ENSV ENSERVCO Corporation

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 first quarter ended March 31, 2023.

“We are pleased to report our eighth consecutive quarter of higher year-over-year revenue,” said Rich Murphy, Executive Chairman. “In addition to a 4% increase in revenue, our gross profit improved by 56% year over year and adjusted EBITDA more than tripled. We anticipate improved profit metrics based on expected non-recurrence of certain legal and stock-based compensation expenses combined with Company-wide cost reductions.

“Going forward, we are focused on three primary initiatives – improving cost efficiencies, further de-levering our balance sheet, and continuing to grow and diversify our revenue,” Murphy added. “We are implementing expense reductions across our business, with an emphasis on lowering corporate overhead, including headcount and public company costs. Having already reduced our peak long-term debt of $36 million to $7.2 million, we anticipate further debt reduction in 2023 and are working on a refinancing plan designed to lower debt service and enhance cash flows. And, finally, we expect to continue driving organic growth while exploring opportunities to add accretive revenue streams through M&A activity and potentially adding new, internally developed service offerings.”

First Quarter Results

Revenue increased 4% year over year to $8.9 million from $8.6 million due to increased customer demand coupled with continued growth in the Company’s East Texas hot oiling operations and price increases in certain markets.

Gross profit increased 56% to $2.0 million from $1.3 million in the same quarter last year due to the positive impact of cost reduction measures.

Adjusted EBITDA in the first quarter was up 255% to $0.7 million compared to adjusted EBITDA of $0.2 million in the same quarter last year.

Net loss in the first quarter was $1.0 million, or $0.07 per basic and diluted share, versus net income of $3.1 million, or $0.27 per basic and diluted share, in the same quarter last year. The first quarter 2023 net loss included approximately $0.3 million in legal costs, a large portion of which are expected to be non-recurring, as well as $0.1 million for a one-time restricted stock issuance. The year-ago first quarter included a $4.3 million gain on extinguishment of debt related to the Company’s first quarter 2022 debt refinancing.

The Company continued to reduce long-term debt in the first quarter, which declined to $7.2 million from $8.4 million at 2022 year-end and from a high of $36 million in 2019 when the Company began its debt reduction program.

Enservco closed the first quarter with stockholders’ equity of $4.3 million, up from $1.2 million at December 31, 2022. Per the NYSE American Exchange’s continued listing standards, the Company is required to have stockholders’ equity in excess of $6.0 million, a threshold it expects to achieve assuming Enservco shareholders approve Proxy Proposal 2 at the upcoming June 13, 2023, Annual Meeting. Management strongly encourages shareholders to approve Proxy Proposal 2, which clears the way for its largest shareholder Cross River Partners to convert up to $2.5 million of convertible debt to equity. Such conversion would not only help Enservco meet the NYSE American’s stockholders’ equity requirement, but it would support the Company’s ongoing initiative to reduce long-term debt to enhance cash flows and increase financial flexibility.

Conference Call InformationManagement will hold a conference call today to discuss these results. The call will begin at 3:00 p.m. Mountain Time (5:00 p.m. Eastern) and will be accessible by dialing 888-506-0062 (973-528-0011 for international callers). Entry code: 48443. A telephonic replay will be available through May 29, 2023, by calling 877-481-4010 (919-882-2331 for international callers) and entering the Replay ID # 48443. To listen to the webcast, participants should go to the Enservco website at www.enservco.com and link to the “Investors” page at least 10 minutes early to register and download any necessary audio software. A replay of the webcast will be available until June 15, 2023. The webcast also is available here: https://www.webcaster4.com/Webcast/Page/2228/48443

About EnservcoThrough its various operating subsidiaries, Enservco provides a 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, West Virginia, Utah, Michigan, Illinois, Florida, and Louisiana. 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 loss 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," “should,” and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond Enservco's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in Enservco’s annual report on Form 10-K for the year ended December 31, 2022, and subsequently filed documents with the SEC. Forward looking statements in this news release that are subject to risk include ability to reduce costs, improve efficiencies and grow and diversify revenue through M&A and internal service development; potential for shareholder approval of Cross River Partners’ debt conversion; ability to meet the NYSE American’s stockholders’ equity standard and to achieve further debt service reduction, debt refinancing and improvement in profit metrics and cash flows; and expectations that certain legal and accounting expenses will be non-recurring. It is important that each person reviewing this release understand the significant risks attendant to the operations of Enservco. The Company disclaims any obligation to update any forward-looking statement made herein.

Contact:

Mark PattersonChief Financial OfficerEnservco Corporationmpatterson@enservco.com

ENSERVCO CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
	For the Three Months Ended March 31,
	2023				2022
Revenues:
Production services	$	2,863			$	2,747
Completion and other services		6,049				5,836
Total revenues		8,912				8,583
Expenses:
Production services		2,317				2,584
Completion and other services		4,580				4,710
Sales, general, and administrative expenses		1,503				1,111
Severance and transition costs		1				-
(Gain) Loss on disposal of equipment		(1	)			35
Depreciation and amortization		971				1,143
Total operating expenses		9,371				9,583
Loss from operations		(459	)			(1,000	)
Other (expense) income:
Interest expense		(590	)			(172	)
Gain on debt extinguishment		-				4,277
Other (expense) income		29				35
Total other (expense) income		(561	)			4,140
(Loss) income from before taxes		(1,020	)			3,140
Deferred Income tax benefit		16				-
Net (loss) income	$	(1,004	)		$	3,140
Net (loss) income per share - basic and diluted	$	(0.07	)		$	0.27
Weighted average number of common shares outstanding - basic and diluted		14,208				11,452
Add: Dilutive shares		-				135
Diluted weighted average number of common shares outstanding		14,208				11,587

NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
	For the Three Months Ended March 31,
Reconciliation from Net (Loss) Income to Adjusted EBITDA	2023				2022
Net (loss) income	$	(1,004	)		$	3,140
Add back:
Interest expense		590				172
Deferred Income tax benefit		(16	)			-
Depreciation and amortization		971				1,143
EBITDA (non-GAAP)		541				4,455
Add back (deduct):
Stock-based compensation		196				21
(Gain) Loss on disposal of assets		(1	)			35
Gain on debt extinguishment		-				(4,277	)
Other (income) expense		(29	)			(35	)
Adjusted EBITDA (non-GAAP)	$	707			$	199

ENSERVCO CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
	March 31, 2023				December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	1,771			$	35
Accounts receivable, net		4,221				4,463
Prepaid expenses and other current assets		508				989
Inventories		322				320
Note receivable, current		75				75
Assets held for sale		78				78
Total current assets		6,975				5,960
Property and equipment, net		10,349				11,236
Goodwill		546				546
Intangible assets, net		127				182
Note receivable, less current		200				225
Right-of-use asset - finance, net		19				22
Right-of-use asset - operating, net		1,338				1,476
Other assets		187				191
TOTAL ASSETS	$	19,741			$	19,838
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	3,660			$	4,868
Utica facility (Note 5)		1,301				1,250
LSQ facility (Note 5)		2,611				2,945
March 2022 convertible note, related party (note 2 and Note 5)		120				100
July 2022 convertible note, related party (note 2 and Note 5)		90				60
Lease liability - finance, current		14				13
Lease liability - operating, current		611				597
Current portion of long-term debt		39				54
Other Current Liabilities		76				354
Total current liabilities		8,522				10,241
Non-Current Liabilities:
Utica facility, less current portion (Note 5)		3,636				3,963
March 2022 convertible note, related party (note 2 and Note 5)		29				1,100
July 2022 convertible note, related party (note 2 and Note 5)		1,110				1,140
Nov Cross River Revolver note, related party (note 2 and Note 5)		870				818
Utica Residual Liability		146				110
Lease liability - finance, less current portion		12				11
Lease liablity - operating, less current portion		833				991
Deferred tax liabilities		257				273
Other non-current liabilities		22				22
Total non-current liabilities		6,915				8,428
TOTAL LIABILITIES		15,437				18,669
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding		-				-
Common stock, $.005 par value, 100,000,000 shares authorized; 11,835,753 and 11,439,191 shares issued as of December 31, 2022 and December 31, 2021, respectively; 6,907 shares of treasury stock as of December 31, 2022 and December 31, 2021, respectively; and 11,828,846 and 11,432,284 shares outstanding as of December 31, 2022 and December 31, 2021, respectively		90				59
Additional paid-in capital		46,374				42,266
Accumulated deficit		(42,160	)			(41,156	)
Total stockholders' equity		4,304				1,169
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	19,741			$	19,838

ENSERVCO CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	For the 3 Months Ended Mar 31,
	2023				2022
OPERATING ACTIVITIES:
Net (loss) income	$	(1,004	)		$	3,140
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities
Depreciation and amortization		971				1,143
(Gain) Loss on disposal of equipment		(1	)			35
Board compensation issued in equity		-				60
Gain on debt extinguishment		-				(4,277	)
Interest paid-in-kind on line of credit		-				119
Stock-based compensation		196				21
Amortization of debt issuance costs and discount		70				12
Income tax benefit		(16	)			-
Changes in operating assets and liabilities:
Accounts receivable		243				(2,821	)
Inventories		(1	)			(60	)
Prepaid expense and other current assets		481				927
Amortization of operating lease assets		139				198
Other assets		17				5
Accounts payable and accrued liabilities		(1,189	)			2,194
Operating lease liabilities		(143	)			(199	)
Other liabilities		(242	)			-
Net cash (used in) provided by operating activities		(479	)			497
INVESTING ACTIVITIES:
Purchases of property and equipment		(49	)			(68	)
Proceeds from disposals of property and equipment		9				-
Collections on note receivable from sale of Tioga property in North Dakota		25				-
Net cash used in investing activities		(15	)			(68	)
FINANCING ACTIVITIES:
Net proceeds from February 2023 Offering		2,952				-
Term loan contractual repayments		-				(350	)
Term loan repayment consummated in conjunction with Refinance		-				(8,400	)
Establishment of LSQ Facility consummated in conjunction with Refinance		-				2,400
Establishment of Utica Facility consummated in conjunction with Refinance, net		-				6,000
Repayments on LSQ Facility, net		(334	)			-
Repayments of Utica Facility		(294	)			-
Troubled debt restructuring accrued future interest payments		-				(176	)
March 2022 Convertible Note proceeds, net, related party		-				963
Repayment of long-term debt		(15	)			(14	)
Payments of finance leases		(80	)			-
Payments of finance leases		1				(11	)
Net cash provided by financing activities		2,230				412
Net Increase in Cash and Cash Equivalents		1,736				841
Cash and Cash Equivalents, beginning of period		35				149
Cash and Cash Equivalents, end of period	$	1,771			$	990
Supplemental Cash Flow Information:
Cash paid for interest		312			$	176
Supplemental Disclosure of Non-cash Investing and Financing Activities:
Non-cash establishment of EWB Obligation consummated in conjunction with the Refinance (Note 5)		-			$	1,000
Non-cash partial conversion of March 2022 Convertible Note to equity		1,051				-