Nuverra Announces Second Quarter and Year-to-Date 2019 Results

SCOTTSDALE, Ariz.–(BUSINESS WIRE)–Nuverra Environmental Solutions, Inc. (NYSE American: NES) (“Nuverra,” the “Company,” “we,” “us” or “our”) today announced financial and operating results for the second quarter and six months ended June 30, 2019.

SUMMARY OF QUARTERLY RESULTS

  • Second quarter revenue was $45.2 million, an increase of approximately 6.1%, or $2.6 million, when compared with revenue of $42.6 million in the first quarter of 2019.
  • When compared to the same period in the prior year, second quarter revenue decreased 7.6%, or $3.7 million.
  • Net loss for the second quarter was $5.0 million as compared to $6.4 million in the first quarter of 2019 and $11.2 million in the second quarter of 2018.
  • Adjusted EBITDA for the second quarter was $5.3 million, an increase of $0.8 million compared with $4.5 million in the first quarter of 2019.
  • Adjusted EBITDA for the second quarter increased by $1.2 million over the same period in the prior year.
  • Total liquidity available for capital spending and other purposes as of June 30, 2019 was $22.6 million.

Overall the second quarter reflected our continued efforts to improve our business in a stable to challenging industry backdrop,” said Charlie Thompson, Chief Executive Officer. “The Rocky Mountain division saw increases in company truck revenue of 4%, salt water disposal well revenue of 36%, rental revenue of 8%, and landfill revenue of 7% when compared to the same period in the prior year. Conversely, revenue related to the use of outside truckers for fracking projects declined 17%, and revenue from lay flat temporary hose declined 84%. The division generated comparable EBITDA, despite a 13% reduction in total revenue as compared to the same period in the prior year, partially as a result of systems modernization and centralization, and management level downsizing that lowered divisional overhead by 36%. The Northeast division saw a dramatic increase in water reuse in 2019. The geographic advantage of our Clearwater acquisition enabled us to increase disposal volumes 155% when compared to the same period in the prior year even with difficult market conditions. However, trucking revenues fell 11% in the suboptimal reuse operating environment. Our focus in the Northeast division continues to be on combining trucking and disposal services for our customers and diversifying our customer base. In the Southern division, revenues declined 11% when compared to the same period in the prior year as a result of materially lower pipeline volumes from a sizable customer, offset by additional volumes from other customers and new business. The influx of new business in the Southern division has helped diversify our customer base in a competitive gas focused market.”

SECOND QUARTER 2019 RESULTS

Second quarter revenue was $45.2 million, an increase of $2.6 million, or 6.1%, from $42.6 million in the first quarter of 2019. Of this 6.1% increase, approximately 7.3% is attributable to increase in activities and (1.1)% to pricing decreases.

When compared to the second quarter of 2018, second quarter 2019 revenue decreased by 7.6%, or $3.7 million, primarily due to decreases in activity levels for water transfer services for all three divisions, partially offset by increases in disposal services in all three divisions. In the Rocky Mountain division, the decrease in water transfer service revenues related to lower trucking volumes for completion projects. Additionally, there was a $2.5 million decrease in water transfer service revenues from lay flat temporary hose due to increased competition for this service in 2019. In the Northeast division, the reuse of production water in customer completion activities during the second quarter of 2019 negatively impacted our activity levels for water transfer services. Offsetting this decrease in the Northeast was an increase in disposal services primarily due to the acquisition of Clearwater Solutions in the fourth quarter of 2018, which contributed revenues of $2.0 million in the second quarter of 2019. In the Southern division, the lower activity levels for water transfer services is due to a decrease in volumes from two key customers in the division. We have replaced some of the lost volume from these customers with new customers and increased volumes through our truck disposal terminal connected to the pipeline.

Total costs and expenses for the second quarter were $49.1 million. Total costs and expenses, adjusted for special items, were $49.3 million, or a $2.0 million increase when compared with $47.3 million in the first quarter of 2019. Total costs and expenses, adjusted for special items, decreased 13.3% compared with $56.9 million in the second quarter of 2018 as a result of a favorable service mix due to growth in higher margin disposal services and active cost reduction efforts over the past year.

Net loss for the second quarter was $5.0 million, an improvement of $1.4 million when compared with a net loss of $6.4 million in the first quarter of 2019. Net loss for the second quarter of 2018 was $11.2 million. For the second quarter of 2019, the Company reported a net loss, adjusted for special items, of $5.3 million. Special items in the second quarter primarily included gains on the sale of underutilized assets, offset by stock-based compensation expense. This compares with a net loss, adjusted for special items, of $6.1 million in the first quarter of 2019 and $9.0 million in the second quarter of 2018.

Adjusted EBITDA for the second quarter of 2019 was $5.3 million, an increase of $0.8 million compared with $4.5 million in the first quarter of 2019. Of the 17.7% increase in adjusted EBITDA, 39.0% related to an increase in activity levels, partially offset by (10.3)% for corporate items and (11.0)% for pricing decreases. When compared to the second quarter of 2018, adjusted EBITDA increased $1.2 million, or 27.9%. The 27.9% increase is comprised of a benefit of 42.1% for acquisitions/closures and 14.0% for corporate items, offset by (23.0)% for decreases in pricing and (5.2)% for decreases in activity levels. Second quarter 2019 adjusted EBITDA margin was 11.7%, compared with 10.6% in the first quarter of 2019 and 8.5% in the second quarter of 2018.

YEAR-TO-DATE RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2019 (“YTD”)

YTD revenue was $87.9 million, a decrease of $10.7 million, or 10.9%, from $98.6 million for the same period in 2018. The decrease in revenues is primarily due to decreases in water transfer services in all three divisions, partially offset by increases in disposal services in all three divisions. Additionally, $1.8 million in revenues associated with the Eagle Ford Shale area were included in revenues in the prior year but did not reoccur in the current year due to management’s decision to exit the Eagle Ford Shale area as of March 1, 2018.

In the Rocky Mountain division, the decrease in water transfer service revenues related to lower trucking volumes for completion projects. Additionally, there was a $2.4 million decrease in water transfer service revenues from lay flat temporary hose due to increased competition for this service in 2019. In the Northeast division, the reuse of production water in customer completion activities during the first six months of 2019 negatively impacted our activity levels for water transfer services. Offsetting this decrease in the Northeast was an increase in disposal services primarily due to the acquisition of Clearwater Solutions in the fourth quarter of 2018, which has contributed revenues of $4.4 million thus far in 2019. In the Southern division, the lower activity levels for water transfer services is due to a decrease in volumes from two key customers in the division.

YTD net loss was $11.4 million, an improvement of $31.9 million when compared with a net loss of $43.3 million for the same period in 2018. YTD net loss, adjusted for special items, was $11.5 million, an improvement of $11.2 million when compared with a net loss, adjusted for special items, of $22.7 million for the same period in 2018. YTD special items primarily included gains on the sale of underutilized assets, offset by stock-based compensation expense and long-lived asset impairment charges.

YTD adjusted EBITDA was $9.8 million, an increase of $3.3 million, or 50.9%, when compared with the same period in 2018. Adjusted EBITDA margin for the 2019 YTD period was 11.2%, compared with 6.6% in 2018.

CASH FLOW AND LIQUIDITY

Net cash provided by operating activities for the six months ended June 30, 2019 was $4.5 million, while capital expenditures net of asset sales consumed cash of $0.5 million. Asset sales were related to unused or under-utilized assets. The proceeds have been reinvested in 2019 in returns-driven growth projects, including the purchase of new water transfer trucks for our fleet.

Total liquidity available for capital spending and other purposes as of June 30, 2019 was $22.6 million. This consisted of cash and available revolver borrowings of $16.9 million, plus an additional $5.7 million delayed draw borrowing capacity under our second lien term loan. As of June 30, 2019, total debt outstanding was $37.1 million, consisting of $19.7 million under our senior secured term loan facility, $9.8 million under our second lien term loan facility, and $7.7 million of finance leases.

About Nuverra

Nuverra Environmental Solutions, Inc. is a leading provider of water logistics and oilfield services to customers focused on the development and ongoing production of oil and natural gas from shale formations in the United States. Our services include the delivery, collection, and disposal of solid and liquid materials that are used in and generated by the drilling, completion, and ongoing production of shale oil and natural gas. We provide a suite of solutions to customers who demand safety, environmental compliance and accountability from their service providers. Find additional information about Nuverra in documents filed with the U.S. Securities and Exchange Commission (“SEC”) at http://www.sec.gov.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. You can identify these and other forward-looking statements by the use of words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “might,” “will,” “should,” “would,” “could,” “potential,” “future,” “continue,” “ongoing,” “forecast,” “project,” “target” or similar expressions, and variations or negatives of these words.

These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, and any forward-looking statements contained herein are based on information available to us as of the date of this press release and our current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. Future performance cannot be ensured, and actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include, among others: financial results that may be volatile and may not reflect historical trends due to, among other things, changes in commodity prices or general market conditions, acquisition and disposition activities, fluctuations in consumer trends, pricing pressures, transportation costs, changes in raw material or labor prices or rates related to our business and changing regulations or political developments in the markets in which we operate; risks associated with our indebtedness, including changes to interest rates, decreases in our borrowing availability, our ability to manage our liquidity needs and to comply with covenants under our credit facilities; the loss of one or more of our larger customers; difficulties in successfully executing our growth initiatives, including identifying and completing mergers, acquisitions and divestitures, successfully integrating merged or acquired business operations, and identifying and managing risks inherent in mergers, acquisitions and divestitures, as well as differences in the type and availability of consideration or financing for such mergers, acquisitions and divestitures; our ability to attract and retain key executives and qualified employees in key areas of our business; our ability to attract and retain a sufficient number of qualified truck drivers in light of industry-wide driver shortages and high-turnover; the availability of less favorable credit and payment terms due to changes in industry condition or our financial condition, which could constrain our liquidity and reduce availability under our revolving credit facility; higher than forecasted capital expenditures to maintain and repair our fleet of trucks, tanks, equipment and disposal wells; control of costs and expenses; changes in customer drilling, completion and production activities, operating methods and capital expenditure plans, including impacts due to low oil and/or natural gas prices or the economic or regulatory environment; risks associated with the limited trading volume of our common stock on the NYSE American Stock Exchange, including potential fluctuation in the trading prices of our common stock; risks and uncertainties associated with our completed restructuring process, including the outcome of a pending appeal of the order confirming the plan of reorganization; risks associated with the reliance on third-party analysts, appraisers, engineers and other experts; present and possible future claims, litigation or enforcement actions or investigations; risks associated with changes in industry practices and operational technologies and the impact on our business; risks associated with the operation, construction, development and closure of saltwater disposal wells, and transportation assets, landfills and pipelines, including access to additional locations and rights-of-way, permitting and licensing, environmental remediation obligations, unscheduled delays or inefficiencies and reductions in volume due to micro- and macro-economic factors or the availability of less expensive alternatives; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; changes in economic conditions in the markets in which we operate or in the world generally, including as a result of political uncertainty; reduced demand for our services due to regulatory or other influences related to extraction methods such as hydraulic fracturing, shifts in production among shale areas in which we operate or into shale areas in which we do not currently have operations; the unknown future impact of changes in laws and regulation on waste management and disposal activities, including those impacting the delivery, storage, collection, transportation, treatment and disposal of waste products, as well as the use or reuse of recycled or treated products or byproducts; risks involving developments in environmental or other governmental laws and regulations in the markets in which we operate and our ability to effectively respond to those developments including laws and regulations relating to oil and natural gas extraction businesses, particularly relating to water usage, and the disposal, transportation and treatment of liquid and solid wastes; and natural disasters, such as hurricanes, earthquakes and floods, or acts of terrorism, or extreme weather conditions, that may impact our business locations, assets, including wells or pipelines, distribution channels, or which otherwise disrupt our or our customers’ operations or the markets we serve.

The forward-looking statements contained, or incorporated by reference, herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s views as of the date of this press release. The Company undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, changes in expectations or otherwise. Additional risks and uncertainties are disclosed from time to time in the Company’s filings with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

– Tables to Follow –

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

Revenue:

 

 

 

 

 

 

 

Service revenue

$

41,238

 

 

$

45,320

 

 

$

80,239

 

 

$

90,847

 

Rental revenue

 

4,002

 

 

 

3,628

 

 

 

7,628

 

 

 

7,770

 

Total revenue

 

45,240

 

 

 

48,948

 

 

 

87,867

 

 

 

98,617

 

Costs and expenses:

 

 

 

 

 

 

 

Direct operating expenses

 

34,517

 

 

 

39,069

 

 

 

67,074

 

 

 

80,696

 

General and administrative expenses

 

5,280

 

 

 

6,014

 

 

 

10,755

 

 

 

25,334

 

Depreciation and amortization

 

9,277

 

 

 

11,969

 

 

 

18,412

 

 

 

26,713

 

Impairment of long-lived assets

 

 

 

332

 

 

 

117

 

 

 

4,463

 

Other, net

 

(6

)

 

 

469

 

 

 

(6

)

 

 

1,068

 

Total costs and expenses

 

49,068

 

 

 

57,853

 

 

 

96,352

 

 

 

138,274

 

Operating loss

 

(3,828

)

 

 

(8,905

)

 

 

(8,485

)

 

 

(39,657

)

Interest expense, net

 

(1,297

)

 

 

(1,204

)

 

 

(2,718

)

 

 

(2,454

)

Other income, net

 

152

 

 

 

587

 

 

 

177

 

 

 

514

 

Reorganization items, net

 

13

 

 

 

(1,654

)

 

 

(210

)

 

 

(1,746

)

Loss before income taxes

 

(4,960

)

 

 

(11,176

)

 

 

(11,236

)

 

 

(43,343

)

Income tax expense

 

(46

)

 

 

 

 

(125

)

 

 

Net loss

$

(5,006

)

 

$

(11,176

)

 

$

(11,361

)

 

$

(43,343

)

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

Net loss per basic common share

$

(0.32

)

 

$

(0.96

)

 

$

(0.73

)

 

$

(3.71

)

 

 

 

 

 

 

 

 

Net loss per diluted common share

$

(0.32

)

 

$

(0.96

)

 

$

(0.73

)

 

$

(3.71

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

15,704

 

 

 

11,696

 

 

 

15,627

 

 

 

11,696

 

Diluted

 

15,704

 

 

 

11,696

 

 

 

15,627

 

 

 

11,696

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

June 30,

 

December 31,

 

2019

 

2018

Assets

 

 

 

Cash and cash equivalents

$

5,978

 

 

$

7,302

 

Restricted cash

 

1,875

 

 

 

656

 

Accounts receivable, net

 

28,777

 

 

 

31,392

 

Inventories

 

3,213

 

 

 

3,358

 

Prepaid expenses and other receivables

 

3,011

 

 

 

2,435

 

Other current assets

 

518

 

 

 

1,582

 

Assets held for sale

 

4,504

 

 

 

2,782

 

Total current assets

 

47,876

 

 

 

49,507

 

Property, plant and equipment, net

 

203,354

 

 

 

215,640

 

Operating lease assets

 

3,612

 

 

 

Equity investments

 

38

 

 

 

41

 

Intangibles, net

 

882

 

 

 

1,112

 

Goodwill

 

29,518

 

 

 

29,518

 

Other assets

 

99

 

 

 

118

 

Total assets

$

285,379

 

 

$

295,936

 

Liabilities and Shareholders’ Equity

 

 

 

Accounts payable

$

7,052

 

 

$

9,061

 

Accrued and other current liabilities

 

14,144

 

 

 

16,670

 

Current portion of long-term debt

 

6,664

 

 

 

38,305

 

Current contingent consideration

 

500

 

 

 

500

 

Derivative warrant liability

 

6

 

 

 

34

 

Total current liabilities

 

28,366

 

 

 

64,570

 

Long-term debt

 

30,272

 

 

 

27,628

 

Noncurrent operating lease liabilities

 

1,653

 

 

 

Deferred income taxes

 

293

 

 

 

181

 

Other long-term liabilities

 

7,364

 

 

 

7,130

 

Total liabilities

 

67,948

 

 

 

99,509

 

Commitments and contingencies

 

 

 

Shareholders’ equity:

 

 

 

Common stock

 

157

 

 

 

122

 

Additional paid-in capital

 

337,018

 

 

 

303,463

 

Treasury stock

 

(402

)

 

 

Accumulated deficit

 

(119,342

)

 

 

(107,158

)

Total shareholders’ equity

 

217,431

 

 

 

196,427

 

Total liabilities and shareholders’ equity

$

285,379

 

 

$

295,936

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended

 

June 30,

 

2019

 

2018

Cash flows from operating activities:

 

 

 

Net loss

$

(11,361

)

 

$

(43,343

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

 

18,412

 

 

 

26,713

 

Amortization of debt issuance costs, net

 

247

 

 

 

Accrued interest added to debt principal

 

 

 

119

 

Stock-based compensation

 

1,415

 

 

 

11,394

 

Impairment of long-lived assets

 

117

 

 

 

4,463

 

Gain on sale of UGSI

 

 

 

(75

)

Gain on disposal of property, plant and equipment

 

(1,706

)

 

 

(254

)

Bad debt (recoveries) expense

 

(9

)

 

 

120

 

Change in fair value of derivative warrant liability

 

(28

)

 

 

(289

)

Deferred income taxes

 

112

 

 

 

Other, net

 

55

 

 

 

221

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

2,724

 

 

 

(1,631

)

Prepaid expenses and other receivables

 

(576

)

 

 

(99

)

Accounts payable and accrued liabilities

 

(6,059

)

 

 

2,243

 

Other assets and liabilities, net

 

1,111

 

 

 

(54

)

Net cash provided by (used in) operating activities

 

4,454

 

 

 

(472

)

Cash flows from investing activities:

 

 

 

Proceeds from the sale of property, plant and equipment

 

4,525

 

 

 

17,649

 

Purchases of property, plant and equipment

 

(5,019

)

 

 

(7,103

)

Proceeds from the sale of UGSI

 

 

 

75

 

Net cash (used in) provided by investing activities

 

(494

)

 

 

10,621

 

Cash flows from financing activities:

 

 

 

Payments on First and Second Lien Term Loans

 

(2,514

)

 

 

(1,597

)

Proceeds from Revolving Facility

 

96,677

 

 

 

117,092

 

Payments on Revolving Facility

 

(96,677

)

 

 

(117,092

)

Payments on Bridge Term Loan

 

(31,382

)

 

 

Proceeds from the issuance of stock

 

31,057

 

 

 

Payments on finance leases and other financing activities

 

(1,226

)

 

 

(980

)

Net cash used in financing activities

 

(4,065

)

 

 

(2,577

)

Change in cash, cash equivalents and restricted cash

 

(105

)

 

 

7,572

 

Cash and cash equivalents, beginning of period

 

7,302

 

 

 

5,488

 

Restricted cash, beginning of period

 

656

 

 

 

1,296

 

Cash, cash equivalents and restricted cash, beginning of period

 

7,958

 

 

 

6,784

 

Cash and cash equivalents, end of period

 

5,978

 

 

 

12,808

 

Restricted cash, end of period

 

1,875

 

 

 

1,548

 

Cash, cash equivalents and restricted cash, end of period

$

7,853

 

 

$

14,356

 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS

(In thousands)

(Unaudited)

This press release contains non-GAAP financial measures as defined by the rules and regulations of the United States Securities and Exchange Commission. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations or balance sheets of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures are included in the attached financial tables.

These non-GAAP financial measures are provided because management of the Company uses these financial measures in maintaining and evaluating the Company’s ongoing financial results and trends.

Contacts

Nuverra Environmental Solutions, Inc.

Investor Relations

602-903-7802

ir@nuverra.com

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