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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to
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Delaware
|
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82-1221944
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(State or other jurisdiction of
incorporation or organization)
|
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(I.R.S. Employer
Identification No.)
|
Large accelerated filer
|
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☐
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Accelerated filer
|
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☐
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|
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Non-accelerated filer
|
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ý
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Smaller reporting company
|
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ý
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Emerging growth company
|
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ý
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Item 1.
|
Financial Statements
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
ASSETS
|
||||||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
23,180
|
|
|
$
|
14,730
|
|
Accounts receivable, net of allowance of $4,146 and $4,057
|
|
58,980
|
|
|
66,309
|
|
||
Unbilled receivables
|
|
4,960
|
|
|
6,913
|
|
||
Inventories (Note 3)
|
|
23,446
|
|
|
21,601
|
|
||
Prepaid expenses and other current assets
|
|
7,750
|
|
|
8,410
|
|
||
Total current assets
|
|
118,316
|
|
|
117,963
|
|
||
Property, plant and equipment, net
|
|
99,229
|
|
|
110,375
|
|
||
Operating lease right-of-use asset
|
|
9,650
|
|
|
10,943
|
|
||
Other assets
|
|
1,158
|
|
|
1,248
|
|
||
Total assets
|
|
$
|
228,353
|
|
|
$
|
240,529
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
38,547
|
|
|
$
|
34,478
|
|
Accrued liabilities (Note 4)
|
|
23,243
|
|
|
29,521
|
|
||
Current lease liabilities
|
|
7,104
|
|
|
7,224
|
|
||
Total current liabilities
|
|
68,894
|
|
|
71,223
|
|
||
Long-term debt (Note 5)
|
|
32,000
|
|
|
21,000
|
|
||
Long-term operating lease liabilities
|
|
7,144
|
|
|
7,970
|
|
||
Long-term finance lease liabilities
|
|
7,333
|
|
|
7,961
|
|
||
Deferred tax liability, net
|
|
103
|
|
|
112
|
|
||
Other long-term liabilities
|
|
—
|
|
|
2
|
|
||
Total liabilities
|
|
115,474
|
|
|
108,268
|
|
||
Commitments and contingencies (Note 8)
|
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
|
||||
Preferred shares, $0.01 par value, 10,000,000 authorized; none issued and outstanding
|
|
—
|
|
|
—
|
|
||
Common shares, $0.01 par value, 150,000,000 authorized; 35,467,609 issued; 33,809,644 outstanding
|
|
362
|
|
|
356
|
|
||
Additional paid-in-capital
|
|
360,321
|
|
|
357,996
|
|
||
Treasury shares, at cost, 1,657,964 and 1,225,330 common shares
|
|
(5,860
|
)
|
|
(4,872
|
)
|
||
Accumulated deficit
|
|
(241,944
|
)
|
|
(221,219
|
)
|
||
Total shareholders’ equity
|
|
112,879
|
|
|
132,261
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
228,353
|
|
|
$
|
240,529
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31, 2020
|
|
March 31, 2019
|
||||
Revenues:
|
|
$
|
92,801
|
|
|
$
|
141,665
|
|
Costs and expenses:
|
|
|
|
|
||||
Direct operating costs
|
|
81,490
|
|
|
121,551
|
|
||
General and administrative
|
|
12,086
|
|
|
15,710
|
|
||
Depreciation and amortization
|
|
9,894
|
|
|
12,440
|
|
||
Gain on disposition of assets
|
|
(26
|
)
|
|
(23
|
)
|
||
Impairment
|
|
9,273
|
|
|
—
|
|
||
Operating loss
|
|
(19,916
|
)
|
|
(8,013
|
)
|
||
Non-operating loss expense:
|
|
|
|
|
||||
Interest expense
|
|
(729
|
)
|
|
(671
|
)
|
||
Other income
|
|
—
|
|
|
—
|
|
||
Loss before income tax
|
|
(20,645
|
)
|
|
(8,684
|
)
|
||
Income tax expense
|
|
(80
|
)
|
|
(177
|
)
|
||
Net loss
|
|
(20,725
|
)
|
|
(8,861
|
)
|
||
Net loss per common share:
|
|
|
|
|
||||
Basic
|
|
$
|
(0.62
|
)
|
|
$
|
(0.26
|
)
|
Diluted
|
|
$
|
(0.62
|
)
|
|
$
|
(0.26
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
||||
Basic
|
|
33,563
|
|
|
33,685
|
|
||
Diluted
|
|
33,563
|
|
|
33,685
|
|
|
Common
Shareholders
Number of
Shares
Outstanding
|
Common
Stock
|
Additional
Paid in
Capital
|
Treasury
Stock
|
Accumulated
Deficit
|
Total
Shareholders’
Equity
|
|||||||||||
Balance at December 31, 2018
|
33,541
|
|
$
|
344
|
|
$
|
349,080
|
|
$
|
(1,821
|
)
|
$
|
(145,783
|
)
|
$
|
201,820
|
|
Stock based compensation - equity awards
|
609
|
|
3
|
|
2,748
|
|
—
|
|
—
|
|
2,751
|
|
|||||
Net loss
|
—
|
|
—
|
|
—
|
|
—
|
|
(8,861
|
)
|
(8,861
|
)
|
|||||
Tax withholding on stock vesting
|
(177
|
)
|
—
|
|
—
|
|
(954
|
)
|
—
|
|
(954
|
)
|
|||||
Stock buyback plan activity
|
(103
|
)
|
—
|
|
—
|
|
(486
|
)
|
—
|
|
(486
|
)
|
|||||
Balance at March 31, 2019
|
33,870
|
|
$
|
347
|
|
$
|
351,828
|
|
$
|
(3,261
|
)
|
$
|
(154,644
|
)
|
$
|
194,270
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2019
|
33,333
|
|
$
|
356
|
|
$
|
357,996
|
|
$
|
(4,872
|
)
|
$
|
(221,219
|
)
|
$
|
132,261
|
|
Stock based compensation - equity awards
|
909
|
|
6
|
|
2,325
|
|
—
|
|
—
|
|
2,331
|
|
|||||
Net loss
|
—
|
|
—
|
|
—
|
|
—
|
|
(20,725
|
)
|
(20,725
|
)
|
|||||
Tax withholding on stock vesting
|
(255
|
)
|
—
|
|
—
|
|
(573
|
)
|
—
|
|
(573
|
)
|
|||||
Stock buyback plan activity
|
(177
|
)
|
—
|
|
—
|
|
(415
|
)
|
—
|
|
(415
|
)
|
|||||
Balance at March 31, 2020
|
33,810
|
|
$
|
362
|
|
$
|
360,321
|
|
$
|
(5,860
|
)
|
$
|
(241,944
|
)
|
$
|
112,879
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31, 2020
|
|
March 31, 2019
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net loss
|
|
$
|
(20,725
|
)
|
|
$
|
(8,861
|
)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
||||
Depreciation and amortization
|
|
9,894
|
|
|
12,440
|
|
||
Impairment expense
|
|
9,273
|
|
|
—
|
|
||
Gain on disposition of assets
|
|
(609
|
)
|
|
(3,270
|
)
|
||
Non-cash interest expense
|
|
88
|
|
|
87
|
|
||
Provision for doubtful accounts
|
|
226
|
|
|
257
|
|
||
Deferred income tax expense
|
|
(31
|
)
|
|
40
|
|
||
Stock-based compensation
|
|
2,331
|
|
|
2,751
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
7,102
|
|
|
4,869
|
|
||
Unbilled receivables
|
|
1,953
|
|
|
5,338
|
|
||
Inventories
|
|
(1,844
|
)
|
|
(1,172
|
)
|
||
Prepaid expenses and other current assets
|
|
1,209
|
|
|
1,867
|
|
||
Other noncurrent assets
|
|
—
|
|
|
3
|
|
||
Accounts payable
|
|
2,681
|
|
|
(2,078
|
)
|
||
Accrued liabilities
|
|
(5,875
|
)
|
|
(1,518
|
)
|
||
Other long-term liabilities
|
|
—
|
|
|
(99
|
)
|
||
Net cash provided by operating activities
|
|
5,673
|
|
|
10,654
|
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Purchases of property, plant and equipment
|
|
(6,735
|
)
|
|
(12,284
|
)
|
||
Advances of deposit on equipment
|
|
—
|
|
|
(354
|
)
|
||
Proceeds from sale of property, plant and equipment
|
|
795
|
|
|
3,754
|
|
||
Net cash used in investing activities
|
|
(5,940
|
)
|
|
(8,884
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Proceeds from revolving debt
|
|
20,000
|
|
|
7,500
|
|
||
Payments on revolving debt
|
|
(9,000
|
)
|
|
—
|
|
||
Payments on finance leases
|
|
(698
|
)
|
|
(122
|
)
|
||
Payments on financed payables
|
|
(597
|
)
|
|
(617
|
)
|
||
Payments for treasury shares
|
|
(988
|
)
|
|
(1,445
|
)
|
||
Net cash provided by financing activities
|
|
8,717
|
|
|
5,316
|
|
||
Net increase in cash and cash equivalents
|
|
8,450
|
|
|
7,086
|
|
||
Cash and cash equivalents beginning of period
|
|
14,730
|
|
|
13,804
|
|
||
Cash and cash equivalents end of period
|
|
$
|
23,180
|
|
|
$
|
20,890
|
|
Supplemental cash flow information
|
|
|
|
|
||||
Cash paid for interest
|
|
$
|
624
|
|
|
$
|
548
|
|
Income taxes paid
|
|
—
|
|
|
6
|
|
||
Supplemental non-cash investing and financing activities
|
|
|
|
|
||||
Fixed asset purchases in accounts payable and accrued liabilities
|
|
832
|
|
|
1,096
|
|
||
Financed payables
|
|
549
|
|
|
392
|
|
||
Non-cash finance lease additions
|
|
106
|
|
|
720
|
|
|
Pressure Pumping
|
|
Pressure Control
|
|
Wireline
|
|
Three Months Ended March 31, 2020
|
||||||||
Property, plant and equipment
|
$
|
2,191
|
|
|
$
|
4,182
|
|
|
$
|
1,297
|
|
|
$
|
7,670
|
|
Operating lease right of use assets
|
47
|
|
|
206
|
|
|
286
|
|
|
539
|
|
||||
Finance lease right of use assets
|
311
|
|
|
727
|
|
|
26
|
|
|
1,064
|
|
||||
Total impairment
|
$
|
2,549
|
|
|
$
|
5,115
|
|
|
$
|
1,609
|
|
|
$
|
9,273
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Inventories:
|
|
|
|
|
||||
Consumables and materials
|
|
$
|
4,696
|
|
|
$
|
4,968
|
|
Spare parts
|
|
18,750
|
|
|
16,633
|
|
||
Total Inventories
|
|
$
|
23,446
|
|
|
$
|
21,601
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Current accrued liabilities:
|
|
|
|
|
||||
Accrued payables
|
|
$
|
9,001
|
|
|
$
|
7,985
|
|
Payroll and payroll taxes
|
|
5,746
|
|
|
7,665
|
|
||
Bonus
|
|
403
|
|
|
3,147
|
|
||
Workers compensation insurance premiums
|
|
1,291
|
|
|
1,328
|
|
||
Sales tax
|
|
673
|
|
|
1,813
|
|
||
Ad valorem tax
|
|
741
|
|
|
648
|
|
||
Health insurance claims
|
|
1,029
|
|
|
1,010
|
|
||
Other accrued liabilities
|
|
4,359
|
|
|
5,925
|
|
||
Total accrued liabilities
|
|
$
|
23,243
|
|
|
$
|
29,521
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Accounts payable to affiliates of Quintana Capital Group, L.P.
|
|
$
|
133
|
|
|
$
|
23
|
|
Accounts payable to affiliates of Archer Well Company Inc.
|
|
$
|
22
|
|
|
$
|
21
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Operating expenses from affiliates of Quintana Capital Group, L.P.
|
|
$
|
158
|
|
|
$
|
172
|
|
Operating expenses from affiliates of Archer Well Company Inc.
|
|
$
|
1
|
|
|
$
|
4
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Segment Adjusted EBITDA:
|
|
|
|
|
||||
Directional Drilling
|
|
$
|
5,490
|
|
|
$
|
9,480
|
|
Pressure Pumping
|
|
959
|
|
|
(3,504
|
)
|
||
Pressure Control
|
|
(191
|
)
|
|
3,241
|
|
||
Wireline
|
|
(1,678
|
)
|
|
2,064
|
|
||
Corporate and Other
|
|
(5,355
|
)
|
|
(6,877
|
)
|
||
Impairment
|
|
(9,273
|
)
|
|
—
|
|
||
Income tax expense
|
|
(80
|
)
|
|
(177
|
)
|
||
Interest expense
|
|
(729
|
)
|
|
(671
|
)
|
||
Depreciation and amortization
|
|
(9,894
|
)
|
|
(12,440
|
)
|
||
Gain on disposition of assets
|
|
26
|
|
|
23
|
|
||
Net loss
|
|
$
|
(20,725
|
)
|
|
$
|
(8,861
|
)
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Directional Drilling
|
|
$
|
93,433
|
|
|
$
|
99,456
|
|
Pressure Pumping
|
|
42,321
|
|
|
45,875
|
|
||
Pressure Control
|
|
54,581
|
|
|
67,685
|
|
||
Wireline
|
|
17,854
|
|
|
21,304
|
|
||
Total
|
|
$
|
208,189
|
|
|
$
|
234,320
|
|
Corporate & Other
|
|
20,164
|
|
|
6,209
|
|
||
Total assets
|
|
$
|
228,353
|
|
|
$
|
240,529
|
|
|
|
Three Months Ended March 31, 2020
|
||||||||||||||||||
|
|
Directional Drilling
|
|
Pressure Pumping
|
|
Pressure
Control
|
|
Wireline
|
|
Total
|
||||||||||
Revenues
|
|
$
|
50,248
|
|
|
$
|
16,149
|
|
|
$
|
19,041
|
|
|
$
|
7,363
|
|
|
$
|
92,801
|
|
Depreciation and amortization
|
|
$
|
3,017
|
|
|
$
|
2,822
|
|
|
$
|
3,258
|
|
|
$
|
797
|
|
|
$
|
9,894
|
|
Capital expenditures
|
|
$
|
4,441
|
|
|
$
|
249
|
|
|
$
|
1,944
|
|
|
$
|
101
|
|
|
$
|
6,735
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||
|
|
Directional Drilling
|
|
Pressure Pumping
|
|
Pressure
Control |
|
Wireline
|
|
Total
|
||||||||||
Revenues
|
|
$
|
61,956
|
|
|
$
|
28,631
|
|
|
$
|
28,775
|
|
|
$
|
22,303
|
|
|
$
|
141,665
|
|
Depreciation and amortization
|
|
$
|
2,966
|
|
|
$
|
5,478
|
|
|
$
|
2,932
|
|
|
$
|
1,064
|
|
|
$
|
12,440
|
|
Capital expenditures
|
|
$
|
3,391
|
|
|
$
|
3,289
|
|
|
$
|
5,048
|
|
|
$
|
910
|
|
|
$
|
12,638
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Restricted stock awards
|
|
$
|
175
|
|
|
$
|
166
|
|
Restricted stock units
|
|
1,809
|
|
|
2,131
|
|
||
Performance stock units
|
|
487
|
|
|
454
|
|
||
Stock-based compensation expense
|
|
$
|
2,471
|
|
|
$
|
2,751
|
|
|
|
Number of Shares
(in thousands)
|
|
Grant Date Fair
Value per Share
|
|
Weighted Average
Remaining Life
(in years)
|
||||
Outstanding at December 31, 2019:
|
|
1,589
|
|
|
$
|
11.53
|
|
|
1.60
|
|
Granted
|
|
901
|
|
|
2.60
|
|
|
2.81
|
|
|
Forfeited
|
|
28
|
|
|
—
|
|
|
—
|
|
|
Vested
|
|
645
|
|
|
—
|
|
|
—
|
|
|
Outstanding at March 31, 2020:
|
|
1,817
|
|
|
$
|
8.30
|
|
|
2.04
|
|
|
|
Number of Shares
(in thousands)
|
|
Grant Date Fair
Value per Share
|
|
Weighted Average
Remaining Life
(in years)
|
||||
Outstanding at December 31, 2019
|
|
315
|
|
|
$
|
4.84
|
|
|
1.91
|
|
Granted
|
|
471
|
|
|
2.96
|
|
|
2.81
|
|
|
Forfeited
|
|
2
|
|
|
—
|
|
|
—
|
|
|
Vested
|
|
134
|
|
|
—
|
|
|
—
|
|
|
Outstanding at March 31, 2020
|
|
650
|
|
|
$
|
3.71
|
|
|
2.45
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Numerator:
|
|
|
|
|
||||
Net loss attributed to common share holders
|
|
$
|
(20,725
|
)
|
|
$
|
(8,861
|
)
|
Denominator:
|
|
|
|
|
||||
Weighted average common shares outstanding - basic
|
|
33,563
|
|
|
33,685
|
|
||
Weighted average common shares outstanding - diluted
|
|
33,563
|
|
|
33,685
|
|
||
Net loss per common share:
|
|
|
|
|
||||
Basic
|
|
$
|
(0.62
|
)
|
|
$
|
(0.26
|
)
|
Diluted
|
|
$
|
(0.62
|
)
|
|
$
|
(0.26
|
)
|
Potentially dilutive securities excluded as anti-dilutive 1
|
|
2,698
|
|
|
2,492
|
|
|
•
|
|
the extraordinary market environment and impacts resulting from the COVID-19 pandemic and related swift and material decline in global crude oil demand and crude oil prices;
|
|
•
|
|
our ability to consummate and realize the anticipated benefits of the proposed Merger with KLX Energy Services Holdings, Inc.;
|
|
•
|
|
our business strategy;
|
|
•
|
|
our operating cash flows, the availability of capital and our liquidity;
|
|
•
|
|
our future revenue, income and operating performance;
|
|
•
|
|
uncertainty regarding our future operating results;
|
|
•
|
|
our ability to sustain and improve our utilization, revenue and margins;
|
|
•
|
|
our ability to maintain acceptable pricing for our services;
|
|
•
|
|
our future capital expenditures;
|
|
•
|
|
our ability to finance equipment, working capital and capital expenditures;
|
|
•
|
|
our ability to regain compliance with the New York Stock Exchange’s (the “NYSE”) continued listing standards and avoid the delisting of our common stock from the NYSE;
|
|
•
|
|
competition and government regulations;
|
|
•
|
|
our ability to obtain permits and governmental approvals;
|
|
•
|
|
pending legal or environmental matters;
|
|
•
|
|
loss or corruption of our information in a cyberattack on our computer systems;
|
|
•
|
|
the supply and demand for oil and natural gas;
|
|
•
|
|
our customers’ ability to obtain capital or financing needed for oil and natural gas exploration and production operations;
|
|
•
|
|
business acquisitions;
|
|
•
|
|
general economic conditions;
|
|
•
|
|
credit markets;
|
|
•
|
|
the occurrence of a significant event or adverse claim in excess of the insurance we maintain;
|
|
•
|
|
seasonal and adverse weather conditions that can affect oil and natural gas operations;
|
|
•
|
|
our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements; and
|
|
•
|
|
plans, objectives, expectations and intentions contained in this Annual Report that are not historical.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
•
|
Decline in Demand and Pricing for our Services - The COVID-19 outbreak and the related significant decrease in the price of oil, along with the mix of moderated 2020 budgets, a shifting strategy for operators to remain within cash flow, and reduced overall activity levels created a decline in demand and pricing for our services. The financial results for the first quarter of 2020 reflect some of the reduced activity experienced towards the latter part of the quarter, and we expect significant further declines to accelerate in the second quarter and lower pricing and activity levels to continue until there are clear signs of a commodity price recovery.
|
•
|
Focus on Workplace Safety - Our business is considered “essential” in all of our areas of operation. To protect our workforce in the wake of COVID-19, we have taken steps to keep our people safe by supporting those affected, mandating that as many employees and contractors as possible work from home, and monitoring those who cannot do so and are required to be at work, as well as monitoring the Center for Disease Control (“CDC”), national, state and local guidance in preparing and responding to the outbreak in our areas of operations. We have also implemented certain protocols should an employee become sick with COVID-19. Thus far, working remotely has not significantly impacted our ability to maintain operations, including use of financial reporting systems, nor has it significantly impacted our internal control environment. We have not incurred, and in the future do not expect to incur, significant expenses related to business continuity as employees work from home. However, our continuing operations and management of the immediate and contingent safety measures for our employees would likely become increasingly difficult if employees are infected by COVID-19 and the practical difficulties of social distancing impact productivity.
|
•
|
Decline in Share Price / NYSE Delisting - We have experienced a sharp decline in our share price over the first quarter 2020, a condition that is consistent across our sector. We do not have any debt covenants or other lending arrangements that depend upon our share price or continued listing compliance. We are in compliance with the covenants contained in our revolving credit facility. On April 27, 2020, we received written notice from the NYSE advising us that we no longer satisfied the continued listing compliance standards set forth under Rule 802.01C of the NYSE Listed Company Manual because the average closing price of our common stock fell below $1.00 over a period of 30 consecutive trading days. We can regain compliance if, at any time in the six-month period following June 30, 2020, the closing price of our common stock on the last trading day of any month is at least $1.00 and the 30 trading-day average closing price of its common stock on such day is also at least $1.00. We are considering various options we may take in an effort to cure this deficiency and regain compliance. If our common stock ultimately were to be suspended from trading on, and delisted from, the NYSE for any reason, it could have adverse consequences including, among others: lower demand and market price for our common stock; adverse publicity; and a reduced interest in our company from investors, analysts and other market participants. In addition, a suspension or delisting could impair our ability to execute on our operational and strategic goals, raise additional capital and attract and retain employees by means of equity compensation.
|
•
|
Impairment - We performed impairment assessments on property, plant and equipment. During the first quarter of 2020, we conducted a review of all of our segment asset groups in consideration of the completion of our first quarter 2020 forecast which provided additional insights into expectations of lower growth and margins for the Pressure Pumping, Pressure Control and Wireline segment asset groups. As a result of our review, we determined that the sum of the estimated undiscounted future cash flows of these asset groups was below their respective carrying amounts and thus were not recoverable. As a result, we performed an impairment assessment for these asset groups as of March 31, 2020 and impaired the carrying value to estimated fair value and recognized a non-cash impairment loss of $9.3 million.
|
•
|
Implemented Further Operating and G&A Cost Reductions - The Company recently implemented a series of additional cost reductions in response to declining customer activity and commodity price instability. In April 2020, the Company took the following actions to reduce its cost structure and protect its balance sheet:
|
◦
|
Made significant reductions in compensation expense;
|
◦
|
Implemented a workforce reduction in order to align with market demand; and
|
◦
|
Pursued other cost reductions, including the idling of three additional locations and both active hydraulic fracturing spreads.
|
•
|
Reduced our 2020 organic capital investment program - We reduced our 2020 organic capital investment program by approximately 50%, or $10.0 to $15.0 million, to a range of $10.0 to $15.0 million, to reflect reductions in non-essential capital spending.
|
•
|
Preserve balance sheet - At March 31, 2020, we had $23.2 million of cash and cash equivalents and $21.2 million availability on the ABL Facility, which resulted in a total liquidity position of $44.4 million.
|
|
|
Three Months Ended
|
||||||
|
|
March 31, 2020
|
|
March 31, 2019
|
||||
|
|
(Unaudited)
|
||||||
Revenues:
|
|
$
|
92,801
|
|
|
$
|
141,665
|
|
Costs and expenses:
|
|
|
|
|
||||
Direct operating costs
|
|
81,490
|
|
|
121,551
|
|
||
General and administrative
|
|
12,086
|
|
|
15,710
|
|
||
Depreciation and amortization
|
|
9,894
|
|
|
12,440
|
|
||
Gain on disposition of assets
|
|
(26
|
)
|
|
(23
|
)
|
||
Impairment
|
|
9,273
|
|
|
—
|
|
||
Operating loss
|
|
(19,916
|
)
|
|
(8,013
|
)
|
||
Non-operating loss expense:
|
|
|
|
|
||||
Interest expense
|
|
(729
|
)
|
|
(671
|
)
|
||
Other income
|
|
—
|
|
|
—
|
|
||
Loss before income tax
|
|
(20,645
|
)
|
|
(8,684
|
)
|
||
Income tax expense
|
|
(80
|
)
|
|
(177
|
)
|
||
Net loss
|
|
$
|
(20,725
|
)
|
|
$
|
(8,861
|
)
|
|
|
Three Months Ended
|
||||||
|
|
March 31, 2020
|
|
March 31, 2019
|
||||
|
|
(Unaudited)
|
||||||
Segment Adjusted EBITDA:
|
|
|
|
|
||||
Directional Drilling
|
|
$
|
5,490
|
|
|
$
|
9,480
|
|
Pressure Pumping
|
|
959
|
|
|
(3,504
|
)
|
||
Pressure Control
|
|
(191
|
)
|
|
3,241
|
|
||
Wireline
|
|
(1,678
|
)
|
|
2,064
|
|
||
Adjusted EBITDA (1)
|
|
$
|
2,379
|
|
|
$
|
7,554
|
|
Other Operational Data:
|
|
|
|
|
||||
Drilling rig days (2)
|
|
4,356
|
|
|
5,279
|
|
||
Average monthly directional rigs on revenue (3)
|
|
60
|
|
|
82
|
|
||
Total hydraulic fracturing stages
|
|
810
|
|
|
853
|
|
||
Average hydraulic fracturing revenue per stage
|
|
$
|
17,989
|
|
|
$
|
31,501
|
|
(1)
|
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. For a definition and description of Adjusted EBITDA and reconciliations of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, please read “Adjusted EBITDA” below.
|
(2)
|
Rig days represent the number of days we are providing services to rigs and are earning revenues during the period, including days that standby revenues are earned.
|
(3)
|
Rigs on revenue represents the average number of rigs earning revenue during a given time period, including days that standby revenues are earned.
|
|
Three Months Ended
|
||||||
|
March 31, 2020
|
|
March 31, 2019
|
||||
Adjustments to reconcile Adjusted EBITDA to net loss:
|
|
|
|
||||
Net loss
|
$
|
(20,725
|
)
|
|
$
|
(8,861
|
)
|
Income tax expense
|
80
|
|
|
177
|
|
||
Interest expense
|
729
|
|
|
671
|
|
||
Depreciation and amortization expense
|
9,894
|
|
|
12,440
|
|
||
Gain on disposition of assets, net
|
(26
|
)
|
|
(23
|
)
|
||
Impairment
|
9,273
|
|
|
—
|
|
||
Stock-based compensation
|
2,471
|
|
|
2,751
|
|
||
Rebranding expense
|
—
|
|
|
16
|
|
||
Settlement expense
|
412
|
|
|
383
|
|
||
Severance expense
|
271
|
|
|
—
|
|
||
Adjusted EBITDA
|
$
|
2,379
|
|
|
$
|
7,554
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31, 2020
|
|
March 31, 2019
|
||||
Revenue:
|
|
|
|
|
||||
Directional Drilling
|
|
$
|
50,248
|
|
|
$
|
61,956
|
|
Pressure Pumping
|
|
16,149
|
|
|
28,631
|
|
||
Pressure Control
|
|
19,041
|
|
|
28,775
|
|
||
Wireline
|
|
7,363
|
|
|
22,303
|
|
||
Total revenue
|
|
$
|
92,801
|
|
|
$
|
141,665
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31, 2020
|
|
March 31, 2019
|
||||
Direct operating expenses:
|
|
|
|
|
||||
Directional Drilling
|
|
$
|
41,809
|
|
|
$
|
48,735
|
|
Pressure Pumping
|
|
13,998
|
|
|
30,310
|
|
||
Pressure Control
|
|
17,519
|
|
|
23,279
|
|
||
Wireline
|
|
8,164
|
|
|
19,227
|
|
||
Total direct operating expenses
|
|
$
|
81,490
|
|
|
$
|
121,551
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31, 2020
|
|
March 31, 2019
|
||||
Net cash provided by operating activities
|
|
$
|
5,673
|
|
|
$
|
10,654
|
|
Net cash used in investing activities
|
|
(5,940
|
)
|
|
(8,884
|
)
|
||
Net cash provided by financing activities
|
|
8,717
|
|
|
5,316
|
|
||
Net change in cash
|
|
8,450
|
|
|
7,086
|
|
||
Cash balance end of period
|
|
$
|
23,180
|
|
|
$
|
20,890
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
our operating and financial performance;
|
•
|
quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;
|
•
|
actual or anticipated changes in revenue or earnings estimates or publication of reports by equity research analysts;
|
•
|
speculation in the press or investment community or the dissemination of information through social media platforms;
|
•
|
sales of our common stock by us or our stockholders, or the perception that such sales may occur;
|
•
|
litigation involving us or that may be perceived as having an adverse effect on our business;
|
•
|
general market conditions, including fluctuations in actual and anticipated future commodity prices;
|
•
|
errors in our forecasting of the demand for our services, which could lead to lower revenue or increased costs; and
|
•
|
domestic and international economic, legal and regulatory factors unrelated to our performance.
|
•
|
each company may experience negative reactions from the financial markets, including negative impacts on its stock price;
|
•
|
each company may experience negative reactions from its suppliers, customers and employees;
|
•
|
each company will be required to pay their respective costs relating to the proposed Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees;
|
•
|
the Merger Agreement places certain restrictions on the conduct of each company’s business prior to completion of the Merger and such restrictions, the waiver of which is subject to the consent of the other company (not to be unreasonably withheld or delayed), may prevent us or KLXE from taking certain other specified actions during the pendency of the Merger; and
|
•
|
the focus of QES and KLXE management on matters relating to the Merger, which could otherwise have been devoted to day-to-day operations or on pursuing other opportunities that may be beneficial to each respective company.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
2020
|
Total Number of
Shares Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares Purchased
as Part of Publicly Announced Plans or Programs
|
|
Maximum Dollar
Value of Shares
that May Yet Be
Purchased Under the Plans or Programs (in thousands)
|
||||||
January
|
94,387
|
|
|
$
|
2.81
|
|
|
94,387
|
|
|
$
|
3,203
|
|
February
|
46,294
|
|
|
$
|
2.42
|
|
|
46,294
|
|
|
$
|
3,091
|
|
March
|
36,119
|
|
|
$
|
1.23
|
|
|
36,119
|
|
|
$
|
3,047
|
|
Total
|
176,800
|
|
|
|
|
176,800
|
|
|
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
2.1
|
|
3.1
|
|
3.2
|
|
10.1
|
|
10.2
|
|
10.3
|
|
31.1*
|
|
31.2*
|
|
32.1**
|
|
32.2**
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
QUINTANA ENERGY SERVICES INC.
|
||
|
|
|
By:
|
|
/s/ Christopher J. Baker
|
|
|
Christopher J. Baker
|
|
|
President, Chief Executive Officer, and Director
|
|
||
Date: May 12, 2020
|
||
|
|
|
By:
|
|
/s/ Keefer M. Lehner
|
|
|
Keefer M. Lehner
|
|
|
Executive Vice President and Chief Financial Officer
|
|
||
Date: May 12, 2020
|
||
|
|
|
By:
|
|
/s/ Geoffrey C. Stanford
|
|
|
Geoffrey C. Stanford
|
|
|
Vice President and Chief Accounting Officer
|
|
||
Date: May 12, 2020
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 of Quintana Energy Services Inc. (the “registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 12, 2020
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/s/ Christopher J. Baker
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Christopher J. Baker
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Chief Executive Officer, President and Director
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 of Quintana Energy Services Inc. (the “registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 12, 2020
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/s/ Keefer M. Lehner
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Keefer M. Lehner
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Executive Vice President and Chief Financial Officer
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(1)
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the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 12, 2020
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/s/ Christopher J. Baker
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Christopher J. Baker
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Chief Executive Officer, President and Director
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(1)
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the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 12, 2020
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/s/ Keefer M. Lehner
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Keefer M. Lehner
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Executive Vice President and Chief Financial Officer
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