2008-08-04 15:17:00
Basic Energy Services Reports Second Quarter 2008 Results
~ Reports diluted EPS of $0.55 before merger costs for the second quarter
of 2008 ~
MIDLAND, Texas, Aug. 4 /EMWNews/ -- Basic Energy Services,
Inc. (NYSE: BAS) ("Basic") today announced its financial and operating
results for the second quarter and six months ended June 30, 2008.
Basic reported net income of $22.9 million, or $0.55 per diluted share,
before merger related costs, for the second quarter of 2008, compared to
$21.7 million, or $0.52 per diluted share, in the same period in 2007. Net
income for the second quarter of 2008, including a $4.2 million after-tax
charge related to the termination of the Grey Wolf, Inc. merger, was $18.7
million, or $0.45 per diluted share. Revenues increased 13% to $251.5
million for the second quarter of 2008 compared to $223.3 million in the
second quarter of 2007.
Adjusted EBITDA (defined as net income before interest, taxes,
depreciation and amortization, excluding pre-tax merger costs ($6.6 million
in the second quarter of 2008)) for the second quarter of 2008 increased 9%
to $71.6 million, or 28% of revenue, compared to EBITDA (defined as net
income before interest, taxes, depreciation and amortization) of $65.8
million, or 29% of revenue, in the same period in 2007. EBITDA and Adjusted
EBITDA, which are not measures determined in accordance with generally
accepted accounting principles ("GAAP"), are defined and reconciled in note
2 under the accompanying financial tables.
For the six-month period ended June 30, 2008, Basic reported net income
of $42.6 million in 2008, or $1.02 per diluted share, before merger related
costs, compared to $43.8 million, or $1.08 per diluted share, in the same
period in 2007. Including the $4.2 million after-tax charge related to the
termination of the Grey Wolf, Inc. merger, net income for the first six
months of 2008 was $38.4 million, or $0.92 per diluted share. Revenues
increased 14% to $481.4 million in the first six months of 2008, compared
to $422.2 million in the same period of 2007.
Adjusted EBITDA (i.e., EBITDA before merger-related costs of $6.6
million in the first six months of 2008) rose 10% to $137.7 million in the
first six months of 2008, or 29% of revenue, compared to $125.5 million, or
30% of revenue, during the same period in 2007.
Ken Huseman, Basic's President and Chief Executive Officer, stated,
"Our record level of revenue and good cost control led to strong operating
margins for the quarter. We are proud of the efforts of our people
throughout the organization who drove exceptional performance despite
distractions from the terminated Grey Wolf merger.
"The outlook for each of our business segments continues to improve as
the year progresses. Despite coming off historical highs, oil prices are
well above the level required by our customers to aggressively seek
opportunities to increase production and add to their reserves. Near-term
weakness in gas prices should be short-lived and offset by increased
activity in the Haynesville shale play where we have had a substantial
presence for years, our internal growth initiatives in the Barnett Shale
and the expansion of our dominant market position in the Permian Basin,
which also includes the growing gas drilling activity in the Ft. Stockton
area. In conjunction with this enhanced activity, we are beginning to
experience an increase in pricing and utilization, making us optimistic for
improved results as we progress through the remainder of 2008."
Business Segment Results
Well Servicing
Well servicing revenues rose approximately 3% to $89.0 million during
the second quarter of 2008 compared to $86.1 million in the same period
last year. Sequentially, revenues for this segment rose about 11% compared
to the first quarter of 2008. Basic added seven newbuild rigs, acquired
eight rigs and retired one rig during the second quarter of 2008, bringing
its well servicing rig count to 409 as of June 30, 2008. Weighted average
number of well servicing rigs increased to 403 during the second quarter of
2008 compared to 371 during the same period in 2007, an increase of 9%.
Revenue per well servicing rig hour decreased 4% to $400 during the second
quarter of 2008 compared to $415 in the same period in 2007. The full-fleet
well servicing rig utilization rate improved sequentially to 77% in the
second quarter of 2008 compared to 72% in the first quarter of 2008 as
activity levels increased due to seasonal and improved market conditions.
Rig utilization rate of 77% for the second quarter of 2008 was essentially
flat from the prior year.
Well servicing segment profit in the second quarter of 2008 was $33.7
million, slightly lower than $34.0 million in the second quarter of 2007,
but higher than the $32.1 million in the first quarter of 2008. Segment
profit margins declined to 38% of revenue in the second quarter of 2008
compared to 40% in the same period of 2007, mainly due to higher personnel
and fuel-related costs.
Fluid Services
Fluid services revenues in the second quarter of 2008 increased 15% to
$72.6 million compared to $63.2 million in the same period in 2007.
Sequentially, revenues for this segment were up 2% compared to the first
quarter of 2008. Basic added 16 new trucks, acquired 21 trucks and retired
7 trucks during the second quarter of 2008, bringing the total number of
fluid services trucks to 678 as of June 30, 2008. Weighted average number
of fluid services trucks increased 1% to 663 during the second quarter of
2008 compared to 657 during the same period in 2007. Average revenue per
fluid services truck increased by 14% to $109,000 in the second quarter of
2008 compared to $96,000 in the same period in 2007. Segment profit in the
second quarter of 2008 was $24.0 million, or 33% of revenue, compared to
$22.8 million, or 36% of revenue, in the same period in 2007. The decrease
in segment profit as a percent of revenue was primarily due to higher
maintenance and repair and fuel-related costs.
Completion & Remedial Services
Completion and remedial services revenues during the second quarter of
2008 increased 25% to $79.6 million compared to $63.7 million in the same
period in 2007. Sequentially, revenues for this segment grew about 16%
compared to the first quarter of 2008. Segment profit in the second quarter
of 2008 rose to $36.9 million, or 46% of revenue, compared to $30.4
million, or 48% of revenue, in the same period in 2007. The increase in
revenue and segment profit was mainly due to several acquisitions made in
the past year as well as internal expansion. Segment profit as a percent of
revenue declined from 2007 mainly due to increased costs of the materials
used in Basic's pressure pumping operations as well as higher fuel related
costs. As of June 30, 2008, Basic had approximately 128,000 hydraulic
horsepower of pressure pumping capacity compared to approximately 119,000
hydraulic horsepower as of June 30, 2007.
Contract Drilling
Contract drilling revenues rose slightly to $10.3 million during the
second quarter of 2008 compared to $10.2 million in the comparable quarter
in 2007. Sequentially, revenues for this segment increased about 9%
compared to the first quarter of 2008. Segment profit in the second quarter
of 2008 declined to $2.8 million versus $4.0 million last year during the
second quarter of 2007, as revenue per day decreased to $14,800 in the
second quarter of 2008 from $17,200 in the same period last year.
Basic operated nine drilling rigs during the second quarter of 2008, up
from eight drilling rigs in the same period in 2007. Rig operating days
were 699 in the second quarter of 2008 compared to 594 in the same period
in 2007.
Capital Expenditures
During the first half of 2008, Basic completed four acquisitions for
total consideration of $51 million in cash. Total capital expenditures that
included capital leases and excluded acquisitions were $65.5 million,
comprised of $21.7 million for expansion projects, $36.7 million for
sustaining and replacement projects, and $7.1 million for other projects.
Expansion capital spending included $6.4 million for the well servicing
segment, $2.6 million for the fluid services segment and $12.7 million for
the completion and remedial services segment. Other capital expenditures of
$7.1 million were mainly for facilities and IT infrastructure.
Recent Events
On July 15, 2008, Basic announced that they had terminated the
Agreement and Plan of Merger (the "Merger Agreement") previously entered
into among Basic, Grey Wolf. Inc. ("Grey Wolf") and Horsepower Holdings,
Inc. on April 20, 2008 pursuant to Section 7.1(b)(iii) of the Merger
Agreement. The decision to terminate the Merger Agreement was made after
Grey Wolf's stockholders did not approve the Merger Agreement at a special
meeting of stockholders held on Tuesday, July 15, 2008. Basic's
stockholders voted in favor of the adoption of the Merger Agreement at
Basic's special meeting of stockholders also held on July 15, 2008.
On July 15, 2008, in accordance with provisions in the merger
agreement, Basic received $5 million expense reimbursement from Grey Wolf
that will be recognized in the third quarter of 2008. Basic expects to
recognize approximately $5 million of other M&A and financing commitment
fees in the same quarter. Combined with the $6.6 million of merger expenses
recognized in the second quarter of 2008, total merger costs are projected
to be approximately $11.6 million, exclusive of the $5 million expense
reimbursement received and any subsequent termination fees to which Basic
may become entitled pursuant to the merger agreement.
Outlook for 2008
The following statements are based on Basic's current expectations,
which do not differ substantially from its previously announced outlook.
These statements are forward-looking and actual results may differ
materially. These statements do not include the potential impact of any
future acquisitions or unbudgeted capital expenditures other than those
previously disclosed. Any material change in market conditions in any of
Basic's business segments could affect its guidance.
Basic believes that seasonally adjusted activity levels in each of its
business segments will increase in the second half of 2008, which should
lead to pricing improvements that will help offset the labor and fuel costs
increases that it has experienced in the first half of the year. Basic also
expects its remaining 12 newbuild well servicing rigs will be delivered in
the second half of 2008, with six to eight of those newbuilds representing
expansion units and the remainder replacing older, less efficient rigs in
the fleet. The increase in expansion newbuild units from previous guidance
reflects Basic's outlook for improved business activity.
Basic is reaffirming the following annual guidance for 2008 that was
given in its first quarter 2008 earnings release dated May 5, 2008:
-- G&A expense as a percent of revenue is estimated to be 11%
-- Depreciation and amortization expense is projected to be in the range
of $118 to $120 million
-- Effective tax rate is estimated to be 38%
Basic Energy Services provides well site services essential to
maintaining production from the oil and gas wells within its operating
area. The company employs approximately 4,500 employees in more than 100
service points throughout the major oil and gas producing regions in Texas,
Louisiana, Oklahoma, New Mexico, Arkansas, Kansas and the Rocky Mountain
states.
For more information, please visit Basic's website at
http://www.basicenergyservices.com.
Conference Call
Basic will host a conference call to discuss its second quarter 2008
results on Tuesday, August 5, 2008, at 10:00 a.m. Eastern Time (9:00 a.m.
Central). To access the call, please dial (303) 262-2066 and ask for the
"Basic Energy Services" call at least 10 minutes prior to the start time.
The conference call will also be broadcast live via the Internet and can be
accessed through the investor relations section of Basic's corporate
website, http://www.basicenergyservices.com.
A telephonic replay of the conference call will be available until
August 19, 2008 and may be accessed by calling (303) 590-3000 and using the
pass code 11117430#. A webcast archive will be available at
http://www.basicenergyservices.com shortly after the call and will be
accessible for approximately 30 days. For more information, please contact
Donna Washburn at DRG&E at (713) 529-6000 or email at [email protected].
Safe Harbor Statement
This release includes forward-looking statements and projections, made
in reliance on the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Basic has made every reasonable effort to
ensure that the information and assumptions on which these statements and
projections are based are current, reasonable, and complete. However, a
variety of factors could cause actual results to differ materially from the
projections, anticipated results or other expectations expressed in this
release, including (i) Basic's ability to successfully execute, manage and
integrate acquisitions, (ii) changes in demand for services and any related
material impact on our pricing and utilizations rates and (iii) changes in
our expenses, including labor or fuel costs. Additional important risk
factors that could cause actual results to differ materially from
expectations are disclosed in Item 1A of Basic's Form 10-K for the year
ended December 31, 2007 and subsequent Form 10-Q's filed with the SEC.
While Basic makes these statements and projections in good faith, neither
Basic nor its management can guarantee that the transactions will be
consummated or that anticipated future results will be achieved. Basic
assumes no obligation to publicly update or revise any forward-looking
statements made herein or any other forward-looking statements made by
Basic, whether as a result of new information, future events, or otherwise.
-Tables to Follow-
Basic Energy Services, Inc.
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
(Unaudited) (Unaudited)
Revenues:
Well servicing $89,018 $86,111 $169,537 $172,780
Fluid services 72,581 63,191 143,980 127,373
Completion and Remedial
Services 79,579 63,736 148,037 109,873
Contract drilling 10,344 10,218 19,841 12,160
Total revenues 251,522 223,256 481,395 422,186
Expenses:
Well servicing 55,293 52,084 103,759 102,178
Fluid services 48,554 40,379 94,987 80,481
Completion and Remedial
Services 42,651 33,374 78,439 56,509
Contract drilling 7,529 6,184 14,589 8,998
General and administrative (1) 26,811 25,592 52,663 48,241
Depreciation and amortization 28,732 24,007 56,764 43,232
(Gain) loss on disposal of
assets (809) (166) (584) 175
Total expenses 208,761 181,454 400,617 339,814
Operating income 42,761 41,802 80,778 82,372
Other income (expense):
Interest expense (6,453) (7,190) (13,802) (12,784)
Interest income 471 413 1,172 883
Loss on early extinguishment
of debt - - - (230)
Other income (expense) (6,469) 40 (6,431) 101
Income from continuing
operations before income taxes 30,310 35,065 61,717 70,342
Income tax expense (11,597) (13,373) (23,348) (26,577)
Net income $18,713 $21,692 $38,369 $43,765
Earnings per share of common
stock:
Basic $0.46 $0.54 $0.94 $1.11
Diluted $0.45 $0.52 $0.92 $1.08
Other Financial Data:
EBITDA (2) $71,599 $65,849 $137,686 $125,475
Capital expenditures:
Acquisitions, net of cash
acquired 24,381 71,116 51,239 175,470
Property and equipment 26,596 29,071 45,023 52,854
As of
June 30, June 30,
2008 2007
Balance Sheet Data (unaudited)
Cash and cash equivalents $77,784 $46,504
Net property and equipment 665,922 607,777
Total assets 1,208,336 1,073,791
Total long-term debt 412,846 403,598
Total stockholders' equity 566,683 479,018
Three months Six months
Ended June 30, Ended June 30,
Segment Data: 2008 2007 2008 2007
Well Servicing
Segment profits as a percent of
revenue 37.9% 39.5% 38.8% 40.9%
Well Servicing Rigs
Weighted average number of rigs 403 371 398 368
Rig hours (000's) 222.3 207.7 424.8 418.5
Rig utilization rate 77.1% 78.3% 74.6% 79.5%
Revenue per rig hour $400 $415 $399 $413
Well Servicing rig profit per rig
hour $152 $163 $155 $169
Fluid Services
Weighted average number of fluid
services trucks 663 657 654 655
Revenue per fluid services truck
(000's) $109 $96 $220 $194
Segment profits per fluid services
truck (000's) $36 $35 $75 $72
Segment profits as a percent of
revenue 33.1% 36.1% 34.0% 36.8%
Completion and Remedial Services
Segment profits as a percent of
revenue 46.4% 47.6% 47.0% 48.6%
Contract Drilling
Segment profits as a percent of
revenue 27.2% 39.5% 26.5% 26.0%
Drilling Rigs
Weighted average number of rigs 9 8 9 6
Rig operating days 699 594 1,344 762
Revenue per day $14,800 $17,200 $14,800 $16,000
Drilling rig profit per day $4,000 $6,900 $4,000 $4,200
(1) Includes approximately $1,184,000 and $1,062,000 of non-cash
compensation expense for the three months ended June 30, 2008 and
2007, respectively. For the six months ended June 30, 2008 and 2007,
it includes approximately $2,264,000 and $2,155,000 of non-cash
expense, respectively.
(2) This earnings release contains references to the non-GAAP financial
measure of earnings (net income) before interest, taxes, depreciation
and amortization, or "EBITDA." EBITDA should not be considered in
isolation or as a substitute for operating income, net income or loss,
cash flows provided by operating, investing and financing activities,
or other income or cash flow statement data prepared in accordance
with GAAP. However, Basic believes EBITDA is a useful supplemental
financial measure used by its management and directors and by external
users of its financial statements, such as investors, to assess:
-- The financial performance of its assets without regard to financing
methods, capital structure or historical cost basis;
-- The ability of its assets to generate cash sufficient to pay
interest on our indebtedness; and
-- Its operating performance and return on invested capital as
compared to those of other companies in the well servicing
industry, without regard to financing methods and capital
structure.
EBITDA has limitations as an analytical tool and should not be
considered an alternative to net income, operating income, cash flow
from operating activities or any other measure of financial
performance or liquidity presented in accordance with GAAP. EBITDA
excludes some, but not all, items that affect net income and operating
income, and these measures may vary among other companies. Limitations
to using EBITDA as an analytical tool include:
-- EBITDA does not reflect its current or future requirements for
capital expenditures or capital commitments;
-- EBITDA does not reflect changes in, or cash requirements necessary
to service interest or principal payments on, its debt;
-- EBITDA does not reflect income taxes;
-- Although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized will often have to be
replaced in the future, and EBITDA does not reflect any cash
requirements for such replacements; and
-- Other companies in its industry may calculate EBITDA differently
than Basic does, limiting its usefulness as a comparative measure.
The following table presents a reconciliation of net income to EBITDA,
which is the most comparable GAAP performance measure, for each of the periods
indicated:
Three months Six months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Reconciliation of Net Income to
EBITDA: (Unaudited) (Unaudited)
Net Income $18,713 $21,692 $38,369 $43,765
Income taxes 11,597 13,373 23,348 26,577
Net interest expense 5,982 6,777 12,630 11,901
Depreciation and amortization 28,732 24,007 56,764 43,232
EBITDA $65,024 $65,849 $131,111 $125,475
The following table presents a reconciliation of net income to "Adjusted
EBITDA," which means our EBITDA excluding merger-related costs incurred by us
in 2008:
Three months Six months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Reconciliation of Net Income to
Adjusted EBITDA, (Unaudited) (Unaudited)
excluding merger-related costs:
Net Income $18,713 $21,692 $38,369 $43,765
Merger-related costs 6,575 - 6,575 -
Income taxes 11,597 13,373 23,348 26,577
Net interest expense 5,982 6,777 12,630 11,901
Depreciation and amortization 28,732 24,007 56,764 43,232
Adjusted EBITDA, excluding merger-
related costs $71,599 $65,849 $137,686 $125,475
We believe Adjusted EBITDA is useful for management and investors in
connection with comparisons of EBITDA excluding the extraordinary charges
represented by our 2008 merger-related costs.
Contacts: Alan Krenek, Chief Financial Officer
Basic Energy Services, Inc.
432-620-5510
Jack Lascar/Sheila Stuewe
DRG&E / 713-529-6600
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