ENSERVCO Reports Third Quarter Financial Results
/EINPresswire.com/ -- DENVER, CO -- (Marketwired) -- 11/12/15 -- ENSERVCO Corporation (NYSE MKT: ENSV)
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Despite industry downturn, Q3 well enhancement revenue flat year over year and total revenue down just 8% compared to revenue declines of 33% to 55% for other oil field services companies
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Gross profit improves $523,000, or 92%, to a marginal loss of $47,000 as a result of cost management efforts and lower fuel prices
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Net loss improves 11% year over year despite 68% increase in depreciation expense
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Adjusted-EBITDA improves $588,000, or 41%, to a loss of $831,000
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Company enters heating season with focus on maximizing utilization of its expanded fleet, continued geographic expansion, generation of cash flow and preservation of liquidity
ENSERVCO Corporation (NYSE MKT: ENSV), a diversified national provider of well-site services to the domestic onshore conventional and unconventional oil and gas industries, today reported financial results for its third quarter and nine month period ended September 30, 2015.
"In spite of the industry downturn, we're pleased to report that in the third quarter, the Company's slowest quarter of the year, ENSERVCO's core well enhancement revenue declined by only 1% and overall revenue was down just 8% year over year at a time when most service companies are reporting significant, double digit declines in revenue and profitability," said Rick Kasch, chairman and CEO. "The overall 8% revenue decline was almost entirely due to a decline in water hauling revenue as we cut back on servicing customers at low or no margin rates. We attribute the minimal decline in well enhancement revenue to the positive impact of our geographic expansion into the Eagle Ford basin in Texas and to our ability to maintain and in some cases increase market share in certain areas in the face of fierce pricing competition and an overall reduction in drilling, completion and maintenance activity. These positive factors helped offset price concessions, which were approximately 5% of revenue for the quarter. Although we don't know to what extent, we anticipate that pricing pressures will continue into the fourth quarter and fiscal 2016.
"In recent quarters we have been focused on maximizing utilization and controlling our cost structure by redeploying personnel and assets to our most active and profitable customers and basins," Kasch added. "These actions have contributed to an improvement in our key profit metrics year over year. Gross profit improved from a loss of $570,000 to essentially breakeven, reflecting cost control measures and lower diesel fuel prices. Our net loss improved 11% year over year in spite of a 68% increase in depreciation and amortization resulting from our fleet expansion. And our EBITDA loss during our historically slowest quarter improved $588,000, or 41%, to a loss of $831,000.
"With our two off-season quarters behind us, we're entering our heating season in a very strong position. With several new customers, a fleet that has doubled in size year-over-year, and a strong balance sheet with high liquidity, we are entering what are historically our two best quarters with confidence. While there is no question that commodity prices and a resultant scale-back in frac activity will continue to impact our frac water heating business in the foreseeable future, we believe we have a solid foundation to weather the downturn and emerge as a larger, more substantial company. In the meantime, we are focused on maintaining our customer relationships with superior service, winning new business in legacy and expansion areas, and controlling costs. And with the expansion of our fleet, which doubled our revenue capacity over the past year, we will be able to quickly respond to increased demand when the commodity prices recover."
Third Quarter Results
Total third quarter revenue declined 8% to $5.3 million from $5.7 million in the same quarter last year. The vast majority of the decline was attributable to a decline in low margin water hauling activities in favor of focusing on maximizing core well enhancement business opportunities.
Revenue mix in the third quarter included $3.4 million in core well enhancement revenue, down 1% from the same quarter last year. The two primary components of well enhancement revenue were hot oiling, which was up 2% to $2.6 million year over year as expansion activities added incremental revenue; and acidizing, which was down 10% to $693,000 due to customers postponing maintenance work. The Company believes that that maintenance work will eventually be commissioned, and in the meantime has lowered its stimulation prices and partnered with chemical suppliers to jointly develop and market new programs. Fluid management and other revenue was $1.9 million in the third quarter, down 17% from $2.3 million for reasons previously mentioned.
Gross profit improved by $523,000 year over year to a negative $47,000 from a negative $570,000. This improvement reflected the Company's efforts to reduce operating costs associated with labor, equipment repairs and maintenance, and supplies. The Company also benefitted from lower diesel fuel costs. The lower operating costs were partially offset by the impact of selective price concessions.
Total operating expenses in the third quarter increased 15% to $2.5 million from $2.2 million in the same quarter last year. This increase reflected a 68% increase ($600,000) in depreciation and amortization expense due to the larger fleet size offset by a 22% decline ($266,000) in general and administrative expense.
Net loss improved by 11% to $1.6 million, or $0.04 per diluted share, from a net loss of $1.8 million, or $0.05 per diluted share, in the same quarter last year. The impact of additional depreciation expense on EPS was $0.01 in the third quarter.
Adjusted EBITDA loss during the quarter improved $588,000, or 41%, to $831,000 from $1.4 million a year ago.
Nine-Month Results
Revenue in the first nine months of 2015 decreased 21% to $30.2 million from $38.3 million in the same period last year. Approximately 81%, or $6.6 million, of that decrease was attributable to the year-over-year decline in propane revenue in the first quarter of 2015, which was due to lower propane prices and a decrease in volume sold due to customers either taking advantage of the Company's cost-saving bi-fuel system or providing their own fuel source.
Gross profit for the nine months declined $1.0 million to $8.0 million primarily due to continuing labor costs during unexpected downtime caused by unseasonably warm weather in the DJ Basin during the first quarter, lower gross profits on propane sales during the first quarter, and year to date price concessions granted to customers. The declines were partially mitigated by management cost reduction efforts and lower fuel prices.
Gross margin increased to 26% from 24% a year ago due primarily to the mathematical impact of lower propane revenue and costs.
Total operating expenses in the first nine months of 2015 increased 36% to $7.9 million from $5.8 million a year ago. This increase was almost entirely attributable to a $2.0 million increase in depreciation and amortization expense year over year related to fleet growth. The Company also had a $313,000 increase in patent litigation expense, although that litigation process is currently under a judge's stay order. The foregoing expense increases were partially offset by a $195,000 decrease in general and administrative expense for the comparative nine-month periods.
Operating income through nine months declined to $106,000 from $3.2 million last year due to lower gross margins and higher depreciation and litigation expense. Net loss through nine months was $371,000, or $0.01 per diluted share, versus net income of $1.5 million, or $0.04 per diluted share, a year ago. The impact of additional depreciation and patent litigation costs on EPS was $0.04 in the nine-month period.
Adjusted EBITDA through the first nine months was $5.3 million, down from $6.2 million a year ago due primarily to the $1.0 million decline in gross profit.
ENSERVCO generated $12.9 million in net cash from operations in the first nine months, up 14% from $11.3 million in the same period last year. The Company closed the first nine months with working capital of $4.7 million. Cash flow from operations were used to pay down the Company's senior credit facility with PNC bank to $18.9 million year to date, thereby improving the long-term debt to equity ratio to 1.05 to 1 as compared to 1.63 to 1 at 2014 year-end.
Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 1:00 p.m. Eastern (11:00 a.m. Mountain) and will be accessible by dialing 877-407-8031 (201-689-8031 for international callers). No passcode is necessary. A telephonic replay will be available through November 19, 2015, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #13622881. To listen to the webcast, participants should go to the ENSERVCO website at www.enservco.com and link to the "Investors" page at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 90 days. The webcast also is available at the following link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=174442.
About ENSERVCO
Through its various operating subsidiaries, ENSERVCO has emerged as one of the energy service industry's leading providers of hot oiling, acidizing, frac water heating and fluid management services in seven major domestic oil and gas fields, serving customers in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia. Additional information is available at www.enservco.com
*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing ENSERVCO's operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Operations table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.
Cautionary Note Regarding Forward-Looking Statements
This news release contains information that is "forward-looking" in that it describes events and conditions ENSERVCO reasonably expects to occur in the future. Expectations for the future performance of ENSERVCO are dependent upon a number of factors, and there can be no assurance that ENSERVCO will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond ENSERVCO's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in our fiscal year 2014 Form 10-K filed on March 19, 2015, and subsequently filed documents. It is important that each person reviewing this release understand the significant risks attendant to the operations of ENSERVCO. ENSERVCO disclaims any obligation to update any forward-looking statement made herein.
ENSERVCO CORPORATION
Condensed Consolidated Statement Of Operations And Comprehensive Income
(Loss)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2015 2014 2015 2014
------------ ------------ ------------ ------------
Revenues $ 5,308,854 $ 5,748,754 $ 30,150,900 $ 38,285,655
Cost of Revenues 5,355,942 6,319,040 22,184,102 29,287,402
------------ ------------ ------------ ------------
Gross Profit (Loss) (47,088) (570,286) 7,966,798 8,998,253
------------ ------------ ------------ ------------
Operating Expenses
General and
administrative
expenses 954,831 1,220,877 3,115,557 3,310,518
Patent litigation
and defense costs 53,844 63,386 493,058 179,807
Depreciation and
amortization 1,489,352 884,964 4,252,124 2,288,852
------------ ------------ ------------ ------------
Total operating
expenses 2,498,027 2,169,227 7,860,739 5,779,177
------------ ------------ ------------ ------------
Income (Loss) from
Operations (2,545,115) (2,739,513) 106,059 3,219,076
Other Income
(Expense)
Interest expense (360,434) (225,062) (860,865) (720,489)
Other income 22,642 21,775 53,822 44,962
------------ ------------ ------------ ------------
Total other
expense (337,792) (203,287) (807,043) (675,527)
------------ ------------ ------------ ------------
Income (Loss) Before
Tax Expense (2,882,907) (2,942,800) (700,984) 2,543,549
Income Tax Benefit
(Expense) 1,234,716 1,094,774 330,162 (1,056,639)
------------ ------------ ------------ ------------
Net Income (Loss) $ (1,648,191) $ (1,848,026) $ (370,822) $ 1,486,910
============ ============ ============ ============
Other Comprehensive
Income (Loss) - (3,735) - (7,075)
------------ ------------ ------------ ------------
Comprehensive Income
(Loss) $ (1,648,191) $ (1,851,761) $ (370,822) $ 1,479,835
============ ============ ============ ============
Earnings (Loss) per
Common Share -
Basic $ (0.04) $ (0.05) $ (0.01) $ 0.04
============ ============ ============ ============
Earnings (Loss) per
Common Share -
Diluted $ (0.04) $ (0.05) $ (0.01) $ 0.04
============ ============ ============ ============
Basic weighted
average number of
common shares
outstanding 38,101,647 36,816,875 37,740,843 36,359,251
Add: Dilutive shares
assuming exercise
of options and
warrants - - - 1,404,213
------------ ------------ ------------ ------------
Diluted weighted
average number of
common shares
outstanding 38,101,647 36,816,875 37,740,843 37,763,464
============ ============ ============ ============
ENSERVCO CORPORATION
Calculation of Adjusted EBITDA *
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2015 2014 2015 2014
------------ ------------ ------------ ------------
Adjusted EBITDA*
Net Income (Loss) $ (1,648,191) $ (1,848,026) $ (370,822) $ 1,486,910
Add Back (Deduct)
Interest expense 360,434 225,062 860,865 720,489
Provision for
income taxes
(benefit)
expense (1,234,716) (1,094,774) (330,162) 1,056,639
Depreciation and
amortization 1,489,352 884,964 4,252,124 2,288,852
------------ ------------ ------------ ------------
EBITDA* (1,033,121) (1,832,774) 4,412,005 5,552,890
Add Back (Deduct)
Stock-based
compensation 170,972 372,239 442,243 520,519
Patent
Litigation
and defense
costs 53,844 63,386 493,058 179,807
(Gain) on sale
and disposal
of equipment - (507) 1,071 (9,744)
Interest and
other income (22,642) (21,268) (54,893) (35,218)
------------ ------------ ------------ ------------
Adjusted EBITDA* $ (830,947) $ (1,418,924) $ 5,293,484 $ 6,208,254
============ ============ ============ ============
ENSERVCO CORPORATION
Condensed Consolidated Balance Sheets
September 30, December 31,
ASSETS 2015 2014
------------- -------------
(Unaudited)
Current Assets
Cash and cash equivalents $ 747,500 $ 954,058
Accounts receivable, net 3,212,609 14,679,858
Prepaid expenses and other current assets 1,287,107 1,540,667
Inventories 324,578 390,081
Income tax receivable 1,967,732 1,776,035
Deferred tax asset 135,055 135,055
------------- -------------
Total current assets 7,674,581 19,475,754
Property and Equipment, net 37,105,534 37,789,004
Goodwill 301,087 301,087
Other Assets 686,939 716,836
------------- -------------
TOTAL ASSETS $ 45,768,141 $ 58,282,681
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 2,665,704 $ 5,472,163
Current portion of long-term debt 321,737 340,520
------------- -------------
Total current liabilities 2,987,441 5,812,683
------------- -------------
Long-Term Liabilities
Senior revolving credit facility 18,929,416 28,634,037
Long-term debt, less current portion 618,189 801,968
Deferred income taxes, net 4,623,748 4,992,681
------------- -------------
Total long-term liabilities 24,171,353 34,428,686
------------- -------------
Total Liabilities 27,158,794 40,241,369
------------- -------------
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.005 par value, 10,000,000
shares authorized, no shares issued or
outstanding - -
Common stock. $.005 par value, 100,000,000
shares authorized, 38,214,758 and 37,159,815
shares issued, respectively; 103,600 shares
of treasury stock; and 38,111,158 and
37,056,215 shares outstanding, respectively 190,556 185,282
Additional paid-in capital 13,684,972 12,751,389
Accumulated earnings 4,733,819 5,104,641
------------- -------------
Total stockholders' equity 18,609,347 18,041,312
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,768,141 $ 58,282,681
============= =============
ENSERVCO CORPORATION
Condensed Consolidated Statement of Cash Flows
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2015 2014 2015 2014
------------ ------------ ------------ ------------
OPERATING ACTIVITIES
Net income (loss) $ (1,648,191) $ (1,848,026) $ (370,822) $ 1,486,910
Adjustments to
reconcile net
income (loss) to
net cash provided
by (used in)
operating
activities
Depreciation and
amortization 1,489,352 884,964 4,252,124 2,288,852
Loss on sale and
disposal of
equipment - (507) 1,071 (9,744)
Deferred income
taxes (1,178,098) (65,572) (368,933) 64,259
Stock-based
compensation 170,972 372,239 442,243 520,519
Amortization of
debt issuance
costs 32,265 63,174 90,048 225,823
Bad debt expense 8,205 41,807 21,050 91,807
Changes in
operating assets
and liabilities
Accounts
receivable 657,071 246,640 11,446,199 7,889,279
Inventories (19,733) 67,107 65,503 (61,614)
Prepaid expense
and other
current assets (263,144) 326,095 278,560 (237,670)
Income taxes
receivable (62,091) (56,887) (191,697) (56,887)
Other non-current
assets 14,849 (381,758) 14,849 (395,759)
Accounts payable
and accrued
liabilities 958,066 1,372,675 (2,806,459) 729,921
Income taxes
payable - (976,591) - (1,278,599)
------------ ------------ ------------ ------------
Net cash
provided by
operating
activities 159,523 45,360 12,873,736 11,257,097
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Purchases of
property and
equipment (429,623) (6,155,517) (3,574,725) (12,760,006)
Proceeds from sale
of equipment - - 5,000 50,000
------------ ------------ ------------ ------------
Net cash used in
investing
activities (429,623) (6,155,517) (3,569,725) (12,710,006)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Net line of credit
borrowings
(payments) 376,522 13,763,001 (9,704,621) 13,763,001
Repayment of long-
term debt (34,703) (11,324,687) (202,562) (12,481,676)
Proceeds from
exercise of
warrants - - 77,100 187,804
Proceeds from
exercise of
options 12,250 61,537 198,285 127,987
Payment of debt
issuance costs (100,000) (163,962) (100,000) (163,962)
Excess tax benefits
from exercise of
options and
warrants 3,109 - 221,229 -
------------ ------------ ------------ ------------
Net cash provided
by (used in)
financing
activities 257,178 2,335,889 (9,510,569) 1,433,154
------------ ------------ ------------ ------------
Net Decrease in Cash
and Cash Equivalents (12,922) (3,774,268) (206,558) (19,755)
Cash and Cash
Equivalents,
Beginning of Period 760,422 5,622,703 954,058 1,868,190
------------ ------------ ------------ ------------
Cash and Cash
Equivalents, End of
Period $ 747,500 $ 1,848,435 $ 747,500 $ 1,848,435
============ ============ ============ ============
Supplemental cash
flow information
consists of the
following:
Cash paid for
interest $ 219,192 $ 126,711 $ 841,252 $ 478,531
Cash paid for
taxes $ 2,362 $ 5,998 $ 9,236 $ 2,329,588
Supplemental
Disclosure of Non-
cash Investing and
Financing
Activities:
Cashless exercise
of stock options
and warrants $ - $ 364 $ 2,751 $ 7,532
Contact:
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
Phone: 303-393-7044
Email: Email Contact
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