Seventy Seven Energy Inc. (“SSE”) today reported financial and
operational results for the one month ended July 31, 2016 for its
Predecessor and the two months ended September 30, 2016 for its
Successor. Upon emergence from Chapter 11 bankruptcy on August 1,
2016, SSE adopted fresh-start accounting, which resulted in the
Company becoming a new entity for financial reporting purposes.
References to “Successor” relate to the financial position and the
results of operations of the reorganized SSE as of and subsequent
to August 1, 2016. References to “Predecessor” refer to the
financial position of SSE prior to August 1, 2016 and the results
of operations through July 31, 2016. As a result of the application
of fresh-start accounting and the effects of the implementation of
the plan of reorganization, the financial statements on or after
August 1, 2016 are not comparable with the financial statements
prior to that date. Key information related to SSE for the one
month ended July 31, 2016 and two months ended September 30, 2016
is as follows:
- Emerged from bankruptcy on August 1,
2016, which reduced debt by $1.115 billion
- Net Loss of $36.5 million and $11.6
million for the two months ended September 30, 2016 and the one
month ended July 31, 2016, respectively
- Consolidated Adjusted EBITDA of $8.5
million and $3.0 million for the two months ended September 30,
2016 and one month ended July 31, 2016, respectively
- 29 rigs currently operating; 22
additional rigs under contract
- Active rig count has more than
doubled during the past six months
For the two months ended September 30, 2016 and one month ended
July 31, 2016, SSE reported total revenues of $79.7 million and
$40.4 million, respectively, a 13% decrease compared to revenues of
$138.1 million for the three months ended June 30, 2016, and a 44%
decrease compared to revenues of $213.5 million for the three
months ended September 30, 2015.
Net loss for the two months ended September 30, 2016 and one
month ended July 31, 2016 was $36.5 million and $11.6 million, or
$1.66 and $0.21 per fully diluted share, respectively, compared to
a net loss for the three months ended June 30, 2016 of $84.5
million, or $1.53 per fully diluted share, and a net loss of $48.5
million, or $0.95 per fully diluted share, for the three months
ended September 30, 2015. SSE’s adjusted EBITDA was $8.5 million
and $3.0 million for the two months ended September 30, 2016 and
one month ended July 31, 2016, respectively, compared to adjusted
EBITDA of $31.5 million for the three months ended June 30, 2016
and adjusted EBITDA of $41.1 million for the three months ended
September 30, 2015.
Adjusted EBITDA is a non-GAAP financial measure. A
reconciliation of this measure to comparable financial measures
calculated in accordance with generally accepted accounting
principles (“GAAP”) is provided on pages 12 - 16 of this
release.
“Having completed the restructuring process in the quarter, we
are now focused completely on maximizing our strong asset base and
operational expertise to grow our business as the industry seems to
enter the start of a recovery period,” Chief Executive Office Jerry
Winchester said. “As our numbers demonstrate, the drilling rig
market is indeed improving but low pricing for hydraulic fracturing
remains challenging.
“The loss in the quarter that we experienced in pressure pumping
can be attributed to an ongoing competitive pricing environment,
our commitment to maintaining service quality and the strategic
decision to invest in a new large, long-term customer. That said,
while I am always hesitant to call the bottom of a cycle, our
increased rig activity and recent pricing and utilization gains in
hydraulic fracturing indicate that an upturn in market conditions
is approaching.”
Drilling
SSE’s drilling segment contributed revenues of $43.0 million and
$20.1 million and adjusted EBITDA of $24.6 million and $12.9
million during the two months ended September 30, 2016 and one
month ended July 31, 2016, respectively, compared to revenues of
$62.8 million and adjusted EBITDA of $40.6 million for the three
months ended June 30, 2016 and revenues of $80.3 million and
adjusted EBITDA of $41.6 million for the three months ended
September 30, 2015. The $0.3 million increase in revenues for the
two months ended September 30, 2016 and one month ended July 31,
2016 compared to the three months ended June 30, 2016 was primarily
due to a 39% increase in revenue days (which is the aggregate
number of days each active rig generated revenue) mostly offset by
a decrease in idle-but-contracted payments of $9.6 million.
Revenues from non-CHK customers as a percentage of total segment
revenues increased from 37% for the three months ended June 30,
2016, to 41% and 39% for the two months ended September 30, 2016
and one month ended July 31, 2016, respectively. As of
September 30, 2016, approximately 75% of SSE’s active rigs
were contracted by non-CHK customers and SSE had a total drilling
revenue backlog of $206.1 million.
As a percentage of drilling revenues, drilling operating costs
were 44% and 37% during the two months ended September 30, 2016 and
one month ended July 31, 2016, respectively, compared to 37% for
the three months ended June 30, 2016 and 52% for the three months
ended September 30, 2015. Operating costs were $18.8 million and
$7.4 million for the two months ended September 30, 2016 and one
month ended July 31, 2016, respectively, compared to $23.0 million
for the three months ended June 30, 2016 and $41.4 million for the
three months ended September 30, 2015. Average operating costs per
revenue day for the two months ended September 30, 2016 and one
month ended July 31, 2016 decreased 18% from the three months ended
June 30, 2016, primarily due to a decrease in fixed labor-related
costs.
As of September 30, 2016, the Company’s marketed fleet
consisted of 90 rigs, 72 of which are multi-well pad capable.
Hydraulic Fracturing
SSE’s hydraulic fracturing segment contributed revenues of $30.5
million and $17.5 million and adjusted EBITDA of ($8.0) million and
($6.1) million during the two months ended September 30, 2016 and
one month ended July 31, 2016, respectively, compared to revenues
of $66.9 million and adjusted EBITDA of $2.8 million for the three
months ended June 30, 2016 and revenues of $118.1 million and
adjusted EBITDA of $15.0 million for the three months ended
September 30, 2015. The decrease in revenues from the three months
ended June 30, 2016 compared to the two months ended September 30,
2016 and one month ended July 31, 2016 was primarily due to a 29%
decrease in revenue per stage as a result of significant reductions
in pricing in order to maintain healthy long-term customer
relationships and to continue to diversify our business. Revenues
from non-CHK customers as a percentage of total segment revenues
increased from 21% in the three months ended June 30, 2016 to 52%
and 49% in the two months ended September 30, 2016 and one month
ended July 31, 2016, respectively. As of September 30, 2016,
SSE’s hydraulic fracturing revenue backlog was $67.4 million with
an average duration of 9 months.
As a percentage of hydraulic fracturing revenues, hydraulic
fracturing operating costs were 127% and 135% for the two months
ended September 30, 2016 and one month ended July 31, 2016,
respectively, compared to 96% for the three months ended June 30,
2016 and 88% for the three months ended September 30, 2015. Average
operating costs per stage for the two months ended September 30,
2016 and one month ended July 31, 2016 decreased 5% from the three
months ended June 30, 2016 primarily due to a decrease in product
costs.
As of September 30, 2016, SSE owned 13 hydraulic
fracturing fleets with an aggregate of 500,000 horsepower operating
in the Anadarko Basin and the Eagle Ford and Utica Shales.
Oilfield Rentals
SSE’s oilfield rentals segment contributed revenues of $6.1
million and $2.9 million and adjusted EBITDA of $0.6 million and
$0.2 million during the two months ended September 30, 2016 and one
month ended July 31, 2016, respectively, compared to revenues of
$8.4 million and adjusted EBITDA of $0.1 million for the three
months ended June 30, 2016 and revenues of $15.0 million and
adjusted EBITDA of $1.5 million for the three months ended
September 30, 2015. Revenues from non-CHK customers as a percentage
of total segment revenues increased from 48% in the three months
ended June 30, 2016 to 62% and 57% in the two months ended
September 30, 2016 and one month ended July 31, 2016,
respectively.
As a percentage of oilfield rental revenues, operating costs
were 93% and 94% for the two months ended September 30, 2016 and
one month ended July 31, 2016, respectively, compared to 100% for
the three months ended June 30, 2016 and 93% for the three months
ended September 30, 2015. The decrease in operating costs as a
percentage of revenues was due to declines in labor-related costs
and sub-contracting services in the two months ended September 30,
2016 and one month ended July 31, 2016 compared to the three months
ended June 30, 2016. Operating costs were $5.7 million and $2.7
million during the two months ended September 30, 2016 and one
month ended July 31, 2016, respectively, compared to $8.4 million
for the three months ended June 30, 2016 and $14.0 million for the
three months ended September 30, 2015.
Former Oilfield Trucking
During the second quarter of 2015, SSE sold its drilling rig and
logistics business and water hauling assets. As of June 30, 2015,
there were no remaining assets or operations in the oilfield
trucking segment, although we do have ongoing liabilities,
primarily related to insurance claims, whose income statement
impact is charged to general and administrative expense.
Reorganization Items
Reorganization items totaled $16.5 million for the one month
ended July 31, 2016, consisting of a $632.1 million non-cash gain
on liabilities subject to compromise, a $596.0 million non-cash
loss on fresh-start fair value adjustments, a $25.1 million
non-cash charge related to stock-based compensation accelerations
and a $6.8 million non-cash expense for the fair value of the
warrants issued to Predecessor stockholders. Additionally,
professional fees and debt issuance write-off costs totaled $19.8
million and $0.8 million, respectively, for the one month ended
July 31, 2016. The Company incurred professional fees of $0.2
million for the two months ended September 30, 2016.
Costs incurred associated with our reorganization activities
consisted of the following:
Successor
Predecessor Successor Predecessor
Two MonthsEndedSeptember
30,2016
One MonthEnded July
31,2016
Three MonthsEnded June30,
2016
Two MonthsEndedSeptember
30,2016
Seven MonthsEnded July
31,2016
Reorganization Items: (In thousands) Net gain on
settlement of liabilities subject to compromise $ — $ (632,059 ) $
— $ — $ (632,059 ) Net loss on fresh-start adjustments — 596,044 —
— 596,044 Stock-based compensation acceleration expense — 25,086 —
— 25,086 Professional fees 246 19,823 405 246 20,228 Write-off of
debt issuance costs — 774 12,544 — 13,318 Fair value of warrants
issued to Predecessor stockholders — 6,797 — — 6,797 DIP credit
agreement — — 478 — 478
Total Reorganization Items, net $ 246 $ 16,465 $
13,427 $ 246 $ 29,892
Professional Fees Related to
the Reorganization: Costs incurred prior to bankruptcy petition
(general and administrative expense) — (1,334 ) 21,105 — 22,009
Costs incurred post bankruptcy petition (reorganization items)
246 19,823 405 246 20,228
Total professional fees related to reorganization $ 246 $
18,489 $ 21,510 $ 246 $ 42,237
General and Administrative Expenses
General and administrative expenses were $16.6 million and $4.7
million for the two months ended September 30, 2016 and one month
ended July 31, 2016, respectively, compared to $39.7 million for
the three months ended June 30, 2016 and $26.7 million for the
three months ended September 30, 2015. General and administrative
expenses for corporate functions settled in cash were $8.4 million
and $4.0 million for the two months ended September 30, 2016 and
one month ended July 31, 2016, respectively, compared to $11.8
million for the three months ended June 30, 2016 and $15.5 million
for the three months ended September 30, 2015. The decrease
compared to the third quarter of 2015 was primarily due to declines
in consulting fees.
SSE incurred restructuring charges of $0.3 million and ($0.4)
million for the two months ended September 30, 2016 and one month
ended July 31, 2016, respectively, compared to $23.5 million for
the three months ended June 30, 2016, respectively. Additionally,
general and administrative expenses include non-cash compensation
of $7.6 million and $1.0 million for the two months ended September
30, 2016 and one month ended July 31, 2016, respectively, compared
to $4.1 million and $8.3 million for the three months ended June
30, 2016 and three months ended September 30, 2015, respectively,
and severance-related costs of $0.3 million and a nominal amount
for the two months ended September 30, 2016 and one month ended
July 31, 2016, respectively, compared to $0.3 million and $1.5
million for three months ended June 30, 2016 and three months ended
September 30, 2015, respectively. Below is a breakout of general
and administrative expenses incurred in the two months ended
September 30, 2016, one month ended July 31, 2016, three months
ended June 30, 2016 and three months ended September 30, 2015.
Successor Predecessor
Two MonthsEnded
September30, 2016
One MonthEnded July
31,2016
Three MonthsEnded
September30, 2015
Three MonthsEnded June
30,2016
(In thousands) G&A expenses settled in cash $8,428
$4,036 $15,504 $11,760 Restructuring charges 315 (376) 1,355 23,535
Non-cash compensation expenses 7,552 1,011 8,333 4,135
Severance-related costs 306 17 1,517 287 Total General and
Administrative Expenses $16,601 $4,688 $26,709 $39,717
Liquidity
As of September 30, 2016, SSE had cash of $23.0 million and
working capital of $88.9 million. As of November 4, 2016, SSE
had cash of $43.8 million and the Company’s revolving credit
facility remained undrawn. As of September 30, 2016, SSE had
$2.6 million of purchase commitments related to future capital
expenditures that the Company expects to incur during the last
quarter of 2016.
Capital expenditures totaled $6.1 million and $6.7 million for
the two months ended September 30, 2016 and one month ended July
31, 2016, respectively, which primarily consisted of investments in
new PeakeRigs™. For the two months ended September 30, 2016
and seven months ended July 31, 2016, capital expenditures totaled
$6.1 million and $82.8 million, respectively.
Conference Call Information
SSE does not plan to host an earnings conference call to discuss
2016 operational and financial results for the third quarter.
However, the Company plans to post an updated investor presentation
and a pre-recorded message from the CEO in the “investors” section
of its website www.77nrg.com.
About Seventy Seven Energy Inc.
Headquartered in Oklahoma City, SSE provides a wide range of
wellsite services and equipment to U.S. land-based exploration and
production customers. SSE’s services include drilling, hydraulic
fracturing and oilfield rentals and its operations are
geographically diversified across many of the most active oil and
natural gas plays in the onshore U.S., including the Anadarko and
Permian basins and the Eagle Ford, Haynesville, Marcellus, Niobrara
and Utica shales. For additional information about SSE, please
visit our website at www.77nrg.com,
where we routinely post announcements, updates, events, investor
information and presentations and recent news releases.
Forward-Looking Statements and Cautionary Statements
This news release (and any oral statements made regarding the
subjects of this release, including on the conference call
announced herein) contains certain statements and information that
may constitute “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. All
statements, other than statements of historical facts that address
activities, events or developments that the Company expects,
believes or anticipates will or may occur in the future are
forward-looking statements. The words “anticipate,” “believe,”
“ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,”
“forecasts,” “predict,” “outlook,” “aim,” “will,” “could,”
“should,” “potential,” “would,” “may,” “probable,” “likely,” and
similar expressions, and the negative thereof, are intended to
identify forward-looking statements. Without limiting the
generality of the foregoing, forward-looking statements contained
in this press release specifically include statements, estimates
and projections regarding the Plan of Reorganization and related
matters, as well as, the Company's business outlook and plans,
future financial position and flexibility, capital structure,
liquidity and capital resources, acquisitions, returns, capital
expenditure budgets and other guidance regarding future
developments. Forward-looking statements are not assurances of
future performance. These forward-looking statements are based on
management’s current expectations and beliefs, forecasts for its
existing operations, experience, and perception of historical
trends, current conditions, anticipated future developments and its
effect on the Company, and other factors believed to be
appropriate. Although management believes that the expectations and
assumptions reflected in these forward-looking statements are
reasonable as and when made, no assurance can be given that these
assumptions are accurate or that any of these expectations will be
achieved (in full or at all). Moreover, the Company's
forward-looking statements are subject to significant risks and
uncertainties, many of which are beyond its control, which may
cause actual results to differ materially from its historical
experience and its present expectations or projections which are
implied or expressed by the forward-looking statements. Important
factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not
limited to, risks relating to general economic and industry
conditions; the terms and availability of any new debt; our
customers’ drilling and completion expenditures; delays in or
failure of delivery of current or future orders of specialized
equipment; the loss of or interruption in operations of one or more
key suppliers or customers; the effects of government regulation,
permitting and other legal requirements, including new legislation
or regulation of hydraulic fracturing; operating risks; the
adequacy of our capital resources and liquidity; weather;
litigation; competition in the onshore oil and natural gas services
industry; and costs and availability of resources.
In addition, SSE calculates its contract drilling backlog by
multiplying the day rate under its contracts by the number of days
remaining under the contract. The Company calculates its hydraulic
fracturing backlog by multiplying the (i) rate per stage, which
varies by operating region and is, therefore, estimated based on
current customer activity levels by region and current contract
pricing, by (ii) the number of stages remaining under the contract,
which it estimates based on current and anticipated utilization of
its crews. With respect to its hydraulic fracturing backlog, the
Company's contracts provide for periodic adjustments of the rates
it may charge for its services, which will be negotiated based on
then-prevailing market pricing and in the future may be higher or
lower than the current rates it charges and utilizes in calculating
its backlog. The drilling backlog calculation does not include any
reduction in revenues related to mobilization or demobilization,
nor does it include potential reductions in rates for unscheduled
standby or during periods in which the rig is moving, on standby or
incurring maintenance and repair time in excess of what is
permitted under the drilling contract. The Company computes average
duration for its contract drilling backlog and hydraulic fracturing
backlog as the average number of months remaining for its drilling
rigs under contract and its remaining hydraulic fracturing fleets
under contract, respectively.
For additional information regarding known material factors that
could cause the Company's actual results to differ from its present
expectations and projected results, please see its filings with the
U.S. Securities and Exchange Commission (“SEC”), including its
Current Reports on Form 8-K that it files from time to time,
Quarterly Reports on Form 10-Q, and Annual Report on Form 10-K.
Readers are cautioned not to place undue reliance on any
forward-looking statement which speaks only as of the date on which
such statement is made. The Company undertakes no obligation to
correct, revise or update any forward-looking statement after the
date such statement is made, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
All references in this release to “Chesapeake” or “CHK” are to
Chesapeake Energy Corporation (NYSE: CHK), SSE's former parent
company.
SEVENTY SEVEN ENERGY INC.
(Debtor-in-possession June 7, 2016 through July 31, 2016)
Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
Successor Predecessor
Two Months EndedSeptember 30,
2016
One Month EndedJuly 31,
2016
Three Months EndedSeptember 30,
2015
Revenues: Revenues $ 79,656 $ 40,438 $ 213,541
Operating Expenses: Operating costs 63,628 33,835 160,889
Depreciation and amortization 31,208 22,902 68,854 General and
administrative 16,601 4,688 26,709 (Gains) losses on sales of
property and equipment, net (798 ) 285 1,804 Impairments and other
— 22 1,566 Total
Operating Expenses 110,639 61,732
259,822
Operating (Loss) Income (30,983
) (21,294 ) (46,281 )
Other (Expense) Income:
Interest expense (6,185 ) (2,374 ) (25,480 ) Gains on early
extinguishment of debt — — 4,975 Loss from equity investee — — (230
) Other income 886 391 942 Reorganization items, net (246 )
(16,465 ) — Total Other Expense (5,545
) (18,448 ) (19,793 )
Loss Before Income Taxes
(36,528 ) (39,742 ) (66,074 )
Income Tax Benefit —
(28,102 ) (17,544 )
Net Loss $ (36,528
) $ (11,640 ) $ (48,530 )
Loss Per Common Share Basic
$ (1.66 ) $ (0.21 ) $ (0.95 ) Diluted $ (1.66 ) $ (0.21 ) $ (0.95 )
Weighted Average Common Shares Outstanding Basic
22,041 55,847 51,117 Diluted 22,041 55,847 51,117
SEVENTY SEVEN ENERGY INC. (Debtor-in-possession
June 7, 2016 through July 31, 2016) Condensed Consolidated
Statements of Operations (unaudited) (in thousands, except
per share data) Successor Predecessor
Two Months EndedSeptember 30,
2016
Seven Months EndedJuly 31,
2016
Nine Months EndedSeptember 30,
2015
Revenues: Revenues $ 79,656 $ 333,919 $ 938,456
Operating Expenses: Operating costs 63,628 237,014 731,627
Depreciation and amortization 31,208 162,425 226,779 General and
administrative 16,601 66,667 95,436 Loss on sale of a business — —
34,989 (Gains) losses on sales of property and equipment, net (798
) 848 15,023 Impairments and other — 6,116
16,720 Total Operating Expenses 110,639
473,070 1,120,574
Operating
(Loss) Income (30,983 ) (139,151 )
(182,118 )
Other (Expense) Income: Interest expense (6,185 )
(48,116 ) (73,964 ) Gains on early extinguishment of debt — —
18,061 Income from equity investee — — 877 Other income 886 2,318
1,889 Reorganization items, net (246 ) (29,892 )
— Total Other Expense (5,545 ) (75,690
) (53,137 )
Loss Before Income Taxes (36,528 )
(214,841 ) (235,255 )
Income Tax Benefit —
(59,131 ) (74,455 )
Net Loss $ (36,528 ) $
(155,710 ) $ (160,800 )
Loss Per Common Share Basic $
(1.66 ) $ (2.84 ) $ (3.24 ) Diluted $ (1.66 ) $ (2.84 ) $ (3.24 )
Weighted Average Common Shares Outstanding Basic
22,041 54,832 49,627 Diluted 22,041 54,832 49,627
SEVENTY SEVEN ENERGY INC. (Debtor-in-possession
June 7, 2016 through July 31, 2016) Condensed Consolidated
Balance Sheets (unaudited) (in thousands, except share
amounts) Successor Predecessor
As of September 30,2016
As of December 31,2015
Assets: Current Assets: Cash $ 23,004 $ 130,648 Accounts
receivable, net of allowance of $47 and $3,680 at September 30,
2016 and December 31, 2015, respectively 109,328 164,721 Inventory
11,303 18,553 Deferred income tax asset — 1,499 Prepaid expenses
and other 14,547 17,141 Total Current
Assets 158,182 332,562 Property and
Equipment: Property and equipment, at cost 812,611 2,646,446 Less:
accumulated depreciation (29,566 ) (1,116,026 ) Property and
equipment held for sale, net 8,418 —
Total Property and Equipment, Net 791,463
1,530,420 Other Assets: Deferred financing costs 1,194 1,238
Other long-term assets 22,114 38,398
Total Other Assets 23,308 39,636
Total Assets $ 972,953 $ 1,902,618
Liabilities and Stockholders’ Equity: Current Liabilities:
Accounts payable $ 19,228 $ 53,767 Current portion of long-term
debt 5,000 5,000 Other current liabilities 45,043
98,318 Total Current Liabilities 69,271
157,085 Long-Term Liabilities: Deferred income tax
liabilities — 60,623 Long-term debt, excluding current maturities
423,347 1,564,592 Other long-term liabilities 1,875
1,478 Total Long-Term Liabilities 425,222
1,626,693 Commitments and Contingencies (Note
8) Stockholders’ Equity: Predecessor common stock, $0.01 par value:
authorized 250,000,000 shares; issued and outstanding 59,397,831
shares at December 31, 2015 — 594 Predecessor paid-in capital —
350,770 Successor preferred stock, $0.01 par value: authorized
10,000,000 shares; zero outstanding at September 30, 2016 — —
Successor common stock, $0.01 par value: authorized 90,000,000
shares; issued and outstanding 22,280,349 shares at September 30,
2016 223 — Successor paid-in capital 514,765 — Accumulated deficit
(36,528 ) (232,524 ) Total Stockholders’ Equity
478,460 118,840
Total Liabilities
and Stockholders’ Equity $ 972,953 $ 1,902,618
SEVENTY SEVEN ENERGY INC.
(Debtor-in-possession June 7, 2016 through July 31, 2016)
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands) Successor Predecessor
Two Months EndedSeptember 30,
2016
Seven Months EndedJuly 31,
2016
Nine Months EndedSeptember 30,
2015
Cash Flows from Operating Activities: Net Loss
$ (36,528 ) $ (155,710 ) $ (160,800 )
Adjustments to Reconcile
Net Loss to Cash Provided by Operating Activities: Depreciation
and amortization 31,208 162,425 226,779 Accretion of discount on
Term Loans 2,077 — — Accretion of discount on Note Receivable (277
) — — Amortization of deferred financing costs 41 2,455 3,381 Gains
on early extinguishment of debt — — (18,061 ) Loss on sale of a
business — — 34,989 (Gains) losses on sales of property and
equipment, net (798 ) 848 15,023 Impairments and other — 6,116
16,720 Income from equity investee — — (877 ) Non-cash
reorganization items, net — 9,185 — Provision for doubtful accounts
47 1,406 1,930 Non-cash compensation 8,224 12,635 43,646 Deferred
income tax benefit — (59,124 ) (74,455 ) Other 9 (10 ) (810 )
Changes in operating assets and liabilities (11,755 )
26,243 176,197 Net cash provided by operating
activities (7,752 ) 6,469 263,662
Cash Flows from Investing Activities: Additions to
property and equipment (6,100 ) (82,787 ) (151,799 ) Purchases of
short-term investments — (6,242 ) — Proceeds from sales of assets
3,808 2,638 18,573 Proceeds from sale of a business — — 15,000
Proceeds from sales of short-term investments — 6,236 — Additions
to investments — — (112 ) Other 14 29
3,434 Net cash used in investing activities
(2,278 ) (80,126 ) (114,904 )
Cash Flows from
Financing Activities: Borrowings from revolving credit facility
— — 160,100 Payments on revolving credit facility — — (210,600 )
Payments to extinguish senior notes — — (31,305 ) Proceeds from
issuance of term loan, net of issuance costs — — 94,481 Payments on
term loan (1,250 ) (17,500 ) (3,500 ) Deferred financing costs —
(1,235 ) (784 ) Other (3,466 ) (506 ) (1,822 )
Net cash provided by financing activities (4,716 )
(19,241 ) 6,570 Net increase in cash (14,746 )
(92,898 ) 155,328 Cash, beginning of period 37,750
130,648 891 Cash, end of period $
23,004 $ 37,750 $ 156,219
SEVENTY SEVEN ENERGY INC.
(Debtor-in-possession June 7, 2016
through July 31, 2016)
Condensed Consolidated Statements of
Cash Flows (unaudited) — (Continued)
Supplemental disclosures to the condensed
consolidated financial statements of cash flows are presented
below:
Successor Predecessor
Two Months EndedSeptember 30,
2016
Seven Months EndedJuly 31,
2016
Nine Months EndedSeptember 30,
2015
Supplemental Disclosure of Significant Non-Cash Investing and
Financing Activities: Increase (decrease) in other current
liabilities related to purchases of property and equipment $ 1,363
$ (3,351 ) $ (9,459 ) Note receivable received as consideration for
sale of a business $ — $ — $ 27,000
Supplemental Disclosure of
Cash Payments: Interest paid, net of amount capitalized $ 2,620
$ 30,814 $ 69,181
SEVENTY SEVEN ENERGY
INC.Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA
“Adjusted EBITDA” is a non-GAAP financial measure. Adjusted
EBITDA, as used and defined by us, may not be comparable to
similarly titled measures employed by other companies and is not a
measure of performance calculated in accordance with GAAP.
Adjusted EBITDA should not be considered in isolation or as a
substitute for operating income, net income or loss, cash flows
provided by operating, investing and financing activities, or other
income or cash flow statement data prepared in accordance with
GAAP. However, our management uses Adjusted EBITDA to evaluate our
performance and liquidity and believes Adjusted EBITDA may be
useful to an investor in evaluating our operating performance and
liquidity because this measure:
- is widely used by investors in the
oilfield services industry to measure a company’s operating
performance without regard to items excluded from the calculation
of such measure, which can vary substantially from company to
company depending upon accounting methods, book value of assets,
capital structure and the method by which assets were acquired,
among other factors;
- is a liquidity measure that is used by
rating agencies, lenders and other parties to evaluate our
creditworthiness; and
- is used by our management for various
purposes, including as a measure of performance for our operating
entities and as a basis for strategic planning and
forecasting.
There are significant limitations to using Adjusted EBITDA as a
measure of performance, including the inability to analyze the
effect of certain recurring and non-recurring items that materially
affect our net income or loss. Additionally, because Adjusted
EBITDA excludes some, but not all, items that affect net income and
is defined differently by different companies in our industry, our
definition of Adjusted EBITDA may not be comparable to similarly
titled measures of other companies.
Consolidated Adjusted EBITDA
Successor Predecessor Successor
Predecessor
Two
MonthsEndedSeptember30, 2016
One MonthEnded July31,
2016
ThreeMonthsEndedSeptember30,
2015
ThreeMonthsEnded
June30, 2016
Two
MonthsEndedSeptember30, 2016
SevenMonthsEnded
July31, 2016
Nine
MonthsEndedSeptember30, 2015
(In thousands) Net Loss $ (36,528 ) $ (11,640 ) $ (48,530 )
$ (84,505 ) $ (36,528 ) $ (155,710 ) $ (160,800 ) Add: Interest
expense 6,185 2,374 25,480 20,464 6,185 48,116 73,964 Gains on
extinguishment of debt — (4,975 ) — — (18,061 ) Income tax benefit
— (28,102 ) (17,544 ) (22,956 ) — (59,131 ) (74,455 ) Depreciation
and amortization 31,208 22,902 68,854 69,877 31,208 162,425 226,779
Losses (gains) on sale of a business and exit costs 177 126 1,355
(138 ) 177 135 36,344 (Gains) losses on sales of property and
equipment, net (798 ) 285 1,804 1,014 (798 ) 848 15,023 Impairments
and other — 22 1,566 5,789 — 6,116 16,720 Non-cash compensation
8,224 1,295 12,160 5,229 8,224 12,637 43,646 Severance-related
costs 306 17 1,517 287 306 643 6,023 Restructuring charges 138 (502
) — 23,673 138 27,918 — Reorganization items, net 246 16,465 —
13,427 246 29,892 — Interest income (690 ) (208 ) (628 ) (614 )
(690 ) (1,438 ) (736 ) Less: Drilling rig relocation and logistics
Adjusted EBITDA — — — — — — (9,745 ) Water hauling Adjusted EBITDA
— — — —
— — (4,531 ) Adjusted EBITDA $
8,468 $ 3,034 $ 41,059 $ 31,547 $ 8,468
$ 72,451 $ 178,723
Drilling Adjusted EBITDA
Successor Predecessor Successor
Predecessor
Two
MonthsEndedSeptember30, 2016
One MonthEnded July31,
2016
ThreeMonthsEndedSeptember30,
2015
ThreeMonthsEnded
June30, 2016
Two
MonthsEndedSeptember30, 2016
SevenMonthsEnded
July31, 2016
Nine
MonthsEndedSeptember30, 2015
(In thousands) Net income (loss)
$
12,477
$ (149,123 ) $ (6,392 ) $ (651 ) $ 12,477 $ (366,593 ) $ (15,710 )
Add: Income tax benefit expense — (365,093 ) (2,311 ) (177 ) —
(142,564 ) (7,274 ) Depreciation and amortization 11,710 11,999
38,197 36,857 11,710 87,160 125,936 (Gains) losses on sales of
property and equipment, net (77 ) 243 1,952 728 (77 ) 1,211 9,903
Impairments and other — — — 2,900 — 3,205 12,417 Non-cash
compensation 374 197 2,273 791 374 1,973 9,942 Severance-related
costs — 17 192 54 — 259 1,048 Corporate overhead allocation(a) — —
7,725 — — — 24,246 Restructuring charges 79 41 — 120 79 280 —
Reorganization items, net — 514,627
— — — 514,627
— Adjusted EBITDA $ 24,563 $ 12,908
$ 41,636 $ 40,622 $ 24,563 $ 99,558
$ 160,508 (a) Prior to 2016, the information
that was regularly reviewed by our chief operating decision maker
included general and administrative expenses that were allocated to
each of our reportable segments for corporate overhead functions
provided by the Other Operations segment, on behalf of our
reportable segments. Effective January 1, 2016, we no longer
allocate general and administrative expenses to our reportable
segments from the Other Operations segment in the information that
is reviewed by our chief operating decision maker. For
comparability purposes, this change has been reflected through
retroactive revision of the prior period segment information.
Hydraulic Fracturing Adjusted
EBITDA
Successor Predecessor Successor
Predecessor
Two
MonthsEndedSeptember30, 2016
One MonthEnded July31,
2016
ThreeMonthsEndedSeptember30,
2015
ThreeMonthsEnded
June30, 2016
Two
MonthsEndedSeptember30, 2016
SevenMonthsEnded
July31, 2016
Nine MonthsEndedSeptember
30,2015
(In thousands) Net loss $ (22,580 ) $ (16,997 ) $ (7,973 ) $
(15,388 ) $ (22,580 ) $ (66,216 ) $ (1,977 ) Add: Income tax
benefit — (41,612 ) (2,882 ) (4,180 ) — (25,750 ) (916 )
Depreciation and amortization 14,002 7,399 17,833 21,983 14,002
49,124 51,915 Losses on sales of property and equipment, net 40 19
172 2 40 66 171 Non-cash compensation 223 62 952 227 223 718 3,234
Severance-related costs 306 — 127 55 306 55 268 Corporate overhead
allocation(a) — — 6,789 — — — 19,551 Restructuring charges 50 26 —
77 50 178 — Reorganization items, net — 45,046
— — —
45,046 — Adjusted EBITDA $ (7,959 ) $
(6,057 ) $ 15,018 $ 2,776 $ (7,959 ) $ 3,221
$ 72,246 (a) Prior to 2016, the information
that was regularly reviewed by our chief operating decision maker
included general and administrative expenses that were allocated to
each of our reportable segments for corporate overhead functions
provided by the Other Operations segment, on behalf of our
reportable segments. Effective January 1, 2016, we no longer
allocate general and administrative expenses to our reportable
segments from the Other Operations segment in the information that
is reviewed by our chief operating decision maker. For
comparability purposes, this change has been reflected through
retroactive revision of the prior period segment information.
Oilfield Rentals Adjusted
EBITDA
Successor Predecessor Successor
Predecessor
Two
MonthsEndedSeptember30, 2016
One MonthEnded July31,
2016
ThreeMonthsEndedSeptember30,
2015
ThreeMonthsEnded
June30, 2016
Two
MonthsEndedSeptember30, 2016
SevenMonthsEnded
July31, 2016
Nine
MonthsEndedSeptember30, 2015
(In thousands) Net loss
$
(2,704 )
$
(6,160 ) $ (7,365 )
$
(6,764 )
$
(2,704 )
$
(28,539 ) $ (20,511 ) Add: Income tax benefit — (15,082 ) (2,663 )
(1,838 ) — (11,099 ) (9,497 ) Depreciation and amortization 3,966
2,425 8,912 7,847 3,966 18,773 31,659 (Gains) losses on sales of
property and equipment, net (750 ) 9 (329 ) 284 (750 ) (425 ) (777
) Impairments — — — 287 — 287 — Non-cash compensation 75 26 483 76
75 285 1,868 Severance-related costs — — 105 135 — 173 93 Corporate
overhead allocation(a) — — 2,379 — — — 6,483 Restructuring charges
27 14 — 43 27 97 — Reorganization items, net —
18,966 — — —
18,966 — Adjusted EBITDA
$
614 $ 198 $ 1,522 $ 70 $ 614 $
(1,482 ) $ 9,318 (a) Prior to 2016, the information
that was regularly reviewed by our chief operating decision maker
included general and administrative expenses that were allocated to
each of our reportable segments for corporate overhead functions
provided by the Other Operations segment, on behalf of our
reportable segments. Effective January 1, 2016, we no longer
allocate general and administrative expenses to our reportable
segments from the Other Operations segment in the information that
is reviewed by our chief operating decision maker. For
comparability purposes, this change has been reflected through
retroactive revision of the prior period segment information.
Segment Statistics
Drilling Successor Predecessor
Successor Predecessor
Two
MonthsEndedSeptember30, 2016
One MonthEnded July31,
2016
ThreeMonthsEndedSeptember30,
2015
ThreeMonthsEnded
June30, 2016
Two
MonthsEndedSeptember30, 2016
SevenMonthsEnded
July31, 2016
Nine
MonthsEndedSeptember30, 2015
(In thousands) Revenues $ 42,969 $ 20,085 $ 80,348 $ 62,801
$ 42,969 $ 154,794 $ 346,846 Operating Costs 18,836
7,433 41,387 22,984 18,836 57,573
196,675 Gross Margin $ 24,133 $ 12,652 $ 38,961 $ 39,817 $
24,133 $ 97,221 $ 150,171
Hydraulic Fracturing
Successor Predecessor Successor
Predecessor
Two
MonthsEndedSeptember30, 2016
One MonthEnded July31,
2016
ThreeMonthsEndedSeptember30,
2015
ThreeMonthsEnded
June30, 2016
Two
MonthsEndedSeptember30, 2016
SevenMonthsEnded
July31, 2016
Nine
MonthsEndedSeptember30, 2015
(In thousands) Revenues $ 30,540 $ 17,502 $ 118,137 $ 66,913
$ 30,540 $ 160,723 $ 483,565 Operating Costs 38,724
23,631 103,941 64,499 38,724
158,569 416,472 Gross Margin $ (8,184 ) $
(6,129 ) $ 14,196 $ 2,414 $ (8,184 ) $ 2,154 $ 67,093
Oilfield Rentals
Successor Predecessor Successor
Predecessor
Two
MonthsEndedSeptember30, 2016
One MonthEnded July31,
2016
ThreeMonthsEndedSeptember30,
2015
ThreeMonthsEnded
June30, 2016
Two
MonthsEndedSeptember30, 2016
SevenMonthsEnded
July31, 2016
Nine
MonthsEndedSeptember30, 2015
(In thousands) Revenues $ 6,147 $ 2,851 $ 15,047 $ 8,406 $
6,147 $ 18,402 $ 65,297 Operating Costs 5,688 2,681
14,037 8,413 5,688 20,172
57,880 Gross Margin $ 459 $ 170 $ 1,010 $ (7 ) $ 459 $
(1,770 ) $ 7,417
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version on businesswire.com: http://www.businesswire.com/news/home/20161109005155/en/
Seventy Seven Energy Inc.Bob Jarvis,
405-608-7730IR@77nrg.com
Silver Spruce Resources (TSXV:SSE)
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