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Mar 11, 2020 2:54 AM ET

NexTier Announces Fourth Quarter and Full Year 2019 Financial and Operational Results


NexTier Announces Fourth Quarter and Full Year 2019 Financial and Operational Results

iCrowd Newswire - Mar 11, 2020

HOUSTON,– NexTier Oilfield Solutions Inc. (NYSE: NEX) (“NexTier” or the “Company”) today reported fourth quarter and full year 2019 financial and operational results.  On October 31, 2019, NexTier completed its previously announced merger between Keane Group Inc. (“Keane”) and C&J Energy Services, Inc. (“C&J”), and concurrent with closing, Keane, as the parent company, was renamed NexTier Oilfield Solutions Inc.  Given the merger close date of October 31, 2019, GAAP financial results for the fourth quarter of 2019 include the full quarterly results of legacy Keane, and legacy C&J results from November 1, 2019 through December 31, 2019.  Pro forma financial results(1) for the third and fourth quarters of 2019 include the full quarterly results of both Keane and C&J giving effect to the merger as if it had closed on January 1, 2019.

Full Year 2019 Results

Fourth Quarter 2019 Results and Recent Highlights

Fourth Quarter 2019 Financial Results

(USD in thousands, except per share amounts)

 

Three Months Ended

 

Previously Disclosed
Guidance for the
Three Months Ended
December 31, 2019

   

December 31, 2019

 

September 30, 2019

 

GAAP revenue

 

$

528,216

   

$

443,953

     

GAAP net income (loss)

 

(82,928)

   

3,558

     

GAAP net income (loss) per share

 

$

(0.47)

   

$

0.03

     
             

Pro forma revenue

 

$

648,434

   

$

896,616

   

$640,000 ¯ $660,000

Pro forma net loss

 

(106,553)

   

(10,410)

     

Pro forma net loss per share

 

$

(0.50)

   

$

(0.05)

     
             

Pro forma Adjusted EBITDA

 

$

77,564

   

$

137,764

   

$73,000 ¯ $78,000

Pro forma Adjusted net income (loss)

 

(19,069)

   

41,523

     

Pro forma Adjusted net income (loss) per share

 

$

(0.09)

   

$

0.20

     

GAAP revenue totaled $528.2 million in the fourth quarter of 2019 compared to GAAP revenue of $444.0 million in the third quarter of 2019.  Pro forma revenue totaled $648.4 million in the fourth quarter of 2019, compared to our previously disclosed guidance range of $640 million to $660 million.  This compared to pro forma revenue of $896.6 million in the third quarter of 2019.

GAAP net loss totaled $82.9 million, or $0.47 per diluted share, in the fourth quarter of 2019, compared to GAAP net income of $3.6 million, or $0.03 per diluted share, in the third quarter of 2019.  Pro forma net loss totaled $106.6 million, or $0.50 per diluted share, in the fourth quarter of 2019, compared to pro forma net loss of $10.4 million, or $0.05 per diluted share, in the third quarter of 2019.  Pro forma Adjusted net loss(2) totaled $19.1 million, or $0.09 per diluted share, in the fourth quarter of 2019, compared to pro forma Adjusted net income of $41.5 million, or $0.20 per diluted share, in the third quarter of 2019.

GAAP selling, general and administrative expense (“SG&A”) totaled $42.7 million in the fourth quarter of 2019, compared to GAAP SG&A of $26.6 million in the third quarter of 2019.  Pro forma SG&A totaled $70.1 million in the fourth quarter of 2019, compared to pro forma SG&A of $102.4 million in the third quarter of 2019.  Excluding management adjustments, pro forma Adjusted SG&A totaled $54.2 million in the fourth quarter of 2019, compared to pro forma Adjusted SG&A of $65.8 million in the third quarter of 2019.

Total pro forma Adjusted EBITDA totaled $77.6 million in the fourth quarter of 2019, compared to our previously disclosed guidance range of $73 million to $78 million.  This compared to total pro forma Adjusted EBITDA of $137.8 million in the third quarter of 2019.

“I am pleased that our fourth quarter financial results exceeded the initial outlook on profitability provided just after closing the merger with C&J,” said Robert Drummond, President and Chief Executive Officer of NexTier.  “Despite a challenging market backdrop, we stayed focused on our partnership model of working closely with our customers, managing what was in our direct control, and driving costs out of operations.  Our focus enabled us to achieve better than expected operational efficiency and commendable relative profitability during a quarter with challenging market-driven obstacles.  We continue to make swift progress with the integration process and the resulting improved cost efficiency.”

“Notwithstanding the recent oil price volatility, NexTier will remain nimble and is uniquely positioned to effectively navigate these challenges.  This includes a strong balance sheet and liquidity position that allows us to be offensive and defensive, with plenty of runway on our debt maturity through 2025, alignment with a base of resilient customers, and a track record of adjusting our cost structure in response to challenging market conditions.”

Fourth Quarter 2019 Management Adjustments

Total pro forma Adjusted EBITDA in the fourth quarter of 2019 includes management adjustments of $87.5 million consisting of $55.0 million of merger and integration related costs primarily driven by severance and accelerated non-cash stock compensation expense, $12.3 million of non-cash impairment expense mostly associated with the retirement of the Keane trade name, $5.6 million of non-cash stock compensation expense, and $14.5 million of other costs driven by tax and litigation reserves and facility closures.

Business Segment Results

Completion Services

GAAP revenue in our Completion Services segment totaled $440.3 million in the fourth quarter of 2019, compared to GAAP revenue of $437.3 million in the third quarter of 2019.  Pro forma revenue in our Completion Services segment totaled $509.8 million in the fourth quarter of 2019, compared to pro forma revenue of $735.2 million in the third quarter of 2019.  The sequential decrease in pro forma revenue was driven by reduced asset deployment and decreased customer activity levels due to year-end seasonality and budget exhaustion. Adjusted Gross Profit totaled $105.1 million in the fourth quarter of 2019, compared to Adjusted Gross Profit of $109.3 million in the third quarter of 2019.  Pro forma Adjusted Gross Profit totaled $105.6 million in the fourth quarter of 2019, compared to pro forma Adjusted Gross Profit of $168.9 million in the third quarter of 2019.  Pro forma net loss totaled $21.5 million, resulting in pro forma Adjusted EBITDA of $83.3 million in the fourth quarter of 2019, compared to pro forma net income of $54.5 million, resulting in pro forma Adjusted EBITDA of $141.3 million in the third quarter of 2019.

The Company had an average of 25 pro forma fully-utilized fracturing fleets in the fourth quarter of 2019.  When taking only fracturing and bundled wireline into account, annualized pro forma Adjusted Gross Profit per fully-utilized fracturing fleet totaled $15.6 million in the fourth quarter of 2019, compared to annualized pro forma Adjusted Gross Profit per fully-utilized fracturing fleet of $18.6 million in the third quarter of 2019.

Well Construction and Intervention Services

GAAP revenue in our Well Construction and Intervention (“WC&I”) Services segment, totaled $39.4 million in the fourth quarter of 2019, compared to GAAP revenue of $6.6 million in the third quarter of 2019.  Pro forma revenue in our WC&I segment totaled $57.7 million in the fourth quarter of 2019, compared to pro forma revenue of $66.9 million in the third quarter of 2019. Adjusted Gross Profit totaled $6.8 million in the fourth quarter of 2019, compared to Adjusted Gross Profit of $1.2 million in the third quarter of 2019.  Pro forma Adjusted Gross Profit totaled $9.1 million in the fourth quarter of 2019, compared to pro forma Adjusted Gross Profit of $13.2 million in the third quarter of 2019.  Pro forma net income totaled $0.3 million, resulting in pro forma Adjusted EBITDA of $7.2 million in the fourth quarter of 2019, compared to pro forma net income of $2.3 million, resulting in pro forma Adjusted EBITDA of $9.1 million in the third quarter of 2019.

Well Support Services

GAAP revenue in our Well Support Services segment, which only includes the period after the completion of the merger on October 31, 2019, totaled $48.6 million in the fourth quarter of 2019.  Pro forma revenue in our Well Support Services segment totaled $80.9 million in the fourth quarter of 2019, compared to pro forma revenue of $94.5 million in the third quarter of 2019. Adjusted Gross Profit totaled $8.0 million in the fourth quarter of 2019.  Pro forma Adjusted Gross Profit totaled $14.9 million in the fourth quarter of 2019, compared to pro forma Adjusted Gross Profit of $14.3 million in the third quarter of 2019.  The sequential decrease in pro forma revenue mostly pertained to the divestiture of the majority of our fluids management assets in West and South Texas on July 31, 2019.  Pro forma net income totaled $5.3 million, resulting in pro forma Adjusted EBITDA of $9.2 million in the fourth quarter of 2019, compared to a pro forma net income of $2.3 million, resulting in pro forma Adjusted EBITDA of $12.4 million in the third quarter of 2019.

Balance Sheet and Capital

Total debt outstanding as of December 31, 2019 totaled $338 million, net of debt discounts and deferred finance costs and excluding lease obligations.  As of December 31, 2019, cash and equivalents totaled $255 million, and total available liquidity was $559 million, which included $304 million of available borrowing capacity under our asset-based credit facility.

Total operating cash flow was $80 million and cash flow used in investing activities was $44 million, resulting in free cash flow of $36 million in the fourth quarter of 2019.  Combined operating cash flow, which includes the full quarterly results for both legacy Keane and C&J, was $48 million and cash flow used in investing activities was $54 million resulting in combined free cash flow usage of $6 million in the fourth quarter of 2019.  Excluding cash used for merger and integration related costs of $61 million, combined Adjusted free cash flow totaled $55 million in the fourth quarter of 2019.

On March 9, 2020, we divested our Well Support Services segment to Basic Energy Services for approximately $93.7 million in total consideration that included $59.35 million in cash consideration before transaction costs, escrowed amounts, and subject to customary working capital adjustments.

First Quarter 2020 Update

For the first quarter of 2020, the Company expects to deploy an average of 28 fully-utilized fracturing fleets compared to 25 fully-utilized fracturing fleets deployed in the fourth quarter.  We expect increased activity levels to be offset by lower overall pricing and the divestiture of our Well Support Service segment on March 9, 2020.

“In light of the ongoing market and commodity price volatility, NexTier is taking the necessary steps to protect our business,” said Kenneth Pucheu, Senior Vice President and Chief Financial Officer of NexTier.  “NexTier is well fortified with a strong balance sheet, further enhanced liquidity position, and an experienced management team to navigate through these challenging market headwinds.”

Conference Call Information

The Company’s executive management team will host a conference call on Wednesday, March 11, 2020 at 8:30 a.m. ET / 7:30 a.m. CT to discuss our fourth quarter 2019 financial and operating results.  Interested parties may listen to the conference call via a live webcast accessible on our website at www.nextierofs.com or by calling U.S. (Toll Free): 1-855-560-2574 or International: 1-412-542-4160 and asking for the “NexTier Oilfield Solutions’ Earnings Call.”  Please dial-in ten to fifteen minutes before the scheduled call time to avoid any delays entering the earnings call.  An archive of the webcast will be available shortly after the call on our website at www.nextierofs.com for twelve months following the call.  A replay of the call will also be available for one week by calling U.S. (Toll Free): 1-877-344-7529 or International: 1-412-317-0088, using the access code: 10138991.

About NexTier Oilfield Solutions

Headquartered in Houston, Texas, NexTier is an industry-leading U.S. land oilfield service company, with a diverse set of well completion and production services across the most active and demanding basins.  Our integrated solutions approach delivers efficiency today, and our ongoing commitment to innovation helps our customers better address what is coming next.  NexTier is differentiated through four points of distinction, including safety performance, efficiency, partnership and innovation.  At NexTier, we believe in living our core values from the basin to the boardroom, and helping customers win by safely unlocking affordable, reliable and plentiful sources of energy.

Pro forma information and Non-GAAP Financial Measures

(1)

Pro forma information before management adjustments was determined in accordance with Article 11 of Regulation S-X and is presented to enhance comparability to the prior quarter pre-merger operating results by adjusting for the merger of Keane and C&J. 

   

(2)

The Company has included in this press release certain non-GAAP financial measures, some of which are calculated on a consolidated basis, segment basis, product line basis, combined basis or pro forma basis, including Adjusted EBITDA, Adjusted Gross Profit, Adjusted Net Income (loss), free cash flow, Adjusted free cash flow, Adjusted SG&A and annualized adjusted gross profit per fully-utilized fracturing fleet.  These measurements provide supplemental information which the Company believes is useful to analysts and investors to evaluate its ongoing results of operations, when considered alongside GAAP measures such as net income and operating income.  These non-GAAP financial measures exclude the financial impact of items management does not consider in assessing the Company’s ongoing operating performance, and thereby facilitate review of the Company’s operating performance on a period-to-period basis.  Other companies may have different capital structures, and comparability to the Company’s results of operations may be impacted by the effects of acquisition accounting on its depreciation and amortization.  As a result of the effects of these factors and factors specific to other companies, the Company believes Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A and Adjusted Net Income provide helpful information to analysts and investors to facilitate a comparison of its operating performance to that of other companies.  The Company believes free cash flow and Adjusted free cash flow is important to investors in that it provides a useful measure to assess management’s effectiveness in the areas of profitability and capital management.  Annualized Gross Profit per fully-utilized fracturing fleet is used to evaluate the operating performance of the business line for comparable periods, and the Company believes it is important as an indicator of operating performance of our fracturing and bundled wireline product line because it excludes the effects of the capital structure and certain non-cash items from the product line’s operating results.  For a reconciliation of these non-GAAP measures, please see the tables at the end of this press release.

   

(3)

Non-GAAP Measure Definitions: Adjusted EBITDA is defined as net income (loss) adjusted to eliminate the impact of interest, income taxes, depreciation and amortization, along with certain items management does not consider in assessing ongoing performance. Adjusted Gross Profit is defined as revenue less cost of services, further adjusted to eliminate items in cost of services that management does not consider in assessing ongoing performance. Adjusted Gross Profit at the segment level is not considered to be a non-GAAP financial measure as it is our segment measure of profit or loss and is required to be disclosed under GAAP pursuant to ASC 280. Adjusted Net Income (Loss) is defined as net income (loss) plus the after-tax amount of merger/transaction-related costs and other non-routine items. Adjusted SG&A is defined as selling, general and administrative expenses adjusted for severance and business divestiture costs, merger/transaction-related costs, and other non-routine items. Free cash flow is defined as the net increase (decrease) in cash and cash equivalents before financing activities, including share repurchase activity. Adjusted free cash flow adjusts free cash flow for certain management adjustments. Annualized Adjusted Gross Profit per fully-utilized fleet, is a non-GAAP measure and is defined as (i) revenue less cost of services attributable to the fracturing and bundled wireline product line, further adjusted to eliminate items in cost of services that management does not consider in assessing ongoing performance for the fracturing and bundled wireline product line, (ii) divided by the fully-utilized fracturing and bundled wireline fleets (average deployed fleets multiplied by fleet utilization) per quarter, and then (iii) multiplied by four.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1993, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Where a forward-looking statement expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. The words “believe,” “continue,” “could,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “should,” “may,” “will,” “would” or the negative thereof and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company’s control. Statements in this press release regarding the Company that are forward-looking, including projections as to the amount and timing of synergies from C&J merger and the Company’s 2020 guidance and outlook information, are based on management’s estimates, assumptions and projections, and are subject to significant uncertainties and other factors, many of which are beyond the Company’s control. These factors and risks include, but are not limited to, (i) the competitive nature of the industry in which the Company conducts its business, including pricing pressures; (ii) the ability to meet rapid demand shifts; (iii) the impact of pipeline capacity constraints and adverse weather conditions in oil or gas producing regions; (iv) the ability to obtain or renew customer contracts and changes in customer requirements in the markets the Company serves; (v) the ability to identify, effect and integrate acquisitions, joint ventures or other transactions; (vi) the ability to protect and enforce intellectual property rights; (vii) the effect of environmental and other governmental regulations on the Company’s operations; (viii) the effect of a loss of, or interruption in operations of, one or more key suppliers, including resulting from product defects, recalls or suspensions; (ix) the variability of crude oil and natural gas commodity prices; (x) the market price and availability of materials or equipment; (xi) the ability to obtain permits, approvals and authorizations from governmental and third parties; (xii) the Company’s ability to employ a sufficient number of skilled and qualified workers to combat the operating hazards inherent in the Company’s industry; (xiii) fluctuations in the market price of the Company’s stock; (xiv) the level of, and obligations associated with, the Company’s indebtedness; (xv) the duration, impact and severity of the novel coronavirus (COVID-19) outbreak; and (xvi) other risk factors and additional information. In addition, material risks that could cause actual results to differ from forward-looking statements include: the inherent uncertainty associated with financial or other projections; the prompt and effective integration of C&J’s businesses into the Company and the ability to achieve the anticipated synergies and value-creation contemplated in connection with the merger. For a more detailed discussion of such risks and other factors, see the Company’s filings with the Securities and Exchange Commission (the “SEC”), including under the heading “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 available on the SEC website or www.NexTierOFS.com. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates, to reflect events or circumstances after the date of this Current Report on Form 8-K, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Investors should not assume that any lack of update to a previously issued “forward-looking statement” constitutes a reaffirmation of that statement.

Coronavirus Monitoring and Planning

The Company is monitoring the spread and impact of the coronavirus closely, and is implementing measures in accordance with local directives, as well as internal policies, to protect employees and limit business interruption.  These measures include restrictions on travel and employee contact in certain regions, employee education, enhanced customer and supplier communication, alternative sourcing, and other measures.  The Company is also preparing mitigation plans for further or prolonged impact from the coronavirus.

Merger of Equals

On October 31, 2019, Keane and C&J completed their merger and concurrent with closing, Keane, as the parent company, was renamed NexTier.  In accordance with the terms of the Agreement and Plan of Merger, dated as of June 16, 2019, by and among NexTier, C&J and King Merger Sub Corp., a wholly owned subsidiary of NexTier (“Merger Sub”), Merger Sub merged with and into C&J, with C&J surviving the merger as a wholly owned subsidiary of NexTier.  Immediately following the merger, C&J was merged with and into King Merger Sub II LLC (“LLC Sub”), with LLC Sub continuing as the surviving entity as a wholly-owned subsidiary of NexTier and as the successor to C&J.  Keane was determined to be the accounting acquirer in the merger, and as a result, the historical financial statements of Keane, prepared under U.S. generally accepted accounting principles (“GAAP”), for the periods prior to the merger are considered to be the historical financial statements of NexTier.

Unaudited Pro Forma Financial Information

In order to provide the most meaningful comparison of results of operations and results by segment, supplemental unaudited pro forma financial information has been included in the following financial schedules. The unaudited pro forma financial information is based on the historical consolidated financial statements and accompanying notes of both Keane and C&J and has been prepared to illustrate the effects of the merger, assuming the merger had been consummated on January 1, 2019. For all periods presented, adjustments have been made for (1) the preliminary acquisition accounting impact, (2) accounting policy alignment, and (3) the elimination of the impact from events that are directly attributable to the Agreement and Plan of Merger (e.g., non-routine merger and integration costs).  The unaudited pro forma financial information was based on and should be read in conjunction with the separate historical financial statements and accompanying notes contained in each of the Keane and C&J Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K for the applicable periods.  The pro forma financial statements were prepared in accordance with Article 11 of Regulation S-X.  The unaudited pro forma financial information has been presented for informational purposes only and is not necessarily indicative of what NexTier’s results of operations actually would have been had the merger been completed on January 1, 2019, nor is it indicative of the future operating results of NexTier.  The unaudited pro forma financial information does not reflect any cost or growth synergies that NexTier may achieve as a result of the merger, future costs to combine the operations of Keane and C&J or the costs necessary to achieve any cost or growth synergies.

Contact Information:

Daniel Jenkins
Vice President - Investor Relations
(713) 325-6000








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