HOUSTON--(BUSINESS WIRE)--Quintana Energy Services Inc. (NYSE: QES) (“QES” or the “Company”) today reported financial and operating results for the first quarter ended March 31, 2018.
First Quarter 2018 Financial Highlights
First quarter 2018 revenue grew 8% to $141.3 million, up from $130.9 million in the fourth quarter of 2017. First quarter 2018 net loss was $16.4 million and Adjusted EBITDA was $15.5 million, compared to a net income of $2.1 million and Adjusted EBITDA of $18.8 million for the fourth quarter of 2017. In the first quarter of 2017, revenue was $85.4 million, net loss was $11.7 million and Adjusted EBITDA was $4.0 million. See “Non-GAAP Financial Measures” at the end of this release for a discussion of Adjusted EBITDA and its reconciliation to the most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”).
Rogers Herndon, QES’ President and Chief Executive Officer, stated, “As expected, our first quarter results were impacted by some transient events that negatively impacted our utilization levels and compressed margins. Still, we achieved commendable revenue gains and exited the first quarter at a strong activity level. We believe that the macroeconomic outlook continues to exhibit momentum building around anticipated drilling and completion activities, which is a reliable indicator of the overall demand for our services. We enter the second quarter looking to increase profitability through strong project execution and higher activity levels.”
Business Segment Results
The following business segments comprise the Company’s primary services: Directional Drilling; Pressure Pumping; Pressure Control; and Wireline.
The Directional Drilling segment provides the highly-technical and essential services of guiding horizontal and directional drilling operations for exploration and production (“E&P”) companies. Revenue was $37.6 million in the first quarter of 2018, down approximately 2% compared to revenue of $38.3 million in the fourth quarter of 2017 but up 21% from the first quarter of 2017. First quarter 2018 Adjusted EBITDA was $2.6 million, compared to Adjusted EBITDA of $5.5 million for the fourth quarter of 2017. The sequential reduction in Adjusted EBITDA was primarily due to supply chain issues compressing margins and a decline in lost-in-hole revenue for the quarter. Specifically, we experienced elevated motor rental and repair expenses driven by delays in third-party repair turnarounds. In the first quarter of 2017, revenue was $31.1 million and Adjusted EBITDA was $3.7 million.
The Pressure Pumping segment primarily provides hydraulic fracturing services to E&P companies. Revenue for the segment grew 8% to $53.4 million in the first quarter of 2018, up from $49.5 million in the fourth quarter of 2017. First quarter 2018 Adjusted EBITDA was $9.9 million, compared to Adjusted EBITDA of $10.5 million for the fourth quarter of 2017. In the first quarter of 2017, revenue was $26.5 million and Adjusted EBITDA was $3.7 million.
The Pressure Control segment consists of coiled tubing, rig-assisted snubbing, nitrogen, and well control services. Revenue for the segment grew approximately 6% to $28.0 million in the first quarter of 2018, up from $26.5 million in the fourth quarter of 2017. First quarter 2018 Adjusted EBITDA was $3.7 million, compared to Adjusted EBITDA of $4.1 million for the fourth quarter of 2017. In the first quarter of 2017, revenue was $18.5 million and Adjusted EBITDA was a loss of $0.3 million.
The Wireline segment primarily provides cased-hole wireline services to E&P companies. Revenue for the segment grew 34% to $22.3 million in the first quarter of 2018, up from $16.6 million in the fourth quarter of 2017, primarily due to strong activity levels coupled with improved pricing in the segment. First quarter 2018 Adjusted EBITDA was $2.6 million, compared to Adjusted EBITDA of $1.5 million for the fourth quarter of 2017. In the first quarter of 2017, revenue was $9.3 million and Adjusted EBITDA was a loss of $1.4 million.
Other Financial Information
General and administrative expense for the first quarter of 2018 was $29.9 million, compared to $18.8 million for the fourth quarter of 2017 and $17.7 million for the first quarter of 2017. The sequential increase in G&A expenses was primarily related to a non-cash stock compensation expense of approximately $9.9 million in the first quarter of 2018.
Capital expenditures including deposits totalled $12.4 million during the first quarter of 2018, compared to capital expenditures of $7.7 million in the fourth quarter of 2017, and $4.2 million in the first quarter of 2017.
First quarter interest expense was $10.2 million, up from $3.0 million in the fourth quarter and up from $2.6 million in the first quarter of 2017. The increase in interest expense was primarily due to $5.3 million of unamortized term loan discount expense, accelerated deferred financing costs expensed of $3 million, and a prepayment fee of $1.3 million as a result of extinguishing the Former Revolving Credit Facility (defined below) and Former Term Loan (defined below) during the first quarter of 2018. The increase was offset by a $1.0 million reduction in interest expense due to having less debt outstanding in the three months ended March 31, 2018.
With the closing of the IPO subsequent to the end of the fiscal year, the Company’s debt structure has improved meaningfully. QES ended the first quarter of 2018 with a total debt balance of $13.0 million, $16.6 million of cash on hand, and $61.4 million of net availability under its new $100 million senior secured asset-based revolving credit facility.
Conference Call Information
QES has scheduled a conference call for 9:00 a.m. Central Time (10:00 a.m. Eastern Time) on Thursday, May 10, 2018, to review reported results. You may access the call by telephone at 1-201-389-0867 and asking for the QES 2018 First Quarter Conference Call. The webcast of the call may also be accessed through the Investor Relations section of the Company’s website at https://ir.quintanaenergyservices.com/ir-calendar. A replay of the call can be accessed on the Company’s website for twelve months and will be available by telephone through May 17, 2018, at (201) 612-7415, access code 13679026#.
About Quintana Energy Services
QES is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas exploration and production companies operating in both conventional and unconventional plays in all of the active major basins throughout the U.S. QES’ primary services include: directional drilling, pressure pumping, pressure control and wireline services. The Company offers a complementary suite of products and services to a broad customer base that is supported by in-house manufacturing, repair and maintenance capabilities. More information is available at www.quintanaenergyservices.com.
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.” All statements, other than statements of historical fact, which address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words “anticipate,” “believe,” “expect,” “plan,” “forecasts,” “will,” “could,” “may,” and similar expressions that convey the uncertainty of future events or outcomes, and the negative thereof, are intended to identify forward-looking statements. Forward-looking statements contained in this news release, which are not generally historical in nature, include those that express a belief, expectation or intention regarding our future activities, plans and goals and our current expectations with respect to, among other things: our operating cash flows, the availability of capital and our liquidity; our future revenue, income and operating performance; our ability to sustain and improve our utilization, revenue and margins; our ability to maintain acceptable pricing for our services; future capital expenditures; our ability to finance equipment, working capital and capital expenditures; our ability to execute our long-term growth strategy; our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements; and the timing and success of strategic initiatives and special projects.
Forward-looking statements are not assurances of future performance and actual results could differ materially from our historical experience and our present expectations or projections. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for our existing operations, experience, expectations and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes 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). Our forward-looking statements involve significant risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks associated with the following: a decline in demand for our services, including due to declining commodity prices, overcapacity and other competitive factors affecting our industry; the cyclical nature and volatility of the oil and gas industry, which impacts the level of exploration, production and development activity and spending patterns by E&P companies; a decline in, or substantial volatility of, crude oil and gas commodity prices, which generally leads to decreased spending by our customers and negatively impacts drilling, completion and production activity; and other risks and uncertainties listed in our filings with the U.S. Securities and Exchange Commission, including our Current Reports on Form 8-K that we file 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 forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by law.