HOUSTON, March 4, 2020 /PRNewswire/ -- Quintana Energy Services Inc. (NYSE: QES) ("QES" or the "Company") today reported financial and operating results for the fourth quarter ended December 31, 2019.

Fourth Quarter Highlights and Updates:

• Revenue of $95.9 million and net loss of $7.9 million
• Adjusted EBITDA of $5.2 million
• Generated $14.1 million in free cash flow
• Paid down $12.0 million of debt ending the year at $6.3 million of net debt
• Achieved new QES TRIR and LTIR safety records
• 2020 Completion and Production segment consolidation is now expected to realize increased annual cost savings

Fourth Quarter 2019 Financial Results

Fourth quarter 2019 revenue was $95.9 million, down 20.8% from $121.1 million in the third quarter of 2019. Fourth quarter 2019 net loss was $7.9 million and Adjusted EBITDA was $5.2 million, compared to a net loss of $47.4 million and Adjusted EBITDA of $8.7 million for the third quarter of 2019, and a net loss of $1.6 million and Adjusted EBITDA of $13.9 million in the fourth quarter of 2018. 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").

Chris Baker, QES' President and Chief Executive Officer, stated, "We are pleased that our fourth quarter Directional Drilling Adjusted EBITDA and Adjusted EBITDA margins came in at all-time highs since becoming a public company, despite experiencing a sizable drop in revenue both sequentially and year-over-year. We also experienced all-time lows in standby days during the quarter, which equated to a higher percentage of operating days. We generated over $14.1 million in free cash flow during the fourth quarter in the face of deteriorating conditions and constrained customer spending. Additionally, during the first quarter of 2020, our Completion and Production segment activated a second hydraulic fracturing spread and both hydraulic fracturing spreads are in service and highly utilized.

"Looking forward, we are not expecting meaningful activity improvements in 2020 over 2019 levels and believe the market will continue to be challenging. We remain alert and ready to respond to negative economic impacts created by potential coronavirus outbreaks in areas we service or to the broader market. Nonetheless, we remain optimistic about our ability to successfully navigate a difficult environment due to meaningful progress we've made in optimizing our cost structure, streamlining the organization, and adapting to adverse market conditions.  Throughout the coming year, we will continue to critically evaluate our cost structure and focus on driving improved returns.  We believe we have the right people, the right strategy and the right assets to weather these difficult times and emerge stronger when the market recovers," concluded Baker.

Directional Drilling

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 $54.6 million in the fourth quarter of 2019, down approximately 4.4% compared to revenue of $57.1 million in the third quarter of 2019 and down 9.6% from the fourth quarter of 2018. Fourth quarter 2019 Adjusted EBITDA was $9.7 million, compared to Adjusted EBITDA of $9.1 million for the third quarter of 2019. The sequential decrease in revenue was primarily due to a 10.4% decrease in rig days while the sequential increase in Adjusted EBITDA was primarily due to higher demand for premium service tools, fewer standby days as a percentage of total days and lower direct operating expenses driven by lower overall job costs per day during the three months ended December 31, 2019. In the fourth quarter of 2018, revenue was $60.4 million and Adjusted EBITDA was $9.4 million.

Pressure Pumping

The Pressure Pumping segment primarily provides hydraulic fracturing services to E&P companies in the Mid-Con, Permian Basin and the Rockies. Revenue for the segment decreased to $10.2 million in the fourth quarter of 2019, down from $27.3 million in the third quarter of 2019.  Fourth quarter 2019 Adjusted EBITDA loss was $3.5 million, compared to Adjusted EBITDA of $1.2 million for the third quarter of 2019.  This decrease was primarily attributable to a decrease in demand for completions activities in our areas of operation, which led to our stacking of three hydraulic fracturing fleets in 2019. During the fourth quarter of 2019 we had one active hydraulic fracturing fleet in service as opposed to four hydraulic fracturing fleets in service during the fourth quarter of 2018. This drove a corresponding 37.9% decrease in stages to 2,598 for the year ended December 31, 2019.The sequential decreases in revenue were primarily due to a 66.4% decrease in stages completed during the fourth quarter of 2019, offset by a corresponding 7.0% increase in average revenue per stage to $37,801 for the three months ended December 31, 2019 driven by a shift in job mix. Cost structure optimization improvements realized during the third quarter of 2019 continue to positively impact Adjusted EBITDA. In the fourth quarter of 2018, revenue was $54.1 million and Adjusted EBITDA was $4.1 million.

Pressure Control

The Pressure Control segment consists of coiled tubing, rig-assisted snubbing, nitrogen, fluid pumping and well control services. Revenue for the segment decreased 13.1% to $23.3 million in the fourth quarter of 2019, down from $26.8 million in the third quarter of 2019. Fourth quarter 2019 Adjusted EBITDA was $2.5 million, compared to Adjusted EBITDA of $3.7 million for the third quarter of 2019. The Pressure Control revenue decrease during the fourth quarter of 2019 was primarily due to a decrease in revenue days for coiled tubing and snubbing services driven by broad market slowdown in completions activity. Additionally we experienced a record quarter in our well control business which partially offset the slowdown in completions activity. The small sequential decrease in Adjusted EBITDA was primarily due to a 13.1% decrease in revenue, offset by a decrease in direct operating expenses driven by results realized from recent cost reduction initiatives during the fourth quarter of 2019. In the fourth quarter of 2018, revenue was $31.6 million and Adjusted EBITDA was $4.7 million.

Wireline

The Wireline segment primarily provides cased-hole wireline services to E&P companies. Revenue for the segment decreased 21.2% to $7.8 million in the fourth quarter of 2019 from $9.9 million in the third quarter of 2019. Fourth quarter 2019 Adjusted EBITDA was a $0.8 million loss, compared to an Adjusted EBITDA loss of $2.7 million for the third quarter of 2019. The sequential decreases in revenue and Adjusted EBITDA were primarily due to decreased utilization, pricing pressures and fewer revenue days compared to the third quarter of 2019. In the fourth quarter of 2018, revenue was $13.7 million and Adjusted EBITDA was a $1.3 million loss.

Other Financial Information

General and administrative ("G&A") expense for the fourth quarter of 2019 increased to $13.5 million compared to the third quarter's G&A expense of $12.1 million, and decreased by $0.3 million, compared to $13.8 million for the fourth quarter of 2018. The sequential increase in G&A expense compared to the third quarter was primarily driven by higher labor and stock based compensation costs in the fourth quarter, offset by lower sales and marketing expenses in the current quarter. The year over year decrease in G&A expenses was the result of cost savings associated with the continued optimization of our cost structure and lower non-cash stock based compensation expense during the fourth quarter of 2019.

Capital expenditures totaled $6.2 million during the fourth quarter of 2019, compared to capital expenditures of $7.6 million in the third quarter of 2019, and $11.8 million in the fourth quarter of 2018. Capital spending during the third and fourth quarter of 2019 was driven primarily by maintenance capital expenditures across all segments.

Fourth quarter interest expense of $0.8 million was consistent with the third quarter's interest expense, and up from $0.6 million in the fourth quarter of 2018. The fourth quarter interest expense increase over the prior year period was primarily due to a higher debt outstanding balance during the fourth quarter of 2019.

The Company's balance sheet remains a significant strength and a key differentiator versus our peers. QES ended the fourth quarter of 2019 with a total debt balance of $21.0 million, $14.7 million of cash on hand, and $37.7 million of net availability under its senior secured asset-based revolving credit facility.  The Company reduced its debt balance by $12.0 million during the three months ended December 31, 2019.

2020 Completion and Production Segment Consolidation

The restructuring of our business segments should be completed by mid-2020 and is expected to yield annual cost savings of four to six million dollars once personnel, systems and facility migrations are fully implemented. This range of expected savings is up from our previously released range of three to five million due to increased efficiencies being identified as we've begun to implement changes.

Share Repurchase Plan

On August 8, 2018, QES' Board of Directors approved a $6.0 million stock repurchase program authorizing the Company to repurchase common stock in the open market. The timing and amount of stock repurchases will depend on market conditions and corporate, regulatory and other relevant considerations. Repurchases may be commenced or suspended at any time without notice. The program does not obligate QES to purchase any particular number of shares of common stock during any period or at all, and the program may be modified or suspended at any time, subject to the Company's insider trading policy, at the Company's discretion. As of December 31, 2019, 0.9 million shares were repurchased under this program.

Conference Call Information

QES has scheduled a conference call for 9:00 a.m. Central Time (10:00 a.m. Eastern Time) on Thursday, March 5, 2020 to review reported results. You may access the call by telephone at 1-201-389-0867 and asking for the QES 2019 Fourth 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 90 days and will be available by telephone through March 12, 2020, at (201) 612-7415, access code 13698732#.

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.

Non-GAAP Financial Measures

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.

Adjusted EBITDA is not a measure of net income or cash flows as determined by GAAP. We define Adjusted EBITDA as net income or (loss) plus income taxes, net interest expense, depreciation and amortization, impairment charges, net (gain) or loss on disposition of assets, stock based compensation, transaction expenses, rebranding expenses, settlement expenses, severance expenses, restructuring expenses, impairment expenses and equipment stand-up expense.

We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP, or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

The following tables present a reconciliation of the non-GAAP financial measures of Adjusted EBITDA to the most directly comparable GAAP financial measure for the periods indicated:

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SOURCE Quintana Energy Services Inc.