Q4 2019 Earnings Call
[music].
Greetings and welcome to U.S., well services fourth quarter earnings Conference call. At this time, all participants are not listen only mode.
<unk> question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference call is being recorded.
It is now my pleasure to introduce your host for today's call Josh Shapiro.
Thank you you may begin.
Thank you operator, and good morning, everyone. We appreciate you joining us for the U.S. while services copper is called webcast for you for your fourth quarter 2019 results with me today are jokers, our Chief Executive Officer in Cala, Neal Chief Financial Officer. Following their prepared remarks called he opened for Q1 day yesterday.
Thank you as well services released its full year fourth quarter 2019, or the earnings release can be found on the company's website at www Dot U.S. wall services Dot Com. The company also intends to file 2019 form 10-K with the FCC later this week.
Please note that the information reported on this call speaks only as of today March 4th 2020, and therefore time sensitive information may no longer be accurate as at the time with any replay listening or transcript reading.
In addition, the comments made by management. During this conference call may contain forward looking statements within the meaning of the United States Federal Securities laws. These forward looking statements reflect the current views U.S. wall services management, however, various risks uncertainties and contingencies could cause our actual results performance or achievements to differ.
Materially from those expressed in the statements made by management. The listener is encouraged to review yesterday's earnings release in the company's filings with the CCGT understand those risks uncertainties and contingencies also during today's call will reference certain non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most directly comparable.
GAAP measures are included in our earnings release, and now but at the turn the call over to U.S., while services CEO Mr. Joker sorry.
Thanks, Josh Good morning, everyone and thank you for joining us in today's call to review U.S., well services full and fourth quarter results to 2019.
In 2019, I industry experience challenging market conditions that continued to deteriorate through the year.
Hi, I'm proud of everything that you us well servicing and accomplish.
Amid this difficult backdrop, and we'd like to take a moment to review some of the highlights from the year.
You SWS deployed three new electric Frac fleets in 2019, and also commission a fourth electric fleet that went into work during the first part of 2020.
We have completed over 4000 stages with our electric fleets in 2019, and that's completed over 12000 stages since the clean fleet was first introduced in 2014.
Our expertise and operate electric Frac fleets continues to expand and we believe will position us WCS as the market leader and electric fracturing.
Yes, well services fleet. Currently includes five all of that your contract hydraulic fracturing fleets as well as our eight conventional diesel fleet.
We averaged 9.9 active frac fleets during 2019 with a utilization rate of approximately 89%, which equates to a fully utilize fleet equivalent of 8.8 fleets for the year.
For the full year 2019, you SWS generated revenue of 514.8 million, which reflects a 21% decrease relative to 2018 revenues.
Adjusted EBITDA was 118 million, which is effectively flat versus 2018 adjusted EBITDA.
Adjusted EBITDA pretty fully utilized fleet was approximately 13.4 million or 11.7 million after deducting maintenance capital expenditures related to fluid ends.
Over the course of the year U.S. well services demonstrated its best in class operational capabilities and ability to leverage emerging technologies to drive greater efficiencies in the field.
We pump for over 36600 hours in 2019, which equates to nearly 4200 hours per fully utilize fleet.
Efficiency was enabled by our operations and technology teams ability to leverage data to inform supply chain decisions and equipment designs.
An example of this was our early adoption of using all large bore flow aren't.
This decision and others are what allows you SWS to consistently pump hi, our days under harsh operating conditions.
Our internet electro property portfolio was expanded considerably in 2019, we now have 30 patents with an additional 104 patents pending we believe our IP combined with our experience operating and maintain electric frac fleets will continue to be a deferred rent trading asset.
As electric fleet share of the overall pressure pumping market grows.
Throughout the course of the year market conditions deteriorated.
Culminating in a sharp deceleration activity during the fourth quarter.
US well services was adversely impacted by customer driven decisions to delay jobs and longer than anticipated holiday shutdowns as a result, U.S. well services active fleets experience a lower utilization.
Than in prior quarters.
During the fourth quarter, you SWS averaged eight point active fleet down from 9.3 fleets in the previous quarter utilization was 84%, resulting in a 6.8 fully utilized fleets now from 8.4 fully utilized feeds into third quarter of 2019.
Revenue for the fourth quarter was 92.7 million, which represents a 29% sequential decline relative to the third quarter of 2019.
You SWS generated an adjusted EBITDA of approximately 12.1 million for the fourth quarter is going to compared to 35.3 million for the third quarter 2019.
Our market pricing.
And the oldest oversupply of horsepower remain critical challenges for our industry U.S. well services has been successful and deploy our equipment for high quality customers. We're currently operating 11 active fleet of which four or the new generation electric Frac fleets. The recent outbreak of the Corona virus.
Has created concerns about global economic growth and crude oil demand, resulting in a rapid decline in oil prices.
Although the ultimate impact to our business is unclear at this time any recession, our sustained period of slowing economic growth would be detrimental.
We have village visually monitoring the situation and maintaining an active dialogue with our customers. So that you SWS can react rapidly as needed.
I would point out that there over 90% of you SWS fleet is working on either ICANN tracked it our dedicated basis, we believe our limited exposure to spot market as an asset.
In a volatile markets such as this one.
Over the long term, we believe us well services combination of top tier efficiency and leading edge technology offers customers a new unique value proposition.
Our electric Frac technology provides the optimal combination of fuel cost savings for customers.
The emissions reductions and reduce ownership cost.
In the current marketing environment demand for these next generation fleets significantly outpacing demand for conventional diesel powered equipment and we believe that there will be an additional.
Opportunities to deploy fleets and generate attractive returns on capital.
Management team is continuously evaluating near term risk, including fluctuations in commodity prices, along with long term opportunities to create value for our shareholders.
With that I would turn it over to cow O'neill, our Chief Financial Officer.
Thanks, John Good morning, everyone.
As Joe mentioned revenue for the full year 2018 was approximately $514.8 million down 21% from 2018 is revenue of $648.8 billion. This year over year decrease was primarily driven by the continued trend for customers to self source materials, such as seen in chemicals.
In province storage and transportation.
As context, 2018, we sold sand to customers in over 50% of our active fleet was as compared to roughly 10% in 2018.
Well this trend has led to a large reduction in revenues are adjusted EBITDA margins have actually improved as our business mix continues to shift towards higher margin service equipment revenue.
Year over year service equipment revenue actually increased by 12%.
Our cost of services.
As approximately $384 million in 2019 compared to 533 million in 2018 to decrease in cost of services was primarily driven by lower costs and materials being seen in chemicals and transportation.
Although you SWS pleaded approximately 24% more stages per active fleet in 2019.
2018, or repair and maintenance costs increased by only 1% year over year. This is largely attributable to a higher proportion electric lease in our portfolio in 2019 versus 2018.
We've often stated that the cost of ownership is lower for electric Frac fleet relative to conventional diesel or dual fuel frac equipment. This point is often overlooked.
In our financial performance leave at lower cost to maintain electric fleets as a critical competitive advantage, particularly in a challenging market. This is the one in which we operate today.
As Jay costs were approximately $31.9 million in 2018 down 8% from 2018 levels of $34.5 million.
Moving stock based compensation and transaction related costs SGN, a increased year over year from 15.9 million in 2018 to 25.3 million. In 2019. This increase was primarily driven by public company costs, such as reporting expenses increased corporate headcount.
We generated approximately $118 million of adjusted EBITDA in 2019 that compares to $117.4 million in 2018 equates to an adjusted EBITDA margin approximately 23%.
Versus 18% in 2018.
It was wells generated approximately $13.4 million of adjusted EBITDA per fully utilize fleet.
Turning now to capital expenditures in 2019, total capex was approximately $279.6 million accrual basis.
$196.6 million.
Those capital expenditures for for growth initiatives, all of which was directed towards new electric fleets.
$34.7 million of our Capex was for fleet enhancements such as the purchase of large for oil actors in other supporting equipment.
Finally use wells spend approximately $48.3 million and maintenance Capex in 2019 of which 14.8 was for fluid ends. This equates to an annual total maintenance capex per fully utilized fleet of approximately $5.5 million of which 1.7 was for fluids.
As of December 30, Onest 2019, you us wells had approximately $52.4 million total liquidity comprised of $41.4 million of cash restricted cash on hand, and $11 million of availability under our ABL facility.
Let's take a moment.
To review key highlights from the fourth quarter of 2018.
As Joel mentioned, you as well services and ended the fourth quarter prepared to be nearly fully utilized so rover customers elected to push back work from the mid fourth quarter, two late fourth quarter or early first quarter of 2020, leaving leaving us with fully crewed fleets that remain inactive for a large portion of quarter.
Revenue in the fourth quarter declined 29% sequentially to $92.7 million decrease in revenue was driven by fewer fleets working at lower utilization, resulting from a larger than normal share of stacked frac work.
Our cost of service decreased 16% sequentially to 76.1 million driven largely by the reduction in activity levels or the cost of services declined overall or labor cross practically increased 8% as we carried more personnel they required to support active operations.
Adjusted EBITDA for the fourth quarter was approximately $12.1 million down from 35.3 in the third quarter.
Adjusted EBITDA margins were approximately 13% compared to 27% in the third quarter of 19.
The fully utilized basis, you as well services generated 7.2 million of adjusted EBITDA per fleet.
Were $6.4 million after deducting fluid and Capex.
As she and eight was approximately $7.4 million in the fourth quarter 2019, compared to 8.2 in Q3 2019.
Excluding share based compensation and transaction costs as Gionee was 6.1 million in the fourth quarter compared to 6.8 in the third quarter.
At this time I'd like to return the call back over to joke resort for some final remarks.
Thanks, Kyle we believe us well services as well position entering 2020, and we believe operational capabilities cutting edge technology and alignment with our customer goals of reducing completion costs, while improving environmental stewardship, we'll continue to serve as a key differentiator for us going for it.
With the uncertainty that has permeating the market at the moment you SWS management is actively monitoring our operations and ought to be able to react swiftly to any adverse impacts on our business, while remaining keenly focused on creating long term value.
With that I'd like to turn it off the call over to the operator for questions and answers.
Thank you we will now be conducting a question and answer session. If you'd like to ask your question. Please press star one on your telephone keypad and confirmation tomo indicate your line is in the question Q you May press star to like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Please ask one question and one follow up question then re queue for additional questions. One moment. Please while we poll for questions.
My first question comes from Stephen Gengaro with Stifel. Please proceed with your question.
Thank you and good morning.
All right on it I guess I guess I'll start with two things.
<unk> is you talked about a have an 11 hoots deployed I think you're talking about 10 under contract or dedicated arrangement.
As we think about one tier one in 2020, what is the buried profitability look like relative to what we've seen a in 2090.
Well, Steven nuclear we don't give up.
Give formal guidance, but I think we were clear in our press release that we're seeing a.
Any pricing pressure in Q1 that being said we have we're taking a hard look at every cost in our cost structure.
Tend to look to offset any pricing declines we have I think we're also.
With anytime that we're deploying crews and then we've talked about this past we will staff up a month to month ahead of time to ensure adequate training and we're doing the right people on site those crews.
That caused us to carry axis headcount in 2019, so that's another area, we'll see improvement in 2020.
Okay and so when you when you if you were to think about the effective utilization of you love them cleats dessert, only where you could ballpark.
Well, we're thinking about core.
Is that visit that it's a tough one because of just customer frac calendars can move around.
Do you you days of delay or for catch up with a rate can ever have an impact on that but I think that will well, we're optimistic that we'll see utilization.
In excess of what we had in Q4.
Okay. Thank you I mean, just.
And your follow up when you when we look at.
And when you're talking to your customers on the east meet side, where she is a conventional side.
It sounded like.
Over the last couple of months, just it's probably been a little stickier and you probably been able to the preference will usually it seems to be pretty high I mean are you continuing to see you hang in there are you seeing that the profitability gap there whiting versus where it was six months ago is maybe because just holding better free fleet Tibet, a reasonable way to think about.
Yes, the profitability between decent electric the gap is widening.
Let's say okay.
Yes, and we're seeing that both through.
Our pricing and obviously lower costs.
Right right rubber in costs.
Okay. Thank you.
Thank you.
Our next question comes from Dillon, Glosser with Simmons and company. Please proceed with your question.
Hey, good morning, guys.
Hey, good morning early morning.
Just wanted to briefly touch on your electric fleet and do you guys expect to deploy.
The idle electric we in either Q1 or Q2, and Additionally in can you talk and your expectations for future electric Frac deployment expansion.
Yes, the the idle electric fleet is one of the first ones, we bill what the drive play stuff.
We Oh, we have their interest however, we're going to wait to see if Ah.
We can get a full counterpart before we go through the course of putting a crew on for three or four months.
Understood and I think you guys mentioned on previous calls you had already invested in some of the assets to build new electric fleets have you guys invested any further not if so were if not how much is remaining on that if you could you remind you that number.
We have about 30 may last one on one fleet that we decided.
On to build it build it out if we have a long term contracts.
Right I agree and.
Well I guess you'd have lost quite active dialogue and and I think we want to be ready to strikes. We have like we said in the basketball the long long lead items would be ready to go.
The final touches on long term.
Okay, Great I guess the loss thinking to ask on that is there a major difference and.
Customer desire for the older Electric fleet did you guys currently have versus maybe finishing out the that new build.
Yeah, everybody wants the Newbuilds slate for sure.
They want the latest latest version.
Yeah, I mean that that fleet was designed back in 2012 13 went to work in 14, it's it's a tried flex or they're all trying to flex problems and so it's it's very well suited for larger pads or we have less moves for per month or per year, and lower rate lower pressure more weight loss.
Russia.
So we're seeing today.
Thank you for that color and I guess last question for me and in the release in prior commentary you guys mentioned pricing pressure is that pricing pressure more of it making pricing flat from Q4 to Q1 or as pricing come down from Q4 Q1 and.
Further what is your expectation and where are you seeing out there today from maybe what the trajectory is from Q1 to Q2.
We think pricing is going to be flat through the year will lease hours arc is if you only get go so low.
And the pricing from fourth quarter first Florida, we think it's right in line maybe.
Slight improvement.
For Q1 Q2 goes though.
Moves in commodity prices recently, I think it's difficult to say right yeah, we're still watching evaluate.
[music].
Okay Awesome. Thanks, guys for your time in.
I'll turn it back.
Thank you.
Our next question comes from Daniel Burke with Johnson Rice. Please proceed with your question.
Hi, good morning, guys.
Hey, Monday.
Oh, let's see.
Anyway to a of the 10 fleets working contracts are dedicated to be possible to get the split into two buckets. And then also could you could you just remind us how how the fleets that are considered contracted work and how pricing works on those fleets.
Sure I mean, I think we've got.
Three dedicated restaurant or not or what we call contracts.
The difference between the two is the under a contract there isn't there is a.
Either there's there's no ability to cancel or there's some type of penalty.
If a customer to cancer convenient.
I'm, sorry dedications or.
Pricing agreement, where it's for let's say here however, they could they could canceling it make hay since April so.
Let me just as we ever.
Have a sleep running we get work, but there's no financial penalty.
Okay got it thanks for that Kaizen, let's see maybe one more in the financial front.
Any any insights on how to think about assuming.
No further growth capex in or or no new fleets added in 2020 on the electric side. How can you help me think about how to think about both capex and maybe working capital since you're starting from a pretty low revenue base. It you're in a in 2020.
Yeah, I mean, I think that right now we've got you anytime anytime we transition from you.
One set of customers to to another side, which we did pick up a couple new customers in Q4 in Q1, it will see working capital kind of stretch out a little bit of is it kind of get into that being the cycle. So I think we'll we'll see it will release, there and should improve.
On the Catholic side no new.
Growth Capex anything in 2000.
19, our total maintenance Capex was <unk> five and happened.
Sleep.
That I included <unk> million seven a little.
I think that will be in line, but we're working very diligently to bring that number down throughout the year.
Yeah, we're seeing some some price reductions and components, but more importantly, we're focused on technology developments.
Things like her fracking D, which can help us reduce the vibrations honor pumps and that directly translates into reviews reduced repair and maintenance and maintenance capex. So.
I think that same same range for remains Capex that we had last year from five to 6 million Bucks.
Five and a half is that where we ended up for 2019, but we've got a very sharp vida to reduce that number throughout the year.
Okay, Great and then or maybe maybe last one Joel just impressive improvement in inefficiencies a in 2019 in terms of a stages per fleet I'm in the industry made pretty good strides as well.
As you look at the 2020 I recognize that what you can achieve is partly attributable to the opportunity set the customer presents to you, but with a maybe a greater mix of electric fleets.
In 2020 do you think you can make further gains in terms of states Bracted fleet and 2020.
[laughter] the great question the a there's only so many hours in a day.
And I think were overhead from 18 to 19, we increased 30% oney efficiencies. So we were backing up to that 24 hours in a day, you know between a well swaps and.
In wireline.
<unk> flight, but not as not as aggressive as it's been from 18 to 19, maybe maybe a 5% to 8% increase in efficiencies.
Okay, maybe I should a phrase that in terms of pump hours per day I. Appreciate appreciate that you guys. You give those maybe that's a better metric that stages, but ah okay, yeah extend or okay, alright, guys I'll leave it there. Thank you for the time I think somebody Dan.
Our next question is from Stephen Gengaro with Stifel. Please proceed with your question.
Uh Huh [laughter], usually fall I wanted to just.
Follow up on the on the working capital question any color you mentioned some improvement, but when we look at your full year 20 versus my team.
That was the comment on the full year or was it more a warm to comment are you going sort of thinking about [noise].
For your working capital needs.
I guess, both I guess, you will see an improvement in.
Starting in Q1.
Okay. Thanks, and then as you.
As you look look at the the the overall market right now when you sort of think about.
Some of the things we've seen on the freed attrition side and you just think about it.
Just from an overall pressure pumping supply demand perspective, what's what's your sort of Uh huh.
View on what the world looks like over the next you know we've got five quarters.
You know they.
The Ohio was 430 fleets working in it.
Dropped to 350, I think with consolidation we're seeing.
Well I own MP companies, the new high is gonna be in the low 300 and.
The downtime capacity to be 220 click Oregon.
I thought I'd say.
Okay.
Thank you.
Thank you.
There are no further questions at this time at this point I'd like to turn the floor back over to Mr. Bouchard for closing comments.
Thank you all for joining a appreciate everything.
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
[music].
[music].
Greetings and welcome to U.S., well services fourth quarter earnings Conference call.
At this time all participants are in to listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference call is being recorded.
It is now my pleasure to introduce your host for today's call Josh apparel.
Thank you you may begin.
Thank you operator, and good morning, everyone. We appreciate you joining us pretty much while services conference call webcast for all your fourth quarter 2019 results with me today or job or sorry, Chief Executive Officer in Cala Neal Chief Financial Officer. Following their prepared remarks called the opening for Q1 day.
Yesterday evening U.S., well services released its full year fourth quarter 2019 earnings the earnings release can be found on the company's website at www Dot U.S., while service the Dot Com. The company also tends to about 2019 form 10-K with the FCC later this week.
Please note that the information reported on this call speaks only as of today March 14, 2020, and therefore time sensitive information they no longer be accurate as time in the replay listening or transcript league.
In addition, the comments made by management. During this conference call may contain forward looking statements within the meaning of the United States Federal Securities laws. These forward looking statements reflect the current views U.S. wall services management.
However, various risks uncertainties and contingencies could cause our actual results performance or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to review yesterday's earnings release in the company's filings CCGT understand those risks uncertainties and contingencies also during today's.
Call will reference certain non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in our earnings release.
Now back to turn the call over to U.S., while services CEO Mr. Joker sorry.
Thanks, Josh Good morning, everyone and thank you for joining us in today's call to review U.S., well services full and fourth quarter results 2019.
In 2019, I industry experience challenging market conditions that continued to deteriorate through the year.
I am proud of everything that U.S., well servicing and accomplished.
Among the difficult backdrop and would like to take a moment to review some of the highlights from the year.
You SWS deployed three new electric Frac fleets in 2019, and also commission a fourth electric fleet that went into work during the first part of 2020.
We have completed over 4000 stages with our electric fleets in 2019, and that's completed over 12000 stages. Since the claim fleet was first introduced in 2014.
Our expertise and operate electric Frac fleets continues to expand and we believe with position you SWS as the market leader and electric fracturing.
The U.S. well services fleet. Currently includes five all of that contract hydraulic fracturing fleets as well as our eight conventional diesel fleet.
We averaged 9.9 active frac fleets during 2019 with a utilization rate of approximately 89%, which equates to a fully utilize fleet equivalent of 8.8 fleet for the year.
For the full year 2019, you SWS generated revenue of 514.8 million, which reflects a 21% decrease relative to 2018 revenues.
Adjusted EBITDA was 118 million, which has effectively flat versus 2018 adjusted EBITDA.
Adjusted EBITDA.
Fully utilized fleet was approximately 13.4 million.
11.7 million after deducting maintenance capital expenditures related to Florida.
Over the course of the year us well services demonstrated its best in class operational capabilities and ability to leverage emerging technologies to drive greater efficiencies in the field.
We probably four or $36600 in 2019, which equates to nearly 4200 hours per fully utilize fleet.
Efficiency was enabled by our operations and technology teams ability to leverage data to inform supply chain decisions and equipment designs.
An example of this was our early adoption of using all large bore flow art.
This decision and others are what allows us to consistently prop hi, our days under harsh operating conditions.
Our inner electro property portfolio was expanded considerably in 2019, we now have 30 patents with an additional 104 patents pending we believe our IP combined with our experience operating and maintain electric frac fleets will continue to be a deferred rent trading asset.
As electric fleet share of the overall pressure pumping market grows.
Throughout the course of the year market conditions deteriorated.
All in meeting in a sharp deceleration activity during the fourth quarter.
Yes, well services was adversely impacted by customer driven decisions to delay jobs and longer than anticipated holiday shutdowns as a result, us well services active fleets experience a lower utilization.
Than in prior quarters.
During the fourth quarter, you SWS averaged eight point active fleet down from 9.3 fleets in the previous quarter.
Realization was 84%, resulting in a 6.8 fully utilized fleet now from 8.4 fully utilized states in the third quarter 2019.
Revenue for the fourth quarter was 92.7 million, which represents a 29% sequential decline relative to the third quarter 2019.
You SWS generated an adjusted EBITDA of approximately 12.1 million for the fourth quarter as compared to 35.3 million for the third quarter 2019.
Market pricing.
And the old oversupply of horsepower remain critical challenges far industry us well services has been successful and deploy our equipment for high quality customers. We're currently operating 11 active fleet of which four or the new generation electric Frac fleets.
The recent outbreak of the Corona virus has created concerns about global economic growth and crude oil demand, resulting in a rapid decline in oil prices.
Although the ultimate impact to our business is unclear at this time any recession, our sustained period of slowing economic growth would be detrimental.
We have villas visually monitoring the situation and maintaining an active dialogue with our customers. So that you SWS can react rapidly as needed.
I would point out that there over 90% of you SWS fleet is working on either ICANN tracked it our dedicated basis, we believe our limited exposure the spot market as an asset.
In a volatile markets such as this one.
Over the long term, we believe us well services combination of top tier efficiency and leading edge technology offers customers a unique value proposition.
Electric Frac technology provides the optimal combination of fuel cost savings for customers.
Emissions reductions and reduce ownership cost.
And the current market environment demand for these next generation fleets significantly outpacing demand for conventional diesel powered equipment and we believe that there will be an additional.
Opportunities to deploy fleets and generate attractive returns on capital.
Management team is continuously evaluating near term risks, including fluctuations in commodity prices, along with long term opportunities to create value for shareholders.
With that I'll turn it over to Kyle nail our Chief Financial Officer.
Thanks, Joel good morning, everyone.
As Joe mentioned revenue for the full year 2018 was approximately $514.8 million, 21% from 2000 eighteens revenue of $648.8 million. This year over year decrease was primarily driven by the continued trend for customers to self source materials, such as seen in chemicals.
In crop and storage and transportation.
As context, 2018, we sold sand to customers in over 50% of our active fleet months as compared to roughly 10% in 2019.
Well this trend has led to a large reduction or revenues are adjusted EBITDA margins have actually improved as our business mix continues to shift towards higher margin service and equipment revenue.
Year over year service equipment revenue actually increased by 12%.
Our cost of services was approximately $384 million in 2019 compared to 533 million in 2018.
Greece and cost of services was primarily driven by lower costs and materials.
And in chemicals and transportation.
Although you SWS fleeted approximately 24% more stages per active fleet in 2019.
2018, our repair and maintenance costs increased by only 1% year over year. This is largely attributable to higher proportion will electric lease in our portfolio in 2019 versus 2018.
We've often stated that the cost of ownership is lower for electric Frac fleet relative to conventional diesel or dual fuel frac equipment. This point is often overlooked.
In our financial performance.
Lower cost to maintain electric fleets as a critical competitive advantage, particularly in a challenging market. This is the one in which we operate today.
As Jay costs were approximately $31.9 million in 2018 down 8% from 2018 levels of $34.5 million.
Moving stock based compensation and transaction related costs SGN, a increased year over year from 15.9 million in 2018 to 25.3 million. In 2019. This increase was primarily driven by public company costs, such as reporting expenses increased corporate headcount.
We generated approximately $180 million of adjusted EBITDA in 2019 that compares to $117.4 million in 2018.
Equates to an adjusted EBITDA margin approximately 23%.
Versus 18% in 2018.
You as well as generated approximately $13.4 million.
Adjusted EBITDA per fully utilize fleet.
Turning now to capital expenditures in 2019 total Capex was approximately $279.6 million on accrual basis I.
$196.6 million.
Those capital expenditures for for growth initiatives, all which was directed towards new electric fleets.
$34.7 million were Capex was for fleet enhancements such as the purchase of large for act is another supporting equivalent.
Highly us wells spend approximately $48.3 million and maintenance Capex in 2019 of which 14.8 was for fluids.
Equates to an annual total maintenance capex per fully utilize fleet of approximately $5.5 million of which 1.7 was for fluid.
As of December 30, Onest 2019.
Well said approximately $52.4 million total liquidity comprised of $41.4 million of cash restricted cash on hand at $11 million, who availability under our ABL facility.
Let's take a moment.
To review key highlights from the fourth quarter 2018.
As Joel mentioned, you as well services and ended the fourth quarter prepared to be nearly fully utilized several of our customers elected to push back work in the mid fourth quarter, two late fourth quarter or early first quarter of 2020, leaving leaving us with fully crewed fleets that remain inactive for a large portion of quarter.
Revenue in the fourth quarter declined 29% sequentially to $92.7 million decrease in revenue was driven by fewer fleets working at lower utilization, resulting from a larger than normal share of stacked frac work.
Our cost of service decreased 16% sequentially to $76.1 million driven largely by the reduction in activity levels.
Cost of services declined overall or labor costs per active fleet increased 8% as we carried more personnel they required to support active operations.
Adjusted EBITDA for the fourth quarter was approximately $12.1 million from 35.3 in the third quarter.
Adjusted EBITDA margins were approximately 13% compared to 27% in the third quarter of 18.
On a fully utilized basis, you us well services generated $7.2 million adjusted EBITDA per fleet.
Or $6.4 million after deducting fluid and Capex.
SGT was approximately 7.4 million in the fourth quarter 2019, compared to 8.2 in Q3, 2019, and excluding share based compensation and transaction costs.
Hey was 6.1 million in the fourth quarter compared to 6.8 in the third quarter.
At this time I'd like to return the call back over to Jolt resort for some closing remarks.
Thanks, Kyle we believe us well services as well position entering in 2020, and we believe operational capabilities cutting edge technology and alignment with our customer goals of reducing completion costs, while improving environmental stewardship, we'll continue to serve as a key differentiator for us going for it.
With the uncertainty that has permeating the market at the moment you SWS management is actively monitoring operations and ought to be able to react swiftly to any adverse impacts on our business, while remaining keenly focused on creating long term value.
With that I would like to turn the call over to the operator for questions and answers.
Thank you we will now be conducting a question and answer session. If you'd like to ask your question. Please press star one on your telephone keypad and confirmation tailwind to get your line is in the question Q.
The press star to like to remove your question from the Q.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Please ask one question and one follow up question then re queue for additional questions. One moment. Please why we pull for questions.
My first question comes from Stephen Gengaro with Stifel. Please proceed with your question.
Thank you and good morning.
All right.
I guess I'll start with two things first is you talked about having a lot of improvements deployed I think you're talking about 10 under contract or dedicated arrangements.
As we think about one tier one and 2020 what is the embedded profitability look like relative to what we've seen.
In 2019.
Steven nuclear we don't give up.
Give formal guidance, but I think we were clear in our press release that we're seeing a.
Pricing pressure in Q1.
That being said, we're taking a hard look at every cost in our cost structure.
Tend to look to offset any pricing declines we have I think we're also.
Anytime that we're deploying cruise and we've talked about this past we will staff up month. Two months ahead of time to ensure adequate training and we're doing the right people on site for those crews.
That caused us to carry excess headcount in 2019. So that's another area, we'll see improvement in 2012.
Okay and so when you when you if you were to think about the.
Our effective utilization of the 11 points dessert anywhere you can ballpark, Alabama.
We're thinking about core.
It's that visit that it's a tough one because of.
Customer frac calendars can move around.
You few days of delay or catch up with a rate can ever have an impact on that but I think that will will we're optimistic that we'll see utilization.
In excess of what we had in Q4.
Okay. Thanks, and then just.
I will follow when you when we look at.
And when you're talking to your customers on the east side, where she is a conventional side.
Sounded like.
Over the last couple of months, if it's probably going a little stickier and you've probably been able.
Preference for me it seems to be pretty high I mean are you continuing to see that I mean are you seeing that.
Capability gap, there Whiting versus where it was six months ago is maybe prices hold in better for you fleet is that a reasonable way to think about.
Yes, the profitability between diesel electric the gap is widening.
Let's say okay.
Yes, we're seeing that both through.
Our pricing and obviously lower cost operating annual run rate cost.
Okay. Thank you.
Thank you.
Our next question comes from Dillon, Glosser with Simmons and company. Please proceed with your question.
Hey, good morning, guys.
Hey, good morning, Marty.
Just wanted to briefly touch on your electric fleet and do you guys expect to deploy.
The idle electrics, we in either Q1 or Q2 and additionally, it can you talk and your expectations for future electric.
Deployment expansion.
Yes.
The idle electric fleet is what are the first one of the bill what the dry place tough.
We.
We have the interest.
However, we're going to wait to see if.
We can get a full calendar part before we go through the costs of putting accrue on for three or four months.
Understood and I think you guys mentioned on previous calls you had already invested in some of the assets to build a new electric fleet.
You guys invested any further than that.
If so or if not how much is remaining on that if you could you remind us to that number.
We have about 30 may last on on one fleet that we decided.
On to build it build it out if we have a long term contracts.
Okay, great and.
I guess you'd have lost had active dialogue and and I think we want to be ready to strikes. We have like we said in the past we have all the long long lead items will be ready to go.
The final touches on long term commitment.
Okay, Great I guess last thing it ask on that is there a major difference in.
Customer desire for the older Electric fleet that you guys currently have versus maybe finishing out the that new build.
Yeah, everybody wants a newbuilds slate for sure.
They are one of the latest latest version.
Yeah, I mean that fleet with design back in 2012 13 went to work in 14, and it's it's a try plex or they are all triplex pumps and so it's very well suited for larger pads.
We have less moves per per month or per year, and lower rate lower pressure or rate more brush.
We're seeing today.
Thank you for that color and I guess last question for me.
In the release in prior commentary you guys mentioned pricing pressure.
Is that pricing pressure more.
Making pricing flat from Q4 to Q1 or as pricing come down from Q4 Q1 in.
Further what is your expectation and where are you seeing out there today from maybe what the trajectory is from Q1 Q2.
We think pricing is going to be flat through the year.
Police hours arc is going to go so low.
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And the pricing from fourth quarter to first Florida, We think right in line maybe.
A slight improvement.
For Q1 Q2, guys, though.
Rooms in commodity prices recently, I think it's difficult to say right yeah, we're still watching.
So.
Okay Awesome. Thanks, guys for your time and I appreciate it I'll turn it back.
Thank you.
Our next question comes from Daniel Burke with Johnson Rice. Please proceed with your question.
Hey, good morning, guys.
Hey, Monday.
Let's see.
Any way to a of the 10 fleets working contracts are dedicated to be possible to get the split into two buckets. And then also could you could you just remind us how how the fleets that are considered contracted work and how pricing works on those fleets.
Sure I mean, I think we've got.
Three dedicated restaurant or under what we call contracts. The difference between the two is the under contract. There is there is a.
Either there's no ability to cancel or there is some type of penalty if a customer to cancer convenience or dedications or.
Pricing agreement, where it's for let's say year, however, they could.
It could cashless it may contain since April.
Languages, we ever.
They have a sleek running we work, but there's no financial penalty.
Okay got it thanks for that Kaizen.
Let's see maybe one more in the financial front.
Any any insights on how to think about assuming.
No further growth capex in or no new fleets added in 2020 on the electric side can you help me think about how to think about both capex and maybe working capital since you're starting from a pretty low revenue base at year end.
In 2020.
Yeah, I mean, I think that.
Right now we've anytime any time, we transition from.
One set of customers to to another side, which we did pick up a couple new customers in Q4 Q1, it will see working capital kind of stretch out a little bit isn't going to get into that being the cycle. So I think we'll we'll see a little bit release, there in should improve.
On the Capex side, though new.
Growth Capex in 2000.
19, our total maintenance Capex was five unhappily per fleet.
And that I included <unk> million seven Lumileds I think that will be in line, what we're working very diligently to to bring that number down throughout the year.
Yeah, we're seeing some some price reductions and components, but more importantly, we're focused on technology.
Developments.
Things like our fracking, the which can help us reduce the vibrations, our pumps and that directly translates into reduced reduced repair and maintenance and maintenance capex. So.
I think same same range for maintenance Capex that we had last year five 6 million Bucks.
Five and a half is that where we end up.
19, but.
Got a very sharp vida to reduce that numbers rather year.
Okay, Great and then or maybe maybe last one Joel just impressive improvement in inefficiencies in 2019 in terms of.
Stages for fleet and the industry made pretty good strides as well as you look at the 2020 I recognize that what you can achieve is.
Partly attributable to the opportunity set the customer presents to you, but with a maybe a greater mix of electric fleets. In 2020 do you think you can make further gains in terms of stage Frac to fleet in 2020.
Great question. The there's only so many hours in a day and I think were overhead from 18 to 19, we increased 30% oney efficiencies.
So we were bucking up that's wonderful hours in a day.
Between a well swaps and.
And wireline.
Flight, but not as not as aggressive as it's been from 18, enacting maybe maybe a 5% to 8% increase and efficiencies.
Okay, and maybe I should a phrase that terms of pump hours per day I. Appreciate appreciate that you guys. You give those maybe that's a better metrics in stages, but Ah okay, yeah extended or okay, alright, guys I'll leave it there. Thank you for the time.
Thanks.
Our next question is from Stephen Gengaro with Stifel. Please proceed with your question.
Hi, Thanks, just in the fall I wanted to just.
Follow up on the on the working capital question any color you mentioned some improvement.
When we look at your full year 20 versus my team.
That was the comment on the full year or was it more a warm Q comment are you going sort of thinking about [noise].
For your working capital needs.
I guess, both I guess, you will see an improvement in.
Starting in Q1.
Okay. Thanks, and then as you.
As you look look at the the the overall market right now and you sort of think about.
Some of the things we've seen on the Threed attrition side and you just sneak it but.
Just from an overall pressure pumping supply demand perspective, what's what's your sort of.
Do you.
One of the world looks like over the next three to five quarters.
You know they.
The Ohio was 430 fleets working in it.
Dropped to 350.
I think with consolidation we're seeing.
Well I own a big companies the new high it's going to be in the low 300 and.
Downtown capacity to be too and it's likely to Oregon.
That's arotech.
Okay.
Thank you.
Thank you.
There are no further questions at this time at this point I'd like to turn the floor back over to Mr. Bouchard for closing comments.
Thank you all for joining a appreciate everything.
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.