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Basic Energy Services Reports Fourth Quarter Results

MIDLAND, Texas, March 3 /PRNewswire-FirstCall/ -- Basic Energy Services, Inc. (NYSE: BAS) ("Basic") today announced its financial and operating results for the fourth quarter and year-ended December 31, 2007.

Basic reported net income of $19.5 million, or $0.47 per diluted share, for the fourth quarter of 2007, compared to $27.3 million, or $0.70 per diluted share, in the same period in 2006. Revenues increased 14% to $225.8 million compared to $197.5 million in the fourth quarter of 2006. EBITDA (defined as net income before interest, taxes, depreciation and amortization) for the fourth quarter of 2007 increased 4% to $64.4 million, or 29% of revenue, compared to $62.2 million, or 32% 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.

In 2007, Basic reported net income of $87.7 million, or $2.13 per diluted share, compared to $98.8 million, or $2.56 per diluted share, 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. Revenues increased 20% to $877.2 million in 2007, compared to $730.1 million in 2006. EBITDA rose 12% to $258.7 million, or 29% of revenue, in 2007 compared to $231.2 million, or 32% of revenue, during the same period in 2006.

Ken Huseman, Basic's President and Chief Executive Officer, stated, "The company achieved record revenue and EBITDA in 2007. Internal growth initiatives, the contributions of acquisitions completed during the year and stable pricing in most of our service lines combined to achieve the record revenues in 2007. Lower utilization of equipment in 2007 and the cost of retaining personnel through periods of lower utilization reduced our margins compared to the record margins recorded in 2006. I commend the efforts of our management team as they continue 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 business segment.

"While utilization rates declined over the prior year because of weaker demand for our services in gas-oriented markets and an increase in new equipment coming into many of our markets, we continued to grow the company and diversify our revenue stream through a combination of acquisitions and internally generated capital projects. Our newbuild program further modernized our well servicing rig fleet as we received 45 newbuilds in 2007 and we retired a number of older and less efficient rigs in our fleet. At year-end, over 50% of our well servicing rigs have been either purchased new or rebuilt since 2000.

"During the year, we invested approximately $65 million in expansion capital projects and completed eight acquisitions for total consideration of approximately $252 million. In 2007, the JetStar acquisition represented the largest acquisition in the history of Basic. We quickly integrated the JetStar operations and it's performing above our expectations. In addition, we acquired Sledge Drilling Company, a well-regarded Permian Basin drilling contractor. That acquisition allowed us to integrate our existing four-rig drilling fleet under an established drilling organization and take advantage of increased oil-directed drilling activity in west Texas and eastern New Mexico.

"We continue to evaluate acquisition opportunities that will increase our footprint, expand our capabilities or consolidate our market position. With our current liquidity, we have ample dry-powder to close those acquisitions which best help strengthen and grow each of our business segments.

"For 2008, we expect a moderately stronger market as both oil and gas prices remain at levels which support efforts to maximize production from existing wells and higher levels of capital investment by our customers. We believe gas activity will increase gradually through the year as concerns over gas storage abate. Even more importantly to our operations, historically high oil prices will drive accelerated spending for enhanced recovery projects and new well drilling as the year progresses."

Business Segment Results

Well Servicing

Well servicing revenues increased approximately 6% to $92.9 million during the fourth quarter of 2007 compared to $87.9 million in the same period last year. Basic added eight newbuild well servicing rigs and retired seven rigs during the fourth quarter of 2007, bringing its well servicing rig count to 387 as of December 31, 2007. Weighted average number of well servicing rigs increased to 386 during the fourth quarter of 2007 compared to 360 during the same period in 2006, an increase of 7%. Revenue per well servicing rig hour increased 3% to $409 during the fourth quarter of 2007 compared to $398 in the same period in 2006. The full-fleet well servicing rig utilization rate declined to 72.7% in the fourth quarter of 2007 compared to 83.1% in the same period in 2006 due to weaker demand in Basic's gas-oriented markets and an increase in new equipment entering certain of its markets. Basic operated ten drilling rigs in the fourth quarter of 2007, up from three drilling rigs in the same period in 2006. This increase was due to the acquisition of Sledge Drilling in April 2007, which included six drilling rigs, as well as internal growth. Revenue per day and rig operating days were $14,600 and 748, respectively, in the fourth quarter of 2007 compared to $13,300 and 208, respectively, in the same period in 2006.

Well servicing segment profit in the fourth quarter of 2007 was $35.8 million, compared with the fourth quarter of 2006 operating segment profit of $37.0 million. Segment profit margins declined to 39% of revenue in the fourth quarter of 2007 compared to 42% in the same period of 2006, mainly due to the lower utilization and higher personnel costs due to the lower utilization.

Fluid Services

Fluid services revenues in the fourth quarter of 2007 increased 8% to $56.0 million compared to $51.9 million in the same period in 2006. During the fourth quarter of 2007, Basic retired a number of its less efficient and under utilized fluid services trucks which caused its fluid services truck fleet to decline by a net of 21 trucks, bringing the total number of fluid services trucks to 645 as of December 31, 2007. Weighted average number of fluid services trucks increased to 656 during the fourth quarter of 2007 compared to 640 during the same period in 2006, an increase of 3%. Average revenue per fluid services truck increased by 5% to $85,000 in the fourth quarter of 2007 compared to $81,000 in the same period in 2006. Segment profit in the fourth quarter of 2007 was $21.0 million, or 37% of revenue, compared to $20.4 million, or 39% of revenue, in the same period in 2006. The decrease in segment profit as a percent of revenue was primarily due to higher personnel and fuel costs.

Completion & Remedial Services

Completion and remedial services revenues during the fourth quarter of 2007 increased 47% to $64.5 million compared to $43.9 million in the same period in 2006. Segment profit in the fourth quarter of 2007 rose to $29.8 million, or 46% of revenue, compared to $22.5 million, or 51% of revenue, in the same period in 2006. The increase in revenue and segment profit was mainly from several acquisitions since the fourth quarter of 2006 including the acquisition of JetStar in March 2007 as well as internal expansion. Segment profit as a percent of revenue declined from 2006 mainly due to increased costs of the materials used in Basic's pressure pumping operations. As of December 31, 2007, Basic had approximately 120,000 hydraulic horsepower of pressure pumping capacity compared to 58,000 hydraulic horsepower as of December 31, 2006.

Well Site Construction Services

Well site construction services revenues in the fourth quarter of 2007 declined to $12.2 million compared to $13.7 million in the same period in 2006. Segment profit in the fourth quarter of 2007 was $3.4 million, or 27% of revenue, compared to $4.6 million, or 33% of revenue, in the same period in 2006.

Capital Expenditures

During 2007, Basic completed eight acquisitions for a total consideration of $252 million, invested $98 million of cash capital expenditures and entered into $27 million of capital leases for additional equipment. Total capital expenditures that included capital leases and excluded acquisitions were $125 million, comprised of $65 million for expansion projects, $45 million for sustaining and replacement projects, and $15 million for other projects. Expansion capital spending included $48 million for the well servicing segment, $7 million for the fluid services segment and $10 million for the completion and remedial services segment. Other capital expenditures of $15 million were mainly for facilities and IT infrastructure.

Recent Events

Basic announced on January 30, 2008 that it had acquired all of the outstanding capital stock of Xterra Fishing and Rental Tools Co. ("Xterra") and purchased substantially all of the operating assets of Lackey Construction L.L.C. ("Lackey") for a total combined consideration of $23.3 million in cash, excluding working capital acquired. These acquisitions are anticipated to be accretive to earnings in 2008.

Xterra, located in Odessa, Texas, further expanded Basic's rental and fishing operations in the Permian Basin market. The projected first-year revenue for this acquisition is expected to be approximately $14.0 million.

The five well servicing rigs obtained in the Lackey acquisition were added to the existing fleet of well servicing rigs in the North Texas portion of Basic's Mid Continent Region and are expected to add approximately $4.5 million in first-year revenue.

Outlook for 2008

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 believes that pricing for its services for the first six months of 2008 will be comparable to where it exited 2007. Demand for those services is expected to increase steadily through 2008 and Basic projects slight price increases for its services in the second half of 2008. Cash capital expenditures for 2008 are expected to be approximately $115 million with plans to enter into $33 million of capital leases for additional equipment. Based on the capital expenditure plans for 2008, Basic expects only slight expansion of its equipment fleets. Included in the 2008 capital budget are 24 newbuild well servicing rigs, with 20 of the newbuilds replacing older, less efficient rigs in the fleet. Depreciation and amortization expense is estimated to be in the range of $118 to $120 million for 2008. G&A expenses as a percent of revenue in 2008 are anticipated to be approximately 11% and the 2008 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 fourth quarter 2007 results on Tuesday, March 4, 2008, at 10:00 a.m. Eastern Time (9:00 a.m. Central). To access the call, please dial (303) 262-2141 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 March 19, 2008 and may be accessed by calling (303) 590-3000 and using the pass code 11108952. 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.



                         Basic Energy Services, Inc.
        Consolidated Statements of Operations and Comprehensive Income
                   (in thousands, except per share amounts)


                                   Three months ended    Twelve months ended
                                       December 31,           December 31,
                                     2007      2006       2007         2006
                                       (Unaudited)     (Unaudited)
     Revenues:
       Well servicing               $92,943  $87,885    $377,157    $330,725
       Fluid services                56,048   51,912     212,489     194,636
       Completion and remedial
        services                     64,515   43,909     240,692     154,412
       Well site construction
        services                     12,249   13,748      46,835      50,375

           Total revenues           225,755  197,454     877,173     730,148

     Expenses:
       Well servicing                57,147   50,898     227,642     186,428
       Fluid services                35,046   31,499     132,989     118,378
       Completion and remedial
        services                     34,708   21,425     125,948      74,981
       Well site construction
        services                      8,898    9,190      32,338      35,067
       General and administrative(1) 25,329   22,262      99,042      81,318
       Depreciation and
        amortization                 26,234   17,422      93,048      62,087
       (Gain) loss on disposal of
        assets                          245      (30)        477         277

           Total expenses           187,607  152,666     711,484     558,536

             Operating income        38,148   44,788     165,689     171,612

     Other income (expense):
       Interest expense              (7,257)  (4,947)    (27,416)    (17,466)
       Interest income                  567      445       2,280       1,962
       Loss on early
        extinguishment of debt          -        -          (230)     (2,705)
       Other income                      52       39         176         169

     Income from continuing
      operations before income
      taxes                          31,510   40,325     140,499     153,572

     Income tax expense             (11,969) (12,991)    (52,766)    (54,742)

     Net income                     $19,541  $27,334     $87,733     $98,830



     Earnings per share of common
      stock:
       Basic                          $0.48    $0.73       $2.19       $2.87
       Diluted                        $0.47    $0.70       $2.13       $2.56

     Weighted Average of Common
      Shares Outstanding :
       Basic                         40,517   37,669      40,013      34,472
       Diluted                       41,551   39,116      41,112      38,593

     Comprehensive Income:
       Net income                   $19,541  $27,334     $87,733     $98,830
       Unrealized gains on
        hedging activities              -        -           -            51
        Less:  reclassification
         adjustment for gain
         included in net income         -        -           -          (287)
     Comprehensive Income           $19,541  $27,334     $87,733     $98,594


     Other Financial Data:
     EBITDA                         $64,434  $62,249    $258,683    $231,163
     Capital Expenditures:
       Acquisitions, net of cash
        acquired                     $5,243   $2,715    $199,673    $135,568
       Property & Equipment         $16,423  $29,017     $98,536    $104,574

                                        As of
                                December 31, December 31,
                                     2007      2006
    Balance Sheet Data           (Unaudited)
      Cash and cash equivalents     $91,941  $51,365
      Net property & equipment      636,924  475,431
      Total long-term debt          406,306  250,742
      Total stockholders equity     524,821  379,250



                                          Three months       Twelve months
                                       Ended December 31,  Ended December 31,
    Segment Data:                          2007     2006     2007     2006

    Well Servicing
    Segment profits as a percent of
     revenue                               38.5%    42.1%    39.6%    43.6%
    Well Servicing Rigs
    Weighted average number of rigs         386      360      376      344
    Rig hours (000's)                     200.6    213.9    831.2    868.2
    Rig utilization rate                   72.7%    83.1%    77.3%    88.2%
    Revenue per rig hour                   $409     $398     $412     $373
    Well Servicing rig profit per
     rig hour                              $159     $174     $166     $168
    Drilling Rigs
    Weighted average number of rigs          10        3        8        2
    Rig operating days                      748      208    2,233      484
    Revenue per day                     $14,600  $13,300  $15,400  $14,400
    Drilling rig profit per day          $5,300  $(1,600)  $5,400  $(3,000)

    Fluid Services
    Weighted average number of fluid
     services trucks                        656      640      655      588
    Revenue per fluid services truck
     (000's)                                $85      $81     $324     $332
    Segment profits per fluid services
     truck (000's)                          $32      $32     $121     $130
    Segment profits as a percent of
     revenue                               37.5%    39.3%    37.4%    39.2%

    Completion and Remedial Services
    Segment profits as a percent of
     revenue                               46.2%    51.2%    47.7%    51.5%

    Well Site Construction Services
    Segment profits as a percent of
     revenue                               27.4%    33.1%    31.0%    30.5%

    (1) Includes approximately $736 and $954 of non-cash compensation expense
    for the three months ended December 31, 2007 and 2006, respectively. For
    the years ended December 31, 2007 and 2006, it includes approximately
    $3,964 and $3,429 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       Twelve months
                                        Ended December 31, Ended December 31,
                                          2007     2006       2007      2006
                                            (Unaudited)         (Unaudited)
    Reconciliation of Net Income to
     EBITDA
    Net Income                           $19,541  $27,334   $87,733   $98,830
         Income Taxes                     11,969   12,991    52,766    54,742
         Net Interest Expense              6,690    4,502    25,136    15,504
         Depreciation and Amortization    26,234   17,422    93,048    62,087
    EBITDA                               $64,434  $62,249  $258,683  $231,163

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.
Web site: http://www.basicenergyservices.com
(BAS)

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