Newpark Resources (NR) Misses Q3 EPS by 9c, Revenues Miss

Newpark Resources (NYSE: NR) reported Q3 EPS of ($0.26), $0.09 worse than the analyst estimate of ($0.17). Revenue for the quarter came in at $96.42 million versus the consensus estimate of $101.55 million.

Paul Howes, Newpark's President and Chief Executive Officer, stated, "I remain extremely proud of the performance of our entire organization, as we've navigated through the combination of the oil & gas industry dislocation, as well as the prolonged COVID-related headwinds. Adding to these market headwinds, the third quarter was also impacted by the most active hurricane year in the last decade, which caused repeated work stoppages in the Gulf of Mexico. Despite these challenging conditions, we've continued to execute the playbook laid out earlier this year, pulling the required levers to maintain positive free cash flow and reduce our debt while right-sizing our cost structure in Fluids Systems.

"Free Cash Flow generation and debt reduction remain our highest priority, and I'm extremely pleased with our performance on this front. During the third quarter, we generated $15 million of cash from operations and reduced our total debt balance by $34 million, as we continue to harvest our working capital investments and right-size our business to the lower activity level. With the strong cash flow generation over the past two quarters, our year-to-date cash from operations is $40 million, yielding Free Cash Flow of $36 million, which combined with our foreign cash repatriation, provided for a $65 million reduction in our total outstanding debt since the beginning of the year," added Howes.

"Our Fluids Systems segment posted third quarter 2020 revenues of $68 million, reflecting a 9% sequential decline. The decline was primarily driven by extensive weather-related disruptions in the Gulf of Mexico, which caused revenues in the region to decline by nearly 50% to $7 million. In contrast with the 35% sequential decline in the North American rig count during the third quarter, our U.S. land revenues began to recover following the trough in the second quarter, with revenues increasing 8% to $30 million in the third quarter, benefitting from our expanding market share and an increase in customer activity per rig. Also, following the repositioning of our chemical blending facility, revenues from the start-up of industrial cleaning product manufacturing contributed nearly $3 million of revenue in the third quarter, as production continues to ramp up. Internationally, activity in key markets within the Middle East and North Africa was negatively impacted by increased travel and operating restrictions imposed in response to a surge in COVID outbreaks, leading to a 12% sequential reduction in our international Fluids revenues to $25 million for the third quarter. The Fluids operating loss in the third quarter was $19.0 million, which includes $4.5 million of charges. Despite realizing meaningful impact from our cost actions, the elevated operating loss primarily reflects the impact of lower revenue and cost inefficiencies driven by the unplanned activity interruptions in the Gulf of Mexico and the EMEA region, the start-up of cleaning product manufacturing, as well as our ongoing efforts to rationalize inventories."

Howes continued, "In Mats and Integrated Services, despite COVID continuing to drive delays in the timing of planned customer projects, revenues improved 5% sequentially to $29 million in the third quarter, driven by improvements in rental and services, as well as product sales. While U.S. E&P customer activity continued to soften, we experienced a late third quarter surge in worksite access demand along the Gulf Coast to support repairs to electrical infrastructure damaged by the recent hurricanes, with these projects continuing into the fourth quarter. Operating income in the third quarter was negatively impacted by our previously announced decision to reduce production at our mats manufacturing facility, a weaker revenue mix, and elevated costs to mobilize assets and resources to respond to the hurricane-driven demand.

"Following the challenging market environment in the third quarter, we expect conditions to be more constructive in the fourth quarter, with operating results benefitting from an anticipated rebound in the Gulf of Mexico, continued momentum in North American land markets resulting from the recent increase in rig counts, improvement in the international markets, as well as fourth quarter seasonal strength in product sales within Mats and Integrated Services," concluded Howes.

For earnings history and earnings-related data on Newpark Resources (NR) click here.

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