Q1 2021 Enservco Corp Earnings Call
Good day, ladies and gentlemen, and welcome to the and surgical first quarter 2021 earnings call.
At this time, all participants have been placed on listen only mode and the floor will be opened for questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Jay Pfeiffer, Sir the floor is yours.
Hello, and welcome to of circa 2021 first quarter conference call presenting on behalf of the company today are rich Murphy executive Chairman and Margie Hargraves, President and CFO as a reminder, matters discussed during this call may include forward looking statements that are based on management's estimates projections and assumptions as of today.
Date and are subject to risks and uncertainties disclosed and the company's most recent 10-K as well as the other filings with the SEC, the company's business and subject to certain risks that could cause actual results to differ materially from those anticipated and its forward looking statements and serco assumes no obligation to update forward looking statements that become untrue because of subsequent events.
I'll also point out the management's ability to respond the questions. During this call is limited by the SEC, Reg FD, which prohibits selective disclosure of material.
Information.
A webcast replay of today's call will be available and sort of co dot com. After the call. In addition to the telephone replay will be available beginning approximately two hours after the call instructions for accessing the webcast and replay are available in today's news release.
With that I'll turn the call over to Rich Murphy Rich. Please go ahead.
Okay.
Thanks Jay.
Welcome everyone and thanks for joining our call. This morning, we released our first quarter financial results.
For the market opened.
As stated in our news release, we did not enjoy the uptick and completions activity that we hope for and the first quarter, despite the steady increase and commodity prices and over the past six months.
And for our Frac water heating services did not approach the expected levels, while the pandemic and some of.
And I'm, the senior and the warm weather played a part of the fact is the operator of that we served had been slow to commit budgets of drilling and completion activity and the good news is of those spec projects that were conducted and our service areas and the first quarter. We certainly one of our fair share and oddly enough given my earlier comments about weather impact on the Frac activity, we continue the heatwave.
Heat water for one customer and Cabos today.
And.
It's possible that project and the even extend into June and Unfortunately, that's the exception rather than a rule of the season all of.
That said, we do anticipate improved results over the next heating season, and here's why first of the world is reopening and the economics of recovery now underway bodes well for increased demand for oil and higher commodity prices and increased drilling and completion activity. You may recall that back in February 2021 of the pandemic really kicked in.
And the domestic rig count plummeted from 790 to a low of 250 rigs in August of last year.
Though the countless went back up above 400, and it's still well below pre pandemic levels.
We are confident and if the rig count normalizes back of near 800, and our equipment utilization and will grow alongside.
Our option and is further buoyed by growing the RFP of bid activity from new and existing customers as well as recent new customer wins were.
Also encouraged like customer acceptance of our up to 20% price increase for Halloween and services and several basis. We think we can achieve similar increase the frac water heating business and the upcoming season.
In addition over the past couple of quarters.
Turning to grow partnerships with two oilfield services companies.
For us into their customer projects.
We have good reason to believe those relationships will continue to grow into the future.
The services companies do a lot of water management work for producers and he just for water heating due to our solid reputation for reliability and safety.
Lastly, we've been focused more focusing more resources time and attention on our Halloween business, where we see good potential for expansion of the service that can generate revenue on a year round basis and March we initiated a 400000, all the Capex program to refresh our Heartland and fleet that program is scheduled to conclude in September and time for upcoming heat and.
So right now our children's and yard the services customers in the Eagle Ford Shale and South Texas is our most active area and is our largest concentration of hotlines for 19 units. We are also pursuing a good opportunity to capture market share and the Haynesville shale, which encompasses the east, Texas Southwest, Arkansas and northwest, Louisiana, We're still we're still early and.
And the process, but we're very excited about this expansion opportunity are.
Our sales team is doing a great job down there and we are in the process of point too hot it whether it's for the area and.
So just recently done the permanent location ultimately believe this area of can support up to another dozen hadaway against over the next 12 months.
And the meantime, we are augmenting our traditional services for non oilfield services and orders to keep our equipment and key field personnel working day and contributing to revenue and profit specifically, we've been doing equipment hauling as well as dirt hauling and the ladder for a customer of that engages for initial project and bag and what's the expectation of two additional projects and June.
And July.
These three projects alone are expected to generate approximately $750000 and total revenue and 2021.
With that I'll turn the call over the margin to recap the financial results.
Thank you rich as noted and as noted in our press release. This morning, but it bears repeating we are moving forward with a much stronger balance sheet that was transformed the.
Through the addition of $12 5 million and fresh capital the elimination of approximately 22 million and debt and the right sizing program that took approximately $4 2 million and annual expense out of our business. Accordingly, we believe we are well positioned to implement our growth strategy and deliver improved financial result.
Going over the long term and out of the numbers total Q1 revenue was $5 1 million down from revenue of $9 4 million and the same quarter of last year.
Production services revenue declined to $1 8 million from $3 2 million for cut the segment loss of 123000 versus the loss of 292000 and Q1 last year. This is the reflection of our cost cutting measures completion services revenue was $3 $3 million and.
In Q1 down from $6 2 million and the same quarter last year, we reported a segment profit of 200000 compared to a profit of $1 2 million and the same quarter last year.
Total operating expenses and the first quarter declined 36% to $7 5 million from 11 $6 million year over year, due primarily to reduced customer activity and the resulting decline in production and completion of expenses.
And the corporate side, we reduced SG&A expenses in Q1 by 43% to $1 million from $1 8 million due to the right sizing activities.
Q1, net loss was $2 2 million or 24 cents per share compared to a net loss of $2 8 million of 77 cents per share and the same quarter last year.
The improved bottom line was primarily attributable to lower interest expense and the first quarter of 2021 due to the cessation of interest expense on our credit facility. Following our third quarter 2020 debt restructuring.
Adjusted EBITDA and the first quarter was negative 940000 compared to a negative 503000, and the same quarter last year and.
And circa used $2 6 million and cash from operations and the first quarter up from $1 million and cash used in operations and Q1 last year cash provided by financing activities increased to $4 9 million from half a million dollars year over year due primarily to the public offering in February 2021.
And partially offset by the $3 million pay down of the company's credit facility.
As noted in our first quarter Q and other income we have begun receiving the cares act employee retention credit totaled 223002 of March 31 2021.
Also we just heard the credit has now been extended through 2021, and we estimate that this credit to the company maybe all in between $2 million to $3 million in 2021 and will be recorded in other income.
With that I'll hand, it back to rich for some closing comments.
Thanks, Marty I'll close by saying despite the chaotic last few years and our industry. We believe there will be plenty of upside in coming years ill remind you that during our best year, We reported revenue of nearly 60 million with adjusted EBITDA of more than $11 million and we accomplished that with a much smaller fleet that we have today.
Given our expanded fleet size, our revenue capacity of those significantly higher than at western and the best years. As a result, we're approaching the features of our best years are still ahead of US. Thank you again for your continued support and sort of co. Operator, please open the call up for questions.
Certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.
And we ask that while posing your question. Please pick up your handset of listening on speaker phone to provide optimum the sound quality.
Once again, please press star one if you have any questions and please hold while we poll for questions.
On the first question is coming from Jeffrey Campbell from Alliance Global Partners Jeffrey Your line of lives.
Thank you the morning.
Good morning.
Good morning, and at the huddle.
The high margin.
Mentioned, the heart of oil price increases and certain markets. I was just wondering are these increases possible elsewhere or are the and likely to be confined to these areas.
The.
The price increases have been accepted.
Across all of our most of our basins and.
And so we're seeing it.
Basically across the board.
Hence by customer and how many trucks are going to dedicate to us typically so but the and they are.
They've been there hasnt been a lot of pushback.
Okay great.
I wanted to hear a little bit more about your large oilfield service partnerships.
What services are the procuring and are you having to discount surprise and any for their business and if so is this being compensated for by the additional volume that debt.
Provider might provide.
And Mark you want take that.
Thanks, sorry about that.
So from what I understand no theres, no discounts and pricing, but what they've done is they've started putting I sounds like the safety committees and getting us more involved and their operation and so it's two large customers that we've had as customers before but we've become.
Much more of a partner with them and all of the operations that we can do for them. They are bringing us in to do in different basins.
Okay. So does that mean.
Just kind of thinking about recent history does this sort of all.
And the only present the possibility for more business than you've had in the past or is it more of a continuation of what you've had through them and how should we think about the.
Its more business than we've had in the past.
Okay.
And and Jeff I'd, just also say that for me.
And from that being something that becomes more common and that is something that we think of the possibility as we come out of this pandemic and the oil crash the the.
They want to tighten up.
Services that it's easier for the E&P companies took the deal with like two or three people versus.
10 people on the Frac jobs so.
That could become.
And of the threat.
Okay.
When you say that DMA and are you thinking about more again more work from these two guys or are you, saying and that you might be able to increase the number of partnerships that you can create.
Paul.
Okay.
Yes.
Okay. So.
You said that the east, Texas Haynesville.
And could support if I heard it correctly the support up to 12 part of ours and the next 12 months and I thought that was interesting.
And the Haynesville is generally thought of as the dry gas play and East, Texas does have some sort of significant wet gas regions. So I was wondering are there is there some oil production kind of hiding under the roof that will support. These oilers are are these gas wells.
And your health.
Yeah, no that's it.
We do do some gas business there is oil and the.
The East Texas area.
And it's mostly.
And all without giving away too much of a lot lot of these people.
And the East, Texas side as you probably know of independents for not the big guys.
So and we have some good inroads to allow the.
And so that's.
That's one reason and it is it is primarily oil.
Okay and the areas of work.
Okay I can share most of the actual.
With you I don't want to do today.
Okay.
And you'll see it as the historically big of oilfield services.
Any more oil coming out or not so that's good news.
Actually our guys say the demand for our <unk>.
<unk> is actually greater down there simply because it is older and so they need more.
Maintenance and.
To keep the the wells more prolific it takes a little more work, so and I'll highlight a perfect for that.
Okay.
You mentioned and the non oilfield services revs and you actually gave us.
A number of potential number for the year of which I thought was interesting.
I guess, what I'm wondering here is should we be thinking about this as ultimately the higher utilization of.
And existing equipment that you got laying around or is this something that could actually grow over time.
Yeah, I mean I think it's.
It's the utilization play obviously, we want equipment, what we're seeing right now with the oil pickup is.
And our equipment.
And getting to the point, where it's fully operable and that we've talked about and.
Until the projects we've done in September So we show how our full fleet ready to go.
There's we're seeing the for the first time of the while a lot of demand for our hot Oilers. So it's it's a.
It's a business decision, whether we want to just take a group of our hot Oilers are called the sleeves is going to be non Hollywood or two if the oil patch.
And get to the point, where east, Texas, and <unk> 15 of the Hot Oilers.
Right it will be a price call. So.
The group that we did.
Just to put in context I mean the.
And then not only for the business a lot more.
Higher margin so and.
Much bigger price points.
And <unk>.
But it's also not as consistent so that's why we were.
And we're trying to figure out how consistent that businesses the oilfield business kind of scaling is procured and consistent.
Lower margin and that's lower margin.
Right well I mean since the since the hot Oiling is also somewhat episodic district and thinking about trying to trade.
The higher margin episodic business for a lower margin episodic business, but it's a nice problem the app.
Yeah, and we're trying to get the logistics and right on I guess I'll speak of worry there, but just to get like all of our trucks.
And I just.
We don't want and move them too much so we want it.
And to see how consistent and some of those now because of the businesses quite frankly.
Yes.
And I mean, as you know part of the spin.
Okay.
What are the key to this business is getting tougher and the right places with the highest.
And the highest price points and that's and.
That's the logistics issue for us and were.
Portion of that right now.
It's nice to have.
Those options and you say because of the oil patch is starting to.
Pick up.
Yes, I'm sorry.
And my last question was I was just a little bit confused by the referenced and the press release the better upcoming.
Coming results and the heating season, and since heating demand should be amongst the way notwithstanding the one customer and you talked about and Colorado. So I was just wondering is this the preferring to advanced booking or and advanced look.
Towards the winter heating utilization or is there something else that's near term.
Yes, it's a good observation, we have gotten some looks already for business.
And that we hadn't seen and the last couple of years just trying to.
Because the rates are still haven't popped up to what the I think the E&P companies might see that the.
Absolutely they want to get.
Get some some business probably locked in right now.
At the current prices. So we are seeing a little bit of that.
Okay, Great all right. Thanks appreciate it thanks for the color.
Thanks, Jeff.
Thank you once again, ladies and gentlemen, and if you do wish to enter the queue to ask a question. Please press star one on your phone.
The next question is coming from and move from ascending capital and your line of glass.
Yes. Thank you for taking my question. My question is what are you seeing out there in terms of the competition has it really changed much and in the past three months as the.
Commodity prices are improving and rig counts are improving.
Yeah.
And the competition.
It's always been mom and pop so.
People with three of five trucks and.
And it seems to be.
As things pick up.
And I'll put it this way when we're asking for price increases and Theres no pushback really at this point and now prices have gotten flow. So to me that's the competitive.
The signal.
Either of our competitions and learned that they can operate and certain hourly rate sort of.
They're saying where does that kind of do it anymore.
This is less and less people out there doing what we're doing because of the pandemic.
Great and then the other question I know you mentioned, possibly 800 of rates coming back of what are you hearing from your customers do they think the price increases for oil was sustainable and long term where to pull through the the rough.
The roughest part or are there still very cautious of the business and.
And how quickly do you think we could ramp up back up to 800.
I think.
The cautious.
And you saw that and the first quarter with the.
The sustained oil sustained oil price of 60.
And that they the.
The completion of activity outside of Texas was pretty sparse.
So.
And I think.
Haven't been burned over the last couple of years.
Not to get financing obviously for for.
The new completion work so the I think it was the most prolific basins will be where they operate and until they can put together.
And can generate cash flow is for their investors, they're not going to go nuts, but that being said 800 rigs is not and thats down significantly as you know from.
A couple of years back.
Well before the Honeywell or oil, but and we used to run of the 800 rigs and that was good.
And it was kind of light so I think that's.
I think we have.
Because of that cautious and so we have probably in total runaway hit with stronger commodity prices.
Great and then my last question is you know theres been some M&A some kind of solve the elevation in the E&P space or you think that helps you of that potentially could hurt you.
I think it helps just because we're the biggest player in the hot oiling and changing and so.
And there was as you know and if youre, referring to the Bonanza Creek merger, just recently, but we do business with both of those players.
But and integrate kind of ex.
Traction so it's the.
And that's actually probably good news for us.
Great well, thank you and I wish you guys. Good luck.
Thanks, Ed.
Thank you once again, ladies and gents roster of any other questions. Please press star one on your phone at this time.
And there were no other questions from the line at this time.
I'll hand, it back to the management team for any final remarks.
And I just want to say thanks to everybody for joining the call I appreciate it.
All of the Investor support.
As you know I'm has invested in this company and anybody so we.
We are working hard for shareholders over the and <unk>.
And the pleasure all bought into what we want to do so I look forward to updating you on things over the next.
Our performance for the next couple of quarters. Thanks again.
Thank you ladies and gentlemen, this does conclude today's conference you may disconnect at this time and have a wonderful day. Thank you for your participation.