Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to Nine Energy Service Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Sirkes. Guy you. Thank

begin. You may

Guy Sirkes

leave. With Good family. participation. Energy morning, results to you. on addition Officer. of and the President upcoming Ann and an Chief is wanted everyone, earnings conference to currently Nine Executive out XXXX. year Service full our appreciate quarter the today call on is fourth Fox, She your Thank maternity We and welcome her me We to for Heather to discuss congratulate

of may Nine's Some today view about reflecting comments forward-looking statements our include future events.

review a are subject These risk the of statements cause many advise SEC. materially Forward-looking in our uncertainties, discussed uncertainties current factors to of and are to actual filings earnings control. number our release our with risks differ the to We from beyond and and our results can which expectations. risks listeners

revise to reason. publicly obligation no forward-looking any undertake or statements for update We any

measures. include comments financial today also Our non-GAAP

financial Additional Relations details also be our reconciliation most our to in included and the and comparable website. a of quarter Investor full the release year measures found in can press are section fourth and GAAP directly

will Ann turn the Fox. I call to now over

Ann Fox

and Good XXXX. discuss you today Thank morning, our Guy. results year for us fourth joining you, Thank everyone. quarter full for to

revenue was our our XX%. to increased to by and for margin and XX%, capitalize by XXXX a adjusted XX Year-over-year, the EBITDA able times increased year our space Nine from on market. was strong oilfield services we an over adjusted improving X% EBITDA

growth approach new our very turnover. navigating pressures, liquidity with XX% the am team's Our is was company. on simultaneously delevering XX%. invested managing simultaneously XXXX return pleased discipline capital inflationary and solid XXXX was and approximately I higher while and margin constraints EBITDA for to This labor employee incremental adjusted while

year. several in million. years, on the last this bonds successful January execution aided we've by refinancing $XX in This market, over reducing of term our of our repurchased debt Over the open the

capital unlock delever new in we have optionality now to continue the to forward. With moving more and value, to structure equity we place, intend

While as pricing frac increased overall I year-over-year, a of categorize XXXX rig story. activity and would more

kept undersupplied, not have capital new equipment. did OFS or access and equipment OFS existing in in invest Underinvestment equipment to to companies

the market pricing drove extremely leverage two Additionally, towards XXXX. These providers constrained. in remained labor elements service back

During grew XX% XXXX, approximately in share, percentage market within and our XX% stages completion approximately in we to completed from growing XXXX. XXXX wireline tools of

and in market in profitability. approximately in approximately Additionally we share conjunction the came grew from to cementing, of followed share significant we gains XXXX growth with our These XXXX. in XX% operate market and rigs basins XX%

In completion over tools, by we grew performance our of We U.S. remain the same completions, increased EIA time XX% unit XX% number the increasing of dissolvable plug, dissolvable stages completed total with compared to by Stinger approximately that of period. which total year-over-year. extremely sold happy number XX% by the year-over-year approximately approximately

composite also strong XX% composite U.S. both and increasing a in held that dissolvable approximately have XX% by We number Nine, of XXXX estimate We of the market, plug composite maintained sold total approximately total plugs the year-over-year. plugs. plug including business,

with and through service the We're year-over-year. while precise approximately approximately to jobs number cementing execution. increasing proprietary this Our also able create by site technical of drive average highly by XX% slurries per line facilities well total profitable completed increased job state-of-the-art price XX% our growth lab that year-over-year, our coupled

both, by demonstrated increasing year-over-year growth pricing, also approximately XX% days day approximately in year-over-year. the and average strong activity rate by XX% Coiled and tubing worked

in Ford a new identified markets. team utilization and maintained existing market tubing coiled the pricing within Our and strong Eagle our

has approximately perspective. a price per line year-over-year, a XX% from stage increasing completed pricing wireline, XX%. This stages total service with In increased been average by approximately challenging by the

insight customer's market. into well plays it important an intelligence the and in the and completion important role However, completion provides

customers made quantifying substantial for new identifying able technologies to GHG Part well as help the emissions. We are data. internal procedures as our measurements development our first of their GHG emissions quantify a were XXXX XXXX that to included investment this these the time and in and working strategy ESG Nine for on reduce commitment through policies, emissions. of and

we identifying this reduce developing efficient data while procedures Through we can accurate on process, collection are more we simultaneously our to gaps make and strategies the and of how this forward as emissions. move

and priorities We continue on details provide will moving to progress our forward.

made profitability the to priority invest it helping that emissions. technologies company a for in We also drive have reduce while to

made commitment hydraulic units significant in diesel electric more wireline on costs XXXX. four convert savings wireline In to The maintenance Nine. electric provide both a and two XXXX, to for we monthly and converted units

GHG reduces introduced And Nine, significantly ring. dissolvable we XXXX, pumpdown plug dissolvable Our emissions. during

dissolvable by ring requirements to shown by water required XX%, XX%. The diesel to pumpdown XX% at depth approximately the been reduce pump set approximately approximately fuel usage to by has plug horsepower and

was total rate year million. $X.XX was incredible who with Net excellent basic million. always through share Company million score Nine diluted so quality, income downs, $XX.X year Once team many the an incident X.XX. service $XXX.X recordable $XX.X the per and of ups Lastly, with $X.XX company reputation, of integrity the and we keeping I recognize or was a the the ended led want safety share. intact. to Adjusted revenue per for EBITDA again,

within share. revenue to $XX EBITDA of per for adjusted which million, million diluted XX%. original reflecting million, QX, or We was $X $X.XX our Net adjusted the $XXX million. quarter and $XXX Now fell EBITDA of margin was $X.XX an of $XXX.X basic per guidance generated income to million share turning

was ROIC in compared holidays highly tool and to for expectations. slightly of international completion XX%. typical management's is QX. down sales was approximately QX for due Adjusted line with EBITDA fourth to mostly that QX was quarter the

to I walk would through call now the to financial over like Guy to detailed information. turn

Guy Sirkes

Ann. you, Thank

each funded new common $X,XXX with proceeds principal In partially and XXXX XX% January, to due offering units, was the our stock. want of on comprised of senior due we Nine's elaborating of XXXX, redemption by announced of of structure. amount notes net our I shares which begin secured capital of XXX,XXX five notes senior the Nine's

revolving and unit of XXXX. amended post-closing our the we credit ABL offering, existing unit terms January asset-based unit's the offering. and collateralization new for extended days ABL amended XX to with and the conjunction within Both the of facility completed were In

We facility free new repay debt. be believe the intend to capital which structure this we will moving provides to flow optionality value. reduce more And any equity generation, under term used delever borrowings ABL and forward, through unlock to cash

XXXX, million under XX, as resulting under XXXX. a million On borrowings in of December of $XX.X of were cash equivalents million million, $XX.X liquidity had and XX, position of revolving the December $XX company credit revolving credit December facility. As the availability facility, XX, cash of XXXX, Nine's the with $XX total

the X.XX% due an pay facility and the the additional XXXX, XX, of senior and to On XXXX related a portion for price borrowed $XX under to for January revolving notes redemption million pay the of to company expenses credit fees offering. the units

the million $XXX.X profit fourth million. During adjusted $XX.X totaled with revenue quarter, of gross

fourth cementing by third the decrease jobs, quarter, X,XXX blended increased we per X%. approximately approximately the During a completed of revenue job average quarter. X% The versus

quarter increase for was revenue of X%. the an approximately million, $XX Cementing

quarter-over-quarter. The we X,XXX approximately wireline quarter of $XX.X the an average completed Wireline flat million, was the stages, stage revenue X%. quarter, X%. was During blended approximately for increase increase revenue per fourth an of

XX%. revenue a decrease X%. Completion approximately was XX,XXX $XX.X completed we of tools, completion approximately million, a of decrease tool stages, For

was our quarter During increased revenue day days X%. tubing the X%, rate tubing the worked $XX.X Coiled fourth an of quarter, X%. the increasing with XX%. approximately coiled the utilization for average increase approximately tubing approximately was during by by blended Coiled quarter million,

and expense expense $X.X quarter for general During company $XX.X of was the quarter. was the administrative fourth G&A $XX.X $XX.X in the $XX.X fourth amortization and million compared was the Depreciation to compared $XX.X million. in G&A year to Full quarter. the Full million reported third quarter, million year third million million.

year, of provision effective tax in $X.X an income X.X% approximately of resulting the an recognized company XXXX. million rate for tax for The

provision tax in of result and is the jurisdictions. XXXX foreign state tax Our for tax our primarily position

by year was which XX.X for reasonable the cash million. into for company a net days, The end DSO is XXXX DSO For activities XXXX, of the $XX.X average reported XXXX. provided looking operating proxy

$XX.X $XX $XX guidance includes management's Our million The XXXX million, $X.X million that fell QX. following total of which original $XX.X spend approximately fell to $XX.X million of for XXXX with CapEx was into CapEx, million million, slightly above XXXX.

Looking $XX units towards to of majority with CapEx to into XX% million this of of million, additional of The go being allocated still four $XX total XXXX, CapEx electric. we anticipate over wireline the conversion will maintenance capital. our towards growth

taxes. net operating loss move meaningful any changes. we our in revenue with cash Working capital substantial carryforward anticipate do not conjunction Given will balance,

back I Ann. to will now it turn

Ann Fox

Thank you, Guy.

flat. production U.S. believe and increase both to a We to anticipate need production. OPEC a operators by keep to XXXX wells taking supportive XXXX cycle market U.S. double-digits longer total for drill to and CapEx approach will fundamentals remain more operators over Overall, more disciplined with

constraints. the XXXX, continues lack companies constraints Throughout to be this, pledging alleviated. instead labor shareholders of both have are With discipline we OFS adopting well return in to and been as investing within equipment. OFS, capital to neither of discussed cash as of equipment capital labor and new There which access a to

and wellbore. quality We up dissolvable Nine. reliable, and across QX comfortable reliability allowing anticipate and our important our of of well a meaningful do is will for be introduction more for to we history dissolvable have friendly which their plug of running continue technology run types, efficient Since to Stinger customers built be to in environmentally the driver growth continues XXXX, the sales an plugs become with option in The basins operators.

balance Given of to priorities. will our strong and top experience sheet be moving through maintaining critical, the delevering believe a Nine's is we cycles, forward, one continue

the the flow capital used will flexibility cash new Our ABL gives debt. be free and and us delever reduce to to any repay structure term

end with far QX, compared XX rigs count XXXX. to transitioning to QX has activity declining since rig thus of the down the been by Now

of to days one depending on carry between service cost labor inclement to which will requiring loss impact EBITDA Nine weather revenues, Additionally, us the no margin. the to negatively line of matching five our with operations

levels several seen and of will a XX% anticipate the comprised Haynesville total these affect Haynesville. in sharp revenue. in Over term. effects natural approximately gas We decline the the Nine's months, in felt and Northeast Haynesville have the last will more be which the we prices, strongly Northeast activity Together, in near

we for today, we that the global revenue million be versus That to seen, slightly very to important said, With of We pieces and of dynamics industry as basins and long-term. feel this quickly, footprint. revenue QX supply million. projected to strongly down in operating QX business with the can are know markets $XXX these we Nine's expect we vital very what $XXX are shift have

of diversity diversity, forward-leaning sustained commodity line by service positioned this to geographic Nine is cycle exposure. take technology, our balanced well advantage differentiated are and and

the of one our proven industry. teams we best grow have We ability undoubtedly earnings, to in and the have

We will now Q&A. open up for the call

Operator

Thank you Instructions]. [Operator

first Waqar Syed comes Our Markets. proceed with from ATB question. Please Capital question your with

Waqar Syed

Good taking morning, my for thanks question.

Ann Fox

morning, Waqar. Good

Waqar Syed

you for And - what's do for your margins QX? guidance landing? see those incremental How

Ann Fox

incremental we're million not at top midpoint so quarter-over-quarter. on revenue so, line guiding if million of at the the So, side. margin X.X% you midpoint guidance, on the Obviously, to on about the the $XXX we're decline guiding $XXX our - revenue look or

a We it's some this the degradation but margin, suspect levels. above to I strong very XXXX still will is be have profitability our going margin. to

warmest at ship the So would XXXX. globe frankly, earlier very gas most January not just think the I we've missed strong, the QX was when very February And in and fact quite and for the QX, be that that still seen year we since rocket the of month saw stable, X%.

no cataclysmic profile really for takes the So is or summer is going slowed where that still catastrophic. to just company us. see by down. means really and This a solid But things be has just earnings let's this

But, as was some Waqar over extreme carrying days that so pretty you on know, fun degradation weather a and storm. that is, labor not just margin, those that

wide market, gas eyes open. different a obviously, again, So are we

are - means. is by catastrophic again not not this We any

given that So, the we gas we're for this we in just QX we seen excited very macro. haven't the see just thought year. still It's propulsion would

Waqar Syed

How your we see that rig It's basin? impacting that hasn't pricing next count degradation couple off come you there. of in the now or that see do in some Haynesville months, the yet. as basin really any Yes, other possible

Ann Fox

It's great question. a

really a we're I is so at feels gas much us February and constructive. over gas think now the that that on had looking side the more had reality we all of up $X tough

was negative as I to up a this in would OFS XXXX. price give think sector surprising if is started that income be because it sector a net

And the caps. of for those not are are companies companies, Those and negative and single-digit companies mega scale of outside sustainable. net small EBITDA of margin, XXXX income

for simply that the reflation. now. scenario a we in had we XXXX a price customers are would in just was the past. was I costs These It Goldilocks garnered normalized say sector So I our as And think reflation.

if you and up here price by be amounts I'll means price has this still of gas is very steady at worst massive because, So given surprised being see the seen. this is country again, no $X

to rigs we're rigs would instead So, XX if that terribly not down, just we We're inclining, a been have scenario had forecast not we makes certainly concerned pricing of XX going which up, about where sense. we in seen have this.

Waqar Syed

you've seen I And share year, for you know were jobs. absolutely. also sharing thanks because Yes, strong data. attribute you What gains that and very that refusing market last that would to

gains? So what share really market those substantial led to

Ann Fox

execution, of lot the service incremental customers there knew execution. for technical on that and up division, Well, would selective slurries I grinder development, customers the that and year, our think certainly last we that so had we nose service those value we of incredible very lot then as a to slurry and capabilities well on cementing progress made as picking a

So just came we eight I this, years. tenure our before on - employees think that hired around, of were when is average, out XXXX our of Nine

we able to maintain we XXXX, here. the because into through when field so weren't wheel So, we grab market able were staff came we the to reinventing were our share

simply technology side. their and demoted for same up the positions, labs back tool performance had in the were on through that the as downturns we that We those so into there rigor still thing and rigor is execution that the people well and the - bringing

else what know I that's it. how to So, harder I this does better you team saw say just in and XXXX. think don't

Waqar Syed

that which gas ones exposure exposure, then average about And on below above XX% exposure? average that what have the Okay. side, mentioned you lines revenue that and business have

Ann Fox

I the Sorry, what first the part. missed to average exposure Waqar,

Waqar Syed

more gas there exposure. have number So than which that mentioned was the XX% revenue about less than basin, on a saying business have But exposure - was the I that the gas which XX% just said you you XX% rigs lines number? and

Ann Fox

don't It's only we that one Haynesville, even a pretty have mix. mix even a service the in wireline, across it's lines. otherwise, the The well, pretty - but

Waqar Syed

emission-friendly just what's very then has introduced one service - final cement. And company large Okay. one question,

Ann Fox

Yes [indiscernible].

Waqar Syed

how Yes, does and the what so do - landscape? you that change think competitive

Ann Fox

I as for think, our cement trial own we have ready well. green-friendly

the are it's manufacturing of with getting because this. I Certainly, play large So carbon reality to think of is, operators very, challenging. the are the going around pressure intensity manufacturers very cement. But

isolate these wellbores the to think long-term. integrity same the over with I

the And what, to so, I on long-term think it's yet productivities see wells. are the implications for those

U.S. with on shale in And where degradation productivity struggling time is very of the wellbores. a much those

a I one that proud think important dissolvable an green have than start. Certainly, I our slurry those will say, this, standards. Certainly, own be But a start. instance. it's we're will think, for this take-up to it's be slower slower plug meets a

Waqar Syed

plug international then if the dissolvable And penetration? side, on make Great. any just one on may to you I comments market would like other,

Ann Fox

that, Argentina it direction. markets well great the know you right been as love in the as remain East and And us, the bottom suspect say just for keeps have those and Middle really a also would we strong. worker I market in as Yes, we international going

So, with very, pleased that. very

Waqar Syed

great, thank Okay comments. for much. very your Thanks you

Ann Fox

Thank you, Waqar. Waqar. you, Thank

Operator

Our Bernaldez proceed with next Hutton. your with Ignacio question is EF Please question. from

Ignacio Bernaldez

time morning for your and thank good Hi today. you

Ann Fox

Good morning.

Guy Sirkes

Good morning.

Ignacio Bernaldez

continue you'll it, could to are year? and the as in impact you look there an headwinds at we 'XX that have, Just areas and think supply chain on any the call have

Ann Fox

if by. Peterbilt I are market. these There's, heavy you on incredibly for immediate engines, difficult look would to generally I no our to tell come concerns term have at just say the equipment, example,

equipment. gaps existing, it last manufacturing year. That are there's, the as slowdown remains may fielding picture sector that in same the still So

big, I Fed think We speak. jobs all the the out big ADT comes. is, data next space to of payroll course, for supposed week be that's as service we seen the the challenge saw We've never the come private data, know, recession from today. the and

is the labor think continue number constraint So, oilfield service. to I for going one, be to

see pick be to not obviously, will unbendable This seems expand unemployment average up suspect labor. and first China gas the picks I and American oil rate that and as the be of economy we

to on it. think So, remain is tight about and going I industry we're labor extremely this concerned

Ignacio Bernaldez

helpful, thank really you. That's

Operator

are comments. at the to call for back turn further There over Fox time. Instructions] [Operator no like to Ann would this I questions closing

Ann Fox

for thanking I end continued you by want your to support.

Additionally, for I want you. thank to team our XXXX. an Thank incredible

Operator

This concludes today's conference.

You may disconnect this lines we at your your participation. you for and time, thank

Nine Energy Service (NINE) 8 Mar 232022 Q4 Earnings call transcript