SOURCE: ENSERVCO

ENSERVCO

November 12, 2014 08:00 ET

ENSERVCO Reports Third Quarter and Nine-Month Financial Results

DENVER, CO--(Marketwired - Nov 12, 2014) - ENSERVCO Corporation (NYSE MKT: ENSV)

Selected Highlights:

  • Record third quarter revenue up 20% year over year
  • Third quarter hot-oiling and well-acidizing revenue up 81% and 36%, respectively
  • Fleet expansion deliveries occurring on time
  • Company enters north Bakken Shale with acquisition of asset package

ENSERVCO Corporation (NYSE MKT: ENSV), a provider of well-site services to the domestic onshore conventional and unconventional oil and gas industries, today reported financial results for its third quarter and nine-month period ended September 30, 2014.

"During the third quarter, which historically has been our slowest of the year, we achieved record revenue as demand for our less seasonal, recurring maintenance services of hot oiling and acidizing increased significantly," stated Rick Kasch, president of ENSERVCO. "However, our continued investments in expansion, conversion of equipment to alternative fuel sources and labor costs incurred in starting to hire and train the 75 additional operators we will need for the upcoming season had a greater impact on profitability in the quarter than anticipated. Nevertheless, with a much larger fleet and solid customer demand, we are now positioned for a strong performance over the foreseeable future."

Third Quarter Results
Revenue in the third quarter was a record $5.7 million, up 20% over the $4.8 million achieved in the same quarter last year. Core well enhancement services -- hot oiling, acidizing and frac water heating -- grew by 47% to $3.4 million from $2.3 million a year ago, more than offsetting a slight decline in fluid management services -- to $2.2 million from $2.4 million. Growth was particularly strong in the high margin, less seasonal, maintenance services of hot oiling, which was up 81% year over year, and acidizing, which was up 36%. This growth was attributable to increases in the number of hot oiling and acidizing trucks, as well as increased utilization and the Company's growing geographic footprint.

The Company's investment in equipment over the past two years and its current CAPEX initiative have collectively doubled the size of the Company's fleet, resulting in a significant impact on primary cost of revenue components in the third quarter as compared to the same quarter last year. Specifically, these costs include the incremental expenses related to the start of hiring and training 75 additional operators for the upcoming season as well as vehicle operating costs such as insurance and maintenance, which is routinely performed in the third quarter between heating seasons. As a result, gross profit margin in the third quarter was a negative 9% of revenue versus a positive 2% in the same quarter last year.

General and administrative expense in the third quarter grew to $1.3 million from $860,000 last year. The majority of this increase was due to a $260,000 increase in non-cash, stock-based compensation expense. Depreciation and amortization expense increased to $885,000 from $544,000 year over year as new equipment was placed into service over the past 12 months.

The third quarter operating loss was $2.7 million, up from $1.3 million year over year. The Company reported a net loss of $1.8 million, or $0.05 per diluted share, versus a net loss of $919,000, or $0.03 per diluted share, in the same quarter last year. Third quarter adjusted EBITDA was a negative $1.5 million versus a negative $626,000 in last year's third quarter.

Nine-Month Results
Revenue for the nine-month period increased 22% to a record $38.3 million from $31.3 million in the same period a year ago. The increase was attributable to record revenue in the first and third quarters, which was driven by a growing well enhancement fleet, increased equipment utilization and geographic expansion.

Gross margin through nine months was 24% of revenue, down from 33% year over year. The decline was due to higher expansion-related costs in the third quarter as well as higher propane prices in the first quarter and unexpected frac water-heating downtime in the second quarter. 

Although general and administrative expense increased to $3.6 million from $2.7 million for the comparative nine-month periods due to higher personnel costs, professional fees, stock-based compensation expense, and listing of the Company's common stock on the New York Stock Exchange, it remained a constant 9% of revenues between the years. Depreciation and amortization expense increased to $2.3 million from $1.7 million year over year, reflecting the increased size of the Company's fleet.

Operating income was $3.2 million through nine months versus $5.8 million in the same period last year. Net income was $1.5 million, or $0.04 per diluted share, versus $3.2 million, or $0.09 per diluted share, a year ago. Adjusted EBITDA through nine months was $6.0 million versus $8.0 million a year ago.

ENSERVCO generated $11.3 million in net cash from operations through the first nine months of 2014, up from $10.5 million over the same period a year ago. The Company closed the third quarter with cash and cash equivalents of $1.8 million and working capital of $3.5 million.

Management Commentary
"We are successfully executing our expansion strategy, bringing new equipment and personnel online and deploying them into areas where demand is highest," Kasch said. "This has led to steadily increasing market share as we capture business with new customers and expand relationships and service mix with existing customers. Our emphasis on growing recurring, less seasonal maintenance revenue streams enables us to achieve a more balanced services portfolio that better insulates us against fluctuating oil prices. We are also pleased to report we've been successful in securing new business following the introduction of our flexible bi-fuel system for frac water heating that allows our units to easily switch between using propane, LNG, CNG or well gas. This value-added service affords our customers cost advantages and a green alternative while setting ENSERVCO apart from the competition. We are actively marketing the system across our nine U.S. service locations.

"We recently announced the acquisition of a package of oil field assets in Tioga, North Dakota, which gives us the ability to service the northern Bakken Shale, an area that's been out of reach of our southern operation in Killdeer," Kasch added. "In addition to the great deal we believe we made on the purchase price and the fact that we believe these assets have the potential to add a minimum of $6.0 million in incremental new annual hot oiling revenue, we have already been approached by customers we do business with in other locations about possible multi-million dollar frac water heating opportunities now that we are in this part of the Bakken and have bi-fuel capabilities. We closed this transaction within 10 days after hearing about it, which demonstrates our financial flexibility and commitment to move quickly to seize attractive opportunities as they arise. With a strong balance sheet and banking relationship, along with solid operating cash flows, we expect to remain active in the M&A arena for the foreseeable future."

Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 1:00 p.m. Eastern (11 a.m. Mountain) and will be accessible by dialing 877-407-8031 (201-689-8031 for international callers). No passcode is necessary. A telephonic replay will be available through November 19, 2014, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #13595347. To listen to the webcast, participants should access the ENSERVCO website, located at www.enservco.com, and link to the "Investors" page at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 90 days. The webcast also is available at the following link: http://www.investorcalendar.com/IC/CEPage.asp?ID=173405

About ENSERVCO
Through its various operating subsidiaries, ENSERVCO has emerged as one of the energy service industry's leading providers of hot oiling, acidizing, frac-water heating and fluid management services. The Company owns and operates a fleet of more than 250 specialized trucks, trailers, frac tanks and related well-site equipment. ENSERVCO serves customers in seven major domestic oil and gas fields, and operates in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia. Additional information is available at www.enservco.com.

*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing ENSERVCO's operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Operations table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.

Cautionary Note Regarding Forward-Looking Statements
This news release contains information that is "forward-looking" in that it describes events and conditions ENSERVCO reasonably expects to occur in the future. Expectations for the future performance of ENSERVCO are dependent upon a number of factors, and there can be no assurance that ENSERVCO will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond ENSERVCO's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in a Form 10-K filed on March 20, 2014. It is important that each person reviewing this release understand the significant risks attendant to the operations of ENSERVCO. ENSERVCO disclaims any obligation to update any forward-looking statement made herein.

   
ENSERVCO CORPORATION  
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)  
                       
  For the three months ended     For the nine months ended  
  September 30,     September 30,  
  2014     2013     2014     2013  
                               
Revenues $ 5,748,754     $ 4,803,503     $ 38,285,655     $ 31,318,304  
                               
Cost of Revenues   6,270,499       4,687,536       29,208,287       21,061,888  
                               
Gross (Loss) Profit   (521,745 )     115,967       9,077,368       10,256,416  
                               
Operating Expenses                              
  General and administrative expenses   1,332,804       859,647       3,569,440       2,722,610  
  Depreciation and amortization   884,964       543,671       2,288,852       1,693,871  
    Total Operating Expenses   2,217,768       1,403,318       5,858,292       4,416,481  
                               
(Loss) Income from Operations   (2,739,513 )     (1,287,351 )     3,219,076       5,839,935  
                               
Other Income (Expense)                              
  Interest expense   (225,062 )     (247,346 )     (720,489 )     (814,015 )
  Gain on disposals of equipment   507       6,842       9,744       313,299  
  Other income   21,268       4,600       35,218       29,338  
    Total Other (Expense) Income   (203,287 )     (235,904 )     (675,527 )     (471,378 )
                               
(Loss) Income Before Tax Expense   (2,942,800 )     (1,523,255 )     2,543,549       5,368,557  
Income Tax Benefit (Expense)   1,094,774       603,835       (1,056,639 )     (2,163,039 )
Net (Loss) Income $ (1,848,026 )   $ (919,420 )   $ 1,486,910     $ 3,205,518  
                               
Other Comprehensive Income (Loss)                              
  Unrealized (loss) gain on interest rate swaps, net of tax   (3,735 )     355       (7,025 )     3,452  
  Settlements - interest rate swap   6,253       7,070       19,368       20,890  
  Reclassification into earnings - interest rate swap   (6,253 )     (7,070 )     (19,368 )     (20,890 )
    Total Other Comprehensive (Loss) Income   (3,735 )     355       (7,025 )     3,452  
                               
Comprehensive (Loss) Income $ (1,851,761 )   $ (919,065 )   $ 1,479,885     $ 3,208,970  
                               
(Loss) Earnings per Common Share - Basic $ (0.05 )   $ (0.03 )   $ 0.04     $ 0.10  
                               
(Loss) Earnings per Common Share - Diluted $ (0.05 )   $ (0.03 )   $ 0.04     $ 0.09  
                               
Basic weighted average number of common shares outstanding   36,816,875       32,262,639       36,359,251       32,064,182  
Add: Dilutive shares assuming exercise of options and warrants   -       -       1,404,213       3,572,096  
Diluted weighted average number of common shares outstanding   36,816,875       32,262,639       37,763,464       35,636,278  
                               
                               
ENSERVCO CORPORATION  
Calculation of Adjusted EBITDA *  
                               
  For the three months ended     For the nine months ended  
  September 30,     September 30,  
  2014     2013     2014     2013  
                               
Adjusted EBITDA*                              
  Net Income $ (1,848,026 )   $ (919,420 )   $ 1,486,910     $ 3,205,518  
  Add Back (Deduct)                              
    Interest Expense   225,062       247,346       720,489       814,015  
    Income Tax Expense   (1,094,774 )     (603,835 )     1,056,639       2,163,039  
    Depreciation and amortization   884,964       543,671       2,288,852       1,693,871  
  EBITDA*   (1,832,774 )     (732,238 )     5,552,890       7,876,443  
  Add Back (Deduct)                              
    Stock-based compensation   372,239       117,224       520,519       446,000  
    (Gain) on sale and disposal of equipment   (507 )     (6,842 )     (9,744 )     (313,299 )
    Interest and other income   (21,268 )     (4,600 )     (35,218 )     (29,338 )
  Adjusted EBITDA* $ (1,482,310 )   $ (626,456 )   $ 6,028,447     $ 7,979,806  
                               
 
 
ENSERVCO CORPORATION
Condensed Consolidated Balance Sheets
         
  September 30,     December 31,
ASSETS 2014     2013
  (Unaudited)      
Current Assets            
  Cash and cash equivalents $ 1,848,435     $ 1,868,190
  Accounts receivable, net   3,704,780       11,685,866
  Prepaid expenses and other current assets   1,325,390       923,758
  Inventories   376,618       315,004
  Income tax receivable   278,268       -
  Deferred tax asset   285,777       336,561
    Total current assets   7,819,268       15,129,379
             
Property and Equipment, net   27,856,726       17,425,828
Goodwill   301,087       301,087
Long-Term Portion of Interest Rate Swap   2,407       18,616
Other Assets   717,274       547,338
             
TOTAL ASSETS $ 36,696,762     $ 33,422,248
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current Liabilities            
  Accounts payable and accrued liabilities $ 3,832,833     $ 3,102,912
  Income taxes payable   -       1,278,599
  Current portion of long-term debt   469,786       2,562,141
  Current portion of interest rate swap   7,272       11,966
    Total current liabilities   4,309,891       6,955,618
             
Long-Term Liabilities            
  Senior revolving credit facility   13,763,001       -
  Long-term debt, less current portion   810,727       11,200,048
  Deferred income taxes, net   2,430,451       2,421,466
    Total long-term liabilities   17,004,179       13,621,514
    Total Liabilities   21,314,070       20,577,132
             
Commitments and Contingencies            
             
Stockholders' Equity            
  Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding   -       -
  Common stock, $.005 par value, 100,000,000 shares authorized, 37,018,920 and 34,926,136 shares issued, respectively; 103,600 shares of treasury stock; and 36,915,320 and 34,822,536 shares outstanding, respectively   184,577       174,113
  Additional paid-in capital   12,615,260       11,568,033
  Accumulated earnings   2,585,810       1,098,900
  Accumulated other comprehensive income   (2,955 )     4,070
    Total stockholders' equity   15,382,692       12,845,116
             
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 36,696,762     $ 33,422,248
             
             
   
ENSERVCO CORPORATION  
Condensed Consolidated Statement of Cash Flows  
(Unaudited)  
                         
    For the three months ended     For the nine months ended  
    September 30,     September 30,  
    2014     2013     2014     2013  
OPERATING ACTIVITIES                                
  Net (loss) income   $ (1,848,026 )   $ (919,420 )   $ 1,486,910     $ 3,205,518  
  Adjustments to reconcile net income to net cash (used in) provided by operating activities                                
    Depreciation and amortization     884,964       543,671       2,288,852       1,693,871  
    Gain on sale and disposal of equipment     (507 )     (6,842 )     (9,744 )     (313,299 )
    Deferred income taxes     (65,572 )     (375,011 )     64,259       1,742,462  
    Stock-based compensation     372,239       117,224       520,519       446,000  
    Amortization of debt issuance costs     63,174       76,944       225,823       230,832  
    Bad debt expense     41,807       -       91,807       170,397  
  Changes in operating assets and liabilities                                
    Accounts receivable     246,640       2,506,976       7,889,279       4,950,184  
    Inventories     67,107       (13,376 )     (61,614 )     (24,962 )
    Prepaid expense and other current assets     326,095       54,461       (237,670 )     (342,181 )
    Other non-current assets     (381,758 )     (10,000 )     (395,759 )     (179,120 )
    Accounts payable and accrued liabilities     1,372,675       194,412       729,921       (1,535,127 )
    Income taxes receivable     (56,887 )     -       (56,887 )     -  
    Income taxes payable     (976,591 )     (228,824 )     (1,278,599 )     417,320  
      Net cash (used in) provided from operating activities     45,360       1,940,215       11,257,097       10,461,895  
                                 
INVESTING ACTIVITIES                                
  Purchases of property and equipment     (6,155,517 )     (1,675,424 )     (12,760,006 )     (3,512,935 )
  Proceeds from sale and disposal of equipment     -       8,942       50,000       1,811,275  
    Net cash (used in) provided by investing activities     (6,155,517 )     (1,666,482 )     (12,710,006 )     (1,701,660 )
                                 
FINANCING ACTIVITIES                                
  Net line of credit borrowings (payments)     13,763,001       -       13,763,001       (2,151,052 )
  Proceeds from exercise of warrants     -       -       187,804       -  
  Proceeds from exercise of options     61,537       -       127,987       -  
  Repayment of long-term debt     (11,324,687 )     (601,483 )     (12,481,676 )     (1,735,855 )
  Deferred financing costs     (163,962 )     -       (163,962 )     -  
    Net cash provided by (used in) financing activities     2,335,889       (601,483 )     1,433,154       (3,886,907 )
                                 
Net (Decrease) Increase in Cash and Cash Equivalents     (3,774,268 )     (327,750 )     (19,755 )     4,873,328  
                                 
Cash and Cash Equivalents, Beginning of Period     5,622,703       5,734,705       1,868,190       533,627  
                                 
Cash and Cash Equivalents, End of Period   $ 1,848,435     $ 5,406,955     $ 1,848,435     $ 5,406,955  
                                 
                                 
Supplemental cash flow information consists of the following:                                
    Cash paid for interest   $ 126,711     $ 180,371     $ 478,531     $ 532,655  
    Cash paid for taxes   $ 5,998     $ -     $ 2,329,588     $ 3,257  
                                 
Supplemental Disclosure of Non-cash Investing and Financing Activities:                                
    Equipment purchased through installment loans   $ -     $ 50,037     $ -     $ 139,628  
    Cashless exercise of stock options and warrants   $ 364     $ 719     $ 7,532     $ 2,555  
                                     

Contact Information

  • Contact:

    Jay Pfeiffer
    Pfeiffer High Investor Relations, Inc.
    Phone: 303-393-7044
    Email: Email Contact