FTS International, Inc. (NYSE American: FTSI) today reported its
financial and operational results for the second quarter of
2021.
Michael Doss, Chief Executive Officer, commented, “I’m pleased
to report that we achieved a 77% sequential increase in adjusted
EBITDA in the second quarter to $13.8 million and that we are back
to generating cash following a large working capital build in the
first quarter.
We efficiently and safely provided best-in-class service quality
to our customers in the second quarter. We had 11.8 fully-utilized
fleets, same as in the first quarter, but we achieved an increase
in stages and pumping hours per fully-utilized fleet due to an
increase in pumping hours per day. Annualized adjusted EBITDA per
fully-utilized fleet increased to $4.7 million in the second
quarter, compared to $2.6 million in the first quarter. We’re on
track to grow this figure in the back half of the year due to
pricing improvements and the continued outstanding performance of
our crews.
I’m also pleased to announce that we have reached an agreement
with a large independent E&P company to build a new fleet
outfitted with Cat’s Tier 4 Dynamic Gas Blending (DGB) engines.
These engines provide a flexible solution to cost-effectively
reduce emissions and lower fuel costs. The new fleet, which we will
assemble in-house, is expected to cost approximately $26 million.
We expect to complete and place the new fleet into service in early
2022.”
Financial Results
Results for the three months and six months ended June 30, 2020,
provided for comparison purposes, are presented separately as
“Predecessor” periods because they occurred prior to our emergence
from bankruptcy on from November 19, 2020. “Successor” periods
refer to those beginning on or after November 20, 2020.
Second Quarter 2021 Compared to First Quarter 2021
- Revenue was $99.8 million, up from $95.9 million
- Net loss was $2.6 million, compared to a net loss of $7.9
million
- Adjusted EBITDA was $13.8 million, compared to $7.8
million
- Cash provided by (used in) operations was $20.0 million,
compared to $(15.0) million
- Capital expenditures were $7.5 million, up from $5.3
million
Second Quarter 2021 (Successor) Compared to Second Quarter 2020
(Predecessor)
- Revenue was $99.8 million, up from $29.5 million
- Net loss was $2.6 million, compared to a net loss of $50.7
million
- Adjusted EBITDA was $13.8 million, compared to $(9.1)
million
- Cash provided by (used in) operations was $20.0 million,
compared to $(6.3) million
- Capital expenditures were $7.5 million, up from $0.4
million
Operational Results
Three Months Ended
Six Months Ended
Successor
Successor
Predecessor
Successor
Predecessor
Jun. 30,
Mar. 31,
Jun. 30,
Jun. 30,
Jun. 30,
2021
2021
2020
2021
2020
Average active fleets
13.0
13.0
5.0
13.0
10.5
Utilization %
91%
91%
46%
91%
78%
Fully-utilized fleets
11.8
11.8
2.3
11.8
8.2
Stages completed
7,569
7,067
1,468
14,636
8,356
Stages per fully-utilized fleet
641
599
638
1,240
1,019
Pumping hours
15,548
14,776
2,631
30,324
17,683
Pumping hours per fully-utilized fleet
1,318
1,252
1,144
2,570
2,156
Pumping days
922
921
183
1,843
1,273
Pumping hours per pumping day
16.9
16.0
14.4
16.5
13.9
Materials and freight costs as a percent of total revenue
11%
20%
34%
15%
26%
We exited the second quarter with 13 active fleets and remain at
that number today. Our active dual fuel fleet count remains at
seven fleets, and we continue to monitor customer demand for
additional dual fuel conversions, which we can deploy quickly and
cost effectively. The rise in diesel prices this year has driven
greater interest in this capability as a way to reduce fuel
costs.
Stages per fully-utilized fleet increased 7% sequentially to 641
in the second quarter from 599 in the first quarter. In addition,
our fleets pumped an average of 16.9 hours per pumping day in the
second quarter, a new record for us. This reflects a 6% sequential
increase from the first quarter, and a 17% increase over the second
quarter of 2020. Average pump time per stage remained relatively
flat in the second quarter at approximately 123 minutes, compared
to approximately 125 minutes in the first quarter.
Our customers provided more of the materials for their
completions in the second quarter. As a percentage of revenue,
material and freight costs declined from 20% in the first quarter
to 11% in the second quarter. Changes in the amount of materials
provided by us affects revenue but has no material impact on gross
profit.
Comment from Michael Doss, CEO on New Tier 4 Dynamic Gas
Blending (“DGB”) Fleet
“There has been a lot of discussion about lower emissions
equipment over the last 24 months, and the market is becoming
segmented by fuel consumption type. We have been a leader in dual
fuel for years and have continued that leadership in West Texas
where customers have increasingly embraced the capability.
Today, we believe that Cat’s Tier 4 DGB engines are the most
proven, economic, and versatile solution that reduces completion
costs and emissions, while providing best-in-class efficiency. The
DGB engine supports our returns-focused investment strategy, fits
well within our in-house refurbishment operations, will integrate
easily into our fleet automation systems, and is supported by a
mature supply chain with third-party expertise.”
Machine IQ (MIQ) Update
Our machine health diagnostic and fleet automation system, MIQ,
is now active on all deployed fleets. This technology not only
improves our maintenance program, but also improves the service
that we deliver to our customers by pumping stages to design and
reducing excess pumping time. MIQ allows us to complete stages at a
consistent rate by reducing or eliminating mid-stage disruptions
that can occur as a result of common pump failures, over 60% of
which are due to fluid end component failures such as cut valves
and seats and blown packing. MIQ ensures equipment on the verge of
mechanical failure is automatically and immediately shut down to
avoid costly repairs. We are currently testing enhancements that
will allow us to achieve the designed rate faster, further reducing
total pumping time per stage. The system is also being trained to
optimize diesel displacement on dual fuel units.
Liquidity and Capital Resources
Capital expenditures for the second quarter totaled $7.5
million, primarily for maintenance. We remain on track to incur
maintenance capital expenditures of $2.5 million per fleet for
2021, or $30 to $35 million for the year. We have focused much of
our effort, investment, and innovation to maintaining that level of
maintenance over the years, despite a dramatic increase in pumping
hours per fleet. We also will have approximately $13 million of
growth capital expenditures in 2021 related to the newbuild Tier 4
DGB fleet.
As of June 30, 2021, we had $98.9 million of cash and $31.7
million of availability under our revolving credit facility, or
total liquidity of $130.6 million. We had no borrowings under our
revolving credit facility during the second quarter, which has a
total capacity of $40 million.
Conference Call & Webcast
FTS International will hold a conference call that will also be
webcast on its website on Friday, August 6, 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 (212) 271-4615 at least 10
minutes before the call. A replay will be available through August
27 by dialing (402) 977-9140 and using the conference ID
21996047#.
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.
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: future
changes; results of operations; 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; the price and availability of alternative fuels,
equipment and energy sources; 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 and
generate future operating plans. 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 to Adjusted
EBITDA and Calculation of Annualized Adjusted EBITDA per
Fully-utilized Fleet” provides a reconciliation of net loss to
adjusted EBITDA for each of the periods indicated.
Consolidated Statements of Operations
(unaudited)
Three Months Ended
Six Months Ended
Successor
Successor
Predecessor
Successor
Predecessor
Jun. 30,
Mar. 31,
Jun. 30,
Jun. 30,
Jun. 30,
(Dollars in millions, except per share amounts; shares in
thousands)
2021
2021
2020
2021
2020
Revenue Revenue $
99.8
$
95.9
$
29.5
$
195.7
$
180.3
Revenue from related parties
-
-
-
-
0.7
Total revenue
99.8
95.9
29.5
195.7
181.0
Operating expenses Costs of revenue, excluding
depreciation and amortization
75.2
78.5
28.9
153.7
143.5
Selling, general and administrative
12.5
10.5
13.2
23.0
30.9
Depreciation and amortization
14.3
13.9
20.2
28.2
41.6
Impairments and other charges
0.2
0.3
10.3
0.5
14.6
Loss on disposal of assets, net
-
-
0.2
-
0.1
Total operating expenses
102.2
103.2
72.8
205.4
230.7
Operating loss
(2.4
)
(7.3
)
(43.3
)
(9.7
)
(49.7
)
Interest expense, net
(0.1
)
(0.1
)
(7.4
)
(0.2
)
(14.7
)
Gain on extinguishment of debt, net
-
-
-
-
2.0
Reorganization items
-
(0.5
)
-
(0.5
)
-
Loss before income taxes
(2.5
)
(7.9
)
(50.7
)
(10.4
)
(62.4
)
Income tax expense
0.1
-
-
0.1
-
Net loss $
(2.6
)
$
(7.9
)
$
(50.7
)
$
(10.5
)
$
(62.4
)
Basic and diluted loss per share $
(0.19
)
$
(0.56
)
$
(9.43
)
$
(0.75
)
$
(11.61
)
Shares used in computing basic and diluted earnings loss per
share
13,995
13,990
5,379
13,992
5,373
Consolidated Balance Sheets
(unaudited)
Jun. 30,
Dec. 31
(Dollars in millions)
2021
2020
ASSETS Current assets Cash and cash
equivalents
$
98.9
$
94.0
Accounts receivable, net
46.8
26.9
Inventories
34.5
29.0
Prepaid expenses and other current assets
4.7
19.5
Total current assets
184.9
169.4
Property, plant, and equipment, net
117.9
132.3
Operating lease right-of-use assets
3.2
4.5
Intangible assets, net
7.1
7.4
Other assets
1.4
1.4
Total assets
$
314.5
$
315.0
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Accounts payable
$
35.3
$
26.9
Accrued expenses
15.2
12.5
Current portion of operating lease liabilities
2.1
3.0
Other current liabilities
0.3
0.3
Total current liabilities
52.9
42.7
Operating lease liabilities
2.1
3.3
Other liabilities
2.1
2.4
Total liabilities
57.1
48.4
Stockholders' equity
257.4
266.6
Total liabilities and stockholders' equity
$
314.5
$
315.0
Consolidated Statement of Cash Flows
(unaudited)
Three Months Ended
Six Months Ended
Successor
Successor
Predecessor
Successor
Predecessor
Jun. 30,
Mar. 31,
Jun. 30,
Jun. 30,
Jun. 30,
(Dollars in millions)
2021
2021
2020
2021
2020
Cash flows from operating activities
Net loss
$
(2.6
)
$
(7.9
)
$
(50.7
)
$
(10.5
)
$
(62.4
)
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization
14.3
13.9
20.2
28.2
41.6
Stock-based compensation
1.7
0.9
3.5
2.6
6.6
Amortization of debt discounts and issuance costs
-
-
0.5
-
0.9
Loss on disposal of assets, net
-
-
0.2
-
0.1
Gain on extinguishment of debt, net
-
-
-
-
(2.0
)
Inventory write-down
-
-
3.9
-
4.5
Non-cash provision for supply commitment charges
-
-
5.9
-
9.1
Cash paid to settle supply commitment charges
-
-
(7.6
)
-
(18.8
)
Other non-cash items
(0.1
)
0.1
(0.1
)
-
0.8
Changes in operating assets and liabilities: Accounts
receivable
9.8
(29.7
)
57.8
(19.9
)
55.4
Accounts receivable from related parties
-
-
0.7
-
-
Inventories
(2.8
)
(2.7
)
(0.3
)
(5.5
)
1.0
Prepaid expenses and other assets
(0.3
)
1.5
9.0
1.2
0.9
Accounts payable
(2.9
)
10.7
(37.5
)
7.8
(21.3
)
Accrued expenses and other liabilities
2.9
(1.8
)
(11.8
)
1.1
(9.5
)
Net cash provided by (used in) operating activities
20.0
(15.0
)
(6.3
)
5.0
6.9
Cash flows from investing activities
Capital expenditures
(7.5
)
(5.3
)
(0.4
)
(12.8
)
(16.8
)
Proceeds from disposal of assets
-
-
-
-
0.1
Net cash used in investing activities
(7.5
)
(5.3
)
(0.4
)
(12.8
)
(16.7
)
Cash flows from financing activities
Repayments of long-term debt
-
-
-
-
(20.6
)
Taxes paid related to net share settlement of equity awards
-
-
-
-
(0.1
)
Net cash used in financing activities
-
-
-
-
(20.7
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
12.5
(20.3
)
(6.7
)
(7.8
)
(30.5
)
Cash, cash equivalents, and restricted cash at beginning of period
86.4
106.7
199.2
106.7
223.0
Cash and cash equivalents at end of period
$
98.9
$
86.4
$
192.5
$
98.9
$
192.5
Reconciliation of Net Loss to Adjusted
EBITDA and Calculation of Annualized Adjusted EBITDA per
Fully-utilized Fleet
Three Months Ended
Six Months Ended
Successor
Successor
Predecessor
Successor
Predecessor
Jun. 30,
Mar. 31,
Jun. 30,
Jun. 30,
Jun. 30,
(Dollars in millions, except fleets)
2021
2021
2020
2021
2020
Net loss
$
(2.6
)
$
(7.9
)
$
(50.7
)
$
(10.5
)
$
(62.4
)
Interest expense, net
0.1
0.1
7.4
0.2
14.7
Income tax expense
0.1
-
-
0.1
-
Depreciation and amortization
14.3
13.9
20.2
28.2
41.6
Loss on disposal of assets, net
-
-
0.2
-
0.1
Gain on extinguishment of debt, net
-
-
-
-
(2.0
)
Stock-based compensation
1.7
0.9
3.5
2.6
6.6
Supply commitment charges
-
-
5.9
-
9.1
Inventory write-down
-
-
3.9
-
4.5
Employee severance costs
-
-
0.5
-
1.0
Transaction and strategic initiative costs
0.2
0.6
-
0.8
-
Reorganization items
-
0.5
-
0.5
-
Gain on contract termination
-
(0.3
)
-
(0.3
)
-
Adjusted EBITDA
$
13.8
$
7.8
$
(9.1
)
$
21.6
$
13.2
Average active fleets
13.0
13.0
5.0
13.0
10.5
Utilization %
91
%
91
%
46
%
91
%
78
%
Fully-utilized fleets
11.8
11.8
2.3
11.8
8.2
Annualized Adjusted EBITDA
$
55.2
$
31.2
$
(36.4
)
$
43.2
$
26.4
Fully-utilized fleets
11.8
11.8
2.3
11.8
8.2
Annualized adjusted EBITDA per fully-utilized fleet
$
4.7
$
2.6
$
(15.8
)
$
3.7
$
3.2
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)
divided by average active fleets.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210805006088/en/
Lance Turner Chief Financial Officer 817-862-2000
Investors@FTSI.com
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