Q2 2020 Enservco Corp Earnings Call
Thank you for holding ladies and gentlemen, your online for this Enservco conference call. At this time, we are still got any additional participants and we'll get started momentarily. We thank you for your patience enough that you. Please continue to halt.
[music].
Good day, ladies and gentlemen, and welcome to the Enservco second quarter earnings Conference call. All lines have been placed under listen only mode and the floor will be opened for your questions and comments following the presentation.
Simon It's my pleasure, it's turned their floor about your host Mr., Jay Peiffer Investor Relations, Sir the floor is yours.
Hello, and welcome to insert goes 2022nd quarter Conference call.
Presenting on behalf of the company today.
Hi, Rich Murphy acting CEO MRG Hargraves CFO.
As a reminder, matters discussed during this call may include forward looking statements that are based on management's estimates projections and assumption doesn't today's date and are subject to risks and uncertainties disclosed in the company's most recent 10-K as well as other filings with the FCC.
The company's business is subject to certain risks that could cause actual results to differ materially from those anticipated in its forward looking statements.
Sure. So assumes no obligation to update forward looking statements the become untrue because in subsequent events also point out that management's ability to respond to questions. During this call.
He is limited by FCC, Reg FD, which prohibits selective disclosure material nonpublic information.
A webcast replay of today's call will be available at Enservco dot com after the call.
Additionally, a telephone replay will be available beginning approximately two hours after the call.
Functions for accessing the webcast or telephone replay are available today's news release.
With that I'll turn the call over to Rich Murphy Rich. Please go ahead.
Thanks, Jay welcome everyone and thanks for joining our call today, I'm Rich Murphy, chairman and acting CEO and circle.
My first time addressing investors.
Since I assume the gold acting CEO I want to give you a little back down to myself.
Yeah. That's in fund I manage crossword partners, it's a long time owner and circle common stock. We are in fact in circles largest shareholder.
Was attracted me to Enservco is the company's blue chip customer base.
Broad geographic footprint diverse services said.
Committed field teams and dominant position the frac water heating space in short circuit provides mission critical services, it's the largest oil and gas producers and most prolific basins in the country.
Approximately five years ago, when oil prices were north of 100, and its circle couldn't keep up with a growing demand for services. The company essentially doubled the size its fleet too ambitious Capex program funded by a large new credit facility.
As liquid habit, just as the expansion was completed oil prices collapsed under the weight of oversupply and slowing global economic growth.
I don't know places meantime, our debt load would not have been a big issue, but in recent years volatility in commodity prices led to an even customer demand, which in turn that's a disappointing financial results.
Today, and this lower revenue environment, our debt service that simply become unsustainable. We are in violation Doe certain loan covenants with our lender East West Bank, which has been extremely patient with us, but which is also assets to refinance our debt.
As noted in our earnings release today, we're working diligently to do that.
Typically we're working with our lender in the third party investment group on a transaction that we hope will result in a significant reduction a long term debt balance.
And an increase in shareholders equity.
Yeah. The plan in place that's been tentatively approved by all involved parties, including East West Bank, which earlier this week to eat up in negotiations grants is a 45 day extension on the maturity date or senior secured revolving credit facility.
We were successful in completeness refinancing in the coming weeks it will be nothing short of transformational for our balance sheet.
By the way.
West of the independent directors or the board and the interest up further increase in shareholders equity investment from Crossword partners will.
We'll be converting.
Approximately 1.5 million of subordinated debt into unregistered and circle common stock at a 50% premium to the August 13th 2020 closing price.
I want to be clear.
This refinancing effort is a work in progress and there's no such as it will be successfully completed while we had made a lot of progress we still have some work to do however, I also want to tell you that all involved parties our lender the investment group and the board and executive team and the executive team and it starts though are working very hard and very collaboratively to get this done.
Concurrently we've been taking costs out of the business to better structure, our organization can be the challenges fluctuating commodity price.
Since the beginning the year, we have made overhead cost reductions of more than 4 million on annualized basis.
These reductions include personnel adjustments at all levels, our business closure and or consolidation of certain physical locations and reduce maintenance capex budget.
The result is a leaner organization with a lower cost structure I'm proud of the work of our Tiger team has done in reshaping our business over the last seven plus months.
With that I'll turn the call over to Margie to recap our financial results.
Thank you rich today, we issued ARQ <unk> 2022nd quarter financial results press release after the market close we reported Q2 revenue of 2.1 million within adjusted EBITDA loss of 2.1 million compared to revenue of 6.3 million in an adjusted EBITDA loss.
1.5 million in Q2 last year that the news to six nights was 11.5 million with an adjusted EBITDA loss of 2.6 million compared to revenue 31.2 million and adjusted EBITDA of 6.5 million in the first half of last year.
As you know Q2 and Q2, we are slower off season quarter, It's about Q1, and cute sorry, Q4, and Q1, our colder quarter's comprise our heating season, when we generate the majority of our revenue and EBITDA for giving you our second quarter was slower than normal this year, reflecting reduced customer activity.
To commodity prices and the coded 19 pandemic those headwinds have carried into Q3, but we have taken advantage of this downturn to add some new customers and redeploy assets to more active areas and today, we are rapidly approaching gearing up for heating season.
When we expect an increasing customer activity through the winter and into next spring.
Rich.
Thanks, Marty so in closing a price right now or do you get the refinancing done. So we can focus all of that hurts our upcoming heating season.
Before I open the call the questions I want to thank you for your interest in serve go after your patience as he moves through this process as a fellow shareholder I want you know their interests are aligned and I am fully engaged and committed to building shareholder value corn circle.
With that I'll now turn the call every operator for questions.
Operator.
Thank you, ladies and gentlemen, if you have a question or comment it as star one on your telephone keypad.
You're using a speaker phone we I saw pose your question you pick up your <unk> your handset to get the best sound quality.
Again, it is star one for any questions or comments.
Well pause for just a moment to some other roster.
Well take our first question from about keeping Bonnie what's the Lions filters.
Good morning, Rich I think you probably taking my questions.
Oh, just a quick question on the activity side, you know given the uncertainty and the only thing than white man or at least on the on the <unk> got a.
Smoked Oh, you know we've got companies <unk>, Oh shouting anything about that you know picking up drilling activity just wanted to he audio to talk on on and what are you hearing from yacht and he got still you know talking bad debt and I'm starting production.
[noise] generally speaking you know we deal with a lot of the blue chip oil oil customers.
The general sense is all obviously caution, but we do we are starting to see if no oil stays in the 40 to $50 range.
The the Capex budgets have been all shut in of itself to this point. So there's which is good for us because we don't really have much business in the second third quarter. So if you're gonna have slowed capex capex activity. This is the time you want it to occur so there is.
We do here the rumblings from our customers that.
Oil stays on this price and they get comfortable with that they'll start open up a lot of the ducks, that's and that's that's kind of what we're hearing right now.
[noise] God. They you know just a follow up you know as of March you mentioned, you know fourth quarter. That's what's what are the strongest or revenue generating gardens because of the heating season. At this point have you received any kind of foam commitment on how does your order book you know look like Oh.
<unk> upcoming heating season.
So part of our cost cutting was the push out a lot of our business development to our yards, which makes more sense because he's our yard managers have their relationships with the with the the guys in the field, who actually makes a decision to who to choose as their service provider.
So and it also gives us better information flow. So what we're seeing and hearing it is what I. Just said is that you know we're going to probably we expect if you know oils and this $45 range that.
There's gonna be a lot of and then by deciding that its energy term, but there's about 850 ducs in the near brother DJ Basin right now they have to be on you know just basically unplug. It's the fact that is essentially almost complete so we are the central service to to to complete that frac job. So.
Just one days and but 850 have been shut in essentially so we get the that you know stable oil price round here, we think those single b they'll be lot activity I just on that front.
[noise] Garden I appreciate the color and just from the cost front you did mention that you know you have you need.
<unk> million in annualized cost just wanted to understand is that what the room.
Yes, what person beach cost reduction do you think you can achieve into back up here.
You know I think there is a little more corporate DNA. One other change we did we regard office from Denver downtown Denver into our biggest yard in Colorado I think it's important for the corporate staff to be intermingled with it with the team the yard guys. So that's that's a cost savings, obviously, but as far as I I'm more focused now.
Well I mean that we've taken a lot out I'm more focused on revenue generation and getting into the heating season, and the right manner. So I think in the past one of our issues has been we might staff up too early or two later, so we'd have a very data driven strategic way with our yard managers to get into the season.
Well, we there's not as much waste. So I think we're going to save some money on that end and have higher margins by just by entering the season in a more structured way.
Okay.
I could get ourselves to probably not what.
We can get I could talk offline about how we expect to do that.
Yeah sure, but yeah, that's it from I think much and good luck.
Thank you.
And with no other questions holding Mr. Murphy I'll turn the conference back to you for any additional or closing comment.
[noise] as always we appreciate your time and attention on the call today, we look forward to talking to you again following the close our third quarter.
Enjoy the weekend thanks.
Ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time and have a great day.
[music].