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Nextier Oilfield Solutions Second Quarter 2022 Results

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   |    Tuesday,July 26,2022

NexTier Oilfield Solutions Inc. reported second quarter 2022 financial and operational results.

2Q Highlights:

  • Total revenue of $842.9 million, a 33% sequential increase and 189% year-over-year
  • Achieved fifth consecutive quarter of 25%+ revenue growth
  • Net income of $68.5 million ($0.27 per diluted share), compared to $8.8 million ($0.04 per diluted share) in the prior quarter and net loss of $31.8 million in second quarter of 2021
  • Adjusted net income(1) of $98.5 million ($0.39 per diluted share), compared to $20.8 million ($0.08 per diluted share) in the prior quarter and adjusted net loss of $41.7 million in second quarter of 2021
  • Adjusted EBITDA(1) of $165.9 million, compared to $83.5 million in the prior quarter and $5.3 million in second quarter of 2021
  • Cash from operations of $117.8 million and positive free cash flow(1) of $67.4 million
  • Exited second quarter of 2022 with total liquidity of $492.4 million, including $158.1 million of cash and undrawn ABL; no term loan maturities until 2025

Robert Drummond, President and Chief Executive Officer of NexTier, commented: "Our operations performed at a high level in the second quarter, as strong efficiency gains, combined with net pricing improvements delivered a record quarter for NexTier. The structurally undersupplied oil and natural gas markets have resulted in robust demand for our services.

"We believe frac fleets are effectively sold-out, and see a scenario where frac fleet supply will remain a bottleneck for US land oil and natural gas production growth through 2023 and beyond. I am excited about the future of NexTier and expect to continue to deliver strong free cash flow, margin expansion and profitable growth during what looks to be a sustained up-cycle," stated Drummond.

"Our adjusted EBITDA doubled, sequentially, driven by strong 33% top line growth and incrementals(1) of 40%, proving the success of our strategy early in the cycle," said Kenny Pucheu, Executive Vice President and Chief Financial Officer of NexTier. "Delivering on our commitments, free cash flow accelerated in the second quarter and we have line of sight to further improvements in future periods. Most importantly, we believe we are in the early stages of a multi-year recovery, and our fleet enhancing countercyclical investments have strengthened our position and ability to deliver leading returns."

Second Quarter 2022 Financial Results

Revenue totaled $842.9 million in the second quarter of 2022, compared to $635.0 million in the first quarter of 2022, and $292.1 million in the second quarter of 2021. The sequential improvement in revenue was primarily driven by improved net and gross pricing, efficiency gains, continued progress in our wellsite integration strategy, and the addition of one fleet late in the first quarter of 2022, as previously reported, that was fully operational for the entirety of the second quarter of 2022.

Net income totaled $68.5 million, or $0.27 per diluted share, in the second quarter of 2022, compared to net income of $8.8 million, or $0.04 per diluted share, in the first quarter of 2022. Adjusted net income totaled $98.5 million, or $0.39 per diluted share, in the second quarter of 2022, compared to adjusted net income of $20.8 million, or $0.08 per diluted share, in the first quarter of 2022.

Selling, general and administrative expense ("SG&A") of $35.9 million in the second quarter of 2022 was relatively unchanged from the first quarter of 2022. Adjusted SG&A(1) totaled $27.4 million in the second quarter of 2022, compared to adjusted SG&A of $27.5 million in the first quarter of 2022.

Adjusted EBITDA totaled $165.9 million in the second quarter of 2022, compared to adjusted EBITDA of $83.5 million in the first quarter of 2022, and $5.3 million in the second quarter of 2021.

Second Quarter 2022 Management Adjustments

EBITDA(1) for the second quarter of 2022 was $135.8 million. When excluding net management adjustments of $30.1 million, adjusted EBITDA for the second quarter was $165.9 million. Management adjustments included $7.5 million in non-cash stock compensation expense, $23.7 million in acquisition, integration, and expansion costs mostly related to the revaluation of the earnout for the Alamo Acquisition, partially offset by a net $1.2 million in other adjustments.

Completion Services

Revenue in our Completion Services segment totaled $801.0 million in the second quarter of 2022, compared to $602.6 million in the first quarter of 2022. Adjusted gross profit(1) totaled $184.7 million in the second quarter of 2022, compared to $106.3 million in the first quarter of 2022.

During the second quarter of 2022, the Company did not deploy any additional horsepower to its Completions Services fleet. 

Well Construction and Intervention Services

Revenue in our Well Construction and Intervention Services segment, totaled $41.9 million in the second quarter of 2022, compared to $32.4 million in the first quarter of 2022. The sequential improvement was primarily driven by increased customer activity. Adjusted gross profit totaled $8.3 million in the second quarter of 2022, compared to adjusted gross profit of $4.1 million in the first quarter of 2022.

Balance Sheet and Capital

Total debt outstanding as of June 30, 2022 was $368.2 million, net of debt discounts and deferred finance costs and excluding finance lease obligations. As of June 30, 2022, total available liquidity was $492.4 million, comprised of cash of $158.1 million and $334.3 million of available borrowing capacity under our asset-based credit facility, which remains undrawn.

Total cash provided by operating activities during the second quarter of 2022 was $117.8 million and cash used by investing activities was $50.5 million, resulting in a positive free cash flow of $67.4 million in the second quarter of 2022.

Sale of Coiled Tubing assets

On July 19, 2022, a wholly-owned subsidiary of the Company entered into a definitive agreement to sell the Company's Coiled Tubing assets to Gladiator Energy LLC for a cash purchase price of $21.55 million. The transaction is subject to customary closing conditions and is expected to close in the third quarter of 2022.

The divestiture of non-core assets is consistent with the Company's strategy to repurpose capital towards the highest return projects that fit the Company's strategy around wellsite integration, while also enhancing liquidity.

Outlook

Industry fundamentals remain positive in the third quarter of 2022, with a continuation of strong demand and very high industry utilization. Seasonally, the third quarter is typically the strongest quarter of the year, and we expect this will again be the case this year.

We do not expect to add any additional horsepower to the market for the remainder of 2022.

For the third quarter of 2022 we anticipate sequential revenue growth of 8-10%. We expect the third quarter of 2022 to see improved profitability and expanded margins relative to the second quarter of 2022.

We now expect to generate free cash flow in excess of $225 million in 2022.

Mr. Drummond concluded, "We are very encouraged by what we see in the market, even considering the concerns about the global economy potentially slowing. Our customers returns are very strong and there is likely considerable room for commodity prices to decrease before impacting demand for our services. Years of underinvestment should provide motivation to continue profitable activity. Given already high equipment utilization, we will use this favorable market backdrop to continue our drive to recapture COVID related pricing concessions, suggesting significant profitability upside remains as we continue to navigate improved cycle dynamics."


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