Select Energy Services Reports 2018 First Quarter Results
Select Energy Services Reports 2018 First Quarter Results
Net Income of $16.1 million and Adjusted EBITDA(1) of $59.6 million
Operating Cash Flow of $35.2 million which fully funded capital expenditures
Total liquidity of $166.9 million, including cash and cash equivalents of $6.1 million
HOUSTON, May 10, 2018 /PRNewswire/ -- Select Energy Services, Inc. (NYSE: WTTR) ("Select" or "the Company"), a leading provider of total water management and chemical solutions to the North American unconventional oil and gas industry, today announced results for the first quarter ended March 31, 2018.
Revenue for the first quarter of 2018 was $376.4 million as compared to $304.2 million in the fourth quarter of 2017 and $99.9 million in the first quarter of 2017. Net income for the first quarter of 2018 was $16.1 million as compared to a net loss of $14.9 million in the fourth quarter of 2017 and a net loss of $12.3 million in the first quarter of 2017. Adjusted EBITDA was $59.6 million in the first quarter of 2018 as compared to $43.9 million in the fourth quarter of 2017 and $13.8 million in the first quarter of 2017. Due to the timing of Select's merger with Rockwater Energy Solutions, Inc. ("Rockwater") that closed on November 1, 2017, results in the fourth quarter of 2017 do not include Rockwater's operating results for the month of October, which included approximately $70.1 million in revenue, $0.7 million in net income and $7.7 million in Adjusted EBITDA.
Holli Ladhani, President and CEO, stated, "We are very encouraged by how the company progressed during the first quarter. The integration of Rockwater has gone well and is reflected in our first quarter results with solid net income and cash flow. With a supportive backdrop of rising oil prices and overall strong market fundamentals, we will continue to remain focused on further improving our margins in the second quarter."
_____________________________
(1) "Adjusted EBITDA" is not presented in accordance with generally
accepted accounting principles in the United States ("GAAP"). Please
see the supplemental financial information in the table under
"Comparison of Non-GAAP Financial Measures" at the end of this
earnings release for a reconciliation of the non-GAAP financial
measure of Adjusted EBITDA to its most directly comparable GAAP
financial measure.
Cash Flow and Balance Sheet
Cash Flow from Operations for the first quarter was $35.2 million. Capital expenditures for the quarter were $32.6 million, which were fully funded with Cash Flow from Operations, which also included $18.2 million of working capital build. Total cash during the quarter increased $3.3 million and, at March 31, 2018, cash and cash equivalents totaled $6.1 million and outstanding borrowings under our revolving credit facility of $75.0 million. In addition to cash and cash equivalents, the Company had approximately $160.8 million of available borrowing capacity under our revolving credit facility after giving effect to $19.8 million of outstanding letters of credit, providing total liquidity of $166.9 million.
Conference Call
Select has scheduled a conference call on Friday, May 11, 2018 at 10:00 a.m. Eastern time. Please dial 201-389-0872 and ask for the Select Energy Services call at least 10 minutes prior to the start time of the call, or listen live over the Internet by logging on to the web at the address http://investors.selectenergyservices.com/events-and-presentations. A telephonic replay of the conference call will be available through May 18, 2018 and may be accessed by calling 201-612-7415 using passcode 13676696#. A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days.
About Select Energy Services, Inc.
Select is a leading provider of total water management and chemical solutions to the North American unconventional oil and gas industry. Select provides for the sourcing and transfer of water, both by permanent pipeline and temporary hose, prior to its use in the drilling and completion activities associated with hydraulic fracturing, as well as complementary water-related services that support oil and gas well completion and production activities, including containment, monitoring, treatment and recycling, flowback, hauling, and disposal. Select, under its Rockwater Energy Solutions brand, develops and manufactures a full suite of specialty chemicals used in the well completion process and production chemicals used to enhance performance over the producing life of a well. Select currently provides services to exploration and production companies and oilfield service companies operating in all the major shale and producing basins in the United States and Western Canada. For more information, please visit Select's website, http://www.selectenergyservices.com.
Cautionary Statement Regarding Forward-Looking Statements
All statements in this communication other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as "expect," "will," "estimate" and other similar expressions. Although we believe that the expectations reflected, and the assumptions or bases underlying our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause our actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements. Factors that could materially impact such forward-looking statements include, but are not limited to, the factors discussed or referenced in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2017 and in any subsequently filed quarterly reports on Form 10-Q or current reports on Form 8-K. Investors should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.
WTTR-ER
SELECT ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31,
----------------------------
2018 2017
---- ----
Revenue
Water solutions and related services $281,555 $78,377
Accommodations and rentals 14,744 9,515
Wellsite completion and construction services 16,466 12,033
Oilfield chemical product sales 63,630 -
------ ---
Total revenue 376,395 99,925
Costs of revenue
Water solutions and related services 215,425 60,621
Accommodations and rentals 10,665 7,923
Wellsite completion and construction services 14,390 10,419
Oilfield chemical product sales 57,084 -
Depreciation and amortization 30,882 21,204
------ ------
Total costs of revenue 328,446 100,167
------- -------
Gross profit (loss) 47,949 (242)
Operating expenses
Selling, general and administrative 25,681 9,957
Depreciation and amortization 541 446
Impairment of investment 2,000 -
Lease abandonment costs 1,124 1,863
----- -----
Total operating expenses 29,346 12,266
------ ------
Income (loss) from operations 18,603 (12,508)
Other income (expense)
Interest expense, net (1,151) (730)
Foreign currency losses, net (400) -
Other (expense) income, net (458) 1,064
---- -----
Income (loss) before tax expense 16,594 (12,174)
Tax expense (462) (106)
---- ----
Net income (loss) 16,132 (12,280)
Less: net (income) loss attributable to noncontrolling interests (6,033) 8,108
------ -----
Net income (loss) attributable to Select Energy Services, Inc. $10,099 $(4,172)
======= =======
Net income (loss) per share attributable to common stockholders:
Class A-Basic $0.15 $(0.21)
===== ======
Class A-1-Basic $ - $(0.21)
=== === ======
Class A-2-Basic $0.15 $ -
===== === ===
Class B-Basic $ - $ -
=== === === ===
Net income (loss) per share attributable to common stockholders:
Class A-Diluted $0.15 $(0.21)
===== ======
Class A-1-Diluted $ - $(0.21)
=== === ======
Class A-2-Diluted $0.15 $ -
===== === ===
Class B-Diluted $ - $ -
=== === === ===
SELECT ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share data)
March 31, 2018 December 31, 2017
-------------- -----------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $6,117 $2,774
Accounts receivable trade, net of
allowance for doubtful accounts of $3,341
and $2,979, respectively 407,046 373,633
Accounts receivable, related parties 7,206 7,669
Inventories 44,501 44,598
Prepaid expenses and other current assets 20,295 17,842
------ ------
Total current assets 485,165 446,516
------- -------
Property and equipment 1,051,970 1,034,995
Accumulated depreciation (578,220) (560,886)
-------- --------
Property and equipment, net 473,750 474,109
------- -------
Goodwill 275,795 273,421
Other intangible assets, net 152,215 156,066
Other assets 4,084 6,256
----- -----
Total assets $1,391,009 $1,356,368
========== ==========
Liabilities and Equity
Current liabilities
Accounts payable $62,415 $52,579
Accounts payable and accrued expenses,
related parties 2,600 2,772
Accrued salaries and benefits 20,222 21,324
Accrued insurance 11,928 12,510
Sales tax payable 12,570 12,931
Accrued expenses and other current
liabilities 91,400 81,112
Current portion of capital lease
obligations 1,706 1,965
----- -----
Total current liabilities 202,841 185,193
------- -------
Accrued lease obligations 18,321 18,979
Other long term liabilities 13,577 13,827
Long-term debt 75,000 75,000
------ ------
Total liabilities 309,739 292,999
------- -------
Commitments and contingencies
Class A common stock, $0.01 par value;
350,000,000 shares authorized and
66,258,163 shares issued and outstanding
as of March 31, 2018; 350,000,000 shares
authorized and 59,182,176 shares issued
and outstanding as of December 31, 2017 662 592
Class A-2 common stock, $0.01 par value;
40,000,000 shares authorized, no shares
issued or outstanding as of March 31,
2018; 40,000,000 shares authorized,
6,731,845 shares issued and outstanding
as of December 31, 2017 - 67
Class B common stock, $0.01 par value;
150,000,000 shares authorized and
40,331,989 shares issued and outstanding
as of March 31, 2018; 150,000,000 shares
authorized and 40,331,989 shares issued
and outstanding as of December 31, 2017 404 404
Preferred stock, $0.01 par value;
50,000,000 shares authorized and no
shares issued and outstanding as of March
31, 2018 and December 31, 2017 - -
Additional paid-in capital 675,895 673,141
Accumulated deficit (7,760) (17,859)
Accumulated other comprehensive income 43 302
--- ---
Total stockholders' equity 669,244 656,647
------- -------
Noncontrolling interests 412,026 406,722
------- -------
Total equity 1,081,270 1,063,369
--------- ---------
Total liabilities and equity $1,391,009 $1,356,368
========== ==========
SELECT ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three Months Ended March 31,
----------------------------
2018 2017
---- ----
Cash flows from operating activities
Net income (loss) $16,132 $(12,280)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities
Depreciation and amortization 31,423 21,650
Loss (gain) on disposal of property and
equipment 554 (1,105)
Bad debt expense 485 334
Amortization of debt issuance costs 172 309
Equity-based compensation 2,481 643
Impairment of investment 2,000 -
Other operating items, net 117 -
Changes in operating assets and
liabilities
Accounts receivable (33,691) (21,157)
Prepaid expenses and other assets (1,017) 1,337
Accounts payable and accrued liabilities 16,549 2,333
------ -----
Net cash provided by (used in) operating
activities 35,205 (7,936)
------ ------
Cash flows from investing activities
Acquisitions, net of cash received - (49,004)
Purchase of property and equipment (32,612) (10,806)
Proceeds received from sale of property
and equipment 1,609 1,753
----- -----
Net cash used in investing activities (31,003) (58,057)
------- -------
Cash flows from financing activities
Proceeds from revolving line of credit
and issuance of long-term debt - 34,000
Payments of capital lease obligations (511) -
Proceeds from share issuance 130 -
Distributions to noncontrolling interests (161) -
Share repurchases (264) -
---- ---
Net cash (used in) provided by financing
activities (806) 34,000
---- ------
Effect of exchange rate changes on cash (53) -
--- ---
Net increase (decrease) in cash and cash
equivalents 3,343 (31,993)
Cash and cash equivalents, beginning of
period 2,774 40,041
----- ------
Cash and cash equivalents, end
of period $6,117 $8,048
====== ======
Supplemental cash flow disclosure:
Cash paid for interest $991 $427
==== ====
Cash paid for taxes $344 $12
==== ===
Supplemental disclosure of noncash
investing activities:
Capital expenditures included
in accounts payable and
accrued liabilities $9,632 $4,766
====== ======
Comparison of Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We define EBITDA as net income, plus interest expense, taxes and depreciation & amortization. We define Adjusted EBITDA as EBITDA, plus impairment of investment, lease abandonment costs, non-recurring severance expenses, non-recurring transaction costs, non-cash compensation expenses, plus/(minus) non-cash loss (gain) on sale of subsidiaries and other assets, plus/(minus) foreign currency loss (gain), plus inventory write downs and other non-recurring charges. EBITDA and Adjusted EBITDA are supplemental non-GAAP financial measures that we believe provide useful information to external users of our financial statements, such as industry analysts, investors, lenders and rating agencies because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and non-recurring items outside the control of our management team. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.
Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. For further discussion, please see "Item 6. Selected Financial Data" in our 2017 Annual Report on Form 10-K.
The following tables present a reconciliation of EBITDA and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure for the periods presented:
Rockwater
Three Months Ended One Month Three Months
Ended Ended
October 31,
March 31, 2018 December 31, 2017 2017 March 31, 2017
-------------- ----------------- ---- --------------
(unaudited)
(in thousands)
Net income (loss) $16,132 $(14,950) $701 $(12,280)
Interest expense 1,151 4,744 468 730
Tax expense (benefit) 462 (525) 121 106
Depreciation and
amortization 31,423 34,993 4,806 21,650
------ ------ ----- ------
EBITDA 49,168 24,262 6,096 10,206
Impairment of
investment 2,000 - - -
Lease abandonment costs 1,124 701 50 1,863
Non-recurring
severance expenses - 4,039 125 -
Non-recurring
transaction costs 2,694 4,717 627 748
Non-cash compensation
expenses 2,481 5,910 387 643
Non-cash loss (gain)
on sale of
subsidiaries and other
assets 1,515 965 (3) 309
Foreign currency loss
(gain) 400 (281) 404 -
Inventory write downs 266 - - -
Other non-recurring
charges - 3,563 21 -
--- ----- --- ---
Adjusted EBITDA $59,648 $43,876 $7,707 $13,769
======= ======= ====== =======
Contacts: Select Energy Services
----------------------
Gary Gillette - CFO & SVP
Chris George - Sr. Director, Finance & Investor Relations
(713) 296-1073
IR@selectenergyservices.com
Dennard Lascar Investor Relations
---------------------------------
Ken Dennard / Lisa Elliott
713-529-6600
WTTR@dennardlascar.com
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SOURCE Select Energy Services, Inc.
