ENSERVCO Reports Third Quarter Financial Results
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E-mailDENVER, CO -- (Marketwired) -- 11/14/16 --
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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 third quarter ended September 30, 2016.
"Our financial results in the third quarter - traditionally our slowest quarter of the year - were generally in line with our expectations," said Rick Kasch, Chairman and CEO. "Although by most accounts the downturn appears to have established a bottom, the lingering effects of reduced drilling and completion activity continued to negatively impact our core well enhancement services. We continued to win new business in the Eagle Ford basin in Texas, where acidizing and hot oiling revenue realized a combined 81% increase year over year - a validation of our decision last year to expand our geographic footprint in spite of the downturn and redeploy assets to more active areas. We also saw a significant increase in construction services revenue due to a dirt-hauling contract that commenced in the second quarter and will conclude in the fourth quarter. With oil prices seeming to stabilize in recent weeks and drilling, completion and maintenance activity on a slow but steady rise, we believe we have weathered the worst of the downturn and are well positioned to grow as the recovery continues.
"We are also beginning to see some positive impact from our decision to add new service lines through the acquisition of distressed assets earlier this year," Kasch added. "By expanding our services portfolio with the addition of water transfer equipment and water treatment technology, we have positioned ENSERVCO as a one-stop-shop for E&Ps who seek to benefit from bundled services pricing and a simplified procurement process with a single vendor. In the third quarter we were awarded our first three water transfer projects - one in North Dakota and two in Colorado - for work in the fourth quarter. We are also forging ahead with our patented HydroFLOW® bacteria and scale treatment product rollout with ongoing trials with an E&P customer showing promising results. Since this product is new to the oil and gas industry, the initial sales cycle is longer than that of our other services.
"We enter our heating season with growing sales momentum from recent customer wins and a continued strong performance in our Texas expansion area where the Company was recently named Oilfield Services Company of the Year at the 4th Annual Oil & Gas Awards. Our September 30, 2016, balance sheet remains solid and we were in compliance with our debt covenants."
Third Quarter Results Total third quarter revenue increased 4% to $5.5 million from $5.3 million in the same quarter last year. The increase in revenue was primarily attributable to the positive impact of a dirt-hauling contract and a strong increase in acidizing revenue, which combined to offset a decline in hot oiling revenue resulting from lower commodity prices and price concessions, and lower water hauling revenue due to the Company's decision to de-emphasize this lower margin service line.
The primary components of revenue mix included hot oiling of $1.8 million, down from $2.6 million year over year; acidizing of $1.1 million, up from $693,000; frac water heating of $85,000, up from $9,000; construction services of $1.6 million, up from $171,000; and water hauling of $891,000, down from $1.6 million. The Company continued to expand its activities in the Eagle Ford Basin in the third quarter, with an 81% increase in revenue year over year to $1.3 million from $739,000.
Gross loss in the third quarter was $458,000 versus a gross loss of $47,000 in the same quarter last year due primarily to a decline in our higher margin well enhancement service lines, carrying costs for the newly launched water management division and costs associated with the dirt hauling project.
General and administrative expenses remained relatively flat year over year at $967,000 compared to $955,000 last year while costs of patent litigation and defense declined 38% to $33,000 from $54,000. Depreciation and amortization expense increased 8% year over year to $1.6 million from $1.5 million due to the Company's acquisition of water transfer assets in early 2016.
The Company reported a net loss of $2.4 million, or $0.06 per diluted share, versus a net loss of $1.6 million, or $0.04 per diluted share, in the same quarter last year.
Adjusted EBITDA in the third quarter was a negative $1.2 million versus a negative $831,000 in the same quarter last year - a reflection of the decline in higher margin hot oil service activity combined with selective price concessions plus startup costs related to new business initiatives.
Nine-Month Results Total revenue for the first nine months of 2016 declined 40% year over year to $17.9 million from $30.2 million due to the overall decline in drilling and completion activities related to lower commodity prices, warm weather impact on heating services in the first half of 2016, and the planned de-emphasis on lower-margin water hauling activity.
The primary contributors to the $12.2 million decline in total revenue were a $9.6 million decline in frac water heating, a $2.4 million decline in hot oiling, and a $1.8 million decline in water hauling. Those declines were partially offset by a $139,000 increase in acidizing revenue due to the expansion into the Eagle Ford basin and a $1.9 million increase in construction services.
Gross profit in the first nine months of 2016 was $279,000 versus $8.0 million in the same period last year. The year over year decline in gross margin - to 2% from 26% - was attributable to the decline in higher margin well enhancement services due to lower service activity, price concessions and warm weather. Additionally, startup costs associated with water management and the dirt-hauling project contributed to the decline.
General and administrative expenses declined 7%, or $221,000, year over year and costs associated with patent litigation and defense declined 78%, or $384,000. These cost reductions were offset by a 17%, or $716,000, increase in depreciation and amortization expense related to the larger fleet size and the addition of water transfer assets.
The Company reported a net loss of $5.8 million, or $0.15 per diluted share, versus a net loss of $371,000, or $0.01 per diluted share, in the same period last year.
Adjusted EBITDA in the first nine months of 2016 was a negative $2.1 million versus positive adjusted EBITDA of $5.3 million in the same period a year ago, primarily reflecting the lower gross profit due to lower levels of higher margin frac water heating revenue.
The Company closed the third quarter with a long-term debt to equity ratio of 2:1, working capital of $2.5 million and a current ratio of 1.8:1.
Conference Call Information Management will hold a conference call today to discuss these results. The call will begin at 11:00 a.m. Mountain Time (1:00 p.m. Eastern) 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 November 21, 2016, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #13648502. 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=175408
About ENSERVCO Through its various operating subsidiaries, ENSERVCO provides a wide range of oilfield services, including hot oiling, acidizing, frac water heating, water transfer, bacteria and scaling treatment, water hauling and oilfield support equipment rental. The Company has a broad geographic footprint covering seven major domestic oil and gas basins and serves 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 (net income or loss) 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 ENSERVCO's annual report on Form 10-K for the year ended December 31, 2015, and subsequently filed documents with the SEC. Forward looking statements in this news release that are subject to risk include expectations for, and sustainability of, a bottom to the downturn and an industry recovery; the Company's ability to weather the downturn, sustain momentum and to grow as the industry recovers; prospects for continued growth in the Eagle Ford Basin; expectations that the HydroFLOW® rollout will be successful; and the Company's ability to maintain a strong balance sheet and remain in compliance with loan covenants. 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
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2016 2015 2016 2015
------------ ------------ ------------ ------------
Revenues $ 5,503,211 $ 5,308,854 $ 17,948,622 $ 30,150,900
Cost of Revenues 5,961,540 5,355,942 17,669,806 22,184,102
------------ ------------ ------------ ------------
Gross Profit (Loss) (458,329) (47,088) 278,816 7,966,798
------------ ------------ ------------ ------------
Operating Expenses
General and
administrative
expenses 966,873 954,831 2,894,769 3,115,557
Patent litigation
and defense costs 33,171 53,844 108,783 493,058
Depreciation and
amortization 1,602,901 1,489,352 4,968,493 4,252,124
------------ ------------ ------------ ------------
Total operating
expenses 2,602,945 2,498,027 7,972,045 7,860,739
------------ ------------ ------------ ------------
Income (Loss) from
Operations (3,061,274) (2,545,115) (7,693,229) 106,059
Other Income
(Expense)
Interest expense (553,049) (360,434) (1,426,500) (860,865)
Gain (Loss) on
disposals of
equipment - - 233,473 (1,071)
Other income 5,198 22,642 12,204 54,893
------------ ------------ ------------ ------------
Total other
expense (547,851) (337,792) (1,180,823) (807,043)
------------ ------------ ------------ ------------
Income (Loss) Before
Tax Expense (3,609,125) (2,882,907) (8,874,052) (700,984)
Income Tax Benefit
(Expense) 1,251,301 1,234,716 3,060,008 330,162
------------ ------------ ------------ ------------
Net Income (Loss) $ (2,357,824) $ (1,648,191) $ (5,814,044) $ (370,822)
============ ============ ============ ============
Other Comprehensive
Income (Loss) - - - -
------------ ------------ ------------ ------------
Comprehensive Income
(Loss) $ (2,357,824) $ (1,648,191) $ (5,814,044) $ (370,822)
============ ============ ============ ============
Earnings (Loss) per
Common Share -
Basic $ (0.06) $ (0.04) $ (0.15) $ (0.01)
============ ============ ============ ============
Earnings (Loss) per
Common Share -
Diluted $ (0.06) $ (0.04) $ (0.15) $ (0.01)
============ ============ ============ ============
Basic weighted
average number of
common shares
outstanding 38,130,160 38,101,647 38,129,994 37,740,843
Add: Dilutive shares
assuming exercise
of options and
warrants - - - -
------------ ------------ ------------ ------------
Diluted weighted
average number of
common shares
outstanding 38,130,160 38,101,647 38,129,994 37,740,843
============ ============ ============ ============
ENSERVCO CORPORATION
Calculation of Adjusted EBITDA *
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2016 2015 2016 2015
------------ ------------ ------------ ------------
Adjusted EBITDA*
Income (Loss) $ (2,357,824) $ (1,648,191) $ (5,814,044) $ (370,822)
Add Back (Deduct)
Interest Expense 553,049 360,434 1,426,500 860,865
Provision for
income taxes
(benefit) expense (1,251,301) (1,234,716) (3,060,008) (330,162)
Depreciation and
amortization 1,602,901 1,489,352 4,968,493 4,252,124
------------ ------------ ------------ ------------
EBITDA* (1,453,175) (1,033,121) (2,479,059) 4,412,005
Add Back (Deduct)
Stock-based
compensation 175,954 170,972 493,458 442,243
Patent Litigation
and defense costs 33,171 53,844 108,783 493,058
(Gain) on sale and
disposal of
equipment - - (233,473) 1,071
Interest and other
income (5,198) (22,642) (12,204) (54,893)
------------ ------------ ------------ ------------
Adjusted EBITDA* $ (1,249,248) $ (830,947) $ (2,122,495) $ 5,293,484
============ ============ ============ ============
*Use of Non-GAAP Financial Measures: Non-GAAP results are presented
only as a supplement to the financial statements and for use within
management's discussion and analysis based on U.S. generally accepted
accounting principles (GAAP). The non-GAAP financial information is
provided to enhance the reader's understanding of the Company's
financial performance, but no non-GAAP measure should be considered in
isolation or as a substitute for financial measures calculated in
accordance with GAAP. Reconciliations of the most directly comparable
GAAP measures to non-GAAP measures are provided herein.
EBITDA is defined as net income (earnings), before interest expense,
income taxes, and depreciation and amortization. Adjusted EBITDA
excludes stock-based compensation from EBITDA and, when appropriate,
other items that management does not utilize in assessing the Company's
ongoing operating performance as set forth in the next paragraph. 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.
All of the items included in the reconciliation from net income to
EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items
(e.g., depreciation, amortization of purchased intangibles, stock-based
compensation, warrants issued, etc.) or (ii) items that management does
not consider to be useful in assessing the Company's ongoing operating
performance (e.g., income taxes, gain on sale of investments, loss on
disposal of assets, patent litigation and defense costs, etc.). In the
case of the non-cash items, management believes that investors can
better assess the company's operating performance if the measures are
presented without such items because, unlike cash expenses, these
adjustments do not affect the Company's ability to generate free cash
flow or invest in its business.
We use, and we believe investors benefit from the presentation of,
EBITDA and Adjusted EBITDA in evaluating our operating performance
because it provides us and our investors with an additional tool to
compare our operating performance on a consistent basis by removing the
impact of certain items that management believes do not directly
reflect our core operations. We believe that EBITDA is useful to
investors and other external users of our financial statements in
evaluating our operating performance because EBITDA is widely used by
investors to measure a company's operating performance without regard
to items such as interest expense, taxes, and depreciation and
amortization, which can vary substantially from company to company
depending upon accounting methods and book value of assets, capital
structure and the method by which assets were acquired. Additionally,
our leverage and fixed charge ratio covenants associated with our 2014
Credit Agreement require the use of Adjusted EBITDA in specific
calculations.
Because not all companies use identical calculations, the Company's
presentation of non-GAAP financial measures may not be comparable to
other similarly titled measures of other companies. However, these
measures can still be useful in evaluating the Company's performance
against its peer companies because management believes the measures
provide users with valuable insight into key components of GAAP
financial disclosures.
ENSERVCO CORPORATION
Condensed Consolidated Balance Sheets
September 30, December 31,
ASSETS 2016 2015
------------- -------------
(Unaudited)
Current Assets
Cash and cash equivalents $ 781,275 $ 804,737
Accounts receivable, net 3,370,676 7,037,419
Prepaid expenses and other current assets 916,553 1,072,479
Inventories 362,582 308,297
Income tax receivable 223,847 222,447
------------- -------------
Total current assets 5,654,933 9,445,379
Property and Equipment, net 36,242,244 36,494,661
Goodwill 301,087 301,087
Other Assets 154,481 180,730
------------- -------------
TOTAL ASSETS $ 42,352,745 $ 46,421,857
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 2,794,122 $ 3,039,859
Current portion of long-term debt 338,178 314,263
------------- -------------
Total current liabilities 3,132,300 3,354,122
------------- -------------
Long-Term Liabilities
Senior revolving credit facility, net of
unamortized deferred loan costs of $469,054
and $532,870, respectively 24,849,530 20,173,371
Long-term debt, less current portion 459,010 590,505
Deferred income taxes, net 1,343,961 4,417,043
------------- -------------
Total long-term liabilities 26,652,501 25,180,919
------------- -------------
Total Liabilities 29,784,801 28,535,041
------------- -------------
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, 38,233,760 and 38,230,729
shares issued, respectively; 103,600 shares
of treasury stock; and 38,130,160 and
38,127,129 shares outstanding, respectively 190,650 190,634
Additional paid-in capital 14,347,719 13,852,563
Accumulated (deficit) earnings (1,970,425) 3,843,619
------------- -------------
Total stockholders' equity 12,567,944 17,886,816
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 42,352,745 $ 46,421,857
============= =============
ENSERVCO CORPORATION
Condensed Consolidated Statement of Cash Flows
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2016 2015 2016 2015
------------ ------------ ------------ ------------
OPERATING ACTIVITIES
Net income (loss) $ (2,357,824) $ (1,648,191) $ (5,814,044) $ (370,822)
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities
Depreciation and
amortization 1,602,901 1,489,352 4,968,493 4,252,124
(Gain) loss on
disposal of
equipment - - (233,473) 1,071
Deferred income
taxes (1,264,375) (1,178,098) (3,073,082) (368,933)
Stock-based
compensation 175,954 170,972 493,458 442,243
Stock issued for
services - - 1,714 -
Amortization of
debt issuance
costs 39,123 32,265 113,816 90,048
Bad debt expense 58,953 8,205 145,902 21,050
Changes in
operating assets
and liabilities
Accounts
receivable (726,901) 657,071 3,520,841 11,446,199
Inventories (4,451) (19,733) (54,285) 65,503
Prepaid expense
and other current
assets 190,956 (263,144) 155,926 278,560
Income taxes
receivable - (62,091) (1,400) (191,697)
Other assets 26,249 14,849 26,249 14,849
Accounts payable
and accrued
liabilities 624,521 958,066 (245,737) (2,806,459)
------------ ------------ ------------ ------------
Net cash provided
by (used in)
operating
activities (1,634,894) 159,523 4,378 12,873,736
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Purchases of
property and
equipment (232,010) (429,623) (4,804,328) (3,574,726)
Proceeds from
disposal of
equipment - - 321,725 5,000
------------ ------------ ------------ ------------
Net cash provided
by (used in)
investing
activities (232,010) (429,623) (4,482,603) (3,569,726)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Net credit facility
borrowings
(payments) 2,117,214 376,522 4,612,343 (9,704,621)
Repayment of long-
term debt (36,221) (34,703) (107,580) (202,563)
Payment of debt
issuance costs - (100,000) (50,000) (100,000)
Proceeds from
exercise of
warrants - - - 77,100
Proceeds from
exercise of stock
options - 12,250 - 198,285
Excess tax benefits
from exercise of
options and
warrants - 3,109 - 221,231
------------ ------------ ------------ ------------
Net cash provided
by (used in)
financing
activities 2,080,993 257,178 4,454,763 (9,510,568)
------------ ------------ ------------ ------------
Net Increase
(Decrease) in Cash
and Cash Equivalents 214,089 (12,922) (23,462) (206,558)
Cash and Cash
Equivalents,
Beginning of Period 567,186 760,422 804,737 954,058
------------ ------------ ------------ ------------
Cash and Cash
Equivalents, End of
Period $ 781,275 $ 747,500 $ 781,275 $ 747,500
============ ============ ============ ============
Supplemental cash
flow information
consists of the
following:
Cash paid for
interest $ 574,076 219,192 $ 1,194,908 $ 841,252
Cash paid for taxes $ 13,074 $ 2,362 $ 14,474 $ 9,236
Supplemental
Disclosure of Non-
cash Investing and
Financing
Activities:
Cashless exercise
of stock options
and warrants $ - $ - $ - $ 2,752
Contact: Jay Pfeiffer Pfeiffer High Investor Relations, Inc. Phone: 303-393-7044 Email: [email protected]
Source: ENSERVCO
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