Quarterly / Earnings Reports | Water Treatment
GreenHunter Ups Appalachian Ops, Reorganizes TX Division
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GreenHunter Resources Inc. has reported financial and operating results for the three and six months ended June 30, 2013.
- Total Revenue Increased 172% to $17.5 million for the six months ended June 30, 2013 versus the similar period in 2012 of $6.4 million
- Total Disposal Volumes Increased 216% in the first six months of 2013 to 2.3 million barrels (BBL) injected compared to 728,700 BBL injected in the first six months of 2012
- Total Operating Salt Water Disposal Permitted Injection Capacity as of June 30, 2013 Exceeded 97,000 BBL per day representing a 1,400% Increase from June 30, 2012
- The Company has received guidance from the US Coast Guard for Waterborne Transport of Oil Field Wastes regarding plans to convert existing infrastructure into a water recycling station and build up to 19,000 barrels of water tank storage
- Three new Hazmat vacuum trucks ordered and delivered for the Appalachia division in August 2013
Financial & Operating Results for the Three Months Ended June 30, 2013
GreenHunter reported revenues for the three months ended June 30, 2013 of $8.9 million, compared to $4.2 million reported during the Second Quarter of 2012. The increase in revenues of 113% or $4.7 million was driven primarily by increases in daily salt water disposal volumes as a result of both organic SWD capacity growth and acquisitions that resulted in a 1,400% increase in permitted operating injection capacity compared to one year ago.
The operating loss for the three months ended June 30, 2013 was ($2.1) million, compared to an operating loss of ($0.4) million during the Second Quarter of 2012. Net loss to common shareholders was ($1.7) million, (($0.05) loss per common share basic and diluted) for the three months ended June 30, 2013 compared to a net loss of ($1.0) million, (($0.04) loss per common share basic and diluted), during the Second Quarter of 2012.
For the three months ended June 30, 2013, GreenHunter’s Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization was $1.2 million. Operating margins decreased during this period resulting in an operating loss and loss to common shareholders due primarily to increased costs associated with a greater scale of operations in South Texas. This is a result of low margin services associated with well-pad completion and rig washing services previously offered by our White Top and Black Water business lines. These services were discontinued during the month of May 2013.
On June 10, 2013, the Company’s wholly-owned subsidiary, GreenHunter Water, LLC closed on the sale of one underutilized saltwater disposal well and associated equipment located in South Texas. The Company received $5.2 million from this non-core asset divestiture, resulting in a gain of $2.3 million.
Financial & Operating Results for the Six Months Ended 30, 2013
GreenHunter reported revenues for the six months ended June 30, 2013 of $8.9 million, compared to $4.2 million reported during the six months ended June 30, 2012. The increase in revenues of 113% or $4.7 million was driven primarily by increases in daily salt water disposal volumes as a result of both organic SWD capacity growth and acquisitions that resulted in a 1,400% increase in permitted operating injection capacity compared to one year ago.
The operating loss for the six months ended June 30, 2013 was ($9.3) million, compared to an operating loss of ($0.9) million during the similar period of 2012. Net loss to common shareholders was ($10.2) million, (($0.30) loss per common share basic and diluted) for the six months ended June 30, 2013 compared to a net loss of ($1.9) million, (($0.07) loss per common share basic and diluted), during the six months ended June 30, 2012.
For the six months ended June 30, 2013, GreenHunter’s Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization (“Adjusted EBITDA”) was $202 thousand. Operating margins decreased during this period resulting in an operating loss and loss to common shareholders due primarily to increased costs associated with greater scale of operations, decreased volumes of product accepted at the New Matamoras bulk storage and barge transloading facility in the Appalachia region due to adverse weather conditions, an impairment of asset value of $1.9 million due to a lightning strike and subsequent fire in Oklahoma, and an impairment of goodwill of $2.8 million.
Fixed Asset and Goodwill Impairments
A lightning strike at the Company’s Rhodes SWD well site in Oklahoma in April resulted in an impairment of $1.9 million to ground facilities at this location. The Company has adequate property, environmental, and casualty insurance in this asset and is presently negotiating a settlement with its existing insurance carriers. The carrying value of goodwill for the White Top and Black Water acquisitions that were completed on December 31, 2012 was fully impaired at March 31, 2013 due to the recent decision of eliminating certain operating segments of White Top and Black Water. The Company has initiated litigation against the prior owners of White Top and Black Water and has recently received injunctive relief associated with its claims.
Total Disposal Capacity and Injection Volumes Overview
The Company’s total daily operating permitted SWD capacity as of June 30, 2013 was over 97,000 BBL representing a 1,400% increase from June 30, 2012. As of June 30, 2013, the Company operated one SWD well servicing producers in Oklahoma’s Horizontal Mississippian Lime play, three SWD wells servicing producers in the Eagle Ford Shale play in South Texas, eight SWD wells servicing producers in the Marcellus and Utica Shale plays in Appalachia and one bulk storage and barge transloading terminal on the Ohio River. Infrastructure upgrades to enable Frac-Cycle® water treatment services at the New Matamoras Ohio River barge facility were completed during the second quarter and a total of 22,500 BBL of high-solids fluids have been received and are being processed at an average rate of 600 BBL per day. Additional processing capacity is being reviewed by management with equipment expansion anticipated this year.
Quarterly Injection Volumes by region are detailed in the table below.
Subsequent Events & Development Pipeline
Subsequent to the end of the Second Quarter and as previously announced, management has i) commenced the sale of its next-generation modular above-ground MAG Tank™ and ii) entered into negotiations with multiple parties to potentially sell two South Texas salt water disposal operations. These potential sales coincide with a reorganization of GreenHunter’s South Texas operations which should result in significantly improved operating efficiencies during the second half of this year. By concentrating development efforts in the Appalachia region where the Company has established a dominant position as the leading commercial disposal well operator, management plans to further distance itself from the competition by augmenting its logistics capabilities with barge transport infrastructure. Some of the more notable ongoing development projects include:
- New Appalachia Barge facility with disposal wells on location;
- Additional Ohio Disposal Facilities,
- Riverside Frac-Cycle® Water Treatment system; and,
- Increased deployment of our new MAG Tank™ above ground storage system.
- Three new Hazmat vacuum trucks ordered and delivered for the Appalachia division in August 2013.
Internal Controls
As disclosed in the Company's Form 10-K for the fiscal year ended December 31, 2012, the Company identified a number of material weaknesses in its internal controls. The Board of Directors, Audit Committee and senior management of the Company recognize the importance of improving the Company's internal controls and are committed to remediating these material weaknesses as quickly as possible. The Company is implementing remediation plans which it believes will successfully address these material weaknesses. Management has contracted with an independent consulting firm that specializes in the areas of financial advisory and interim staffing solutions to assist us in complying with our financial reporting obligations, is in the process of expanding the number and quality of staff; is adding outside consultants with the knowledge, training and experience necessary to develop and support the Company's overall internal control environment; and is implementing an operations tracking and an improved accounting information system. The Company announced today the hiring of a new Senior Vice President and CFO.
Commenting on GreenHunter Resources Second Quarter 2013 financial and operating results, Mr. Jonathan D. Hoopes, GreenHunter Resources’ Interim CEO, President and COO, stated, "Volumes in our core operating area of the Appalachia region are continuing to increase following a seasonal slow down experienced earlier in the year, primarily as a result of weather-related issues that delayed our customers’ drilling and completion efforts in this area. This slow down resulted in lowered margins and an operating loss which carried over to the second quarter of this year. However, we are seeing a strong pickup in activity in Appalachia - especially around both the Marcellus and the Utica Shale Plays where we are strategically positioned as a dominant commercial SWD operator. Our Appalachian operation is currently experiencing record volumes of water handling with existing SWD wells running at 100% of capacity. We are especially excited to deploy additional MAG Tanks in the Appalachia region where we expect to see new orders from customers who have expressed an interest in this exciting new product since the first Appalachia deployment occurred during the Second Quarter of 2013.
"In addition, we are completing the insurance settlement process on our Rhoades well, which was struck by lighting and plan to commence rebuilding this location in the third quarter this year. We are realizing significant cost savings and operational efficiencies as a result of our recent reorganization efforts in South Texas and expect to see further improvements throughout the remainder of the year."