Basic Energy Services reports Q1 loss of $89.9 million

Basic EnergyCEO Roe Patterson says improving capital structure of Basic Energy Services remains a primary focus

Basic Energy Services’ second quarter 2016 revenues declined 8 per cent to $120.0 million from $130.4 million, as continued low levels of activity driven by weak and volatile energy prices and significant weather impact during the first two months of the quarter and drove customers to further delay a growing inventory of maintenance and workover projects.

Basic Energy

Roe Patterson, Basic Energy President and CEO.

In the second quarter of 2015, Basic Energy generated $193.6 million in revenues, the company said in a press release. For the second quarter of 2016, Basic reported a net loss of $89.9 million, or a loss of $2.11 per basic and diluted share. This includes a non-cash charge of $32.9 million, or $0.77 per basic and diluted share, related to a valuation allowance on federal deferred tax assets.

“While revenue came in slightly better than our modified guidance and we believe activity levels probably reached the bottom of this cycle during the month of May, our second quarter results continued to reflect the uncertainty and volatility in oil prices; forcing our customers to further curtail their capital spending programs,” said CEO Roe Patterson.

“In addition, unprecedented rainy conditions in the first two months of the quarter, which represented approximately three percentage points of the total sequential revenue drop, added to the challenges we faced.”

Excluding this valuation allowance, Basic reported a net loss of $57.0 million, or $1.34 per basic and diluted share for the second quarter of 2016.

For the first quarter of 2016, Basic Energy reported a net loss of $83.3 million, or a loss of $2.00 per basic and diluted share, which included a tax-effected, non-cash charge of $1.3 million, or $0.03 per basic and diluted share pertaining to the early extinguishment of deferred debt costs related to the amendment of Basic’s revolving credit facility and a non-cash charge of $27.3 million, or $0.66 per share, related to a valuation allowance on federal deferred tax assets.

Excluding the impact of these special items, Basic Energy reported a net loss of $54.8 million, or a loss of $1.32 per basic and diluted share for the first quarter of 2016. In the second quarter of 2015, Basic Energy reported a net loss of $48.3 million, or a loss of $1.20 per basic and diluted share.

Excluding a special item related to a credit given to a customer resulting from the settlement of an audit, Basic Energy reported a net loss of $45.4 million, or $1.13 per basic and diluted share for the second quarter of 2015.

“While margins for the quarter reflect the continued competitive pricing environment, our utilization numbers have held up well compared to the overall softening market conditions,” said Patterson.

“For this reason, we believe we have gained market share in our production oriented business lines such as well servicing and fluid services. Should the improved activity levels we saw in June, and early July, continue for the remainder of the year, we will fall back on this higher market share to drive our business during the recovery.

Patterson says Basic Energy made further progress in the quarter to adjust both our operational infrastructure and general & administrative costs to address the prolonged weak market conditions.

“We continue to look for ways to operate in a cost effective manner to get the company to cash flow break-even or better by the end of the second half of 2016. This will be difficult to achieve without continued improvements in overall activity levels,” he said.

Patterson says improving the capital structure remains a primary focus for the company: “We have retained the firm of Moelis & Companyand the law firm of Weil, Gotshal, & Manges LLP to assist us in discussions with certain creditors to achieve our goals. These discussions are ongoing at this time.”

Posted in: Energy Financial

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