MIDLAND, Texas, Nov. 8 /PRNewswire-FirstCall/ -- Basic Energy Services, Inc. (NYSE: BAS) ("Basic") today announced results for the third quarter and nine months ended September 30, 2006.
Basic reported net income of $27.3 million, or $0.71 per diluted share, for the third quarter of 2006, compared to $12.3 million, or $0.37 per diluted share, in the same period in 2005. During the third quarter of 2006, revenues increased 61% to $194.6 million compared to $120.8 million in the same period last year. EBITDA (defined as net income before interest, taxes, depreciation and amortization) for the third quarter of 2006 was $64.6 million, or 33.2% of revenue, compared to $32.2 million, or 26.7% of revenue, in the same period in 2005. EBITDA, which is not a measure determined in accordance with generally accepted accounting principles ("GAAP"), is defined and reconciled in note 2 under the accompanying financial tables.
During the first nine months of 2006, Basic reported net income of $71.5 million, or $1.86 per diluted share, compared to $28.9 million, or $0.88 per diluted share, in the same period in 2005. Revenues increased 64% to $532.7 million during the first nine months of 2006, compared to $324.4 million in the same period in 2005. Year-to-date EBITDA rose to $168.9 million in 2006, or 31.7% of revenue, compared to $81.6 million, or 25.1% of revenue, during the same period in 2005.
Ken Huseman, Basic's President and Chief Executive Officer, stated, "We are pleased with our financial results for the third quarter, and particularly the EBITDA margin which exceeded 33%. The substantial year-over-year increase in revenue was driven primarily by acquisitions completed and new equipment added over the course of the year. The continued improvement in profitability reflects the great job our management team is doing in converting the strong demand for our services into tangible results for our shareholders.
"Each of our business segments generated favorable returns driven by the continued relatively high oil and gas prices received by our customers for their oil and gas production. Our well servicing and drilling and completion segments benefited from capacity constraints and continue to produce margins well above historical levels. We experienced some margin pressure in several markets in our fluid services segment as new entrants bid up labor without an offsetting increase in rates charged.
"Recent softness in gas prices, as well as slightly lower oil prices, have not translated into a discernable change in our customers' plans to this point. Our balanced exposure to oil and gas activity and a substantial presence in the most developed markets provide a high level of demand for our services. We expect a strong finish to what has been an exceptional year with continued demand as oil and gas operators focus on maximizing production from their existing oil and gas wells."
Business Segment Results
Well servicing revenues increased 49% to $88.2 million during the third quarter of 2006 compared to $59.2 million in the same period last year. During the third quarter of 2006, Basic added one newbuild rig and acquired ten rigs in conjunction with the Chaparral Services, Inc. ("Chaparral") and Hennessey Rental Tools, Inc. acquisitions. The Company also retired two rigs, bringing its well servicing rig count to 357 as of September 30, 2006. Revenue per rig hour increased 28% to $383 during the third quarter of 2006 compared to $299 in the same period in 2005. Full-fleet rig utilization rates increased to 91.2% in the third quarter of 2006 compared to 89.0% in the same period in 2005. Operating segment profit in the third quarter of 2006 was $39.8 million, or 45.1% of revenue, compared to $21.3 million, or 36.0% of revenue, in the same period in 2005.
Fluid services revenues in the third quarter of 2006 increased 48% to $50.7 million compared to $34.3 million in the same period in 2005. During the third quarter of 2006, Basic added a net of 43 fluid services trucks, including 28 acquired in conjunction with the Chaparral acquisition, bringing the total number of fluid services trucks to 635 as of September 30, 2006. Average revenue per fluid services truck increased by 12% to $83,000 in the third quarter of 2006 compared to $74,000 in the same period in 2005. Operating segment profit in the third quarter of 2006 was $19.5 million, or 38.5% of revenue, compared to $13.2 million, or 38.6% of revenue, in the same period in 2005.
Drilling & Completion Services
Drilling and completion services revenues during the third quarter of 2006 increased 165% to $42.1 million compared to $15.9 million in the same period in 2005. Operating segment profit in the third quarter of 2006 was $21.6 million, or 51.3% of revenue, compared to $7.7 million, or 48.2% of revenue, in the same period in 2005. The year-over-year improvements were the results of the integration of asset purchases and acquisitions, internal expansion and enhanced utilization and pricing.
Well Site Construction Services
Well site construction services revenues in the third quarter of 2006 increased 19% to $13.5 million compared to $11.4 million in the same period in 2005. Operating segment profit in the third quarter of 2006 was $4.1 million, or 30.2% of revenue, compared to $3.6 million, or 31.6% of revenue, in the same period in 2005.
During the first three quarters of 2006, Basic invested $94.8 million for capital expenditures, including capital leases and excluding acquisitions. This amount included $63.1 million for expansion capital expenditures, including $40.7 million for the well servicing segment, $12.2 million for the fluid services segment and $8.9 million for the drilling and completion services segment. Maintenance capital expenditures amounted to approximately $31.7 million, or 6% of revenues, for the first nine months of 2006.
On October 5, 2006, outstanding warrants to purchase an aggregate of 4,350,000 shares of common stock of Basic were exercised in full by DLJ Merchant Banking Partners III, L.P. and its affiliates ("Warrant Holders"). In connection with the exercise of the warrants, Basic received an aggregate of $17.4 million as the exercise price of the warrants (representing an exercise price of $4.00 per share of common stock acquired), and Basic issued an aggregate of 4,350,000 shares of common stock to the Warrant Holders. The shares of common stock issued by Basic were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.
The following statements are based on Basic's current expectations. These statements are forward-looking and actual results may differ materially. These statements do not include the potential impact of any future acquisitions other than those previously disclosed. Any material change in market conditions in any of Basic's business segments could affect its guidance.
Basic updated its guidance for annual key operating data for 2006 as follows:
Annual Guidance for 2006 Well Servicing Average revenue per rig hour $375 - $380 Average number of rigs 345 - 350 Fluid Services Average revenue per fluid services truck $332,000 Average number of fluid services trucks 580 - 585 Total Company General and administrative expenses as a percent of total revenue 11.0% Depreciation and amortization $62 million EBITDA as a percent of total revenue 32% Effective tax rate 37%
We expect our well servicing rig utilization rate in the fourth quarter of 2006, which is seasonally affected by shorter daylight hours, holidays and weather, to be similar to the fourth quarter of 2005. We believe that our revenue per truck in the fourth quarter of 2006 will remain at the same level as the third quarter of 2006.
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 4,000 employees in more than 100 service points throughout the major oil and gas producing regions in Texas, Louisiana, Oklahoma, New Mexico and the Rocky Mountain states.
For more information, please visit Basic's website at http://www.basicenergyservices.com .
Basic will host a conference call to discuss its third quarter 2006 results on Thursday, November 9, 2006, at 10:00 a.m. Eastern Time (9:00 a.m. Central). To access the call, please dial (303) 262-2211 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 November 16, 2006 and may be accessed by calling (303) 590-3000 and using the pass code 11074662. A web cast 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 firstname.lastname@example.org .
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. 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.
Contacts: Alan Krenek, Chief Financial Officer Basic Energy Services, Inc. 432-620-5510 Jack Lascar/Sheila Stuewe DRG&E / 713-529-6600 -Tables to Follow- Basic Energy Services, Inc. Consolidated Statements of Operations and Comprehensive Income (Dollars in thousands, except per share amounts) Three Months Ended Nine Months Ended Sept. 30, Sept. 30, 2006 2005 2006 2005 (Unaudited) (Unaudited) Revenues: Well servicing $88,221 $59,213 $242,840 $157,863 Fluid services 50,742 34,308 142,724 95,147 Drilling and completion services 42,109 15,883 110,503 40,159 Well site construction services 13,483 11,367 36,627 31,233 Total revenues 194,555 120,771 532,694 324,402 Expenses: Well servicing 48,399 37,901 135,530 99,365 Fluid services 31,231 21,081 86,879 60,200 Drilling and completion services 20,522 8,226 53,556 20,957 Well site construction services 9,414 7,772 25,877 22,435 General and administrative(1) 20,907 13,944 59,056 40,407 Depreciation and amortization 16,706 9,387 44,665 26,205 (Gain) loss on disposal of assets (420) (351) 307 (401) Total expenses 146,759 97,960 405,870 269,168 Operating income 47,796 22,811 126,824 55,234 Other income (expense): Interest expense (4,732) (3,157) (12,519) (9,358) Interest income 603 80 1,517 279 Loss on early extinguishment of debt --- --- (2,705) --- Other income 75 11 130 148 Income from continuing operations before income taxes 43,742 19,745 113,247 46,303 Income tax expense (16,414) (7,410) (41,751) (17,420) Net income $27,328 $12,335 $71,496 $28,883 Earnings per share of common stock: Basic $0.81 $0.44 $2.14 $1.02 Diluted $0.71 $0.37 $1.86 $0.88 Comprehensive Income: Net income $27,328 $12,335 $71,496 $28,883 Unrealized gains (losses) on hedging activities --- 114 (236) 374 Comprehensive Income: $27,328 $12,449 $71,260 $29,257 Other Financial Data: EBITDA(2) $64,577 $32,209 $168,914 $81,587 Capital expenditures: Acquisitions, net of cash acquired $33,865 $1,729 $132,853 $11,614 Property and equipment $26,730 $22,340 $75,557 $57,828 As of September 30, December 31, 2006 2005 Balance Sheet Data: (Unaudited) Cash and cash equivalents $29,220 $32,845 Net property and equipment 462,078 309,075 Total assets 749,631 496,957 Total long-term debt 247,910 119,241 Total stockholders' equity 332,889 258,575 Three months Nine months Ended September 30, Ended September 30, Segment Data: 2006 2005 2006 2005 Well Servicing Weighted average number of rigs 353 311 340 302 Rig hours (000's) 230.1 198.0 660.9 565.7 Rig utilization rate 91.2% 89.0% 90.6% 87.3% Revenue per rig hour $383 $299 $367 $279 Segment profits per rig hour $173 $108 $162 $103 Segment profits as a percent of revenue 45.1% 36.0% 44.2% 37.1% Fluid Services Weighted average number of fluid services trucks 614 465 570 449 Revenue per fluid services truck (000's) $83 $74 $250 $212 Segment profits per fluid services truck (000's) $32 $28 $98 $78 Segment profits as a percent of revenue 38.5% 38.6% 39.1% 36.7% Drilling and Completion Services Segment profits as a percent of revenue 51.3% 48.2% 51.5% 47.8% Well Site Construction Services Segment profits as a percent of revenue 30.2% 31.6% 29.4% 28.2% (1) Includes approximately $842,000 and $772,000 of non-cash compensation expense for the three months ended September 30, 2006 and 2005, respectively. For the nine months ended September 30, 2006 and 2005, it includes approximately $2,475,000 and $2,131,000 of non-cash compensation 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 too 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 EBITDA to net income, which is the most comparable GAAP performance measure, for each of the periods indicated: Three months Nine months Ended September 30, Ended September 30, 2006 2005 2006 2005 Reconciliation of EBITDA to Net Income: (unaudited) (unaudited) (unaudited) (unaudited) Net Income $27,328 $12,335 $71,496 $28,883 Income taxes 16,414 7,410 41,751 17,420 Net interest expense 4,129 3,077 11,002 9,079 Depreciation and amortization 16,706 9,387 44,665 26,205 EBITDA $64,577 $32,209 $168,914 $81,587SOURCE Basic Energy Services, Inc. CONTACT: Alan Krenek, Chief Financial Officer of Basic Energy Services,
Inc., 1-432-620-5510; or Jack Lascar, or Sheila Stuewe, both of DRG&E,
1-713-529-6600, for Basic Energy Services, Inc.
Web site: http://www.basicenergyservices.com