SOURCE: ENSERVCO

ENSERVCO

November 12, 2015 07:00 ET

ENSERVCO Reports Third Quarter Financial Results

DENVER, CO--(Marketwired - Nov 12, 2015) - ENSERVCO Corporation (NYSE MKT: ENSV)

  • Despite industry downturn, Q3 well enhancement revenue flat year over year and total revenue down just 8% compared to revenue declines of 33% to 55% for other oil field services companies

  • Gross profit improves $523,000, or 92%, to a marginal loss of $47,000 as a result of cost management efforts and lower fuel prices

  • Net loss improves 11% year over year despite 68% increase in depreciation expense

  • Adjusted-EBITDA improves $588,000, or 41%, to a loss of $831,000

  • Company enters heating season with focus on maximizing utilization of its expanded fleet, continued geographic expansion, generation of cash flow and preservation of liquidity

ENSERVCO Corporation (NYSE MKT: ENSV), a diversified national 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, 2015.

"In spite of the industry downturn, we're pleased to report that in the third quarter, the Company's slowest quarter of the year, ENSERVCO's core well enhancement revenue declined by only 1% and overall revenue was down just 8% year over year at a time when most service companies are reporting significant, double digit declines in revenue and profitability," said Rick Kasch, chairman and CEO. "The overall 8% revenue decline was almost entirely due to a decline in water hauling revenue as we cut back on servicing customers at low or no margin rates. We attribute the minimal decline in well enhancement revenue to the positive impact of our geographic expansion into the Eagle Ford basin in Texas and to our ability to maintain and in some cases increase market share in certain areas in the face of fierce pricing competition and an overall reduction in drilling, completion and maintenance activity. These positive factors helped offset price concessions, which were approximately 5% of revenue for the quarter. Although we don't know to what extent, we anticipate that pricing pressures will continue into the fourth quarter and fiscal 2016.

"In recent quarters we have been focused on maximizing utilization and controlling our cost structure by redeploying personnel and assets to our most active and profitable customers and basins," Kasch added. "These actions have contributed to an improvement in our key profit metrics year over year. Gross profit improved from a loss of $570,000 to essentially breakeven, reflecting cost control measures and lower diesel fuel prices. Our net loss improved 11% year over year in spite of a 68% increase in depreciation and amortization resulting from our fleet expansion. And our EBITDA loss during our historically slowest quarter improved $588,000, or 41%, to a loss of $831,000.

"With our two off-season quarters behind us, we're entering our heating season in a very strong position. With several new customers, a fleet that has doubled in size year-over-year, and a strong balance sheet with high liquidity, we are entering what are historically our two best quarters with confidence. While there is no question that commodity prices and a resultant scale-back in frac activity will continue to impact our frac water heating business in the foreseeable future, we believe we have a solid foundation to weather the downturn and emerge as a larger, more substantial company. In the meantime, we are focused on maintaining our customer relationships with superior service, winning new business in legacy and expansion areas, and controlling costs. And with the expansion of our fleet, which doubled our revenue capacity over the past year, we will be able to quickly respond to increased demand when the commodity prices recover."

Third Quarter Results
Total third quarter revenue declined 8% to $5.3 million from $5.7 million in the same quarter last year. The vast majority of the decline was attributable to a decline in low margin water hauling activities in favor of focusing on maximizing core well enhancement business opportunities.

Revenue mix in the third quarter included $3.4 million in core well enhancement revenue, down 1% from the same quarter last year. The two primary components of well enhancement revenue were hot oiling, which was up 2% to $2.6 million year over year as expansion activities added incremental revenue; and acidizing, which was down 10% to $693,000 due to customers postponing maintenance work. The Company believes that that maintenance work will eventually be commissioned, and in the meantime has lowered its stimulation prices and partnered with chemical suppliers to jointly develop and market new programs. Fluid management and other revenue was $1.9 million in the third quarter, down 17% from $2.3 million for reasons previously mentioned.

Gross profit improved by $523,000 year over year to a negative $47,000 from a negative $570,000. This improvement reflected the Company's efforts to reduce operating costs associated with labor, equipment repairs and maintenance, and supplies. The Company also benefitted from lower diesel fuel costs. The lower operating costs were partially offset by the impact of selective price concessions.

Total operating expenses in the third quarter increased 15% to $2.5 million from $2.2 million in the same quarter last year. This increase reflected a 68% increase ($600,000) in depreciation and amortization expense due to the larger fleet size offset by a 22% decline ($266,000) in general and administrative expense.

Net loss improved by 11% to $1.6 million, or $0.04 per diluted share, from a net loss of $1.8 million, or $0.05 per diluted share, in the same quarter last year. The impact of additional depreciation expense on EPS was $0.01 in the third quarter.

Adjusted EBITDA loss during the quarter improved $588,000, or 41%, to $831,000 from $1.4 million a year ago.

Nine-Month Results
Revenue in the first nine months of 2015 decreased 21% to $30.2 million from $38.3 million in the same period last year. Approximately 81%, or $6.6 million, of that decrease was attributable to the year-over-year decline in propane revenue in the first quarter of 2015, which was due to lower propane prices and a decrease in volume sold due to customers either taking advantage of the Company's cost-saving bi-fuel system or providing their own fuel source.

Gross profit for the nine months declined $1.0 million to $8.0 million primarily due to continuing labor costs during unexpected downtime caused by unseasonably warm weather in the DJ Basin during the first quarter, lower gross profits on propane sales during the first quarter, and year to date price concessions granted to customers. The declines were partially mitigated by management cost reduction efforts and lower fuel prices. 

Gross margin increased to 26% from 24% a year ago due primarily to the mathematical impact of lower propane revenue and costs.

Total operating expenses in the first nine months of 2015 increased 36% to $7.9 million from $5.8 million a year ago. This increase was almost entirely attributable to a $2.0 million increase in depreciation and amortization expense year over year related to fleet growth. The Company also had a $313,000 increase in patent litigation expense, although that litigation process is currently under a judge's stay order. The foregoing expense increases were partially offset by a $195,000 decrease in general and administrative expense for the comparative nine-month periods.

Operating income through nine months declined to $106,000 from $3.2 million last year due to lower gross margins and higher depreciation and litigation expense. Net loss through nine months was $371,000, or $0.01 per diluted share, versus net income of $1.5 million, or $0.04 per diluted share, a year ago. The impact of additional depreciation and patent litigation costs on EPS was $0.04 in the nine-month period.

Adjusted EBITDA through the first nine months was $5.3 million, down from $6.2 million a year ago due primarily to the $1.0 million decline in gross profit.

ENSERVCO generated $12.9 million in net cash from operations in the first nine months, up 14% from $11.3 million in the same period last year. The Company closed the first nine months with working capital of $4.7 million. Cash flow from operations were used to pay down the Company's senior credit facility with PNC bank to $18.9 million year to date, thereby improving the long-term debt to equity ratio to 1.05 to 1 as compared to 1.63 to 1 at 2014 year-end.

Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 1:00 p.m. Eastern (11:00 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, 2015, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #13622881. To listen to the webcast, participants should go to the ENSERVCO website 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=174442

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 in seven major domestic oil and gas fields, serving customers 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 (net income or loss) 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 our fiscal year 2014 Form 10-K filed on March 19, 2015, and subsequently filed documents. 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  
Condensed Consolidated Statement Of Operations And Comprehensive Income (Loss)  
                         
    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2015     2014     2015     2014  
                                 
Revenues   $ 5,308,854     $ 5,748,754     $ 30,150,900     $ 38,285,655  
                                 
Cost of Revenues     5,355,942       6,319,040       22,184,102       29,287,402  
                                 
Gross Profit (Loss)     (47,088 )     (570,286 )     7,966,798       8,998,253  
                                 
Operating Expenses                                
  General and administrative expenses     954,831       1,220,877       3,115,557       3,310,518  
  Patent litigation and defense costs     53,844       63,386       493,058       179,807  
  Depreciation and amortization     1,489,352       884,964       4,252,124       2,288,852  
    Total operating expenses     2,498,027       2,169,227       7,860,739       5,779,177  
                                 
Income (Loss) from Operations     (2,545,115 )     (2,739,513 )     106,059       3,219,076  
                                 
Other Income (Expense)                                
  Interest expense     (360,434 )     (225,062 )     (860,865 )     (720,489 )
  Other income     22,642       21,775       53,822       44,962  
    Total other expense     (337,792 )     (203,287 )     (807,043 )     (675,527 )
                                 
Income (Loss) Before Tax Expense     (2,882,907 )     (2,942,800 )     (700,984 )     2,543,549  
Income Tax Benefit (Expense)     1,234,716       1,094,774       330,162       (1,056,639 )
Net Income (Loss)   $ (1,648,191 )   $ (1,848,026 )   $ (370,822 )   $ 1,486,910  
                                 
Other Comprehensive Income (Loss)     -       (3,735 )     -       (7,075 )
                                 
Comprehensive Income (Loss)   $ (1,648,191 )   $ (1,851,761 )   $ (370,822 )   $ 1,479,835  
                                 
Earnings (Loss) per Common Share - Basic   $ (0.04 )   $ (0.05 )   $ (0.01 )   $ 0.04  
                                 
Earnings (Loss) per Common Share - Diluted   $ (0.04 )   $ (0.05 )   $ (0.01 )   $ 0.04  
                                 
Basic weighted average number of common shares outstanding     38,101,647       36,816,875       37,740,843       36,359,251  
Add: Dilutive shares assuming exercise of options and warrants     -       -       -       1,404,213  
Diluted weighted average number of common shares outstanding     38,101,647       36,816,875       37,740,843       37,763,464  
                                 
                                 
                                 
ENSERVCO CORPORATION  
Calculation of Adjusted EBITDA *  
                                 
    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2015     2014     2015     2014  
                                 
Adjusted EBITDA*                                
  Net Income (Loss)   $ (1,648,191 )   $ (1,848,026 )   $ (370,822 )   $ 1,486,910  
  Add Back (Deduct)                                
    Interest expense     360,434       225,062       860,865       720,489  
    Provision for income taxes (benefit) expense     (1,234,716 )     (1,094,774 )     (330,162 )     1,056,639  
    Depreciation and amortization     1,489,352       884,964       4,252,124       2,288,852  
EBITDA*     (1,033,121 )     (1,832,774 )     4,412,005       5,552,890  
Add Back (Deduct)                                
      Stock-based compensation     170,972       372,239       442,243       520,519  
      Patent Litigation and defense costs     53,844       63,386       493,058       179,807  
      (Gain) on sale and disposal of equipment     -       (507 )     1,071       (9,744 )
      Interest and other income     (22,642 )     (21,268 )     (54,893 )     (35,218 )
Adjusted EBITDA*   $ (830,947 )   $ (1,418,924 )   $ 5,293,484     $ 6,208,254  
                                 
 
 
ENSERVCO CORPORATION
Condensed Consolidated Balance Sheets
       
  September 30,   December 31,
ASSETS 2015   2014
  (Unaudited)    
Current Assets          
  Cash and cash equivalents $ 747,500   $ 954,058
  Accounts receivable, net   3,212,609     14,679,858
  Prepaid expenses and other current assets   1,287,107     1,540,667
  Inventories   324,578     390,081
  Income tax receivable   1,967,732     1,776,035
  Deferred tax asset   135,055     135,055
    Total current assets   7,674,581     19,475,754
           
Property and Equipment, net   37,105,534     37,789,004
Goodwill   301,087     301,087
Other Assets   686,939     716,836
           
TOTAL ASSETS $ 45,768,141   $ 58,282,681
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current Liabilities          
  Accounts payable and accrued liabilities $ 2,665,704   $ 5,472,163
  Current portion of long-term debt   321,737     340,520
    Total current liabilities   2,987,441     5,812,683
           
Long-Term Liabilities          
  Senior revolving credit facility   18,929,416     28,634,037
  Long-term debt, less current portion   618,189     801,968
  Deferred income taxes, net   4,623,748     4,992,681
    Total long-term liabilities   24,171,353     34,428,686
    Total Liabilities   27,158,794     40,241,369
           
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, 38,214,758 and 37,159,815 shares issued, respectively; 103,600 shares of treasury stock; and 38,111,158 and 37,056,215 shares outstanding, respectively   190,556     185,282
  Additional paid-in capital   13,684,972     12,751,389
  Accumulated earnings   4,733,819     5,104,641
    Total stockholders' equity   18,609,347     18,041,312
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,768,141   $ 58,282,681
           
           
           
ENSERVCO CORPORATION              
Condensed Consolidated Statement of Cash Flows              
(Unaudited)              
                       
  For the Three Months Ended     For the Nine Months Ended  
  September 30,     September 30,  
  2015     2014     2015     2014  
OPERATING ACTIVITIES                              
  Net income (loss) $ (1,648,191 )   $ (1,848,026 )   $ (370,822 )   $ 1,486,910  
  Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities                              
    Depreciation and amortization   1,489,352       884,964       4,252,124       2,288,852  
    Loss on sale and disposal of equipment   -       (507 )     1,071       (9,744 )
    Deferred income taxes   (1,178,098 )     (65,572 )     (368,933 )     64,259  
    Stock-based compensation   170,972       372,239       442,243       520,519  
    Amortization of debt issuance costs   32,265       63,174       90,048       225,823  
    Bad debt expense   8,205       41,807       21,050       91,807  
  Changes in operating assets and liabilities                              
    Accounts receivable   657,071       246,640       11,446,199       7,889,279  
    Inventories   (19,733 )     67,107       65,503       (61,614 )
    Prepaid expense and other current assets   (263,144 )     326,095       278,560       (237,670 )
    Income taxes receivable   (62,091 )     (56,887 )     (191,697 )     (56,887 )
    Other non-current assets   14,849       (381,758 )     14,849       (395,759 )
    Accounts payable and accrued liabilities   958,066       1,372,675       (2,806,459 )     729,921  
    Income taxes payable   -       (976,591 )     -       (1,278,599 )
      Net cash provided by operating activities   159,523       45,360       12,873,736       11,257,097  
                               
INVESTING ACTIVITIES                              
  Purchases of property and equipment   (429,623 )     (6,155,517 )     (3,574,725 )     (12,760,006 )
  Proceeds from sale of equipment   -       -       5,000       50,000  
    Net cash used in investing activities   (429,623 )     (6,155,517 )     (3,569,725 )     (12,710,006 )
                               
FINANCING ACTIVITIES                              
  Net line of credit borrowings (payments)   376,522       13,763,001       (9,704,621 )     13,763,001  
  Repayment of long-term debt   (34,703 )     (11,324,687 )     (202,562 )     (12,481,676 )
  Proceeds from exercise of warrants   -       -       77,100       187,804  
  Proceeds from exercise of options   12,250       61,537       198,285       127,987  
  Payment of debt issuance costs   (100,000 )     (163,962 )     (100,000 )     (163,962 )
  Excess tax benefits from exercise of options and warrants   3,109       -       221,229       -  
    Net cash provided by (used in) financing activities   257,178       2,335,889       (9,510,569 )     1,433,154  
                               
Net Decrease in Cash and Cash Equivalents   (12,922 )     (3,774,268 )     (206,558 )     (19,755 )
                               
Cash and Cash Equivalents, Beginning of Period   760,422       5,622,703       954,058       1,868,190  
                               
Cash and Cash Equivalents, End of Period $ 747,500     $ 1,848,435     $ 747,500     $ 1,848,435  
                               
                               
Supplemental cash flow information consists of the following:                              
    Cash paid for interest $ 219,192     $ 126,711     $ 841,252     $ 478,531  
    Cash paid for taxes $ 2,362     $ 5,998     $ 9,236     $ 2,329,588  
                               
Supplemental Disclosure of Non-cash Investing and Financing Activities:                              
    Cashless exercise of stock options and warrants $ -     $ 364     $ 2,751     $ 7,532  
                               

Contact Information

  • Contact:

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