ENSERVCO Reports Fourth Quarter and Full Year Financial Results
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E-mailDENVER, CO -- (Marketwired) -- 03/18/15 -- ENSERVCO Corporation (NYSE MKT: ENSV)
Selected Highlights:
- Record Q4 adjusted EBITDA of $5.3 million, up 80% over prior year, drives EPS growth of 133% to $0.07 from $0.03
- Full year revenue and adjusted EBITDA at record levels despite several unexpected events that impacted revenue and profitability
- All three well enhancement business lines deliver double digit revenue growth
- Fleet expansion strengthens recurring, year-round maintenance capabilities to further reduce dependence on drilling activity
- Working capital increases 67% and stockholders' equity increases of 40%
- Company positioned to weather oil price downturn and pursue M&A opportunities
ENSERVCO Corporation (NYSE MKT: ENSV), a diversified national provider of well-site services to the domestic onshore conventional and unconventional oil and gas industries, today reported financial results for its fourth quarter and full year ended December 31, 2014.
"We are very pleased to announce record revenue and adjusted EBITDA for the full year -- highlighted by a strong fourth quarter in which we achieved record revenue, an 80% increase in adjusted EBITDA and a 133% increase in earnings per share," said Rick Kasch, Chairman and CEO. "These results are especially gratifying given the unusual confluence of certain issues we faced during the year, including (i) temporary safety stand-downs by two large customers (neither deemed a result of our actions); (ii) the effects of severe propane price fluctuations (which among other impacts influenced customers to utilize alternative fuel sources); and (iii) unfavorable weather patterns in the fourth quarter.
"During 2014 we successfully executed an aggressive capital expenditure program that contributed to record revenue in all three of our well enhancement business lines -- hot oiling, acidizing and frac water heating," Kasch added. "This capacity increase -- essentially doubling our fleet size year over year -- was our response to growing demand from existing and new customers throughout our traditional service territories as well as in new geographical expansion areas. We are particularly focused on growing our hot oiling and acidizing services, which represent less seasonal, recurring revenue streams that give us a more balanced revenue mix while reducing the risks associated with oil and gas price fluctuations. We also continue to build on our leadership position in frac water heating by increasing our capacity 81% year over year and capturing new business with our flexible bi-fuel system, which allows our frac water heating units to switch between using propane or natural gas. Although our introduction of bi-fuel heating units contributed to lower propane revenue in the short term, our early mover status in providing E&P customers with this cost-saving service resulted in increased market share and improved customer loyalty that will serve us well in the long term.
"Looking forward, as projected, we will have 100% of the new equipment from our 2014 capex program available for service by March 31, 2015, resulting in 81 frac water heating units (up from 42 last season); 59 hot oil units (up from 27); and 7 acidizing units (up from 3). This increase in capacity also includes our acquisition in Tioga, ND, which has met our expectations and enabled us to expand our operations in the Bakken, capture additional market share with major producers and grow our recurring maintenance work. In addition to successfully expanding our fleet, we entered 2015 with a track record of solid cash flows; a strong, underleveraged balance sheet; and significant capacity under our bank line. I believe we are in an excellent position to weather the current oil price decline and to aggressively pursue M&A opportunities that we anticipate will be accretive to earnings and enable us to diversify our service offerings, balance revenue streams between recurring maintenance and drilling-related work, further reduce the seasonality aspect of our business, and achieve high gross margins."
Fourth Quarter Results Revenue in the fourth quarter increased to a record $18.3 million, up 21% over $15.2 million in the same quarter last year. This $3.1 million increase is net of a $4.2 million decline in revenue year over year due to unseasonably warm temperatures until mid-November and lower propane revenues. Core well enhancement services -- hot oiling, acidizing and frac water heating -- increased 27% to a record $16.1 million from $12.6 million a year ago, more than offsetting a 17% decline in fluid management services -- to $2.0 million from $2.4 million. Hot oiling revenue growth was particularly strong (up 52% to $4.0 million from $2.7 million). Frac water heating revenue increased 20% to $11.3 million from $9.4 million. This across the board growth in well enhancement services reflected our fleet expansion, increased equipment utilization, and geographic expansion.
Gross profit margin in the fourth quarter increased to 34% from 26% in the same quarter a year ago. This increase reflected higher overall revenue and increased utilization of equipment in the fourth quarter of 2014 in addition to the mathematical impact of lower propane costs and related revenues.
Total operating expenses in the fourth quarter increased 59% to $2.5 million from $1.6 million. This increase reflected an additional $700,000 in depreciation and amortization expense due to the larger fleet size, and a nearly $300,000 increase in legal costs associated primarily with the Company's efforts to invalidate certain patent claims. General and administrative expense in the fourth quarter declined slightly to $1.0 million from $1.1 million as the Company continued to carefully manage its cost structure.
Operating income in the fourth quarter increased 55% to $3.7 million from $2.4 million year over year. Net income increased 129% to $2.5 million, or $0.07 per diluted share, from $1.1 million, or $0.03 per diluted share, in the same quarter last year.
Adjusted EBITDA grew by 80% year over year to $5.3 million from $2.9 million. It is estimated that the effects on revenue of the warm weather and the lower propane revenues resulted in lower EBITDA for the quarter of approximately $1.6 million.
Full-Year Results Revenue in 2014 increased 22% to a record $56.6 million from $46.5 million in 2013. This increase reflected growing fleet capacity and utilization in combination with geographic expansion and new customer wins, more than offsetting a $3.0 million decline in year-over-year revenue resulting from the aforementioned challenging events.
Gross profit margin declined to 27% from 31% a year ago due to higher expansion-related costs in the third quarter as well as higher propane prices in the first quarter, unexpected frac water-heating downtime in the second quarter, and unseasonably warm weather in the fourth quarter.
Total operating expenses in 2014 increased 32% to $8.4 million from $6.4 million a year ago. Of the $2.0 million increase, $1.3 million was due to higher depreciation and amortization expense ($3.4 million vs. $2.1 million year over year) related to fleet growth and $370,000 was due to patent-related expense ($560,000 vs. $190,000 year over year). While general and administrative expense increased 8% to $4.4 million from $4.1 million due to higher personnel costs, professional fees, stock-based compensation expense, and listing of the Company's common stock on the New York Stock Exchange, it improved to 8% of revenue from 9% of revenues a year ago.
Operating income in 2014 declined to $6.9 million from $8.2 million due to a combination of lower gross margins and higher operating expenses. Net income was $4.0 million, or $0.10 per diluted share, versus $4.3 million, or $0.12 per diluted share, a year ago.
Adjusted EBITDA for the full year was a record $11.5 million, up from $11.0 million a year ago. It is estimated that the impact of the lower revenue resulting from all of the issues described in the first paragraph was to lower EBITDA by approximately $2.9 million.
ENSERVCO generated $6.2 million in net cash from operations in 2014, up 17% from $5.3 million in 2013. The Company closed the year with working capital of $13.7 million, up 67% from $8.2 million a year ago.
Conference Call Information Management will hold a conference call today to discuss these results. The call will begin at 1:00 p.m. Eastern (11 a.m. Mountain) and will be accessible by dialing 877-407-8031 (201-689-8031 for international callers). No passcode is necessary. A telephonic replay will be available through March 25, 2015, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #13604000. To listen to the webcast, participants should go to the ENSERVCO website at www.enservco.com and link to the "Investors" page at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 90 days. The webcast also is available at the following link: http://www.investorcalendar.com/IC/CEPage.asp?ID=173722
About ENSERVCO Through its various operating subsidiaries, ENSERVCO has emerged as one of the energy service industry's leading providers of hot oiling, acidizing, frac water heating and fluid management services in seven major domestic oil and gas fields, serving customers in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia. Additional information is available at www.enservco.com
*Note on non-GAAP Financial Measures This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing ENSERVCO's operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Operations table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.
Cautionary Note Regarding Forward-Looking Statements This news release contains information that is "forward-looking" in that it describes events and conditions ENSERVCO reasonably expects to occur in the future. Expectations for the future performance of ENSERVCO are dependent upon a number of factors, and there can be no assurance that ENSERVCO will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond ENSERVCO's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in our fiscal year 2013 Form 10-K filed on March 20, 2014, subsequently filed documents, and those to be disclosed in our fiscal year 2014 Form 10-K, which we expect to file on or about March 19, 2015. It is important that each person reviewing this release understand the significant risks attendant to the operations of ENSERVCO. ENSERVCO disclaims any obligation to update any forward-looking statement made herein.
ENSERVCO CORPORATION
Consolidated Statement Of Operations And Comprehensive Income (Loss)
(Unaudited)
For the Quarter Ended For the Year Ended
December 31, December 31,
------------------------ ------------------------
2014 2013 2014 2013
----------- ----------- ----------- -----------
Revenues $18,278,289 $15,154,458 $56,563,944 $46,472,677
Cost of Revenues 12,049,312 11,175,528 41,257,600 31,869,312
----------- ----------- ----------- -----------
Gross Profit 6,228,977 3,978,930 15,306,344 14,603,365
----------- ----------- ----------- -----------
Operating Expenses
General and
administrative
expenses 1,003,489 1,083,468 4,393,129 4,076,088
Patent litigation and
defense costs 382,679 89,079 562,486 189,645
Depreciation and
amortization 1,113,478 394,896 3,402,330 2,088,767
----------- ----------- ----------- -----------
Total Operating
Expenses 2,499,646 1,567,443 8,357,945 6,354,500
----------- ----------- ----------- -----------
Income from Operations 3,729,331 2,411,487 6,948,399 8,248,865
Other Income (Expense)
Interest expense (70,670) (259,861) (791,159) (1,073,875)
Gain (Loss) on
disposals of equipment 170,159 (144,105) 179,903 169,194
Other income 5,252 7,045 40,470 36,383
----------- ----------- ----------- -----------
Total Other (Expense)
Income 104,741 (396,921) (570,786) (868,298)
----------- ----------- ----------- -----------
Income Before Tax Expense 3,834,072 2,014,566 6,377,613 7,380,567
Income Tax Expense (1,315,241) (916,289) (2,371,872) (3,079,330)
----------- ----------- ----------- -----------
Net Income $ 2,518,831 $ 1,098,277 $ 4,005,741 $ 4,301,237
=========== =========== =========== ===========
Other Comprehensive
Income (Loss)
Unrealized gain (loss)
on interest rate
swaps, net of tax - 5,423 (7,025) 8,875
Settlements - interest
rate swap - 6,441 19,368 27,331
Reclassification into
earnings - interest
rate swap 2,955 (6,441) (16,413) (27,331)
----------- ----------- ----------- -----------
Total Other
Comprehensive Income
(Loss) 2,955 5,423 (4,070) 8,875
----------- ----------- ----------- -----------
Comprehensive Income $ 2,521,786 $ 1,103,700 $ 4,001,671 $ 4,310,112
=========== =========== =========== ===========
Earnings per Common Share
- Basic $ 0.07 $ 0.03 $ 0.11 $ 0.13
=========== =========== =========== ===========
Earnings per Common Share
- Diluted $ 0.07 $ 0.03 $ 0.10 $ 0.12
=========== =========== =========== ===========
Basic weighted average
number of common shares
outstanding 37,036,306 33,614,572 36,529,906 32,454,965
Add: Dilutive shares
assuming exercise of
options and warrants 1,666,632 3,744,463 2,469,099 4,658,052
----------- ----------- ----------- -----------
Diluted weighted average
number of common shares
outstanding 38,702,938 37,359,035 38,999,005 37,113,017
=========== =========== =========== ===========
ENSERVCO CORPORATION
Calculation of Adjusted EBITDA *
For the Quarter Ended For the Year Ended
December 31, December 31,
------------------------ ------------------------
2014 2013 2014 2013
----------- ----------- ----------- -----------
Adjusted EBITDA*
Net Income $ 2,518,831 $ 1,098,277 $ 4,005,741 $ 4,301,237
Add Back (Deduct)
Interest Expense 70,670 259,861 791,159 1,073,875
Income Tax Expense 1,315,241 916,289 2,371,872 3,079,330
Depreciation and
amortization 1,113,478 394,896 3,402,330 2,088,767
----------- ----------- ----------- -----------
EBITDA* 5,018,220 2,669,323 10,571,102 10,543,209
Add Back (Deduct)
Stock-based
compensation 42,385 26,357 562,903 472,356
Patent litigation and
defense costs 382,679 89,079 562,486 189,645
(Gain) Loss on sale
and disposal of
equipment (170,159) 144,105 (179,903) (169,194)
Interest and other
income (5,252) (7,045) (40,470) (36,383)
----------- ----------- ----------- -----------
Adjusted EBITDA* $ 5,267,873 $ 2,921,819 $11,476,118 $10,999,633
=========== =========== =========== ===========
ENSERVCO CORPORATION
Consolidated Balance Sheets
December 31, December 31,
ASSETS 2014 2013
------------ ------------
(Unaudited)
Current Assets
Cash and cash equivalents $ 954,058 $ 1,868,190
Accounts receivable, net 14,679,858 11,685,866
Prepaid expenses and other current assets 1,540,667 923,758
Inventories 390,081 315,004
Income tax receivable 1,776,035 -
Deferred tax asset 135,055 336,561
------------ ------------
Total current assets 19,475,754 15,129,379
Property and Equipment, net 37,789,004 17,425,828
Goodwill 301,087 301,087
Long-Term Portion of Interest Rate Swap - 18,616
Other Assets 716,836 547,338
------------ ------------
TOTAL ASSETS $ 58,282,681 $ 33,422,248
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 5,462,268 $ 3,102,912
Income tax payable - 1,278,599
Current portion of long-term debt 340,520 2,562,141
Current portion of interest rate swap 9,895 11,966
------------ ------------
Total current liabilities 5,812,683 6,955,618
------------ ------------
Long-Term Liabilities
Senior revolving credit facility 28,634,037 -
Long-term debt, less current portion 801,968 11,200,048
Deferred income taxes, net 4,992,681 2,421,466
------------ ------------
Total long-term liabilities 34,428,686 13,621,514
------------ ------------
Total Liabilities 40,241,369 20,577,132
------------ ------------
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.005 par value, 10,000,000
shares authorized, no shares issued or
outstanding - -
Common stock. $.005 par value, 100,000,000
shares authorized, 37,159,815 and 34,926,136
shares issued, respectively; 103,600 shares of
treasury stock; and 37,056,215 and 34,822,536
shares outstanding, respectively 185,282 174,113
Additional paid-in capital 12,751,389 11,568,033
Accumulated earnings 5,104,641 1,098,900
Accumulated other comprehensive income - 4,070
------------ ------------
Total stockholders' equity 18,041,312 12,845,116
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,282,681 $ 33,422,248
============ ============
ENSERVCO CORPORATION
Condensed Consolidated Statement of Cash Flows
(Unaudited)
For the Three Months
ended For the 12 months ended
December 31, December 31,
------------------------- -------------------------
2014 2013 2014 2013
------------ ----------- ------------ -----------
OPERATING ACTIVITIES
Net income $ 2,518,831 $ 1,098,277 $ 4,005,741 $ 4,301,237
Adjustments to
reconcile net income
to net cash (used
in) provided by
operating activities
Depreciation and
amortization 1,113,478 394,896 3,402,330 2,088,767
Gain on sale and
disposal of
equipment (170,159) 144,105 (179,903) (169,194)
Deferred income
taxes 2,720,937 37,928 2,785,196 1,781,057
Stock-based
compensation 42,385 26,357 562,903 472,356
Amortization of
debt issuance
costs 27,980 76,944 253,803 309,236
Bad debt expense 4,785 79,412 96,592 249,809
Changes in operating
assets and
liabilities
Accounts receivable (10,979,863) (9,094,517) (3,090,584) (4,144,333)
Inventories (13,463) (16,939) (75,077) (41,901)
Prepaid expense and
other current
assets (179,414) 220,443 (417,084) (121,738)
Other non-current
assets (27,542) 5,318 (423,301) (175,262)
Accounts payable
and accrued
liabilities 1,629,435 1,031,395 2,359,356 (503,733)
Income taxes
receivable (1,497,767) - (1,776,035) -
Income taxes
payable - 861,279 (1,278,599) 1,278,599
------------ ----------- ------------ -----------
Net cash (used
in) provided
from operating
activities (4,810,377) (5,135,102) 6,225,338 5,324,900
------------ ----------- ------------ -----------
INVESTING ACTIVITIES
Purchases of property
and equipment (11,195,598) (2,130,068) (23,955,603) (5,837,126)
Proceeds from sale
and disposal of
equipment 320,000 46,277 370,000 2,053,568
------------ ----------- ------------ -----------
Net cash (used in)
provided by
investing
activities (10,875,598) (2,083,791) (23,585,603) (3,783,558)
------------ ----------- ------------ -----------
FINANCING ACTIVITIES
Net line of credit
borrowings 14,871,036 - 28,634,037 (2,151,052)
Proceeds from
issuance of long-
term debt - 3,720,000 - 3,720,000
Proceeds from
excerise of warrants 77,494 1,246,300 265,298 1,246,300
Proceeds from
excerise of options - - 127,987 -
Excess tax benefits
from exercise of
options and warrants 16,956 - 238,337
Repayment of long-
term debt (138,025) (1,235,750) (12,619,701) (2,971,605)
Deferred financing
costs (35,863) (50,422) (199,825) (50,422)
Payments upon
interest rate swap
settlements - - - -
------------ ----------- ------------ -----------
Net cash provided
by (used in)
financing
activities 14,791,598 3,680,128 16,446,133 (206,779)
------------ ----------- ------------ -----------
Net (Decrease) Increase
in Cash and Cash
Equivalents (894,377) (3,538,765) (914,132) 1,334,563
Cash and Cash
Equivalents, Beginning
of Period 1,848,435 5,406,955 1,868,190 533,627
------------ ----------- ------------ -----------
Cash and Cash
Equivalents, End of
Period $ 954,058 $ 1,868,190 $ 954,058 $ 1,868,190
============ =========== ============ ===========
Supplemental cash flow
information consists
of the following:
Cash paid for
interest $ 40,519 $ 180,371 $ 519,050 $ 764,667
Cash paid for taxes $ 83,093 $ - $ 2,412,681 $ 19,672
Supplemental Disclosure
of Non-cash Investing
and Financing
Activities:
Equipment purchased
through installment
loans $ - $ 50,037 $ - $ 206,523
Cashless exercise of
stock options and
warrants $ - $ 719 $ 7,532 $ 3,656
Contact: Jay Pfeiffer Pfeiffer High Investor Relations, Inc. Phone: 303-393-7044 Email: Email Contact
Source: ENSERVCO
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