USWS - U.S. Well Services Announces Third Quarter 2019 Financial and Operational Results

November, 06 2019 04:15 PM U.S. Well Services Inc.

HOUSTON, Nov. 06, 2019 (GLOBE NEWSWIRE) -- U.S. Well Services, Inc. (the “Company”, “U.S. Well Services” or “we”) (NASDAQ: USWS) today reported third quarter 2019 financial and operational results.

Third Quarter 2019 Highlights

Finalized a long-term contract for an electric fracturing fleet for work in the Northeast beginning in November 2019
Averaged 8.4 fully-utilized fleets compared to 10.4 fully-utilized fleets during the second quarter of 2019
Total revenue of $130.9 million compared to $151.4 million in the second quarter of 2019
Net loss attributable to the Company of $17.0 million compared to net loss of $21.5 million in the second quarter of 2019
Adjusted EBITDA⁽¹⁾ of $35.3 million compared to $42.6 million in the second quarter of 2019
Reported annualized Adjusted EBITDA per fully-utilized fleet of $16.9 million compared to $16.4 million for the second quarter of 2019⁽²⁾
After deduction of fluid end maintenance capital expenditures, annualized Adjusted EBITDA per fully-utilized fleet was $16.1 million compared to $14.9 million for the second quarter of 2019
Awarded one new patent, bringing total granted patents to 23, with over 95 pending patents
Total liquidity, consisting of cash and availability under the Company’s asset-backed revolving credit facility, was $61.5 million as of September 30, 2019

Each of Adjusted EBITDA and Adjusted EBITDA margin is a Non-GAAP financial measure. Please read “Non-GAAP Financial Measures.”
Adjusted EBITDA per fully-utilized fleet equivalent is defined as Adjusted EBITDA divided by the product of average active fleets during the quarter and the utilization rate for active fleets during the quarter.

“U.S. Well Services continued to execute our business strategy in spite of volatile commodity prices and a challenging operating environment,” said Joel Broussard, President and CEO of U.S. Well Services. “During the quarter we continued to improve efficiencies for our customers, demonstrating sequential growth in both pumping hours and stages completed per fleet.

“As we look to the fourth quarter, we expect our customers to continue to exercise capital discipline and limit drilling and completion spending, which will result in a reduced number of active fleets for USWS. However, based on recent commercial success, including the execution of a new long-term contract to provide electric hydraulic fracturing services in the Northeast, and visibility into our customers’ completions schedules, we expect to experience higher activity levels beginning in early 2020,” added Mr. Broussard.

Outlook

U.S. Well Services began taking delivery of equipment for the one new electric fleet currently on order during the third quarter. This fleet will begin working under contract for Shell in the first quarter of 2020.

Market conditions remained challenging during the third quarter of 2019, driving a lower number of active fleets for U.S. Well Services as well as reduced utilization. While we expect these conditions to persist through the remainder of the year, U.S. Well Services anticipates an acceleration in activity beginning in the first quarter of 2020 as E&P companies’ budgets reset. U.S. Well Services currently has 9 of its 13 fleets contracted or dedicated to customers in 2020 and expects high demand for its remaining fleet based on dialog with customers.

Third Quarter 2019 Financial Summary

Revenue for the third quarter of 2019 decreased 14% to $130.9 million versus $151.4 million in the second quarter of 2019, driven by a reduction in the number of active fleets working. U.S. Well Services averaged 9.3 active fleets during the quarter, as compared to 11.3 for the second quarter of 2019. Utilization of the Company’s active fleets averaged 90% during the third quarter, resulting in a fully-utilized equivalent of 8.4 fleets. This compares to 92% utilization and a fully-utilized equivalent of 10.4 fleets for the second quarter of 2019.

Costs of services, excluding depreciation and amortization, for the third quarter of 2019 decreased to $90.8 million from $107.4 million during the second quarter of 2019, primarily as a result of lower activity levels.

Selling, general and administrative expense (“SG&A”) increased to $8.2 million in the third quarter of 2019 from $7.6 million in the second quarter of 2019. Excluding stock-based compensation and transaction related costs, SG&A in the third quarter of 2019 was $6.8 million compared to $5.9 million in the second quarter of 2019. The increase in SG&A was primarily attributable to an increase in professional fees and personnel costs.

Net loss attributable to the Company decreased approximately 21% sequentially to $17.0 million in the third quarter of 2019 from $21.5 million in the first quarter of 2019. Adjusted EBITDA decreased 17% in the third quarter to $35.3 million from $42.6 million in the second quarter as a result of reductions in active fleets and utilization. Adjusted EBITDA margin decreased to 27% from 28% in the second quarter of 2019.⁽¹⁾

Operational Highlights

U.S. Well Services exited the third quarter with seven active frac fleets, with two fleets in the Appalachian Basin, two fleets in the Eagle Ford and three fleets in the Permian Basin. Currently, the Company has nine active frac fleets.

U.S. Well Services delivered increasing operating efficiency for its customers during the third quarter. The Company increased its stage count per fully-utilized fleet by approximately 6%, completing 4,823 frac stages during the third quarter, or 574 stages per fully-utilized fleet, as compared to 5,658 frac stages, or 544 stages per fully-utilized fleet, during the second quarter of 2019. Pumping hours per day increased approximately 3% sequentially. The Company pumped for 9,174 hours during 696 frac days, as compared to 11,019 hours during 854 frac days in the second quarter of 2019.

U.S. Well Services continues to be the market leader in electric fracturing, with 9,974 electric fracturing stages completed since the deployment of our first Clean Fleet® in 2014. The Company continued to expand its intellectual property portfolio during the third quarter, receiving a grant for one additional patent, bringing our total granted patent portfolio to 23 patents, with over 95 patents pending.

Balance Sheet and Capital Spending

As of September 30, 2019, total liquidity was $61.5 million, consisting of $32.8 million of cash on the Company’s balance sheet and $28.7 million of availability under the Company’s asset-backed revolving credit facility, and net debt was $290.9 million.

Capital expenditures, on an accrual basis, were $14.5 million during the third quarter of 2019. The capital expenditures consisted of $8.1 million for growth initiatives, $1.4 million for fleet enhancements and $5.0 million for maintenance capital expenditures, which equates to an annualized rate of $2.4 million per fully-utilized fleet. Maintenance capital expenditures during the third quarter of 2019 included approximately $1.7 million for fluid ends, which equates to an annualized rate of $0.8 million per fully-utilized fleet and 33% of total maintenance capital expenditures.

Conference Call Information

The Company will host a conference call at 9:00 am Central / 10:00 am Eastern Time on Thursday, November 7, 2019 to discuss financial and operating results for the third quarter of 2019 and recent developments. This call will also be webcast and an investor presentation will be available on U.S. Well Services’ website at http://ir.uswellservices.com/events-and-presentations/events. To access the conference call, please dial 201-389-0872 and ask for the U.S. Well Services call at least 10 minutes prior to the start time or listen to the call live over the Internet by logging on to the Company’s website from the link above. A telephonic replay of the conference call will be available through November 14, 2019 and may be accessed by calling 201-612-7415 using passcode 13696028#. A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days.

About U.S. Well Services, Inc.

U.S. Well Services, Inc. is a leading provider of hydraulic fracturing services and a market leader in electric fracture stimulation. The Company’s patented electric frac technology provides one of the first fully electric, mobile well stimulation systems powered by locally supplied natural gas including field gas sourced directly from the wellhead. The Company’s electric frac technology dramatically decreases emissions and sound pollution while generating exceptional operational efficiencies including significant customer fuel cost savings versus conventional diesel fleets. For more information visit: www.uswellservices.com. The information on our website is not part of this release.

Forward-Looking Statements

The information above includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included herein concerning, among other things, availability under the Company’s credit facilities, business strategy and objectives for future operations, results of discussions with potential customers, potential new contract opportunities and planned deployment and operation of fleets, are forward-looking statements. These forward-looking statements may be identified by their use of terms and phrases such as “may,” “expect,” “guidance,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” “target” and similar terms and phrases. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. These forward-looking statements represent the Company’s current expectations or beliefs concerning future events, and it is possible that the results described in this release will not be achieved. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those identified in this release or disclosed from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”). Factors that could cause actual results to differ from the Company’s expectations include changes in market conditions, changes in commodity prices, changes in supply and demand for oil and gas, changes in demand for our services, availability of financing and capital, the Company’s liquidity, the Company’s compliance with covenants under its credit agreements, actions by customers and potential customers, geopolitical events, availability of equipment and personnel and other factors described in the Company’s public disclosures and filings with the SEC, including those described under “Risk Factors” in our annual report on Form 10-K filed on March 14, 2019 and in our quarterly reports on Form 10-Q. As a result of these factors, actual results may differ materially from those indicated or implied by forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

- Tables to Follow -












U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and amounts in thousands except for active fleets and per share amounts)









































Three Months Ended

Nine Months Ended


September 30,

June 30,

September 30,



2019



2018



2019



2019



2018













Statement of Operations Data:










Revenue
$
130,884


$
166,173


$
151,419


$
422,075


$
530,411


Costs and expenses:










Cost of services (excluding depreciation and amortization)

90,792



137,452



107,369



307,841



427,243


Depreciation and amortization

39,723



26,765



40,322



117,888



77,547


Selling, general and administrative expenses

8,216



5,248



7,638



24,474



14,863


Loss on disposal of assets

4,976



(126
)


4,003



15,884



7,990


Income (loss) from operations

(12,823
)


(3,166
)


(7,913
)


(44,012
)


2,768


Interest expense, net

(8,449
)


(7,387
)


(7,820
)


(21,384
)


(21,672
)

Loss on extinguishment of debt

-



-



(12,558
)


(12,558
)


-


Other income

62



9



1,686



1,774



331


Loss before income taxes

(21,210
)


(10,544
)


(26,605
)


(76,180
)


(18,573
)

Income tax expense

39



-



306



469



-


Net loss

(21,249
)


(10,544
)


(26,911
)


(76,649
)


(18,573
)

Net loss attributable to noncontrolling interest

(4,280
)


-



(5,432
)


(15,929
)


-


Net loss attributable to U.S. Well Services, Inc.
$
(16,969
)

$
(10,544
)

$
(21,479
)

$
(60,720
)

$
(18,573
)












Net lost attributable to U.S. Well Services, Inc. stockholders per common share (1):







Basic and diluted

(0.45
)


(0.21
)


(0.46
)


(1.36
)


(0.37
)

Weighted average common shares outstanding:










Basic and diluted

50,250



47,940



49,846



49,182



47,940













Other Financial and Operational Data










Capital Expenditures (2)

14,523



79,464



87,645



257,280



107,932


Adjusted EBITDA (3)

35,288



28,322



42,584



105,858



97,914


Average Active Fleets

9.3



9.7



11.3



10.6



9.9













(1) Due to the Company's combination with the SPAC which was accounted for as a reverse recapitalization, earnings per share has been recast to reflect the Company's capital structure post-combination for all comparative periods.




(2) Capital expenditures presented above are shown on an accrual basis, including capital expenditures in accounts payable, accrued liabilities and under equipment financing arrangements.




(3) Adjusted EBITDA is a Non-GAAP Financial Measure. See the tables entitled "Reconciliation and Calculation of Non-GAAP Financial and Operational Measures" below.

U.S. WELL SERVICES, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS


(unaudited, amounts in thousands except shares)













September 30, 2019
December 31, 2018

ASSETS





CURRENT ASSETS:





Cash and cash equivalents
$
20,712


$
29,529



Restricted cash

12,084



507



Accounts receivable (net of allowance for doubtful accounts of





$22 and $189 in 2019 and 2018, respectively)

108,050



58,026



Inventory, net

10,488



9,413



Prepaids and other current assets

14,867



16,437



Total current assets

166,201



113,912



Property and equipment, net

461,529



331,387



Intangible assets, net

22,191



27,890



Goodwill

4,971



4,971



Deferred financing costs, net

1,108



2,070



TOTAL ASSETS
$
656,000


$
480,230



LIABILITIES AND STOCKHOLDERS' EQUITY





CURRENT LIABILITIES:





Accounts payable
$
78,559


$
89,360



Accrued expenses and other current liabilities

29,453



17,044



Notes payable, current portion

7,250



4,560



Current portion of long-term equipment financing

7,886



3,263



Current portion of long-term capital lease obligation

13,286



25,338



Current portion of long-term debt

5,000



900



Total current liabilities

141,434



140,465



Notes payable, less current portion

1,867



-



Long-term equipment financing

11,926



8,304



Long-term capital lease obligation

1,330



-



Long-term debt

275,154



91,112



Deferred rent

166



-



TOTAL LIABILITIES

431,877



239,881









MEZZANINE EQUITY





Series A Convertible Preferred Stock, par value $0.0001 per share; 55,000 shares





authorized, issued and outstanding as of September 30, 2019; aggregate liquidation




preference of $57,330 as of September 30, 2019

31,968



-









STOCKHOLDERS' EQUITY





Class A Common Stock, par value of $0.0001 per share; 400,000,000 shares





authorized; 54,588,775 shares and 49,254,760 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively

5



5



Class B Common Stock, par value of $0.0001 per share; 20,000,000 shares





authorized; 13,775,400 shares and 13,937,332 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively

1



1



Additional paid in capital

232,080



204,928



Accumulated deficit

(78,008
)


(17,383
)


Total stockholders' equity attributable to U.S. Well Services, Inc.

154,078



187,551



Noncontrolling interest

38,077



52,798



Total Stockholders' Equity

192,155



240,349



TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY
$
656,000


$
480,230

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(unaudited and amounts in thousands)










2019



2018


CASH FLOWS FROM OPERATING ACTIVITIES:





Net loss

$
(76,649
)

$
(18,573
)

Adjustments to reconcile net loss to cash provided by





operating activities:





Depreciation and amortization


117,888



77,547


Loss on disposal of assets


15,884



7,990


Non-cash interest


-



7,196


Share-based compensation expense


5,672



2,802


Loss on extinguishment of debt


12,558



-


Other noncash items


2,729



2,231


Changes in working capital


(35,752
)


4,921


Net cash provided by operating activities


42,330



84,114


CASH FLOWS FROM INVESTING ACTIVITIES:





Purchase of property and equipment


(194,114
)


(58,557
)

Insurance proceeds from damaged property and equipment


706



8,011


Net cash used in investing activities


(193,408
)


(50,546
)

CASH FLOWS FROM FINANCING ACTIVITIES:





Proceeds from issuance of revolving credit facility


49,134



-


Repayments of revolving credit facility


(65,000
)


-


Proceeds from issuance of long-term debt


285,000




Repayments of long-term debt


(75,000
)


-


Payment of fees related to debt extinguishment


(6,560
)



Repayments of amounts under equipment financing


(66,872
)


(12,484
)

Principal payments under finance lease obligation


(12,494
)


(7,144
)

Proceeds from issuance of preferred stock and warrants, net


54,524



-


Deferred financing costs


(13,451
)


-


Repayments of note payable


(4,560
)


(2,145
)

Other


9,117



3,084


Net cash provided (used) by financing activities


153,838



(18,689
)

Net increase in cash and cash equivalents and restricted cash


2,760



14,879


Cash and cash equivalents and restricted cash, beginning of period


30,036



6,426


Cash and cash equivalents and restricted cash, end of period

$
32,796


$
21,305

Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP. The Company believes, however, that certain non-GAAP performance measures allow external users of its consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate its operating performance and compare the results of its operations from period to period and against the Company’s peers without regard to the Company’s financing methods, hedging positions or capital structure. Additionally, the Company believes the use of certain non-GAAP measures highlights trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP measures.

Reconciliation of Net Income to Adjusted EBITDA

EBITDA and Adjusted EBITDA are non-GAAP financial measures and should not be considered as a substitute for net income (loss), operating income (loss) or any other performance measure derived in accordance with GAAP or as an alternative to net cash provided by operating activities as a measure of the Company’s profitability or liquidity. The Company’s management believes EBITDA and Adjusted EBITDA are useful because they allow external users of its consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate the Company’s operating performance, compare the results of its operations from period to period and against the Company’s peers without regard to the Company’s financing methods, hedging positions or capital structure and because it highlights trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP measures. The Company believes EBITDA and Adjusted EBITDA are important supplemental measures of its performance that are frequently used by others in evaluating companies in its industry. Because EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income (loss) and may vary among companies, the EBITDA and Adjusted EBITDA that the Company presents may not be comparable to similarly titled measures of other companies.

The Company defines EBITDA as earnings before interest, income taxes, depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA excluding the following: loss on disposal of assets; share-based compensation; impairments; and other items that the Company believes to be non-recurring in nature. The Company defines Adjusted EBITDA margin as Adjusted EBITDA as a percentage of Revenue.

U.S. WELL SERVICES, INC.

RECONCILIATION OF NET INCOME (GAAP) TO EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(unaudited, amounts in thousands)













Three Months Ended

Nine Months Ended


September 30,

June 30,

September 30,



2019



2018



2019



2019



2018


Net loss
$
(21,249
)

$
(10,544
)

$
(26,911
)

$
(76,649
)

$
(18,573
)

Interest expense, net

8,449



7,387



7,820



21,384



21,672


Income tax expense

39



-



306



469



-


Depreciation and amortization

39,723



26,765



40,322



117,888



77,547


EBITDA

26,962



23,608



21,537



63,092



80,646


Loss on disposal of assets (a)

4,976



(126
)


4,003



15,884



7,990


Share based compensation (b)

2,305



896



2,307



5,672



2,802


Certain non-productive time (c)

-



-



-



-



1,200


Fleet start-up and relocation costs (d)

1,045



1,437



3,170



8,208



1,717


Restructuring and transaction related costs (e)

-



1,213



303



1,738



2,265


Fleet 6 fire (f)

-



1,294



(1,294
)


(1,294
)


1,294


Loss on extinguishment of debt (g)

-



-



12,558



12,558



-


Adjusted EBITDA
$
35,288


$
28,322


$
42,584


$
105,858


$
97,914













(a) Represents net losses on the disposal of property and equipment.









(b) Represents non-cash share-based compensation.










(c) Represents revenue shortfall associated with non-productive time due to sand mine issues with a customer. The delays were caused by excessive wait times at the customer’s chosen sand mine as sand mine operations were starting up and have since been addressed. Additionally, the Company has come to an agreement with the customer to better define how non-productive time caused by sand mine delays are to be split between the two parties. As such, the Company does not anticipate, nor has experienced, additional material revenue shortfalls related to delays at the customer’s sand mine moving forward.




(d) Represents non-recurring costs related to the start-up, enhancement and / or relocation of hydraulic fracturing fleets.





(e) Represents non-recurring third-party professional fees and other costs including costs related to financing transactions, the capital restructuring and the potential sale of U.S. Well Services, LLC.
(f) Represents non-recurring insurance reimbursement of costs related to a fleet fire previously reported as an add-back.





(g) Represents non-recurring costs related to debt extinguishment.

Contacts:
U.S. Well Services
Josh Shapiro, VP, Finance and Investor Relations
(832) 562-3730
IR@uswellservices.com

Dennard Lascar Investor Relations
Ken Dennard / Lisa Elliott
(713) 529-6600
USWS@dennardlascar.com

Company Name:	U.S. Well Services Inc.
Stock Symbol:	USWS
Market:	NASDAQ
Website:	uswellservices.com

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