FTS International, Inc. (NYSE American: FTSI) today reported its
financial and operational results for the first quarter of
2021.
Michael Doss, Chief Executive Officer, commented “I am
incredibly pleased to report that we are back to generating
positive adjusted EBITDA as we continue to efficiently and safely
provide best-in-class performance to our customers. Our adjusted
EBITDA was $7.8 million in the first quarter, a $13 million
sequential increase, despite significant operational disruptions
from Winter Storm Uri in February.
With the depressed business conditions of 2020 and our financial
restructuring behind us, we are focused on the future with several
important initiatives, including Machine IQ and fleet automation,
as well as responding to our customers’ evolving expectations for
lower emissions equipment. We are excited to be on an upward
trajectory in terms of operating and financial performance, which
we expect will move our adjusted EBITDA to the $11 to $15 million
range in the second quarter. Our financial flexibility, operating
efficiency, safety record, and innovation have never been better in
the history of the Company.”
Financial Results
First Quarter 2021 (Successor) Compared to Fourth Quarter 2020
(Combined)
- Revenue was $95.9 million, up from $49.8 million
- Net loss was $7.9 million, compared to net income of $93.3
million, which included a positive contribution from reorganization
items of $114.9 million
- Adjusted EBITDA was $7.8 million, compared to $(5.2)
million
- Capital expenditures were $5.3 million, compared to $1.8
million
- Adjusted EBITDA less capital expenditures was $2.5 million,
compared to $(7.0) million
Operational Results
Three Months Ended
Mar. 31,
Dec. 31,
Mar. 31,
2021
2020
2020
Average active fleets
13.0
10.5
16.0
Utilization %
91%
79%
88%
Fully-utilized fleets
11.8
8.3
14.0
Stages completed
7,067
5,243
6,888
Stages per full-utilized fleet
599
632
492
Pumping hours
14,776
9,773
15,052
Pumping hours per fully-utilized fleet
1,252
1,177
1,075
Pumping days
921
647
1,090
Pumping hours per pumping day
16.0
15.1
13.8
Materials and freight costs as a percent of total revenue
20%
7%
25%
We exited the first quarter with 13 active fleets and remain at
that number today. Seven of our active fleets are dual fuel
capable, and we continue to monitor customer demand for additional
dual fuel conversions, which we can deploy quickly and cost
effectively.
Our average pump time per stage increased 12% in the first
quarter due to variation in the composition of job designs,
resulting in a 5% sequential decline in stages per fully-utilized
fleet. In addition, our fleets pumped an average of 16 hours per
pumping day in the first quarter, a 6% increase sequentially. While
activity improved in the first quarter, we experienced significant
operational disruptions due to Winter Storm Uri and its lingering
effects, which reduced fleet utilization costing us approximately
700 stages and $2 to $3 million of adjusted EBITDA in February.
Mr. Doss commented further, “After deploying fleet 13 at the
beginning of the year, we chose to focus on negotiating reasonable
price increases before deploying additional fleets. While those
pricing discussions were successful and positively contributed to
our first quarter results, the full effect of the price increases
will not be realized until the second quarter. Our April work
calendar was full and May is off to a strong start. It has been a
while since we have felt this kind of positive momentum, and I am
excited for the rest of 2021.”
MachineIQ™ / Fleet Automation Update
In the first quarter, we successfully launched our fully
automated equipment health monitoring and control technology on an
active hydraulic fracturing site. This is the culmination of a
five-year partnership with KCF Technologies to develop a
technological breakthrough that is poised to revolutionize the
hydraulic fracturing industry. This technology utilizes KCF’s
MachineIQ™ (MIQ) in combination with FTSI’s Petrix pump control and
other support systems.
It is based on over one billion data points of unsupervised
anomaly detection, which led us to a binary fault identification
system. From there, we logged over 20,000 fault events in a
supervised learning environment to determine fault classification
and load balance recommendations.
This technology does two things: (1) it allows us to complete
stages more closely to job design than ever before and (2) it
ensures that equipment on the verge of mechanical failure is
automatically and immediately shut down to avoid more costly
repairs and improve safety on location.
In an industry where most stages completed have some divergence
from job design, this technology employs machine learning to
proactively identify and address issues caused by potential
equipment failures or human-error that could result in a mid-stage
rate fluctuation. The systems working together continuously monitor
and automatically adjust pumps to deliver a consistent rate,
resulting in stages being completed efficiently and to design,
unless downhole conditions do not permit it.
This technology is now operational on nine fleets after
deploying it to our first fleet working for Devon Energy less than
two months ago. We expect to roll it out to all active fleets by
the end of May.
Liquidity and Capital Resources
Capital expenditures for the first quarter totaled $5.3 million,
primarily for maintenance. We continue to expect recurring
maintenance capital expenditures per active fleet to be
approximately $2.5 million annualized, or $30 to $40 million in
2021 based on activity levels.
As of March 31, 2021, we had $86.4 million of cash and $31.6
million of availability under our revolving credit facility, or
total liquidity of $118.0 million. We had no borrowings under our
revolving credit facility during the first quarter, which has a
total capacity of $40 million.
Other Non-Recurring Items
In the first quarter, we incurred $0.2 million of remaining
legal and professional fees and $0.3 million related to other
claims and charges related to our financial restructuring that was
completed in the fourth quarter. In addition, we incurred $0.6
million of transaction and strategic initiative costs.
Conference Call & Webcast
FTS International will hold a conference call that will also be
webcast on its website on Wednesday, May 5, 2021 at 10:00 a.m.
Central Time (11:00 a.m. Eastern Time) to discuss the results.
Presenting the Company’s results will be Michael Doss, Chief
Executive Officer, who will then be joined by Buddy Petersen, Chief
Operating Officer, and Lance Turner, Chief Financial Officer, for
Q&A.
Please see below for instructions on how to access the
conference call and webcast. If you intend to ask a question in the
Q&A portion of the call, please join by phone.
By Phone:
Dial (312) 281-2972 at least 10 minutes
before the call. A replay will be available through June 1 by
dialing (402) 977-9140 and using the conference ID 21993701#.
By Webcast:
Connect to the webcast via the Events page
of FTSI’s website at www.FTSI.com/investor-relations/events. Please
join the webcast at least 10 minutes in advance to register and
download any necessary software. A replay will be available shortly
after the call.
Restructuring
We emerged from Chapter 11 bankruptcy protection pursuant to a
prepackaged plan of reorganization on November 19, 2020 and
eliminated $488 million of debt and other liabilities as part of
our financial restructuring. Upon emergence, we adopted fresh start
accounting as a new entity for accounting and financial reporting
purposes.
Results for the fourth quarter are presented separately as the
“Predecessor” period from October 1, 2020 through November 19, 2020
and the “Successor” period from November 20, 2020 through December
31, 2020.
In addition to presenting Successor and Predecessor periods, we
also present our results for the fourth quarter ended December 31,
2020 on a combined basis (i.e., by combining the results of the
Predecessor and Successor periods). These combined results are not
considered to be prepared in accordance with GAAP, but we believe
that describing certain period-over-period variances and trends in
our activity levels on a combined basis facilitates a meaningful
analysis of our operating results and cash flows.
About FTS International, Inc.
Headquartered in Fort Worth, Texas, FTS International is a
pure-play hydraulic fracturing service company with operations
across multiple basins in the United States.
To learn more, visit www.FTSI.com.
Forward-Looking Statements
This press release contains forward-looking statements that
involve substantial risks and uncertainties and are based on our
beliefs and assumptions and on information currently available to
us. All statements other than statements of historical facts
contained in this press release, including statements regarding our
future results of operations, financial condition, capital
expenditures, business strategy and plans and objectives of
management for future operations, are forward-looking statements.
In some cases, these forward-looking statements can be identified
by words such as “could,” “should,” “may,” “might,” “will,”
“likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,”
“estimates,” “expects,” “continues,” “projects” and similar
references to future periods.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance, or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Forward-looking statements
represent our beliefs and assumptions only as of the date of this
release. These statements, and related risks, uncertainties,
factors and assumptions, include, but are not limited to: the
effects of our bankruptcy proceedings on our business, liquidity,
results of operations and prospects and the interests of various
constituents; a further decline or future decline in domestic
spending by the onshore oil and natural gas industry; continued
volatility or future volatility in oil and natural gas prices;
deterioration in general economic conditions or a continued
weakening or future weakening of the broader energy industry;
federal, state and local regulation of hydraulic fracturing and
other oilfield service activities, as well as exploration and
production activities, including public pressure on governmental
bodies and regulatory agencies to regulate our industry; our
ability to obtain permits, approvals and authorizations from
governmental and third parties; the effects of or changes to U.S.
and foreign government regulation; the price and availability of
alternative fuels and energy sources; the discovery rates of new
oil and natural gas reserves; and other factors described in our
SEC filings, including our Annual Report on Form 10-K for the year
ended December 31, 2020 and our subsequent reports on Forms 10-Q,
8-K and 10-K Amendment. These risks are not exhaustive.
Except as required by law, we assume no obligation to update
these forward-looking statements, or to update the reasons actual
results could differ materially from those anticipated in the
forward-looking statements, even if new information becomes
available in the future. Further information on factors that could
cause actual results to differ materially from the results
anticipated by our forward-looking statements is included in the
reports we have filed or will file with the Securities and Exchange
Commission. These filings, when available, are available on the
SEC’s website at www.sec.gov.
Non-GAAP Financial Measures
To provide investors with additional information regarding our
financial results, we have disclosed here and elsewhere in this
earnings release adjusted EBITDA, a non-GAAP financial measure that
we calculate as earnings before net interest expense, taxes, and
depreciation and amortization further adjusted for expenses that
management believes are non-recurring, and/or non-core to business
operations and other non-cash expenses, including but not limited
to employee severance costs, stock-based compensation, balance
sheet impairments and write-downs, gains or losses on
extinguishment of debt, gains or losses on disposal of assets,
supply commitment charges, restructuring items, transaction and
strategic initiative costs.
Adjusted EBITDA is a key measure used by our management and
board of directors to evaluate our operating performance, generate
future operating plans and make strategic decisions regarding the
allocation of capital. The exclusion of certain expenses
facilitates operating performance comparability across reporting
periods by removing the effect of non-cash expenses and certain
variable charges. Accordingly, we believe that adjusted EBITDA
provides useful information to investors and others in
understanding and evaluating our operating results in the same
manner as our management and board of directors.
Adjusted EBITDA has limitations as a financial measure and you
should not consider it in isolation or as a substitute for analysis
of our results as reported under GAAP. Some of these limitations
are:
- adjusted EBITDA does not reflect net interest expense or
changes in, or cash requirements for, working capital;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized may have to be replaced
in the future and adjusted EBITDA does not reflect capital
expenditure requirements for such replacements or for new capital
expenditures;
- adjusted EBITDA does not reflect stock-based compensation
expenses. Stock-based compensation has been, and will continue to
be for the foreseeable future, a recurring expense in our business
and an important part of our compensation strategy;
- adjusted EBITDA does not reflect supply commitment
charges;
- adjusted EBITDA does not reflect restructuring items or
transaction and strategic initiative costs;
- other companies, including companies in our industry, may
calculate adjusted EBITDA differently, which reduces its usefulness
as a comparative measure.
Because of these limitations, you should consider adjusted
EBITDA alongside other financial performance measures, including
net loss and our other GAAP results.
The table included under “Reconciliation of Net (Loss) Income to
Adjusted EBITDA and Calculations of Adjusted EBITDA per
fully-utilized fleet and, Adjusted EBITDA Less Capital
Expenditures,” provides a reconciliation of net loss to adjusted
EBITDA for each of the periods indicated.
Consolidated Statements of Operations (unaudited)
Three Months Ended
Three Months Ended
Successor
Successor
Predecessor
Combined
Predecessor
Mar. 31,
Nov. 20 - Dec. 31
Oct. 1 - Nov. 19
Dec. 31,
Mar. 31,
(Dollars in millions, except per share amounts; shares in
thousands)
2021
2020
2020
2020
2020
Revenue Revenue
$
95.9
$
22.6
$
27.2
$
49.8
$
150.8
Revenue from related parties
-
-
-
-
0.7
Total revenue
95.9
22.6
27.2
49.8
151.5
Operating expenses
Costs of revenue, excluding depreciation and amortization
78.5
24.1
23.0
47.1
114.6
Selling, general and administrative
10.5
4.7
5.1
9.8
17.7
Depreciation and amortization
13.9
4.8
9.1
13.9
21.4
Impairments and other charges
0.3
0.3
0.1
0.4
4.3
Gain on disposal of assets, net
-
-
-
-
(0.1
)
Total operating expenses
103.2
33.9
37.3
71.2
157.9
Operating loss
(7.3
)
(11.3
)
(10.1
)
(21.4
)
(6.4
)
Interest expense, net
(0.1
)
-
-
-
(7.3
)
Gain on extinguishment of debt, net
-
-
-
-
2.0
Reorganization items
(0.5
)
(2.1
)
117.0
114.9
-
(Loss) income before income taxes
(7.9
)
(13.4
)
106.9
93.5
(11.7
)
Income tax expense
-
-
0.2
0.2
-
Net (loss) income
$
(7.9
)
$
(13.4
)
$
106.7
$
93.3
$
(11.7
)
Basic and diluted earnings (loss) per share
$
(0.56
)
$
(0.96
)
$
19.83
$
(2.18
)
Shares used in computing basic and diluted earnings (loss) per
share
13,990
13,990
5,382
5,367
Consolidated Balance Sheets (unaudited)
Successor
Successor
Predecessor
Mar. 31
Dec. 31
Mar. 31
(Dollars in millions)
2021
2020
2020
ASSETS Current assets Cash and cash
equivalents
$
86.4
$
94.0
$
199.2
Accounts receivable, net
56.5
26.9
78.6
Accounts receivable from related parties, net
-
-
0.6
Inventories
31.8
29.0
43.6
Prepaid expenses and other current assets
4.5
19.5
15.0
Total current assets
179.2
169.4
337.0
Property, plant, and equipment, net
125.4
132.3
223.1
Operating lease right-of-use assets
3.8
4.5
22.5
Intangible assets, net
7.2
7.4
29.5
Other assets
1.4
1.4
3.9
Total assets
$
317.0
$
315.0
$
616.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
39.1
$
26.9
$
53.6
Accrued expenses
10.9
12.5
25.2
Current portion of operating lease liabilities
2.6
3.0
13.8
Other current liabilities
0.3
0.3
14.6
Total current liabilities
52.9
42.7
107.2
Long-term debt
-
-
434.7
Operating lease liabilities
2.3
3.3
10.5
Other liabilities
2.2
2.4
34.6
Total liabilities
57.4
48.4
587.0
Stockholders' equity
259.6
266.6
29.0
Total liabilities and stockholders' equity
$
317.0
$
315.0
$
616.0
Consolidated Statement of Cash Flows (unaudited)
Three Months Ended
Three Months Ended
Successor
Successor
Predecessor
Combined
Predecessor
Mar. 31,
Nov. 20 - Dec. 31
Oct. 1 - Nov. 19
Dec. 31,
Mar. 31,
(Dollars in millions)
2021
2020
2020
2020
Cash flows from operating activities
Net (loss) income
$
(7.9
)
$
(13.4
)
$
106.7
$
93.3
$
(11.7
)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization
13.9
4.8
9.1
13.9
21.4
Stock-based compensation
0.9
0.4
1.5
1.9
3.1
Amortization of debt discounts and issuance costs
-
-
-
-
0.4
Gain on disposal of assets, net
-
-
-
-
(0.1
)
Gain on extinguishment of debt, net
-
-
-
-
(2.0
)
Inventory write-down
-
-
-
-
0.6
Non-cash reorganization items
-
-
(131.0
)
(131.0
)
-
Non-cash provision for supply commitment charges
-
-
-
-
3.2
Cash paid to settle supply commitment charges
-
-
(12.5
)
(12.5
)
(11.2
)
Other non-cash items
0.1
-
-
-
0.9
Changes in operating assets and liabilities:
Accounts receivable
(29.7
)
3.2
(1.5
)
1.7
(2.4
)
Accounts receivable from related parties
-
-
-
-
(0.7
)
Inventories
(2.7
)
2.2
2.1
4.3
1.3
Prepaid expenses and other assets
1.5
(0.1
)
0.5
0.4
(8.1
)
Accounts payable
10.7
5.5
7.0
12.5
16.2
Accrued expenses and other liabilities
(1.8
)
0.3
2.4
2.7
2.3
Net cash (used in) provided by operating activities
(15.0
)
2.9
(15.7
)
(12.8
)
13.2
Cash flows from investing activities
Capital expenditures
(5.3
)
(1.5
)
(0.3
)
(1.8
)
(16.4
)
Proceeds from disposal of assets
-
-
0.1
0.1
0.1
Net cash used in investing activities
(5.3
)
(1.5
)
(0.2
)
(1.7
)
(16.3
)
Cash flows from financing activities
Repayments of long-term debt
-
-
-
-
(20.6
)
Payments to secured debtholders
-
-
(30.7
)
(30.7
)
-
Taxes paid related to net share settlement of equity awards
-
-
(0.2
)
(0.2
)
(0.1
)
Payments of credit facility issuance costs
-
-
(0.2
)
(0.2
)
-
Net cash used in financing activities
-
-
(31.1
)
(31.1
)
(20.7
)
Net (decrease) increase in cash, cash equivalents, and restricted
cash
(20.3
)
1.4
(47.0
)
(45.6
)
(23.8
)
Cash, cash equivalents, and restricted cash at beginning of period
106.7
105.3
152.3
152.3
223.0
Cash, cash equivalents, and restricted cash at end of period
$
86.4
$
106.7
$
105.3
$
106.7
$
199.2
Reconciliation of Net (Loss) Income to Adjusted EBITDA and
Calculations of Adjusted EBITDA per Fully-utilized Fleet and
Adjusted EBITDA Less Capital Expenditures
Three Months Ended Three Months Ended
Successor Successor Predecessor
Combined Predecessor Mar. 31, Nov. 20 -
Dec. 31 Oct. 1 - Nov. 19 Dec. 31, Mar. 31,
(Dollars in millions, except fleets)
2021
2020
2020
2020
2020
Net (loss) income
$
(7.9
)
$
(13.4
)
$
106.7
$
93.3
$
(11.7
)
Interest expense, net
0.1
-
-
-
7.3
Income tax expense
-
-
0.2
0.2
-
Depreciation and amortization
13.9
4.8
9.1
13.9
21.4
Gain on disposal of assets, net
-
-
-
-
(0.1
)
Gain on extinguishment of debt, net
-
-
-
-
(2.0
)
Stock-based compensation
0.9
0.4
1.5
1.9
3.1
Supply commitment charges
-
-
-
-
3.2
Inventory write-down
-
-
-
-
0.6
Employee severance costs
-
-
-
-
0.5
Transaction and strategic initiative costs
0.6
-
-
-
-
Reorganization items
0.5
2.1
(117.0
)
(114.9
)
-
(Gain) loss on contract termination
(0.3
)
0.3
0.1
0.4
-
Adjusted EBITDA
$
7.8
$
(5.8
)
$
0.6
$
(5.2
)
$
22.3
Average active fleets
13.0
10.5
16.0
Utilization %
91
%
79
%
88
%
Fully-utilized fleets
11.8
8.3
14.0
Adjusted EBITDA
7.8
(5.2
)
22.3
Fully-utilized fleets
11.8
8.3
14.0
Annualized adjusted EBITDA per fully-utilized fleet
$
2.6
$
(2.5
)
$
6.4
Adjusted EBITDA
7.8
(5.2
)
22.3
Less: Capital expenditures
(5.3
)
(1.8
)
(16.4
)
Adjusted EBITDA less capital expenditures
$
2.5
$
(7.0
)
$
5.9
Note: Fully-utilized fleets are calculated by multiplying
average active fleets by the utilization percent. Utilization
percent is calculated by dividing total pumping days for the
quarter by the product of 78 (which is equivalent to 26 pumping
days per month) times average active fleets.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210504006209/en/
Lance Turner Chief Financial Officer 817-862-2000
Investors@FTSI.com
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