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8-K - FORM 8-K - Forbes Energy Services Ltd.d441206d8k.htm

Exhibit 99.1

 

LOGO

   NEWS RELEASE
   Contact:    Preston Graham
      Investor Relations
      214-987-4121

Forbes Energy Services Reports 2012 Third Quarter Results

Announces Concentration of Trading on NASDAQ, Decision to Delist from TSX

ALICE, Texas (November 12, 2012) – Forbes Energy Services Ltd. (NASDAQ: FES and TSX:FRB) today announced financial and operating results for the three months ended September 30, 2012. All share and per share amounts prior to August 12, 2011 have been adjusted to reflect the four-to-one share consolidation completed on August 12, 2011.

Please note: The term “U.S. Operations” refers to continuing operations, which represent the Company’s financial results excluding its discontinued Mexico operations that were sold in January 2012.

Highlights for the quarter ended September 30, 2012:

 

  Revenues from U.S. Operations decreased 4.6% to $114.3 million in the third quarter of 2012 as compared to $119.8 million in the second quarter of 2012, and decreased 1.2% from the $115.8 million reported in the third quarter of 2011.

 

  Gross profit from U.S. Operations decreased to $25.8 million, or 22.5% of revenues, in the third quarter of 2012 compared to $33.0 million, or 27.5% of revenues, in the second quarter of 2012, and $27.1 million, or 23.4% of revenues, in the third quarter of 2011.

 

  GAAP net loss from U.S. Operations attributable to common shares was $1.3 million, or $0.07 per diluted share, for the third quarter of 2012, compared to net income from U.S. Operations attributable to common shares of $2.6 million or $0.10 per diluted share for the second quarter of 2012, and a net income from U.S. Operations attributable to common shares of $2.5 million or $0.10 per diluted share for the third quarter of 2011.

 

  Adjusted EBITDA from U.S. Operations* totaled $19.2 million in the third quarter of 2012 compared to $26.8 million in the second quarter of 2012, and $21.5 million in the third quarter of 2011.

 

* 

Adjusted EBITDA from U.S. Operations, a non-GAAP financial measure, is defined by the Company as income (loss) from continuing operations before interest, taxes, depreciation, amortization, gain or loss on early extinguishment of debt, non-cash stock based compensation, and litigation settlement. For a reconciliation of such measure to net income, please see the disclosures at the end of this release and on the Company’s Website.


Forbes Energy Services Reports 2012 Third Quarter Results    Page 2

 

Voluntary TSX Delisting

The Company today announced that, because its common stock trades on the NASDAQ Stock Market (“NASDAQ”) under the symbol “FES,” the Company intends to voluntarily delist its common stock from the Toronto Stock Exchange (“TSX”). The Company feels that the minimal trading volume of these shares on the TSX no longer justifies the expenses associated with maintaining this listing.

The Company believes that its listing with NASDAQ provides its shareholders with sufficient liquidity, as NASDAQ accounts for a large majority of the Company’s current trading volume. Further, the Company feels that administrative and regulatory efficiencies will be achieved by focusing on the single listing.

John Crisp, President and CEO of the Company, stated, “the TSX and the Canadian capital markets have been very important to the growth of this Company, however, at this time, with our recent listing on NASDAQ, we feel that it is in the best interest of the Company to focus our resources on our NASDAQ listing.”

The Company has provided written notice to the TSX regarding the delisting and anticipates that its common stock will be delisted from the TSX at the close of trading on Friday, November 16, 2012.

Overview

Crisp stated, “Our third quarter results reflect the past few months’ steadily weakening demand for oilfield services, which persists in the seasonally slow fourth quarter. The decreased activity by most of our customers was due to their need to manage capital expenses in the second half of 2012 after an unexpected improvement in drilling cycle times and consequently, in the number of completed wells, prematurely draining budgets. Early indicators suggest that next year’s spending will be similar to that in 2012, with some customers slowly ramping up in the beginning of the first quarter, while others lag behind.

“Our well servicing segment experienced a decrease in margins as part of the oilfield services’ second-half slowdown. This performance was partly associated with fewer active 24-hour rigs and higher operating expenses. Our fluid logistics segment experienced similar but less severe conditions.

“Given the challenging market, we remain focused on liquidity. As of November 12, 2012, we have $26.8 million in unrestricted cash and $72.1 million available under our revolving credit agreement for total liquidity of $98.9 million. We are projecting approximately $20.0 million in capital expenditures for 2013, which will be spent with discretion as we strive to maintain our liquidity goal.”

Business Segment Results

Well Servicing Segment

In the third quarter of 2012, Well Servicing segment revenues from U.S. Operations decreased $0.7 million, or 1.5%, to $50.6 million compared to $51.3 million in the second quarter of 2012, and increased $2.2 million compared to $48.4 million in the prior year quarter. Segment gross


Forbes Energy Services Reports 2012 Third Quarter Results    Page 3

 

profit totaled $9.2 million, or 18.2% of revenues, in the third quarter of 2012 compared to $13.9 million, or 27.0% of revenues, for the second quarter of 2012, and $9.5 million, or 19.7% of revenues, in the prior year quarter. This decrease is attributable to fewer 24-hour rigs working, higher group and workers compensation insurance expense, increased bad debt expense, and other factors in line with cyclical industry trends.

The Company recorded approximately 107,435 U.S. rig hours for the third quarter of 2012, compared to 114,308 in the second quarter of 2012, and 112,239 in the third quarter of 2011. Capital expenditures for U.S. Operations in the Well Servicing segment for the quarter ended September 30, 2012, were approximately $6.2 million associated with two new coiled tubing spreads, mud pumps, high-pressure pumps and related well service equipment.

As of September 30, 2012, the Company had 162 well service rigs, nine tubing testing systems, four pump-down units and two coiled tubing units.

Fluid Logistics and Other Segment

In the third quarter of 2012, Fluid Logistics and Other segment revenues decreased $4.7 million, or 6.9%, to $63.8 million compared to $68.5 million in the second quarter of 2012, and decreased $3.5 million compared to $67.3 million in the third quarter of 2011. Gross operating profit for the Fluid Logistics and Other segment totaled $16.6 million, or 26.0% of revenues, in the third quarter of 2012 compared to $19.1 million, or 27.9% of revenues, in the second quarter of 2012, and $17.5 million, or 26.0% of revenues, in the prior year quarter.

The Company recorded 405,672 truck hours during the third quarter of 2012 compared to 422,248 hours in the second quarter of 2012, and 364,682 hours for the third quarter of 2011. The Company’s heavy truck fleet totaled 580 at September 30, 2012. Capital expenditures for the Fluid Logistics and Other segment were approximately $5.7 million for the quarter ended September 30, 2012, and consisted of purchases or additions to frac tanks, salt water disposal wells, and other related equipment.

As of September 30, the Company utilized 475 vacuum trucks, 21 high pressure pump trucks, 84 other heavy trucks, 3,149 frac tanks, and 23 salt water disposal wells.

Liquidity and Capital Resources

As of September 30, 2012, the Company had $5.3 million in unrestricted cash and $16.6 million of restricted cash. The Company also had $280 million of 9.0% Senior Notes and $16.1 million of other notes outstanding. In November, restricted cash of $13.7 million related to Mexico was released and returned to the Company. As of November 12, 2012, the Company had $26.8 million in unrestricted cash and the $75.0 million secured credit facility remained undrawn, except for the letters of credit in the amount of $2.9 million. New equipment to be added for the remainder of 2012 will primarily consist of three new coiled tubing spreads. This new equipment will be either financed through debt financing or operating leases.

Conference Call

Company management will conduct an investor conference call starting at 10 a.m. EST (9 a.m. CST) on Tuesday, November 13th, 2012.


Forbes Energy Services Reports 2012 Third Quarter Results    Page 4

 

To participate, please dial the toll free number at (877) 303-1298 and provide the Conference ID: 69433283. To access the replay of the call, dial (855) 859-2056. Alternatively, a webcast is available. To access, visit www.ForbesEnergyServices.com and click on “Investor Relations,” then “Events and Presentations.” Shortly after the conclusion of the call, a webcast replay will be made available for a period of 21 days on the same page of the Company’s investor relations website.

About the Company

Forbes Energy Services Ltd. is an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, Mississippi and Pennsylvania. More information on the Company can be found by visiting www.ForbesEnergyServices.com.

Forward-Looking Statements and Regulation G Reconciliation

This press release contains “forward-looking statements,” as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect its performance in the future. The accuracy of the Company’s assumptions, expectations, beliefs and projections depend on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company’s actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include: supply and demand for oilfield services and the level of oil and natural gas prices; the timing of spending by customers in relation to their exploratory budgets; the continued uncertainty in the global financial markets and its effect on domestic spending in the oil and natural gas industry; the Company’s ability to maintain or improve pricing on its core services; the potential for excess capacity in the industry; and competition. Additional factors that you should consider are set forth in detail in the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011(the “Form 10-K”), as well as other filings the Company has made with the Securities and Exchange Commission. Should one or more of the foregoing risks or uncertainties materialize, or should the Company’s underlying assumptions prove incorrect, the Company’s actual results may vary materially from those anticipated in its forward-looking statements, and the Company’s business, financial condition and results of operations could be materially and adversely affected.

The Company’s financial statements and management’s discussion and analysis of financial condition and results of operations will be found in the Company’s Form 10-Q, which will be submitted for filing by November 14, 2012 with the Securities and Exchange Commission and posted on the Company’s website.

This press release also contains references to the non-GAAP financial measure of Adjusted EBITDA from U.S. Operations. For a reconciliation of such measure to net income, please see the table at the end of this release. Management’s opinion regarding the usefulness of Adjusted EBITDA from U.S. Operations to investors and a description of the ways in which management uses such measure can be found on the “Investor Relations” page of the Company’s website. http://www.forbesenergyservices.com/.

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Forbes Energy Services Ltd.

Selected Statement of Operations Data

(Unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2012     2011     2012     2011  

Revenues

        

Well servicing

   $ 50,565,392      $ 48,421,163      $ 154,119,591      $ 126,869,856   

Fluid logistics and other

     63,755,018        67,340,814        211,470,157        194,371,015   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     114,320,410        115,761,977        365,589,748        321,240,871   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Well servicing

     41,371,866        38,880,709        117,912,986        103,029,914   

Fluid logistics and other

     47,185,691        49,816,736        151,395,792        142,730,107   

General and administrative

     7,278,249        6,187,055        26,022,710        24,983,659   

Depreciation and amortization

     13,187,483        9,861,254        37,073,641        29,077,466   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     109,023,289        104,745,754        332,405,129        299,821,146   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     5,297,121        11,016,223        33,184,619        21,419,725   

Other income (expense)

        

Interest expense, net

     (7,138,339     (6,740,695     (20,851,339     (20,468,815

Loss on early estinguishment of debt

     —          —          —          (35,414,833

Other income, net

     —          —          —          69,104   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     (1,841,218     4,275,528        12,333,280        (34,394,819

Income tax expense (benefit)

     (571,433     1,735,702        5,745,575        (10,455,365
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     (1,269,785     2,539,826        6,587,705        (23,939,454

Income from discontinued operations, net of tax expense (benefit) of ($0.0 million), $1.1 million, $0.4 million, $3.2 million respectively

     (1,072,248     1,821,581        (1,566,785     5,510,677   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (2,342,033     4,361,407        5,020,920        (18,428,777

Preferred shares dividends

     (194,139     (194,135     (582,417     7,552   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common shareholders

   $ (2,536,172   $ 4,167,272      $ 4,438,503      $ (18,421,225
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) per share of common stock from continuing operations

        

Basic

   $ (0.07   $ 0.11      $ 0.29      $ (1.14

Diluted

   $ (0.07   $ 0.10      $ 0.25      $ (1.14

Income (loss) per share of common stock from discontinued operations

        

Basic

   $ (0.05   $ 0.09      $ (0.08   $ 0.26   

Diluted

   $ (0.05   $ 0.06      $ (0.06   $ 0.26   

Income (loss) per share of common stock

        

Basic

   $ (0.12   $ 0.20      $ 0.21      $ (0.88

Diluted

   $ (0.12   $ 0.16      $ 0.19      $ (0.88

Weighted average number of shares outstanding

        

Basic

     21,068,417        20,918,417        21,038,850        20,918,417   

Diluted

     21,068,417        26,600,004        26,650,490        20,918,417   


Forbes Energy Services Ltd.

Selected Balance Sheet Data

(Unaudited)

 

     September 30,      December 31,  
     2012      2011  

Cash

   $ 5,311,287       $ 36,600,091   

Accounts receivable, net

     103,771,271         132,024,147   

Working capital

     64,757,896         86,765,717   

Other intangibles, net

     28,730,492         30,876,389   

Total assets

     527,534,967         550,423,053   

Total debt

     296,088,184         296,150,274   

Deferred tax liability

     33,326,479         27,491,812   

Shareholders’ equity

     135,362,690         125,780,359   

Forbes Energy Services Ltd.

Selected Operating Data

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2012      2011      2012      2011  

Working days

     63         64         192         191   

Rig hours

     107,435         112,239         339,375         299,495   

Truck hours

     405,672         364,682         1,261,424         1,045,524   

Forbes Energy Services Ltd.

Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA

(Unaudited)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2012     2011      2012      2011  

Net Income (loss) from continuing operations

   $ (1,269,785   $ 2,539,826       $ 6,587,705       $ (23,939,454

Depreciation and amortization

     13,187,483        9,861,254         37,073,641         29,077,466   

Interest expense, net

     7,138,339        6,740,695         20,851,339         20,468,815   

Income tax expense (benefit)

     (571,433     1,735,702         5,745,575         (10,455,365

Share-based compensation

     708,417        581,355         4,346,025         1,929,633   

Loss on early estinguishment of debt

     —          —           —           35,414,833   

Litigation settlement and associated legal fees

     —          —           —           6,784,164   
  

 

 

   

 

 

    

 

 

    

 

 

 

Adjusted EBITDA from U. S. Operations

   $ 19,193,021      $ 21,458,832       $ 74,604,285       $ 59,280,092