Quintana Energy Services Inc. (NYSE: QES) (“QES” or the
“Company”) today reported financial and operating results for the
first quarter ended March 31, 2019.
First Quarter 2019 Financial Results
First quarter 2019 revenue was $141.7 million, up 0.3% from
$141.3 million in the first quarter 2018. First quarter 2019 net
loss was $8.9 million and Adjusted EBITDA was $7.6 million,
compared to a net loss of $1.6 million and Adjusted EBITDA of $13.9
million for the fourth quarter of 2018, and a net loss of $16.4
million and Adjusted EBITDA of $15.5 million in the first quarter
of 2018. 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, “Despite a challenging market backdrop and challenging
weather conditions, we had a strong quarter across our Directional
Drilling, Wireline and Pressure Control businesses. While the
performance in our Pressure Pumping business has been negatively
impacted by weak fundamentals, we are taking the steps needed to
adjust capacity and utilization levels to better position Pressure
Pumping for success in the current market.
- In Directional Drilling, we continued
to realize high utilization and strong field performance despite a
broader market decline in active rig count.
- In Wireline, improvements in our
unconventional completions field level utilization drove sequential
top-line growth of 60% and a return to positive Adjusted EBITDA for
the quarter.
- In Pressure Control, we recovered from
a slow start to 2019 at the end of the first quarter and realized
full utilization from both of our large diameter coil tubing units
which were delivered in the fourth quarter. We will continue to
focus on increasing our large diameter coil tubing capacity
throughout 2019.
- In Pressure Pumping, we made the
decision to idle two hydraulic fracturing spreads and have further
consolidated our activities to increase utilization and field-level
efficiencies. We continue to deliver leading performance in the
field for our customers and are beginning to see improved
utilization levels.
Our team remains focused on free cash flow. As of the end of the
first quarter 2019, our net debt balance was $16.1 million, largely
flat to the prior quarter. We remain on track with our previously
announced reduced capex spend of approximately $45 million for
2019, of which approximately $15 million will go toward our most
attractive growth investment opportunities and the remainder
towards expected maintenance needs.
The current market remains challenging. While commodity prices
have improved, that has not translated into additions to rig count
or material improvements in completions activity. However, based on
our conversations with customers we do believe we will begin to see
improvements on both fronts as we progress through the second
quarter.
We continue to pursue opportunities to strengthen the QES
platform and create value through strategic consolidation. We see
consolidation as an attractive avenue to accelerate and drive much
needed efficiencies and improved returns while adding size, scale
and enhanced liquidity for shareholders. Here too, we are
optimistic that the opportunity to execute and create meaningful
value through consolidation is improving," concluded Herndon.
Business Segment Results
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 $62.0 million in the first
quarter of 2019, up approximately 2.6% compared to revenue of $60.4
million in the fourth quarter of 2018 and up 64.9% from the first
quarter of 2018. First quarter 2019 Adjusted EBITDA was $9.5
million, compared to Adjusted EBITDA of $9.4 million for the fourth
quarter of 2018. The sequential increases in revenue and Adjusted
EBITDA were primarily due to increased pricing associated with
increased deployment of specialized technology. In the first
quarter of 2018, revenue was $37.6 million and Adjusted EBITDA was
$2.6 million.
Pressure Pumping
The Pressure Pumping segment primarily
provides hydraulic fracturing services to E&P companies in the
Mid-Con. Revenue for the segment decreased 47.1% to $28.6 million
in the first quarter of 2019, down from $54.1 million in the fourth
quarter of 2018. The sequential decrease in revenue was primarily
attributable to the stacking of two of four hydraulic fracturing
fleets during the first quarter, which drove a corresponding 11.4%
decrease in stages. Additionally we experienced a 40.0% decrease in
average revenue per stage to $31,501 for the three months ended
March 31, 2019. First quarter 2019 Adjusted EBITDA was a loss of
$3.5 million, compared to Adjusted EBITDA of $4.1 million for the
fourth quarter of 2018. The sequential decrease in Adjusted EBITDA
was primarily attributable to a 47.1% decrease in revenue driven by
market conditions and customer delays which resulted in decreased
hydraulic fracturing activity and reduced pricing. In the first
quarter of 2018, revenue was $53.4 million and Adjusted EBITDA was
$9.9 million.
Pressure Control
The Pressure Control segment consists of
coiled tubing, rig-assisted snubbing, nitrogen, fluid pumping and
well control services. Revenue for the segment decreased 8.9% to
$28.8 million in the first quarter of 2019, down from $31.6 million
in the fourth quarter of 2018. First quarter 2019 Adjusted EBITDA
was $3.2 million, compared to Adjusted EBITDA of $4.7 million for
the fourth quarter of 2018. The sequential decreases in revenue and
Adjusted EBITDA were primarily due to decreases in coiled tubing
pricing, nitrogen volumes and well control activity during the
first quarter of 2019. In the first quarter of 2018, revenue was
$28.0 million and Adjusted EBITDA was $3.7 million.
Wireline
The Wireline segment primarily provides
cased-hole wireline services to E&P companies. Revenue for the
segment increased 62.8% to $22.3 million in the first quarter of
2019 from $13.7 million in the fourth quarter of 2018. First
quarter 2019 Adjusted EBITDA was $2.1 million, compared to an
Adjusted EBITDA loss of $1.3 million for the fourth quarter of
2018. The sequential increases in revenue and Adjusted EBITDA were
primarily due to increased crew utilization, increased pricing as
work mix shifted towards multi-well unconventional pads and the
successful completion of Wireline's reorganization. In the first
quarter of 2018, revenue was $22.3 million and Adjusted EBITDA was
$2.6 million.
Other Financial Information
General and administrative ("G&A") expense for the first
quarter of 2019 increased to $15.7 million compared to the fourth
quarter's G&A expense of $13.8 million, and decreased by $4.6
million, compared to $20.3 million for the first quarter of 2018.
The sequential increase in G&A expense compared to the fourth
quarter was primarily the additional administrative expenses
related to being a publicly traded company and related expenses.
The year over year decrease in G&A expenses was primarily
driven by a lower stock based compensation expense of $2.8 million
during the first quarter of 2019, partially offset by increased
headcount and additional administrative expenses related to being a
publicly traded company and related expenses.
Capital expenditures totaled $12.6 million during the first
quarter of 2019, compared to capital expenditures of $11.8 million
in the fourth quarter of 2018, and $12.4 million in the first
quarter of 2018. Capital spending during the first quarter of 2019
was driven by pressure pumping equipment lease buyouts, Directional
Drilling's expenditures on motors, a new robotics cell for our
machine shop and overall maintenance capital expenditures, compared
to the fourth quarter of 2018 where expenditures stabilized
following the deployment of the fourth hydraulic fracturing
fleet.
First quarter interest expense of $0.7 million was consistent
with the fourth quarter's interest expense, and down from $10.2
million in the first quarter of 2018. The first quarter interest
expense decrease over prior year period was primarily due to a
lower debt outstanding balance during the first quarter of
2019.
The Company’s balance sheet remains a significant strength and a
key differentiator versus our peers. QES ended the first quarter of
2019 with a total debt balance of $37.0 million, $20.9 million of
cash on hand, and $45.2 million of net availability under its
senior secured asset-based revolving credit facility.
Share Repurchase Plan
On August 8, 2018, QES' Board of Directors approved a $6.0
million stock repurchase program authorizing the Company to
repurchase common stock in the open market. The timing and amount
of stock repurchases will depend on market conditions and
corporate, regulatory and other relevant 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,
subject to the Company's insider trading policy, at the Company’s
discretion. As of March 31, 2019, 0.2 million share
repurchases were made under this program.
Conference Call Information
QES has scheduled a conference call for 9:00 a.m. Central Time
(10:00 a.m. Eastern Time) on Thursday, May 9, 2019, to review
reported results. You may access the call by telephone at
1-201-389-0867 and asking for the QES 2019 First 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 May 16, 2019, at (201) 612-7415,
access code 13689715#.
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 U.S. dollars and
shares, except per share amounts)
(Unaudited)
Three Months Ended
March 31,2019
December 31,2018
March 31,2018
Revenues: $ 141,665 $ 159,653 $ 141,268
Costs and
expenses: Direct operating costs 121,551 135,393 116,097
General and administrative 15,710 13,834 20,312 Depreciation and
amortization 12,440 12,417 11,078 Gain on disposition of assets (23
) (1,046 ) (106 ) Operating loss (8,013 ) (945 ) (6,113 )
Non-operating expense:
Interest expense (671 ) (626 ) (10,192 ) Loss before income tax
(8,684 ) (1,571 ) (16,305 ) Income tax expense (177 ) (37 )
(51 ) Net loss (8,861 ) (1,608 ) (16,356 ) Net loss attributable to
predecessor — — (1,546 ) Net loss attributable to
Quintana Energy Services Inc. $ (8,861 ) $ (1,608 ) $ (14,810 ) Net
loss per common share: Basic $ (0.26 ) $ (0.05 ) $ (0.44 ) Diluted
$ (0.26 ) $ (0.05 ) $ (0.44 ) Weighted average common shares
outstanding: Basic 33,685 33,600 33,318 Diluted 33,685 33,600
33,318
Quintana Energy Services Inc.
Condensed Consolidated Balance
Sheets
(in thousands of U.S. dollars, except
per share and share amounts)
March 31, 2019 December 31, 2018
(Unaudited) ASSETS Current assets: Cash and cash
equivalents $ 20,890 $ 13,804 Accounts receivable, net of allowance
of $1,834 and $1,841 96,495 101,620 Unbilled receivables 8,427
13,766 Inventories 24,636 23,464 Prepaid expenses and other current
assets 6,006 7,481 Total current assets 156,454
160,135 Property, plant and equipment, net 153,670 153,878
Operating lease right-of-use asset 25,581 — Intangible assets, net
8,566 9,019 Other assets 1,428 1,517 Total assets $
345,699 $ 324,549
LIABILITIES AND SHAREHOLDERS'
EQUITY Current liabilities: Accounts payable $ 48,694 $ 51,568
Accrued liabilities 35,460 37,533 Other current liabilities 8,344
422 Total current liabilities 92,498 89,523 Long-term
debt 37,000 29,500 Long-term operating lease liabilities 17,820 —
Long-term finance lease obligations 3,895 3,451 Deferred tax
liability 190 130 Other long-term liabilities 26 125
Total liabilities 151,429 122,729 Commitments and contingencies
Shareholders’ equity: Preferred shares, $0.01 par value, 10,000,000
authorized; none issued and outstanding — — Common shares, $0.01
par value, 150,000,000 authorized; 34,382,599 issued; 33,869,589
outstanding 347 344 Additional paid-in-capital 351,828 349,080
Treasury shares, at cost, 513,010 and 232,892 common shares (3,261
) (1,821 ) Accumulated deficit (154,644 ) (145,783 ) Total
shareholders’ equity 194,270 201,820 Total
liabilities and shareholders’ equity $ 345,699 $ 324,549
Quintana Energy Services Inc.
Condensed Consolidated Statements of
Cash Flows
(in thousands of U.S. dollars)
(Unaudited)
Three Months Ended March 31, 2019
March 31, 2018 Cash flows from operating
activities: Net loss $ (8,861 ) $ (16,356 ) Adjustments to
reconcile net loss to net cash used in operating activities
Depreciation and amortization 12,440 11,078
Gain on disposition of assets
(3,270 ) (458 ) Non-cash interest expense 87 764 Loss on debt
extinguishment — 8,594 Provision for doubtful accounts 257 159
Deferred income tax expense 40 — Stock-based compensation 2,751
9,886 Changes in operating assets and liabilities: Accounts
receivable 4,869 (1,411 ) Unbilled receivables 5,338 1,422
Inventories (1,172 ) (3,789 ) Prepaid expenses and other current
assets 1,867 459 Other noncurrent assets 3 — Accounts payable
(2,078 ) 1,508 Accrued liabilities (1,518 ) (1,448 ) Other
long-term liabilities (99 ) (7 ) Net cash provided by
operating activities 10,654 10,401
Cash flows from investing activities: Purchases of property,
plant and equipment (12,284 ) (10,705 ) Advances of deposit on
equipment (354 ) (1,709 ) Proceeds from sale of property, plant and
equipment 3,754 998
Net cash used in investing activities
(8,884 ) (11,416 )
Cash flows from financing
activities: Proceeds from revolving debt 7,500 15,000 Payments
on revolving debt — (81,071 ) Payments on term loans — (11,225 )
Payments on finance leases (122 ) (90 ) Payments on financed
payables (617 ) — Payment of deferred financing costs — (1,416 )
Prepayment premiums on early debt extinguishment — (1,346 )
Payments for treasury shares (1,445 ) (1,271 ) Proceeds from new
shares issuance, net of underwriting commissions — 90,541 Costs
incurred for stock issuance — (212 ) Net cash
provided by financing activities 5,316 8,910
Net increase in cash and cash
equivalents
7,086 7,895 Cash and cash equivalents
beginning of period 13,804 8,751 Cash
and cash equivalents end of period $ 20,890 $ 16,646
Supplemental cash flow information Cash paid
for interest $ 548 $ 792 Income taxes refund 6 —
Supplemental
non-cash investing and financing activities Fixed asset
purchases in accounts payable and accrued liabilities 1,096 832
Financed payables 392 — Non-cash capital lease additions 720 —
Non-cash payment for property, plant and equipment — 682 Debt
conversion of Former Term Loan to equity — 33,632 Issuance of
common shares for members’ equity — 212,630 Stock issuance cost
included in accounts payable $ — $ 1,967
Quintana Energy Services Inc.
Additional Selected Operating
Data
(Unaudited)
Three Months Ended
March 31,2019
December 31,2018
March 31,2018
Other Operational Data: Directional Drilling rig days (1)
(2) 5,279 5,564 3,706 Average monthly Directional Drilling rigs on
revenue (3) 82 82 57 Total hydraulic fracturing stages 853 1,363
963 Average hydraulic fracturing revenue per stage $ 31,501 $
37,479 $ 52,477 (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 a reconciliation of the non-GAAP
financial measures of Adjusted EBITDA to the most directly
comparable GAAP financial measure for the periods indicated:
Quintana Energy Services Inc.
Reconciliation of Net Loss to Adjusted
EBITDA
(In thousands of U.S. dollars)
(Unaudited)
Three Months Ended
March 31,2019
December 31,2018
March 31,2018
Net loss $ (8,861 ) $ (1,608 ) $ (16,356 ) Income tax expense 177
37 51 Interest expense 671 626 10,192 Depreciation and amortization
expense 12,440 12,418 11,078 Gain on disposition of assets, net (23
) (1,046 ) (106 ) Non-cash stock based compensation 2,751 2,503
9,886 Rebranding expense (1) 16 74 — Settlement expense (2) 383 304
223 Severance expense (3) — 107 — Equipment and stand-up expense
(4) — 517 515
Adjusted EBITDA $ 7,554
$ 13,932 $ 15,483 (1) Relates to
expenses incurred in connection with rebranding our business
segments. (2) For 2019, represents legal fees for FLSA claims and
other non-recurring expenses that were recorded in general and
administrative expenses. For 2018, represents legal fees for FLSA
claims, facility closures and other non-recurring expenses that
were recorded in general and administrative expenses.
(3) Relates to severance expenses incurred
in connection with a program implemented to reduce headcount. In
our performance for the three months ended December 31, 2018, $0.1
million was recorded in general and administrative expenses. All
severance expenses in the fourth quarter of 2018 were recorded in
general and administrative expenses.
(4) Relates to equipment stand-up costs incurred in connection with
the mobilization and redeployment of assets. In our actual
performance for the three months ended March 31, 2018, primarily
represents costs relating to the deployment of our third pressure
pumping fleet, of which, approximately $0.4 million was recorded in
direct operating expenses and approximately $0.1 million was
recorded in general and administrative expenses. In our performance
for the three months ended December 31, 2018, approximately $0.5
million was recorded in direct operating expenses.
Quintana Energy Services Inc.
Reconciliation of Segment Adjusted
EBITDA to Net Loss
(In thousands of U.S. dollars)
(Unaudited)
Three Months Ended
March 31,2019
December 31,2018
March 31,2018
Directional Drilling $ 9,480 $ 9,420 $ 2,580 Pressure Pumping
(3,504 ) 4,131 9,889 Pressure Control 3,241 4,716 3,650 Wireline
2,064 (1,251 ) 2,564 Corporate and Other (6,877 ) (6,589 ) (13,824
) Income tax expense (177 ) (37 ) (51 ) Interest expense (671 )
(626 ) (10,192 ) Depreciation and amortization (12,440 ) (12,418 )
(11,078 ) Gain on disposition of assets, net 23
1,046 106
Net loss $ (8,861 ) $
(1,608 ) $ (16,356 )
Quintana Energy Services Inc.
Segment Adjusted EBITDA Margin
(In thousands of U.S. dollars, except
percentages)
(Unaudited)
Three Months Ended
March 31,2019
December 31,2018
March 31,2018
Segment Adjusted EBITDA Margin(1) Directional
Drilling Adjusted EBITDA $ 9,480 $ 9,420 $ 2,580 Revenue
61,956 60,365 37,602 Adjusted
EBITDA Margin Percentage 15.3 15.6
6.9
Pressure Pumping Adjusted EBITDA (3,504 )
4,131 9,889 Revenue 28,631 54,064
53,400 Adjusted EBITDA Margin Percentage (12.2
) 7.6 18.5
Pressure Control
Adjusted EBITDA 3,241 4,716 3,650 Revenue 28,775
31,557 27,961 Adjusted EBITDA Margin
Percentage 11.3 14.9 13.1
Wireline Adjusted EBITDA 2,064 (1,251 ) 2,564 Revenue
22,303 13,667 22,305 Adjusted
EBITDA Margin Percentage 9.3 (9.2 )
11.5 (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/20190508005969/en/
Quintana Energy ServicesKeefer M.
Lehner, EVP & CFO832-518-4094IR@qesinc.com
Dennard Lascar Investor
RelationsKen Dennard / Natalie
Hairston713-529-6600QES@dennardlascar.com
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