FTS International Inc. (NYSE: FTSI) on April 30 reported its financial and operational results for the first quarter 2020 reporting a drop off in activity as the price in crude oil fell precipitously.
“We were pleased with our first quarter results despite a significant drop-off in activity that began in late March,” said Michael Doss, CEO of the Fort Worth-based oil field services company. “Most of our customers have reduced or suspended completions as a result of the sharp fall in oil prices due to the economic effects of COVID-19. Accordingly, we have taken a series of aggressive measures to reduce costs and preserve liquidity.”
The COVID-19 pandemic has drastically affected the global economy and oil demand, along with the OPEC related price war related to oil supply. The consequential plummet in global oil prices has resulted in U.S. exploration and production companies announcing significant cuts in their 2020 capital expenditures, decreasing our frac activity to historic lows.
First Quarter 2020 Compared to the Fourth Quarter 2019
- Comparing the first quarter of 2020 to the fourth quarter of 2019, FTS International reported that revenue was $151.5 million, up from $142.3 million, while reporting a net loss was $(11.7) million, compared to a loss of $(13.0) million.
- Earnings per share of $(0.11) in the first quarter, compared to $(0.12) in the fourth.
- The company said it repaid $22.6 million in aggregate principal amount of term loan at a discount of approximately $2 million
FTS said it has been examining its cost structure to ensure it is well positioned to supply the industry with hydraulic fracturing services, which are an integral part of U.S. oil production. Among the actions taken, the company has:
- Bolstered safety procedures and emergency plans at both district offices and customer worksites;
- Reduced crews that no longer have scheduled work and related support staff;
- Reduced executive salaries by over 25%, on top of a 15% reduction at the beginning of the year;
- Reduced wages and salaries across the entire company;
- Had rolling furloughs for certain SG&A and manufacturing staff;
- Suspended bonuses to eligible SG&A staff under the company’s short-term incentive plan, except for the safety component;
- Reduced capital expenditures and repairs to the minimum level needed to operate the limited active fleets; and
- Aggressively reduced all non-labor costs and re-negotiating contractual commitments where possible.
The company said average active fleets during the first quarter of 2020 was 16.0, down from 16.5 in the fourth quarter of 2019. During the month of March, we stacked 9 fleets that were released by customers, exiting the quarter with 7 active fleets.
The company completed 6,888 stages during the first quarter of 2020, or 431 stages per active fleet. This compares to 6,346 stages in the fourth quarter of 2019, or 385 stages per active fleet.
Since March, low oil prices due to the COVID-19 pandemic and the Saudi-Russia price war have caused our customers to substantially reduce their hydraulic fracturing activities and the prices they are willing to pay for our services, the company said in a news release.
While our first quarter results reflect some reduction of this activity at the end of the quarter, we have limited visibility for future work and currently expect to only average three to four active fleets in the second quarter, the company said in the news release.
Liquidity and Capital Resources
Capital expenditures were $16.4 million in the first quarter, up from $14.9 million in the fourth quarter due largely to a front-loaded purchasing schedule, the company said. In March, FTS said it began rationalizing all capital expenditures, which we now expect to be in the range of $30 – $35 million for 2020. The company said it will continue to reassess our capital expenditures to ensure they are aligned with the market outlook.
At March 31, 2020, the company had $199.2 million of cash and $434.7 million of long-term debt. Net debt, excluding unamortized discount and debt issuance costs, was $238.1 million at March 31, 2020. Additionally, at quarter end, total liquidity was $255.5 million, including $56.3 million of availability under the company’s revolving credit facility. During the first quarter of 2020, the company had no borrowings outstanding under its revolving credit facility.