SOURCE: Aly Energy

Aly Energy

November 17, 2015 23:17 ET

Aly Energy Announces Third Quarter Earnings

HOUSTON, TX--(Marketwired - Nov 17, 2015) - Aly Energy Services, Inc. ("Aly Energy") (OTCQB: ALYE) yesterday filed its Form 10-Q for the quarter ended September 30, 2015 with the Securities and Exchange Commission and today provided a discussion of operations and financial results for the third quarter. Revenues for the third quarter of 2015 decreased 48.6% to $6.9 million as compared to $13.5 million for the third quarter of 2014, and Adjusted EBITDA decreased 75.9% in the third quarter of 2015 to $0.8 million as compared to $3.3 million for the same quarter last year. Aly Energy reported net loss available to common stockholders for the third quarter of 2015 of approximately $1.2 million, after preferred stock dividends and accretion aggregating to approximately $0.1 million, as compared to a net income available to common stockholders of approximately $1.0 million after preferred dividends and accretion aggregating to approximately $0.1 million for the same period in 2014.

Revenues for the first nine months of 2015 decreased 17.1% to $23.1 million as compared to $27.9 million for the first nine months of 2014, and Adjusted EBITDA decreased 87.8% in the first nine months of 2015 to $1.0 million compared to $7.9 million for the first nine months of 2014. EBITDA and Adjusted EBITDA are non-GAAP financial measures that are not necessarily comparable from one company to another. Adjusted EBITDA is defined as earnings before net interest expense, income taxes, depreciation and amortization, certain non-cash items, such as stock compensation expense, bad debt expense, and fair value adjustments, and certain non-routine items, including transaction costs. Management believes that Adjusted EBITDA is useful to investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of the Company's normal operating results. For a reconciliation of Adjusted EBITDA to net income, please see the tables at the end of this release.

Aly Energy reported net loss available to common stockholders for the first nine months of 2015 of approximately $4.5 million, after preferred stock dividends and accretion aggregating to approximately $0.4 million, as compared to net income available to common stockholders of approximately $1.8 million, after preferred stock dividends and accretion aggregating to approximately $0.3 million for the same period in 2014.

The 48.6% decrease in revenues in the third quarter is due primarily to the sharp decline in oil prices and activity within the oilfield services industry subsequent to September 30, 2014. Day rates and the number of revenue generating days, which is a reflection of the utilization of our equipment, for our core products each declined approximately 20-30% during the three and nine months ended September 30, 2015, as compared to the three and nine months ended September 30, 2014.

During 2015, we decreased headcount and reduced overall direct and indirect wage rates. In addition, third party expenses declined significantly as our owned inventory of equipment was sufficient to meet the demand for our services. The increase in operating expenses as a percentage of revenues for the nine months ended September 30, 2015, as compared to the same period last year was due primarily to the impact of aggressively cutting prices to retain market share, which reduced revenue at a faster rate than we were able to implement offsetting cost reductions. Although we have reduced operating expenses 42% in the third quarter of 2015, as compared to the same period last year, we continue to pursue cost reduction initiatives in order to strengthen profitability.

Outlook

As we enter the fourth quarter of 2015, oil prices remain depressed and we expect further reductions in the rig count. Although it is customary to experience declines in activity in the fourth quarter due to the holidays and the exhaustion of our customers' annual spending budgets, we believe the declines this year may be even more pronounced as operators extend holiday breaks and aggressively cut end-of-year spending. Although we believe we will begin to see increases in activity next year, we do not anticipate any material improvement in prices until the second half of 2016.

Management Comment

Micki Hidayatallah, Aly Energy's Chairman and Chief Executive Officer, said: "Our team has responded proactively and decisively to retain existing customers, attract new ones and align our cost structure at both the field and corporate levels with the realities of the current market. In the third quarter, we began to benefit from the cost reductions we implemented earlier in the year. Our Adjusted EBITDA margin for the third quarter was 11%, which was significantly higher than in the first half of the year when we essentially broke even and nearly three times higher than the 4% margin generated for the first nine months of the year. It is notable that on a recurring run rate basis we achieved our target Adjusted EBITDA margin of 12%, and we believe we can maintain this level of profitability in the fourth quarter with further cost control initiatives.

"Turning to liquidity, we were successful in raising $3.35 million from the sale of Common Stock in the third quarter, and were able to amend the terms of the Senior Secured Debt to provide for greater financial flexibility. The net proceeds from the offering were used to reduce debt by $3.4 million, including a regularly scheduled payment of $1.5 million on our Senior Secured Debt at the end of the quarter and a prepayment of $1.9 million made on October 13, 2015. After giving effect to the prepayment, we had $800 thousand of cash available for operations, and at the end of the third quarter we had no borrowings on our $1.0 million Revolving Line of Credit.

"Importantly, all scheduled principal payments have been deferred on the Term Debt until March 31, 2017, so we do not have any impending debt maturities. Combined with our cost reduction initiatives, we have sufficient liquidity to fulfill our service mission to customers, and we will endeavor to review financing options to enhance our liquidity, reduce debt and identify bolt-on acquisitions that meet our strategic objectives.

"That we have been able to retain market share and preserve profitability is a testament to our business strategy of offering differentiated solutions to the market, superior value and uncompromised service."

About Aly Energy

Aly Energy Services and its subsidiaries provide equipment and services essential to the drilling and development of oil and gas resources, including mud delivery, solids control, fluid management, and directional drilling and measurement-while-drilling services. The Company serves the Permian Basin (in Texas and New Mexico), Eagle Ford Shale, Utica Shale, Marcellus Shale, Woodford Shale, Granite Wash, Mississippian Lime, and Tuscaloosa Marine Shale.

Forward-Looking Statements

This press release contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Aly Energy's business, financial condition, results of operations and prospects. Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this press release.

Although forward-looking statements in this press release reflect the good faith judgment of our management, such statements can only be based on facts and factors that our management currently knows. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, demand for oil and natural gas drilling services in the areas and markets in which Aly Energy operates, competition, obsolescence of products and services, the ability to obtain financing to support operations, environmental and other casualty risks, and the effect of government regulation.

Further information about the risks and uncertainties that may affect our business are set forth in our most recent filings on Form 10-K (including without limitation in the "Risk Factors" section) and in our other SEC filings and publicly available documents. We urge readers not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Aly Energy undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this press release.

                         
                         
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2015     2014     2015     2014  
Components of EBITDA:                                
                                 
Net Income/(Loss)   $ (1,033 )   $ 1,112     $ (4,043 )   $ 2,118  
                                 
Non-GAAP Adjustments:                                
                                 
Depreciation and Amortization     1,702       1,345       5,067       3,409  
Interest Expense, Net     459       376       1,404       891  
Income Tax Expense/(Benefit)     (921 )     621       (2,336 )     1,387  
                                 
EBITDA   $ 207     $ 3,454     $ 92     $ 7,805  
                                 
Adjustments to EBITDA:                                
                                 
Stock-Based Compensation Expense     -       -       100       -  
Bad Debt Expense     176       37       320       94  
Fair Value Adjustments to Contingent Payment Liability     (270 )     (270 )     (580 )     (183 )
(Gain)/Loss on Disposal     213       16       209       16  
Non-Recurring Expenses     460       19       815       138  
                                 
Adjusted EBITDA   $ 786     $ 3,256     $ 956     $ 7,870  
                                 
                                 
             
             
ALY ENERGY SERVICES, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(in thousands, except shares)  
             
    September 30, 2015     December 31, 2014  
    (Unaudited)        
Assets                
  Current Assets                
    Cash and Cash Equivalents   $ 2,739     $ 2,050  
    Accounts Receivable, Net of Allowance for Doubtful Accounts of $440 and $178, as of September 30, 2015 and December 31, 2014, respectively     4,816       11,053  
    Unbilled Receivables     654       2,479  
    Inventory     294       431  
    Deferred Tax Assets     283       57  
    Prepaid Expenses and Other Current Assets     313       757  
  Total Current Assets     9,099       16,827  
                   
  Property and Equipment, Net     54,958       56,484  
                   
  Intangible Assets, Net     8,929       10,475  
  Goodwill     11,407       11,407  
  Deferred Loan Costs, Net     485       768  
  Other Assets     34       12  
Total Assets   $ 84,912     $ 95,973  
                 
Liabilities and Stockholders' Equity                
  Current Liabilities                
    Accounts Payable   $ 1,716     $ 4,628  
    Accounts Payable - Affiliates     -       590  
    Accrued Expenses     2,112       2,453  
    Deferred Tax Liabilities     6       58  
    Current Portion of Long-Term Debt     2,611       6,758  
    Current Portion of Contingent Payment Liability     792       876  
  Total Current Liabilities     7,237       15,363  
                   
  Long-Term Debt, Net of Current Portion     23,446       23,455  
  Contingent Payment Liability, Net of Current Portion     875       2,233  
  Deferred Tax Liabilities     10,048       12,136  
  Other Long-Term Liabilities     35       28  
  Total Liabilities     41,641       53,215  
                   
  Commitments and Contingencies (See Note 5)     -       -  
  Aly Operating Redeemable Preferred Stock, $0.01 par value, 4,000,000 shares authorized, issued and outstanding at September 30, 2015 and December 31, 2014     4,579       4,382  
  Aly Centrifuge Redeemable Preferred Stock, $0.01 par value, 15,000 shares authorized, 9,252 shares issued and outstanding as of September 30, 2015 and December 31, 2014     9,818       9,584  
        14,397       13,966  
                   
  Stockholders' Equity                
    Common Stock, $0.001 par value, 200,000,000 shares authorized, 6,707,039 shares issued, and 6,706,814 shares outstanding as of September 30, 2015 and 200,000,000 shares authorized, 5,511,341 issued and 5,511,116 outstanding as of December 31, 2014     7       6  
    Treasury Stock, 225 Shares at Cost     (2 )     (2 )
    Additional Paid-In-Capital     29,042       24,917  
    Retained Earnings     (173 )     3,871  
  Total Stockholders' Equity     28,874       28,792  
Total Liabilities and Stockholders' Equity   $ 84,912     $ 95,973  
                 
                 
                         
                         
ALY ENERGY SERVICES, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except shares and per share data)  
(Unaudited)  
                         
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2015     2014     2015     2014  
                                 
Revenues   $ 6,936     $ 13,491     $ 23,080     $ 27,851  
Expenses:                                
  Operating Expenses     4,382       7,607       15,616       14,566  
  Depreciation and Amortization     1,702       1,345       5,067       3,409  
  Selling, General and Administrative Expenses     2,347       2,430       7,372       5,480  
                                 
Total Expenses     8,431       11,382       28,055       23,455  
                                 
Operating Income/(Loss)     (1,495 )     2,109       (4,975 )     4,396  
                                 
Interest Expense, Net     459       376       1,404       891  
                                 
Income/(Loss) Before Income Tax     (1,954 )     1,733       (6,379 )     3,505  
                                 
Income Tax Expense/(Benefit)     (921 )     621       (2,336 )     1,387  
                                 
Net Income/(Loss)     (1,033 )     1,112       (4,043 )     2,118  
                                 
Preferred Stock Dividends     175       141       528       297  
Accretion of Preferred Stock, Net     (32 )     (34 )     (97 )     (24 )
                                 
Net Income/(Loss) Available to Common Stockholders   $ (1,176 )   $ 1,005     $ (4,474 )   $ 1,845  
                                 
Basic Net Income/(Loss) per Common Share   $ (0.21 )   $ 0.18     $ (0.79 )   $ 0.37  
Diluted Net Income/(Loss) per Common Share   $ (0.21 )   $ 0.18     $ (0.79 )   $ 0.37  
                                 
Basic Average Common Shares Outstanding     5,659,390       5,469,346       5,649,636       5,012,258  
Diluted Average Common Shares Outstanding     5,659,390       5,969,346       5,649,636       5,280,181  
                                 
                                 
             
             
ALY ENERGY SERVICES, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(Unaudited)  
    Nine Months Ended September 30,  
    2015     2014  
                 
Cash Flows from Operating Activities                
  Net Income/(Loss)   $ (4,043 )   $ 2,118  
  Adjustments to Reconcile Net Income/(Loss) to Net Cash Provided by Operating Activities                
    Depreciation and Amortization of Property and Equipment     3,521       2,416  
    Amortization of Deferred Loan Costs     311       203  
    Amortization of Intangible Assets     1,546       993  
    Stock-Based Compensation     100       -  
    Bad Debt Expense     320       94  
    Fair Value Adjustments to Contingent Payment Liability     (580 )     (183 )
    Loss on Disposal of Asset     209       16  
    Deferred Taxes     (2,366 )     (31 )
  Changes in Operating Assets and Liabilities                
    Accounts Receivable     5,917       (4,636 )
    Unbilled Receivables     1,825       (1,741 )
    Inventory     138       (198 )
    Prepaid Expenses and Other Assets     422       (990 )
    Accounts Payable     (2,912 )     1,403  
    Accounts Payable - Affiliates     -       (821 )
    Accrued Expenses and Other Liabilities     (334 )     2,443  
                 
  Net Cash Provided by Operating Activities     4,074       1,086  
                 
  Cash Flows from Investing Activities                
    Purchase of Property and Equipment     (1,353 )     (10,245 )
    Disposal of Property and Equipment     216       -  
    Cash Paid for United Acquisition, Net of Cash Acquired     -       (15,063 )
    Cash Acquired from Acquisition of Evolution Guidance Systems     -       167  
                 
  Net Cash Used in Investing Activities     (1,137 )     (25,141 )
                 
  Cash Flows from Financing Activities                
    Proceeds from Issuance of Common Stock, Net of Transaction Cost     3,872       9,110  
    Proceeds from Borrowing on Debt     -       28,069  
    Payment of Contingent Consideration     (862 )     -  
    Repayment of Debt     (5,223 )     (14,079 )
    Payment of Deferred Loan Costs     (35 )     -  
    Financing Costs     -       (485 )
                 
  Net Cash Provided by/(Used in) Financing Activities     (2,248 )     22,615  
                 
  Net Increase/(Decrease) in Cash and Cash Equivalents     689       (1,440 )
                 
  Cash and Cash Equivalents, Beginning of Period     2,050       1,440  
  Cash and Cash Equivalents, End of Period     2,739     $ -  

Contact Information

  • Contact:

    Alya Hidayatallah
    Chief Financial Officer
    Aly Energy Services, Inc.
    713-333-4000
    Email Contact