Nine Energy Service Announces Fourth Quarter and Full Year 2020 Results
Nine reported Q4 2020 revenues of $62.0 million with a net loss of $(35.4) million and adjusted EBITDA of $(13.9) million. Revenue increased 25% quarter-over-quarter, though pricing pressures and non-cash items impacted net loss. The company ended 2020 with $68.9 million in cash and reduced debt by repurchasing bonds at 27% of par value. For 2021, Nine anticipates continued challenges with E&P capital spending expected to decline year-over-year, despite operational gains like a market share increase to 23% of U.S. stages completed.
- Quarter-over-quarter revenue increased by 25%.
- Ended 2020 with a cash balance of $68.9 million.
- Successfully reduced debt through opportunistic bond buybacks at approximately 27% of par value.
- Increased market share from approximately 17% in 2019 to 23% in 2020.
- Achieved the lowest Total Recordable Incident Rate (TRIR) in company history at 0.30.
- Reported Q4 2020 net loss of $(35.4) million.
- Adjusted EBITDA of $(13.9) million indicates ongoing profitability challenges.
- Total net loss for 2020 was $(378.9) million or $(12.74) per basic share.
- Adjusted net loss for 2020 was $(118.1) million or $(3.97) per adjusted basic share.
- Anticipated decline in E&P capital spending for 2021, with slower start in Q1.
Nine Energy Service, Inc. ("Nine" or the "Company") (NYSE: NINE) reported fourth quarter 2020 revenues of
“As anticipated, holiday and weather shutdowns were not as pronounced as we have seen historically during the fourth quarter,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service. “Activity improvements are reflected in our
“The market continues to face unparalleled uncertainty and heightened volatility. Throughout 2020, we were always balancing the short, medium, and long-term needs of the Company including making significant cost-reductions to preserve liquidity, but also maintaining key people, assets, and our footprint in order not to impede the future earnings of the Company. Although profitability was down year over year in conjunction with activity, we were able to demonstrate our ability to flex with the market and preserve liquidity through good working capital management and ended the year with a cash balance of
“Operationally, our team once again demonstrated their ability to gain market share, growing our percentage of US stages completed from approximately
“While we have seen improvement in the market throughout Q4 2020, we are still anticipating a very challenging environment in 2021 and expect E&P capital spend will be down year over year. Q1 2021 is off to a slower start as customers finalize their 2021 activity plans and many completion schedules are delayed. Additionally, the inclement weather in Texas caused significant shutdowns within all service lines. Texas weather-related shutdowns in February aside, we anticipate the pace of Q1 activity and revenue will be better sequentially than Q4, but still expect to generate a net loss and negative adjusted EBITDA for the quarter. For Nine, we will continue to flex with the market and our strategy is unchanged. We are focused on building an asset-light business with high barriers to entry and will continue to differentiate through our service execution and leading technology.”
Operating Results
For the year ended December 31, 2020, the Company reported revenues of
During the fourth quarter of 2020, the Company reported revenues of
During the fourth quarter of 2020, the Company reported selling, general and administrative (“SG&A”) expense of
The Company recognized an income tax benefit of approximately
Liquidity and Capital Expenditures
For the year ended December 31, 2020, the Company reported net cash used in operating activities of
As of December 31, 2020, Nine’s cash and cash equivalents were
ABCDESee end of press release for definitions
Conference Call Information
The call is scheduled for Monday, March 8, 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 March 22, 2021 and may be accessed by dialing U.S. (Toll Free): (877) 660-6853 or International: (201) 612-7415 and entering the passcode of 13715295.
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.
AAdjusted EBITDA is defined as net income (loss) before interest, taxes, and depreciation and amortization, further adjusted for (i) property and equipment, goodwill, and/or intangible asset impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) loss or gain on revaluation of contingent liabilities, (iv) gain on the extinguishment of debt, (v) loss or gain on the sale of subsidiaries, (vi) restructuring charges, (vii) stock-based compensation expense, (viii) loss or gain on sale of property and equipment, and (ix) other expenses or charges to exclude certain items which we believe are not reflective of ongoing performance of our business, such as legal expenses and settlement costs related to litigation outside the ordinary course of business. Management believes Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure and helps identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments, acquisitions and dispositions and costs that are not reflective of the ongoing performance of our business.
BAdjusted Net Income (Loss) is defined as net income (loss) adjusted for (i) property and equipment, goodwill, and/or intangible asset impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) restructuring charges, (iv) loss or gain on the sale of subsidiaries, (v) gain on the extinguishment of debt and (vi) tax impact of such adjustments. Management believes Adjusted Net Income (Loss) is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period and helps identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments and acquisitions.
CAdjusted Basic Earnings (Loss) Per Share is defined as adjusted net income (loss), divided by weighted average basic shares outstanding. Management believes Adjusted Basic Earnings (Loss) Per Share is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period and help identify underlying trends in our operations that could otherwise be distorted by the effect of the impairments and acquisitions.
DAdjusted Gross Profit (Loss) is defined as revenues less direct and indirect cost of revenues (excluding depreciation and amortization). This measure differs from the GAAP definition of gross profit (loss) because we do not include the impact of depreciation and amortization, which represent non-cash expenses. Our management uses adjusted gross profit (loss) to evaluate operating performance. We prepare adjusted gross profit (loss) to eliminate the impact of depreciation and amortization because we do not consider depreciation and amortization indicative of our core operating performance.
EReturn on Invested Capital (“ROIC”) is defined as after-tax net operating profit (loss), divided by average total capital. We define after-tax net operating profit (loss) as net income (loss) plus (i) property and equipment, goodwill, and/or intangible asset impairment charges, (ii) transaction and integration costs related to acquisitions, (iii) interest expense (income), (iv) restructuring charges, (v) loss or gain on the sale of subsidiaries, (vi) gain on extinguishment of debt, and (vii) the provision or benefit for deferred income taxes. We define total capital as book value of equity plus the book value of debt less balance sheet cash and cash equivalents. We compute the average of the current and prior period-end total capital for use in this analysis. Management believes ROIC provides useful information because it quantifies how well we generate operating income relative to the capital we have invested in our business and illustrates the profitability of a business or project taking into account the capital invested. Management uses ROIC to assist them in making capital resource allocation decisions and in evaluating business performance.
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 |
Year Ended December 31, |
|||||||||||||||
December 31,
|
September 30,
|
2020 |
2019 |
|||||||||||||
Revenues |
$ |
61,971 |
|
$ |
49,521 |
|
$ |
310,851 |
|
$ |
832,937 |
|
||||
Cost and expenses |
||||||||||||||||
Cost of revenues (exclusive of depreciation and |
||||||||||||||||
amortization shown separately below) |
|
66,963 |
|
|
52,483 |
|
|
302,157 |
|
|
669,979 |
|
||||
General and administrative expenses |
|
10,966 |
|
|
10,701 |
|
|
49,346 |
|
|
81,327 |
|
||||
Depreciation |
|
7,678 |
|
|
7,763 |
|
|
32,431 |
|
|
50,544 |
|
||||
Amortization of intangibles |
|
4,091 |
|
|
4,091 |
|
|
16,467 |
|
|
18,367 |
|
||||
Impairment of property and equipment |
|
- |
|
|
- |
|
|
- |
|
|
66,200 |
|
||||
Impairment of goodwill |
|
- |
|
|
- |
|
|
296,196 |
|
|
20,273 |
|
||||
Impairment of intangibles |
|
- |
|
|
- |
|
|
- |
|
|
114,804 |
|
||||
(Gain) loss on revaluation of contingent liabilities |
|
(505 |
) |
|
297 |
|
|
276 |
|
|
(21,187 |
) |
||||
Loss on sale of subsidiaries |
|
- |
|
|
- |
|
|
- |
|
|
15,896 |
|
||||
(Gain) loss on sale of property and equipment |
|
43 |
|
|
(535 |
) |
|
(2,857 |
) |
|
(538 |
) |
||||
| Loss from operations |
|
(27,265 |
) |
|
(25,279 |
) |
|
(383,165 |
) |
|
(182,728 |
) |
||||
Interest expense |
|
8,615 |
|
|
9,130 |
|
|
36,759 |
|
|
39,770 |
|
||||
Interest income |
|
(22 |
) |
|
(43 |
) |
|
(615 |
) |
|
(860 |
) |
||||
Gain on extinguishment of debt |
|
(340 |
) |
|
(15,798 |
) |
|
(37,841 |
) |
|
- |
|
||||
Other income |
|
(33 |
) |
|
(29 |
) |
|
(62 |
) |
|
- |
|
||||
| Loss before income taxes |
|
(35,485 |
) |
|
(18,539 |
) |
|
(381,406 |
) |
|
(221,638 |
) |
||||
Benefit for income taxes |
|
(110 |
) |
|
(37 |
) |
|
(2,458 |
) |
|
(3,887 |
) |
||||
| Net loss | $ |
(35,375 |
) |
$ |
(18,502 |
) |
$ |
(378,948 |
) |
$ |
(217,751 |
) |
||||
Loss per share |
||||||||||||||||
| Basic | $ |
(1.18 |
) |
$ |
(0.62 |
) |
$ |
(12.74 |
) |
$ |
(7.43 |
) |
||||
| Diluted | $ |
(1.18 |
) |
$ |
(0.62 |
) |
$ |
(12.74 |
) |
$ |
(7.43 |
) |
||||
Weighted average shares outstanding |
||||||||||||||||
| Basic |
|
29,852,516 |
|
|
29,849,753 |
|
|
29,744,830 |
|
|
29,308,107 |
|
||||
| Diluted |
|
29,852,516 |
|
|
29,849,753 |
|
|
29,744,830 |
|
|
29,308,107 |
|
||||
Other comprehensive income (loss), net of tax |
||||||||||||||||
Foreign currency translation adjustments, net of tax of |
$ |
230 |
|
$ |
132 |
|
$ |
(34 |
) |
$ |
376 |
|
||||
| Total other comprehensive income (loss), net of tax |
|
230 |
|
|
132 |
|
|
(34 |
) |
|
376 |
|
||||
| Total comprehensive loss | $ |
(35,145 |
) |
$ |
(18,370 |
) |
$ |
(378,982 |
) |
$ |
(217,375 |
) |
||||
NINE ENERGY SERVICE, INC. |
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
(In Thousands) |
||||||||
(Unaudited) |
||||||||
At December 31, |
||||||||
2020 |
2019 |
|||||||
FAQ
What were Nine's revenues for Q4 2020?
What was Nine's net loss for the fourth quarter of 2020?
How much cash did Nine have at the end of 2020?
What percentage of U.S. stages completed did Nine achieve in 2020?
What is Nine's outlook for 2021?
