Quintana Energy Services Reports Third Quarter 2018 Results
HOUSTON--(BUSINESS WIRE)--Nov 6, 2018--Quintana Energy Services Inc. (NYSE: QES) (“QES” or the “Company”) today reported financial and operating results for the third quarter ended September 30, 2018.
Third Quarter 2018 Financial Highlights
Third quarter 2018 revenue of $150.9 million, compared to $152.5 million from the second quarter of 2018. Third quarter 2018 net loss was $2.4 million and Adjusted EBITDA was $12.9 million, compared to a net income of $2.1 million and Adjusted EBITDA of $17.9 million for the second quarter of 2018. In the third quarter of 2017, revenue was $113.3 million, net loss was $8.4 million and Adjusted EBITDA was $6.8 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, “Our third quarter was negatively impacted by pricing pressure and activity headwinds on the completions side of our business, primarily in Pressure Pumping and Wireline. However, in Directional Drilling we continued to capture market share, increase margins and saw sequential increases in both utilization and pricing.”
“As we start the fourth quarter we are seeing notable improvements in our Pressure Pumping activity levels versus the third quarter. Directional Drilling continues to realize market share gains and is focused on increasing margins. In Pressure Control, we will begin to realize the benefit from the activity of our two additional large diameter coil tubing units delivered in early November. We are making the needed adjustments to our Wireline offering this quarter and will begin to realize the improvements by the end of the year.”
“Despite a challenging third quarter, we were able to reduce our net debt to approximately $12.0 million. We expect improved results in the fourth quarter and believe we are well positioned to resume our growth trajectory as we enter 2019,” concluded Herndon.
Business Segment Results
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 $50.9 million in the third quarter of 2018, up approximately 16.7% compared to revenue of $43.6 million in the second quarter of 2018 and up 31.5% from the third quarter of 2017. Third quarter 2018 Adjusted EBITDA was $6.5 million, compared to Adjusted EBITDA of $5.2 million for the second quarter of 2018. The sequential increases in revenue and Adjusted EBITDA were primarily due to increased utilization and pricing. In the third quarter of 2017, revenue was $38.7 million and Adjusted EBITDA was $3.4 million.
The Pressure Pumping segment primarily provides hydraulic fracturing services to E&P companies in the Mid-Con. Revenue for the segment fell 11.8% to $50.0 million in the third quarter of 2018, down from $56.7 million in the second quarter of 2018. The sequential decrease in revenue was primarily driven by white space on the hydraulic fracturing schedule and market driven pricing pressure during the third quarter of 2018 compared to the prior quarter. Third quarter 2018 Adjusted EBITDA was $5.8 million, compared to Adjusted EBITDA of $8.9 million for the second quarter of 2018. The sequential decrease in Adjusted EBITDA was primarily due to an 11.8% decrease in revenues and increased costs associated with an underutilized fourth spread in the third quarter of 2018. In the third quarter of 2017, revenue was $39.4 million and Adjusted EBITDA was $5.8 million.
The Pressure Control segment consists of coiled tubing, rig-assisted snubbing, nitrogen, and well control services. Revenue for the segment fell approximately 2.8% to $31.1 million in the third quarter of 2018, down from $32.0 million in the second quarter of 2018. Third quarter 2018 Adjusted EBITDA was $4.4 million, compared to Adjusted EBITDA of $5.6 million for the second quarter of 2018. The sequential decreases in revenue and Adjusted EBITDA were primarily due to a reduction in well control activity and scheduling disruptions driven by prevailing market conditions. In the third quarter of 2017, revenue was $22.5 million and Adjusted EBITDA was $0.8 million.
The Wireline segment primarily provides cased-hole wireline services to E&P companies. Revenue for the segment decreased to $18.9 million in the third quarter of 2018 from $20.3 million in the second quarter of 2018. Third quarter 2018 Adjusted EBITDA was $(0.7) million, compared to Adjusted EBITDA of $0.8 million for the second quarter of 2018. The sequential decreases in revenue and Adjusted EBITDA were primarily due to low utilization and pricing pressure driven by prevailing market conditions during the quarter. In the third quarter of 2017, revenue was $12.6 million and Adjusted EBITDA was a loss of $1.2 million.
Other Financial Information
General and administrative (“G&A”) expense for the third quarter of 2018 was consistent with the prior quarter’s G&A expense of $22.5 million, and increased by $3.9 million, compared to $18.6 million for the third quarter of 2017. The increase in G&A expenses over 2017 was primarily driven by stock based compensation expense of $2.6 million, increased headcount, additional administrative expenses related to being a publicly traded company and related expenses.
Capital expenditures totaled $11.9 million during the third quarter of 2018, compared to capital expenditures of $28.8 million in the second quarter of 2018, and $4.8 million in the third quarter of 2017. The sequential decrease in capital expenditures compared to the second quarter was driven by the deployment of the fourth hydraulic fracturing fleet and related capital spending in the second quarter that did not reoccur in the current quarter.
Third quarter interest expense was $0.6 million, up from $0.4 million in the second quarter and down from $2.9 million in the third quarter of 2017. The third quarter interest expense was consistent with the second quarter and the interest expense decrease over prior year period was primarily due to a lower debt outstanding balance during the third 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 third quarter of 2018 with a total debt balance of $30.0 million, $22.1 million of cash on hand, and $47.7 million of net availability under its new senior secured asset-based revolving credit facility.
Share Repurchase Plan
On August 8, 2018, our Board of Directors approved a $6.0 million stock repurchase program authorizing us 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 September 30, 2018, no repurchases had been 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, November 7, 2018, to review reported results. You may access the call by telephone at 1-201-389-0867 and asking for the QES 2018 Third 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 November 14, 2018, at (201) 612-7415, access code 13684027#.
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.
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:
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CONTACT: Quintana Energy Services
Keefer M. Lehner, EVP & CFO
Dennard Lascar Investor Relations
Ken Dennard / Natalie Hairston
KEYWORD: UNITED STATES NORTH AMERICA TEXAS
INDUSTRY KEYWORD: ENERGY OIL/GAS MANUFACTURING OTHER MANUFACTURING
SOURCE: Quintana Energy Services Inc.
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PUB: 11/06/2018 05:38 PM/DISC: 11/06/2018 05:38 PM