Higher demand for well and fluid services produces strong top- and bottom-line results
Forbes Energy Services Ltd. (NASDAQ: FES) and (TSX: FRB) today announced financial and operating results for the three and nine months ended Sept. 30, 2011. All share and per share amounts have been adjusted to reflect the recently completed four-to-one share consolidation.
Highlights for the three months ended Sept. 30, 2011:
- Revenues increased 59% to $133.2 million compared to $84.0 million in the third quarter 2010. The increase was driven by significantly higher utilization and pricing in both divisions;
- GAAP net income attributable to common shareholders was $4.2 million or $0.16 per diluted share compared to a net loss of $2.4 million or a loss of $0.11 per diluted share for the third quarter of 2010;
- Adjusted EBITDA* totaled $24.9 million compared to $14.3 million for the three months ended Sept. 30, 2010, and $23.8 million in the second quarter of 2011.
Highlights for the nine months ended Sept. 30, 2011:
- Revenues increased 59% to $367.2 million compared to $231.3 million for the nine months ended Sept. 30, 2010. The increase was driven by significantly higher utilization and pricing in both divisions;
- The first nine months of 2011 produced a GAAP net loss attributable to common shareholders of $18.4 million or a loss of $0.88 per diluted share compared to a net loss of $12.8 million or a loss of $0.61 per share for the first nine months of 2010;
- Adjusted EBITDA* totaled $69.7 million compared to $32.9 million for the nine months ended Sept. 30, 2010, and $44.8 million in the first half of 2011.
* Adjusted EBITDA, a non-GAAP financial measure, is defined by the company as net income before interest, taxes, depreciation, amortization, gain or loss on early extinguishment of debt, non-cash impairments and non-cash stock based compensation. For a reconciliation of Adjusted EBITDA excluding non-recurring items to net income, please see the disclosures at the end of this release and on the Company's website.
"Our strong results, both sequentially and year-over-year, are due primarily to the steady increase in drilling and production activities in the prolific oil and gas fields where we operate in both the U.S. and Mexico," said John Crisp, president and CEO of Forbes Energy Services Ltd. "I'm pleased with our industry leading position in the Eagle Ford shale and look forward to serving the needs of our customers as they geographically expand operations into other promising hydrocarbon basins."
Business Segment Results
Well Servicing Segment
In the third quarter of 2011, Well Servicing segment revenues increased by $25.0 million or 61% to $65.8 million compared to $40.8 million in the prior year period and $58.3 million in the second quarter of 2011. Segment gross margin totaled $13.8 million (21% of revenues) in the third quarter compared to $8.2 million (20% of revenues) in the third quarter of 2010 and $12.0 million (21% of revenues) for the second quarter of 2011. The sequential and year-over-year increase in the Well Servicing segment is the result of higher prices for our services and greater utilization, partially offset by rising labor, maintenance and fuel costs.
The company recorded approximately 134,295 rig hours for the third quarter of 2011, including 22,056 hours in Mexico, compared to 98,337 total hours in the third quarter of 2010 (17,856 in Mexico) and 116,673 total hours in the second quarter of 2011 (19,032 in Mexico). The company had 172 rigs in its well service fleet at Sept. 30, 2011. Capital expenditures for the three months ended Sept. 30, 2011, were approximately $8.2 million.
For the nine months ended Sept. 30, 2011, Well Servicing revenues increased $61.3 million or 55% to $172.8 million compared to $111.5 million for the same nine-month period in 2010. Segment gross margin for the first nine months of 2011 totaled $35.8 million (21% of revenues) compared to $21.5 million (19% revenues) in the first nine months of 2010. The company recorded approximately 353,999 and 283,524 rig hours for the nine months ended Sept. 30, 2011 and 2010, respectively. Capital expenditures for the nine months ended Sept. 30, 2011 were $28.6 million.
Fluid Logistics and Other Segment
In the third quarter of 2011, Fluid Logistics and other segment revenues increased $24.2 million or 56% to $67.3 million compared to $43.1 million in the third quarter of 2010 and $68.8 million in the second quarter of 2011. Gross operating margins for the fluid logistics segment totaled $17.5 million (26% of revenues) in the third quarter of 2011 compared to $10.9 million (25% of revenues) in the prior year period and $18.1 million (26% of revenues) in the second quarter of 2011. The year-over-year increase is the result of higher prices for our services and greater utilization, partially offset by rising labor, maintenance and fuel costs.
The company recorded 364,682 truck hours during the third quarter of 2011 compared to 293,488 hours for the third quarter of 2010 and 367,397 hours in the second quarter of 2011. The company's fluid transport segment heavy truck fleet totaled 370 as of Sept. 30, 2011. Total capital expenditures for the fluid logistics segment were approximately $9.7 million for the three months ended Sept. 30, 2011.
For the nine months ended Sept. 30, 2011, Fluid Logistics and other segment revenues increased $74.6 million or 62% to $194.4 million compared to $119.8 million for the same nine-month period in 2010. Gross operating margins for this segment in the first nine months of 2011 totaled $51.6 million (27% of revenues) compared to $27.2 million (23% revenues) in the first nine months of 2010. The company recorded 1,045,524 and 830,114 truck hours for the nine months ended Sept. 30, 2011 and 2010, respectively. Total capital expenditures for the fluid logistics segment were approximately $17.3 million for the nine months ended Sept. 30, 2011.
Liquidity and Capital Resources
As of Sept. 30, 2011, the company had $27.2 million in unrestricted cash and $280 million of 9% Senior Notes and $6.8 million of other notes. As of Nov. 11, 2011, the company had $29.3 million in unrestricted cash. The new $75 million secured credit facility remains undrawn.
Conference Call
Company management will host a conference call to discuss its third quarter 2011 financial results starting at 10 a.m. EST (9 a.m. CST) tomorrow, Nov. 15, 2011. Investors can participate in the call by phone, or listen to the call via audio webcast, as follows:
Via phone
In the U.S. and Canada, dial 888-679-8040 (passcode 71917746). International callers dial 617-213-4851 (passcode 71917746). A telephone replay will be available through Nov. 22, 2011. To access the replay, callers in the U.S. and Canada dial 888-286-8010 (passcode 13992142). International callers can access the replay by dialing 617-801-6888 (passcode 13992142).
To minimize telephone hold times, participants can pre-register for the call by visiting the following site: www.theconferencingservice.com/prereg/key.process?key=P6KUNV846.
Via webcast
Visit www.ForbesEnergyServices.com and click on "Investor Relations," then "Events and Presentations." Shortly after the conclusion of the call, a webcast replay will be made available on the same page of the company's investor relations website.
About the Company
Forbes Energy Services Ltd. is an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, Mississippi, Pennsylvania and Mexico.
Forward-Looking Statements and Regulation G Reconciliation
This press release contains "forward-looking statements," as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect its performance in the future. The accuracy of the Company's assumptions, expectations, beliefs and projections depend on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company's actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include: supply and demand for oilfield services and the level of oil and natural gas prices; the continued uncertainty in the global financial markets and its effect on domestic spending in the oil and natural gas industry; the Company's ability to maintain or improve pricing on its core services; the potential for excess capacity in the industry; and competition. Additional factors that you should consider are set forth in detail in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2010 (the "Form 10-K"), which was previously filed, as well as other filings the Company has made with the Securities and Exchange Commission. Should one or more of the foregoing risks or uncertainties materialize, or should the Company's underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated in its forward-looking statements, and the Company's business, financial condition and results of operations could be materially and adversely affected.
The Company's financial statements and management's discussion and analysis of financial condition and results of operations can be found in the Form 10-Q, which is being submitted for filing today with the Securities and Exchange Commission and posted on the Company's website.
This press release also contains references to the non-GAAP financial measure of adjusted EBITDA. For a reconciliation of adjusted EBITDA to net income, please see the table at the end of this release. Management's opinion regarding the usefulness of adjusted EBITDA to investors and a description of the ways in which management uses such measures can be found on the "Investor Relations" page of the Company's website, www.forbesenergyservices.com.
Forbes Energy Services Ltd. | |||||||||||||||||||
Selected Statement of Operations Data | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
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Three Months Ended | Nine Months Ended | ||||||||||||||||||
 | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |  | ||||||||
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Revenues | |||||||||||||||||||
Well servicing | $ | 65,830,108 | $ | 40,847,610 | $ | 172,816,789 | $ | 111,521,202 | |||||||||||
Fluid logistics | Â | 67,340,814 | Â | Â | 43,128,903 | Â | Â | 194,371,015 | Â | Â | 119,762,826 | Â | |||||||
Total revenues | Â | 133,170,922 | Â | Â | 83,976,513 | Â | Â | 367,187,804 | Â | Â | 231,284,028 | Â | |||||||
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Expenses | |||||||||||||||||||
Well servicing | 52,043,990 | 32,632,654 | 136,969,813 | 89,992,590 | |||||||||||||||
Fluid logistics | 49,816,736 | 32,262,539 | 142,730,107 | 92,554,158 | |||||||||||||||
General and administrative | 6,944,206 | 5,535,451 | 26,768,334 | 17,747,263 | |||||||||||||||
Depreciation and amortization | Â | 10,463,137 | Â | Â | 10,089,067 | Â | Â | 30,575,444 | Â | Â | 29,927,159 | Â | |||||||
Total expenses | Â | 119,268,069 | Â | Â | 80,519,711 | Â | Â | 337,043,698 | Â | Â | 230,221,170 | Â | |||||||
Operating income (loss) | 13,902,853 | 3,456,802 | 30,144,106 | 1,062,858 | |||||||||||||||
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Other income (expense) | |||||||||||||||||||
Interest expense | (6,740,423 | ) | (6,758,856 | ) | (20,459,287 | ) | (20,501,533 | ) | |||||||||||
Gain on extinguishment of debt | - | - | (35,414,833 | ) | 18,591 | ||||||||||||||
Other income (expense) | Â | 2,292 | Â | Â | 116,137 | Â | Â | 71,128 | Â | Â | 7,871 | Â | |||||||
Income before taxes | 7,164,722 | (3,185,917 | ) | (25,658,886 | ) | (19,412,213 | ) | ||||||||||||
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Income tax benefit | Â | 2,803,315 | Â | Â | (1,104,267 | ) | Â | (7,230,109 | ) | Â | (6,917,701 | ) | |||||||
Net loss | 4,361,407 | (2,081,650 | ) | (18,428,777 | ) | (12,494,512 | ) | ||||||||||||
Preferred shares dividends | Â | (194,135 | ) | Â | (278,432 | ) | Â | 7,552 | Â | Â | (342,389 | ) | |||||||
Net loss attributable to common shares | $ | 4,167,272 | Â | $ | (2,360,082 | ) | $ | (18,436,329 | ) | $ | (12,836,901 | ) | |||||||
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Earnings/(loss) per share of common stock | |||||||||||||||||||
Basic | $ | 0.20 | $ | (0.11 | ) | $ | (0.88 | ) | $ | (0.61 | ) | ||||||||
Diluted | 0.16 | $ | (0.11 | ) | (0.88 | ) | $ | (0.61 | ) | ||||||||||
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Weighted average number of shares outstanding | |||||||||||||||||||
Basic | 20,918,417 | 20,918,417 | 20,918,417 | 20,918,417 | |||||||||||||||
Diluted | 26,600,004 | 20,918,417 | 20,918,417 | 20,918,417 | |||||||||||||||
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Forbes Energy Services Ltd. | |||||||||||||||||
Selected Balance Sheet Data | |||||||||||||||||
(Unaudited) | |||||||||||||||||
 |  | September 30, |  | December 31, |  |  | |||||||||||
 | 2011 |  | 2010 |  | |||||||||||||
Cash | $ | 27,222,278 | $ | 30,458,457 | |||||||||||||
Accounts receivable | 126,591,586 | 85,682,475 | |||||||||||||||
Working Capital | 91,650,532 | 68,712,861 | |||||||||||||||
Goodwill and other intangibles (net) | 31,591,688 | 33,737,585 | |||||||||||||||
Total assets | 510,001,917 | 451,829,867 | |||||||||||||||
Total debt | 286,754,618 | 219,378,505 | |||||||||||||||
Deferred tax liability | 20,382,466 | 29,685,339 | |||||||||||||||
Shareholders' equity | 118,974,584 | 136,795,397 | |||||||||||||||
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Forbes Energy Services Ltd. | |||||||||||||||||
Selected Operating Data | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
 | 2011 |  | 2010 |  |  | 2011 |  |  | 2010 |  | |||||||
Working Days | 64 | 63 | 191 | 189 | |||||||||||||
Rig Hours | |||||||||||||||||
U.S. | 112,239 | 80,481 | 299,495 | 224,724 | |||||||||||||
Mexico | Â | 22,056 | Â | 17,856 | Â | Â | 54,504 | Â | Â | 58,800 | Â | ||||||
Total Rig Hours | Â | 134,295 | Â | 98,337 | Â | Â | 353,999 | Â | Â | 283,524 | Â | ||||||
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Truck Hours | 364,682 | 293,488 | 1,045,524 | 830,114 | |||||||||||||
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Forbes Energy Services Ltd. | |||||||||||||||||
Reconciliation of Adjusted EBITDA Excluding Non-Recurring Items to Net Income | |||||||||||||||||
(Unaudited) | |||||||||||||||||
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Three Months Ended | Nine Months Ended | ||||||||||||||||
 | 2011 |  | 2010 |  |  | 2011 |  |  | 2010 |  | |||||||
Net Income (loss) | $ | 4,361,407 | $ | (2,081,650 | ) | $ | (18,428,777 | ) | $ | (12,494,512 | ) | ||||||
Depreciation and amortization | 10,463,137 | 10,089,067 | 30,575,444 | 29,927,159 | |||||||||||||
Interest expense | 6,740,423 | 6,758,856 | 20,459,287 | 20,501,533 | |||||||||||||
Income tax expense (benefit) | 2,803,315 | (1,104,267 | ) | (7,230,109 | ) | (6,917,701 | ) | ||||||||||
Gain (loss) on early extinguishment of debt | 35,414,833 | (18,581 | ) | ||||||||||||||
Stock based compensation | Â | 581,354 | Â | 674,239 | Â | Â | 1,929,632 | Â | Â | 1,919,076 | Â | ||||||
Adjusted EBITDA | Â | 24,949,636 | Â | 14,336,245 | Â | Â | 62,720,310 | Â | Â | 32,916,974 | Â | ||||||
Litigation settlement and associated legal fees | - | - | 6,784,164 | - | |||||||||||||
Legal fees associated with debt repurchase | Â | - | Â | - | Â | Â | 211,000 | Â | Â | - | Â | ||||||
Adjusted EBITDA Excluding Non-Recurring Items | $ | 24,949,636 | $ | 14,336,245 | Â | $ | 69,715,474 | Â | $ | 32,916,974 | Â |
Contacts:
Forbes Energy Services Ltd.
L. Melvin
Cooper, 361-664-0549
SVP & CFO
or
Michael Russell,
512-750-4925
Investor Relations