Quintana Energy Services Inc. (NYSE: QES) (“QES” or the
“Company”) today reported financial and operating results for the
second quarter ended June 30, 2019.
Second Quarter 2019 Financial Results
Second quarter 2019 revenue was $125.6 million, down 11.4% from
$141.7 million in the first quarter of 2019. Second quarter 2019
net loss was $11.3 million and Adjusted EBITDA was $5.9 million,
compared to a net loss of $8.9 million and Adjusted EBITDA of $7.6
million for the first quarter of 2019, and a net income of $2.1
million and Adjusted EBITDA of $17.9 million in the second 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”).
Christopher J. Baker, QES’ President and Chief Executive
Officer, stated, “In the second quarter of 2019, all four of our
segments experienced negative impacts due to pricing volatility and
market softness, however, our Pressure Pumping segment marked a
return to profitability. All four of our business segments ended
the quarter EBITDA positive for the first time since Q2 2018. Most
of the sequential decline in results was attributable to weaker
activity levels in the Directional Drilling segment, which, despite
its excellent performance, reputation and outstanding strength over
the last several quarters, has now begun to feel the impact of rig
count reductions as well as a difficult macroeconomic
environment."
“Although we remain hopeful that market conditions will bottom
and ultimately begin to recover at some point in the second half of
2019 or early 2020, we will continue to seek improvements in our
cost structure to build on and increase our returns. We believe
Quintana is well-positioned to benefit in a rising market; but we
also want to ensure that, should market challenges persist, we are
fully prepared to weather an extended period of adversity with our
strong balance sheet and substantial liquidity in order to
strategically position ourselves for future success,” concluded
Baker.
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 $54.4 million in the second
quarter of 2019, down approximately 12.3% compared to revenue of
$62.0 million in the first quarter of 2019 and up 24.8% from the
second quarter of 2018. Second quarter 2019 Adjusted EBITDA was
$5.9 million, compared to Adjusted EBITDA of $9.5 million for the
first quarter of 2019. The sequential decreases in revenue and
Adjusted EBITDA were primarily due to decreased pricing and
utilization associated with declining rig counts and prevailing
market conditions. In the second quarter of 2018, revenue was $43.6
million and Adjusted EBITDA was $5.2 million.
Pressure Pumping
The Pressure Pumping segment primarily
provides hydraulic fracturing services to E&P companies in the
Mid-Con, Permian Basin, and Rockies. Revenue for the segment
decreased 16.1% to $24.0 million in the second quarter of 2019,
down from $28.6 million in the first quarter of 2019. The
sequential decrease in revenue was primarily attributable to the
stacking of two of our four hydraulic fracturing fleets during the
first quarter of 2019, which drove a corresponding 5.0% decrease in
stages completed during the second quarter of 2019. Additionally,
we experienced a 12.6% decrease in average revenue per stage to
$27,545 for the three months ended June 30, 2019. Second quarter
2019 Adjusted EBITDA was $0.8 million, compared to an Adjusted
EBITDA loss of $3.5 million for the first quarter of 2019. The
sequential increase in Adjusted EBITDA was primarily attributable
to increased utilization, less white space on the calendar and
efficiency improvements realized during the second quarter of 2019.
In the second quarter of 2018, revenue was $56.7 million and
Adjusted EBITDA was $8.9 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 4.2% to
$27.6 million in the second quarter of 2019, down from $28.8
million in the first quarter of 2019. Second quarter 2019 Adjusted
EBITDA was $1.6 million, compared to Adjusted EBITDA of $3.2
million for the first quarter of 2019. The sequential decreases in
revenue and Adjusted EBITDA were primarily due to decreases in
coiled tubing pricing and activity during the second quarter of
2019. In the second quarter of 2018, revenue was $32.0 million and
Adjusted EBITDA was $5.6 million.
Wireline
The Wireline segment primarily provides
cased-hole wireline services to E&P companies. Revenue for the
segment decreased 12.1% to $19.6 million in the second quarter of
2019 from $22.3 million in the first quarter of 2019. Second
quarter 2019 Adjusted EBITDA was $0.4 million, compared to Adjusted
EBITDA of $2.1 million for the first quarter of 2019. The
sequential decreases in revenue and Adjusted EBITDA were primarily
due to decreased utilization, decreased pumpdown pricing and fewer
revenue days compared to the first quarter of 2019. In the second
quarter of 2018, revenue was $20.3 million and Adjusted EBITDA was
$0.8 million.
Other Financial Information
General and administrative ("G&A") expense for the second
quarter of 2019 decreased to $13.9 million compared to the first
quarter's G&A expense of $15.7 million, and decreased by $0.6
million, compared to $14.5 million for the second quarter of 2018.
The sequential decrease in G&A expense compared to the first
quarter was primarily lower labor costs in the current quarter. The
year over year decrease in G&A expenses was primarily driven by
a lower stock-based compensation expense of $5.4 million during the
first half of 2019, decreased headcount and efficiency improvements
realized during the second quarter of 2019
Capital expenditures totaled $8.9 million during the second
quarter of 2019, compared to capital expenditures of $12.6 million
in the first quarter of 2019, and $28.8 million in the second
quarter of 2018. Capital spending during the second quarter of 2019
was driven primarily by Directional Drilling expenditures on
motors, Pressure Control expenditures on trailers and overall
maintenance capital expenditures, compared to the first quarter of
2019 where capital expenditures were driven by pressure pumping
equipment lease buyouts, Directional Drilling's expenditures on
machining capability, a new robotics cell for our machine shop and
overall maintenance capital expenditures.
Second quarter interest expense of $0.9 million was consistent
with the first quarter's interest expense, and down from $0.4
million in the second quarter of 2018. The second quarter interest
expense increase over prior year period was primarily due to a
higher debt outstanding balance during the second quarter of
2019.
The Company’s balance sheet remains a significant strength and a
key differentiator versus our peers. QES ended the second quarter
of 2019 with a total debt balance of $35.0 million, $16.6 million
of cash on hand, and $41.9 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 June 30, 2019, 0.4 million share were repurchased
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, August 8, 2019, to review
reported results. You may access the call by telephone at
1-201-389-0867 and asking for the QES 2019 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, 2019, at (201)
612-7415, access code 13692097#.
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
June 30, 2019
March 31, 2019
June 30, 2018
Revenues:
$
125,627
$
141,665
$
152,536
Costs and expenses:
Direct operating costs
109,075
121,551
124,592
General and administrative
13,862
15,710
14,489
Depreciation and amortization
13,116
12,440
11,155
Gain on disposition of assets
(153
)
(23
)
(594
)
Operating (loss) income
(10,273
)
(8,013
)
2,894
Non-operating expense:
Interest expense
(853
)
(671
)
(433
)
(Loss) income before income tax
(11,126
)
(8,684
)
2,461
Income tax expense
(154
)
(177
)
(326
)
Net (loss) income
(11,280
)
(8,861
)
2,135
Net (loss) income per common share:
Basic
$
(0.33
)
$
(0.26
)
$
0.06
Diluted
$
(0.33
)
$
(0.26
)
$
0.06
Weighted average common shares
outstanding:
Basic
33,804
33,685
33,631
Diluted
33,804
33,685
35,227
Quintana Energy Services Inc.
Condensed Consolidated Balance Sheets (in thousands of U.S.
dollars, except per share and share amounts) (Unaudited)
June 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
16,583
$
13,804
Accounts receivable, net of allowance of
$1,726 and $1,841
84,753
101,620
Unbilled receivables
8,131
13,766
Inventories
25,005
23,464
Prepaid expenses and other current
assets
5,165
7,481
Total current assets
139,637
160,135
Property, plant and equipment, net
156,577
153,878
Operating lease right-of-use asset
16,208
—
Intangible assets, net
8,112
9,019
Other assets
1,333
1,517
Total assets
$
321,867
$
324,549
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
40,665
$
51,568
Accrued liabilities
32,599
37,533
Other current liabilities
8,127
422
Total current liabilities
81,391
89,523
Long-term debt
35,000
29,500
Long-term operating lease liabilities
10,844
—
Long-term finance lease obligations
9,222
3,451
Deferred tax liability
232
130
Other long-term liabilities
18
125
Total liabilities
136,707
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; 33,705,148
outstanding
350
344
Additional paid-in-capital
354,517
349,080
Treasury shares, at cost, 677,451 and
232,892 common shares
(3,783
)
(1,821
)
Accumulated deficit
(165,924
)
(145,783
)
Total shareholders’ equity
185,160
201,820
Total liabilities and shareholders’
equity
$
321,867
$
324,549
Quintana Energy Services Inc.
Condensed Consolidated Statements of Cash Flows (in thousands of
U.S. dollars) (Unaudited)
Six Months Ended
June 30, 2019
June 30, 2018
Cash flows from operating
activities:
Net loss
$
(20,140
)
$
(14,222
)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization
25,556
22,233
Gain on disposition of assets
(5,165
)
(3,068
)
Non-cash interest expense
174
855
Loss on debt extinguishment
—
8,594
Provision for doubtful accounts
300
460
Deferred income tax expense
67
—
Stock-based compensation
5,443
12,826
Changes in operating assets and
liabilities:
Accounts receivable
16,566
(12,567
)
Unbilled receivables
5,635
(3,204
)
Inventories
(1,542
)
(5,051
)
Prepaid expenses and other current
assets
2,743
1,331
Other noncurrent assets
11
(176
)
Accounts payable
(9,387
)
3,413
Accrued liabilities
(3,448
)
1,009
Other long-term liabilities
(106
)
(15
)
Net cash provided by operating
activities
16,707
12,418
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(21,521
)
(41,194
)
Proceeds from sale of property, plant and
equipment
6,520
3,911
Net cash used in investing activities
(15,001
)
(37,283
)
Cash flows from financing
activities:
Proceeds from revolving debt
7,500
33,000
Payments on revolving debt
(2,000
)
(81,071
)
Payments on term loans
—
(11,225
)
Payments on finance leases
(625
)
(182
)
Payments on financed payables
(1,839
)
(1,268
)
Payment of deferred financing costs
—
(1,416
)
Prepayment premiums on early debt
extinguishment
—
(1,346
)
Payments for treasury shares
(1,963
)
(1,271
)
Proceeds from new shares issuance, net of
underwriting commissions
—
90,542
Costs incurred for stock issuance
—
(2,673
)
Net cash provided by financing
activities
1,073
23,090
Net increase in cash and cash
equivalents
2,779
(507
)
Cash and cash equivalents beginning of
period
13,804
8,751
Cash and cash equivalents end of
period
$
16,583
$
8,244
Supplemental cash flow
information
Cash paid for interest
$
1,270
$
1,119
Income taxes paid
84
151
Supplemental non-cash investing and
financing activities
Fixed asset purchases in accounts payable
and accrued liabilities
1,513
570
Financed payables
426
—
Non-cash capital lease additions
8,696
—
Non-cash payment for property, plant and
equipment
—
3,279
Debt conversion of Former 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, 2019
March 31, 2019
June 30, 2018
Other Operational Data:
Directional Drilling rig days (1) (2)
4,854
5,279
4,108
Average monthly Directional Drilling rigs
on revenue (3)
71
82
61
Total hydraulic fracturing stages
810
853
947
Average hydraulic fracturing revenue per
stage
$
27,545
$
31,501
$
56,000
(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
June 30, 2019
March 31, 2019
June 30, 2018
Net (loss) income
$
(11,280
)
$
(8,861
)
$
2,135
Income tax expense
154
177
326
Interest expense
853
671
433
Depreciation and amortization expense
13,116
12,440
11,155
Gain on disposition of assets, net
(153
)
(23
)
(594
)
Non-cash stock based compensation
2,692
2,751
2,940
Rebranding expense (1)
—
16
53
Settlement expense (2)
408
383
166
Severance expense (3)
85
—
53
Equipment and stand-up expense (4)
—
—
1,251
Adjusted EBITDA
$
5,875
$
7,554
$
17,918
(1) Relates to expenses incurred in
connection with rebranding our business segments.
(2) For 2019, represents certain
nonrecurring corporate professional fees related to contemplated
mergers and acquisitions activities, legal fees for FLSA claims and
other non-recurring settlement 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 in
incurred in connection with a program implemented to reduce
headcount. In our performance for the three months ended June 30,
2019, $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. For 2018, primarily represents costs relating to the
deployment of our third pressure pumping fleet, of which,
approximately $1.2 million was recorded in direct operating
expenses and approximately $0.1 million was recorded in general and
administrative expenses.
Quintana Energy Services Inc.
Reconciliation of Segment Adjusted EBITDA to Net Loss (In thousands
of U.S. dollars) (Unaudited)
Three Months Ended
June 30, 2019
March 31, 2019
June 30, 2018
Directional Drilling
$
5,854
$
9,480
$
5,242
Pressure Pumping
762
(3,504
)
8,884
Pressure Control
1,584
3,241
5,602
Wireline
384
2,064
788
Corporate and Other
(5,894
)
(6,877
)
(7,061
)
Income tax expense
(154
)
(177
)
(326
)
Interest expense
(853
)
(671
)
(433
)
Depreciation and amortization
(13,116
)
(12,440
)
(11,155
)
Gain on disposition of assets,
net
153
23
594
Net (loss) income
$
(11,280
)
$
(8,861
)
$
2,135
Quintana Energy Services Inc.
Segment Adjusted EBITDA Margin (In thousands of U.S. dollars,
except percentages) (Unaudited)
Three Months Ended
June 30, 2019
March 31, 2019
June 30, 2018
Segment Adjusted EBITDA
Margin(1)
Directional Drilling
Adjusted EBITDA
$
5,854
$
9,480
$
5,242
Revenue
54,380
61,956
43,605
Adjusted EBITDA Margin Percentage
10.8
15.3
12.0
Pressure Pumping
Adjusted EBITDA
762
(3,504
)
8,884
Revenue
24,038
28,631
56,702
Adjusted EBITDA Margin Percentage
3.2
(12.2
)
15.7
Pressure Control
Adjusted EBITDA
1,584
3,241
5,602
Revenue
27,646
28,775
31,965
Adjusted EBITDA Margin Percentage
5.7
11.3
17.5
Wireline
Adjusted EBITDA
384
2,064
788
Revenue
19,563
22,303
20,264
Adjusted EBITDA Margin Percentage
2.0
9.3
3.9
(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/20190807005874/en/
Quintana Energy Services Keefer M.
Lehner, EVP & CFO 832-518-4094 IR@qesinc.com
Dennard Lascar Investor Relations
Ken Dennard / Natalie Hairston 713-529-6600
QES@dennardlascar.com
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