Quarterly Report (10-q)

Date : 05/09/2019 @ 9:46PM
Source : Edgar (US Regulatory)
Stock : Basic Energy Services Inc New (BAS)
Quote : 1.96  0.09 (4.81%) @ 10:59PM

Quarterly Report (10-q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________________________________________________________________ 
Form 10-Q
______________________________________________________________________________________________________________________________________________ 
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended   March 31, 2019  
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to             
Commission File Number 001-32693
______________________________________________________________________________________________________________________________________________  
Basic Energy Services, Inc.
(Exact name of registrant as specified in its charter)
 ______________________________________________________________________________________________________________________________________________ 
Delaware 54-2091194
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
801 Cherry Street, Suite 2100
Fort Worth, Texas
76102
(Address of principal executive offices) (Zip code)
(817) 334-4100
(Registrant’s telephone number, including area code)
______________________________________________________________________________________________________________________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒   No  ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer Accelerated filer
Non-accelerated filer ☐   Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No   ☒ 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  ☒    No   ☐ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common stock, par value $0.01 per share BAS New York Stock Exchange

There were 26,957,350 shares of the registrant’s common stock outstanding as of May 9, 2019.  




BASIC ENERGY SERVICES, INC.
Index to Form 10-Q 
 

i


CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are subject to risks and uncertainties. These statements may relate to, but are not limited to, information or assumptions about us, our capital and other expenditures, dividends, financing plans, capital structure, cash flows, pending legal or regulatory proceedings and claims, future economic performance, operating income, costs savings and management's plans, strategies, goals and objectives for future operations and goals. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things, the risk factors  discussed in this quarterly report, and in our most recent Annual Report on Form 10-K and other factors, most of which are beyond our control.

The words “believe,” “estimate,” “expect,” “anticipate,” “project,” “intend,” “plan,” “seek,” “could,” “should,” “may,” “potential” and similar expressions are intended to identify forward-looking statements. All statements other than statements of current or historical fact contained in this quarterly report are forward-looking statements. Although we believe that the forward-looking statements contained in this quarterly report are based upon reasonable assumptions, the forward-looking events and circumstances discussed in this quarterly report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.
Important factors that may affect our expectations, estimates or projections include:
a decline in, or substantial volatility of, oil and natural gas prices, and any related changes in expenditures by our customers;
competition within our industry;
the effects of future acquisitions on our business;
uncertainties about our ability to successfully execute our business and financial plans and strategies;
our access to current or future financing arrangements;  
changes in customer requirements in markets or industries we serve;
availability and cost of equipment;
general economic and market conditions;
our ability to replace or add workers at economic rates;
our borrowing capacity , covenant compliance under instruments governing any of our existing or future indebtedness and cash flows; and
environmental and other governmental regulations.

Our forward-looking statements speak only as of the date of this quarterly report. Unless otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.


ii


PART I — FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS
Basic Energy Services, Inc.
(in thousands, except share and per share data)
March 31, 2019 December 31, 2018
ASSETS
(Unaudited)
Current assets:
Cash and cash equivalents
$ 63,796  $ 90,300 
Trade accounts receivable, net of allowance of $1,573 and $1,838, respectively 140,269  144,767 
Income tax receivable
3,425  1,574 
Inventories
33,740  36,449 
Prepaid expenses
16,164  17,479 
Other current assets
6,299  4,640 
Total current assets
263,693  295,209 
Property and equipment, net 442,092  448,801 
Operating lease right-of-use assets 19,321  — 
Deferred debt costs, net of amortization 2,604  2,747 
Intangible assets, net of amortization 2,925  2,984 
Other assets 12,585  12,036 
Total assets
$ 743,220  $ 761,777 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$ 76,833  $ 98,323 
Accrued expenses
71,484  55,826 
Current portion of long-term debt, net of $359 and $479 discount at March 31, 2019 and December 31, 2018, respectively 22,465  27,039 
Operating lease right-of-use liabilities, current portion 5,347  — 
Other current liabilities
719  3,123 
Total current liabilities
176,848  184,311 
Long-term debt, net of discounts and deferred financing costs of $10,448 and $10,690, at March 31, 2019 and December 31, 2018, respectively 322,358  322,701 
Operating lease right-of-use liabilities, long-term portion 13,974  — 
Other long-term liabilities 35,156  35,337 
Stockholders' equity:
Preferred stock; $0.01 par value; 5,000,000 shares authorized; zero outstanding at March 31, 2019 and December 31, 2018 —  — 
Common stock; $0.01 par value; 80,000,000 shares authorized; 27,267,899 and 26,990,034 shares issued and 26,957,350 and 26,747,712 shares outstanding at March 31, 2019 and December 31, 2018, respectively 273  270 
Additional paid-in capital
467,373  464,264 
Retained deficit
(268,747) (241,271)
Treasury stock, at cost, 310,549 and 242,322 shares at March 31, 2019 and December 31, 2018, respectively (4,015) (3,835)
Total stockholders' equity
194,884  219,428 
Total liabilities and stockholders' equity
$ 743,220  $ 761,777 

See accompanying notes to   unaudited   consolidated financial statements.



1



Basic Energy Services, Inc.
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended March 31,
2019 2018
Revenues:
Completion & Remedial Services
$ 76,834  $ 117,597 
Well Servicing
60,515  56,951 
Water Logistics
55,601  56,509 
Other Services
4,252  3,608 
Total revenues
197,202  234,665 
Expenses:
Completion & Remedial Services
63,433  89,659 
Well Servicing
47,196  46,511 
Water Logistics
37,299  40,923 
Other Services
3,914  4,223 
General and administrative, including stock-based compensation of $3,288 and $6,798 in the three months ended March 31, 2019 and 2018, respectively 35,522  40,978 
Depreciation and amortization
27,498  30,235 
Loss on disposal of assets
1,455  1,779 
Total expenses
216,317  254,308 
Operating loss
(19,115) (19,643)
Other income (expense):
Interest expense
(10,756) (11,283)
Interest income
245  27 
Other income
299  309 
Loss before income taxes (29,327) (30,590)
Income tax benefit 1,851  59 
Net loss $ (27,476) $ (30,531)
Loss per share of common stock:
Basic
$ (1.02) $ (1.16)
Diluted
$ (1.02) $ (1.16)

See accompanying notes to   unaudited   consolidated financial statements.













2


Basic Energy Services, Inc.
(in thousands, except share data)

Common Stock Additional Treasury Total
Issued Common Paid-In Treasury Treasury Retained Stockholders'
Shares Stock Capital Shares Stock Deficit Equity
Balance - December 31, 2018 26,990,034  $ 270  $ 464,264  242,322  $ (3,835) $ (241,271) $ 219,428 
Issuances of restricted stock 277,865  (3) —  —  —  — 
Amortization of equity-classified share-based compensation —  —  3,275  —  —  —  3,275 
Treasury stock, net —  —  (163) 68,227  (180) —  (343)
Net loss —  —  —  —  —  (27,476) (27,476)
Balance - March 31, 2019 (unaudited) 27,267,899  $ 273  $ 467,373  310,549  $ (4,015) $ (268,747) $ 194,884 


Common Stock Additional Treasury Total
Issued Common Paid-In Treasury Treasury Retained Stockholders'
Shares Stock Capital Shares Stock Deficit Equity
Balance - December 31, 2017 26,371,572  $ 264  $ 439,517  152,443  $ (4,454) $ (96,674) $ 338,653 
Issuances of restricted stock 272,510  (2) —  —  —  — 
Amortization of equity-classified share-based compensation —  —  6,798  —  —  —  6,798 
Treasury stock, net —  —  (291) 69,337  (1,051) —  (1,342)
Net loss —  —  —  —  —  (30,531) (30,531)
Balance - March 31, 2018 (unaudited) 26,644,082  $ 266  $ 446,022  221,780  $ (5,505) $ (127,205) $ 313,578 


See accompanying notes to   unaudited   consolidated financial statements.

3


Basic Energy Services, Inc.
(Unaudited)
(in thousands)
Three Months Ended March 31,
2019 2018
Cash flows from operating activities:
Net loss $ (27,476) $ (30,531)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation and amortization
27,498  30,235 
Accretion on asset retirement obligation
85  41 
Change in allowance for doubtful accounts
(265) (159)
Amortization of deferred financing costs
564  176 
Amortization of debt discounts 262  1,474 
Non-cash compensation
3,288  6,798 
Loss on disposal of assets 1,455  1,779 
Deferred income taxes
—  (78)
Changes in operating assets and liabilities:
Accounts receivable
4,763  (7,618)
Inventories
2,709  (812)
Prepaid expenses and other current assets
(1,282) 1,593 
Other assets
(549) 44 
Accounts payable
(20,496) (5,987)
Income tax receivable
(1,851) 19 
Other liabilities
(2,559) (1,641)
Accrued expenses
15,658  9,215 
Net cash provided by operating activities
1,804  4,548 
Cash flows from investing activities:
Purchase of property and equipment
(18,885) (15,412)
Proceeds from sale of assets
2,664  198 
Net cash used in investing activities
(16,221) (15,214)
Cash flows from financing activities:
Proceeds from debt —  21,000 
Payments of debt (11,423) (13,657)
Change in treasury stock including restricted stock issuances (343) (1,342)
Deferred loan costs and other financing activities
(321) — 
Net cash provided by (used in) financing activities
(12,087) 6,001 
Net decrease  in cash and cash equivalents
(26,504) (4,665)
Cash and cash equivalents - beginning of period 90,300  86,223 
Cash and cash equivalents - end of period $ 63,796  $ 81,558 
Noncash investing and financing activity:
Finance leases and notes issued for equipment $ 6,144  $ 3,321 
Change in accrued property and equipment (994) 2,518 
Change in asset retirement obligations $ 124  $ 58 
Income tax paid —  — 
See accompanying notes to   unaudited   consolidated financial statements.
4


BASIC ENERGY SERVICES, INC.
March 31, 2019 (unaudited) 
1. Basis of Presentation and Nature of Operations
Basis of Presentation
The accompanying unaudited consolidated financial statements of Basic Energy Services, Inc. and subsidiaries (“Basic” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. Certain information relating to Basic's organization and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in this Quarterly Report on Form 10-Q in accordance with GAAP and financial statement requirements promulgated by the U.S. Securities and Exchange Commission (“SEC”). The notes to the consolidated financial statements (unaudited) should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair presentation have been made in the accompanying unaudited financial statements.
On June 28, 2018, the SEC adopted amendments that expanded the definition of “smaller reporting company” by increasing the applicable public float and revenue thresholds. Under the amended definition, which became effective on September 10, 2018, a company qualifies as a smaller reporting company if it has (i) a public float of less than $250 million at the end of its most recently completed second fiscal quarter or (ii) less than $100 million in annual revenues and either no public float or a public float of less than $700 million. Based on the Company's public float (the aggregate market value of its common equity held by non-affiliates) as of June 29, 2018, the Company is considered a smaller reporting company under the revised SEC rules and, as such, is eligible to use certain scaled financial and non-financial disclosure requirements. Smaller reporting companies may elect to comply with the scaled reporting requirements separately, thereby permitting the Company to choose such disclosure requirements on an item-by-item basis.
Liquidity and Capital Resources
On October 2, 2018, the Company issued in a private offering $300.0 million aggregate principal amount of 10.75% senior secured notes due 2023 at 99.042% of par and entered into a new $150.0 million senior secured revolving credit facility. For further discussion see Note 4, "Long-Term Debt and Interest Expense".
Basic's current primary capital resources are cash flow from operations, the availability under the New ABL Facility, the ability to enter into finance leases, the ability to incur additional secured indebtedness, and a cash balance of $63.8 million at March 31, 2019. The Company had $66.2 million of available borrowing capacity under the New ABL Facility at March 31, 2019.
Nature of Operations   
Basic provides a wide range of well site services to oil and natural gas drilling and producing companies, including completion & remedial services, water logistics, well servicing and contract drilling. These services are primarily provided by Basic’s fleet of equipment. Basic’s operations are concentrated in major United States onshore oil and natural gas producing regions located in Texas, New Mexico, Oklahoma, Kansas, Arkansas, Louisiana, Wyoming, North Dakota, Colorado and California.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Basic's subsidiaries, for which Basic holds a majority voting interest. All intercompany transactions and balances have been eliminated.
Segment Information
In the first quarter of 2019, Basic revised its reportable segments for financial reporting purposes to combine its contract drilling operations with its rig manufacturing operations to form an Other Services segment. The Company's business now consists of the following four segments: Well Servicing, Water Logistics, Completion & Remedial Services, and Other Services. See Note 12, "Business Segment Information" for further information.
5


Estimates, Risks and Uncertainties
Preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management uses historical and other pertinent information to determine these estimates. Actual results could differ from those estimates. Areas where critical accounting estimates are made by management include litigation and self-insured risk reserves. 
2. Property and Equipment
The following table summarizes the components of property and equipment (in thousands):
March 31, 2019 December 31, 2018
Land $ 20,827  $ 21,431 
Buildings and improvements 41,212  40,524 
Well service units and equipment 128,960  122,694 
Fracturing/test tanks 121,206  123,550 
Pumping equipment 103,532  103,689 
Fluid services equipment 80,061  78,524 
Disposal facilities 66,995  63,229 
Rental equipment 67,735  62,642 
Light vehicles 29,828  27,080 
Contract drilling equipment 9,039  9,846 
Other 4,262  4,257 
Brine and fresh water stations 3,192  3,296 
Software 833  857 
Property and equipment, gross
677,682  661,619 
Less accumulated depreciation and amortization (235,590) (212,818)
Property and equipment, net $ 442,092  $ 448,801 
  
Basic is obligated under various finance leases for certain vehicles and equipment that expire at various dates during the next five years. The table below summarizes the gross amount of property and equipment and related accumulated amortization recorded under finance leases and included above (in thousands):
March 31, 2019 December 31, 2018
Fluid services equipment $ 35,437  $ 35,034 
Pumping equipment 24,393  48,929 
Light vehicles 21,182  18,376 
Contract drilling equipment —  314 
Well service units and equipment —  199 
Property and equipment under finance lease, cost 81,012  102,852 
Less accumulated amortization (22,513) (31,954)
Property and equipment under finance lease, net $ 58,499  $ 70,898 

6


3. Intangible Assets
Basic had trade names of $3.4 million as of each of March 31, 2019 and December 31, 2018. Trade names have a 15-year life and are tested for impairment when triggering events are identified.
Basic’s intangible assets subject to amortization were as follows (in thousands):
March 31, 2019 December 31, 2018
Trade names $ 3,410  $ 3,410 
Other intangible assets 48  48 
Intangible assets 3,458  3,458 
Less accumulated amortization (533) (474)
Intangible assets subject to amortization, net $ 2,925  $ 2,984 
Amortization expense of intangible assets for the three months ended March 31, 2019 and 2018 was as follows (in thousands):
Three Months Ended March 31,
2019 2018
Intangible amortization expense $ 59  $ 60 

4. Long-Term Debt and Interest Expense
Long-term debt consisted of the following (in thousands): 
March 31, 2019 December 31, 2018
10.75% Senior Notes due 2023 $ 300,000  $ 300,000 
Finance leases and other notes 55,630  60,909 
Unamortized discounts and deferred financing costs (10,807) (11,169)
Total long-term debt 344,823  349,740 
Less current portion 22,465  27,039 
Total non-current portion of long-term debt $ 322,358  $ 322,701 
Debt Discounts
The following discounts on debt represent the unamortized discount to fair value of the Senior Notes and the short-term portions of the fair value discount o f finance leases (in thousands):
March 31, 2019 December 31, 2018
Unamortized discount on Senior Notes $ 2,589  $ 2,731 
Unamortized discount on finance leases - short-term 359  479 
Unamortized deferred debt issuance costs 7,859  7,959 
Total unamortized discounts and deferred financing costs $ 10,807  $ 11,169 

Interest Expense
Basic’s interest expense for the three months ended March 31, 2019 and 2018, consisted of the following (in thousands):
Three Months Ended March 31,
2019 2018
Cash payments for interest $ 1,752  $ 8,578 
Change in accrued interest 8,148  221 
Amortization of discounts 262  1,474 
Amortization of deferred debt costs 564  177 
Commitment and other fees paid 11  809 
Other 19  24 
Total interest expense $ 10,756  $ 11,283 

7


Senior Secured Notes
On October 2, 2018, the Company issued $300.0 million aggregate principal amount of 10.75% senior secured notes due 2023 (the “Senior Notes”) in an offering exempt from registration under the Securities Act. The Senior Notes were issued at a price of 99.042% of par to yield 11.0%. The Senior Notes are secured by a first-priority lien on substantially all of the assets of the Company and the subsidiary guarantors other than accounts receivable, inventory and certain related assets. Net proceeds from the offering of approximately $290.0 million were used to repay the Company’s existing indebtedness under the Amended and Restated Term Loan Agreement, to repay the Company’s outstanding borrowings under its previous credit facility (the "Prior ABL Facility"), and for general corporate purposes.
Indenture
The Company’s Senior Notes were issued under and are governed by an indenture, dated as of October 2, 2018 (the “Indenture”), by and among the Company, the guarantors named therein (the “Guarantors”), and UMB Bank, N.A. as Trustee and Collateral Agent (the “Trustee”). The Senior Notes are jointly and severally, fully and unconditionally guaranteed (the “Guarantees”) on a senior secured basis by the Guarantors and are secured by first priority liens on substantially all of the Company’s and the Guarantors’ assets, other than accounts receivable, inventory and certain related assets.
The Indenture contains covenants that limit the ability of the Company and certain subsidiaries to:

incur additional indebtedness or issue preferred stock;
pay dividends or make other distributions to its stockholders;
repurchase or redeem capital stock or subordinated indebtedness and certain refinancings thereof;
make certain investments;
incur liens;
enter into certain types of transactions with affiliates;
limit dividends or other payments by restricted subsidiaries to the Company; and
sell assets or consolidate or merge with or into other companies.
These limitations are subject to a number of important qualifications and exceptions. Upon an Event of Default (as defined in the Indenture), the Trustee or the holders of at least 25.0% in aggregate principal amount of the outstanding Senior Notes may declare the entire principal of, premium, if any, and accrued and unpaid interest, if any, on all the Senior Notes to be due and payable immediately.
At any time on or prior to October 15, 2020, the Company may redeem up to 35.0% of the aggregate principal amount of the Senior Notes at a redemption price equal to 110.8% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with an amount of cash not greater than the net proceeds from certain equity offerings. At any time prior to October 15, 2020, the Company may redeem the Senior Notes, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the Senior Notes plus a “make-whole” premium plus accrued and unpaid interest, if any, to the redemption date. The Company may also redeem all or a part of the Senior Notes at any time on or after October 15, 2020, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to the redemption date.
The Company may redeem all, but not less than all, of the Senior Notes in connection with a company sale transaction, at a redemption price of 105.4% of principal for a company sale that occurs on or after April 15, 2019 and on or before October 15, 2019, or 108.1% of principal amount for a company sale that occurs after October 15, 2019 and before October 15, 2020, in each case plus accrued and unpaid interest, if any, to the redemption date. If the Company experiences a change of control, the Company may be required to offer to purchase the Senior Notes at a purchase price equal to 101.0% of the principal amount, plus accrued and unpaid interest, if any, to the purchase date.
The Senior Notes and the Guarantees rank equally in right of payment with all of the Company’s and the Guarantors’ existing and future unsubordinated indebtedness, effectively senior to all of the Company’s and the Guarantors’ existing and future indebtedness to the extent of the value of the collateral securing the Senior Notes but junior to other indebtedness that is secured by liens on assets other than collateral for the Senior Notes to the extent of the value of such assets, and senior to all of the Company’s and the Guarantors’ future subordinated indebtedness.
Pursuant to a collateral rights agreement, the Senior Notes and Guarantees are secured by first priority liens, subject to limited exceptions, on the collateral securing the Senior Notes, consisting of substantially all of the property and assets now owned or hereafter acquired by the Company and the Guarantors, except for certain excluded property described in the Indenture.
8


New ABL Facility
On October 2, 2018, the Company terminated the Prior ABL Facility and Amended and Restated Term Loan Agreement and entered into an ABL Credit Agreement (the “New ABL Credit Agreement”) among the Company, as borrower (in such capacity, the “Borrower”), Bank of America, N.A., as administrative agent (the “Administrative Agent”), swing line lender and letter of credit issuer, UBS Securities LLC, as syndication agent, PNC Bank National Association, as documentation agent and letter of credit issuer, and the other lenders from time to time party thereto (collectively, the “New ABL Lenders”). Pursuant to the New ABL Credit Agreement, the New ABL Lenders have extended to the Borrower a revolving credit facility in the maximum aggregate principal amount of $150.0 million, subject to borrowing base capacity (the “New ABL Facility”). The New ABL Facility includes a sublimit for letters of credit of up to $50.0 million in the aggregate, and for borrowings on same-day notice under swingline loans subject to a sublimit of the lesser of (a) $15.0 million and (b) the aggregate commitments of the New ABL Lenders. The New ABL Facility also provides capacity for base rate protective advances up to $10.0 million at the discretion of the Administrative Agent and provisions relating to overadvances. The New ABL Facility contains no restricted cash requirements.
Borrowings under the New ABL Facility bear interest at a rate per annum equal to an applicable rate, plus, at Borrower’s option, either (a) a base rate or (b) a LIBO rate. The applicable rate was fixed from the closing date to April 1, 2019. Following April 1, 2019, the applicable rate is determined by reference to the average daily availability as a percentage of the borrowing base during the fiscal quarter immediately preceding such applicable quarter.
Principal amounts outstanding under the New ABL Facility will be due and payable in full on the maturity date, which is five years from the closing of the facility; provided that if the Senior Notes have not been redeemed by July 3, 2023, then the maturity date shall be July 3, 2023.
Substantially all of the domestic subsidiaries of the Company guarantee the borrowings under the New ABL Facility, and Borrower guarantees the payment and performance by each specified loan party of its obligations under its guaranty with respect to swap obligations. All obligations under the New ABL Facility and the related guarantees are secured by a perfected first-priority security interest in substantially all accounts receivable, inventory, and certain other assets, not including equity interests. As of March 31, 2019, Basic had no borrowings and $39.6 million of letters of credit outstanding under the New ABL Facility.

5.   Leases
Basic adopted ASU No. 2016-02, Topic 842 - Leases,   effective January 1, 2019. This ASU requires lessees to recognize an operating lease right-of-use ("ROU") asset and liability on the balance sheet for all operating leases with an initial lease term greater than twelve months.
Per ASU 2018-11 Leases – Targeted Improvements, allowed for a practical expedient wherein all periods previously reported under ASC 840 will continue to be reported under ASC 840, and periods beginning January 1, 2019 and after are reported under ASC 842. Basic elected to adopt this practical expedient along with the package of practical expedients which allows Basic to combine lease and non-lease costs, and not to assess whether existing or or expired land easements that were not previously accounted for as leases under Topic 840 are or contain a lease under this Topic.  
Under this transition option, Basic will continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented and will make only annual disclosures for the comparative periods because ASC 840 does not require interim disclosures. Prior period amounts have not been adjusted and continue to be reflected in accordance with Basic’s historical accounting. The adoption of this standard resulted in the recording of ROU assets and lease liabilities of approximately of $20.8 million as of January 1, 2019, with no related impact on Basic’s Consolidated Statement of Equity or Consolidated Statement of Income (Loss) .
As a lessee, Basic leases its corporate office headquarters in Fort Worth, Texas, and conducts its business operations through various regional offices located throughout the United States. These operating locations typically include regional offices, storage and maintenance yards, disposal facilities and employee housing sufficient to support its operations in the area. Basic leases most of these properties under non-cancelable term and month-to-month operating leases, many of which contain renewal options that can extend the lease term from one to five years and some of which contain escalation clauses. Basic also leases supplemental equipment, typically under cancelable short-term and very short term (less than 30 days) leases. Due to the nature of the Company's business, any option to renew these short-term leases, and the options to extend certain of its long-term real estate leases, are generally not considered reasonably certain to be exercised. Therefore, the periods covered by such optional periods are not included in the determination of the term of the lease, and the lease payments during these periods are similarly excluded from the calculation of operating lease asset and lease liability balances.
9


Basic recognizes rent expense on a straight-line basis, except for certain variable expenses which are recognized when the variability is resolved, typically during the period in which they are paid. Variable lease payments typically include charges for property taxes and insurance, and some leases contain variable payments related to non-lease components, including common area maintenance and usage of facilities or office equipment (for example, copiers), which totaled approximately $0.3 million during the three months ended March 31, 2019. Prepaid rent total $0.2 million during the three months ended March, 31, 2019. Operating lease expense consists of rent expense related to leases which were included in ROU assets under Topic 842. The following table summarizes the components of the Company's lease expense recognized for the three months ending March 31, 2019, excluding variable lease and prepaid rent costs (amounts in thousands):  
Three Months ended
March 31, 2019
Operating lease expense:
Short-term operating lease expense $ 1,974 
Long-term operating lease expense 2,185 
Total operating lease expense $ 4,159 
Finance lease expense:
Amortization of right-of-use assets $ 5,440 
Interest on lease liabilities 1,382 
Total finance lease expense $ 6,822 
Supplemental information related to leases was as follows:
Weighted Average Remaining Lease Term (in years)
Operating leases 3.0
Finance leases 2.6
Weighted Average Discount Rate
Operating leases 14.4%   
Finance leases 8.0%   
10


Supplemental cash flow information related to leases was as follows for the periods presented (in thousands):
Three Months ended
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash outflows from operating leases $ 4,159 
Operating cash outflows from finance leases 1,382 
Financing cash outflows from finance leases 11,423 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ — 
Finance leases 6,144 
Supplemental balance sheet information related to leases was as follows for the periods presented (in thousands):
March 31, 2019 December 31, 2018
Right-of-Use Assets under Operating Leases
Operating lease right-of-use assets $ 19,321  $ 20,819 
Operating lease right-of-use liabilities, current portion 5,347  5,649 
Operating lease right-of-use liabilities, long-term portion 13,974  15,170 
Total operating lease liabilities $ 19,321  $ 20,819 
Right-of-Use Assets under Finance Leases
Property and equipment, at cost $ 81,012  $ 102,852 
Accumulated depreciation (22,513) (31,954)
Property and equipment, net $ 58,499  $ 70,898 
Current portion of long-term debt $ 22,824  $ 27,519 
Long-term debt 32,806  33,390 
Total finance lease liabilities $ 55,630  $ 60,909 
The Company adopted ASU 2016-02 on January 1, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption. Future annual minimum lease payments and capital lease commitments as of December 31, 2018 were as follows (in thousands):
Operating Leases Finance Leases
2019 $ 8,179  $ 27,519 
2020 6,323  19,322
2021 5,438  10,697
2022 4,696  3,233
2023 1,248  83
Thereafter 1,215  55
Total lease payments $ 27,099  $ 60,909 

11


Maturities of lease liabilities were as follows at March 31, 2019 (in thousands):
Operating Leases Finance Leases
2019 $ 5,926  $ 17,575 
2020 6,398  20,463
2021 5,517  12,156
2022 4,775  4,786
2023 1,308  595
Thereafter 1,158  55
Total lease payments $ 25,082  $ 55,630 
Impact of discounting (5,761)
Discounted value of operating lease obligations $ 19,321 
Current operating lease liabilities $ 4,151 
Noncurrent operating lease liabilities 15,170 
$ 19,321 


6. Fair Value Measurements
The following is a summary of the carrying amounts, net of discounts, and estimated fair values of the Company's Senior Notes as of March 31, 2019 and December 31, 2018:
March 31, 2019 December 31, 2018
Hierarchy Level Carrying Amount Fair Value Carrying Amount Fair Value
(In thousands)
10.75% Senior Notes due 2023 1 $ 297,411  $ 245,568  $ 297,269  $ 257,806 
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair value due to the short maturities of these instruments. 
Basic did not have any assets or liabilities that were measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018.

7. Commitments and Contingencies
Environmental
Basic is subject to various federal, state and local environmental laws and regulations that establish standards and requirements for protection of the environment. Basic cannot predict the future impact of such standards and requirements, which are subject to change and can have retroactive effectiveness. Basic continues to monitor the status of these laws and regulations.
Currently, Basic has not been fined, cited or notified of any environmental violations that would have a material adverse effect upon its financial position, liquidity or capital resources. However, management recognizes that by the very nature of its business, material costs could be incurred in the near term to maintain compliance. The amount of such future expenditures is not determinable due to several factors, including the unknown magnitude of possible regulation or liabilities, the unknown timing and extent of the corrective actions which may be required, the determination of Basic’s liability in proportion to other responsible parties and the extent to which such expenditures are recoverable from insurance or indemnification.
Litigation
From time to time, Basic is a party to litigation or other legal proceedings that Basic considers to be a part of the ordinary course of business. Basic is not currently involved in any legal proceedings that it considers probable or
12


reasonably possible, individually or in the aggregate, to result in a material adverse effect on its financial condition, results of operations or liquidity.
Sales and Use Tax Audit
In 2014, Basic was notified by the Texas State Comptroller’s office that a sales and use tax audit for the period from 2010 through 2013 would be conducted. A preliminary report was issued in the second quarter of 2018 for this audit, and Basic will appeal the preliminary report through the redetermination process. Based on the Company's analysis, the potential liability associated with this audit ranges from $6.0 million to $24.0 million. This range could potentially change in future periods as the appeal and redetermination process progresses. Net of good faith payments made by the Company, the Company currently has $5.1 million in its financial statements as liabilities and the related interest associated with the taxes of $0.3 million is included in interest expense for the three months ended March 31, 2019.
Self-Insured Risk Accruals
Basic is self-insured up to retention limits as it relates to workers’ compensation, general liability claims, and medical and dental coverage of its employees. Basic generally maintains no physical property damage coverage on its rig fleet, with the exception of certain of its 24-hour workover rigs, newly manufactured rigs and pumping services equipment. Basic has deductibles per occurrence for workers’ compensation, general liability claims, and medical and dental coverage of $4.0 million, $1.0 million, and $0.4 million, respectively. Basic has a $1.0 million deductible per occurrence for automobile liability. Basic maintains accruals in the accompanying consolidated balance sheets related to self-insurance retentions based upon third-party data and claims history. At March 31, 2019, short-term and long-term self-insured risk reserves were $7.2 million and $16.3 million, respectively. At December 31, 2018, short-term and long-term self-insured risk reserves were $6.7 million and $16.3 million, respectively.
8. Stockholders’ Equity
Common Stock
Basic did not make any equity grants or issue any new shares in the quarter ended March 31, 2019. In February 2018, Basic granted certain members of management 203,625 performance-based restricted stock units and 203,625 restricted stock units, which each vest over a three -year period. 
9. Incentive Plan
During the three-month periods ended March 31, 2019 and 2018, compensation expense related to share-based arrangements under the Basic Energy Services, Inc. Management Incentive Plan (the “MIP”), including restricted stock, restricted stock units and stock option awards, was approximately $3.3 million and $6.8 million respectively. Basic did not recognize a tax benefit for compensation expense recognized during the three-month periods ended March 31, 2019 and 2018.
At March 31, 2019, there was $13.2 million unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the MIP. That cost is expected to be recognized over a weighted average period of 1.9 years.
Stock Option Awards
The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. Stock options granted under the MIP expire ten years from the date they are granted, and vest over a three -year service period. Total expense related to stock options in three-month periods ended March 31, 2019 and 2018, was approximately $755,000 and $1.1 million, respectively. Future expense for all options is expected to be approximately $2.5 million in total through February 2020.
13


The following table reflects changes during the three-month period and a summary of stock options outstanding at March 31, 2019:
Weighted
Average
Weighted Remaining Aggregate
Number of Average Contractual Intrinsic
Options Exercise Term Value
Non-statutory stock options: Granted Price (Years) (000's)
Outstanding, beginning of period 595,736  $ 39.23 
Options granted
—  — 
Options forfeited (6,474) $ 40.12 
Options exercised
—  — 
Options expired (71,228) $ 39.23 
Outstanding, end of period
518,034  $ 39.21  7.8 $— 
Exercisable, end of period
347,528  $ 39.21  7.8 $— 
Vested or expected to vest, end of period
170,506  $ 39.23  7.8 $— 
 There were  no stock options exercised during the three months ended March 31, 2019 and 2018.
Restricted Stock Unit Awards
Time-based
 A summary of the status of Basic’s non-vested restricted stock units at March 31, 2019 and changes during the three months ended March 31, 2019 are presented in the following table:
Weighted Average
Number of Grant Date Fair
Non-vested Units Restricted Stock Units Value Per Unit
Non-vested at beginning of period 191,302  $ 16.58 
Granted during period —  — 
Vested during period (73,976) 16.17 
Forfeited during period (2,912) 17.31 
Non-vested at end of period 114,414  $ 16.83 
  Valuation of time vesting restricted stock units for all periods presented is equal to the quoted market price for the shares on the date of the grant. The total fair value of time-vesting restricted stock units vested in three months ended March 31, 2019 and 2018, was $299,000 and $49,000, respectively, and is measured as the quoted market price of the Company’s common stock on the vesting date for the number of shares vested.
Performance-based
 A summary of the status of Basic’s non-vested performance-based grants at March 31, 2019 and changes during the three months ended March 31, 2019 are presented in the following table:

Weighted Average
Number of Grant Date Fair
Non-vested Units Performance Stock Units Value Per Unit
Non-vested at beginning of period 682,985  $ 27.27 
Granted during period —  — 
Vested during period (218,541) 36.33 
Forfeited during period (9,764) 26.66 
Non-vested at end of period 454,680  $ 22.93 
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The total fair value of performance-based restricted stock units vested during the three months ended March 31, 2019 and 2018 was $1.0 million and $4.8 million, respectively, and was measured as the quoted market price of the Company’s common stock on the vesting date for the number of shares vested.
Restricted   Stock Awards
On May 21, 2018, Basic’s Board of Directors (the "Board") approved grants of an aggregate of 48,400 restricted stock shares to non-employee members of the Board. These grants are subject to vesting over a period of  ten  months and are subject to accelerated vesting under certain circumstances. The total fair value of restricted stock awards vested during the three months ended March 31, 2019 and 2018 was $33,000 and $77,000, respectively, and was measured as the quoted market price of the Company’s common stock on the vesting date for the number of shares vested.
Phantom   Stock Awards
On March 21, 2019, the Compensation Committee of the Board approved grants of phantom restricted stock awards to certain key employees. Phantom shares are recorded as a liability at their current market value and are included in other current liabilities. The number of phantom shares issued on March 22, 2019 was 370,350. These grants remain subject to vesting annually in one-third increments over a three -year period, with the first portion vesting on March 22, 2020, and are subject to accelerated vesting in certain circumstances. Total expense related to phantom stock in three-month periods ended March 31, 2019 and 2018, was approximately $13,000 and $276,000, respectively.

10.   Revenues
The Company's revenues are generated by services, which are consumed as provided by its customers on their sites. As a decentralized organization, contracts for the Company's services are negotiated on a regional level and are on a per job basis, with jobs being completed in a short period of time, usually one day or up to a week. Revenue is recognized as performance obligations have been completed on a daily basis either as Accounts Receivable or Work-in-Process ("WIP"), when all of the proper approvals are obtained.
A small percentage of the Company's jobs may require performance obligations which extend over a longer period of time and are not invoiced until all performances obligations in the contract are complete, such as, drilling or plugging a well, fishing services, and pad site preparation jobs. Because these jobs are performed on the customer's job site, and Basic is contractually entitled to bill for its services performed to date, revenues for these service lines are recognized on a daily basis as services are performed and recorded as Contract Assets rather than a WIP or Accounts Receivable. Contract Assets are typically invoiced within 30 to 60 days of recognizing revenue.
As of March 31, 2019, accounts receivable related to products and services were $140.3 million compared to $144.8 million at December 31, 2018. At March 31, 2019, the Company had $1.6 million of contract assets and no contract liabilities on its consolidated balance sheet compared to $1.1 million of contract assets and $855,000 of contract liabilities on its consolidated balance sheet at December 31, 2018.
Basic does not have any long-term service contracts, nor does it have revenue expected to be recognized in any future year related to remaining performance obligations or contracts with variable consideration related to undelivered performance obligations. 
The following table sets forth certain financial information with respect to Basic’s disaggregation of revenues by geographic location and type (in thousands):
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Completion & Remedial Services Water Logistics Well Servicing Other Services Total
Three Months Ended March 31, 2019
Primary Geographical Markets
Permian Basin $ 32,520  $ 31,687  $ 31,506  $ 3,033  $ 98,746 
Texas Gulf Coast —  9,350  7,398  —  16,748 
ArkLaTex & Mid-Continent 28,392  10,680  9,491  6,492  55,055 
Rocky Mountain 17,893  6,542  6,089  —  30,524 
West Coast —  —  6,730  —  6,730 
Corporate (Intercompany) (1,971) (2,658) (699) (5,273) (10,601)
Total $ 76,834  $ 55,601  $ 60,515  $ 4,252  $ 197,202 
Major Products or Service Line
Pumping equipment $ 25,716  $ —  $ —  $ —  $ 25,716 
Well servicing —  —  51,383  —  51,383 
Transport/vacuum —  32,554  —  —  32,554 
Coiled tubing 12,438  —  —  —  12,438 
RAFT 20,643  —  —  —  20,643 
Plugging —  —  6,626  —  6,626 
Production and disposal facilities —  5,600  —  —  5,600 
Hot oiler —  6,745  —  —  6,745 
Other 18,037  10,702  2,506  4,252  35,497 
Total $ 76,834  $ 55,601  $ 60,515  $ 4,252  $ 197,202 
Timing of Revenue Recognition
Products transferred at a point in time $ —  $ —  $ —  $ 1301  $ 1,301 
Products and services transferred over time 76,834  55,601  60,515  2,951  195,901 
Total $ 76,834  $ 55,601  $ 60,515  $ 4,252  $ 197,202 
Three Months Ended March 31, 2018
Primary Geographical Markets
Permian Basin $ 38,166  $ 30,588  $ 27,013  $ 3,156  $ 98,923 
Texas Gulf Coast 809  8,874  7,315  —  16,998 
ArkLaTex & Mid-Continent 49,727  10,706  8,642  2,150  71,225 
Rocky Mountain 29,789  7,776  6,224  —  43,789 
Eastern USA 1,690  —  2,185  —  3,875 
West Coast —  —  6,449  —  6,449 
Corporate (Intercompany) (2,584) (1,435) (877) (1,698) (6,594)
Total $ 117,597  $ 56,509  $ 56,951  $ 3,608  $ 234,665 
Major Products or Service Line
Pumping equipment $ 72,810  $ —  $ —  $ —  $ 72,810 
Well servicing —  —  48,536  —  48,536 
Transport/vacuum —  35,245  —  —  35,245 
Coiled tubing 19,980  —  —  —  19,980 
RAFT 20,782  —  —  —  20,782 
Plugging —  —  6,013  —  6,013 
Production and disposal facilities —  5,651  —  —  5,651 
Hot oiler —  5,385  —  —  5,385 
Other 4,025  10,228  2,402  3,608  20,263 
Total $ 117,597  $ 56,509  $ 56,951  $ 3,608  $ 234,665 
Timing of revenue recognition
Products transferred at a point in time $ —  $ —  $ —  $ —  $ — 
Products and services transferred over time 117,597  56,509  56,951  3,608  234,665 
Total $ 117,597  $ 56,509  $ 56,951  $ 3,608  $ 234,665 

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11. Earnings (Loss) Per Share
The following table sets forth the computation of unaudited basic and diluted loss per share (in thousands, except share and per share data): 
Three Months Ended March 31,
2019 2018
(Unaudited)
Numerator (both basic and diluted):
Net loss $ (27,476) $ (30,531)
Denominator:
Denominator for basic and diluted loss per share 26,850,499  26,336,044 
Basic loss per common share: $ (1.02) $ (1.16)
Diluted loss per common share: $ (1.02) $ (1.16)
The Company has issued potentially dilutive instruments such as unvested restricted stock and common stock options. However, the Company did not include these instruments in its calculation of diluted loss per share during the periods presented, because to include them would be anti-dilutive.
The following table sets forth potentially dilutive instruments:
Three Months Ended March 31,
2019 2018
(Unaudited)
Stock options 517,674  654,016 
Warrants 2,066,576  2,066,624 
Unvested restricted stock 6,153  3,536 
Total 2,590,403  2,724,176 

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12. Business Segment Information
In the first quarter of 2019, the Company revised its reportable segments to combine its rig manufacturing business with its Contract Drilling segment, creating an Other Services segment. With this change, the Company's segments consist of: Well Servicing, Water Logistics, Completion & Remedial Services, and Other Services. These reporting segments, which are also the Company's operating segments, align with how the Chief Operating Decision Maker allocates resources and assesses performance against the Company’s key growth strategies. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the four operating segments as "Corporate." The Company evaluates segment performance on earnings before interest expense and income taxes. Products are transferred between segments and geographic areas on a basis intended to reflect as nearly as possible the “market value” of the products. Prior period segment information has been retrospectively revised to reflect Basic's current segmentation.
The following table sets forth certain financial information with respect to Basic’s reportable segments (in thousands): 
Completion
& Remedial
Well
Water Other
Services
Servicing
Logistics Services Corporate Total
Three Months Ended March 31, 2019 (Unaudited)
Operating revenues $ 76,834  $ 60,515  $ 55,601  $ 4,252  $ —  $ 197,202 
Direct operating costs (63,433) (47,196) (37,299) (3,914) —  (151,842)
Segment profits 13,401  13,319  18,302  338  —  45,360 
Depreciation and amortization 13,193  5,295  6,968  274  1,768  27,498 
Capital expenditures including ARO additions 10,008  6,238  7,510  272  24,034 
Identifiable assets $ 229,004  $ 102,033  $ 112,533  $ 4,252  $ 295,398  $ 743,220 
Three Months Ended March 31, 2018 (Unaudited)
Operating revenues $ 117,597  $ 56,951  $ 56,509  $ 3,608  $ —  $ 234,665 
Direct operating costs (89,659) (46,511) (40,923) (4,223) —  (181,316)
Segment profits 27,938  10,440  15,586  (615) —  53,349 
Depreciation and amortization 14,260  5,700  7,726  492  2,057  30,235 
Capital expenditures including ARO additions 11,517  6,705  2,189  407  433  21,251 
Identifiable assets $ 255,067  $ 109,279  $ 123,599  $ 7,810  $ 315,810  $ 811,565 
The following table reconciles the segment profits reported above to the operating loss as reported in the consolidated statements of operations (in thousands):
Three Months Ended March 31,
2019 2018
Segment profits $ 45,360  $ 53,349 
General and administrative expenses (35,522) (40,978)
Depreciation and amortization (27,498) (30,235)
Loss on disposal of assets (1,455) (1,779)
Operating loss $ (19,115) $ (19,643)

13.   Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02 - “ Leases (Topic 842). ” The purpose of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.  Basic has adopted the standard effective January 1, 2019 and has included the disclosures required by ASU 2016-02. For further discussion see Note 5, "Leases".

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ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  
Management’s Overview 
We provide a wide range of well site services to oil and natural gas drilling and producing companies, including Completion & Remedial Services, well servicing, water logistics and contract drilling.
Our total hydraulic horsepower (“HHP”) decreased to 489,000 at the end of the first quarter of 2019 compared to 523,000 for the first quarter of 2018. Our weighted average HHP capacity decreased from 523,000 at January 1, 2018 to 502,900 at March 31, 2019. Our weighted average number of fluid service trucks decreased to 818 in the first quarter of 2019 from 960 in the first quarter of 2018. Our weighted average number of well servicing rigs remained constant at 310 in the first quarter of 2019 compared to the first quarter of 2018.
Our operating revenues from each of our segments, and their relative percentages of our total revenues, consisted of the following (dollars in millions):
Three Months Ended March 31,
2019 2018
Revenues:
Completion & Remedial Services $ 76.8  39%    $ 117.6  50%   
Well servicing 60.5  31%    57.0  24%   
Water Logistics 55.6  28%    56.5  24%   
Other Services 4.3  2%    3.6  2%   
Total revenues
$ 197.2  100%    $ 234.7  100%   
  During 2018 and the first quarter of 2019, oil prices have stayed relatively stable. We expect our customers' capital programs to remain relatively steady during the remainder of 2019.  
We believe that the most important performance measures for our business segments are as follows:
Completion & Remedial Services  — segment profits as a percent of revenues;
Well Servicing  — rig hours, rig utilization rate, revenue per rig hour, profits per rig hour and segment profits as a percent of revenues; 
Water Logistics — trucking hours, segment revenue, pipeline volumes, and segment profits as a percent of revenues; and
Other Services — rig operating days, revenue per drilling day, profits per drilling day and segment profits as a percent of revenues.
Segment profits are computed as segment operating revenues less direct operating costs. These measurements provide important information to us about the activity and profitability of our lines of business. For a detailed analysis of these indicators for the Company, see “Segment Overview” below.
Selected Acquisitions   and Divestitures
During the year ended December 31, 2018 and through the first three months of 2019, we did not enter into or complete any business acquisitions or divestitures.
Segment Overview
Completion & Remedial Services
During the first three months of 2019, our Completion & Remedial Services segment represented approximately 39% of our revenues. Revenues from our Completion & Remedial Services segment are generally derived from a variety of services designed to complete and stimulate oil and natural gas production or place cement slurry within the wellbores. Our Completion & Remedial Services segment includes pumping services, rental and fishing tool operations, coiled tubing services, nitrogen services, snubbing and underbalanced drilling.  
Our pumping services concentrate on providing single truck, lower-horsepower cementing and acidizing services, as well as various fracturing services in selected markets. Our total HHP capacity for our pumping services was approximately 489,000 horsepower at March 31, 2019.
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In this segment, we derive our revenues on a project-by-project basis in a competitive bidding process. Our bids are based on the amount and type of equipment and personnel required, with the materials consumed billed separately.
The following is an analysis of our Completion & Remedial Services segment for each of the quarters in 2018, the full year ended December 31, 2018 and the quarter ended  March 31, 2019 (dollars in thousands):
Total FRAC Segment
HHP HHP Revenues Profits %
2018:
First Quarter 522,565  413,300  $ 117,597  24%   
Second Quarter 516,465  407,800  $ 126,948  21%   
Third Quarter 516,465  386,050  $ 115,978  21%   
Fourth Quarter 513,000  386,050  $ 108,933  21%   
Full Year 513,000  386,050  $ 469,456  22%   
2019:
First Quarter 489,270  360,800  $ 76,834  17%   
The decrease in Completion & Remedial Services revenue to $76.8 million in the first quarter of 2019 from $108.9 million in the fourth quarter of 2018 resulted primarily from pricing pressures in our coiled tubing and fracing operations. Segment profits as a percentage of revenue decreased to 17% in the first quarter of 2019 from 21% in fourth quarter of 2018 due to increased costs and sustained pricing pressures in our pressure pumping operations.
Well Servicing
During the first three months of 2019, our Well Servicing segment represented 31% of our revenues. Revenue in our Well Servicing segment is derived from maintenance, workover, completion and plugging and abandonment services. We provide maintenance-related services as part of the normal, periodic upkeep of producing oil and natural gas wells. Maintenance-related services represent a relatively consistent component of our business. Workover and completion services generate more revenue per hour than maintenance work due to the use of auxiliary equipment, but demand for workover and completion services fluctuates more with the overall activity level in the industry.
We typically charge our well servicing rig customers for services on an hourly basis at rates that are determined by the type of service and equipment required, market conditions in the region in which the rig operates, the ancillary equipment provided on the rig and the necessary personnel. We measure the activity level of our well servicing rigs on a weekly basis by calculating a rig utilization rate based on a 55-hour work week per rig.
The following is an analysis of our well servicing segment for each of the quarters in 2018, the full year ended December 31, 2018 and the quarter ended March 31, 2019:  
Weighted
Average Rig Revenue
Number Utilization Per Rig Profits Per Segment
of Rigs Rig hours Rate Hour Rig hour Profits %
2018:
First Quarter 310  168,500  76%    $338  $62  18%   
Second Quarter 310  181,600  82%    $348  $83  24%   
Third Quarter 310  180,300  82%    $357  $76  21%   
Fourth Quarter 310  159,600  72%    $368  $71  19%   
Full Year 310  690,000  78%    $353  $73  21%   
2019:
First Quarter 310  165,000  74%    $367  $81  22%   
Rig utilization was 74% in the first quarter of 2019, up from 72% in the fourth quarter of 2018.  The utilization rate in the first quarter of 2019 resulted from a marginal improvement in customer demand and activity on flat pricing, primarily for our 24-hour rig packages. Our segment profit percentage increased to 22% for the first quarter of 2019 compared to 19% in the fourth quarter of 2018, due to improved cost management.
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Water Logistics
During the first three months of 2019, our Water Logistics segment represented approximately 28% of our revenues. Revenues in our water logistics segment are earned from the sale, transportation, storage and disposal of fluids used in the drilling, production and maintenance of oil and natural gas wells. Revenues also include water treatment, well site construction and maintenance services. The water logistics segment has a base level of business consisting of transporting and disposing of saltwater produced as a by-product of the production of oil and natural gas. These services are necessary for our customers and have a stable demand but typically produce lower relative segment profits than other parts of our water logistics segment. Water logistics for completion and workover projects typically require fresh or brine water for making drilling mud, circulating fluids or fracturing fluids used during a job, and all of these fluids require storage tanks and hauling and disposal. Because we can provide a full complement of fluid sales, trucking, storage and disposal required on most drilling and workover projects, the add-on services associated with drilling and workover activity enable us to generate higher segment profits. The higher segment profits are due to the relatively small incremental labor costs associated with providing these services in addition to our base water logistics operations. Revenues from our well site construction services are derived primarily from preparing and maintaining access roads and well locations, installing small diameter gathering lines and pipelines, constructing foundations to support drilling rigs and providing maintenance services for oil and natural gas facilities. Revenue from water treatment services results from the treatment and reselling of produced water and flowback to customers for the purposes of reusing as fracturing water. We typically price fluid services by the job, by the hour or by the quantities sold, disposed of or hauled.
The following is an analysis of our water logistics operations for each of the quarters in 2018, the full year ended December 31, 2018 and the quarter ended March 31, 2019 (dollars in thousands): 
Weighted
Average
Number of Trucking Pipeline
Fluid Service Truck Volumes Volumes Segment
Trucks Hours (in bbls) (in bbls) Revenue Profits %
2018:
First Quarter 960  479,600  6,414,800  1,551,000  $56,509  28%   
Second Quarter 903  486,800  6,912,900  2,064,000  $59,679  26%   
Third Quarter 870  448,200  6,898,200  2,526,000  $59,539  28%   
Fourth Quarter 837  438,500  6,659,000  3,221,000  $55,556  29%   
Full Year 891  1,853,100  26,884,900  9,362,000  $231,283  28%   
2019:
First Quarter 818  424,100  6,620,000  3,050,000  $55,601  33%   
Revenue for the water logistics segment remained flat at $55.6 million in the first quarter of 2019 compared to $55.6 million in fourth quarter of 2018 as a result of decreased levels of trucking utilization offset by improved disposal services revenues. Segment profit percentage increased to 33% in the first quarter of 2019 from 29% in the fourth quarter of 2018 primarily due to the an increase in higher margin pipeline revenue.
Other Services
During the first three months of 2019, our Other Services segment represented approximately 2% of our revenues. Revenues from our Other Services segment are derived from our contract drilling operations, which consists of drilling of new wells, and our rig manufacturing operations.
Within our contract drilling operations, we typically charge our drilling rig customers a daily rate, or a rate based on footage at an established rate per number of feet drilled. Depending on the type of job, we may also charge by the project. We measure the activity level of our drilling rigs on a weekly basis by calculating a rig utilization rate based on a seven-day work week per rig.
We also manufacture rigs and other related equipment for internal purposes as well as to sell to outside companies. Our rig manufacturing operation also performs large scale refurbishments and maintenance services to used workover rigs.
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The following is an analysis of our contract drilling operations for each of the quarters in 2018, the full year ended December 31, 2018 and quarter ended March 31, 2019 (dollars in thousands):  
 
Weighted
Average Rig Contract
Number of Operating Revenue Per Profits Per Drilling Segment