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Basic Energy Services Announces Third Quarter Results

MIDLAND, Texas, Nov. 8 /PRNewswire-FirstCall/ -- Basic Energy Services, Inc. (NYSE: BAS) ("Basic") today announced its financial and operating results for the third quarter and nine months ended September 30, 2007.

Basic reported net income of $24.4 million, or $0.59 per diluted share, for the third quarter of 2007, compared to $27.3 million, or $0.71 per diluted share, in the same period in 2006. Revenues increased 18% to $229.2 million compared to $194.6 million in the same period last year. EBITDA (defined as net income before interest, taxes, depreciation and amortization) for the third quarter of 2007 increased 6% to $68.8 million, or 30% of revenue, compared to $64.6 million, or 33% of revenue, in the same period in 2006. 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.

For the nine month period, Basic reported net income of $68.2 million in 2007, or $1.66 per diluted share, compared to $71.5 million, or $1.86 per diluted share, in the same period in 2006. Net income in 2006 included an after-tax loss of $1.7 million, or $0.05 per diluted share, associated with the early extinguishment of debt.

Year-to-date, revenues increased 22% to $651.4 million in 2007, compared to $532.7 million in the same period in 2006. EBITDA rose 15% to $194.2 million in 2007, or 30% of revenue, compared to $168.9 million, or 32% of revenue, during the same period in 2006.

Ken Huseman, Basic's President and Chief Executive Officer, stated, "The company achieved a record level of revenue and EBITDA in the third quarter. The combination of internal growth initiatives, contribution from acquisitions closed over the last year and higher pricing in all service lines more than offset lower year-over-year utilization. Our management team continues to do an excellent job of controlling costs in a tight labor market to produce margins which remain at the upper end of the historical range in each service segment.

"The current level of profitability in our core services continues to support investment in new equipment, particularly by many of our smaller competitors. Some relocation of equipment from the slower gas markets to the more active oil markets is underway, further adding to competition for available work and scarce qualified personnel. We could very well see increased pressure on utilization, rates and margins until gas prices increase sufficiently to boost activity in the higher-cost gas markets or new equipment deliveries abate.

"As for the fourth quarter outlook, the industry typically experiences a seasonal decline in activity during the period due to fewer daylight hours, inclement weather and holidays and this year, fully expended capital budgets for several of our customers. We expect our fourth quarter revenue levels to be four to six percent below third quarter results with margins slightly lower as labor and winter-related costs consume a larger portion of revenue.

"Given that short term outlook, we are confirming the 2007 full-year profit guidance provided in our previous quarter's earnings release but will not provide 2008 guidance at this time. Uncertainty in the gas markets is causing disruptions and some suspensions of drilling and workover programs in many of those markets. While most of our business is oil and production maintenance-driven, reduced activity in gas markets can cause a ripple effect in contiguous oil markets due to increased competition. Reflecting our expectations for a balanced supply and demand for equipment, as announced in our recent operating data releases, we have reduced capital spending and expect to spend approximately $115 million in 2007 rather than the $130 to $140 million previously projected.

"We continue to find and close acquisitions at reasonable valuations to build our footprint in the most active oil and gas markets. Our dominant market position in the Permian Basin of west Texas and southeastern New Mexico was further strengthened by our acquisition in late September of two fluid services companies which added a total of 25 trucks along with related support equipment. We believe the current environment will lead to a larger number of established companies and many of the financially-sponsored start-ups and roll-ups to look for an exit, providing numerous acquisition opportunities for us in 2008."

Business Segment Results

Well Servicing

Well servicing revenues increased approximately 13% to $99.3 million during the third quarter of 2007 compared to $88.2 million in the same period last year.

During the third quarter of 2007, we added 17 workover rigs, including 16 newbuilds and one swab rig, and retired ten rigs, bringing our workover rig count to 386 as of September 30, 2007. Revenue per workover rig hour increased 9% to $414 during the third quarter of 2007 compared to $379 in the same period in 2006. The full-fleet workover rig utilization rate declined to 78% in the third quarter of 2007 compared to 90% in the same period in 2006.

During the third quarter of 2007, Basic added one medium-depth drilling rig, increasing the drilling rig count to ten at September 30, 2007. Revenue per day and operating days were $15,700 and 723, respectively, in the third quarter of 2007 compared to $14,700 and 160, respectively, in the same period in 2006.

Well servicing operating segment profit in the third quarter of 2007 was $40.0 million, compared with last year's third quarter operating segment profit of $39.8 million. Operating margins declined to 40% of revenue in the third quarter of 2007 compared to 45% in the same period of 2006, mainly due to lower utilization, higher personnel costs related to lower utilization and increased maintenance and repair costs.

Fluid Services

Fluid services revenues in the third quarter of 2007 increased 4% to $52.7 million compared to $50.7 million in the same period in 2006. During the third quarter of 2007, Basic added a net of seven fluid services trucks, bringing the total number of fluid services trucks to 666 as of September 30, 2007. Average revenue per fluid services truck decreased by 2% to $81,000 in the third quarter of 2007 compared to $83,000 in the same period in 2006. Operating segment profit in the third quarter of 2007 was $19.4 million, or 37% of revenue, compared to $19.5 million, or 38% of revenue, in the same period in 2006, due to higher personnel, maintenance and supplies costs.

Completion & Remedial Services

Completion and remedial services revenues during the third quarter of 2007 increased 57% to $66.3 million compared to $42.1 million in the same period in 2006. Operating segment profit in the third quarter of 2007 rose to $31.6 million, or 48% of revenue, compared to $21.6 million, or 51% of revenue, in the same period in 2006. The increase in revenue and operating profit in this segment was the result of several acquisitions since the third quarter of 2006 including the acquisition of JetStar in March 2007. As of September 30, 2007, Basic had 121,000 hydraulic horsepower of pressure pumping capacity compared to 60,000 hydraulic horsepower as of September 30, 2006.

Well Site Construction Services

Well site construction services revenues in the third quarter of 2007 declined to $11.0 million compared to $13.5 million in the same period in 2006. Operating segment profit in the third quarter of 2007 was $3.4 million, or 31% of revenue, compared to $4.1 million, or 30% of revenue, in the same period in 2006.

Capital Expenditures

During the first nine months of 2007, Basic invested $102 million for capital expenditures, including capital leases and excluding acquisitions. This amount included $61 million for expansion capital expenditures, including $46 million for the well servicing segment, $7 million for the fluid services segment and $8 million for the completion and remedial services segment. Maintenance capital expenditures amounted to approximately $28 million, or 4% of revenues, for the first three quarters of 2007. Other capital expenditures of $13 million, mainly for facilities and IT infrastructure, comprise the remainder of capital spending for the first three quarters of 2007.

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 third quarter 2007 results on Friday, November 9, 2007, at 10:00 a.m. Eastern Time (9:00 a.m. Central). To access the call,please dial (303) 262-2140 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, 2007 and may be accessed by calling (303) 590-3000 and using the pass code 11099827. 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 dmw@drg-e.com.

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 and Form 10-Q 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
                 (Dollars in thousands, except per share amounts)

                                  Three Months Ended      Nine Months Ended
                                    September 30,           September 30,
                                    2007     2006        2007            2006
                                     (Unaudited)           (Unaudited)
     Revenues:
       Well servicing              $99,274  $88,221    $284,214      $242,840
       Fluid services               52,696   50,742     156,441       142,724
       Completion and remedial
        services                    66,304   42,109     176,177       110,503
       Well site construction
        services                    10,958   13,483      34,586        36,627

           Total revenues          229,232  194,555     651,418       532,694

     Expenses:
       Well servicing               59,319   48,399     170,495       135,530
       Fluid services               33,299   31,231      97,943        86,879
       Completion and remedial
        services                    34,731   20,522      91,240        53,556
       Well site construction
        services                     7,603    9,414      23,440        25,877
       General and administrative
        (1)                         25,472   20,907      73,713        59,056
       Depreciation and
        amortization                23,582   16,706      66,814        44,665
       (Gain) loss on disposal of
        assets                          58     (420)        233           307

           Total expenses          184,064  146,759     523,878       405,870

             Operating income       45,168   47,796     127,540       126,824

     Other income (expense):
       Interest expense             (7,375)  (4,732)    (20,159)      (12,519)
       Interest income                 830      603       1,713         1,517
       Loss on early
        extinguishment of debt         -        -          (230)       (2,705)
       Other income                     23       75         124           130

     Income from continuing
      operations before income
      taxes                         38,646   43,742     108,988       113,247

     Income tax expense            (14,220) (16,414)    (40,797)      (41,751)

     Net income                    $24,426  $27,328     $68,191       $71,496

     Earnings per share of common
      stock:
       Basic                         $0.60    $0.81       $1.71         $2.14

       Diluted                       $0.59    $0.71       $1.66         $1.86

     Comprehensive Income:
     Net income                    $24,426  $27,328     $68,191       $71,496
         Unrealized gains (losses)
          on hedging activities        -        -           -            (236)
     Comprehensive Income:         $24,426  $27,328     $68,191       $71,260



     Other Financial Data:
     EBITDA(2)                     $68,773  $64,577    $194,248      $168,914
     Capital expenditures:
       Acquisitions, net of cash
        acquired                   $18,960  $33,865    $194,430      $132,853
       Property and equipment      $29,259  $26,730     $82,113       $75,557




                                                            As of
                                               September 30,     September 30,
                                                    2007              2006
     Balance Sheet Data:                                (Unaudited)
     Cash and cash equivalents                      $57,339        $29,220
     Net property and equipment                     655,928        462,078
     Total assets                                 1,129,029        749,631
     Total long-term debt                           405,324        247,910
     Total stockholders' equity                     504,532        332,889





                                            Three months       Nine months
                                           Ended September   Ended September
                                                 30,               30,
    Segment Data:                             2007     2006     2007     2006

    Well Servicing
    Segment profits as a percent of
     revenue                                 40.2%    45.1%    40.0%    44.2%
    Workover rigs
    Weighted average number of rigs            383      351      373      338
    Rig hours (000's)                        212.1    226.3    630.6    654.3
    Rig utilization rate                     77.7%    90.2%    78.8%    90.3%
    Revenue per rig hour                      $414     $379     $413     $365
    Workover rig profit per rig hour          $166     $175     $168     $166
    Drilling rigs
    Weighted average number of rigs              9        2        7        2
    Rig operating days                         723      160    1,484      276
    Revenue per day                        $15,700  $14,700  $15,900  $15,200
    Drilling rig profit (loss) per day      $6,700   $1,600   $5,400  $(4,000)

    Fluid Services
    Weighted average number of fluid
     services trucks                           653      614      654      570
    Revenue per fluid services truck
     (000's)                                   $81      $83     $239     $250
    Segment profits per fluid services
     truck (000's)                             $30      $32      $89      $98
    Segment profits as a percent of
     revenue                                 36.8%    38.5%    37.4%    39.1%

    Completion and Remedial Services
    Segment profits as a percent of
     revenue                                 47.6%    51.3%    48.2%    51.5%

    Well Site Construction Services
    Segment profits as a percent of
     revenue                                 30.6%    30.2%    32.2%    29.3%


    (1)  Includes approximately $1,073,000 and $842,000 of non-cash
         compensation expense for the three months ended September 30, 2007
         and 2006, respectively.  For the nine months ended September 30, 2007
         and 2006, it includes approximately $3,228,000 and $2,475,000 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 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           Nine months
                                  Ended September 30,      Ended September 30,
                                     2007     2006            2007      2006
    Reconciliation of Net
     Income to  EBITDA:         (unaudited) (unaudited) (unaudited)(unaudited)
    Net Income                     $24,426   $27,328     $68,191     $71,496
       Income taxes                 14,220    16,414      40,797      41,751
       Net interest expense          6,545     4,129      18,446      11,002
       Depreciation and
        amortization                23,582    16,706      66,814      44,665
    EBITDA                         $68,773   $64,577    $194,248    $168,914


    Contacts:  Alan Krenek, Chief Financial Officer
               Basic Energy Services, Inc.
               432-620-5510

               Jack Lascar/Sheila Stuewe
               DRG&E / 713-529-6600
SOURCE  Basic Energy Services, Inc.
    -0-                             11/08/2007
    /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 /
    (BAS)

CO:  Basic Energy Services, Inc.
ST:  Texas
IN:  OIL
SU:  CCA ERN

KB-CJ
-- LATH201 --
7156 11/08/2007 20:23 EST http://www.prnewswire.com
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