Service & Supply | Oilfield Services | Third Quarter (3Q) Update | Frac Markets - Pressure Pumping

NexTier Removing More Fleets From Market; 3Q Results

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   |    Tuesday,November 03,2020

NexTier Oilfield Solutions today reported third quarter 2020 financial and operational results.

Quick Read

Averaged 11 fully-utilized fleets in Q3 2020 and exited with 13 fully-utilized and 14 deployed fleets

Generated total revenue of $163.7 million in Q3 2020, compared to $196.2 million in Q2 2020

Third Quarter 2020 Results and Recent Highlights

• Generated total revenue of $163.7 million in Q3 2020, compared to $196.2 million in Q2 2020
• Reported fracturing and bundled wireline revenue of $141.3 million in Q3 2020, compared to $169.5 million in Q2 2020
• Reported net loss of $102.4 million in Q3 2020, compared to net loss of $112.5 million in Q2 2020
• Reported SG&A of $25.5 million in Q3 2020, reflecting a decrease of 33% versus Q2 2020
• Reported Adjusted SG&A⁽¹⁾ of $19.8 million in Q3 2020, reflecting a decrease of 36% versus Q2 2020
• Reported Adjusted EBITDA⁽¹⁾ of $(2.4) million in Q3 2020, compared to $1.7 million in Q2 2020
• Averaged 11 fully-utilized fleets in Q3 2020 and exited with 13 fully-utilized and 14 deployed fleets
• Further reducing marketed hydraulic fracturing fleet by 0.4 million diesel-powered horsepower
• Total liquidity of $370.8 million exiting Q3 2020, including $305.2 million of cash; no term loan maturities through 2025

Management Commentary

"Despite COVID-19 market challenges and a fiercely competitive landscape, NexTier deployed 5 additional fleets during the third quarter," said Robert Drummond, President and Chief Executive Officer of NexTier. "We benefited from our market readiness strategy and effectively re-deployed fleets with minimal start-up costs. The strong momentum gained with customers during the third quarter is carrying over into the fourth quarter, where we have 15 fully-utilized fleets working today, nearly doubling our fully-utilized fleet count exiting the second quarter."

"NexTier delivered third quarter Adjusted EBITDA decrementals ahead of our outlook due to strong operational performance and continued reduction of costs," said Kenny Pucheu, Executive Vice President and Chief Financial Officer of NexTier. "Despite the depths of the downturn, we did not cut to the trough, nor did we size NexTier to operate at current deployed fleet counts. Instead, we are positioning the company to participate and lead in the eventual market recovery, anchored by our fortified balance sheet, including liquidity in excess of $370 million."

"NexTier is executing its strategy to harvest pent-up earnings power as the market continues to recover," said Mr. Drummond. "We continue to reduce our carbon footprint by strategically growing the clean, natural gas-powered portion of our fleet via existing fleet conversions, while proactively taking actions that responsibly utilize our assets and capital. Further, our digital capabilities enable our strategy to increase work scope at the frac well site and improve the overall value proposition for our customers, including reducing costs associated with logistics services. Currently, the growth rate of NexTier's new cutting edge logistics support capabilities is outpacing the growth seen in the rest of NexTier's business."

Quarter 2020 Financial Results

Revenue totaled $163.7 million in the third quarter of 2020, compared to $196.2 million in the second quarter of 2020. The sequential decrease was primarily driven by reduced calendar utilization and lower pricing in Completion Services and Well Construction and Intervention services segments, combined with the impact of a relatively strong April 2020, partially offset by efficiency gains.

Net loss totaled $102.4 million, or $0.48 per diluted share, in the third quarter of 2020, compared to $112.5 million, or $0.53 per diluted share in the second quarter of 2020. Adjusted net loss⁽¹⁾ totaled $82.0 million, or $0.38 per diluted share, in the third quarter of 2020, compared to Adjusted net loss of $79.4 million, or $0.37 per diluted share, in the second quarter of 2020.

Selling, general and administrative expense ("SG&A") totaled $25.5 million in the third quarter of 2020, compared to SG&A of $38.0 million in the second quarter of 2020. Adjusted SG&A⁽¹⁾ totaled $19.8 million in the third quarter of 2020, compared to Adjusted SG&A of $31.0 million in the second quarter of 2020.

Adjusted EBITDA totaled $(2.4) million in the third quarter of 2020, compared to Adjusted EBITDA of $1.7 million in the second quarter of 2020.

Third Quarter 2020 Management Adjustments

Adjusted EBITDA for the third quarter includes management adjustments of approximately $20.4 million, consisting primarily of $7.3 million of merger and integration costs, $4.7 million of non-cash stock compensation expense, $3.8 million for an accounting loss associated with a make-whole provision on the Basic notes received as part of the Well Support Services divestiture in March, $2.7 million of an inventory impairment, and $1.4 million of market-driven severance and restructuring costs. The Company does not anticipate material future merger and integration costs going forward.

Well Construction and Intervention Services

Revenue in our Well Construction and Intervention ("WC&I") Services segment, totaled $9.7 million in the third quarter of 2020, compared to $17.3 million in the second quarter of 2020. The sequential decrease in revenue was primarily driven by a further reduction in the Company's footprint of its cementing and coil tubing services lines. Adjusted Gross Loss totaled $0.8 million in the third quarter of 2020, compared to Adjusted Gross Profit of $0.8 million in the second quarter of 2020. Net loss totaled $4.0 million in the third quarter of 2020, compared to net loss of $6.2 million in the second quarter of 2020.

Balance Sheet and Capital

Total debt outstanding as of September 30, 2020 totaled $336.1 million, net of debt discounts and deferred finance costs and excluding lease obligations. As of September 30, 2020, total available liquidity was $370.8 million, comprised of cash of $305.2 million, and $65.6 million of available borrowing capacity under our asset-based credit facility.

Total cash used in operations was $27.7 million and cash used in investing activities was $3.4 million, resulting in a cash use of $31.1 million in the third quarter of 2020. Excluding cash used for merger and integration related costs of $7.4 million, and for market related severance and restructuring cash costs of $1.2 million, combined Adjusted free cash flow⁽¹⁾ totaled $22.6 million in the third quarter of 2020.

NexTier expects its 2020 total capital expenditures to be between $120 million and $130 million, compared to a previous guidance range of between $100 and $120 million. The revision is driven by investments in converting Tier 4 equipment currently in the fleet to produce additional dual fuel capabilities, with expected delivery in the fourth quarter of 2020.

Outlook

For the fourth quarter of 2020, NexTier currently expects a sequential increase in revenue of between 10% and 15% and positive Adjusted EBITDA. The Company's outlook for the fourth quarter of 2020 is based on current visibility and assuming no improvement in pricing.