Friday, 16 November 2018 11:31 GMT
img

National Energy Services Reunited Corp. reports Third Quarter 2018 Results



(MENAFN - African Press Organization) HOUSTON, United States of America, November 8, 2018/APO Group/ --

National Energy Services Reunited Corp. ("NESR") (NASDAQ: NESR; NASDAQ: NESRW), a national, industry-leading provider of integrated energy services in the Middle East and North Africa ("MENA") and Asia Pacific region, today reported results for the third quarter ended September 30, 2018.

Operating and Financial Highlights

  • Revenue on a combined basis grew by over 10% from the prior quarter and by more than 20% compared to the prior year quarter with new contract start-ups and product offerings as well as increases in market share in NESR's key markets.
  • Net income of $16.2 million for the successor quarter period compared to a net loss for the preceding period of $4 million.
  • Adjusted EBITDA on a combined basis for the third quarter was $46.5 million, a sequential growth in excess of 30% on the back of increased service intensity and startup of new contracts as well as realization of integration synergies.
  • Signed an agreement with Dhahran Techno Valley Company ("DTVC"), a wholly owned subsidiary of King Fahd University of Petroleum, to create a global center for the development of scientific research in DTVC. This is in line with NESR's vision to create an open source platform in the region to partner with innovative technology companies to create fit for purpose technologies for our customers in the region.
  • Acquired quality coiled tubing and pumping assets of North American service company to deploy in the MENA region.

"We are very pleased with our results for the third quarter," said Sherif Foda, Chairman of the Board and CEO of NESR. "NESR is attractively positioned, with the ability to capitalize on its footprint across the MENA region. We remain encouraged by the outlook for our key markets, and we believe the services industry in the region will continue to grow further over the coming quarters. Additionally, as MENA activity increases in the fourth quarter, we have been deploying our resources strategically to take advantage of this trend."

Mr. Foda continued, "I am very proud of the employees of both companies we acquired as our integration efforts continue to exceed expectations and are showing significant results. At NESR, we value agility, empowerment and fast decision making and this quarter's operational and financial results are a testimony to the hard work of our personnel as well as the faith our customers have placed in our ability to deliver superior execution. Our ability to respond quickly and efficiently to our customers' needs has already distinguished us and will continue to be a competitive advantage. We are very excited about the future and we have talented, motivated teams to execute at the highest levels of quality."

Production Services Segment Results

Production Services contributed $88.7 million to consolidated revenue for the 2018 Successor third quarter period. Segment EBITDA totaled $33.2 million in the quarter. In addition to higher activity across all our product lines, this segment benefitted from the redeployment of idle assets where operations overlapped as well as from contract start-up costs recorded in the second quarter which did not recur in the third quarter.

See "Business Combination Accounting and Presentation of Results of Operations" section below for additional information on current reporting conventions.

Successor (NESR)

Predecessor (NPS)

(in thousands)

2018

2018

2017

July 1 to September 30

June 7 to September 30

January 1 to June 6

July 1 to September 30

January 1 to September 30

Revenue

$88,666

$117,268

$112,295

$59,164

$164,493

Segment EBITDA

$33,180

$41,952

$36,836

$21,252

$58,463

Drilling and Evaluation Services Segment Results

Drilling and Evaluation Services contributed $56.9 million to consolidated revenue for the 2018 Successor third quarter period. Segment EBITDA totaled $17.6 million in the quarter. The improved performance of this segment was most noticeably impacted by new drilling contract start-ups with improved pricing along with the continued growth and expansion of our evaluation service offerings.

Successor (NESR)

Predecessor (NPS)

(in thousands)

2018

2018

2017

July 1 to September 30

June 7 to September 30

January 1 to June 6

July 1 to September 30

January 1 to September 30

Revenue

$56,914

$73,298

$24,732

$11,289

$29,288

Segment EBITDA

$17,630

$18,905

$3,267

$1,618

$3,277

Offsetting our segment results were certain Corporate costs which are not yet allocated to segment operations.

Net Income and Consolidated Adjusted EBITDA Results

The Company had Successor period net income for the third quarter totaling $16.2 million, which includes the impact of $2.4 million of transaction and integration costs related to the combination transaction completed in June 2018 and $3.6 million of purchase accounting related amortization costs incurred in the quarter. On a combined basis, the Company had Adjusted EBITDA of $111.8 million for the year to date period through September 30, 2018. Adjustments to EBITDA include transaction and integration costs of $25 million for the 2018 period.

Balance Sheet

Cash and cash equivalents were $67.6 million as of September 30, 2018 (Successor), compared to $27.5 million as of December 31, 2017 (Predecessor) and $36.9 million as of June 30, 2018. The Company had $355.3 million in debt as of September 30, 2018 including a $50 million convertible loan facility with an implied conversion price of 11.244 per share. During July, the Company completed a refinancing of its $50 million bridge loan facility to term out the debt. Additionally, in July the Company entered into a previously disclosed $50 million working capital facility and drew down $25 million under the facility. During August, the Company drew down the remaining $25 million to provide the company with financial flexibility and seize growth opportunities as and when they arise.

The Company purchased certain assets from a North American service company for $7 million in cash. Offsetting these asset additions were additional adjustments to the fixed asset values made as part of the Company's finalization of purchase price accounting.

Improvements to working capital efficiency were initiated post-combination and the Company anticipates additional benefits from these actions to be reflected in the year-end balance sheet.

Predecessor/Successor Accounting Treatment

NESR continues to report in a Predecessor/Successor format whereby the National Petroleum Services ("NPS") legacy entity is the Predecessor for periods prior to the completion of the business combination on June 7, 2018 and NESR, including NPS and Gulf Energy Services ("GES"), is the Successor for post-transaction periods.

Conference Call Information

NESR will host a conference call on Thursday, November 8, 2018, to discuss the third quarter 2018 financial results. The call will begin at 8:00 AM Central Time (9:00 AM Eastern Time) and 6:00 PM UAE time.

Investors, analysts and members of the media interested in listening to the call are encouraged to participate by dialing into the toll-free line at 1-877-407-0312 or the international line at 1-201-389-0899. A live, listen-only webcast will also be available in the investors section of www.NESR.com . A replay of the conference call will be available a few hours after the event in the investors section of the Company's website.

About National Energy Services Reunited Corp.

Founded in 2017, NESR is one of the largest national oilfield services providers in the MENA and Asia Pacific regions. With over 3,200 employees, representing more than 40 nationalities in over 14 countries, the Company helps its customers unlock the full potential of their reservoirs by providing Production Services such as Cementing, Coiled Tubing, Filtration, Completions, Stimulation and Fracturing, and Nitrogen Services. The Company also helps its customers to access the reservoirs in a smarter and faster manner by providing Drilling and Evaluation services like Drilling Downhole Tools, Directional Drilling Fishing Tools, Testing Services, Wireline, Slickline, Fluids and Rig Services.

Business Combination Accounting and Presentation of Results of Operations

As a result of the Business Combination, NESR was determined to be the accounting acquirer and NPS was determined to be the predecessor for SEC reporting purposes. Pursuant to Accounting Standard Codification ("ASC") 805, Business Combinations ("ASC 805"), a preliminary assessment was made as of the acquisition-date fair value of the purchase consideration paid by NESR to effect the Business Combination was allocated to the assets acquired and the liabilities assumed based on their estimated fair values. As a result of the application of the acquisition method of accounting resulting from the Business Combination, the financial statements and certain footnote presentations separate our presentations into two distinct sets of reporting periods, the periods before the consummation of the transaction ("Predecessor Periods") and the period after that date ("Successor Period"), to indicate the application of the different basis of accounting between the periods presented. The Predecessor Periods reflect the historical financial information of NPS prior to the Business Combination, while the Successor Period reflects our consolidated financial information, including the results of NPS and GES, after the Business Combination. The Successor Periods are from June 7, 2018 to September 30, 2018 and for the three months ended September 30, 2018. The Predecessor Periods are from January 1, 2017 to September 30, 2017, for the three months ended September 30, 2017 and from January 1, 2018 to June 6, 2018.

Note

This communication includes certain statements that may constitute "forward-looking statements" for purposes of the federal securities laws. Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements may include, among others, statements about the benefits and synergies of the recently completed business combination transaction. These forward-looking statements are based on information available as of the date of this communication, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing NESR's views as of any subsequent date, and NESR does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not place undue reliance on these forward-looking statements. As a result of a number of known and unknown risks and uncertainties, NESR's actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include NESR's ability to recognize the anticipated benefits of the transaction, which may be affected by, among other things, competition and the ability of NESR to grow and manage growth profitably following the transaction; changes in applicable laws or regulations; the possibility that NESR may be adversely affected by other economic, business, and/or competitive factors; and other risks and uncertainties indicated in NESR's public filings with the Securities and Exchange Commission.

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

Successor (NESR)

Predecessor (NPS)

September 30, 2018

December 31, 2017

Assets

Current assets

Cash and cash equivalents

67,560

27,545

Accounts receivable, net

76,758

58,174

Unbilled revenue

96,895

24,167

Inventories

65,765

32,313

Other current assets

47,142

19,656

Total current assets

354,120

161,855

Non-current assets

Property, plant and equipment, net

304,727

264,269

Intangible assets

140,894

10

Goodwill

532,441

182,053

Other assets

8,836

11,385

Total assets

$1,341,018

$619,572

Liabilities and equity

Liabilities

Accounts payable

54,345

25,132

Accrued expenses

55,795

23,324

Current portion of loans and borrowings

16,368

-

Short-term borrowings

71,940

8,773

Other current liabilities

37,933

5,228

Total current liabilities

236,381

62,457

Loans and borrowings

266,964

147,024

Other liabilities

26,126

20,662

Total liabilities

529,471

230,143

Commitments

-

-

Equity

Successor preferred shares, no par value; unlimited shares authorized; none issued and outstanding Predecessor common stock, par value $1; 370,000,000 shares authorized; 342,250,000 shares issued and outstanding at December 31, 2017

-

342,250

Successor common stock, no par value; unlimited shares authorized; 85,562,769 shares issued and outstanding at September 30, 2018

801,546

-

Predecessor convertible redeemable shares

-

27,750

Additional paid in capital

331

3,345

Retained earnings

8,745

18,480

Accumulated other comprehensive (loss)

-

(436)

Total shareholders' equity

810,622

391,389

Non-controlling interests

925

(1,960)

Total equity

811,547

389,429

Total liabilities and equity

$1,341,018

$619,572

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except share data)

Successor (NESR)

Predecessor (NPS)

2018

2018

2017

Period fromJuly 1 toSeptember 30

Period fromJune 7 toSeptember 30

Period fromJanuary 1 toJune 6

Period FromJuly 1 toSeptember 30

Period FromJanuary 1 toSeptember 30

Revenues

$145,580

$190,566

$137,027

$70,453

$193,781

Cost of products and services

(102,349)

(139,404)

(104,242)

(50,551)

(142,722)

Gross profit

43,231

51,162

32,785

19,902

51,059

Selling, general and administrative expense

(13,759)

(22,779)

(19,969)

(7,514)

(22,851)

Amortization

(3,577)

(5,116)

(10)

(158)

(304)

Operating income

25,895

23,267

12,806

12,230

27,904

Interest expense, net

(6,199)

(8,099)

(4,090)

(712)

(3,985)

Other income (expense), net

450

(18)

362

(1,151)

(1,339)

Income before income taxes

20,146

15,150

9,078

10,367

22,580

Income taxes

(3,989)

(2,960)

(2,342)

313

(1,641)

Net income

16,157

12,190

6,736

10,680

20,939

Net income (loss) attributable to non-controlling interests

47

(172)

(881)

(558)

(1,770)

Net income attributable to shareholders

$16,110

$12,362

$7,617

$11,238

$22,709

Weighted average shares outstanding

Basic

85,562,769

85,562,769

348,524,566

342,250,000

342,250,000

Diluted

85,912,715

85,840,312

370,000,000

370,000,000

370,000,000

Net earnings per share

Basic

0.19

0.14

0.02

0.03

0.07

Diluted

0.19

0.14

0.02

0.03

0.06

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)

Successor (NESR)

Predecessor (NPS)

2018

2018

2017

Period fromJuly 1 toSeptember 30

Period fromJune 7 toSeptember 30

Period fromJanuary 1 toJune 6

Period fromJuly 1 toSeptember 30

Period fromJanuary 1 toSeptember 30

Net income

$16,157

$12,190

$6,736

$10,680

$20,939

Foreign currency translation adjustments

-

-

(16)

364

338

Other comprehensive earnings

16,157

12,190

6,720

11,044

21,277

Total comprehensive earnings

$16,157

$12,190

$6,720

$11,044

$21,277

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS SHAREHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)

Predecessor (NPS) Shares Outstanding Common Stock Redeemable Convertible Shares Outstanding Redeemable Convertible Shares Additional Paid In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Company Stockholders' Equity Noncontrolling Interests Total Stockholders' Equity Balance at January 1, 2018 342,250,000 $342,250 27,750,000 $27,750 $3,345 $(436) $18,480 $391,389 $(1,960) $389,429 Net income (loss) 7,617 7,617 -881 6,736 Foreign currency translation adjustment -16 -16 -16 Conversion of redeemable shares 6,274,566 6,275 (6,274,566) -6,275 - - Dividends paid -48,21 -48,21 -48,21 Amount of Provision for Zakat -767 -767 -767 Balance at June 6, 2018 348,524,566 $348,525 21,475,434 $21,475 $3,345 $(452) $(22,880) $350,013 $(2,841) $347,172

Successor (NESR) Ordinary Shares Redeemable Convertible Shares Outstanding Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Shareholders' Equity Noncontrolling Interests Total Equity Shares Amount Balances at June 7, 2018 11,730,425 $56,602 - $(4,611) $51,991 $51,991 Reclassification of shares previously subject to redemption 16,921,700 165,188 165,188 165,188 Redeemed shares (1,916,511) -19,379 -19,379 -19,379 Shares issued to acquire NPS 25,077,277 255,537 255,537 255,537 Shares issued to acquire GES 28,346,229 288,848 288,848 288,848 Shares issued to related party for loan fee and transaction costs 266,809 2,719 2,719 2,719 Shares issued in secondary offering 4,829,375 48,294 48,294 48,294 Shares issued for IPO underwriting fees 307,465 3,737 3,737 3,737 Shares issued through Restricted Stock Units 331 331 331 Business combination non-controlling interest -951 -951 Non - controlling interest - 3,042 3,042 Acquisition of noncontrolling interest during the period 994 994 -994 - Net income (loss) through September 30, 2018 12,362 12,362 -172 12,19 Balances at September 30, 2018 85,562,769 $801,546 - $331 - $8,745 $810,622 $925 $811,547 NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIESThe accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Successor (NESR)

Predecessor (NPS)

Period from June 7 to September 30, 2018

Period from January 1 to June 6, 2018

Period from January 1 to September 30, 2017

Cash Flows from Operating Activities:

Net income

$12,190

$6,736

$20,939

Adjustments to reconcile net income to net cash provided by operating activities:

-

-

Depreciation and amortization

24,155

17,284

28,389

Shares issued for transaction costs

2,175

(Loss) on disposal of assets, net

(684)

-

(216)

Accrued interest

8,001

3,350

2,139

Deferred tax (asset)

948

Bad Debt Expense

629

2,402

949

Other operating activities, net

603

1,442

506

Changes in operating assets and liabilities:

Decrease (increase) in accounts receivable

10,178

(15)

(10,757)

(Increase) in inventories

(2,297)

(2,080)

(5,911)

(Increase) in prepaid expenses

(2,943)

(759)

(2,153)

(Increase) in other current assets

(21,866)

(16,257)

(1,588)

Decrease (increase) in other long term assets

312

(544)

-

Increase (decrease) accounts payable and accrued liabilities

(14,629)

7,335

12,556

Increase in other current liabilities

(2,341)

1,932

3,264

Net cash provided by operating activities

14,431

20,826

48,117

Cash Flows from Investing Activities:

Proceeds from the Company's Trust Account

231,782

-

-

Capital expenditures

(16,169)

(9,861)

(36,030)

Acquisition of business, net of cash acquired

(285,081)

(1,098)

(625)

Proceeds from disposal of assets

4,432

288

Other investing activities

330

-

-

Net cash used in investing activities

(64,706)

(10,959)

(36,367)

Cash Flows from Financing Activities:

Redemption of ordinary shares

(19,380)

-

-

Proceeds from issuance of shares

48,294

-

-

Proceeds from borrowings

100,000

47,063

-

Payment of deferred underwriting fees

(5,333)

(164)

(2,885)

Proceeds from lines of credit and other debt

-

-

749

Dividend paid

-

(48,210)

(5,000)

Other financing activities, net

(5,792)

(4,429)

(1,734)

Net cash provided by (used in) financing activities

117,789

(5,740)

(8,870)

Effect of exchange rate changes on cash

-

(16)

(40)

Net increase in cash

67,514

4,111

2,840

Cash, beginning of period

46

27,545

25,534

Cash, end of period

$67,560

$31,656

$28,374

Supplemental disclosure of cash flow information

Interest paid

3,724

3,636

4,222

Taxes paid

3,129

345

358

NATIONAL ENERGY SERVICES REUNITED CORP. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME
(Unaudited)
(In thousands)

The Company uses and presents certain key non-GAAP financial measures to evaluate its business and trends, measure performance, prepare financial projections and make strategic decisions. Included in this earnings release are discussions of earnings before interest, income tax and depreciation and amortization adjusted for certain non-recurring and non-core expenses ("Adjusted EBITDA"), as well a reconciliation of this non-GAAP measure to net income in accordance with U.S. GAAP.

The Company believes that the presentation of Adjusted EBITDA provides useful information to investors in assessing its financial performance and results of operations as the Company's board of directors, management and investors use Adjusted EBITDA to compare the Company's operating performance on a consistent basis across periods by removing the effects of changes in capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization and impairment), items that do not impact the ongoing operations (Business Combination transaction expenses and related integration costs) and items outside the control of its management team. Adjusted EBITDA should not be considered as an alternative to net income, the most directly comparable GAAP financial measure. Non-GAAP financial measures have important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measure. You should not consider non-GAAP measures in isolation or as a substitute for an analysis of the Company's results as reported under U.S. GAAP.

Successor (NESR)

July 1, 2018 to September 30, 2018

Net Income (loss)

16,157

Add:

Income Taxes

3,989

Interest Expense, net

6,199

Depreciation and Amortization

17,694

Transaction and Integration Costs

2,434

Total Adjusted EBITDA

46,473

Successor (NESR)

Predecessor (NPS), NESR and GES

Combined

June 7, 2018 to September 30, 2018

January 1 To June 6, 2018

YTD January 1 To September 30, 2018

Net Income (loss)

12,191

4,544

16,735

Add:

Income Taxes

2,960

3,705

6,665

Interest Expense, net

8,100

5,097

13,197

Depreciation and Amortization

24,154

26,085

50,238

Transaction and Integration Costs

9,736

15,227

24,963

Total Adjusted EBITDA

57,140

54,658

111,798

Successor (NESR)

Predecessor (NPS), NESR and GES

Combined

June 7, 2018 to June 30, 2018

April 1 To June 6, 2018

April 1 To June 30, 2018

Net Income (loss)

(3,965)

(1,500)

(5,465)

Add:

Income Taxes

(1,029)

1,804

775

Interest Expense, net

1,900

1,370

3,270

Depreciation and Amortization

6,460

10,338

16,798

Transaction and Integration Costs

7,832

11,047

18,879

Total Adjusted EBITDA

11,198

23,059

34,257

Distributed by APO Group on behalf of National Energy Services Reunited Corp.

For inquiries regarding NESR, please contact:
Dhiraj Dudeja
NESR Corp.
832-925-3777
or
Joseph Caminiti or Steve Calk
Alpha IR Group
312-445-2870

MENAFN0811201800701784ID1097676180


National Energy Services Reunited Corp. reports Third Quarter 2018 Results

APO (http://www.APO-opa.com) is the sole press release newswire in Africa and is a global leader in media relations relating to Africa.
APO is the undisputed source of press releases and multimedia files related to Africa, publishing press releases, videos, photos, documents and audio-files for high-quality, authoritative sources, including global fortune 1000 companies, renowned PR agencies, government and international institutions.

  Most popular stories  

Day | Week | Month