BAS Basic Energy Services Inc New

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,  D.C. 20549 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported): July 24, 2014

 

 

Basic Energy Services, Inc.

(Exact name of registrant as specified in its charter)

 

 

Registrant’s telephone number, including area code: (817)  334-4100   

 

Not Applicable

(Former name or former address, if changed since last report.)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[   ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[   ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[   ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[   ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

 

 

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Item 2.02    Results of Operations and Financial Condition.  

 

On July 24, 2014, Basic Energy Services, Inc. (“Basic”) issued a press release reporting financial results for the second quarter and six months ended June 30, 2014. A copy of the press release is being furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

 

The information furnished pursuant to Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing of Basic’s under the Exchange Act or the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

 

Item 9.01    Financial Statements and Exhibits.  

 

 

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

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EXHIBIT INDEX

 

 

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Exhibit 99.1

NEWS RELEASE    

 

 

 

BASIC ENERGY SERVICES REPORTS

 SECOND QUARTER 2014 RESULTS

 

 

FORT WORTH, Texas – July 24, 2014 – Basic Energy Services, Inc. (NYSE: BAS) (“Basic”) today announced its financial and operating results for the second quarter and six months ended June 30, 2014.

 

SECOND QUARTER HIGHLIGHTS

 

Second quarter 2014 revenue increased nine percent to $359.7 million from $331.3 million in the first quarter of 2014, adjusted for the impact of the sale of Basic’s barge rig operations in March 2014.  All metrics for 2013 and for the first quarter of 2014 were adjusted for this divestiture for comparability purposes.  Second quarter 2014 revenue increased 12% from the $320.7 million generated in the second quarter of 2013. Revenues improved sequentially, mainly driven by the completion and remedial services segment.

 

For the second quarter of 2014, Basic reported net income of $2.4 million, or $0.06 per basic and diluted share, compared to an adjusted net loss of $4.2 million, or $0.10 per basic and diluted share, reported in the first quarter of 2014.  Excluding a special item, Basic generated an operating income of $5.4 million, or $0.13 per basic and diluted share.  The special item was related to a $2.9 million ($4.6 million pre-tax), or $0.07 per diluted share, after-tax amount related to Basic’s participation in a legal settlement associated with a 2013 accident.  Last year in the second quarter, Basic reported a net loss of $12.8 million, or $0.32 per diluted share. Second quarter 2013 net loss before a special item was $6.2 million, or $0.15 per basic and diluted share. The special item was related to a $6.6 million ($8.0 million pre-tax), or $0.17 per diluted share, after-tax reserve for an expected settlement associated with an accident that occurred in 2008.

 

Adjusted EBITDA, excluding special items, increased 24% to $78.5 million, or 22% of revenues for the second quarter of 2014, up from $63.5 million, or 19% of revenue, in the first quarter of 2014.  In the second quarter of 2013, Basic generated Adjusted EBITDA of $61.0 million, or 19% of revenue.  Adjusted EBITDA is defined as net income before interest, taxes, depreciation and amortization, loss on legal settlements, and the net gain or loss from the disposal of assets.  EBITDA and Adjusted EBITDA, which are not measures determined in accordance with United

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States generally accepted accounting principles (“GAAP”), are defined and reconciled in note 3 under the accompanying financial tables.

Basic’s tax expense for the second quarter of 2014 was $2.2 million, compared to an adjusted tax benefit of $1.1 million in the first quarter of 2014 and a  tax benefit of $2.8 million in the second quarter of 2013.  The tax expense in the second quarter of 2014 equals an effective tax rate of 47%, up from the first quarter effective tax benefit rate of 24% and an effective tax benefit rate in the second quarter of 2013 of 18%.  The increase from the first quarter is primarily due to the change from a negative to positive pre-tax earnings base.  Basic expects the full year 2014 effective tax rate to be in the 40% range. 

Roe Patterson, Basic’s President and Chief Executive Officer, stated, “We are pleased with our second quarter results as they continue to reflect the strong levels of activity that emerged late last year.  Our improved operating performance gained momentum as the quarter progressed. Strong oil prices and relatively stable natural gas prices, drove demand for our services across our footprint. The Permian Basin’s oil directed drilling rig count continues to increase. Because of our strong position there, the Permian was the lead driver of our performance.

 

“Our completion and remedial services segment, especially stimulation services, showed marked improvement as we experienced a busy calendar of activity during the quarter. Demand for our pumping services and coil tubing operations increased during the quarter due to the high level of completion activity. Our calendar for hydraulic fracturing services remains relatively full through the remainder of this year.   In addition, our well servicing revenues increased during the quarter, mainly due to the steadiness of busier well servicing markets like the Permian Basin, Mid-Continent and Eagle Ford. Our fluid services segment experienced flat margins and slightly lower revenue due to less frac heating and hot oiling work during the warmer months of the second quarter. Our contract drilling fleet experienced higher utilization during the quarter as we saw an increase in activity for our 1,000 horsepower rigs in the vertical Wolfberry play in the Permian Basin.

 

"Pricing improved slightly in pumping and coil segments while in our other service lines pricing remained stable during the second quarter. We were able to offset some wage and cost increases by raising prices in selected lines of business in our busier markets. Excess service capacity is still an issue in some areas. We remain cautiously optimistic that as activity levels continue to improve throughout 2014 and into 2015, improving utilization rates may create an environment where prices can move higher.

 

"We expect our third quarter revenue to be up 4% to 6% sequentially as we anticipate demand for our services to benefit from increased customer spending, along with better weather and longer daylight hours. We also expect additional revenue from new expansion pumping equipment delivered in the third quarter.  Overall, we currently anticipate a stronger second half of 2014 compared to the first half.

 

“As previously announced, our revised capital budget for 2014 is $285 million, with approximately $114 million dedicated mainly to expansion of our completion and remedial services business lines. We received approximately 50,000 hydraulic horse power (HHP) near the end of the second quarter, finishing the quarter at 351,000 HHP. We expect a full third quarter impact from these additions. We should receive another 50,000 HHP and  one complete coil tubing spread by the end of the third quarter.  A second expansion coil tubing spread should be delivered  in the latter part of the fourth quarter. We will continue to evaluate organic growth

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opportunities across all business lines and remain confident that we will be able to close on some acquisitions in the near term.”

 

2014 FIRST SIX MONTHS HIGHLIGHTS

 

Revenues increased 12% to $696.4 million for the first six months of 2014 compared to $619.8 million during the comparable period of 2013.

 

Adjusted EBITDA for the first six months of 2014, excluding special items, increased 27% to $143.9 million, or 21% of revenue, compared to $113.6 million, or 18% of revenue, for the first six months of 2013.  Adjusted EBITDA excludes the special item discussed above for 2014. Adjusted EBITDA is reconciled in note 2 under the accompanying financial tables.

 

For the first half of 2014, Basic reported net income of $536,000, or $0.01 per basic and diluted share. Excluding the special item in the second quarter of 2014 mentioned above, Basic generated net income of $3.5 million, or $0.08 per basic and diluted share. For the first half of 2013, Basic reported a net loss of $21.6 million, or $0.53 per basic and diluted share.  Excluding the special item in last year’s second quarter mentioned above, Basic generated an adjusted net loss of $15.0 million, or $0.36 per basic and diluted share. 

 

Business Segment Results

 

Completion and Remedial Services

Completion and remedial services revenue rose 20% to $164.4 million in the second quarter of 2014 from $137.5 million in the prior quarter.  The sequential increase in revenue was mainly due to an increased activity in our pumping and coil tubing services based on increased activity by our customers and a larger equipment base due to capital expenditures during the quarter. In the second quarter of 2013, this segment generated $132.2 million in revenue.

As of June 30, 2014, Basic had approximately 351,000 HHP compared to approximately 301,000 HHP at the end of the previous quarter and 292,000 HHP as of June 30, 2013.

 

Segment profit in the second quarter of 2014 increased to $61.7 million compared to $51.0 million in the prior quarter.  Segment margin for the 2013 second quarter rose to 38% from 37% in the prior quarter, due to the higher utilization for our pumping services as well as slight increases in selected markets.  During the second quarter of 2013, segment profit was $46.4 million, or 35% of revenue. 

 

Well Servicing

Adjusted for the sale of our barge operations in March 2014, well servicing revenues increased two percent to $89.6 million during the second quarter of 2014 compared to $87.5 million in the prior quarter. Revenues from the Taylor manufacturing operations were $1.9 million in the second quarter, down from $2.2 million in the first quarter of 2014.  In the second quarter of 2013, adjusted well servicing revenues were $88.9 million. 

At June 30, 2014, the well servicing rig count was 421, the same as the end of the prior quarter.  The weighted average number of well servicing rigs during the second quarter of 2014 was also 421. During the second quarter of 2013, the weighted average well servicing rig count was 421. Rig hours improved to 214,200 in the second quarter of 2014, up by two percent from 209,600 in

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the previous quarter and down three percent from 216,600 in the comparable quarter of last year. Rig utilization was 71% in the second quarter of 2014, equal to the prior quarter and 72% in the second quarter of 2013. Lost hours due to inclement weather in our Texas and Oklahoma footprint offset regular seasonal improvements during the second quarter.   

Excluding revenues associated with the Taylor manufacturing operations, revenue per well servicing rig hour was $410 in the second quarter of 2014, compared to $407 in the previous quarter and to $408 reported in the second quarter of 2013.

Segment profit in the second quarter of 2014 increased to $24.9 million from $21.0 million in the prior quarter and from $24.5 million in the same period in 2013.  Segment profit margins increased to 28% in the second quarter of 2014 from 24% in the previous quarter. The sequential increase in segment margin resulted from increased rig hours, a decrease in insurance and legal costs and lower unemployment payroll taxes in the second quarter.  In the second quarter of 2013, segment profit was 28% of revenue. Segment profit from the Taylor manufacturing operations was $241,000 in the second quarter of 2014 compared to $134,000 in the prior quarter and $502,000 in the second quarter of 2013.

Fluid Services

Fluid services revenue in the second quarter of 2014 decreased three percent to $90.3 million compared to $92.8 million in the prior quarter.  The sequential decrease in revenue was due primarily to seasonal-based declines in frac heating and hot oiling, as well as inclement weather during the quarter impacting operations. During the second quarter of 2013, this segment generated $85.6 million in revenue. 

The weighted average number of fluid services trucks rose less than one percent to 1,015 during the second quarter of 2014, increasing by nine trucks from the weighted average truck count of 1,006 during the first quarter of 2014.  The weighted average number of fluid services trucks was 972 during the second quarter of 2013.  Truck hours of 630,900 during the second quarter of 2014 rose four percent from the 607,200 generated in the first quarter of 2014, and were up 11% compared to 568,500 in the same period in 2013. 

The average revenue per fluid service truck declined to $89,000 from $92,000 in the first quarter of 2014 due to declines in non-trucking revenue streams, such as frac heating, hot oiling and disposal operations. In the comparable quarter of 2013, average revenue per fluid truck was $88,000. 

Segment profit in the second quarter of 2014 was $25.3 million, compared to a profit of $26.1 million in the prior quarter, with profit margin remaining flat at 28%. Segment profit in the same period in 2013 was $26.3 million, or 31% of revenue.

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Contract Drilling

Contract drilling revenue increased 14% to $15.4 million during the second quarter of 2014, and from $13.5 million in the prior quarter.  During the second quarter of 2013, this segment generated $14.0 million in revenue.  Basic operated 12 drilling rigs during the second quarter of 2014, the same number of rigs as in the previous quarter and in the second quarter of 2013.  Revenue per drilling day in the second quarter of 2014 was $16,300, down slightly from $16,500 in both the previous quarter and in the second quarter of 2013. 

Rig operating days during the second quarter of 2014 increased 15% to 942 compared to 821 days in the prior quarter, resulting in rig utilization of 86% during the second quarter of 2014 compared to 76% during the prior quarter. The sequential increase in drilling rig utilization was mainly due to an increase in demand for our medium-sized horsepower vertical drilling rigs.  In the comparable period in 2013, rig operating days were 846, producing a utilization of 77%.

Segment profit in the second quarter of 2014 was $4.8 million, up from $4.4 million in the prior quarter and increasing from $4.2 million in the second quarter of 2013.  Segment margin for both the first and second quarter of 2014 remained flat at 32% of revenues.  Last year in the comparable period, segment margin was 30%.

G&A Expense

General and administrative (“G&A”) expense in the second quarter of 2014 was $43.0 million, or 12% of revenue. Excluding the $4.6 million pre-tax charge taken in the second quarter, G&A expense for the quarter was $38.4 million, or 11% of revenue.  This compares to last quarter’s G&A expense of $39.6 million, or 12% of revenue. G&A expense was $49.3 million, or 15% of revenue, in the second quarter of 2013, including $8.0 million in charges for the 2012 legal settlement.

Cash and Total Liquidity

On June 30, 2014, Basic had cash and cash equivalents of approximately $99.0 million, down from $116.6 million at March 31, 2014 and up from $95.6 million on June 30, 2013.  At June 30, 2014, total liquidity was approximately $311 million, which included $212 million of availability under Basic’s $250 million revolving credit facility. 

Capital Expenditures

 

Total capital expenditures during the six months ended June 30, 2014, including capital leases of $13.8 million, were approximately $121.1 million, comprised of $69.0 million for expansion projects, $48.3 million for sustaining and replacement projects and $3.8 million for other projects.  Expansion capital spending included $56.1 million for the completion and remedial services segment, $8.1 million for the fluid services segment, $3.6 million for the well servicing segment, and $1.2 million for the contract drilling segment.  Other capital expenditures are mainly for facilities and IT infrastructure. 

 

Conference Call

 

Basic will host a conference call to discuss its second quarter 2014 results on Friday, July 25, 2014, at 9:00 a.m. Eastern Time (8:00 a.m. Central).  To access the call, please dial (719) 325-2144 and ask for the “Basic Energy Services” call at least 10 minutes prior to the start

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time.  The conference call will also be broadcast live via the Internet and can be accessed through the investor relations section of Basic’s corporate website, www.basicenergyservices.com.

 

A telephonic replay of the conference call will be available until August 8, 2014 and may be accessed by calling (719) 457-0820 and using pass code 2907271#.  A webcast archive will be available at www.basicenergyservices.com shortly after the call and will be accessible for approximately 30 days.

 

About Basic Energy Services

 

Basic Energy Services provides well site services essential to maintaining production from the oil and gas wells within its operating area.  The company employs more than 5,600 employees in more than 100 service points throughout the major oil and gas producing regions in Texas, Louisiana, Oklahoma, New Mexico, Arkansas, Kansas and the Rocky Mountain States. Additional information on Basic Energy Services is available on the Company’s website at http://www.basicenergyservices.com. 

 

Safe Harbor Statement

 

This release includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Basic has made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete.  However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, including (i) changes in demand for Basic’s services and any related material impact on its pricing and utilizations rates, (ii) Basic's ability to execute, manage and integrate acquisitions successfully, (iii) changes in Basic’s expenses, including labor or fuel costs and financing costs, and (iv) regulatory changes.  Additional important risk factors that could cause actual results to differ materially from expectations are disclosed in Item 1A of Basic’s Form 10-K for the year ended December 31, 2013 and subsequent Form 10-Qs filed with the SEC.  While Basic makes these statements and projections in good faith, neither Basic nor its management can guarantee that anticipated results will be achieved.  Basic assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by Basic, whether as a result of new information, future events, or otherwise.

 

-Tables to Follow-

 

 

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EBITDA and Adjusted EBITDA each have limitations as an analytical tool and should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income and operating income, and these measures may vary among other companies. Limitations to using EBITDA as an analytical tool include:

 

 

In addition to each of the limitations with respect to EBITDA noted above, the limitations to using Adjusted EBITDA as an analytical tool include:

 

The following table presents a reconciliation of net income to EBITDA, which is the most comparable GAAP performance measure, for each of the periods indicated:

 

 

 

 

The following table presents a reconciliation of net income to “Adjusted EBITDA,” which means our EBITDA excluding the loss on disposal of assets and loss on legal settlements:  

 

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