses: Direct operating costs
116,581 106,492 81,667 General and administrative 22,500 29,917
16,024 Depreciation and amortization 11,155 11,078 11,432 Gain on
disposition of assets (594 ) (106 ) (332 ) Operating income
(loss) 2,894 (6,113 ) (334 ) Non-operating expense: Interest
expense (433 ) (10,192 ) (2,788 ) Income (loss) before income tax
2,461 (16,305 ) (3,122 ) Income tax (expense) benefit (326 ) (51 )
9 Net income (loss) 2,135 (16,356 )
(3,113 ) Net loss attributable to predecessor — (1,546 )
— Net income (loss) attributable to Quintana Energy
Services Inc. $ 2,135 $ (14,810 ) $ (3,113 ) Net
income (loss) per common share: Basic $ 0.06 $ (0.44 ) $ — Diluted
$ 0.06 $ (0.44 ) $ — Weighted average common shares outstanding:
Basic 33,631 33,318 — Diluted 35,227 33,318 —
Quintana Energy Services Inc. Condensed Consolidated
Balance Sheets (in thousands, except per share and share
amounts) (Unaudited)
June 30, 2018 December 31, 2017
ASSETS Current assets Cash and cash equivalents $ 8,244 $
8,751 Accounts receivable, net of allowance of $1,244 and $776
95,432 83,325 Unbilled receivables 12,849 9,645 Inventories 27,744
22,693 Prepaid expenses and other current assets 4,598 9,520
Total current assets 148,867 133,934 Property, plant and
equipment, net 151,391 128,518 Intangible assets, net 9,925 10,832
Other assets 1,719 2,375 Total assets $ 311,902
$ 275,659
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities Accounts payable $ 40,499 $ 36,027 Accrued
liabilities 34,834 33,825 Current portion of debt and capital lease
obligations 388 79,443 Total current liabilities
75,721 149,295 Deferred income taxes — 185 Long-term debt, net of
deferred financing costs of $0 and $1,709 31,000 37,199 Long-term
capital lease obligations 3,631 3,829 Other long-term liabilities
167 183 Total liabilities 110,519 190,691 Commitments
and contingencies Shareholders’ and members’ equity Members’ equity
— 212,630 Preferred shares, $0.01 par value, 10,000,000 authorized;
none issued and outstanding — — Common shares, $0.01 par value,
150,000,000 authorized; 33,765,486 issued; 33,630,934 outstanding
340 — Additional paid-in-capital 344,013 — Treasury stock, at cost,
134,552 common shares (1,271 ) — Accumulated deficit (141,699 )
(127,662 ) Total shareholders’ and members’ equity 201,383
84,968 Total liabilities, shareholders’ and members’ equity
$ 311,902 $ 275,659
Quintana Energy
Services Inc. Condensed Consolidated Statements of Cash
Flows (in thousands of dollars) (Unaudited)
Six Months Ended
June 30, 2018 June 30, 2017
Cash flows from operating activities: Net loss $ (14,222 ) $
(14,786 ) Adjustments to reconcile net loss to net cash used in
operating activities Depreciation and amortization 22,233 23,026
Gain on disposition of assets (3,068 ) (6,625 ) Non-cash interest
expense 855 2,945 Loss on debt extinguishment 8,594 — Provision for
doubtful accounts 460 90 Deferred income tax benefit — (26 )
Stock-based compensation 12,826 — Changes in operating assets and
liabilities: Accounts receivable (12,567 ) (22,719 ) Unbilled
receivables (3,204 ) (7,084 ) Inventories (5,051 ) (544 ) Prepaid
expenses and other current assets 1,331 (1,071 ) Other noncurrent
assets (176 ) 168 Accounts payable 3,413 (2,114 ) Accrued
liabilities 1,009 11,961 Other long-term liabilities (15 ) (33 )
Net cash provided by (used in) operating activities 12,418
(16,812 )
Cash flows from investing activities: Purchases of
property, plant and equipment (41,194 ) (8,689 ) Proceeds from sale
of property, plant and equipment 3,911 31,131 Net
cash (used in) provided by investing activities (37,283 ) 22,442
Cash flows from financing activities: Proceeds from
revolving debt 33,000 2,485 Payments on revolving debt (81,071 )
(13,414 ) Proceeds from term loans — 5,000 Payments on term loans
(11,225 ) — Payments on capital lease obligations (182 ) (142 )
Payment of deferred financing costs (1,416 ) — Prepayment premiums
on early debt extinguishment (1,346 ) — Payments for treasury
shares (1,271 ) — Proceeds from new shares issuance, net of
underwriting commission costs 90,542 — Costs incurred for stock
issuance (2,673 ) — Net cash provided by (used in) financing
activities 24,358 (6,071 ) Net decrease in cash and cash
equivalents (507 ) (441 ) Cash and cash equivalents beginning of
period 8,751 12,219 Cash and cash equivalents end of
period $ 8,244 $ 11,778
Supplemental cash flow
information
Cash paid for interest 1,119 2,289 Income taxes paid 151 167
Supplemental noncash investing and financing activities
Noncash proceeds from sale of assets held for sale — 3,990 Fixed
asset purchases in accounts payable and accrued liabilities 570 —
Non cash payment for property, plant and equipment 3,279 — Debt
conversion of term loan to equity 33,631 — Issuance of common
shares for members’ equity 212,630 — Stock issuance cost included
in accounts payable 501 —
Quintana Energy Services
Inc. Additional Selected Operating Data
(Unaudited)
Three Months Ended June 30, 2018
March 31, 2018 June 30, 2017
(Unaudited) Other Operational Data:
Directional Drilling rig days (1) (2) 4,108 3,706 3,667 Average
monthly Directional Drilling rigs on revenue (3) 61 57 57 Total
hydraulic fracturing stages 945 963 715 Average hydraulic
fracturing revenue per stage $ 56,000 $ 52,477 $ 48,173
(1) Rig days represent the number of
days we are providing services to rigs and are earning revenues
during the period, including days that standby revenues are earned.
(2) Rigs on revenue represents the number of rigs earning revenues
during a time period, including days that standby revenues are
earned. (3) Includes unconventional stages and conventional jobs,
the latter are counted as a single stage.
Non-GAAP Financial Measures
Adjusted EBITDA is a supplemental non-GAAP financial
measure that is used by management and external users of our
financial statements, such as industry analysts, investors, lenders
and rating agencies.
Adjusted EBITDA is not a measure of net income or cash flows as
determined by GAAP. We define Adjusted EBITDA as net income or
(loss) plus income taxes, net interest expense, depreciation and
amortization, impairment charges, net (gain) or loss on disposition
of assets, stock based compensation, transaction expenses,
rebranding expenses, settlement expenses, severance expenses and
equipment standup expense.
We believe Adjusted EBITDA is useful because it allows us to
more effectively evaluate our operating performance and compare the
results of our operations from period to period without regard to
our financing methods or capital structure. We exclude the items
listed above in arriving at Adjusted EBITDA because these amounts
can vary substantially from company to company within our industry
depending upon accounting methods and book values of assets,
capital structures and the method by which the assets were
acquired. Adjusted EBITDA should not be considered as an
alternative to, or more meaningful than, net income as determined
in accordance with GAAP, or as an indicator of our operating
performance or liquidity. Certain items excluded from Adjusted
EBITDA are significant components in understanding and assessing a
company’s financial performance, such as a company’s cost of
capital and tax structure, as well as the historic costs of
depreciable assets, none of which are components of Adjusted
EBITDA. Our computations of Adjusted EBITDA may not be comparable
to other similarly titled measures of other companies.
The following tables present reconciliations of Adjusted EBITDA
to the most directly comparable GAAP financial measure for the
periods indicated:
Quintana Energy Services Inc. Reconciliation of
Net Income (Loss) to adjusted EBITDA (In thousands of
dollars) (Unaudited)
Three Months Ended June 30, 2018
March 31, 2018 June 30, 2017
Adjustments to reconcile Adjusted EBITDA to net loss: Net
Income (loss) $ 2,135 $ (16,356 ) $ (3,113 ) Income tax expense
(benefit) 326 51 (9 ) Interest expense 433 10,192 2,788
Depreciation and amortization expense 11,155 11,078 11,432 Gain on
disposition of assets, net (594 ) (106 ) (332 ) Non-cash stock
based compensation 2,940 9,886 — Rebranding expense(1) 53 — —
Settlement expense(2) 166 223 913 Severance expense(3) 53 — 20
Equipment and standup expense(4) 1,251 515 1
Adjusted EBITDA $ 17,918 $ 15,483 $ 11,700
(1) Relates to expenses incurred in connection with rebranding
our business segments.
(2) For 2017, represents professional fees related to investment
banking, accounting and legal services associated with entering
into the Former Term Loan that were recorded in general and
administrative expenses. For 2018, represents lease buyouts, legal
fees and settlement costs for FLSA claims, facility closures and
other non-recurring expenses that were recorded in general and
administrative expenses.
(3) Relates to severance expenses in 2017 incurred in connection
with a program implemented to reduce headcount in connection with
the industry downturn. In our performance for the three months
ended June 30, 2018 and 2017, $0.1 million and none was recorded in
direct operating expenses, respectively, and the remainder was
recorded in general and administrative expenses.
(4) Relates to equipment standup costs incurred in connection
with the mobilization and redeployment of assets. In our
performance for the three months ended June 30, 2018, approximately
$1.2 million was recorded in direct operating expenses and
approximately $0.1 million was recorded in general and
administration expenses. In our performance for the three months
ended June 30, 2017, a nominal amount was recorded in direct
operating expenses and none was recorded in general and
administration expenses.
Quintana Energy Services Inc. Reconciliation of
Segment Adjusted EBITDA to Net Income (In thousands of
dollars) (Unaudited)
Three Months Ended June 30, 2018
March 31, 2018 June 30, 2017
Directional Drilling $ 5,242 $ 2,580 $ 4,808 Pressure Pumping 8,884
9,889 7,799 Pressure Control 5,602 3,650 1,860 Wireline 788 2,564
(743 ) Corporate and Other (7,061 ) (13,824 ) (2,958 ) Income tax
(expense) benefit (326 ) (51 ) 9 Interest expense (433 ) (10,192 )
(2,788 ) Depreciation and amortization (11,155 ) (11,078 ) (11,432
) Gain on disposition of assets, net 594 106
332 Net income (loss)
$ 2,135 $
(16,356 ) $ (3,113 )
Quintana Energy Services Inc. Segment
Adjusted EBITDA Margin (In thousands of dollars, except
percentages) (Unaudited)
Three Months Ended June 30, 2018
March 31, 2018 June 30, 2017
Segment Adjusted EBITDA Margin(1) Directional
Drilling Adjusted EBITDA $ 5,242 $ 2,580 $ 4,808 Revenue 43,605
37,602 37,099 Adjusted EBITDA Margin
Percentage 12.0 6.9 13.0
Pressure
Pumping Adjusted EBITDA 8,884 9,889 7,799 Revenue 56,702
53,400 37,687 Adjusted EBITDA Margin Percentage 15.7
18.5 20.7
Pressure Control Adjusted
EBITDA 5,602 3,650 1,860 Revenue 31,965 27,961 22,335
Adjusted EBITDA Margin Percentage 17.5 13.1
8.3
Wireline Adjusted EBITDA 788 2,564 (743 ) Revenue
20,264 $ 22,305 11,336 Adjusted EBITDA Margin
Percentage 3.9 11.5 (6.6 )
(1) Segment Adjusted EBITDA Margin is defined as the quotient of
Segment Adjusted EBITDA and total segment revenue. Segment Adjusted
EBITDA is net income (loss) plus income taxes, net interest
expense, depreciation and amortization, impairment charges, net
(gain) loss on disposition of assets, stock based compensation,
transaction expenses, rebranding expenses, settlement expenses,
severance expenses and equipment standup expense.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180808005818/en/
Quintana Energy ServicesKeefer M.
Lehner, EVP & CFO832-518-4094IR@qesinc.comorDennard Lascar Investor RelationsKen Dennard /
Natalie Hairston713-529-6600QES@dennardlascar.com
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