Select Energy Services Reports 2018 First Quarter Results
HOUSTON, May 10, 2018 /PRNewswire/ -- Select Energy Services, Inc. (NYSE: WTTR) ("Select" or "the Company"), a leading provider of total water management and chemical solutions to the North American unconventional oil and gas industry, today announced results for the first quarter ended March 31, 2018.
Revenue for the first quarter of 2018 was $376.4 million as compared to $304.2 million in the fourth quarter of 2017 and $99.9 million in the first quarter of 2017. Net income for the first quarter of 2018 was $16.1 million as compared to a net loss of $14.9 million in the fourth quarter of 2017 and a net loss of $12.3 million in the first quarter of 2017. Adjusted EBITDA was $59.6 million in the first quarter of 2018 as compared to $43.9 million in the fourth quarter of 2017 and $13.8 million in the first quarter of 2017. Due to the timing of Select's merger with Rockwater Energy Solutions, Inc. ("Rockwater") that closed on November 1, 2017, results in the fourth quarter of 2017 do not include Rockwater's operating results for the month of October, which included approximately $70.1 million in revenue, $0.7 million in net income and $7.7 million in Adjusted EBITDA.
Holli Ladhani, President and CEO, stated, "We are very encouraged by how the company progressed during the first quarter. The integration of Rockwater has gone well and is reflected in our first quarter results with solid net income and cash flow. With a supportive backdrop of rising oil prices and overall strong market fundamentals, we will continue to remain focused on further improving our margins in the second quarter."
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(1) "Adjusted EBITDA" is not presented in accordance with generally accepted accounting principles in the United States ("GAAP"). Please see the supplemental financial information in the table under "Comparison of Non-GAAP Financial Measures" at the end of this earnings release for a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to its most directly comparable GAAP financial measure. |
Cash Flow and Balance Sheet
Cash Flow from Operations for the first quarter was $35.2 million. Capital expenditures for the quarter were $32.6 million, which were fully funded with Cash Flow from Operations, which also included $18.2 million of working capital build. Total cash during the quarter increased $3.3 million and, at March 31, 2018, cash and cash equivalents totaled $6.1 million and outstanding borrowings under our revolving credit facility of $75.0 million. In addition to cash and cash equivalents, the Company had approximately $160.8 million of available borrowing capacity under our revolving credit facility after giving effect to $19.8 million of outstanding letters of credit, providing total liquidity of $166.9 million.
Conference Call
Select has scheduled a conference call on Friday, May 11, 2018 at 10:00 a.m. Eastern time. Please dial 201-389-0872 and ask for the Select Energy Services call at least 10 minutes prior to the start time of the call, or listen live over the Internet by logging on to the web at the address http://investors.selectenergyservices.com/events-and-presentations. A telephonic replay of the conference call will be available through May 18, 2018 and may be accessed by calling 201-612-7415 using passcode 13676696#. A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days.
About Select Energy Services, Inc.
Select is a leading provider of total water management and chemical solutions to the North American unconventional oil and gas industry. Select provides for the sourcing and transfer of water, both by permanent pipeline and temporary hose, prior to its use in the drilling and completion activities associated with hydraulic fracturing, as well as complementary water-related services that support oil and gas well completion and production activities, including containment, monitoring, treatment and recycling, flowback, hauling, and disposal. Select, under its Rockwater Energy Solutions brand, develops and manufactures a full suite of specialty chemicals used in the well completion process and production chemicals used to enhance performance over the producing life of a well. Select currently provides services to exploration and production companies and oilfield service companies operating in all the major shale and producing basins in the United States and Western Canada. For more information, please visit Select's website, http://www.selectenergyservices.com.
Cautionary Statement Regarding Forward-Looking Statements
All statements in this communication other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as "expect," "will," "estimate" and other similar expressions. Although we believe that the expectations reflected, and the assumptions or bases underlying our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause our actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements. Factors that could materially impact such forward-looking statements include, but are not limited to, the factors discussed or referenced in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2017 and in any subsequently filed quarterly reports on Form 10-Q or current reports on Form 8-K. Investors should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.
WTTR-ER
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SELECT ENERGY SERVICES, INC. | |||||
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CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
|
(unaudited) | |||||
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(in thousands, except share and per share data) | |||||
|
Three Months Ended March 31, | |||||
|
2018 |
2017 | ||||
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Revenue |
|||||
|
Water solutions and related services |
$ |
281,555 |
$ |
78,377 | |
|
Accommodations and rentals |
14,744 |
9,515 | |||
|
Wellsite completion and construction services |
16,466 |
12,033 | |||
|
Oilfield chemical product sales |
63,630 |
— | |||
|
Total revenue |
376,395 |
99,925 | |||
|
Costs of revenue |
|||||
|
Water solutions and related services |
215,425 |
60,621 | |||
|
Accommodations and rentals |
10,665 |
7,923 | |||
|
Wellsite completion and construction services |
14,390 |
10,419 | |||
|
Oilfield chemical product sales |
57,084 |
— | |||
|
Depreciation and amortization |
30,882 |
21,204 | |||
|
Total costs of revenue |
328,446 |
100,167 | |||
|
Gross profit (loss) |
47,949 |
(242) | |||
|
Operating expenses |
|||||
|
Selling, general and administrative |
25,681 |
9,957 | |||
|
Depreciation and amortization |
541 |
446 | |||
|
Impairment of investment |
2,000 |
— | |||
|
Lease abandonment costs |
1,124 |
1,863 | |||
|
Total operating expenses |
29,346 |
12,266 | |||
|
Income (loss) from operations |
18,603 |
(12,508) | |||
|
Other income (expense) |
|||||
|
Interest expense, net |
(1,151) |
(730) | |||
|
Foreign currency losses, net |
(400) |
— | |||
|
Other (expense) income, net |
(458) |
1,064 | |||
|
Income (loss) before tax expense |
16,594 |
(12,174) | |||
|
Tax expense |
(462) |
(106) | |||
|
Net income (loss) |
16,132 |
(12,280) | |||
|
Less: net (income) loss attributable to noncontrolling interests |
(6,033) |
8,108 | |||
|
Net income (loss) attributable to Select Energy Services, Inc. |
$ |
10,099 |
$ |
(4,172) | |
|
Net income (loss) per share attributable to common stockholders: |
|||||
|
Class A—Basic |
$ |
0.15 |
$ |
(0.21) | |
|
Class A-1—Basic |
$ |
— |
$ |
(0.21) | |
|
Class A-2—Basic |
$ |
0.15 |
$ |
— | |
|
Class B—Basic |
$ |
— |
$ |
— | |
|
Net income (loss) per share attributable to common stockholders: |
|||||
|
Class A—Diluted |
$ |
0.15 |
$ |
(0.21) | |
|
Class A-1—Diluted |
$ |
— |
$ |
(0.21) | |
|
Class A-2—Diluted |
$ |
0.15 |
$ |
— | |
|
Class B—Diluted |
$ |
— |
$ |
— | |
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SELECT ENERGY SERVICES, INC. | |||||
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CONSOLIDATED BALANCE SHEETS | |||||
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(unaudited) | |||||
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(in thousands, except share data) | |||||
|
March 31, 2018 |
December 31, 2017 | ||||
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(unaudited) |
|||||
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Assets |
|||||
|
Current assets |
|||||
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Cash and cash equivalents |
$ |
6,117 |
$ |
2,774 | |
|
Accounts receivable trade, net of allowance for doubtful accounts of $3,341 and $2,979, respectively |
407,046 |
373,633 | |||
|
Accounts receivable, related parties |
7,206 |
7,669 | |||
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Inventories |
44,501 |
44,598 | |||
|
Prepaid expenses and other current assets |
20,295 |
17,842 | |||
|
Total current assets |
485,165 |
446,516 | |||
|
Property and equipment |
1,051,970 |
1,034,995 | |||
|
Accumulated depreciation |
(578,220) |
(560,886) | |||
|
Property and equipment, net |
473,750 |
474,109 | |||
|
Goodwill |
275,795 |
273,421 | |||
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Other intangible assets, net |
152,215 |
156,066 | |||
|
Other assets |
4,084 |
6,256 | |||
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Total assets |
$ |
1,391,009 |
$ |
1,356,368 | |
|
Liabilities and Equity |
|||||
|
Current liabilities |
|||||
|
Accounts payable |
$ |
62,415 |
$ |
52,579 | |
|
Accounts payable and accrued expenses, related parties |
2,600 |
2,772 | |||
|
Accrued salaries and benefits |
20,222 |
21,324 | |||
|
Accrued insurance |
11,928 |
12,510 | |||
|
Sales tax payable |
12,570 |
12,931 | |||
|
Accrued expenses and other current liabilities |
91,400 |
81,112 | |||
|
Current portion of capital lease obligations |
1,706 |
1,965 | |||
|
Total current liabilities |
202,841 |
185,193 | |||
|
Accrued lease obligations |
18,321 |
18,979 | |||
|
Other long term liabilities |
13,577 |
13,827 | |||
|
Long-term debt |
75,000 |
75,000 | |||
|
Total liabilities |
309,739 |
292,999 | |||
|
Commitments and contingencies |
|||||
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Class A common stock, $0.01 par value; 350,000,000 shares authorized and 66,258,163 shares issued and outstanding as of March 31, 2018; 350,000,000 shares authorized and 59,182,176 shares issued and outstanding as of December 31, 2017 |
662 |
592 | |||
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Class A-2 common stock, $0.01 par value; 40,000,000 shares authorized, no shares issued or outstanding as of March 31, 2018; 40,000,000 shares authorized, 6,731,845 shares issued and outstanding as of December 31, 2017 |
— |
67 | |||
|
Class B common stock, $0.01 par value; 150,000,000 shares authorized and 40,331,989 shares issued and outstanding as of March 31, 2018; 150,000,000 shares authorized and 40,331,989 shares issued and outstanding as of December 31, 2017 |
404 |
404 | |||
|
Preferred stock, $0.01 par value; 50,000,000 shares authorized and no shares issued and outstanding as of March 31, 2018 and December 31, 2017 |
— |
— | |||
|
Additional paid-in capital |
675,895 |
673,141 | |||
|
Accumulated deficit |
(7,760) |
(17,859) | |||
|
Accumulated other comprehensive income |
43 |
302 | |||
|
Total stockholders' equity |
669,244 |
656,647 | |||
|
Noncontrolling interests |
412,026 |
406,722 | |||
|
Total equity |
1,081,270 |
1,063,369 | |||
|
Total liabilities and equity |
$ |
1,391,009 |
$ |
1,356,368 | |
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SELECT ENERGY SERVICES, INC. | |||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
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(unaudited) | |||||
|
(in thousands) | |||||
|
Three Months Ended March 31, | |||||
|
2018 |
2017 | ||||
|
Cash flows from operating activities |
|||||
|
Net income (loss) |
$ |
16,132 |
$ |
(12,280) | |
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities |
|||||
|
Depreciation and amortization |
31,423 |
21,650 | |||
|
Loss (gain) on disposal of property and equipment |
554 |
(1,105) | |||
|
Bad debt expense |
485 |
334 | |||
|
Amortization of debt issuance costs |
172 |
309 | |||
|
Equity-based compensation |
2,481 |
643 | |||
|
Impairment of investment |
2,000 |
— | |||
|
Other operating items, net |
117 |
— | |||
|
Changes in operating assets and liabilities |
|||||
|
Accounts receivable |
(33,691) |
(21,157) | |||
|
Prepaid expenses and other assets |
(1,017) |
1,337 | |||
|
Accounts payable and accrued liabilities |
16,549 |
2,333 | |||
|
Net cash provided by (used in) operating activities |
35,205 |
(7,936) | |||
|
Cash flows from investing activities |
|||||
|
Acquisitions, net of cash received |
— |
(49,004) | |||
|
Purchase of property and equipment |
(32,612) |
(10,806) | |||
|
Proceeds received from sale of property and equipment |
1,609 |
1,753 | |||
|
Net cash used in investing activities |
(31,003) |
(58,057) | |||
|
Cash flows from financing activities |
|||||
|
Proceeds from revolving line of credit and issuance of long-term debt |
— |
34,000 | |||
|
Payments of capital lease obligations |
(511) |
— | |||
|
Proceeds from share issuance |
130 |
— | |||
|
Distributions to noncontrolling interests |
(161) |
— | |||
|
Share repurchases |
(264) |
— | |||
|
Net cash (used in) provided by financing activities |
(806) |
34,000 | |||
|
Effect of exchange rate changes on cash |
(53) |
— | |||
|
Net increase (decrease) in cash and cash equivalents |
3,343 |
(31,993) | |||
|
Cash and cash equivalents, beginning of period |
2,774 |
40,041 | |||
|
Cash and cash equivalents, end of period |
$ |
6,117 |
$ |
8,048 | |
|
Supplemental cash flow disclosure: |
|||||
|
Cash paid for interest |
$ |
991 |
$ |
427 | |
|
Cash paid for taxes |
$ |
344 |
$ |
12 | |
|
Supplemental disclosure of noncash investing activities: |
|||||
|
Capital expenditures included in accounts payable and accrued liabilities |
$ |
9,632 |
$ |
4,766 | |
Comparison of Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We define EBITDA as net income, plus interest expense, taxes and depreciation & amortization. We define Adjusted EBITDA as EBITDA, plus impairment of investment, lease abandonment costs, non-recurring severance expenses, non-recurring transaction costs, non-cash compensation expenses, plus/(minus) non-cash loss (gain) on sale of subsidiaries and other assets, plus/(minus) foreign currency loss (gain), plus inventory write downs and other non-recurring charges. EBITDA and Adjusted EBITDA are supplemental non-GAAP financial measures that we believe provide useful information to external users of our financial statements, such as industry analysts, investors, lenders and rating agencies because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and non-recurring items outside the control of our management team. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.
Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. For further discussion, please see "Item 6. Selected Financial Data" in our 2017 Annual Report on Form 10-K.
The following tables present a reconciliation of EBITDA and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure for the periods presented:
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Rockwater |
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Three Months Ended |
One MonthEndedOctober 31, |
Three MonthsEnded | |||||||||
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March 31, 2018 |
December 31, 2017 |
2017 |
March 31, 2017 | ||||||||
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(unaudited) | |||||||||||
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(in thousands) | |||||||||||
|
Net income (loss) |
$ |
16,132 |
$ |
(14,950) |
$ |
701 |
$ |
(12,280) | |||
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Interest expense |
1,151 |
4,744 |
468 |
730 | |||||||
|
Tax expense (benefit) |
462 |
(525) |
121 |
106 | |||||||
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Depreciation and amortization |
31,423 |
34,993 |
4,806 |
21,650 | |||||||
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EBITDA |
49,168 |
24,262 |
6,096 |
10,206 | |||||||
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Impairment of investment |
2,000 |
— |
— |
— | |||||||
|
Lease abandonment costs |
1,124 |
701 |
50 |
1,863 | |||||||
|
Non-recurring severance expenses |
— |
4,039 |
125 |
— | |||||||
|
Non-recurring transaction costs |
2,694 |
4,717 |
627 |
748 | |||||||
|
Non-cash compensation expenses |
2,481 |
5,910 |
387 |
643 | |||||||
|
Non-cash loss (gain) on sale of subsidiaries and other assets |
1,515 |
965 |
(3) |
309 | |||||||
|
Foreign currency loss (gain) |
400 |
(281) |
404 |
— | |||||||
|
Inventory write downs |
266 |
— |
— |
— | |||||||
|
Other non-recurring charges |
— |
3,563 |
21 |
— | |||||||
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Adjusted EBITDA |
$ |
59,648 |
$ |
43,876 |
$ |
7,707 |
$ |
13,769 | |||
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Contacts: |
Select Energy Services |
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Gary Gillette - CFO & SVP | |
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Chris George - Sr. Director, Finance & Investor Relations | |
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(713) 296-1073 | |
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Dennard Lascar Investor Relations | |
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Ken Dennard / Lisa Elliott | |
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713-529-6600 | |
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SOURCE Select Energy Services, Inc.