Basic Energy reports lower rig utilization rates, Q1 revenue will be down 17%

Basic Energy CEO says oil prices under $30 WTI have caused many producers to cut back on projects

Basic Energy Services, Inc. says rig utilization rates have plummeted over the past year and the Forth Worth, Texas-based company continues to stack equipment due to soft customer demand caused by low oil prices.

Basic’s well servicing rig count remained unchanged at 421. Well servicing rig hours for the month were 37,200 producing a rig utilization rate of 35 per cent, compared to 38 per cent and 55 per cent in Jan. 2016 and Feb. 2015, respectively.

“February activity remained soft on continued low levels of spending by our customers, including spending for maintaining existing oil wells, which reduced well servicing utilization,” said CEO Roe Patterson in a press release.

“Our pumping services utilization was impacted by several projects being delayed by our customers.  Our fluid services business, anchored by our extensive network of salt-water disposal wells, continues to operate at stable levels despite the current environment as we benefit from protected market share and a low cost structure.

During Feb. Basic Energy’s fluid service truck count increased by one to 987. Fluid service truck hours for the month were 168,100, compared to 180,800 and 184,100 in Jan. 2016 and Feb. 2015, respectively.

“As of Feb. 29, we have stacked 119,000 hydraulic horsepower due to lower completion demand.  We also stacked nine additional well servicing rigs in Feb.to bring our total stacked rig inventory to 119 at month end.  We will continue to adjust our operations and structure to adapt to the current market environment,” said Patterson.

Drilling rig days for the month were 29 producing a rig utilization of 8 per cent, compared to 8 per cent and 63 per cent in Jan. 2016 and Feb. 2015, respectively.

Roe Patterson, Basic’s President and Chief Executive Officer

“In our fourth quarter earnings call, we had said that we believed that revenues for the first quarter of 2016 would be in the range of 10 per cent lower sequentially. We had anticipated a growing inventory of maintenance and workover projects being deferred at the end of 2015, and our customers indicated many of these would be completed in the first quarter,” Patterson said.

“This inventory has indeed grown, but our customers’ reactions to sub-thirty dollar dips in WTI pricing have been swift and drastic, thereby postponing several of these projects. Visibility as to when these projects will be completed is currently unclear, though we still believe they offer the lowest cost per barrel of all capex options available to our clients.

“These jobs are typically much cheaper than new drills and can be quickly activated. However, because of this near term uncertainty, and these very recent delays, we are guiding first quarter revenue to 16 per cent to 17 per cent lower sequentially.”