Service & Supply | Quarterly / Earnings Reports | Oilfield Services | Fourth Quarter (4Q) Update | Financial Results | Capital Markets
FTS International Fourth Quarter, Full Year 2020 Results
FTS International, Inc. reported its financial and operational results for the fourth quarter and full year 2020.
Michael Doss, Chief Executive Officer, commented "2021 is off to a strong start with us operating 13 active fleets compared to an average of 10.5 in the fourth quarter. Our fleets are continually setting new efficiency records. While market pricing for frac services remains low, we are seeing modest improvements. As a result, we expect to report positive adjusted EBITDA in the first quarter, despite the loss of about 760 stages related to severe winter weather in February. We are optimistic for the remainder of the year and expect activity levels and pricing to continue increasing."
Restructuring
We emerged from Chapter 11 bankruptcy protection pursuant to a prepackaged plan of reorganization (the "Plan") on November 19, 2020 and eliminated $488 million of debt and other liabilities as part of our financial restructuring. Upon emergence, we adopted fresh start accounting as a new entity for accounting and financial reporting purposes.
Mr. Doss commented "I'm thankful for our great team, vendors, and customers who helped us continue normal business operations during the financial restructuring process. We are now debt-free with strong liquidity, making us a considerably stronger, more nimble company."
Results for the fourth quarter are presented separately as the "Predecessor" period from October 1, 2020 through November 19, 2020 and the "Successor" period from November 20, 2020 through December 31, 2020. Similarly, results for the year are presented separately as the "Predecessor" period from January 1, 2020 through November 19, 2020 and the "Successor" period from November 20, 2020 through December 31, 2020.
In addition to presenting Successor and Predecessor periods, we also present our results for the fourth quarter and year ended December 31, 2020 on a combined basis (i.e., by combining the results of the Predecessor and Successor periods). These combined results are not considered to be prepared in accordance with GAAP, but we believe that describing certain period-over-period variances and trends in our activity levels on a combined basis facilitates a meaningful analysis of our operating results and cash flows.
Financial Results
Combined Fourth Quarter 2020 Compared to Third Quarter 2020
- Revenue was $49.8 million, up from $32.1 million
- Net income was $93.3 million, including a positive contribution from reorganization items of $114.9 million, up from a loss of $68.7 million, including a negative contribution of $13.7 million from reorganization items and $18.5 million of transaction costs
- Adjusted EBITDA was $(5.2) million, compared to $(7.6) million
- Capital expenditures were $1.8 million, compared to $2.5 million
- Adjusted EBITDA less capital expenditures was $(7.0) million, compared to $(10.1) million
- Net cash used in operating activities was $12.8 million, including a use of cash of $35.9 million associated with reorganization items, compared to net cash used in operating activities of $37.7 million, including a use of cash of $18.5 million for transaction costs
Combined Full Year 2020 Compared to Full Year 2019
- Revenue was $262.9 million, compared to $776.6 million
- Net loss was $37.8 million, compared to a loss of $72.9 million
- Adjusted EBITDA was $0.4 million, compared to $129.6 million
- Capital expenditures were $21.1 million, compared to $54.4 million
- Adjusted EBITDA less capital expenditures was $(20.7) million, compared to $75.2 million
- Net cash used in operating activities was $43.6 million, including a use of cash of $54.4 million associated with reorganization items, compared to net cash provided by operating activities of $123.9 million
Operational Update
Average active fleets during the fourth quarter was 10.5, up from 7.3 in the third quarter. Utilization of our active fleets averaged 79%, resulting in fully-utilized fleets of 8.3 during the fourth quarter. This compares to 77% utilization and fully-utilized fleets of 5.6 during the third quarter. We exited the fourth quarter with 12 active fleets. Today, we have 13 fleets active with 7 of these fleets being dual fuel capable.
Two of our fleets are working with large independent E&P customers utilizing a simul-frac technique that involves stimulating two horizontal wells at the same time. This technique is gaining increased interest across the industry as a way to further reduce completion costs.
We completed 5,243 stages during the fourth quarter, or 632 stages per fully-utilized fleet. This compares to 3,243 stages during the third quarter, or 579 stages per fully-utilized fleet. In addition, our fleets pumped an average of 15.1 hours per active day in the fourth quarter, compared to an average of 14.9 hours per active day in the third quarter.
Safety Update
We are pleased to report that our safety record for 2020 was the best in our history. Our 2020 Total Recordable Incident Rate ("TRIR") was 0.20, Lost Time Incident Rate ("LTIR") was 0.00, and Experience Modification Rate was 0.58.
"I am incredibly proud of our employees as a result of these outstanding safety results from approximately 2 million man hours in 2020. We believe these safety rates are considerably better than our industry peer group and set us apart as a solid and reliable partner in the field," Mr. Doss said.
Liquidity and Capital Resources
Capital expenditures for the combined full year 2020 was $21.1 million with the bulk of these expenditures occurring in the first quarter. Capital expenditures per average active fleet was $2.2 million for the combined full year 2020. For 2021, we expect maintenance capital expenditures will be approximately $2.5 million per average active fleet. Separately, we are actively considering investments in lower-emissions equipment to assist our customers in achieving their ESG initiatives.
As of December 31, 2020, we had $94.0 million of cash and approximately $13.2 million of net availability under our revolving credit facility, or total liquidity of $107.2 million at year end. We had no borrowings under our revolving credit facility during the fourth quarter, which has a total capacity of $40 million. We also had $12.7 million of restricted cash, included in other current assets, as of December 31, 2020 associated with the restructuring.
Overview of Restructuring Related Expenses and Cash Payments
In the combined full year 2020, we paid $54.4 million in cash for fees and expenses related to our financial restructuring. In the third quarter, we incurred and paid $18.5 million of transaction costs prior to our filing for bankruptcy protection, which included $7.0 million paid for legal and professional fees and $11.5 million in consent fees paid to certain secured debt holders pursuant to the Restructuring Support Agreement. In the fourth quarter, we paid $35.9 million, which included $17.1 million for legal and professional fees, $12.5 million in settlement to a sand supplier, and $6.3 million for insurance premiums and emergence cash awards. In addition, we distributed $30.7 million in cash to secured debt holders as consideration under the Plan.
As a result of the restructuring, we terminated our sand supply contracts. Apart from the payment described above, we paid $18.8 million of supply commitment payments in the first half of 2020 under the normal course of business prior to the termination of the contracts. We do not expect any future charges or payments related to these Predecessor contracts.
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