CJ C&J Energy Services Inc

HOUSTON, May 7, 2019 /PRNewswire/ -- C&J Energy Services, Inc. ("C&J" or the "Company") (NYSE: CJ) today announced financial and operating results for the first quarter ended March 31, 2019.

First Quarter 2019 Highlights and Recent Developments

• Grew consolidated revenue 4% sequentially to $510.8 million resulting in a net loss of $23.6 million with consolidated Adjusted EBITDA⁽¹⁾ of $49.6 million
• Increased fracturing utilization resulting in revenue growth of 22% and annualized Adjusted EBITDA per fleet⁽³⁾ expansion to $10.2 million
• Improving customer activity levels across our service lines set the stage for expected revenue growth in the second quarter of 2019

First Quarter 2019 Financial Results

"The sequential improvement in our consolidated revenue was driven by the strong operational execution of our fracturing business.  The momentum from increasing our dedicated fleet count at the end of 2018 positioned us well as we entered the new year.  We capitalized on refreshed E&P capital budgets from our customers that drove utilization improvement across our deployed fracturing fleets.  This increase in utilization coupled with customer efficiencies resulted in a 22% sequential increase in fracturing revenue with solid improvement in profitability per deployed fleet.  As we communicated when announcing our fourth quarter 2018 earnings in late February, our other service lines were negatively impacted by inclement weather and lower activity levels for much of the first quarter.  These businesses also experienced varying degrees of pricing pressure, and we had unexpected downtime with several of our large diameter coiled tubing units.  Since March, activity levels have been increasing, supported by better weather conditions and growth in the drilling rig count.  We currently expect to deliver improved sequential results in all of our operating segments in the second quarter.  We continue to focus on driving utilization by partnering with high efficiency customers who value our superior service quality and the safety record of our operations.  As always, and regardless of market conditions, we are committed to creating long-term value for our shareholders by executing a disciplined capital deployment strategy to achieve superior returns, maintaining a strong balance sheet and generating free cash flow," commented C&J's President and Chief Executive Officer, Don Gawick.

For the first quarter of 2019, revenue totaled $510.8 million, a decrease of 7.6% compared to the first quarter of 2018, but an increase of 4.1% compared to the fourth quarter of 2018.  We reported a net loss of $23.6 million, or $(0.36) per diluted share, in the first quarter of 2019, which included $3.3 million, or $0.05 per diluted share, of severance and business divestiture costs, as well as $1.7 million, or $0.03 per diluted share, of other non-routine items.  This compared to net income of $20.6 million, or $0.31 per diluted share, in the first quarter of 2018, and a net loss of $189.5 million, or $(2.87) per diluted share, in the fourth quarter of 2018, which included a $146.0 million impairment of goodwill and a $21.4 million loss on the retirement of certain assets.

We reported an Adjusted Net Loss⁽¹⁾ of $18.5 million, or $(0.28) per diluted share, for the first quarter of 2019, compared to Adjusted Net Income of $28.6 million, or $0.42 per diluted share, for the first quarter of 2018, and an Adjusted Net Loss of $17.9 million, or $(0.27) per diluted share, in the fourth quarter of 2018.  During the first quarter of 2019, Adjusted EBITDA⁽¹⁾ totaled $49.6 million compared to Adjusted EBITDA of $78.6 million in the first quarter of 2018, and Adjusted EBITDA of $52.6 million in the fourth quarter of 2018.

Other Financial Information

Our selling, general and administrative ("SG&A") expense in the first quarter of 2019 was $53.7 million, compared to $65.9 million in the first quarter of 2018, and $49.8 million in the fourth quarter of 2018.  The sequential increase in SG&A expense was the result of higher incentive compensation expense including non-cash share-based compensation and higher payroll taxes that are typical during the first quarter.

Depreciation and amortization expense in the first quarter of 2019 was $59.8 million, compared to $46.3 million in the first quarter of 2018, and $63.4 million in the fourth quarter of 2018.  The sequential decrease was primarily driven by the disposition of certain assets in the fourth quarter of 2018.

Liquidity and Capital Expenditures

As of March 31, 2019, we had a cash balance of $88.8 million and no borrowings drawn on our credit facility.  We exited the first quarter with borrowing capacity of $274.7 million, resulting in $363.5 million of total liquidity as of March 31, 2019.  Capital expenditures totaled $48.3 million during the first quarter of 2019, compared to $63.0 million in the first quarter of 2018, and $66.8 million in the fourth quarter of 2018.

During the first quarter, free cash flow⁽¹⁾ usage totaled $42.7 million mostly to fund capital expenditures and other items that are typical during the first quarter such as annual incentive compensation payments, property taxes and the reset of payroll taxes.  In addition, as a result of increased activity levels, our accounts receivable balance increased by $47.8 million, which we expect will result in increased cash conversion in the second quarter, positioning the Company for free cash flow generation in 2019.

Business Segment Results

Completion Services

In our Completion Services segment, we generated first quarter 2019 revenue of $327.1 million, a decrease of 12.6% compared to revenue of $374.1 million generated in the first quarter of 2018, and an increase of 11.5% compared to fourth quarter 2018 revenue of $293.3 million.  For the first quarter of 2019, we reported net income of $10.6 million resulting in Adjusted EBITDA⁽²⁾ of $54.4 million.  This is compared to net income of $58.1 million resulting in Adjusted EBITDA of $81.8 million for the first quarter of 2018, and a net loss of $17.0 million, which included a $16.3 million loss on the disposition of certain assets and a $6.1 million inventory reserve largely associated with a previously divested business, resulting in Adjusted EBITDA of $44.2 million for the fourth quarter of 2018.

Revenue and profitability in our Completion Services segment increased sequentially due to the strong performance of our fracturing operations.  The operational momentum created by the increase in our dedicated fleet count as we exited 2018, combined with improved customer activity levels and efficiencies in the first quarter, resulted in improved utilization levels and enhanced profitability in our fracturing business.  In our wireline and pumpdown businesses, delayed completion activity in our largest operating area that includes the Bakken and the Rocky Mountains, inclement weather in all of our core operating basins, and a more competitive pricing environment resulted in both revenue and profitability decreasing sequentially.  With the challenging conditions of the first quarter, we worked to increase efficiencies and streamline costs in our wireline and pumpdown businesses, including reallocating assets to more profitable locations and closing select operating districts in line with our disciplined returns focused strategy.

Well Construction and Intervention Services

In our Well Construction and Intervention Services ("WC&I") segment, we generated first quarter 2019 revenue of $79.1 million, a decrease of 9.5% compared to revenue of $87.4 million generated in the first quarter of 2018, and a decrease of 15.4% compared to revenue of $93.5 million generated in the fourth quarter of 2018.  For the first quarter of 2019, we reported a net loss of $3.4 million resulting in Adjusted EBITDA⁽²⁾ of $6.5 million.  This is compared to net income of $5.4 million resulting in Adjusted EBITDA of $16.3 million for the first quarter of 2018, and a net loss of $141.7 million, which included a $146.0 million goodwill impairment charge and a $2.3 million loss on the retirement of certain assets, resulting in Adjusted EBITDA of $15.9 million for the fourth quarter of 2018.

Revenue and profitability decreased sequentially in our WC&I segment primarily due to lower customer activity levels, inclement weather and reduced asset deployment.  These factors, together with the lower overall drilling rig count from smaller public and private customers in West Texas and a more competitive pricing environment in West Texas and the Mid-Continent, negatively impacted our cementing business throughout the first quarter.  In our coiled tubing business, we experienced unexpected downtime with some of our large diameter units, several of which were warrantied by the manufacturer, and all but one returned to service early in the second quarter of 2019.  Additionally, slower than expected completion activity levels in South Texas and the Mid-Continent resulted in lower overall utilization in our coiled tubing business during the first quarter.

Well Support Services

In our Well Support Services segment, we generated first quarter 2019 revenue of $104.6 million, an increase of 14.4% compared to revenue of $91.4 million generated in the first quarter of 2018, and an increase of 0.7% compared to revenue of $103.9 million generated in the fourth quarter of 2018.  For the first quarter of 2019, we reported a net loss of $4.5 million resulting in Adjusted EBITDA⁽²⁾ of $7.0 million.  This is compared to a net loss of $8.6 million resulting in Adjusted EBITDA of $5.6 million for first quarter of 2018, and a net loss of $4.0 million, which included a $2.8 million loss on the retirement of certain assets, resulting in Adjusted EBITDA of $13.1 million for the fourth quarter of 2018.

Segment revenue was essentially flat, but segment profitability declined sequentially due to inclement weather across our operating basins and higher overall labor costs.  In our rig services business, we benefited from the full quarter impact of rate increases implemented in the fourth quarter of 2018, which were offset by multiple instances of harsh weather conditions throughout the back half of the quarter, especially in our largest operating basin of California.  Weather-driven delays also inhibited our ability to get equipment to location to meet continued strong customer demand for plug and abandonment services, which resulted in special services revenue and profitability decreasing sequentially.  In our fluids management business, customer demand continued to improve, but weather-driven delays in our largest operating basins and higher labor costs caused profitability to decline sequentially.

Forward Outlook

Focusing on the second quarter of 2019, we currently expect improved financial results in each of our operating segments. At the end of the first quarter, we experienced a rebound in activity levels and many of the challenges experienced earlier in the quarter subsided.  In our Completion Services segment, customer demand for our fracturing operations is stable, and wireline and pumpdown activity levels have improved nicely off the bottom reached during the first quarter.  While the pricing environment remains challenged in our cementing business, we believe the drilling rig count with our smaller public and private customers in West Texas will continue to recover from the low point reached late in the first quarter.  Our WC&I segment is expected to also benefit from the deployment of all our large diameter coiled tubing fleet during the second quarter.  Now that the seasonally driven weather delays that are typical in both the fourth and first quarters have passed, our Well Support Services segment is experiencing steady customer demand for workover and well maintenance services.  Clearly, the outlook is more favorable, and we are well positioned to grow both revenue and profitability across our service lines and for each of our operating segments.  With that said, the oilfield services environment remains extremely competitive and customers remain very price sensitive.  We will remain focused on the things that we can control and stay committed to generating targeted returns, maintaining capital spending discipline, and generating free cash flow in 2019.

Conference Call Information

We will host a conference call on Tuesday, May 7, 2019 at 10:00 a.m. ET / 9:00 a.m. CT to discuss our first quarter 2019 financial and operating results.  Interested parties may listen to the conference call via a live webcast accessible on our website at www.cjenergy.com or by calling U.S. (Toll Free): 1-855-560-2574 or International: 1-412-542-4160 and asking for the "C&J Energy Services' 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.cjenergy.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: 10130830.

About C&J Energy Services

C&J Energy Services is a leading provider of well construction and intervention, well completion, well support and other complementary oilfield services and technologies to independent and major oilfield companies engaged in the exploration, production and development of oil and gas properties in onshore basins throughout the continental United States.  We offer a diverse, integrated suite of services across the life cycle of the well, including hydraulic fracturing, cased-hole wireline and pumpdown, cementing, coiled tubing, rig services, fluids management, other completions logistics, and specialty well site support services.  We are headquartered in Houston, Texas and operate across all active onshore basins of the continental United States.  For additional information about C&J, please visit www.cjenergy.com.

C&J Energy Services Investor Contact

Daniel E. Jenkins
Vice President – Investor Relations
investors@cjenergy.com  
1-713-260-9986

This news release (and any oral statements made regarding the subjects of this release, including those that may be made on the conference call announced herein) contains certain statements and information that may constitute "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 that address circumstances, activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.  In addition, words such as "anticipate," "believe," "ensure," "expect," "if," "once" "intend," "plan," "focus," "estimate," "project," "forecasts," "predict," "outlook," "will," "could," "should," "potential," "would," "may," "probable," "likely," variations of such words and similar expressions that convey the uncertainty of future events or outcomes 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 ability to successfully integrate acquisitions; 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 supply of oil and gas, declining or perceived instability of commodity prices, overcapacity of supply, constrained pipeline capacity and other competitive factors affecting our industry; the cyclical nature and volatility of the oil and gas industry, which may impact the level of drilling, completion and production activity and spending patterns by our customers; 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; pressure on pricing for our services, including due to competition and industry and/or economic conditions, which impacts, among other things, our ability to implement price increases or maintain pricing and margin on our services; the loss of, or interruption or delay in operations by, one or more customers; the failure by one or more of our customers to pay amounts when due, or at all; changes in customer requirements in the markets or industries we serve; costs, delays, compliance requirements and other difficulties in executing our short-and long-term business plans and growth strategies; the effects of recent or future acquisitions or customer opportunities on our business, including our ability to successfully integrate our operations and the costs incurred in doing so and the costs and potential liabilities associated with new or expanded areas of operational risks (such as offshore or international operations); business growth outpacing the capabilities of our infrastructure; the loss of, or interruption or delay in operations by, one or more of our key suppliers, including resulting from product defects, recalls or suspensions; adverse weather conditions in oil and gas producing regions; operating hazards inherent in our industry, including the possibility of accidents resulting in personal injury or death, property damage or environmental damage; the effect of environmental and other governmental regulations on our operations, including the risk that future changes in the regulation of hydraulic fracturing could reduce or eliminate demand for our hydraulic fracturing services; the incurrence of significant costs and liabilities resulting from litigation or governmental proceedings; the incurrence of significant costs and liabilities or severe restrictions on our operations or the inability to perform certain operations or provide certain services resulting from a failure to comply, or our compliance with, new or existing regulations; the effect of new or existing regulations, industry and/or commercial conditions on the availability of and costs for raw materials, consumables and equipment; our ability to implement new technologies and services; the loss of, or inability to attract, key management and other competent personnel; a shortage of qualified workers; damage to or malfunction of equipment; our ability to maintain sufficient liquidity and/or obtain adequate financing to allow us to execute our business plan;  and our ability to comply with covenants under our credit facility.

C&J cautions that the foregoing list of factors is not exclusive.  For additional information regarding known material factors that could cause our actual results to differ from our present expectations and projected results, please see 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.

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SOURCE C&J Energy Services, Inc.