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Banking Basic Energy Services reports 2Q revenue decline, Quantum partnership

Basic Energy Services reports 2Q revenue decline, Quantum partnership

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Basic Energy Services Inc. of Fort Worth has reported lower revenue in second-quarter 2015, dropping 26 percent to $193.6 million from $261.7 million in the prior quarter as all service lines continued to experience lower activity levels and higher pricing pressure mainly driven by reduced rig count.

The newly released figures reflect credit given to a customer stemming from an audit settlement, which the company said affected both revenue and earnings. Excluding that item, the company reported revenues of $198.1 million in second-quarter 2015, a 24 percent decline compared to revenues in first-quarter 2015 and a 45 percent decline from $359.7 million in revenues generated in second-quarter 2014.

The revenue slump also came with news of a newly signed letter of intent with an affiliate of Quantum Energy Partners. The letter outlines plans for the private capital investor to fund up to $250 million for selected future transactions in North American oilfield service assets, companies or strategic joint ventures.

“The opportunity to partner with Quantum represents a very attractive opportunity for Basic to remain active in the consolidation market by providing the framework for larger deals that could require funding beyond the reach of our current cash position,” said president and CEO Roe Patterson in a news release.

Meanwhile, the oil and gas well-services company reported a net loss of $48.3 million, or $1.20 per basic and diluted share in second-quarter 2015. Excluding the aforementioned audit settlement, Basic reported a net loss of $454.4 million, or $1.13 per basic and diluted share. That compares to a net loss of $32.6 million, or 81 cents per basic and diluted share reported in first-quarter 2015.

Adjusted earnings before interest, taxes, depreciation and amortization dropped to $6.1 million, or 3.1 percent of revenues for the second quarter of 2015 from $27.3 million, or 10 percent of revenues, in the first quarter of 2015. Adjusted EBITDA is net income before interest, taxes, depreciation and amortization, and the net gain or loss from disposing assets.

“Our second quarter results reflect the continuing impact of the decline in the U.S. drilling rig count, the reduced demand for our services and the resulting pressure on margins,” Patterson said.

Impacting the company’s second quarter performance were weather disruptions that reduced its revenue, Patterson said. Its workforce also continues to shrink as the company pares employees.

“Our response to this challenging environment has been to continue to right-size our operations within operating cash flow in order to preserve liquidity and match customer activity,” Patterson said.

Well servicing revenues dropped 11 percent to $56.5 million during second-quarter 2015 compared to $63.7 million in the prior quarter, which the company attributes to lower utilization and pricing pressure resulting from a highly competitive market, among other factors.

As of June 30, 2015, the firm’s well servicing rig count totaled 421, the same as the end of the prior quarter. Rig hours totaled 154,700 in second-quarter 2015, down from 163,900 in the previous quarter and down from 214,200 hours in same period last year.

Rig utilization totaled 51 percent in second-quarter 2015, compared to 55 percent in the prior quarter and 71 percent in the second quarter of 2014.

Rig utilization rates determine what percentage of a company’s rigs is in use.

Basic Energy Services, which provides oil and gas well-site services, employs more than 4,400 workers in Texas, Louisiana, Oklahoma, New Mexico, Arkansas, Kansas, Wyoming, North Dakota, Colorado, Utah, Ohio, West Virginia, Pennsylvania, Kentucky, California and Montana. More information about the company and its latest quarterly results is available at www.basicenergyservices.com.

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