ENSERVCO Reports Fourth Quarter and Year End Financial Results
/EINPresswire.com/ -- DENVER, CO -- (Marketwired) -- 03/31/16 -- ENSERVCO Corporation (NYSE MKT: ENSV)
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Company generates solid cash flows and EBITDA in 2015 despite lower revenue due to industry downturn, El Nino warming effect and decline in propane sales
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Comprehensive expense reductions help Company sustain gross margin levels at 26% in 2015 vs. 27% in 2014
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Company uses portion of $12.1 million in cash flows from operations to pay down debt by $8.2 million in 2015
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Strong balance sheet, new service offerings, modern fleet and broad geographic footprint position Company to seize opportunities when commodity prices rebound
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 fourth quarter and full year ended December 31, 2015.
"Despite the perfect storm of reduced oilfield service activity due to declining oil prices throughout 2015, the warming impact of one of the most powerful El Nino conditions on record and lower propane prices, ENSERVCO continued to outperform many of its peers by generating positive EBITDA and solid cash flow for the year," said Rick Kasch, chairman and CEO. "Although full-year revenue declined 31% due to reduced drilling, completion and maintenance activity along with the record warm temperatures during our first and fourth quarters -- historically our most productive quarters in terms of revenue and profitability -- we reported adjusted EBITDA of $6.3 million and generated $12.1 million in cash from operations for the year. Nevertheless, the reduced activity and warm weather we experienced in the fourth quarter have continued into the first quarter of 2016 and we expect revenue and profitability to reflect that.
"Our balance sheet remains in very good shape as evidenced by our current ratio of 2.9:1 and long-term debt to equity ratio of only 1.2:1. We paid down nearly $8.2 million of long-term debt during the year after making payments of $4.5 million to complete the remaining portion of our 2014 fleet expansion" Kasch added. "In light of the short-term weather impact and decreased activity, our lender, PNC Bank, has agreed to modify our loan covenants so that we can continue taking advantage of our facility to fund growth initiatives and ongoing operations. Details on those modifications are contained in our Form 10K which was filed yesterday.
"Throughout 2015 we worked hard to manage our cost structure and size the company appropriately for the current level of business activity. We have implemented headcount and pay reductions at both the corporate and field levels. We have reduced general and administrative expense year over year and our increase in total operating expenses was entirely attributable to higher non-cash depreciation expense associated with our fleet expansion in 2014. We have also focused intensively on developing new revenue streams via M&A activity and by redeploying assets and personnel to our more active basins, such as the Eagle Ford in Texas where soon we will have relocated 23 hot oilers since targeting the area for expansion early last year.
"We are particularly excited about prospects for the HydroFLOW® (HF) system, a product line we acquired exclusive marketing rights to in the first quarter of 2016," Kasch added. "HF uses patented electrical induction technology to remove bacteria from frac and recycled water, eliminating down-hole scaling and corrosion. A lower cost, 'green' alternative to traditional chemical treatment, HF can achieve a 95% bacteria kill rate. Our first field trial of the effectiveness of HF on treatment of water flowing into injection wells begins in the next couple of weeks with a mid-size E&P and we expect to have results of that trial in 45 to 60 days. We are optimistic that HydroFLOW can become a significant contributor to ENSERVCO's revenue mix over the long term."
Full-Year Results
Total revenue in 2015 decreased $17.8 million, or 31%, from the prior year to $38.8 million. Approximately $5.9 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. The balance of the revenue decline was due to reduced drilling, completion and maintenance activity, price concessions, El Nino-related warm weather -- particularly in the DJ Basin and Marcellus Shale - and the Company's de-emphasis on lower margin water hauling.
By service line, the $17.8 million decline in total revenue included a $13.1 million, or 42%, decline in frac water heating; a $2.2 million, or 24%, decline in water hauling; and a $2.5 million, or 15%, decline in the Company's well maintenance services of hot oiling and acidizing. During 2015 many of the Company's customers postponed well maintenance work and some increased their inventories of wells drilled but not completed -- all work that the Company hopes to capture when commodity prices recover.
Gross profit for the year declined to $10.0 million from $15.3 million in 2014. The decline was attributable to lower revenue from higher margin frac water heating services due to unseasonably warm weather, reduced capital spending by the Company's customers, price concessions and lower profit on propane sales. The decline in gross profit was mitigated by cost reduction efforts and lower fuel prices in 2015 as evidenced by gross margins remaining relatively constant at 26% versus 27% a year ago.
Total operating expenses in 2015 increased 27% to $10.6 million from $8.4 million a year ago. This increase was attributable to a $2.4 million year over year increase in depreciation and amortization expense related to fleet expansion in 2014, partially offset by a decline in G&A and patent litigation expenses.
The Company reported a net loss for 2015 of $1.3 million, or $0.03 per diluted share, versus net income of $4.0 million, or $0.10 per diluted share, a year ago. The impact of additional depreciation costs on EPS was $0.04 for the year.
Adjusted EBITDA for the year was $6.3 million versus $11.5 million a year ago due primarily to the $5.3 million decline in gross profit.
ENSERVCO generated $12.1 million in cash from operations in 2015, up 95% from $6.2 million in the prior year. This cash was used to pay down the Company's senior credit facility with PNC bank to $20.7 million at year-end, giving the Company a long-term debt to equity ratio to 1.2:1 as compared to 1.7:1 at 2014 year-end. The Company closed the year with working capital of $6.5 million and a current ratio of 2.9:1.
Fourth Quarter Results
Total fourth quarter revenue declined 53% to $8.6 million from $18.3 million in the same quarter last year. The decline was attributable to reduced E&P spending, warm weather and continued de-emphasis of lower margin water hauling.
By service line, the $9.7 million decline in total revenue included a $7.2 million, or 64%, decline in frac water heating; a $1.0 million, or 40%, decline in water hauling; and a $1.5 million, or 32%, decline in the Company's well maintenance services of hot oiling and acidizing.
Gross profit in the fourth quarter was $2.0 million versus a gross profit of $6.2 million in the same quarter last year. During the quarter the Company was successful in reducing variable costs. However, due to the level of fixed costs that could not be reduced, the Company's gross margin declined to 23% from 34% year over year.
Total operating expenses in the fourth quarter increased 9%, or $229,000, to $2.7 million from $2.5 million in the same quarter last year. This increase reflected a 38% increase ($427,000) in depreciation and amortization expense due to the larger fleet size and a 14% increase ($141,000) in general and administrative expense due to higher stock based compensation expense, partially offset by a $339,000 decline in patent litigation costs.
The Company reported a net loss of $890,000, or $0.02 per diluted share, versus net income of $2.5 million, or $0.07 per diluted share, in the same quarter last year. The impact of additional depreciation expense on EPS was $0.01 in the quarter.
Adjusted EBITDA in the fourth quarter was $1.0 million versus $5.3 million in the same quarter last year.
Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 11:00 a.m. Mountain Time (1:00 p.m. Eastern) 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 April 7, 2016, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #13632184. 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=174876
About ENSERVCO
Through its various operating subsidiaries, ENSERVCO provides a wide range of oilfield services, including hot oiling, acidizing, frac water heating, water transfer, bacteria and scaling treatment, and oilfield support equipment rental. The Company has a broad geographic footprint covering seven major domestic oil and gas fields and serves 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 ENSERVCO's annual report on Form 10-K for the year ended December 31, 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
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Three Months For the Twelve Months
Ended Ended
December 31, December 31,
------------------------- --------------------------
2015 2014 2015 2014
----------- ------------ ------------ ------------
Revenues $ 8,626,960 $ 18,278,289 $ 38,777,860 $ 56,563,944
Cost of Revenues 6,624,497 12,049,312 28,808,599 41,257,600
----------- ------------ ------------ ------------
Gross Profit 2,002,463 6,228,977 9,969,261 15,306,344
----------- ------------ ------------ ------------
Operating Expenses
General and
administrative
expenses 1,144,982 1,003,489 4,260,539 4,393,129
Patent litigation
and defense
expenses 43,524 382,679 536,582 562,486
Depreciation and
amortization 1,540,242 1,113,478 5,792,366 3,402,330
----------- ------------ ------------ ------------
Total operating
expenses 2,728,748 2,499,646 10,589,487 8,357,945
----------- ------------ ------------ ------------
Income (Loss) from
Operations (726,285) 3,729,331 (620,226) 6,948,399
Other Income (Expense)
Interest expense (252,679) (70,670) (1,113,544) (791,159)
Gain (Loss) on sale
and disposals of
equipment (7,089) 170,159 (8,160) 179,903
Other income 7,762 5,252 62,655 40,470
----------- ------------ ------------ ------------
Total other
(expense) income (252,006) 104,741 (1,059,049) (570,786)
----------- ------------ ------------ ------------
Income (Loss) Before
Tax Expense (978,291) 3,834,072 (1,679,275) 6,377,613
Income Tax Benefit
(Expense) 88,091 (1,315,241) 418,253 (2,371,872)
----------- ------------ ------------ ------------
Net Income (Loss) $ (890,200) $ 2,518,831 $ (1,261,022) $ 4,005,741
=========== ============ ============ ============
Other Comprehensive
Loss - 2,955 - (4,070)
----------- ------------ ------------ ------------
Comprehensive Income
(Loss) $ (890,200) $ 2,521,786 $ (1,261,022) $ 4,001,671
=========== ============ ============ ============
Earnings (Loss) per
Common Share - Basic $ (0.02) $ 0.07 $ (0.03) $ 0.11
=========== ============ ============ ============
Earnings (Loss) per
Common Share -
Diluted $ (0.02) $ 0.07 $ (0.03) $ 0.10
=========== ============ ============ ============
Basic weighted average
number of common
shares outstanding 38,116,928 37,036,306 37,835,637 36,529,906
Add: Dilutive shares
assuming exercise of
options and warrants - 1,666,632 - 2,469,099
----------- ------------ ------------ ------------
Diluted weighted
average number of
common shares
outstanding 38,116,928 38,702,938 37,835,637 38,999,005
=========== ============ ============ ============
ENSERVCO CORPORATION
Calculation of Adjusted EBITDA *
For the Three Months For the Twelve Months
Ended Ended
December 31, December 31,
------------------------- --------------------------
2015 2014 2015 2014
----------- ------------ ------------ ------------
Adjusted EBITDA*
Net Income (Loss) $ (890,200) $ 2,518,831 $ (1,261,022) $ 4,005,741
Add Back (Deduct)
Interest Expense 252,679 70,670 1,113,544 791,159
Provision for
income taxes
(benefit) expense (88,091) 1,315,241 (418,253) 2,371,872
Depreciation and
amortization 1,540,242 1,113,478 5,792,366 3,402,330
----------- ------------ ------------ ------------
EBITDA* 814,630 5,018,220 5,226,635 10,571,102
Add Back (Deduct)
Stock-based
compensation 175,287 42,385 617,530 562,903
Patent litigation
and defense
expenses 43,524 382,679 536,582 562,486
Loss (Gain) on
sale and disposal
of equipment 7,089 (170,159) 8,160 (179,903)
Interest and other
income (7,762) (5,252) (62,655) (40,470)
----------- ------------ ------------ ------------
Adjusted EBITDA* $ 1,032,768 $ 5,267,873 $ 6,326,252 $ 11,476,118
=========== ============ ============ ============
ENSERVCO CORPORATION
Condensed Consolidated Balance Sheets
December 31, December 31,
ASSETS 2015 2014
-------------- --------------
(Unaudited)
Current Assets
Cash and cash equivalents $ 804,737 $ 954,058
Accounts receivable, net 7,037,419 14,679,858
Prepaid expenses and other current assets 1,213,049 1,540,667
Inventories 308,297 390,081
Income tax receivable 222,447 1,776,035
Deferred tax asset 237,411 135,055
-------------- --------------
Total current assets 9,823,360 19,475,754
Property and equipment, net 36,494,661 37,789,004
Goodwill 301,087 301,087
Other assets 573,030 716,836
-------------- --------------
TOTAL ASSETS $ 47,192,138 $ 58,282,681
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 3,039,859 $ 5,472,163
Current portion of long-term debt 314,263 340,520
-------------- --------------
Total current liabilities 3,354,122 5,812,683
-------------- --------------
Long-Term Liabilities
Senior revolving credit facility 20,706,241 28,634,037
Long-term debt, less current portion 590,505 801,968
Deferred income taxes, net 4,654,454 4,992,681
-------------- --------------
Total long-term liabilities 25,951,200 34,428,686
-------------- --------------
Total liabilities 29,305,322 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, 38,230,729 and
37,159,815 shares issued, respectively;
103,600 shares of treasury stock; and
38,127,129 and 37,056,215 shares
outstanding, respectively 190,634 185,282
Additional paid-in capital 13,852,563 12,751,389
Accumulated earnings 3,843,619 5,104,641
-------------- --------------
Total stockholders' equity 17,886,816 18,041,312
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,192,138 $ 58,282,681
============== ==============
ENSERVCO CORPORATION
Condensed Consolidated Statement of Cash Flows
(Unaudited)
For the Twelve Months
For the Three Months Ended Ended
December 31, December 31,
-------------------------- --------------------------
2015 2014 2015 2014
------------ ------------ ------------ ------------
OPERATING ACTIVITIES
Net income (loss) $ (890,200) $ 2,518,831 $ (1,261,022) $ 4,005,741
Adjustments to
reconcile net
income (loss) to
net cash (used in)
provided by
operating
activities
Depreciation and
amortization 1,540,242 1,113,478 5,792,366 3,402,330
Loss (gain) on
sale and
disposal of
equipment 7,089 (170,159) 8,160 (179,903)
Deferred income
taxes (71,650) 2,720,937 (440,583) 2,785,196
Stock-based
compensation 175,289 42,385 617,530 562,903
Stock issued for
services 10,380 - 10,380 -
Amortization of
debt issuance
costs 35,356 27,980 125,404 253,803
Bad debt expense 114,384 4,785 135,434 96,592
Changes in
operating assets
and liabilities
Accounts
receivable (3,939,194) (10,979,863) 7,507,005 (3,090,584)
Inventories 16,281 (13,463) 81,784 (75,077)
Prepaid expense
and other
current assets 74,058 (179,414) 352,618 (417,084)
Income taxes
receivable 1,745,285 (1,497,767) 1,553,588 (1,776,035)
Other assets 78,553 (27,542) 93,402 (423,301)
Accounts payable
and accrued
liabilities 374,155 1,629,435 (2,432,304) 2,359,356
Income taxes
payable - - - (1,278,599)
------------ ------------ ------------ ------------
Net cash (used
in) provided
from operating
activities (729,972) (4,810,377) 12,143,762 6,225,338
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Purchases of
property and
equipment (958,627) (11,195,598) (4,533,352) (23,955,603)
Proceeds from sale
and disposal of
equipment 22,169 320,000 27,169 370,000
------------ ------------ ------------ ------------
Net cash used in
by investing
activities (936,458) (10,875,598) (4,506,183) (23,585,603)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Net credit facility
borrowings
(payments) 1,776,825 14,871,036 (7,927,796) 28,634,037
Repayment of long-
term debt (35,158) (138,025) (237,720) (12,619,701)
Payment of debt
issuance costs - (35,863) (100,000) (199,825)
Proceeds from
exercise of
warrants - 77,494 77,100 265,298
Proceeds from
exercise of
options - - 198,285 127,987
Excess tax benefits
related to
exercise of
options and
warrants (18,000) 16,956 203,231 238,337
------------ ------------ ------------ ------------
Net cash provided
by (used in)
financing
activities 1,723,667 14,791,598 (7,786,900) 16,446,133
------------ ------------ ------------ ------------
Net Increase
(Decrease) in Cash
and Cash Equivalents 57,237 (894,377) (149,321) (914,132)
Cash and Cash
Equivalents,
Beginning of Period 747,500 1,848,435 954,058 1,868,190
------------ ------------ ------------ ------------
Cash and Cash
Equivalents, End of
Period $ 804,737 $ 954,058 $ 804,737 $ 954,058
============ ============ ============ ============
Supplemental cash
flow information
consists of the
following:
Cash paid for
interest $ 214,748 $ 40,519 $ 814,033 $ 519,050
Cash (refund)
paid for taxes $ (1,751,293) $ 83,093 $ (1,742,057) $ 2,412,681
Supplemental
Disclosure of Non-
cash Investing and
Financing
Activities:
Cashless exercise
of stock options
and warrants $ - $ - $ 2,751 $ 7,531
Contact:
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
Phone: 303-393-7044
Email: Email Contact
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