Quintana Energy Services Reports Second Quarter 2018 Results
HOUSTON--(BUSINESS WIRE)--Aug 8, 2018--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.
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.
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.
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.
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 .
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.
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