ITEM 1. FINANCIAL STATEMENTS
Basic Energy Services, Inc.
(in thousands, except share and per share data)
|
|
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|
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|
|
|
|
|
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|
|
|
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September 30, 2019
|
December 31, 2018
|
|
ASSETS
|
|
(Unaudited)
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
50,460
|
|
$
|
90,300
|
|
|
|
|
|
|
|
Trade receivable, net of allowances of $2,549 and $1,838, respectively
|
|
123,655
|
|
144,767
|
|
|
|
|
|
|
|
Income tax receivable
|
|
—
|
|
1,574
|
|
|
Inventories
|
|
28,039
|
|
36,449
|
|
|
Prepaid expenses
|
|
14,784
|
|
17,479
|
|
|
Other current assets
|
|
8,958
|
|
4,640
|
|
|
|
|
|
|
|
Total current assets
|
|
225,896
|
|
295,209
|
|
|
Property and equipment, net
|
|
406,878
|
|
448,801
|
|
|
Operating lease right-of-use assets
|
|
17,248
|
|
—
|
|
|
Deferred debt costs, net of amortization
|
|
2,346
|
|
2,747
|
|
|
|
|
|
|
|
Intangible assets, net of amortization
|
|
2,806
|
|
2,984
|
|
|
Other assets
|
|
12,455
|
|
12,036
|
|
|
Total assets
|
|
$
|
667,629
|
|
$
|
761,777
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
66,396
|
|
$
|
98,323
|
|
|
Accrued expenses
|
|
65,345
|
|
44,956
|
|
|
Current portion of long-term debt, net of $120 and $479 discount at September 30, 2019 and December 31, 2018, respectively
|
|
22,627
|
|
27,039
|
|
|
Operating lease right-of-use liabilities, current portion
|
|
5,459
|
|
—
|
|
|
Accrued short-term insurance reserves
|
|
8,221
|
|
10,870
|
|
|
Other current liabilities
|
|
4,031
|
|
3,123
|
|
|
Total current liabilities
|
|
172,079
|
|
184,311
|
|
|
Long-term debt, net of discounts and deferred financing costs of $9,385 and $10,690, at September 30, 2019 and December 31, 2018, respectively
|
|
313,511
|
|
322,701
|
|
|
Operating lease right-of-use liabilities, long-term portion
|
|
11,789
|
|
—
|
|
|
Asset retirement obligations
|
|
9,331
|
|
2,587
|
|
|
Accrued long-term insurance reserves
|
|
18,800
|
|
18,624
|
|
|
Other long-term liabilities
|
|
14,174
|
|
14,126
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
Preferred stock; $0.01 par value; 5,000,000 shares authorized; zero outstanding at September 30, 2019 and December 31, 2018
|
|
—
|
|
—
|
|
|
Common stock; $0.01 par value; 80,000,000 shares authorized; 27,912,059 and 26,990,034 shares issued and 24,946,685 and 26,747,712 shares outstanding at September 30, 2019 and December 31, 2018, respectively
|
|
279
|
|
270
|
|
|
Additional paid-in capital
|
|
471,648
|
|
464,264
|
|
|
Retained deficit
|
|
(335,401)
|
|
(241,271)
|
|
|
Treasury stock, at cost, 2,965,374 and 242,322 shares at September 30, 2019 and December 31, 2018, respectively
|
|
(8,581)
|
|
(3,835)
|
|
|
Total stockholders' equity
|
|
127,945
|
|
219,428
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
667,629
|
|
$
|
761,777
|
|
See accompanying notes to unaudited consolidated financial statements.
Basic Energy Services, Inc.
(Unaudited)
(in thousands, except per share amounts)
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|
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|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
Three Months Ended September 30,
|
|
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|
Nine Months Ended September 30,
|
|
|
|
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|
|
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|
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2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
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|
|
|
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|
|
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|
|
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|
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Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completion & Remedial Services
|
|
$
|
70,002
|
|
|
$
|
115,978
|
|
|
$
|
224,897
|
|
|
$
|
360,523
|
|
|
|
|
|
|
|
Well Servicing
|
|
57,094
|
|
|
64,314
|
|
|
175,777
|
|
|
184,533
|
|
|
|
|
|
|
|
Water Logistics
|
|
48,451
|
|
|
59,539
|
|
|
155,083
|
|
|
175,727
|
|
|
|
|
|
|
|
Other Services
|
|
2,818
|
|
|
6,503
|
|
|
9,657
|
|
|
13,585
|
|
|
|
|
|
|
|
Total revenues
|
|
178,365
|
|
|
246,334
|
|
|
565,414
|
|
|
734,368
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completion & Remedial Services
|
|
53,825
|
|
|
89,777
|
|
|
176,918
|
|
|
279,963
|
|
|
|
|
|
|
|
Well Servicing
|
|
43,510
|
|
|
50,591
|
|
|
135,752
|
|
|
145,303
|
|
|
|
|
|
|
|
Water Logistics
|
|
34,783
|
|
|
42,785
|
|
|
107,611
|
|
|
127,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Services
|
|
6,348
|
|
|
7,246
|
|
|
13,191
|
|
|
14,691
|
|
|
|
|
|
|
|
General and administrative, including stock-based compensation of $1,386 and $5,570 in the three months ended September 30, 2019 and 2018 and $8,237 and $21,995 for the nine months ended September 30, 2019 and 2018, respectively
|
|
32,125
|
|
|
39,599
|
|
|
102,450
|
|
|
132,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
29,179
|
|
|
32,754
|
|
|
85,668
|
|
|
94,150
|
|
|
|
|
|
|
|
Impaired asset expense
|
|
3,216
|
|
|
—
|
|
|
3,216
|
|
|
—
|
|
|
|
|
|
|
|
Loss on disposal of assets
|
|
837
|
|
|
191
|
|
|
2,634
|
|
|
3,891
|
|
|
|
|
|
|
|
Total expenses
|
|
203,823
|
|
|
262,943
|
|
|
627,440
|
|
|
797,752
|
|
|
|
|
|
|
|
Operating loss
|
|
(25,458)
|
|
|
(16,609)
|
|
|
(62,026)
|
|
|
(63,384)
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(11,729)
|
|
|
(10,896)
|
|
|
(33,003)
|
|
|
(34,985)
|
|
|
|
|
|
|
|
Interest income
|
|
112
|
|
|
88
|
|
|
472
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
215
|
|
|
81
|
|
|
565
|
|
|
492
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
(36,860)
|
|
|
(27,336)
|
|
|
(93,992)
|
|
|
(97,702)
|
|
|
|
|
|
|
|
Income tax (expense) benefit
|
|
(2,017)
|
|
|
—
|
|
|
(138)
|
|
|
(219)
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(38,877)
|
|
|
$
|
(27,336)
|
|
|
$
|
(94,130)
|
|
|
$
|
(97,921)
|
|
|
|
|
|
|
|
Loss per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.52)
|
|
|
$
|
(1.03)
|
|
|
$
|
(3.55)
|
|
|
$
|
(3.70)
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.52)
|
|
|
$
|
(1.03)
|
|
|
$
|
(3.55)
|
|
|
$
|
(3.70)
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
Basic Energy Services, Inc.
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Additional
|
|
Treasury
|
|
|
|
|
|
Total
|
|
|
|
Issued
|
|
Common
|
|
Paid-In
|
|
Treasury
|
|
Treasury
|
|
Retained
|
|
Stockholders'
|
|
|
|
Shares
|
|
Stock
|
|
Capital
|
|
Shares
|
|
Stock
|
|
Deficit
|
|
Equity
|
|
Balance - December 31, 2018
|
|
26,990,034
|
|
|
$
|
270
|
|
|
$
|
464,264
|
|
|
242,322
|
|
|
$
|
(3,835)
|
|
|
$
|
(241,271)
|
|
|
$
|
219,428
|
|
|
Issuances of restricted stock
|
|
277,865
|
|
|
3
|
|
|
(3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of equity-classified share-based compensation
|
|
—
|
|
|
—
|
|
|
3,275
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,275
|
|
|
Treasury stock, net
|
|
—
|
|
|
—
|
|
|
(163)
|
|
|
68,227
|
|
(180)
|
|
|
—
|
|
|
(343)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,476)
|
|
|
(27,476)
|
|
|
Balance - March 31, 2019 (unaudited)
|
|
27,267,899
|
|
|
$
|
273
|
|
|
$
|
467,373
|
|
|
310,549
|
|
|
$
|
(4,015)
|
|
|
$
|
(268,747)
|
|
|
$
|
194,884
|
|
|
Issuances of restricted stock
|
|
644,160
|
|
|
6
|
|
|
(6)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of equity-classified share-based compensation
|
|
—
|
|
|
—
|
|
|
3,329
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,329
|
|
|
Treasury stock, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
596,194
|
|
|
(1,340)
|
|
|
—
|
|
|
(1,340)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,777)
|
|
|
(27,777)
|
|
|
Balance - June 30, 2019 (unaudited)
|
|
27,912,059
|
|
|
$
|
279
|
|
|
$
|
470,696
|
|
|
906,743
|
|
|
$
|
(5,355)
|
|
|
$
|
(296,524)
|
|
|
$
|
169,096
|
|
|
Issuances of restricted stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of equity-classified share-based compensation
|
|
—
|
|
|
—
|
|
|
1,165
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,165
|
|
|
Treasury stock, net
|
|
—
|
|
|
—
|
|
|
(213)
|
|
|
2,058,631
|
|
|
(3,226)
|
|
|
—
|
|
|
(3,439)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(38,877)
|
|
|
(38,877)
|
|
|
Balance - September 30, 2019 (unaudited)
|
|
27,912,059
|
|
|
$
|
279
|
|
|
$
|
471,648
|
|
|
2,965,374
|
|
|
$
|
(8,581)
|
|
|
$
|
(335,401)
|
|
|
$
|
127,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Additional
|
|
Treasury
|
|
|
|
|
|
Total
|
|
|
|
Issued
|
|
Common
|
|
Paid-In
|
|
Treasury
|
|
Treasury
|
|
Retained
|
|
Stockholders'
|
|
|
|
Shares
|
|
Stock
|
|
Capital
|
|
Shares
|
|
Stock
|
|
Deficit
|
|
Equity
|
|
Balance - December 31, 2017
|
|
26,371,572
|
|
|
$
|
264
|
|
|
$
|
439,517
|
|
|
152,443
|
|
|
$
|
(4,454)
|
|
|
$
|
(96,674)
|
|
|
$
|
338,653
|
|
|
Issuances of restricted stock
|
|
272,510
|
|
|
2
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of equity-classified share-based compensation
|
|
—
|
|
|
—
|
|
|
6,798
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,798
|
|
|
Treasury stock, net
|
|
—
|
|
|
—
|
|
|
(291)
|
|
|
69,337
|
|
|
(1,051)
|
|
|
—
|
|
|
(1,342)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,531)
|
|
|
(30,531)
|
|
|
Balance - March 31, 2018 (unaudited)
|
|
26,644,082
|
|
|
$
|
266
|
|
|
$
|
446,022
|
|
|
221,780
|
|
|
$
|
(5,505)
|
|
|
$
|
(127,205)
|
|
|
$
|
313,578
|
|
|
Issuances of restricted stock
|
|
48
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
Amortization of equity-classified share-based compensation
|
|
—
|
|
|
—
|
|
|
9,626
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,626
|
|
|
Treasury stock, net
|
|
—
|
|
|
—
|
|
|
(1,743)
|
|
|
(48,400)
|
|
|
1,742
|
|
|
—
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40,054)
|
|
|
(40,054)
|
|
|
Balance - June 30, 2018 (unaudited)
|
|
26,644,130
|
|
|
$
|
266
|
|
|
$
|
453,907
|
|
|
173,380
|
|
|
$
|
(3,763)
|
|
|
$
|
(167,259)
|
|
|
$
|
283,151
|
|
|
Issuances of restricted stock
|
|
120,959
|
|
|
2
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of equity-classified share-based compensation
|
|
—
|
|
|
—
|
|
|
5,571
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,571
|
|
|
Treasury stock, net
|
|
—
|
|
|
—
|
|
|
1
|
|
|
44,238
|
|
|
(377)
|
|
|
—
|
|
|
(376)
|
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,336)
|
|
|
(27,336)
|
|
|
Balance - September 30, 2018 (unaudited)
|
|
26,765,089
|
|
|
$
|
268
|
|
|
$
|
459,477
|
|
|
217,618
|
|
|
$
|
(4,140)
|
|
|
$
|
(194,595)
|
|
|
$
|
261,010
|
|
See accompanying notes to unaudited consolidated financial statements.
Basic Energy Services, Inc.
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(94,130)
|
|
|
|
|
$
|
(97,921)
|
|
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
85,668
|
|
|
|
|
94,150
|
|
|
Impaired asset expense and inventory write-downs
|
|
7,080
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Accretion on asset retirement obligation
|
|
607
|
|
|
|
|
115
|
|
|
Change in allowance for doubtful accounts
|
|
711
|
|
|
|
|
278
|
|
|
Amortization of deferred financing costs
|
|
1,745
|
|
|
|
|
586
|
|
|
Amortization of debt discounts
|
|
789
|
|
|
|
|
3,708
|
|
|
Non-cash compensation
|
|
8,237
|
|
|
|
|
21,995
|
|
|
Loss on disposal of assets
|
|
2,634
|
|
|
|
|
3,891
|
|
|
Deferred income taxes
|
|
—
|
|
|
|
|
(78)
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
20,401
|
|
|
|
|
(7,977)
|
|
|
Inventories
|
|
4,546
|
|
|
|
|
313
|
|
|
Prepaid expenses and other current assets
|
|
2,404
|
|
|
|
|
7,010
|
|
|
Other assets
|
|
(8)
|
|
|
|
|
(49)
|
|
|
Accounts payable
|
|
(31,617)
|
|
|
|
|
5,736
|
|
|
Income tax receivable
|
|
1,574
|
|
|
|
|
291
|
|
|
Other liabilities
|
|
131
|
|
|
|
|
8,629
|
|
|
Accrued expenses
|
|
17,740
|
|
|
|
|
15,705
|
|
|
Net cash provided by operating activities
|
|
28,512
|
|
|
|
|
56,382
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
(46,263)
|
|
|
|
|
(48,588)
|
|
|
Proceeds from sale of assets
|
|
7,122
|
|
|
|
|
1,942
|
|
|
Payments for other long-term assets
|
|
(411)
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
(39,552)
|
|
|
|
|
(46,646)
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from debt
|
|
—
|
|
|
|
|
32,500
|
|
|
Payments of debt
|
|
(23,209)
|
|
|
|
|
(50,313)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in treasury stock including restricted stock issuances
|
|
(5,122)
|
|
|
|
|
(1,717)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loan costs and other financing activities
|
|
(469)
|
|
|
|
|
(585)
|
|
|
Net cash used in financing activities
|
|
(28,800)
|
|
|
|
|
(20,115)
|
|
|
Net decrease in cash and cash equivalents
|
|
(39,840)
|
|
|
|
|
(10,379)
|
|
|
Cash and cash equivalents - beginning of period
|
|
90,300
|
|
|
|
|
86,223
|
|
|
Cash and cash equivalents - end of period
|
|
$
|
50,460
|
|
|
|
|
$
|
75,844
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activity:
|
|
|
|
|
|
|
|
Finance leases and notes issued for equipment
|
|
$
|
7,943
|
|
|
|
|
$
|
16,565
|
|
|
Change in accrued property and equipment
|
|
310
|
|
|
|
|
3,675
|
|
|
Change in asset retirement obligations
|
|
6,420
|
|
|
|
|
(148)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements.
BASIC ENERGY SERVICES, INC.
September 30, 2019 (unaudited)
1. Basis of Presentation and Nature of Operations
Basis of Presentation
The accompanying unaudited consolidated financial statements of Basic Energy Services, Inc. and subsidiaries (“Basic” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. Certain information relating to Basic's organization and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in this Quarterly Report on Form 10-Q in accordance with GAAP and financial statement requirements promulgated by the U.S. Securities and Exchange Commission (“SEC”). The notes to the consolidated financial statements (unaudited) should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair presentation have been made in the accompanying unaudited financial statements.
On June 28, 2018, the SEC adopted amendments that expanded the definition of “smaller reporting company” by increasing the applicable public float and revenue thresholds. Under the amended definition, which became effective on September 10, 2018, a company qualifies as a smaller reporting company if it has (i) a public float of less than $250 million at the end of its most recently completed second fiscal quarter or (ii) less than $100 million in annual revenues and either no public float or a public float of less than $700 million. Based on the Company's public float (the aggregate market value of its common equity held by non-affiliates) as of June 29, 2018, the Company is considered a smaller reporting company under the revised SEC rules and, as such, is eligible to use certain scaled financial and non-financial disclosure requirements. Smaller reporting companies may elect to comply with the scaled reporting requirements separately, thereby permitting the Company to choose such disclosure requirements on an item-by-item basis.
Liquidity and Capital Resources
On October 2, 2018, the Company issued in a private offering $300.0 million aggregate principal amount of 10.75% senior secured notes due 2023 at 99.042% of par and entered into a new $150.0 million senior secured revolving credit facility. For further discussion, see Note 4, "Long-Term Debt and Interest Expense".
Basic's current primary capital resources are cash flow from operations, the availability under the New ABL Facility (defined in Note 4, "Long-Term Debt and Interest Expense"), the ability to enter into finance leases, the ability to incur additional secured indebtedness, and a cash balance of $50.5 million at September 30, 2019. The Company had $50.4 million of available borrowing capacity under the New ABL Facility at September 30, 2019.
Nature of Operations
Basic provides a wide range of wellsite services to oil and natural gas drilling and producing companies, including Completion & Remedial Services, Water Logistics, Well Servicing and Contract Drilling. These services are primarily provided by Basic’s fleet of equipment. Basic’s operations are concentrated in major United States onshore oil and natural gas producing regions located in Texas, New Mexico, Oklahoma, Kansas, Arkansas, Louisiana, Wyoming, North Dakota, Colorado and California.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Basic's subsidiaries, for which Basic holds a majority voting interest. All intercompany transactions and balances have been eliminated.
Segment Information
In the first quarter of 2019, Basic revised its reportable segments for financial reporting purposes to combine its contract drilling operations with its rig manufacturing operations to form an Other Services segment. The Company's business now consists of the following four segments: Well Servicing, Water Logistics, Completion & Remedial Services, and Other Services. See Note 13, "Business Segment Information" for further information.
Estimates, Risks and Uncertainties
Preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management uses historical and other pertinent information to determine these estimates. Actual results could differ from those estimates. Areas where critical accounting estimates are made by management include litigation, asset retirement obligations and self-insured risk reserves.
Inventories
For rental and fishing tools, inventories consisting mainly of grapples, controls and drill bits are stated at lower of cost or net realizable value. Other inventories, consisting mainly of manufacturing raw materials, rig components, repair parts, drilling and completion materials and gravel, are held for use in the operations of Basic and are stated at lower of cost or net realizable value, with cost being determined on the first-in, first-out method.
In addition to comparing the carrying amount of inventory to its market, Basic also makes a comparison between volume of inventory and demand for the ultimate production into which inventory will be converted. During the period ended September 30, 2019, Basic determined that due to decreased demand for rigs and equipment manufactured by Basic's wholly owned subsidiary, Taylor Industries, LLC, the subsidiary would change its focus to servicing and providing parts for previously manufactured equipment. Related to this change in strategy, certain manufacturing inventories were determined not to be fully recoverable. Taylor Industries recorded an increase in reserves for excess and obsolete inventory of $3.9 million, and included in direct expense in our Other Services segment in our consolidated statement of operations.
2. Property and Equipment
The following table summarizes the components of property and equipment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Land
|
|
$
|
20,351
|
|
|
$
|
21,431
|
|
|
Buildings and improvements
|
|
40,392
|
|
|
40,524
|
|
|
Well service units and equipment
|
|
130,300
|
|
|
122,694
|
|
|
Fracturing/test tanks
|
|
119,999
|
|
|
123,550
|
|
|
Pumping equipment
|
|
102,294
|
|
|
103,689
|
|
|
Fluid services equipment
|
|
79,426
|
|
|
78,524
|
|
|
Disposal facilities
|
|
83,655
|
|
|
63,229
|
|
|
Rental equipment
|
|
65,775
|
|
|
62,642
|
|
|
Light vehicles
|
|
30,563
|
|
|
27,080
|
|
|
|
|
|
|
|
|
Brine and fresh water stations
|
|
4,374
|
|
|
3,296
|
|
|
Software
|
|
925
|
|
|
857
|
|
|
Other
|
|
4,415
|
|
|
4,257
|
|
|
Contract drilling equipment
|
|
—
|
|
|
9,846
|
|
|
Property and equipment, gross
|
|
682,469
|
|
|
661,619
|
|
|
Less accumulated depreciation and amortization
|
|
275,591
|
|
|
212,818
|
|
|
Property and equipment, net
|
|
$
|
406,878
|
|
|
$
|
448,801
|
|
Basic is obligated under various finance leases for certain vehicles and equipment that expire at various dates during the next five years. The table below summarizes the gross amount of property and equipment and related accumulated amortization recorded under finance leases and included above (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Fluid services equipment
|
|
$
|
35,595
|
|
|
$
|
35,034
|
|
|
Pumping equipment
|
|
22,958
|
|
|
48,929
|
|
|
Light vehicles
|
|
22,245
|
|
|
18,376
|
|
|
Rental equipment
|
|
1,131
|
|
|
—
|
|
|
Contract drilling equipment
|
|
—
|
|
|
314
|
|
|
Well service units and equipment
|
|
—
|
|
|
199
|
|
|
Property and equipment under finance lease, cost
|
|
81,929
|
|
|
102,852
|
|
|
Less accumulated amortization
|
|
30,000
|
|
|
31,954
|
|
|
Property and equipment under finance lease, net
|
|
$
|
51,929
|
|
|
$
|
70,898
|
|
During the period ended September 30, 2019, based on the Company's evaluation of the demand for contract drilling services, the Company's management decided to divest all nine of Basic's contract drilling rigs and related ancillary equipment, having a carrying value of $9.3 million. The Company determined that the carrying value of these assets may not be fully recoverable upon liquidation. The fair value of assets was determined after considering third-party estimates of expected liquidation value, and an impairment of $3.2 million was recognized on the consolidated statement of operations during the quarter ended September 30, 2019. The remaining carrying value of $6.1 million was transferred to assets held for sale, which is included in other current assets on the Company's consolidated balance sheets. The divestiture of the contract drilling rig assets does not represent part of Basic's asset base, revenue base, or a strategic shift for the Company. Basic's estimate of expected cash flows which may result from the sale of equipment may differ from actual cash received due to excess capacity in the industry.
3. Intangible Assets
Basic had trade names of $3.4 million as of September 30, 2019, and December 31, 2018. Trade names have a 15-year life and are tested for impairment when triggering events are identified.
Basic’s intangible assets subject to amortization were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
$
|
3,410
|
|
|
$
|
3,410
|
|
|
Other intangible assets
|
|
48
|
|
|
48
|
|
|
Intangible assets
|
|
3,458
|
|
|
3,458
|
|
|
Less accumulated amortization
|
|
652
|
|
|
474
|
|
|
Intangible assets subject to amortization, net
|
|
$
|
2,806
|
|
|
$
|
2,984
|
|
Amortization expense of intangible assets for the three and nine months ended September 30, 2019 and 2018 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset amortization expense
|
|
$
|
59
|
|
|
$
|
60
|
|
|
$
|
178
|
|
|
$
|
178
|
|
|
|
|
|
|
|
|
|
|
4. Long-Term Debt and Interest Expense
Long-term debt consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
10.75% Senior Notes due 2023
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
Finance leases and other notes
|
|
45,643
|
|
|
60,909
|
|
|
Unamortized discounts and deferred financing costs
|
|
(9,505)
|
|
|
(11,169)
|
|
|
Total long-term debt
|
|
336,138
|
|
|
349,740
|
|
|
Less current portion
|
|
22,627
|
|
|
27,039
|
|
|
Total non-current portion of long-term debt
|
|
$
|
313,511
|
|
|
$
|
322,701
|
|
Debt Discounts
The following discounts on debt represent the unamortized discount to fair value of the Senior Notes and the short-term portions of the fair value discount of finance leases (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Unamortized discount on Senior Notes
|
|
$
|
2,301
|
|
|
$
|
2,731
|
|
|
Unamortized discount on finance leases - short-term
|
|
120
|
|
|
479
|
|
|
|
|
|
|
|
|
Unamortized deferred debt issuance costs
|
|
7,084
|
|
|
7,959
|
|
|
Total unamortized discounts and deferred financing costs
|
|
$
|
9,505
|
|
|
$
|
11,169
|
|
Interest Expense
Basic’s interest expense for the three and nine months ended September 30, 2019, and 2018, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for interest
|
|
$
|
1,580
|
|
|
$
|
8,266
|
|
|
$
|
22,310
|
|
|
$
|
24,408
|
|
|
|
|
|
|
Change in accrued interest
|
|
9,236
|
|
|
56
|
|
|
8,050
|
|
|
3,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of discounts
|
|
265
|
|
|
967
|
|
|
789
|
|
|
3,709
|
|
|
|
|
|
|
Amortization of deferred debt costs
|
|
590
|
|
|
214
|
|
|
1,745
|
|
|
586
|
|
|
|
|
|
|
Commitment and other fees paid
|
|
12
|
|
|
1,338
|
|
|
36
|
|
|
3,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
46
|
|
|
55
|
|
|
73
|
|
|
95
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
11,729
|
|
|
$
|
10,896
|
|
|
$
|
33,003
|
|
|
$
|
34,985
|
|
|
|
|
|
Senior Secured Notes
On October 2, 2018, the Company issued $300.0 million aggregate principal amount of 10.75% senior secured notes due 2023 (the “Senior Notes”) in an offering exempt from registration under the Securities Act. The Senior Notes were issued at a price of 99.042% of par to yield 11%. The Senior Notes are secured by a first-priority lien on substantially all of the assets of the Company and the subsidiary guarantors other than accounts receivable, inventory and certain related assets. Net proceeds from the offering of approximately $290.0 million were used to repay the Company’s existing indebtedness under the Amended and Restated Term Loan Agreement, to repay the Company’s outstanding borrowings under its previous credit facility (the "Prior ABL Facility"), and for general corporate purposes.
Indenture
The Company’s Senior Notes were issued under and are governed by an indenture, dated as of October 2, 2018 (the “Indenture”), by and among the Company, the guarantors named therein (the “Guarantors”), and UMB Bank, N.A. as Trustee and Collateral Agent (the “Trustee”). The Senior Notes are jointly and severally, fully and unconditionally guaranteed (the “Guarantees”) on a senior secured basis by the Guarantors and are secured by first priority liens on substantially all of the Company’s and the Guarantors’ assets, other than accounts receivable, inventory and certain related assets.
The Indenture contains covenants that limit the ability of the Company and certain subsidiaries to:
•incur additional indebtedness or issue preferred stock;
•pay dividends or make other distributions to its stockholders;
•repurchase or redeem capital stock or subordinated indebtedness and certain refinancings thereof;
•make certain investments;
•incur liens;
•enter into certain types of transactions with affiliates;
•limit dividends or other payments by restricted subsidiaries to the Company; and
•sell assets or consolidate or merge with or into other companies.
These limitations are subject to a number of important qualifications and exceptions. Upon an Event of Default (as defined in the Indenture), the Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Senior Notes may declare the entire principal of, premium, if any, and accrued and unpaid interest, if any, on all the Senior Notes to be due and payable immediately.
At any time on or prior to October 15, 2020, the Company may redeem up to 35% of the aggregate principal amount of the Senior Notes at a redemption price equal to 110.8% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with an amount of cash not greater than the net proceeds from certain equity offerings. At any time prior to October 15, 2020, the Company may redeem the Senior Notes, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the Senior Notes plus a “make-whole” premium plus accrued and unpaid interest, if any, to the redemption date. The Company may also redeem all or a part of the Senior Notes at any time on or after October 15, 2020, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to the redemption date.
The Company may redeem all, but not less than all, of the Senior Notes in connection with a company sale transaction, at a redemption price of 105.4% of principal for a company sale that occurs on or after April 15, 2019, and on or before October 15, 2019, or 108.1% of principal amount for a company sale that occurs after October 15, 2019, and before October 15, 2020, in each case plus accrued and unpaid interest, if any, to the redemption date. If the Company experiences a change of control, the Company may be required to offer to purchase the Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the purchase date.
The Senior Notes and the Guarantees rank equally in right of payment with all of the Company’s and the Guarantors’ existing and future unsubordinated indebtedness, effectively senior to all of the Company’s and the Guarantors’ existing and future indebtedness to the extent of the value of the collateral securing the Senior Notes but junior to other indebtedness that is secured by liens on assets other than collateral for the Senior Notes to the extent of the value of such assets, and senior to all of the Company’s and the Guarantors’ future subordinated indebtedness.
Pursuant to a collateral rights agreement, the Senior Notes and Guarantees are secured by first priority liens, subject to limited exceptions, on the collateral securing the Senior Notes, consisting of substantially all of the property and assets now owned or hereafter acquired by the Company and the Guarantors, except for certain excluded property described in the Indenture.
New ABL Facility
On October 2, 2018, the Company terminated the Prior ABL Facility and Amended and Restated Term Loan Agreement and entered into an ABL Credit Agreement (the “New ABL Credit Agreement”) among the Company, as borrower (in such capacity, the “Borrower”), Bank of America, N.A., as administrative agent (the “Administrative Agent”), swing line lender and letter of credit issuer, UBS Securities LLC, as syndication agent, PNC Bank National Association, as documentation agent and letter of credit issuer, and the other lenders from time to time party thereto (collectively, the “New ABL Lenders”). Pursuant to the New ABL Credit Agreement, the New ABL Lenders have extended to the Borrower a revolving credit facility in the maximum aggregate principal amount of $150.0 million, subject to borrowing base capacity (the “New ABL Facility”). The New ABL Facility includes a sublimit for letters of credit of up to $50.0 million in the aggregate, and for borrowings on same-day notice under swingline loans subject to a sublimit of the lesser of (a) $15.0 million and (b) the aggregate commitments of the New ABL Lenders. The New ABL Facility also provides capacity for base rate protective advances up to $10.0 million at the discretion of the Administrative Agent and provisions relating to overadvances. The New ABL Facility contains no restricted cash requirements.
Borrowings under the New ABL Facility bear interest at a rate per annum equal to an applicable rate, plus, at Borrower’s option, either (a) a base rate or (b) a LIBO rate. The applicable rate was fixed from the closing date to April 1, 2019. Following April 1, 2019, the applicable rate is determined by reference to the average daily availability
as a percentage of the borrowing base during the fiscal quarter immediately preceding such applicable quarter. The applicable rate has remained unchanged since inception of the New ABL Facility.
Principal amounts outstanding under the New ABL Facility will be due and payable in full on the maturity date, which is five years from the closing of the facility; provided that if the Senior Notes have not been redeemed by July 3, 2023, then the maturity date shall be July 3, 2023.
Substantially all of the domestic subsidiaries of the Company guarantee the borrowings under the New ABL Facility, and Borrower guarantees the payment and performance by each specified loan party of its obligations under its guaranty with respect to swap obligations. All obligations under the New ABL Facility and the related guarantees are secured by a perfected first-priority security interest in substantially all accounts receivable, inventory, and certain other assets, not including equity interests. As of September 30, 2019, Basic had no borrowings and $37.7 million of letters of credit outstanding under the New ABL Facility.
5. Leases
Basic adopted ASU No. 2016-02, Topic 842 - Leases, effective January 1, 2019. This ASU requires lessees to recognize an operating lease right-of-use ("ROU") asset and liability on the balance sheet for all operating leases with an initial lease term greater than twelve months.
ASU 2018-11 Leases – Targeted Improvements, allows for a practical expedient wherein all periods previously reported under ASC 840 will continue to be reported under ASC 840, and periods beginning January 1, 2019 and after are reported under ASC 842. Basic elected to adopt this practical expedient along with the package of practical expedients, which allows Basic to combine lease and non-lease costs, and not to assess whether existing or expired land easements that were not previously accounted for as leases under Topic 840 are or contain a lease under this Topic.
Under this transition option, Basic will continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented and will make only annual disclosures for the comparative periods because ASC 840 does not require interim disclosures. Prior period amounts have not been adjusted and continue to be reflected in accordance with Basic’s historical accounting. The adoption of this standard resulted in the recording of ROU assets and lease liabilities of approximately of $20.8 million as of January 1, 2019, with no related impact on Basic’s Consolidated Statement of Shareholders' Equity or Consolidated Statement of Operations.
As a lessee, Basic leases its corporate office headquarters in Fort Worth, Texas, and conducts its business operations through various regional offices located throughout the United States. These operating locations typically include regional offices, storage and maintenance yards, disposal facilities and employee housing sufficient to support its operations in the area. Basic leases most of these properties under either non-cancelable term leases many of which contain renewal options that can extend the lease term from one to five years and some of which contain escalation clauses, or month-to-month operating leases. Options to renew these leases are generally not considered reasonably certain to be exercised. Therefore, the periods covered by such optional periods are not included in the determination of the term of the lease. Basic also leases supplemental equipment, typically under cancellable short-term or contracts which are less than 30 days. Due to the nature of the Company's business, any option to renew these short-term leases is generally not considered reasonably certain to be exercised. Therefore, the periods covered by such optional periods are not included in the determination of the term of the lease, and the lease payments during these periods are similarly excluded from the calculation of operating lease asset and lease liability balances.
Operating lease expense consists of rent expense related to leases that were included in ROU assets under Topic 842. Basic recognizes operating lease expense on a straight-line basis, except for certain variable expenses that are recognized when the variability is resolved, typically during the period in which they are paid. Variable operating lease payments typically include charges for property taxes and insurance, and some leases contain variable payments related to non-lease components, including common area maintenance and usage of facilities or office equipment (for example, copiers), which totaled approximately $0.3 million and $0.8 million during the three and nine months ended September 30, 2019, respectively. Prepaid rent totaled $0.1 million at September 30, 2019.
The following table summarizes the components of the Company's lease expense recognized for the three and nine months ending September 30, 2019, excluding variable lease and prepaid rent costs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
|
|
|
Operating lease expense:
|
|
|
|
|
|
|
|
Short-term operating lease expense
|
|
$
|
1,118
|
|
|
$
|
4,630
|
|
|
|
|
Long-term operating lease expense
|
|
2,178
|
|
|
6,533
|
|
|
|
|
Total operating lease expense
|
|
$
|
3,296
|
|
|
$
|
11,163
|
|
|
|
|
Finance lease expense:
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
$
|
4,052
|
|
|
$
|
13,388
|
|
|
|
|
Interest on lease liabilities
|
|
1,239
|
|
|
3,957
|
|
|
|
|
Total finance lease expense
|
|
$
|
5,291
|
|
|
$
|
17,345
|
|
|
|
Supplemental information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
Operating leases
|
|
|
|
Weighted average remaining lease term
|
|
3.0 years
|
|
Weighted average discount rate
|
|
15.2%
|
|
|
|
|
|
|
Finance leases
|
|
|
|
Weighted average remaining lease term
|
|
2.2 years
|
|
Weighted average discount rate
|
|
8.1%
|
|
Supplemental cash flow information related to leases was as follows for the nine months ended September 30, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash outflows from operating leases
|
|
$
|
11,163
|
|
|
Operating cash outflows from finance leases
|
|
3,957
|
|
|
Financing cash outflows from finance leases
|
|
23,209
|
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
Operating leases
|
|
1,597
|
|
|
Finance leases
|
|
$
|
7,943
|
|
Supplemental balance sheet information related to leases was as follows as of September 30, 2019, and December 31, 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
|
|
|
Right-of-Use Assets under Operating Leases
|
|
|
|
|
|
Operating lease right-of-use assets
|
|
$
|
17,248
|
|
|
$
|
20,819
|
|
|
|
|
|
|
|
|
Operating lease right-of-use liabilities, current portion
|
|
5,459
|
|
|
5,649
|
|
|
Operating lease right-of-use liabilities, long-term portion
|
|
11,789
|
|
|
15,170
|
|
|
Total operating lease liabilities
|
|
$
|
17,248
|
|
|
$
|
20,819
|
|
|
|
|
|
|
|
|
Right-of-Use Assets under Finance Leases
|
|
|
|
|
|
Property and equipment, at cost
|
|
$
|
81,929
|
|
|
$
|
102,852
|
|
|
Less accumulated depreciation
|
|
30,000
|
|
|
31,954
|
|
|
Property and equipment, net
|
|
$
|
51,929
|
|
|
$
|
70,898
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
22,747
|
|
|
$
|
27,519
|
|
|
Long-term debt
|
|
22,896
|
|
|
33,390
|
|
|
Total finance lease liabilities
|
|
$
|
45,643
|
|
|
$
|
60,909
|
|
The Company adopted ASU 2016-02 on January 1, 2019 and as required, the following disclosure is provided for periods prior to adoption. Future annual minimum lease payments and capital lease commitments as of December 31, 2018 and September 30, 2019 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
|
2019
|
|
$
|
8,179
|
|
|
$
|
27,519
|
|
|
2020
|
|
6,323
|
|
|
19,322
|
|
|
2021
|
|
5,438
|
|
|
10,697
|
|
|
2022
|
|
4,696
|
|
|
3,233
|
|
|
2023
|
|
1,248
|
|
|
83
|
|
|
Thereafter
|
|
1,215
|
|
|
55
|
|
|
Total lease payments
|
|
$
|
27,099
|
|
|
$
|
60,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
|
|
|
|
|
|
|
2019
|
|
$
|
2,060
|
|
|
$
|
6,241
|
|
|
2020
|
|
7,075
|
|
|
20,840
|
|
|
2021
|
|
5,712
|
|
|
12,567
|
|
|
2022
|
|
4,807
|
|
|
5,250
|
|
|
2023
|
|
1,257
|
|
|
810
|
|
|
Thereafter
|
|
1,091
|
|
|
55
|
|
|
Total lease payments
|
|
$
|
22,002
|
|
|
$
|
45,763
|
|
|
Impact of discounting
|
|
(4,754)
|
|
|
(120)
|
|
|
Discounted value of operating lease obligations
|
|
$
|
17,248
|
|
|
$
|
45,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Fair Value Measurements
The following is a summary of the carrying amounts, net of discounts, and estimated fair values of the Company's Senior Notes as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
|
|
December 31, 2018
|
|
|
|
|
Hierarchy Level
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
10.75% Senior Notes due 2023
|
1
|
|
$
|
297,699
|
|
|
$
|
244,997
|
|
|
$
|
297,269
|
|
|
$
|
257,806
|
|
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair value due to the short maturities of these instruments.
Basic did not have any assets or liabilities that were measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018.
7. Asset Retirement Obligation
The Company has the obligation to plug and remediate its saltwater disposal wellsites when the assets are to be retired. This asset retirement obligation ("ARO") includes plugging inactive assets, removal of surface equipment, and returning the land to its original state. The Company records a liability for the fair value of asset retirement obligations ("AROs") that we can reasonably estimate, on a discounted basis, in the period in which the asset is acquired. The fair value of the liability is calculated using discounted cash flow techniques and based on internal estimates and assumptions related to (i) future retirement costs, (ii) expected remaining lives of the assets (iii) future inflation rates, and (iv) credit adjusted risk-free interest rates. Significant increases or decreases in these assumptions could result in a significant change to the fair value measurement. During the quarter ended September 30, 2019, Basic revised our estimated ARO liability upward by $6.4 million based on updated data gathered from increasing plugging and abandoning activity incurred during 2019.
The following table presents activity in our AROs (in thousands):
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
Balance as of January 1, 2019
|
$
|
2,587
|
|
|
Additions
|
280
|
|
|
Revision in estimate
|
6,140
|
|
|
Disposals
|
(124)
|
|
|
Expenditures
|
(159)
|
|
|
Accretion expense
|
607
|
|
|
Balance as of September 30, 2019
|
$
|
9,331
|
|
8. Commitments and Contingencies
Environmental
Basic is subject to various federal, state and local environmental laws and regulations that establish standards and requirements for protection of the environment. The Company cannot predict the future impact of such standards and requirements, which are subject to change and can have retroactive effectiveness. Basic continues to monitor the status of these laws and regulations.
Currently, the Company has not been fined, cited or notified of any environmental violations that would have a material adverse effect upon its financial position, liquidity or capital resources. However, management recognizes that by the very nature of its business, material costs could be incurred in the near term to maintain compliance. The amount of such future expenditures is not determinable due to several factors, including the unknown magnitude of possible regulation or liabilities, the unknown timing and extent of the corrective actions which may be required, the determination of the Company’s liability in proportion to other responsible parties and the extent to which such expenditures are recoverable from insurance or indemnification.
Litigation
From time to time, Basic is a party to litigation or other legal proceedings that Basic considers to be a part of the ordinary course of business. The Company is not currently involved in any legal proceedings that it considers probable or reasonably possible, individually or in the aggregate, to result in a material adverse effect on its financial condition, results of operations or liquidity.
State Tax
In 2014, Basic was notified by the Texas State Comptroller’s office that a sales and use tax audit for the period from 2010 through 2013 would be conducted. A preliminary report was issued in the second quarter of 2018 for this audit, and the Company will appeal the preliminary report through the redetermination process. Based upon the Company's analysis, the potential liability associated with this audit ranges from $6.0 million to $24.0 million. This range could potentially change in future periods as the appeal and redetermination process progresses. Net of good faith payments made by the Company, the Company currently has recorded a $4.5 million liability. Interest expense associated with the taxes for the nine months ended September 30, 2019, of $0.2 million is included in approximately $1.9 million of accrued interest on the liability.
On August 15, 2019, the Company was notified by the Oklahoma Tax Commission (the "OTC") that the tax court had issued findings, conclusions, and recommendations in an on-going tax case related to tax years 2006 through 2008. Based on the ruling and the advice of our Oklahoma tax counsel, the Company decided to negotiate a settlement with the OTC. The Company's analysis is that the potential liability associated with the settlement may range from $2.3 million to $3.5 million. The Company recorded $2.3 million of income tax and interest payable, which are included as accrued expenses on our consolidated balance sheets, and the related expense during the quarter ended September 30, 2019.
Self-Insured Risk Accruals
Basic is self-insured up to retention limits as it relates to workers’ compensation, general liability claims, and medical and dental coverage of its employees. Basic generally maintains no physical property damage coverage on its rig fleet, with the exception of certain of its 24-hour workover rigs, newly manufactured rigs and pumping services equipment. Basic has deductibles per occurrence for workers’ compensation, general liability claims, and medical and dental coverage of $2.0 million, $1.0 million, and $0.4 million, respectively. Basic has a $1.0 million deductible per occurrence for automobile liability. Basic maintains accruals in the accompanying consolidated balance sheets related to self-insurance retentions based upon third-party data and claims history.
9. Stockholders’ Equity
Common Stock
In the second quarter of 2019, Basic granted certain members of management time-based restricted stock awards representing an aggregate 533,160 shares of common stock of the Company, which vest over a three-year period and are subject to accelerated vesting under certain circumstances. On May 21, 2018, Basic’s Board of Directors (the "Board") made grants of time-based restricted stock awards representing an aggregate 48,400 shares of common stock of the Company to non-employee members of the Board. These grants were subject to vesting over a period of ten months and were subject to accelerated vesting under certain circumstances.
10. Incentive Plan
On May 14, 2019, the stockholders of the Company approved the Basic Energy Services, Inc. 2019 Long Term Incentive Plan (the “LTIP”) to succeed the Basic Energy Services, Inc. Management Incentive Plan (the “MIP”). The LTIP became effective on May 14, 2019, and replaced the MIP. A total of 681,657 shares of the Company’s common stock are reserved for issuance pursuant to the LTIP. No further awards will be granted under the MIP.
During the nine month period ended September 30, 2019, and 2018, compensation expenses related to share-based arrangements under the MIP and the LTIP, including restricted stock, restricted stock units and stock option awards, were approximately $7.8 million and $22.0 million, respectively.
During the three months ended September 30, 2019, and 2018, compensation expenses related to share-based arrangements under the MIP and LTIP, including restricted stock, restricted stock units and stock option awards, were approximately $1.2 million and $5.6 million, respectively. The decrease in compensation expense is primarily related to forfeiture credits in Q3 2019 related to an executive resignation.
Basic did not recognize a tax benefit for compensation expense recognized during the three and nine month periods ended September 30, 2019 and 2018.
At September 30, 2019, there was $5.8 million unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the MIP. That cost is expected to be recognized over a weighted average period of 2.1 years.
Stock Option Awards
The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. Stock options granted under the MIP and the LTIP expire ten years from the date they are granted, and vest over a three-year service period. Total expenses related to stock options in three and nine month periods ended September 30, 2019, were approximately $0.8 million and $2.4 million, respectively. Stock option expenses for the three and nine months ended September 30, 2018, were $0.8 million, $3.5 million, respectively. Future expense for all options is expected to be approximately $0.5 million in total through February 2020.
The following table reflects changes during the nine-month period and a summary of stock options outstanding at September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Weighted
|
|
Remaining
|
|
Aggregate
|
|
|
|
Number of
|
|
Average
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Options
|
|
Exercise
|
|
Term
|
|
Value
|
|
Non-statutory stock options:
|
|
Granted
|
|
Price
|
|
(Years)
|
|
(000's)
|
|
Outstanding, beginning of period
|
|
595,736
|
|
|
$
|
39.23
|
|
|
|
|
|
|
Options granted
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Options forfeited
|
|
(6,474)
|
|
|
$
|
40.12
|
|
|
|
|
|
|
Options exercised
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Options expired
|
|
(77,704)
|
|
|
$
|
39.30
|
|
|
|
|
|
|
Outstanding, end of period
|
|
511,558
|
|
|
$
|
39.23
|
|
|
7.3
|
|
$—
|
|
|
Exercisable, end of period
|
|
341,052
|
|
|
$
|
39.23
|
|
|
7.3
|
|
$—
|
|
|
Vested or expected to vest, end of period
|
|
170,506
|
|
|
$
|
39.23
|
|
|
7.3
|
|
$—
|
|
There were no stock options exercised during the nine months ended September 30, 2019, and 2018.
Restricted Stock Unit Awards
Time-based
A summary of the status of Basic’s non-vested restricted stock units at September 30, 2019, and changes during the nine months ended September 30, 2019, are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of
|
|
Grant Date Fair
|
|
Non-vested Units
|
|
Restricted Stock Units
|
|
Value Per Unit
|
|
Non-vested at beginning of period
|
|
191,302
|
|
|
$
|
16.59
|
|
|
Granted during period
|
|
653,160
|
|
|
2.53
|
|
|
Vested during period
|
|
(73,976)
|
|
|
16.17
|
|
|
Forfeited during period
|
|
(148,560)
|
|
|
5.78
|
|
|
Non-vested at end of period
|
|
621,926
|
|
|
$
|
1.28
|
|
Valuation of time vesting restricted stock units for all periods presented is equal to the quoted market price for the shares on the date of the grant. The total fair value of time-vesting restricted stock units vested in nine months ended September 30, 2019 and 2018, was $299,000 and $474,000, respectively, and is measured as the quoted market price of the Company’s common stock on the vesting date for the number of shares vested.
Performance-based
A summary of the status of Basic’s non-vested performance-based grants at September 30, 2019, and changes during the nine months ended September 30, 2019, are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of
|
|
Grant Date Fair
|
|
Non-vested Units
|
|
Performance Stock Units
|
|
Value Per Unit
|
|
Non-vested at beginning of period
|
|
682,985
|
|
|
$
|
27.27
|
|
|
Granted during period
|
|
—
|
|
|
—
|
|
|
Vested during period
|
|
(218,541)
|
|
|
36.33
|
|
|
Forfeited during period
|
|
(138,019)
|
|
|
28.66
|
|
|
Non-vested at end of period
|
|
326,425
|
|
|
$
|
25.63
|
|
The total fair value of performance-based restricted stock units vested during the nine months ended September 30, 2019, and 2018 was $1.0 million and $5.4 million, respectively, and was measured as the quoted market price of the Company’s common stock on the vesting date for the number of shares vested.
Restricted Stock Awards
On May 15, 2019, the Board made grants of time-based restricted stock awards representing an aggregate 120,000 shares of common stock of the Company to non-employee members of the Board. These grants are subject to vesting fully on the first anniversary of the grant date and are subject to accelerated vesting under certain circumstances.
In the second quarter of 2019, the Board also made grants of time-based restricted stock awards representing an aggregate 533,160 shares of common stock of the Company to certain members of management. These grants are subject to vesting over a three-year period and are subject to accelerated vesting under certain circumstances.
The total fair value of restricted stock awards vested during the nine months ended September 30, 2019, and 2018 was $33,000 and $77,000, respectively, and was measured as the quoted market price of the Company’s common stock on the vesting date for the number of shares vested.
Phantom Stock Awards
On March 21, 2019, the Compensation Committee of the Board approved grants of phantom restricted stock awards to certain key employees. Phantom shares are recorded as a liability at their current market value and are included in other current liabilities. The aggregate number of phantom shares issued on March 22, 2019, was 370,350. These grants remain subject to vesting annually in one-third increments over a three-year period, with the first portion vesting on March 22, 2020, and are subject to accelerated vesting in certain circumstances. Total expense related to phantom stock granted to key employees in nine-month periods ended September 30, 2019 and 2018, was approximately $114,000 and $596,000, respectively.
On May 15, 2019, the Compensation Committee of the Board made grants of phantom restricted stock to certain members of management. The aggregate number of phantom shares issued on May 15, 2019 to certain members of management was 524,160. These grants remain subject to vesting annually in one-third increments over a three-year period, with the first portion vesting on May 15, 2020, and are subject to accelerated vesting in certain circumstances. Total expense related to this grant in nine-month period ended September 30, 2019, was approximately $123,000.
On May 15, 2019, the Compensation Committee of the Board made grants of phantom restricted stock to non-employee members of the Board. The number of phantom shares issued on May 15, 2019 to non-employee members of the Board was 54,000. These grants remain subject to vesting fully on the first anniversary of the grant date, and are subject to accelerated vesting in certain circumstances. Total expense related to this grant in nine-month period ended September 30, 2019 was approximately $35,000.
In the second quarter of 2019, the Compensation Committee of the Board approved grants of phantom performance-based restricted stock to certain members of management. The performance-based phantom stock awards are tied to Basic’s achievement of total stockholder return (“TSR”) relative to the TSR of a peer group of energy services companies over the performance period. The number of phantom shares to be issued will range from 0% to 150% of the 1,069,320 target number of phantom shares. Any phantom shares earned at the end of the performance period will then remain subject to vesting in one-half increments on May 15, 2021, and 2022 (subject to accelerated vesting in certain circumstances). Phantom shares are recorded as a liability at fair value calculated using a Monte Carlo valuation and are included in other current liabilities. Total expense related to performance-
based phantom stock in the nine-month period ended September 30, 2019 was approximately $160,000.
11. Revenues
The Company's revenues are generated by services, which are consumed as provided by its customers on their sites. As a decentralized organization, contracts for the Company's services are negotiated on a regional level and are on a per job basis, with jobs being completed in a short period of time, usually one day or up to a week. Revenue is recognized as performance obligations have been completed on a daily basis either as accounts receivable or Work-in-Process ("WIP"), when all of the proper approvals are obtained.
A small percentage of the Company's jobs may require performance obligations which extend over a longer period of time and are not invoiced until all performances obligations in the contract are complete, such as drilling or plugging a well, fishing services, and pad site preparation jobs. Because these jobs are performed on the customer's job site, and Basic is contractually entitled to bill for its services performed to date, revenues for these service lines are recognized on a daily basis as services are performed and recorded as Contract Assets rather than a WIP or accounts receivable. Contract Assets are typically invoiced within 30 to 60 days of recognizing revenue.
As of September 30, 2019, accounts receivable related to products and services were $123.7 million compared to $144.8 million at December 31, 2018. At September 30, 2019, the Company had $1.8 million of contract assets and $778,000 of contract liabilities on its consolidated balance sheet compared to $1.1 million of contract assets and $855,000 of contract liabilities on its consolidated balance sheet at December 31, 2018. Contract assets are included in Trade Receivables, and contract liabilities are included in Other Current Liabilities on our consolidated balances sheets.
Basic does not have any long-term service contracts, nor does it have revenue expected to be recognized in any future year related to remaining performance obligations or contracts with variable consideration related to undelivered performance obligations.
The following table sets forth certain financial information with respect to Basic’s disaggregation of revenues by geographic location and type (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completion & Remedial Services
|
Well Servicing
|
Water Logistics
|
Other Services
|
Total
|
|
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
Permian Basin
|
$
|
62,932
|
|
$
|
91,165
|
|
$
|
82,982
|
|
$
|
8,160
|
|
$
|
245,239
|
|
|
Texas Gulf Coast
|
6,733
|
|
22,394
|
|
28,627
|
|
—
|
|
57,754
|
|
|
ArkLaTex & Mid-Continent
|
101,443
|
|
28,868
|
|
34,010
|
|
10,917
|
|
175,238
|
|
|
Rocky Mountain
|
58,535
|
|
18,620
|
|
17,465
|
|
—
|
|
94,620
|
|
|
|
|
|
|
|
|
|
West Coast
|
—
|
|
16,838
|
|
—
|
|
—
|
|
16,838
|
|
|
Corporate (Intercompany)
|
(4,746)
|
|
(2,108)
|
|
(8,001)
|
|
(9,420)
|
|
(24,275)
|
|
|
Total
|
$
|
224,897
|
|
$
|
175,777
|
|
$
|
155,083
|
|
$
|
9,657
|
|
$
|
565,414
|
|
|
Major Products or Service Line
|
|
|
|
|
|
|
Fracturing
|
$
|
66,342
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
66,342
|
|
|
Rental Tool Revenue
|
60,027
|
|
—
|
|
—
|
|
—
|
|
60,027
|
|
|
Coiled Tubing
|
43,875
|
|
—
|
|
—
|
|
—
|
|
43,875
|
|
|
Snubbing
|
3,137
|
|
—
|
|
—
|
|
—
|
|
3,137
|
|
|
Well Servicing
|
—
|
|
148,065
|
|
—
|
|
—
|
|
148,065
|
|
|
Plugging
|
—
|
|
20,307
|
|
—
|
|
—
|
|
20,307
|
|
|
Transport/Vacuum
|
—
|
|
—
|
|
93,740
|
|
—
|
|
93,740
|
|
|
Hot Oiler
|
—
|
|
—
|
|
16,437
|
|
—
|
|
16,437
|
|
|
Production and Disposal Facilities
|
—
|
|
—
|
|
15,637
|
|
—
|
|
15,637
|
|
|
Other
|
51,516
|
|
7,405
|
|
29,269
|
|
9,657
|
|
97,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
224,897
|
|
$
|
175,777
|
|
$
|
155,083
|
|
$
|
9,657
|
|
$
|
565,414
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
Products transferred at a point in time
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,302
|
|
$
|
1,302
|
|
|
Products and services transferred over time
|
224,897
|
|
175,777
|
|
155,083
|
|
8,355
|
|
564,112
|
|
|
Total
|
$
|
224,897
|
|
$
|
175,777
|
|
$
|
155,083
|
|
$
|
9,657
|
|
$
|
565,414
|
|
|
Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
Permian Basin
|
$
|
102,059
|
|
$
|
88,427
|
|
$
|
94,302
|
|
$
|
9,220
|
|
$
|
294,008
|
|
|
Texas Gulf Coast
|
11,663
|
|
21,290
|
|
26,644
|
|
—
|
|
59,597
|
|
|
ArkLaTex & Mid-Continent
|
172,864
|
|
28,150
|
|
33,234
|
|
11,709
|
|
245,957
|
|
|
Rocky Mountain
|
76,869
|
|
20,681
|
|
25,798
|
|
—
|
|
123,348
|
|
|
Eastern USA
|
3,609
|
|
5,560
|
|
—
|
|
—
|
|
9,169
|
|
|
West Coast
|
—
|
|
22,520
|
|
—
|
|
—
|
|
22,520
|
|
|
Corporate (Intercompany)
|
(6,541)
|
|
(2,096)
|
|
(4,251)
|
|
(7,343)
|
|
(20,231)
|
|
|
Total
|
$
|
360,523
|
|
$
|
184,532
|
|
$
|
175,727
|
|
$
|
13,586
|
|
$
|
734,368
|
|
|
Major Products or Service Line
|
|
|
|
|
|
|
Fracturing
|
$
|
165,597
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
165,597
|
|
|
Rental Tool Revenue
|
66,153
|
|
—
|
|
—
|
|
—
|
|
66,153
|
|
|
Coiled Tubing
|
52,487
|
|
—
|
|
—
|
|
—
|
|
52,487
|
|
|
Snubbing
|
9,654
|
|
—
|
|
—
|
|
—
|
|
9,654
|
|
|
Well Servicing
|
—
|
|
157,766
|
|
—
|
|
—
|
|
157,766
|
|
|
Plugging
|
—
|
|
19,219
|
|
—
|
|
—
|
|
19,219
|
|
|
Transport/Vacuum
|
—
|
|
—
|
|
107,932
|
|
—
|
|
107,932
|
|
|
Hot Oiler
|
—
|
|
—
|
|
15,084
|
|
—
|
|
15,084
|
|
|
Production and Disposal Facilities
|
—
|
|
—
|
|
17,853
|
|
—
|
|
17,853
|
|
|
Other
|
66,632
|
|
7,547
|
|
34,858
|
|
13,586
|
|
122,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
360,523
|
|
$
|
184,532
|
|
$
|
175,727
|
|
$
|
13,586
|
|
$
|
734,368
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
Products transferred at a point in time
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3,331
|
|
$
|
3,331
|
|
|
Products and services transferred over time
|
360,523
|
|
184,532
|
|
175,727
|
|
10,255
|
|
731,037
|
|
|
Total
|
$
|
360,523
|
|
$
|
184,532
|
|
$
|
175,727
|
|
$
|
13,586
|
|
$
|
734,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completion & Remedial Services
|
Well Servicing
|
Water Logistics
|
Other Services
|
Total
|
|
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
Permian Basin
|
$
|
21,162
|
|
$
|
29,231
|
|
$
|
25,048
|
|
$
|
2,670
|
|
$
|
78,111
|
|
|
Texas Gulf Coast
|
1,390
|
|
7,356
|
|
10,043
|
|
—
|
|
18,789
|
|
|
ArkLaTex & Mid-Continent
|
28,179
|
|
9,716
|
|
10,665
|
|
717
|
|
49,277
|
|
|
Rocky Mountain
|
20,062
|
|
6,404
|
|
5,395
|
|
—
|
|
31,861
|
|
|
|
|
|
|
|
|
|
West Coast
|
—
|
|
4,981
|
|
—
|
|
—
|
|
4,981
|
|
|
Corporate (Intercompany)
|
(791)
|
|
(594)
|
|
(2,700)
|
|
(569)
|
|
(4,654)
|
|
|
Total
|
$
|
70,002
|
|
$
|
57,094
|
|
$
|
48,451
|
|
$
|
2,818
|
|
$
|
178,365
|
|
|
|
|
|
|
|
|
|
Major Products or Service Line
|
|
|
|
|
|
|
Fracturing Equipment
|
$
|
17,326
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
17,326
|
|
|
Rental Tool Revenue
|
19,572
|
|
—
|
|
—
|
|
—
|
|
19,572
|
|
|
Coiled Tubing
|
15,248
|
|
—
|
|
—
|
|
—
|
|
15,248
|
|
|
Snubbing
|
1,034
|
|
—
|
|
—
|
|
—
|
|
1,034
|
|
|
Well Servicing
|
—
|
|
47,481
|
|
—
|
|
—
|
|
47,481
|
|
|
Plugging
|
—
|
|
7,227
|
|
—
|
|
—
|
|
7,227
|
|
|
Transport/Vacuum
|
—
|
|
—
|
|
30,277
|
|
—
|
|
30,277
|
|
|
Hot Oiler
|
—
|
|
—
|
|
4,950
|
|
—
|
|
4,950
|
|
|
Production and Disposal Facilities
|
—
|
|
—
|
|
4,574
|
|
—
|
|
4,574
|
|
|
Other
|
16,822
|
|
2,386
|
|
8,650
|
|
2,818
|
|
30,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
70,002
|
|
$
|
57,094
|
|
$
|
48,451
|
|
$
|
2,818
|
|
$
|
178,365
|
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
Products transferred at a point in time
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Products and services transferred over time
|
70,002
|
|
57,094
|
|
48,451
|
|
2,818
|
|
178,365
|
|
|
Total
|
$
|
70,002
|
|
$
|
57,094
|
|
$
|
48,451
|
|
$
|
2,818
|
|
$
|
178,365
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2018
|
|
|
|
|
|
|
Primary Geographical Markets
|
|
|
|
|
|
|
Permian Basin
|
$
|
29,344
|
|
$
|
31,046
|
|
$
|
31,647
|
|
$
|
3,598
|
|
$
|
95,635
|
|
|
Texas Gulf Coast
|
3,509
|
|
6,635
|
|
9,156
|
|
—
|
|
19,300
|
|
|
ArkLaTex & Mid-Continent
|
58,692
|
|
10,271
|
|
10,913
|
|
6,080
|
|
85,956
|
|
|
Rocky Mountain
|
26,513
|
|
7,546
|
|
9,190
|
|
—
|
|
43,249
|
|
|
Eastern USA
|
652
|
|
1,090
|
|
—
|
|
—
|
|
1,742
|
|
|
West Coast
|
—
|
|
8,341
|
|
—
|
|
—
|
|
8,341
|
|
|
Corporate (Intercompany)
|
(2,732)
|
|
(615)
|
|
(1,367)
|
|
(3,175)
|
|
(7,889)
|
|
|
Total
|
$
|
115,978
|
|
$
|
64,314
|
|
$
|
59,539
|
|
$
|
6,503
|
|
$
|
246,334
|
|
|
Major Products or Service Line
|
|
|
|
|
|
|
Fracturing Equipment
|
$
|
49,076
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
49,076
|
|
|
Rental Tool Revenue
|
23,511
|
|
—
|
|
—
|
|
—
|
|
23,511
|
|
|
Coiled Tubing
|
17,328
|
|
—
|
|
—
|
|
—
|
|
17,328
|
|
|
Snubbing
|
2,213
|
|
—
|
|
—
|
|
—
|
|
2,213
|
|
|
Well Servicing
|
—
|
|
55,098
|
|
—
|
|
—
|
|
55,098
|
|
|
Plugging
|
—
|
|
6,685
|
|
—
|
|
—
|
|
6,685
|
|
|
Transport/Vacuum
|
—
|
|
—
|
|
35,889
|
|
—
|
|
35,889
|
|
|
Hot Oiler
|
—
|
|
—
|
|
4,696
|
|
—
|
|
4,696
|
|
|
Production and Disposal Facilities
|
—
|
|
—
|
|
6,158
|
|
—
|
|
6,158
|
|
|
Other
|
23,850
|
|
2,531
|
|
12,796
|
|
6,503
|
|
45,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
115,978
|
|
$
|
64,314
|
|
$
|
59,539
|
|
$
|
6,503
|
|
$
|
246,334
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
|
|
|
|
|
Products transferred at a point in time
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,601
|
|
$
|
2,601
|
|
|
Products and services transferred over time
|
115,978
|
|
64,314
|
|
59,539
|
|
3,902
|
|
243,733
|
|
|
Total
|
$
|
115,978
|
|
$
|
64,314
|
|
$
|
59,539
|
|
$
|
6,503
|
|
$
|
246,334
|
|
12. Loss Per Share
The following table sets forth the computation of unaudited basic and diluted loss per share for the three and nine months ended September 30, 2019 and 2018 (in thousands, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator (both basic and diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(38,877)
|
|
|
$
|
(27,336)
|
|
|
$
|
(94,130)
|
|
|
$
|
(97,921)
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted loss per share
|
25,606,264
|
|
|
26,509,944
|
|
|
26,551,592
|
|
|
26,430,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per common share:
|
$
|
(1.52)
|
|
|
$
|
(1.03)
|
|
|
$
|
(3.55)
|
|
|
$
|
(3.70)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per common share:
|
$
|
(1.52)
|
|
|
$
|
(1.03)
|
|
|
$
|
(3.55)
|
|
|
$
|
(3.70)
|
|
|
|
|
|
|
|
|
|
|
The Company has issued potentially dilutive instruments such as unvested restricted stock and common stock options. However, the Company did not include these instruments in its calculation of diluted loss per share during the periods presented, because to include them would be anti-dilutive.
The following table sets forth weighted average shares outstanding of potentially dilutive instruments for the three and nine months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
Stock options
|
|
511,558
|
|
|
608,688
|
|
|
511,558
|
|
|
608,688
|
|
|
Warrants
|
|
2,066,576
|
|
|
2,066,576
|
|
|
2,066,576
|
|
|
2,066,576
|
|
|
Weighted average unvested restricted stock
|
|
631,742
|
|
|
86,761
|
|
|
326,054
|
|
|
37,656
|
|
|
Total
|
|
3,209,876
|
|
|
2,762,025
|
|
|
2,904,188
|
|
|
2,712,920
|
|
13. Business Segment Information
In the first quarter of 2019, the Company revised its reportable segments to combine its rig manufacturing business with its Contract Drilling segment, creating an Other Services segment. With this change, the Company's segments consist of: Well Servicing, Water Logistics, Completion & Remedial Services, and Other Services. These reporting segments, which are also the Company's operating segments, align with how the Chief Operating Decision Maker allocates resources and assesses performance against the Company’s key growth strategies. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the four operating segments as "Corporate." The Company evaluates segment performance on earnings before interest expense and income taxes. Products are transferred between segments and geographic areas on a basis intended to reflect as nearly as possible the “market value” of the products. Prior period segment information has been retrospectively revised to reflect Basic's current segmentation.
The following table sets forth certain financial information with respect to Basic’s reportable segments for the three and nine months ended September 30, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completion
|
|
|
|
|
|
|
|
|
& Remedial
|
Well
|
Water
|
|
Other
|
|
|
|
|
Services
|
Servicing
|
Logistics
|
|
Services
|
Corporate
|
Total
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 (Unaudited)
|
|
|
|
|
|
|
|
|
Operating revenues
|
$
|
70,002
|
|
$
|
57,094
|
|
$
|
48,451
|
|
|
$
|
2,818
|
|
$
|
—
|
|
$
|
178,365
|
|
|
Direct operating costs
|
(53,825)
|
|
(43,510)
|
|
(34,783)
|
|
|
(6,348)
|
|
—
|
|
(138,466)
|
|
|
Segment profits
|
$
|
16,177
|
|
$
|
13,584
|
|
$
|
13,668
|
|
|
$
|
(3,530)
|
|
$
|
—
|
|
$
|
39,899
|
|
|
Depreciation and amortization
|
$
|
13,930
|
|
$
|
5,608
|
|
$
|
7,774
|
|
|
$
|
64
|
|
$
|
1,803
|
|
$
|
29,179
|
|
|
Capital expenditures
|
$
|
2,494
|
|
$
|
1,622
|
|
$
|
7,273
|
|
|
$
|
—
|
|
$
|
212
|
|
$
|
11,601
|
|
|
Three Months Ended September 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
Operating revenues
|
$
|
115,978
|
|
$
|
64,314
|
|
$
|
59,539
|
|
|
$
|
6,503
|
|
$
|
—
|
|
$
|
246,334
|
|
|
Direct operating costs
|
(89,777)
|
|
(50,591)
|
|
(42,785)
|
|
|
(7,246)
|
|
—
|
|
(190,399)
|
|
|
Segment profits
|
$
|
26,201
|
|
$
|
13,723
|
|
$
|
16,754
|
|
|
$
|
(743)
|
|
$
|
—
|
|
$
|
55,935
|
|
|
Depreciation and amortization
|
$
|
16,563
|
|
$
|
6,533
|
|
$
|
7,214
|
|
|
$
|
314
|
|
$
|
2,130
|
|
$
|
32,754
|
|
|
Capital expenditures
|
$
|
10,664
|
|
$
|
4,921
|
|
$
|
6,710
|
|
|
$
|
43
|
|
$
|
804
|
|
$
|
23,142
|
|
|
Nine Months Ended September 30, 2019 (Unaudited)
|
|
|
|
|
|
|
|
|
Operating revenues
|
$
|
224,897
|
|
$
|
175,777
|
|
$
|
155,083
|
|
|
$
|
9,657
|
|
$
|
—
|
|
$
|
565,414
|
|
|
Direct operating costs
|
(176,918)
|
|
(135,752)
|
|
(107,611)
|
|
|
(13,191)
|
|
—
|
|
(433,472)
|
|
|
Segment profits
|
$
|
47,979
|
|
$
|
40,025
|
|
$
|
47,472
|
|
|
$
|
(3,534)
|
|
$
|
—
|
|
$
|
131,942
|
|
|
Depreciation and amortization
|
$
|
40,898
|
|
$
|
16,464
|
|
$
|
22,824
|
|
|
$
|
189
|
|
$
|
5,293
|
|
$
|
85,668
|
|
|
Capital expenditures
|
$
|
17,634
|
|
$
|
13,127
|
|
$
|
22,300
|
|
|
$
|
123
|
|
$
|
712
|
|
$
|
53,896
|
|
|
Identifiable assets
|
$
|
205,950
|
|
$
|
82,819
|
|
$
|
115,693
|
|
|
$
|
5,483
|
|
$
|
257,684
|
|
$
|
667,629
|
|
|
Nine Months Ended September 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
Operating revenues
|
$
|
360,523
|
|
$
|
184,533
|
|
$
|
175,727
|
|
|
$
|
13,585
|
|
$
|
—
|
|
$
|
734,368
|
|
|
Direct operating costs
|
(279,963)
|
|
(145,303)
|
|
(127,716)
|
|
|
(14,691)
|
|
—
|
|
(567,673)
|
|
|
Segment profits
|
$
|
80,560
|
|
$
|
39,230
|
|
$
|
48,011
|
|
|
$
|
(1,106)
|
|
$
|
—
|
|
$
|
166,695
|
|
|
Depreciation and amortization
|
$
|
45,638
|
|
$
|
18,196
|
|
$
|
22,978
|
|
|
$
|
1,097
|
|
$
|
6,241
|
|
$
|
94,150
|
|
|
Capital expenditures
|
$
|
32,002
|
|
$
|
17,227
|
|
$
|
17,488
|
|
|
$
|
553
|
|
$
|
1,558
|
|
$
|
68,828
|
|
|
Identifiable assets
|
$
|
245,273
|
|
$
|
105,287
|
|
$
|
115,803
|
|
|
$
|
5,203
|
|
$
|
307,404
|
|
$
|
778,970
|
|
The following table reconciles the segment profits reported above to the operating loss as reported in the consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profits
|
|
$
|
39,899
|
|
|
$
|
55,935
|
|
|
$
|
131,942
|
|
|
$
|
166,695
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
(32,125)
|
|
|
(39,599)
|
|
|
(102,450)
|
|
|
(132,038)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
(29,179)
|
|
|
(32,754)
|
|
|
(85,668)
|
|
|
(94,150)
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of assets
|
|
(837)
|
|
|
(191)
|
|
|
(2,634)
|
|
|
(3,891)
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment
|
|
(3,216)
|
|
|
$
|
—
|
|
|
(3,216)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(25,458)
|
|
|
$
|
(16,609)
|
|
|
$
|
(62,026)
|
|
|
$
|
(63,384)
|
|
|
|
|
|
|
|
|
|
|
14. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02 - “Leases (Topic 842).” The purpose of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Basic has adopted the standard effective January 1, 2019, and has included the disclosures required by ASU 2016-02. For further discussion see Note 5, "Leases".
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In addition, the ASU requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The new standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Basic is currently evaluating the impact of this pronouncement on its consolidated financial statements
In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract." ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancellable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The effective date of this pronouncement is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. The standard can be adopted either using the prospective or retrospective transition approach. Basic is currently evaluating the impact of this pronouncement on its consolidated financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Overview
We provide a wide range of wellsite services to oil and natural gas drilling and producing companies, including Completion & Remedial Services, Well Servicing, Water Logistics and Other Services.
Our total hydraulic horsepower (“HHP”) decreased to 479,470 at the end of the third quarter of 2019 compared to 516,465 for the third quarter of 2018. Our weighted average HHP capacity decreased from 522,565 at January 1, 2018, to 479,470 at September 30, 2019. Our weighted average number of fluid service trucks decreased to 795 in the third quarter of 2019 from 870 in the third quarter of 2018. Our weighted average number of Well Servicing rigs decreased from 310 in the third quarter of 2018 to 307 in the third quarter of 2019.
Our operating revenues from each of our segments, and their relative percentages of our total revenues, consisted of the following for the nine months ended September 30, 2019 and 2018 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Completion & Remedial Services
|
|
$
|
224.9
|
|
|
40%
|
|
|
$
|
360.5
|
|
|
49%
|
|
|
Well Servicing
|
|
175.8
|
|
31%
|
|
|
184.6
|
|
25%
|
|
|
Water Logistics
|
|
155.1
|
|
27%
|
|
|
175.7
|
|
24%
|
|
|
Other Services
|
|
9.6
|
|
2%
|
|
|
13.6
|
|
2%
|
|
|
Total revenues
|
|
$
|
565.4
|
|
|
100%
|
|
|
$
|
734.4
|
|
|
100%
|
|
During 2018 and through the third quarter of 2019, oil prices have remained depressed though relatively stable. We expect our customers' capital programs to remain comparatively conservative during the remainder of 2019, as the Exploration and Production sector is under pressure to grow within the limits of operating cash flow.
We believe that the most important performance measures for our business segments are as follows:
•Completion & Remedial Services — segment revenue and segment profits as a percent of revenues;
•Well Servicing — segment profits as a percent of revenues, rig hours, rig utilization rate, revenue per rig hour, and profits per rig hour;
•Water Logistics — segment revenue, segment profits as a percent of revenues, trucking hours, pipeline volumes ; and
•Other Services — rig operating days, revenue per drilling day, profits per drilling day and segment profits as a percent of revenues.
Segment profits are computed as segment operating revenues less direct operating costs. These measurements provide important information to us about the activity and profitability of our lines of business. For a detailed analysis of these indicators for the Company, see “Segment Overview” below.
Selected Acquisitions and Divestitures
During the year ended December 31, 2018, and through the first nine months of 2019, we did not enter into or complete any business acquisitions or divestitures.
Segment Overview
Completion & Remedial Services
During the first nine months of 2019, our Completion & Remedial Services segment represented approximately 40% of our revenues. Revenues from our Completion & Remedial Services segment are derived from a variety of services designed to complete and stimulate oil and natural gas production or place cement slurry within the wellbores. Our Completion & Remedial Services segment includes fracturing equipment, pumping services, rental and fishing tool operations, coiled tubing services, nitrogen services, snubbing and underbalanced drilling.
Our pumping services concentrate on providing primary and remedial cementing and acidizing services, as well as various fracturing services in selected markets. Our total HHP capacity was approximately 479,470 horsepower at September 30, 2019.
In this segment, we derive our revenues on a project-by-project basis in a competitive bidding process. Our bids are based on the amount and type of equipment and personnel required, with the materials consumed billed separately.
The following is an analysis of our Completion & Remedial Services segment for each of the quarters in 2018, the full year ended December 31, 2018 and the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Frac
|
|
|
|
Segment
|
|
|
|
HHP
|
|
HHP
|
|
Revenues
|
|
Profits %
|
|
2018:
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
522,565
|
|
|
413,300
|
|
|
$
|
117,597
|
|
|
24%
|
|
|
Second Quarter
|
|
516,465
|
|
|
407,800
|
|
|
$
|
126,948
|
|
|
21%
|
|
|
Third Quarter
|
|
516,465
|
|
|
386,050
|
|
|
$
|
115,978
|
|
|
21%
|
|
|
Fourth Quarter
|
|
513,000
|
|
|
386,050
|
|
|
$
|
108,933
|
|
|
21%
|
|
|
Full Year
|
|
513,000
|
|
|
386,050
|
|
|
$
|
469,456
|
|
|
22%
|
|
|
2019:
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
489,270
|
|
|
360,800
|
|
|
$
|
76,834
|
|
|
17%
|
|
|
Second Quarter
|
|
479,000
|
|
|
344,500
|
|
|
$
|
78,061
|
|
|
24%
|
|
|
Third Quarter
|
|
479,470
|
|
|
344,500
|
|
|
$
|
70,002
|
|
|
23%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in Completion & Remedial Services revenue to $70.0 million in the third quarter of 2019 from $78.1 million in the second quarter of 2019 resulted from declines in our fracturing and coiled tubing lines of business. Segment profits as a percentage of revenue decreased marginally to 23% in the third quarter of 2019 from 24% in second quarter of 2019.
Well Servicing
During the first nine months of 2019, our Well Servicing segment represented 31% of our revenues. Revenue in our Well Servicing segment is derived from maintenance, workover, completion and plugging and abandonment services. We provide maintenance-related services as part of the normal, periodic upkeep of producing oil and natural gas wells. Maintenance-related services represent a relatively consistent component of our business. Workover and completion services generate more revenue per hour than maintenance work due to the use of auxiliary equipment, but demand for workover and completion services fluctuates more with the overall activity level in the industry.
We typically charge our Well Servicing rig customers for services on an hourly basis at rates that are determined by the type of service and equipment required, market conditions in the region in which the rig operates, the ancillary equipment provided on the rig and the necessary personnel. We measure the activity level of our Well Servicing rigs on a weekly basis by calculating a rig utilization rate based on a 55-hour workweek per rig.
The following is an analysis of our Well Servicing segment for each of the quarters in 2018, the full year ended December 31, 2018, and the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Rig
|
|
Revenue
|
|
|
|
|
|
|
|
Number
|
|
|
|
Utilization
|
|
Per Rig
|
|
Profits Per
|
|
Segment
|
|
|
|
of Rigs
|
|
Rig hours
|
|
Rate
|
|
Hour
|
|
Rig hour
|
|
Profits %
|
|
2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
310
|
|
|
168,500
|
|
|
76%
|
|
|
$338
|
|
|
$62
|
|
|
18%
|
|
|
Second Quarter
|
|
310
|
|
|
181,600
|
|
|
82%
|
|
|
$348
|
|
|
$83
|
|
|
24%
|
|
|
Third Quarter
|
|
310
|
|
|
180,300
|
|
|
82%
|
|
|
$357
|
|
|
$76
|
|
|
21%
|
|
|
Fourth Quarter
|
|
310
|
|
|
159,600
|
|
|
72%
|
|
|
$368
|
|
|
$71
|
|
|
19%
|
|
|
Full Year
|
|
310
|
|
|
690,000
|
|
|
78%
|
|
|
$353
|
|
|
$73
|
|
|
21%
|
|
|
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
310
|
|
|
165,000
|
|
|
74%
|
|
|
$367
|
|
|
$81
|
|
|
22%
|
|
|
Second Quarter
|
|
308
|
|
|
155,200
|
|
|
70%
|
|
|
$375
|
|
|
$85
|
|
|
23%
|
|
|
Third Quarter
|
|
307
|
|
|
149,000
|
|
|
68%
|
|
|
$383
|
|
|
$91
|
|
|
24%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rig utilization was 68% in the third quarter of 2019, down from 70% in the second quarter of 2019. The decreased utilization rate in the third quarter of 2019 resulted from a marginal decrease in customer demand and activity and slightly improved pricing, primarily for our 24-hour rig packages. Our segment profit percentage increased slightly to 24% for the third quarter of 2019 compared to 23% in the second quarter of 2019.
Water Logistics
During the first nine months of 2019, our Water Logistics segment represented approximately 27% of our revenues. Revenues in our Water Logistics segment are earned from the sale, transportation, storage and disposal of fluids used in the drilling, production and maintenance of oil and natural gas wells. Revenues also include water treatment, wellsite construction and maintenance services. The Water Logistics segment has a base level of business consisting of transporting and disposing of saltwater produced as a by-product of the production of oil and natural gas. These services are necessary for our customers and have a stable demand but typically produce lower relative segment profits than other parts of our Water Logistics segment. Water Logistics for completion and workover projects typically require fresh or brine water for making drilling mud, circulating fluids or fracturing fluids used during a job, and all of these fluids require storage tanks and hauling and disposal. Because we can provide a full complement of fluid sales, trucking, storage and disposal required on most drilling and workover projects, the add-on services associated with drilling and workover activity enable us to generate higher segment profits. The higher segment profits are due to the relatively small incremental labor costs associated with providing these services in addition to our base Water Logistics operations. Revenues from our wellsite construction services are derived primarily from preparing and maintaining access roads and well locations, installing small diameter gathering lines and pipelines, constructing foundations to support drilling rigs and providing maintenance services for oil and natural gas facilities. Revenue from water treatment services results from the treatment and reselling of produced water and flowback to customers for the purposes of reusing as fracturing water. We typically price fluid services by the job, by the hour or by the quantities sold, disposed of or hauled.
The following is an analysis of our Water Logistics operations for each of the quarters in 2018, the full year ended December 31, 2018 and the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Trucking
|
|
Pipeline
|
|
|
|
|
|
|
|
Fluid Service
|
|
Truck
|
|
Volumes
|
|
Volumes
|
|
|
|
Segment
|
|
|
|
Trucks
|
|
Hours
|
|
(in bbls)
|
|
(in bbls)
|
|
Revenue
|
|
Profits %
|
|
2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
960
|
|
|
479,600
|
|
|
6,414,800
|
|
|
1,551,000
|
|
|
$56,509
|
|
|
28%
|
|
|
Second Quarter
|
|
903
|
|
|
486,800
|
|
|
6,912,900
|
|
|
2,064,000
|
|
|
$59,679
|
|
|
26%
|
|
|
Third Quarter
|
|
870
|
|
|
448,200
|
|
|
6,898,200
|
|
|
2,526,000
|
|
|
$59,539
|
|
|
28%
|
|
|
Fourth Quarter
|
|
837
|
|
|
438,500
|
|
|
6,659,000
|
|
|
3,221,000
|
|
|
$55,556
|
|
|
29%
|
|
|
Full Year
|
|
891
|
|
|
1,853,100
|
|
|
26,884,900
|
|
|
9,362,000
|
|
|
$231,283
|
|
|
28%
|
|
|
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
818
|
|
|
424,100
|
|
|
6,620,000
|
|
|
3,050,000
|
|
|
$55,601
|
|
|
33%
|
|
|
Second Quarter
|
|
814
|
|
|
403,200
|
|
|
6,778,000
|
|
|
3,174,000
|
|
|
$51,031
|
|
|
30%
|
|
|
Third Quarter
|
|
795
|
|
|
382,500
|
|
|
6,956,000
|
|
|
3,807,000
|
|
|
$48,451
|
|
|
28%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue for the Water Logistics segment decreased to $48.5 million in the third quarter of 2019 compared to $51.0 million in the second quarter of 2019 as a result of decreased levels of trucking utilization. Segment profit percentage decreased slightly to 28% in the third quarter of 2019 from 30% in the second quarter of 2019 primarily due to the effect of reduced revenues on lower production-related demand.
Other Services
During the first nine months of 2019, our Other Services segment represented approximately 2% of our revenues. Revenues from our Other Services segment are derived from our contract drilling operations, which consist of drilling of new wells, and our rig manufacturing operations.
Within our contract drilling operations, we typically charge our drilling rig customers a daily rate, or a rate based on footage at an established rate per number of feet drilled. Depending on the type of job, we may also charge by the project. We measure the activity level of our drilling rigs on a weekly basis by calculating a rig utilization rate based on a seven-day workweek per rig.
We also manufacture rigs and other related equipment for internal purposes as well as to sell to outside companies. Our rig manufacturing operation also performs large-scale refurbishments and maintenance services to used workover rigs. As a result of decreased demand for newly manufactured rigs, the Company increased reserves for unrecoverable inventory by $3.9 million during the third quarter of 2019, as our manufacturing entity turns its focus to providing services and parts for previously manufactured equipment.
The following is an analysis of our contract drilling operations for each of the quarters in 2018, the full year ended December 31, 2018, and quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
Rig
|
|
|
|
|
|
Contract
|
|
|
|
|
|
Number of
|
|
Operating
|
|
Revenue Per
|
|
Profits Per
|
|
Drilling
|
|
Segment
|
|
|
|
Rigs
|
|
Days
|
|
Drilling Day
|
|
Drilling Day
|
|
Profits %
|
|
Profits %
|
|
2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
11
|
|
|
175
|
|
|
$17.3
|
|
|
$2.7
|
|
|
16%
|
|
|
(17)%
|
|
|
Second Quarter
|
|
11
|
|
|
91
|
|
|
$25.7
|
|
|
$6.5
|
|
|
25%
|
|
|
7%
|
|
|
Third Quarter
|
|
11
|
|
|
129
|
|
|
$27.7
|
|
|
$6.5
|
|
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24%
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|
|
(11)%
|
|
|
Fourth Quarter
|
|
11
|
|
|
184
|
|
|
$22.1
|
|
|
$4.8
|
|
|
23%
|
|
|
11%
|
|
|
Full Year
|
|
11
|
|
|
579
|
|
|
$22.4
|
|
|
$4.9
|
|
|
22%
|
|
|
(1)%
|
|
|
2019:
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|
|
|
|
|
|
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|
|
|
|
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|
First Quarter
|
|
11
|
|
|
115
|
|
|
$24.2
|
|
|
$5.9
|
|
|
20%
|
|
|
8%
|
|
|
Second Quarter
|
|
9
|
|
|
90
|
|
|
$24.9
|
|
|
$5.0
|
|
|
20%
|
|
|
(13)%
|
|
|
Third Quarter
|
|
9
|
|
|
92
|
|
|
$26.9
|
|
|
$8.1
|
|
|
28%
|
|
|
(125)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Contract drilling revenue per drilling day increased to $26,900 in the third quarter of 2019 compared to $24,900 in the second quarter of 2019 due to improved pricing. Contract drilling profit percentage increased to 28% in the third quarter of 2019 compared to 20% in the second quarter of 2019, while segment loss margin was 125% in the third quarter, compared to a loss margin of 13% in the second quarter of 2019. The segment decrease is related to reduced demand for newly manufactured capital equipment in the third quarter for 2019.
During the third quarter of 2019, the Company recognized an asset impairment of $3.2 million related to Contract Drilling assets, and transferred $6.3 million of equipment to Assets Held for Sale, which is included in Current Assets on our Consolidated Balance Sheet.
Operating Cost Overview
Our operating costs are comprised primarily of labor costs, including workers’ compensation and health insurance, repair and maintenance, fuel and insurance. A majority of our employees are paid on an hourly basis. We also employ personnel to supervise our activities, sell our services and perform maintenance on our fleet. These costs are not directly tied to our level of business activity. Repair and maintenance is performed by our crews, company maintenance personnel and outside service providers. Insurance is generally a fixed cost regardless of utilization and can vary depending on the number of rigs, trucks and other equipment in our fleet, as well as employee payroll, and our safety record. Compensation for administrative personnel in local operating yards and our corporate office is accounted for as general and administrative expenses.
Critical Accounting Policies and Estimates
Our unaudited consolidated financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of our significant accounting policies is included in Note 4. "Summary of Significant Accounting Policies" of the Financial Statements and Supplementary Data in our most recent Annual Report on Form 10-K.
Results of Operations
The following is a comparison of our results of operations for the three and nine months ended September 30, 2019, compared to the three and nine months ended September 30, 2018. For additional segment-related information and trends, please read “Segment Overview” above.
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Revenues. Revenues decreased by 28% to $178.4 million during the third quarter of 2019 from $246.3 million during the same period in 2018. This decrease was primarily due to decreased activity, particularly in our
Completion & Remedial Services segment, by our customers as Exploration & Production companies are increasingly graded on production of free cash flow rather than growth of reserves.
Completion & Remedial Services revenues decreased by 40% to $70.0 million during the third quarter of 2019 compared to $116.0 million in the same period in 2018, as exploration and production companies continue to curtail capital spending. Total HHP decreased to 479,470 at September 30, 2019 from 516,465 at September 30, 2018. Weighted average HHP decreased to 479,470 for the third quarter of 2019 from 516,000 in the third quarter of 2018.
Well Servicing revenues decreased by 11% to $57.1 million during the third quarter of 2019 compared to $64.3 million during the same period in 2018. The decrease was driven by a decrease in 24-hour work and relatively flat pricing of our equipment packages, primarily due to decreases in customer demand. Our weighted average number of Well Servicing rigs decreased to 307 during the third quarter of 2019 compared to 310 during the third quarter of 2018. Utilization decreased to 68% in the third quarter of 2019, compared to 82% in the comparable quarter of 2018 due to decreased demand. Revenue per rig hour in the third quarter of 2019 was $383, increasing from $357 in the comparable quarter of 2018 due to rate increases to customers.
Water Logistics revenues decreased by 19% to $48.5 million during the third quarter of 2019 compared to $59.5 million in the same period in 2018. Our revenue decrease was mainly due to declines in production related services in the third quarter of 2019. Pipeline water volumes increased by 51% to 3.8 million barrels or 35% of total disposal volumes compared to 2.5 million barrels or 27% of total disposal volumes in the third quarter of 2018. Our weighted average number of fluid service trucks decreased to 795 during the third quarter of 2019 compared to 870 in the same period in 2018, related to the increase in piped water.
Other Services segment revenues decreased by 57% to $2.8 million during the third quarter of 2019 compared to $6.5 million in the same period in 2018. The number of rig operating days decreased to 92 in the third quarter of 2019 from 129 in the third quarter of 2018. The decrease in revenue was due to decreases in manufacturing revenue.
Direct Operating Expenses. Direct operating expenses, which primarily consist of labor, including workers’ compensation and health insurance, repair and maintenance, fuel and insurance, decreased 27% to $138.5 million during the third quarter of 2019 from $190.4 million in the same period in 2018, primarily due to decreases in Completion & Remedial segment activity and corresponding decreases in employee headcount and wages to adapt to current activity levels.
Direct operating expenses for the Completion & Remedial Services segment decreased by 40% to $53.8 million during the third quarter of 2019 compared to $89.8 million for the same period in 2018 due primarily to decreased activity levels, especially in our pumping and fracturing services. Segment profits remained constant at 23% of revenues during the third quarter of 2019 compared to the same period in 2018.
Direct operating expenses for the Well Servicing segment decreased by 14% to $43.5 million during the third quarter of 2019 compared to $50.6 million for the same period in 2018. The decrease in direct operating expenses corresponds to decreased workover and plugging activity levels, however rate increases to customers resulted in segment profits increasing slightly to 24% of revenues during the third quarter of 2019 from 21% for the same period in 2018.
Direct operating expenses for the Water Logistics segment decreased by 19% to $34.8 million during the third quarter of 2019 compared to $42.8 million for the same period in 2018 due to decreased production related activities. Segment profits remained constant at 28% of revenues during the third quarter of 2019 compared to the same period in 2018, despite declines in revenue due to higher margin pipeline revenues.
Direct operating expenses for the Other Services segment decreased 12% to $6.3 million, which includes a charge for unrecoverable inventory of $3.9 million, during the third quarter of 2019 compared to $7.2 million for the same period in 2018. Segment loss for third quarter of 2019 was 125%, up from a segment loss of 11% during the third quarter of 2018 due to increased reserves for unrecoverable manufacturing inventory of $3.9 million, which was a charge to direct expense.
General and Administrative Expenses. General and administrative expenses decreased by 19% to $32.1 million during the third quarter of 2019 from $39.6 million for the same period in 2018. Stock-based compensation expense was $1.2 million and $5.6 million during the third quarter of 2019 and 2018, respectively. In addition, in the third quarter of 2019, our Chief Executive Officer announced his departure, which required the Company to accrue additional severance compensation charges of $0.8 million. This charge was offset by a reversal of non-cash share compensation expense $2.3 million, related to the accounting treatment of unvested shares forfeitures. For the same period in 2018, we incurred strategic realignment costs of approximately $2.3 million.
Depreciation and Amortization Expenses. Depreciation and amortization expenses were $29.2 million during the third quarter of 2019 compared to $32.8 million for the same period in 2018.
Interest Expense. Interest expense increased to $11.7 million during the third quarter of 2019 compared to $10.9 million during the third quarter of 2018. Interest expense consisted primarily of interest on our Senior Notes and capital leases. The decrease is related to interest on the Prior ABL Facility, which was extinguished in the fourth quarter of 2018.
Income Tax Benefit. Income tax expense during the third quarter of 2019 was $2.0 million compared to no income tax expense in the same period in 2018. Tax expense in the third quarter was related to the write-off of unrecoverable Oklahoma state income taxes receivable and related accrual of state income tax expense of $1.2 million. Our effective tax rate during the third quarter of 2019 and 2018 was approximately 5% and 0%, respectively.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Revenues. Revenues decreased by 23% to $565.4 million during the nine months ended September 30, 2019 from $734.4 million during the same period in 2018. This decrease was primarily due to decreased activity, particularly in our Completion & Remedial Services segment, by our customers as Exploration & Production companies are increasingly graded on production of free cash flow rather than growth of reserves.
Completion & Remedial Services revenues decreased by 38% to $224.9 million during the nine months ended September 30, 2019 compared to $360.5 million in the same period in 2018. The decrease in revenue between these periods was primarily due to decreased activity, particularly in our fracturing and pumping lines of business. Total HHP decreased to 479,470 at September 30, 2019, from 516,465 at September 30, 2018. Weighted average HHP decreased to 489,410 for the nine months ended September 30, 2019, from 516,000 in the same period of 2018.
Well Servicing revenues decreased by 5% to $175.8 million during the nine months ended September 30, 2019, compared to $184.5 million during the same period in 2018. The decrease was driven by a decrease in 24-hour work and in pricing of our equipment packages, primarily due to decreases in customer demand. Our weighted average number of Well Servicing rigs decreased to 307 during the nine months ended September 30, 2019, compared to 310 during same period 2018. Utilization decreased to 71% in the nine months ended September 30, 2019, compared to 80% in the comparable period of 2018 due to declines in production related activity. Revenue per rig hour in the nine months ended September 30, 2019 was $375, increasing from $348 in the comparable period of 2018.
Water Logistics revenues decreased by 12% to $155.1 million during the nine months ended September 30, 2019, compared to $175.7 million in the same period in 2018, mainly due to decreases in customer demand. Pipeline water volumes increased 62% to 10.0 million barrels or 33% of total disposal volumes during the nine months ended September 30, 2019, compared to 6.1 million barrels or 23% of total disposal volumes during the nine months ended September 30, 2018. Our weighted average number of fluid service trucks decreased to 809 during the nine months ended September 30, 2019, compared to 909 in the same period in 2018, as pipeline volumes increased.
Other Services revenues decreased by 29% to $9.7 million during the nine months ended September 30, 2019, compared to $13.6 million in the same period in 2018. This decrease is related to decreases in rig manufacturing activity and the decreased number of rig operating days to 297 in the nine months ended September 30, 2019, from 395 in the comparable period of 2018.
Direct Operating Expenses. Direct operating expenses, which primarily consist of labor, including workers’ compensation and health insurance, repair and maintenance, fuel and insurance, decreased to $433.5 million during the nine months ended September 30, 2019, from $567.7 million in the same period in 2018, primarily due to decreases in activity and corresponding decreases in employee headcount and wages to adapt to current activity levels.
Direct operating expenses for the Completion & Remedial Services segment decreased by 37% to $176.9 million during the nine months ended September 30, 2019, compared to $280.0 million for the same period in 2018. Segment profits were relatively stable at 21% of revenues during the nine months ended September 30, 2019, compared to 22% for the same period in 2018, as decreases in direct cost kept pace with decreased revenues.
Direct operating expenses for the Well Servicing segment decreased by 7% to $135.8 million during the nine months ended September 30, 2019, compared to $145.3 million for the same period in 2018. Segment profits increased to 23% of revenues during the nine months ended September 30, 2019, from 21% for the same period in 2018 due to improved cost management.
Direct operating expenses for the Water Logistics segment decreased by 16% to $107.6 million during the nine months ended September 30, 2019, compared to $127.7 million for the same period in 2018. Segment profits were 31% of revenues during the nine months ended September 30, 2019, compared to 27% for the same period in 2018, due to higher margin pipeline revenues.
Direct operating expenses for the Other Services segment included a charge of $3.9 million for unrecoverable manufacturing inventory, and decreased 10% to $13.2 million during the nine months ended September 30, 2019 compared to $14.7 million for the same period in 2018. Segment loss increased to 37% of revenues during the nine months ended September 30, 2019, from a segment loss of 8% during the nine months ended September 30, 2018, mainly due to the increased reserve expense for unrecoverable manufacturing inventory during nine months ended September 30, 2019 .
General and Administrative Expenses. General and administrative expenses decreased by 22% to $102.5 million during the nine months ended September 30, 2019, from $132.0 million for the same period in 2018. Stock-based compensation expense was $7.8 million and $22.0 million during the nine months ended September 30, 2019, and 2018, respectively. During the nine months ended September 30, 2019, G&A included: one-time charges related to consulting fees of $0.9 million for reclamation of tax refund for the 2007 tax year, $1.2 million in fees for an acquisition deal that we chose not to pursue, and $0.8 million in severance, and a related decrease in non-cash share compensation expense due to the forfeiture of unvested shares related to the CEO's departure. During the nine months ended September 30, 2018, one-time costs included: $6.0 million accrued expense for Texas State Sales Tax audit settlement, $3.9 million for executive retirement, $3.1 million for bad debt related to one customer, and $4.6 million for consulting fees related to our realignment in 2018.
Depreciation and Amortization Expenses. Depreciation and amortization expenses were $85.7 million during the nine months ended September 30, 2019, compared to $94.2 million for the same period in 2018. The decrease is mainly related to reduced capital spending during the nine months ended September 30, 2019.
Interest Expense. Interest expense decreased to $33.0 million during the nine months ended September 30, 2019 compared to $35.0 million during the nine months ended September 30, 2018. Interest expense consisted primarily of interest on our Senior Notes and capital leases. The decrease in interest expense was related to interest on the balance outstanding under our Prior ABL Facility, which was extinguished in the fourth quarter of 2018.
Income Tax Expense. Income tax expense during the nine months ended September 30, 2019, was $0.1 million compared to $0.2 million for the same period in 2018. On March 1, 2019, we filed an amended 2007 federal tax return under section 172(f) of the Internal Revenue Code of 1986, as amended which allowed us to carry-back and recover workers’ compensation expenses in years we had Net Operating Losses "NOL" for 10 years. We carried back approximately $5.3 million of expense to 2007, which allowed us to claim a refund of $1.9 million of 2007 taxes. The net effect of this transaction was a tax benefit and a reduction of our NOL of $1.8 million in the first quarter of 2019, offset by write-offs of unrecoverable Oklahoma state income taxes receivable of $0.8 million, and accrual for state income taxes payable of $1.2 million. Our effective tax rate during the nine months ended September 30, 2019, and 2018 was approximately 0.1% and 0.2%, respectively.
Liquidity and Capital Resources
Our current primary capital resources are cash flow from our operations, availability under our New ABL Facility, the ability to enter into finance leases, the ability to incur additional secured indebtedness, and a cash balance of $50.5 million at September 30, 2019. We had $50.4 million of available borrowing capacity under the New ABL Facility at September 30, 2019.
On October 2, 2018, the Company issued in a private offering $300.0 million aggregate principal amount of 10.75% senior secured notes due 2023 at 99.042% of par and entered into a new $150.0 million senior secured revolving credit facility. For further discussion see Note 4, "Long-Term Debt and Interest Expense".
We have utilized, and expect to utilize in the future, bank and finance lease financing and sales of equity to obtain capital resources.
As market conditions warrant and subject to our contractual restrictions, liquidity position and other factors, we may from time to time access the capital markets or seek to recapitalize, refinance or otherwise restructure our capital structure. We may accomplish this through open market or privately negotiated transactions, which may include, among other things, repurchases of our common stock or outstanding debt, debt-for-debt or debt-for-equity exchanges, refinancings, private or public equity or debt raises and rights offerings. Many of these alternatives may require the consent of current lenders, stockholders or noteholders, and there is no assurance that we will be able to execute any of these alternatives on acceptable terms or at all. The amounts involved in any such transaction, individually or in the aggregate, may be material.
Share Repurchase Program
On May 31, 2019, we announced that the Board authorized a share repurchase plan whereby we may repurchase up to $5.0 million of our outstanding shares of common stock beginning on June 4, 2019 for a period of 12 months. We are authorized to repurchase our common stock from time to time in open market purchases or in private transactions in accordance with applicable federal securities laws. The timing of repurchases and the exact number of shares to be purchased will be determined by our management, in its discretion, and will depend upon market conditions and other factors including the stock price, corporate and regulatory requirements and other market and economic conditions. The stock repurchase program may be suspended or discontinued as determined by the Board. During the year ended September 30, 2019, we repurchased approximately 2,547,920 shares of common stock at a weighted average purchase price of $1.88 per share. The total remaining share authorization as of September 30, 2019 was $0.2 million.
Net Cash Provided by Operating Activities
Cash provided by operating activities was $28.5 million for the nine months ended September 30, 2019, a decrease compared to cash provided by operating activities of $56.4 million during the same period in 2018. Operating cash flow provided in the first nine months of 2019 decreased compared to the same period in 2018 due to lower working capital levels as accounts payable decreased by $31.6 million during the nine months ended September 30, 2019.
Our liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things, our ability to maintain adequate cash on hand and generate cash flow from operations. Maintaining adequate liquidity depends upon industry conditions and financial, competitive, and other factors beyond our control. In the event that cash on hand and cash flow from operations is not sufficient to meet our liquidity needs, we may have limited access to additional financing.
Capital Expenditures
Cash capital expenditures during the first nine months of 2019 were $46.3 million, compared to $48.6 million in the same period of 2018. We added $7.9 million of leased assets through our finance lease program and other financing arrangements during the first nine months of 2019 compared to $16.6 million of leased asset additions in the same period in 2018.
We currently have planned capital expenditures for the full year of 2019 of approximately $58.3 million, including finance leases of $7.9 million. We do not budget acquisitions in the normal course of business, and we regularly engage in discussions related to potential acquisitions related to the oilfield services industry.
Contractual Obligations
Outside of the normal course of our business, as of September 30, 2019, there have been no material changes to our contractual obligations reported in our Annual Report on Form 10-K for the year ended December 31, 2018.
Other Matters
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Net Operating Losses
As of September 30, 2019, we had approximately $860.9 million of NOLs, for federal income tax purposes, which begin to expire in 2032 and $323.4 million of NOLs for state income tax purposes, which begin to expire in 2019. NOLs generated after 2017 are carried forward indefinitely and are limited to 80% of taxable income. NOLs generated prior to 2018 continue to be carried forward for 20 years and have no 80% limitation on utilization.
We provide a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized. As of September 30, 2019, a valuation allowance of $192.0 million was recorded against our net deferred tax assets for all jurisdictions that are not expected to be realized.
Recent Accounting Pronouncements
Our consideration of recent accounting pronouncements is included in Note 14. "Recent Accounting Pronouncements" to the consolidated financial statements included in this quarterly report.
Impact of Inflation on Operations
Inflation in the United States has been relatively low in recent years and did not have a material impact on our results of operations for the three and nine months ended September 30, 2019, or the year ended December 31, 2018. Although the impact of inflation has been insignificant in recent years, it is still a factor in the U.S. economy, and we tend to experience inflationary pressure on the cost of our equipment, materials and supplies as increasing oil and natural gas prices also increase activity in our areas of operations.