- Q3 revenue up 72% as Company posts gains across all service offerings
- Q3 adjusted EBITDA improves by 10%
- Increase in customer activity driven by higher commodity prices and steady recovery from pandemic impact
- Company amends credit facility and obtains waiver
LONGMONT, Colo., Nov. 15, 2021 (GLOBE NEWSWIRE) -- Enservco Corporation (NYSE American: ENSV), a diversified national provider of specialized well-site services to the domestic onshore conventional and unconventional oil and gas industries, today reported financial results for its third quarter and nine-month period ended September 30, 2021.
“Our renewed growth momentum carried into the third quarter as the industry continued to recover from the pandemic impact and steadily rising commodity prices drove increased customer activity and higher utilization rates for our fleet. As in our second quarter, we generated solid growth in all service segments in the third quarter, including hot oiling, frac water heating, acidizing and non-oilfield services,” said Rich Murphy, Executive Chairman. “Rig counts and wells drilled in the third quarter increased by double digits on both a year-over-year and sequential quarter basis, and these favorable tailwinds should help position us to sustain our revenue momentum during our fourth and first quarter heating season.”
Marjorie Hargrave, President and CFO, added, “We are particularly pleased with our Texas operations, where third quarter revenue grew 126% year over year on the strength of increased demand for our hot oiling services in both our legacy south Texas yard and our new location in east Texas. We are in the process of re-deploying additional hot oiling assets to meet this growing demand in Texas.”
Hargrave also noted that on November 12, 2021, Enservco entered into an amendment with its lender, East West Bank, that revised the revenue covenant on its senior credit facility and granted the Company a waiver for a covenant breach related to an October 2021 revenue shortfall that resulted from warmer than anticipated weather.
Third Quarter Results
Total revenue in the third quarter increased 72% to $3.0 million from $1.8 million in the same quarter last year. The increase was attributable to higher commodity prices and increased customer demand across all the Company’s service offerings.
Production services revenue, which includes hot oiling and acidizing services, increased 82% to $2.5 million from $1.4 million in the same quarter last year. Production services generated a segment loss of $6,000 compared to a segment profit of $16,000 in the same quarter last year.
Completion services revenue, which includes frac water heating and other services, increased 36% in the third quarter to $544,000 from $401,000. The segment loss improved to $645,000 from $725,000 year over year.
Sales, general and administrative expense improved by 14% year over year to $0.9 million from $1.0 million – a reflection of lower professional fees and a decrease in bad debt expense. Depreciation and amortization expense was flat at $1.3 million.
Total operating expenses in the third quarter increased 22% to $5.9 million from $4.8 million due to higher costs of supporting increased customer activity.
The Company reported a net loss of $0.2 million, or $0.02 per diluted share, in the third quarter, compared to net income of $8.4 million, or $2.15 per diluted share, in the same quarter last year. The third quarter 2021 net loss included the impact of $2.0 million in PPP loan and accrued interest forgiveness and $0.6 million in CARES Act payroll tax credits. The $8.4 million in net income in the year-ago third quarter included an $11.9 million gain on restructuring of the Company’s senior revolving credit facility.
Adjusted EBITDA in the third quarter improved by 10% to a negative $1.5 million compared to a negative $1.7 million in the year-ago third quarter.
Nine Month Results
Total revenue for the nine months ended September 30, 2021, was $11.3 million, down 15% from $13.3 million in the same period last year. The decline reflected the challenging first quarter of 2021 when commodity prices and rig counts were significantly lower than those in the first quarter of 2020 prior to onset of the pandemic.
Production services revenue through the first nine months increased 10% to $6.6 million from $5.9 million. The increase reflected the Company’s growth momentum in the second and third quarters of 2021, which more than offset lower activity in the first quarter. Higher production services revenue year-to-date combined with cost-savings initiatives to result in a 65% improvement in segment profitability to a negative $246,000 from a negative $707,000.
Completion services revenue declined 36% year over year to $4.7 million from $7.3 million due to reduced activity in the first quarter of 2021, which more than offset higher completion services revenue in both the second and third quarters of this year. The segment loss increased 263% to $979,000 from $270,000.
Total operating expenses in the first nine months of 2021 were 14% lower at $19.4 million versus $22.5 million in the prior year due to lower costs of providing completion services combined with the benefit of cost reductions at the corporate level.
Sales, general and administrative expense through nine months was reduced by $1.2 million to $2.9 million from $4.1 million in the same period last year, reflecting successful cost reduction efforts. Depreciation and amortization expense was flat at $4.0 million.
Net loss for the nine-month period was $4.0 million, or $0.37 per basic share, compared to net income of $1.2 million, or $0.32 per basic and diluted share, in the same period last year. The 2021 nine-month net loss included nearly $4.3 million in other income resulting primarily from PPP loan forgiveness and CARES Act payroll tax credits while the 2020 nine-month net income included the $11.9 million gain on restructuring of the Company’s credit facility.
Adjusted EBITDA in the first nine months of 2021 improved 5% to a negative $4.1 million from a negative $4.3 million in the same period last year.
Enservco used $3.9 million in cash from operations in the first nine months of 2021 compared to $2.3 million in the same period last year.
Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 2:30 p.m. Mountain Time (4:30 p.m. Eastern) and will be accessible by dialing 877-545-0523 (973-528-0016 for international callers). Entry code: 634413. A telephonic replay will be available through November 18, 2021, by calling 877-481-4010 (919-882-2331 for international callers) and entering the Replay ID # 43352. To listen to the webcast, participants should go to the ENSERVCO website at www.enservco.com and link to the “Investors” page at least 10 minutes early to register and download any necessary audio software. A replay of the webcast will be available until December 4, 2021. The webcast also is available here: https://www.webcaster4.com/webcast/page/2228/43352
About Enservco
Through its various operating subsidiaries, Enservco provides a wide range of oilfield services, including hot oiling, acidizing, frac water heating and related services. The Company has a broad geographic footprint covering seven major domestic oil and gas basins and serves customers in Colorado, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia. Additional information is available at www.enservco.com
*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing Enservco’s operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Operations table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.
Cautionary Note Regarding Forward-Looking Statements
This news release contains information that is "forward-looking" in that it describes events and conditions Enservco reasonably expects to occur in the future. Expectations for the future performance of Enservco are dependent upon a number of factors, and there can be no assurance that Enservco will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," “should,” and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond Enservco's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in Enservco’s annual report on Form 10-K for the year ended December 31, 2020, and subsequently filed documents with the SEC. Forward looking statements in this news release that are subject to risk include ability to sustain increased customer activity and revenue momentum during the fourth and first quarter heating season; the sustainability of higher oil prices and increased demand; ability to add hot oiling capacity in Texas; and ability to meet loan covenants. It is important that each person reviewing this release understand the significant risks attendant to the operations of Enservco. Enservco disclaims any obligation to update any forward-looking statement made herein.
Contact:
Marjorie Hargrave
President and CFO
Enservco Corporation
mhargrave@enservco.com
Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
Phone: 303-880-9000
Email: jay@pfeifferhigh.com
| ENSERVCO CORPORATION AND SUBSIDIARIES | |||||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||||
| (In thousands except per share amounts) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| Revenues: | |||||||||||||||||
| Production services | $ | 2,483 | $ | 1,363 | $ | 6,556 | $ | 5,948 | |||||||||
| Completion and other services | 544 | 401 | 4,701 | 7,343 | |||||||||||||
| Total revenues | 3,027 | 1,764 | 11,257 | 13,291 | |||||||||||||
| Expenses: | |||||||||||||||||
| Production services | 2,489 | 1,347 | 6,802 | 6,655 | |||||||||||||
| Completion and other services | 1,189 | 1,126 | 5,680 | 7,613 | |||||||||||||
| Sales, general, and administrative expenses | 907 | 1,049 | 2,904 | 4,058 | |||||||||||||
| Severance and transition costs | - | - | - | 139 | |||||||||||||
| Loss on disposal of equipment | - | 21 | 70 | 59 | |||||||||||||
| Depreciation and amortization | 1,302 | 1,271 | 3,975 | 3,977 | |||||||||||||
| Total operating expenses | 5,887 | 4,814 | 19,431 | 22,501 | |||||||||||||
| Loss from operations | (2,860 | ) | (3,050 | ) | (8,174 | ) | (9,210 | ) | |||||||||
| Other (expense) income: | |||||||||||||||||
| Interest expense | (6 | ) | (477 | ) | (50 | ) | (1,665 | ) | |||||||||
| Gain on restructuring of senior revolving credit facility | - | 11,916 | - | 11,916 | |||||||||||||
| Other income | 2,689 | 29 | 4,276 | 125 | |||||||||||||
| Total other income | 2,683 | 11,468 | 4,226 | 10,376 | |||||||||||||
| (Loss) income from continuing operations before taxes | (177 | ) | 8,418 | (3,948 | ) | 1,166 | |||||||||||
| Income tax expense | - | (6 | ) | - | (15 | ) | |||||||||||
| (Loss) income from continuing operations | $ | (177 | ) | $ | 8,412 | $ | (3,948 | ) | $ | 1,151 | |||||||
| (Loss) income from discontinued operations | - | (7 | ) | (8 | ) | 60 | |||||||||||
| Net (loss) income | $ | (177 | ) | $ | 8,405 | $ | (3,956 | ) | $ | 1,211 | |||||||
| (Loss) income from continuing operations per common share - basic and diluted | $ | (0.02 | ) | $ | 2.15 | $ | (0.37 | ) | $ | 0.31 | |||||||
| Income from discontinued operations per common share - basic and diluted | - | $ | - | - | $ | 0.01 | |||||||||||
| Net (loss) income per share - basic and diluted | $ | (0.02 | ) | $ | 2.15 | $ | (0.37 | ) | $ | 0.32 | |||||||
| Weighted average number of common shares outstanding – basic and diluted | 11,433 | 3,910 | 10,692 | 3,768 | |||||||||||||
| ENSERVCO CORPORATION AND SUBSIDIARIES | ||||||||||||||||||
| Adjusted EBITDA* | ||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| Net (loss) income | $ | (177 | ) | $ | 8,405 | $ | (3,956 | ) | $ | 1,211 | ||||||||
| Add back: | ||||||||||||||||||
| Interest expense (including discontinued operations) | 6 | 478 | 51 | 1,667 | ||||||||||||||
| Provision for income tax expense | - | 6 | - | 15 | ||||||||||||||
| Depreciation and amortization (including discontinued operations) | 1,302 | 1,277 | 3,981 | 3,996 | ||||||||||||||
| EBITDA* | 1,131 | 10,166 | 76 | 6,889 | ||||||||||||||
| Add back (deduct): | ||||||||||||||||||
| Stock-based compensation | 21 | 16 | 70 | 377 | ||||||||||||||
| Severance and transition costs | - | - | 7 | 139 | ||||||||||||||
| Loss (gain) on disposal of equipment (including discontinued operations) | - | 20 | 70 | (34 | ) | |||||||||||||
| Gain on debt restructuring | - | (11,916 | ) | - | (11,916 | ) | ||||||||||||
| Other (income) expense | (2,689 | ) | 1 | (4,276 | ) | 282 | ||||||||||||
| EBITDA related to discontinued operations | - | - | 1 | 11 | ||||||||||||||
| Adjusted EBITDA | $ | (1,537 | ) | $ | (1,713 | ) | $ | (4,052 | ) | $ | (4,252 | ) | ||||||
| Use of Non-GAAP Financial Measures: Non-GAAP results are presented only as a supplement to the financial statements and for use within management’s discussion and analysis based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the reader's understanding of the Company’s financial performance, but no non-GAAP measure should be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided herein. | ||||||||||||||||||
| EBITDA is defined as net (loss) income (earnings), before interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA excludes stock-based compensation from EBITDA and, when appropriate, other items that management does not utilize in assessing the Company’s ongoing operating performance as set forth in the next paragraph. None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. | ||||||||||||||||||
| All of the items included in the reconciliation from net income to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, impairment losses, etc.) or (ii) items that management does not consider to be useful in assessing the Company’s ongoing operating performance (e.g., income taxes, gain or losses on sale of equipment, severance and transition costs, gain on settlement, expenses to consolidate former Adler facilities, patent litigation and defense costs, other expense (income), EBITDA related to discontinued operations, etc.). In the case of the non-cash items, management believes that investors can better assess the company’s operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company’s ability to generate free cash flow or invest in its business. | ||||||||||||||||||
| We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Additionally, our fixed charge coverage ratio covenant associated with our Loan and Security Agreement with East West Bank require the use of Adjusted EBITDA in specific calculations. | ||||||||||||||||||
| Because not all companies use identical calculations, the Company’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company’s performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures. | ||||||||||||||||||
| ENSERVCO CORPORATION AND SUBSIDIARIES | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (In thousands) | |||||||||
| (Unaudited) | |||||||||
| September 30, | December 31, | ||||||||
| ASSETS | 2021 | 2020 | |||||||
| Current Assets: | |||||||||
| Cash and cash equivalents | $ | 1,673 | $ | 1,467 | |||||
| Accounts receivable, net | 2,279 | 1,733 | |||||||
| Prepaid expenses and other current assets | 2,456 | 858 | |||||||
| Inventories | 371 | 295 | |||||||
| Assets for held for sale | 527 | 527 | |||||||
| Total current assets | 7,306 | 4,880 | |||||||
| Property and equipment, net | 17,070 | 20,317 | |||||||
| Goodwill | 546 | 546 | |||||||
| Intangible assets, net | 454 | 617 | |||||||
| Right-of-use asset - finance, net | 50 | 129 | |||||||
| Right-of-use asset - operating, net | 2,279 | 2,918 | |||||||
| Other assets | 404 | 423 | |||||||
| Non-current assets of discontinued operations | - | 353 | |||||||
| TOTAL ASSETS | $ | 28,109 | $ | 30,183 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current Liabilities: | |||||||||
| Accounts payable and accrued liabilities | $ | 1,635 | $ | 1,931 | |||||
| Senior revolving credit facility, related party (including future interest payable of $772 and $892, respectively) | 2,000 | 1,593 | |||||||
| Lease liability - finance, current | 26 | 65 | |||||||
| Lease liability - operating, current | 775 | 854 | |||||||
| Current portion of long-term debt | 57 | 100 | |||||||
| Current liabilities of discontinued operations | - | 31 | |||||||
| Total current liabilities | 4,493 | 4,574 | |||||||
| Non-Current Liabilities: | |||||||||
| Senior revolving credit facility, related party (including future interest payable of $20 and $485, respectively) | 12,792 | 17,485 | |||||||
| Subordinated debt, related party | - | 1,180 | |||||||
| Long-term debt, less current portion | 69 | 2,052 | |||||||
| Lease liability - finance, less current portion | 26 | 55 | |||||||
| Lease liability - operating, less current portion | 1,631 | 2,185 | |||||||
| Other liabilies | 24 | 88 | |||||||
| Long-term liabilities of discontinued operations | - | 9 | |||||||
| Total non-current liabilities | 14,542 | 23,054 | |||||||
| TOTAL LIABILITIES | 19,035 | 27,628 | |||||||
| Commitments and Contingencies | |||||||||
| Stockholders' Equity | |||||||||
| Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding | - | - | |||||||
| Common stock, $.005 par value, 100,000,000 shares authorized? 11,439,191 and 6,307,868 shares issued as of September 30, 2021 and December 31, 2020, respectively? 6,907 shares of treasury stock as of September 30, 2021 and December 31, 2020, respectively? and 11,432,284 and 6,300,961 shares outstanding as of September 30, 2021 and December 31, 2020, respectively | 57 | 32 | |||||||
| Additional paid-in capital | 40,502 | 30,052 | |||||||
| Accumulated deficit | (31,485 | ) | (27,529 | ) | |||||
| Total stockholders' equity | 9,074 | 2,555 | |||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 28,109 | $ | 30,183 | |||||
| ENSERVCO CORPORATION AND SUBSIDIARIES | |||||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||||
| (In thousands) | |||||||||||
| (Unaudited) | |||||||||||
| For the Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net (loss) income | $ | (3,956 | ) | $ | 1,211 | ||||||
| Net (loss) income from discontinued operations | (8 | ) | 60 | ||||||||
| Net (loss) income from continuing operations | (3,948 | ) | 1,151 | ||||||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 3,975 | 3,977 | |||||||||
| Loss on disposal of equipment | 70 | 59 | |||||||||
| Board compensation issued in equity | 311 | - | |||||||||
| Stock-based compensation | 70 | 377 | |||||||||
| Amortization of debt issuance costs and discount | 8 | 119 | |||||||||
| Gain on restructuring of senior revolving credit facility | - | (11,916 | ) | ||||||||
| Gain on forgiveness of PPP loan | (1,964 | ) | - | ||||||||
| Provision for bad debt (recovery) expense | (15 | ) | 362 | ||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (531 | ) | 5,048 | ||||||||
| Inventories | (76 | ) | 88 | ||||||||
| Prepaid expense and other current assets | (1,596 | ) | (593 | ) | |||||||
| Income taxes receivable | - | (14 | ) | ||||||||
| Amortization of operating lease assets | 638 | 635 | |||||||||
| Other assets | 92 | 363 | |||||||||
| Accounts payable and accrued liabilities | (224 | ) | (1,469 | ) | |||||||
| Operating lease liabilities | (633 | ) | (615 | ) | |||||||
| Other liabilities | (64 | ) | - | ||||||||
| Net cash used in operating activities - continuing operations | (3,887 | ) | (2,428 | ) | |||||||
| Net cash provided by operating activities - discontinued operations | 4 | 133 | |||||||||
| Net cash used in operating activities | (3,883 | ) | (2,295 | ) | |||||||
| INVESTING ACTIVITIES: | |||||||||||
| Purchases of property and equipment | (348 | ) | (344 | ) | |||||||
| Proceeds from insurance claims | - | 294 | |||||||||
| Proceeds from disposals of property and equipment | 65 | 341 | |||||||||
| Net cash (used in) provided by investing activities - continuing operations | (283 | ) | 291 | ||||||||
| Net cash provided by investing activities - discontinued operations | - | 675 | |||||||||
| Net cash (used in) provided by investing activities | (283 | ) | 966 | ||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Gross proceeds from stock issuance | 9,660 | 205 | |||||||||
| Stock issuance costs and registration fees | (815 | ) | (165 | ) | |||||||
| Term loan repayment | (3,000 | ) | - | ||||||||
| Net line of credit repayments | (701 | ) | (855 | ) | |||||||
| Proceeds from PPP loan | - | 1,940 | |||||||||
| TDR accrued future interest payments | (585 | ) | - | ||||||||
| Repayment of long-term debt | (86 | ) | (109 | ) | |||||||
| Payments of finance leases | (99 | ) | (350 | ) | |||||||
| Net cash provided by financing activities - continuing operations | 4,374 | 666 | |||||||||
| Net cash used in financing activities - discontinued operations | (2 | ) | - | ||||||||
| Net cash provided by financing activities | 4,372 | 666 | |||||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | 206 | (663 | ) | ||||||||
| Cash and Cash Equivalents, beginning of period | 1,467 | 663 | |||||||||
| Cash and Cash Equivalents, end of period | $ | 1,673 | $ | - | |||||||
| Supplemental Cash Flow Information: | |||||||||||
| Cash paid for interest | $ | 630 | $ | 1,415 | |||||||
| Cash paid for taxes | - | 2 | |||||||||
| Supplemental Disclosure of Non-cash Investing and Financing Activities: | |||||||||||
| Non-cash conversion of subordinated debt and accrued interest to Company common stock | $ | 1,312 | $ | 1,515 | |||||||
| Non-cash conversion of unamortized subordinated debt discount | 61 | - | |||||||||
| Non-cash reduction of debt in connection with restructuring of senior revolving credit facility | - | 16,000 | |||||||||
| Non-cash issuance of Company common stock and warrants in connection with restructuring of senior revolving credit facility | - | 2,532 | |||||||||
| Non-cash conversion of accrued interest to senior revolving credit facility | - | 219 | |||||||||
