Q3 2021 Enservco Corp Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the and surf co third quarter earnings call. At this time, all participants have been placed on a listen only mode and we will open the floor for your 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 observe codes 2021 third quarter conference call presenting on behalf of the company today are rich Murphy executive Chairman and Mark <unk>, 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 todays date and are subject to risks and uncertainties disclosed in the company's most recent 10-K as well as other filings with the SEC.
The Companys business is subject to certain risks that could cause actual results to differ materially from those anticipated in its forward looking statements.
<unk> assumes no obligation to update forward looking statements that become untrue because of subsequent events.
So point out that management's ability to respond to questions. During this call is limited by SEC, Reg FD, which prohibits selective disclosure of material nonpublic information.
The webcast replay of today's call will be available at and serve co dot com. After the call. In addition, a telephone replay will be available beginning approximately two hours after the call instructions for accessing the webcast or replay are available in today's news release with that I'll turn the call over to rich Murphy Rich. Please go ahead.
Thank you Jay welcome everyone and thanks for joining our call.
Today, we announced our third quarter financial results. After the market close we are pleased to report that for the second consecutive quarter circle generated solid year over year revenue growth.
<unk> revenue in Q3 increased 72% over the same quarter last year.
That's followed a second quarter in which revenue increased 44% year over year.
This renewed momentum reflects in oilfield services industry that is steadily recovering.
Some of the effects of the pandemic as evidenced by increased activity by e&ps across the country.
I want to share a few data points on this according to Baker Hughes as of November 5th the U S rig count had increased 83% over the previous 12 months to 550 rigs from 300 a year ago.
And that has resulted in a steadily rising number of wells being drilled and completed.
As encouraging as these increases are the rig count is still well below levels from 2018 in 2019. So we think there is still significant upside in the cycle.
In another positive development over the past 12 months crude oil has more than doubled from approximately $37 per barrel to well over $80 per barrel.
Obviously all of these trends bode well for our business and we are hopeful that the tailwind we're experiencing will carry into 2022 and beyond and help US drive further revenue increases and return us to the profit profile, we enjoyed before the downturn.
Our growth in the last couple of quarters has been driven by improved performance across all four of our service lines Hot Oiling Frac water heating acidize ing and non oilfield services.
We are especially excited about the momentum in our heartland business.
Most of this momentum is coming from our Texas operations, where third quarter revenue grew 126% year over year on the strength of increased customer demand at our legacy South Texas yard and continued growth in new customer wins at our new location in East Texas.
We are in the process of deploying additional hot oiling assets to Texas to meet current and anticipated demand.
As you know our second and third quarters are traditionally are slower off season quarters. So we are encouraged with our improved results during the middle half of the year.
Our fourth and first quarters constitute our heating season.
Which is historically when we generate a high percentage of our revenue and profitability.
This year the fourth quarter has started off warmer than usual following the start of our heating season.
As temperatures drop in coming weeks, we expect demand for our completion services to increase and support a continuation of quarterly growth on a year over year basis.
Although most of our focus is now on maximizing equipment utilization in our heating season, we continue to look at ways to take costs out of the business by operating more efficiently divesting noncore assets consolidated consulting physical locations and redeploying equipment to stronger markets.
These actions and cost cuts will better enable us to invest in other aspects of our business such as our ongoing initiatives to refresh our hot Oiling fleet.
That program once completed will solidify our position as a premier provider of Hot Oiling services in the U S with that I will turn the call over to Margaret recap the financial results.
Okay.
Thank you rich in <unk> reported third quarter revenue of $3 million or 72% increase over revenue of $1 8 million in the same quarter last year. It was our second straight quarter of year over year double digit revenue growth as in the second quarter, our growth was attributable to.
Higher commodity prices and increased customer activity, including some new customer wins as rig counts continue to increase.
Production services revenue increased 82% year over year to $2 5 million from $1 4 million.
This segment generated a slight loss of $6000 compared to segment income of 16000 and in the year ago third quarter.
<unk> revenue in Q2 increased 36% to 544000 from 401000, a year ago. The segment loss improved to 645000 versus a segment loss of 725000 in the same quarter last year.
SG&A expenses in the third quarter totaled 900000, representing a 14% improvement over $1 million in the year ago third quarter.
This improvement reflected lower professional fees and a reduction in bad debt expense.
Depreciation and amortization expense was flat year over year at $1 3 million.
Total operating expenses in the third quarter increased 22% to $5 9 million from $4 8 million based on higher cost of providing services in line with increased customer activity.
And Sir reported a reduced third quarter net loss of 200000 or two cents per diluted share compared to net income of $8 4 million or $2.15 per diluted share in the same quarter last year.
This quarters net loss included the impact of $1 9 million in PPP loan forgiveness and 600000 in cares Act payroll tax credits.
I'll also point out that last year's Q3 net income of $8 4 million included an $11 $9 million gain on the restructuring of our senior revolving credit facility.
And finally, adjusted EBITDA in the third quarter improved by 10% year over year to a negative $1 $5 million from a negative $1 7 million.
Turning to our nine months results I'll remind you that despite double digit revenue gains in our second and third quarters. This year. Our nine months results were heavily influenced by challenging first quarter when commodity prices and rig counts were much lower than those in the same quarter last year just prior to the onset.
Of the pandemic as a result total revenue for the nine months ended September 32021 was $11 3 million, which was down 15% from $13 3 million in the same period last year.
Production services revenue increased 10% year over year to $6 6 million from $5 $9 million.
This increase combined with the impact of cost cutting efforts helped us reduce our segment loss by 65% to a negative 246000 from a negative 707000 in the same period last year.
Completion services revenue.
And the first nine months was $4 7 million compared to $7 3 million, a 64% decline year over year and the segment loss increased to 979000 from 270000.
Total operating expenses for the nine months period were reduced by 14% to $19 4 million from $22 5 million in the prior year due to reduced customer activity as well as cost reductions in our SG&A category.
Sales general and administrative expenses through the nine months ending September 32021, with $2 9 million, a $1 $2 million improvement from $4 1 million in the same period last year, reflecting cost cuts depreciation.
Depreciation and amortization expense was flat at $4 million.
Net loss through nine months was $4 million or <unk> 37 per basic share compared to net income of $1 2 million or 32 cents per basic and diluted share in the same period last year.
Net loss. This year included approximately $4 3 million in PPP loan forgiveness in cares Act payroll tax credits, while the 2029 months net income included the $11 million 11 $9 million gain on our credit facility restructuring.
Adjusted EBITDA improved by 5% to negative $4 $94 1 million versus a negative $4 3 million in the prior year.
And circle used $3 9 million in cash from operations year to date compared to $2 3 million at the same time last year.
On the subject of the cares act payroll tax credits that we benefited from in the recent quarters unit you may be aware that the infrastructure investment and jobs Act.
Recently signed into law today once that happens the tax credits will be retroactively ended as of September 32021, and as a result, and circa will need to we.
We will not receive any additional tax credit going forward and will repay approximately 210000.
October credits already received.
Before I open the call to question one quick update regarding our term loan with East West Bank.
Certainly were granted a waiver after narrowly falling short on our covenant thresholds tied to our revenue for October of this year as a result of warm weather pushing out expected frac water heating.
The term loan is due to tour in October of 2022, and as we told you last quarter, we are evaluating our options for refinancing that debt we.
We believe that a continuation of our growth momentum with a strong heating season will put us in a better position to refinance at rates that are acceptable to the company and our shareholders, including East West Bank, which became a large equity stake holder during our last refinancing transaction.
And with that I'll now open the call to questions operator.
Thank you. Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please indicate so by pressing star one on your Touchtone phone at this time pressing star to remove you from the queue should your question to be answered and lastly, while posing your question. Please pickup your handset of loosening on speaker phone to provide optimal sound quality.
Please hold while we poll for questions.
Once again Thats Star one if you have a question or comment.
And your first question is coming from Ed Woo from <unk> capital. Your line is live.
Yes, as oil prices and rig counts rebound have you noticed any changes in the competition.
Okay.
So at all.
We don't we don't give guidance.
But what we can say there.
There is definitely more activity levels.
As far as competition, you're asking up.
Less competitors around given the pandemic and the downturn that the nature of the question.
Yeah, just wondering what the competitive latest I wonder just wondering as our people coming back into this market and competing with you guys or has a lot of people just been knocked out.
You know that's a tough one to answer only because our competition is.
Largely mom and Pops and so.
It would be easier if we had two or three big players, we could point to and say other gone but.
Yes.
The competitive landscape.
No that better when I talked to you in March.
Just because we're just starting now getting into the season as the weather turns.
As far as we can as far as the hot oiling.
The competitive landscape.
That business has indicated by our results have been has been much stronger.
A year ago. So it's.
That's that doesn't speak almost of the competition is to there is just more work out there.
Great and I know it can be tough, but any.
Forecast heading into the season I know you mentioned that you've got there is a little bit of a cold spell recently, but.
Do you have any visibility on what you think that this winter is going to be.
Well yeah.
I'm not we're definitely not in the business of pegging weather.
It is starting to you know one of the things. We mentioned has been a little warmer October tends to be fairly warm in general.
If you look historically back in our business November is when it starts to time, particularly in the Colorado market, Pennsylvania markets more December ish.
So.
We're not overly surprised by the October being a little warm.
But as far as looking to the future is predicting whether that's a.
Oh.
I'll, let you answer that question Im not a weatherman here.
Great No problem, sorry to put you on the spot. Thanks for answering my questions and I wish you guys. Good luck. Thank you.
Ed.
Once again, if there are any remaining questions or comments. Please indicate so now by pressing star one on your Touchtone phone.
Once again Thats Star one if you have a question or comment.
I would now like to turn the call back to management.
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