Nine Energy Service Announces First Quarter 2021 Results

Rhea-AI Summary

Nine Energy Service reported Q1 2021 revenues of $66.6 million with a net loss of $(8.2) million or $(0.28) per share. Adjusted EBITDA stood at $(3.4) million.

Despite a 3% decrease in EIA-reported completed wells, revenue increased 8% due to heightened activity in cementing and completion tools. The company repurchased $26.3 million of bonds for $8.4 million cash during Q1, raising liquidity to $98.8 million. Nine anticipates double-digit revenue growth in Q2 and Q3, exhibiting cautious optimism about market recovery.

Positive

• Q1 2021 revenue increased by 8% despite a 3% drop in completed wells.
• Repurchased $26.3 million of bonds for $8.4 million, improving cash interest expenses.
• Total liquidity position reached $98.8 million as of March 31, 2021.
• Dissolvable plug technology sales surged over 80%, indicating strong market adoption.

Negative

• Reported net loss of $(8.2) million and adjusted net loss of $(25.4) million.
• Gross loss of $(7.0) million, indicating challenges in profitability.
• Still facing a depressed pricing environment across service lines.

Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE) reported first quarter 2021 revenues of $66.6 million, net loss of $(8.2) million, or $(0.28) basic loss per share, and adjusted EBITDA of $(3.4) million. For the first quarter 2021, adjusted net loss^B was $(25.4) million, or $(0.85) adjusted basic loss per share^C.

“While overall market activity improved quarter over quarter, we saw a much slower start in January versus last year, coupled with weather-related shut-downs in February,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service. “Despite EIA reported completed wells decreasing approximately 3% in Q1 versus Q4, Nine’s revenue increased by approximately 8%, driven mostly by strong activity increases in cementing and completion tools. Pricing has stabilized across service lines but remains extremely depressed. We have begun to feel some tightness, specifically in the labor market, but any potential pricing leverage will depend significantly on the timing and pace of rig and frac crew additions.”

“Our team once again saw an opportunity to purchase additional bonds on the open market at a significant discount to par, lowering our annual cash interest expense, and reducing our overall debt outstanding. During Q1, the Company repurchased $26.3 million par value of bonds for $8.4 million of cash. To date, Nine has repurchased approximately $79.7 million of bonds for $22.9 million leaving $320.3 million of bonds outstanding and an undrawn ABL.”

“We continue to make progress with the commercialization of our new dissolvable plug technology across all basins with our total number of Stinger Dissolvable plugs sold increasing by over 80% quarter over quarter. During the quarter, we also began running trials for our new Scorpion Pincer Composite plug, which is approximately 35% shorter than our current offering.”

“While we continue to see improvements in the market, we are still anticipating a challenging environment in 2021. That said, we expect Q2 to be better sequentially than Q1 with double-digit sequential revenue increases, followed by sequential revenue increases in Q3 over Q2.”

Operating Results

During the first quarter of 2021, the Company reported revenues of $66.6 million with gross loss of $(7.0) million and adjusted gross profit^D of $4.3 million. During the first quarter, the Company generated ROIC^E of (23)%.

During the first quarter of 2021, the Company reported selling, general and administrative (“SG&A”) expense of $10.2 million, compared to $11.0 million for the fourth quarter of 2020. Depreciation and amortization expense ("D&A") in the first quarter of 2021 was $11.9 million, compared to $11.8 million for the fourth quarter of 2020.

The Company’s tax provision for the first quarter of 2021 was less than $0.1 million.

Liquidity and Capital Expenditures

During the first quarter of 2021, the Company reported net cash used in operating activities of $(5.2) million, compared to $(9.5) million for the fourth quarter of 2020. Capital expenditures totaled $1.9 million during the first quarter of 2021.

As of March 31, 2021, Nine’s cash and cash equivalents were $53.0 million, and the Company had $45.8 million of availability under the revolving credit facility, which remains undrawn, resulting in a total liquidity position of $98.8 million as of March 31, 2021.

During the first quarter, the Company repurchased approximately $26.3 million of the senior notes for a repurchase price of approximately $8.4 million in cash. As a result, the Company recorded a $17.6 million gain on extinguishment of debt with no cash tax obligation. To date, the Company has repurchased approximately $79.7 million of the senior notes for a repurchase price of approximately $22.9 million in cash, leaving $320.3 million of bonds outstanding.

^ABCDESee end of press release for definitions

Conference Call Information

The call is scheduled for Thursday, May 6, 2021 at 9:00 am Central Time. Participants may join the live conference call by dialing U.S. (Toll Free): (877) 524-8416 or International: (412) 902-1028 and asking for the “Nine Energy Service Earnings Call”. Participants are encouraged to dial into the conference call ten to fifteen minutes before the scheduled start time to avoid any delays entering the earnings call.

For those who cannot listen to the live call, a telephonic replay of the call will be available through May 20, 2021 and may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or International: (201) 612-7415 and entering the passcode of 13718631.

About Nine Energy Service

Nine Energy Service is an oilfield services company that offers completion solutions within North America and abroad. The Company brings years of experience with a deep commitment to serving clients with smarter, customized solutions and world-class resources that drive efficiencies. Serving the global oil and gas industry, Nine continues to differentiate itself through superior service quality, wellsite execution and cutting-edge technology. Nine is headquartered in Houston, Texas with operating facilities in the Permian, Eagle Ford, SCOOP/STACK, Niobrara, Barnett, Bakken, Marcellus, Utica and Canada.

For more information on the Company, please visit Nine’s website at nineenergyservice.com.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. Forward-looking statements also include statements that refer to or are based on projections, uncertain events or assumptions. The forward-looking statements included herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, the severity and duration of the COVID-19 pandemic, related economic repercussions and the resulting negative impact on demand for oil and gas; the current significant surplus in the supply of oil and the ability of the OPEC+ countries to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the oil and gas industry currently resulting from the impact of the foregoing factors, which is negatively impacting our business; operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; pricing pressures, reduced sales, or reduced market share as a result of intense competition in the markets for the Company’s dissolvable plug products; the Company’s ability to implement and commercialize new technologies, services and tools; the Company’s ability to grow its completion tool business; the Company’s ability to reduce capital expenditures; the Company’s ability to accurately predict customer demand; the loss of, or interruption or delay in operations by, one or more significant customers; the loss of or interruption in operations of one or more key suppliers; the adequacy of the Company’s capital resources and liquidity; the incurrence of significant costs and liabilities resulting from litigation; the loss of, or inability to attract, key personnel; the Company’s ability to successfully integrate recently acquired assets and operations and realize anticipated revenues, cost savings or other benefits thereof; and other factors described in the “Risk Factors” and “Business” sections of the Company’s most recently filed Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.

NINE ENERGY SERVICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
	Three Months Ended
	March 31, 2021			December 31, 2020
Revenues	$	66,626		$	61,971
Cost and expenses
Cost of revenues (exclusive of depreciation and
amortization shown separately below)		62,283			66,963
General and administrative expenses		10,224			10,966
Depreciation		7,789			7,678
Amortization of intangibles		4,092			4,091
Gain on revaluation of contingent liabilities		(190)			(505)
(Gain) loss on sale of property and equipment		(273)			43
Loss from operations		(17,299)			(27,265)
Interest expense		8,585			8,615
Interest income		(13)			(22)
Gain on extinguishment of debt		(17,618)			(340)
Other income		(34)			(33)
Loss before income taxes		(8,219)			(35,485)
Provision (benefit) for income taxes		27			(110)
Net loss	$	(8,246)		$	(35,375)
Loss per share
Basic	$	(0.28)		$	(1.18)
Diluted	$	(0.28)		$	(1.18)
Weighted average shares outstanding
Basic		29,878,426			29,852,516
Diluted		29,878,426			29,852,516
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax of $0 and $0	$	41		$	230
Total other comprehensive income, net of tax		41			230
Total comprehensive loss	$	(8,205)		$	(35,145)

NINE ENERGY SERVICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
	March 31, 2021			December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	52,982		$	68,864
Accounts receivable, net		48,139			41,235
Income taxes receivable		1,142			1,392
Inventories, net		38,759			38,402
Prepaid expenses and other current assets		13,115

FAQ

What were Nine Energy Service's revenues in Q1 2021?

Nine Energy Service reported Q1 2021 revenues of $66.6 million.

What was Nine Energy's net loss for the first quarter of 2021?

The net loss for Nine Energy Service in Q1 2021 was $(8.2) million.

How much did Nine Energy Service repurchase in bonds during Q1 2021?

Nine Energy Service repurchased $26.3 million par value of bonds for $8.4 million in Q1 2021.

What is Nine Energy Service's stock symbol?

Nine Energy Service is traded under the stock symbol NINE.

What is Nine Energy's expected revenue growth in Q2 2021?

Nine Energy Service anticipates double-digit sequential revenue increases in Q2 2021.