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 fourth quarter and full year ended December 31, 2019.

“After two years of solid growth, followed by a strong start to 2019 that included 19% year-over-year revenue growth and positive EBITDA through the first three quarters, customer activity levels began a steady decline, resulting in a challenging fourth quarter that offset much of our early gains.  During 2019 the U.S. rig count declined by 26% from 2018 and capital budget exhaustion late in the year led to pricing pressure that negatively impacted our completion services revenue.  In addition, an unseasonably warm fourth quarter in Oklahoma and Pennsylvania negatively impacted frac water heating revenue. As a result, we reported only modest overall revenue growth and a decline in adjusted EBITDA for the full year,” said Ian Dickinson, President and CEO.  “Activity levels have continued to decline into 2020 and are likely to remain depressed in the near term due to pressure on crude oil prices related to the Saudi-Russia oil price war and to the impact of COVID-19 on the world economy.

“On a positive note, we grew our market share in 2019 as a result of our acquisition of Adler Hot Oil Services and ended the year with our largest customer base in company history,” Dickinson added. “In addition, we closed our non-strategic water transfer business that had been a drain on profitability and renewed our focus on core competencies in production and completion services with the aim to increase fleet utilization and optimize fleet deployment. Over the past two years we have made significant investments in process improvement initiatives designed to increase efficiencies and take better advantage of our expanded fleet and national leadership position in frac water heating.  We believe we can drive further efficiencies through technology and de-levering our balance sheet.  In addition, we continue to look at ways to take costs out of our business.  In the second half of 2019 we eliminated $1.1 million in redundant costs associated with the Adler transaction.  We will realize additional cost savings from the closing of our water transfer business in 2019 and the closing of our Oklahoma field operation in the first quarter of 2020.”

Full Year ResultsTotal revenue for the year ended December 31, 2019, increased 1% to $43.0 million from $42.8 million in the prior year.

Production services revenue grew 1% year over year to $14.7 million from $14.5 million. The production services segment includes hot oiling revenue, which increased 6% in 2019 to $12.4 million from $11.7 million due to the larger fleet size and an increase in market share; and acidizing revenue, which decreased year over year to $2.3 million from $2.9 million due primarily to a decline in services performed for two large customers that changed their well maintenance programs. That decline was partially offset by new customer wins.

Production services generated a segment profit of $1.1 million in 2019, down from a segment profit of $1.7 million in the prior year.

Completion services revenue, which consists of frac water heating services, rose slightly in 2019 to $28.3 million from $28.2 million in the prior year.  Completion services generated a segment profit of $7.3 million, down from $7.6 million in the prior year.

Total operating expenses in 2019 increased 6% to $46.6 million from $44.2 million in the prior year due to several factors, including higher direct variable costs associated with increased activity and investments in South Texas and Wyoming growth initiatives, first quarter cost overruns in the now discontinued water transfer division, and higher sales, general and administrative and depreciation and amortization expenses. Sales, general and administrative expenses increased 18% year over year to $6.2 million from $5.2 million due to an increase in bad debt reserve, higher overhead related to the Adler acquisition, higher D&O insurance costs, and an increase in professional fees related to investment in IT infrastructure and processes. In the second half of 2019 the Company achieved approximately $1.1 million in cost reductions through elimination of redundant personnel and facilities primarily related to the Adler acquisition.  Depreciation and amortization expense increased 17% to $5.7 million from $4.9 million due to the increase in fleet size.

Operating loss in 2019 was $3.6 million, up 157% year over year from $1.4 million.  Net loss from continuing operations in 2019, including a gain of approximately $1.2 million related to the April settlement agreement with the sellers of Adler, increased 31% to $5.3 million from $4.1 million in the prior year.  Net loss from discontinued operations totaled $2.3 million in 2019 versus a net loss from discontinued operations of $1.8 million in the prior year.  Net loss for 2019 increased to $7.7 million, or $0.14 per diluted share, from a net loss of $5.9 million, or $0.11 per diluted share, in the prior year.

Adjusted EBITDA in 2019 declined 41% to $2.8 million from $4.7 million in the prior year.

Enservco generated $4.5 million in cash from operations in 2019, up 234% from $1.3 million in 2018.

Fourth Quarter ResultsTotal revenue in the fourth quarter ended December 31, 2019, declined 39% to $8.1 million from $13.3 million in the same quarter last year.

Production services revenue was flat year over year at $3.5 million. Production services included hot oiling, which was flat at $3.0 million, and acidizing, which was essentially flat at $455,000 versus 486,000 year over year.

Production services generated a segment loss of $116,000 in the fourth quarter as compared to a segment profit of $468,000 in the same quarter last year.

Completion services revenue was down 53% year over year to $4.6 million from $9.8 million.

Completion services generated a segment profit of $404,000 in the fourth quarter, down from a segment profit of $2.7 million in the same quarter last year.

Total operating expenses in the fourth quarter declined 17% year over year to $10.5 million from $12.7 million due primarily to lower costs of providing production and completion services.  Sales, general and administrative expense declined 7% in the fourth quarter to $1.4 million from $1.5 million due to cost efficiencies achieved in connection with the Adler acquisition.  Depreciation and amortization expense increased 14% to $1.4 million from $1.3 million due to the increase in fleet size.

Operating loss in the fourth quarter was $2.5 million compared to operating income of $544,000 in the same quarter last year.  Net loss from continuing operations in the fourth quarter increased to $3.0 million from a net loss from continuing operations of $141,000 in the same quarter last year.  Net loss from discontinued operations totaled $340,000 in the fourth quarter compared to a net loss from discontinued operations of $376,000 in the fourth quarter a year ago. Net loss in the fourth quarter was $3.3 million, or $0.06 per diluted share, versus a net loss of $517,000, or $0.01 per diluted share, in the same quarter last year.

Adjusted EBITDA in the fourth quarter was $168,000, down from $2.0 million in the same quarter last year.

Conference Call InformationManagement 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 844-369-8770 (862-298-0840 for international callers).  No passcode is necessary.  A telephonic replay will be available through April 3, 2020, by calling 877-481-4010 (919-882-2331 for international callers) and entering the Conference ID #33431. To listen to the webcast, participants should go to the ENSERVCO website at www.enservco.com and link to the “Investors” page at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available until April 20, 2020.  The webcast also is available at the following link:https://www.webcaster4.com/Webcast/Page/2228/33431

About EnservcoThrough 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 StatementsThis 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," 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, 2019, and subsequently filed documents with the SEC.  Forward looking statements in this news release that are subject to risk include the ability to continue generating positive financial results; expectations that activity levels will remain depressed in the near term; ability to increase fleet utilization, optimize fleet deployment, increase efficiencies and take better advantage of the Company’s expanded fleet and national leadership position in frac water heating; and ability to de-lever the balance sheet and take costs of our the business.  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:

Jay PfeifferPfeiffer High Investor Relations, Inc.Phone: 303-880-9000Email: jay@pfeifferhigh.com

 
ENSERVCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
 For the Three Months Ended For the Year Ended
 December 31, December 31,
  2019  2018  2019  2018
        
Revenues       
Production services$3,465  $3,454  $14,704  $14,538 
Completion services 4,612   9,816   28,322   28,222 
  8,077   13,270   43,026   42,760 
        
Expenses       
Production services 3,581   2,986   13,575   12,864 
Completion services 4,208   7,089   21,032   20,614 
Sales, general and administrative expenses 1,373   1,470   6,153   5,193 
Patent litigation and defense costs -   3   10   80 
Severance and Transition Costs -   -   83   633 
Gain (Loss) on disposals of equipment (78)  (90)  (73)  (104)
Impairment loss -   -   127   - 
Depreciation and amortization 1,447   1,268   5,692   4,871 
Total operating expenses 10,531   12,726   46,599   44,151 
        
(Loss) Income from Operations (2,454)  544   (3,573)  (1,391)
        
Other (expense) income       
Interest expense (570)  (746)  (2,805)  (2,228)
Gain on settlement -   -   1,252   
Other income (expense) 21   61   (162)  (407)
Total other expense (549)  (685)  (1,715)  (2,635)
        
(Loss) income from continuing operations Before Tax Expense (3,003)  (141)  (5,288)  (4,026)
Income tax (expense) benefit -   -   (32)  (32)
Income from continuing operations$(3,003) $(141) $(5,320) $(4,058)
Discontinued operations       
Loss from operations of discontinued operations (340)  (376)  (2,332)  (1,807)
Income tax benefit -   -   -   - 
Loss on discontinued operations (340)  (376)  (2,332)  (1,807)
Net (loss) income$(3,343) $(517) $(7,652) $(5,865)
        
(Loss) earnings from continuing operations per Common Share - Basic$(0.05) $-  $(0.10) $(0.08)
Loss from discontinued operations per Common Share - Basic (0.01)  (0.02)  (0)  (0.03)
Net loss per share - basic$(0.06) $(0.02) $(0.14) $(0.11)
        
(Loss) earnings from continuing operations per Common Share - Diluted$(0.06) $(0.01) $(0.14) $(0.10)
Loss from discontinued operations per Common Share - Diluted -   -   -   (0.01)
Net loss per share - diluted$(0.06) $(0.01) $(0.14) $(0.11)
        
Basic weighted average number of common shares outstanding$55,479  $54,243  $55,071  $52,865 
Add: Dilutive shares assuming exercise of options and warrants -   -   -   - 
Diluted weighted average number of common shares outstanding$55,479  $54,243  $55,071  $52,865 
        

ENSERVCO CORPORATION AND SUBSIDIARIES
Calculation of Adjusted EBITDA *
        
    For the Three Months Ended For the Year Ended
    December 31, December 31,
     2019  2018  2019  2018
           
EBITDA*       
 Net (loss) income$(3,343) $(517) $(7,652) $(5,865)
 Add Back (Deduct)       
  Interest Expense 573   746   2,808   2,228 
  Provision for income tax expense -   -   32   32 
  Depreciation and amortization 1,748   1,595   6,870   6,264 
 EBITDA* (1,022)  1,824   2,058   2,659 
 Add Back (Deduct)       
   Stock-based compensation 54   102   275   393 
   Severance and Transition Costs -   -   83   633 
   Patent Litigation and defense costs -   3   10   80 
   Impairment loss -   130   127   130 
   Acquisition-related expenses -   186   -   224 
   Gain on settlement -   -   (1,252)  - 
   One-time software expense 64   -   64   - 
   Adler consolidation -   -   156   - 
   Other (income) expense (22)  (61)  153   407 
   Gain on disposal of assets (78)  (184)  (80)  (237)
   EBITDA related to discontinued operations 1,172   12   1,172   416 
 Adjusted EBITDA*$168  $2,012  $2,766  $4,705 
   *Note: See below for discussion of the use of non-GAAP financial measurements.       
           
           
   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
Condensed Consolidated Balance Sheets
(In thousands)
    
 Dec 31, December 31,
ASSETS 2019  2018
    
Current Assets   
Cash and cash equivalents$663  $257 
Accounts receivable, net 6,424   9,848 
Prepaid expenses and other current assets 1,016   1,043 
Inventories 398   514 
Income tax receivable, current 43   85 
Current assets of discontinued operations 187   1,783 
Total current assets 8,731   13,530 
    
Property and equipment, net 26,620   30,858 
Goodwill 546   546 
Intangible assets, net 828   1,033 
Income taxes receivable, noncurrent 14   28 
Right-of-use asset - financing, net 569   0 
Right-of-use asset - operating, net 3,793   0 
Other assets 445   650 
Non-current assets of discontinued operations 1,430   2,376 
TOTAL ASSETS$42,976  $49,021 
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current Liabilities   
Accounts payable and accrued liabilities$4,470  $3,094 
Senior revolving credit facility 33,994   - 
Note Payable -   3,868 
Lease liability - financing, current 207   - 
Lease liability - operating, current 848   - 
Current portion of long-term debt 147   149 
Current liabilities of discontinued operations 72   341 
Total current liabilities 39,738   7,452 
    
Long-Term Liabilities   
Senior revolving credit facility -   33,882 
Subordinated debt 2,381   1,832 
Long-term debt, less current portion 198   312 
Lease liability - Financing 259   - 
Lease liability - Operating 3,009   - 
Other liability 33   941 
Long-term liability of discontinued operations 34   - 
Total long-term liabilities 5,914   36,967 
Total liabilities 45,652   44,419 
    
Commitments and Contingencies ( Note 8)   
    
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, 55,642,829 and PY shares issued, respectively; 103,600 shares of treasury stock; and 55,539,229 and PY shares outstanding, respectively 278   271 
Additional paid-in capital 22,066   21,797 
Accumulated (deficit) earnings (25,020)  (17,466)
Total stockholders' equity (2,676)  4,602 
    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$42,976  $49,021 
    

ENSERVCO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
    
 For the Year Ended
 December 31,
  2019  2018
OPERATING ACTIVITIES   
Net Income (loss)$(7,652) $(5,865)
Net Loss from discontinued operations (2,332)  (1,807)
Net Loss from continuing operations (5,320)  (4,058)
Adjustments to reconcile net income (loss) to net cash provided by operating activities   
Depreciation and amortization 5,692   4,871 
(Gain) loss on disposal of equipment (73)  (104)
Impairment on Dillco 127   
Gain on Adler settlement (1,252)  
Change in fair value of warrant -   540 
Deferred income taxes -   - 
Stock-based compensation 275   393 
Amortization of debt issuance costs and discounts 321   297 
Lease termination expense 62   
Provision for bad debt expense 160   31 
Changes in operating assets and liabilities   - 
Accounts receivable 3,257   988 
Inventories 116   38 
Prepaid expense and other current assets 17   1,079 
Income taxes receivable 43   (28)
Amortization of operating lease assets 736   
Other assets 274   (120)
Accounts payable and accrued liabilities 1,328   (2,806)
Income taxes payable -   - 
Operating lease liabilities (727)  - 
Other liabilities 44   25 
Net cash provided by (used in) operating activities - continuing operations 5,080   1,146 
Net cash provided by (used in) operating activities - discontinued operations (613)  190 
Net cash provided by (used in) operating activities 4,467   1,336 
    
    
INVESTING ACTIVITIES    
Acquisition of Adler -   (6,164)
Purchases of property and equipment (1,191)  (1,058)
Proceeds from insurance claims 49   122 
Proceeds from disposal of equipment 284   578 
Net cash used in investing activities - continuing operations (858)  (6,522)
Net cash used in investing activities - discontinued operations 400   (752)
Net cash used in investing activities (458)  (7,274)
    
    
FINANCING ACTIVITIES   
Stock issuance costs and registration fees   - 
Net line of credit (payments) borrowings 61   6,728 
Proceeds from issuance of long-term debt 500   - 
Repayment of Note (3,700)  (800)
Repayment of long-term debt (115)  (93)
Payments of finance leases (326)  
Other financing (1)  (31)
Net Cash provided by (used in) financing activities - continuing operations (3,581)  5,804 
Net Cash provided by (used in) financing activities - discontinued operations (22)  
Net Cash provided by (used in) financing activities - discontinued operations (3,603)  
    
Increase Decrease in Cash Flows 406   (134)
    
Beginning Cash 257   391 
    
Ending Cash $663  $257 
  -   
    

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