KLXE - Earnings call transcript Q3 2019 | KLX Energy Services Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the KLX Energy Services Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. Please be advised that today's conference is being recorded. [Operator Instructions]

to Perlman, conference of Treasurer like speaker to Investor now Michael today and would hand over the your Relations. I Senior Director ahead go sir. Please

Michael Perlman

Thank XXXX. Services financial for for the thank are you, ended to results morning October quarter Today XX, here Energy us. we you KLX discuss third Sonya. Good joining and

company's its costs the issued company's the major For comparative our on presents presented described with have pre-announcement impairment our financial results as program results. The morning which These associated collectively and non-cash earnings XX. purposes, we adjusted asset charge was to costs news release this costs exclude to referred November downsizing company's has in earlier are defined. as

site. If you haven't it, find received Web you'll a our on copy

Amin morning is Financial McCaffrey, and We and Energy Officer. remarks Chairman KLX of President begin Chief Tom this also Officer with on call Chief Services; from Khoury, Senior Vice the Executive will

help today's call our will a be discussion. prepared For slides we you follow to few

our Energy Services You can at KLX of site presentation page Relations find klxenergy.com. Web the Investor the on

on of posted refer slides are to. site Web In addition you copies for the our to

Before we cover make forward-looking uncertainties that subject additional begin, some we and and our that as to have to risks in prepared your questions. information are always statements remarks any responses we our

Exchange Harbor rely the Safe company's securities and statements Safe Securities Commission. our on will and the and You with Harbor various exemptions the acts under filings the

following Q&A questions remarks address the provide instructions. will We will that our prepared at time operator

over Khoury. to Amin Now, I will the call turn

Amin Khoury

third our Thanks Michael us and to joining quarter discuss results. you, morning financial everyone. for Thank good today

to activity conditions hydraulic on our sharp sequential October a quarter. on XXXX, our free flow capital industry reflects and production led of which an the a quarter sequential there decline during second third by through in quarterly accelerated Rough spreads was back rig of ended an focus the significant the XX, and the This frac generation in third to each count discipline, cash customers. intense exploration quarter fracturing month decline deterioration active unprecedented end quarter third decline in

abrupt customer the and business with current will cost structure our demand. we a comprehensive Temporaneously initiated align in our rationalization with review decline cost program activity,

an our approximate vast wireline we we aggressively assets Specifically, force, cost warm-stacked area business. we the reduction majority XX% of in Permian-based implemented cut in every of our and

free industry the conditions $XX that increasing third approximately and in abrupt during quarter the for million to operations million quarter $XXX cash from XX, in our of ended change XXXX. October cash approximately cash generated Notwithstanding approximately the $XX flow flow million balance

facility Our remains $XXX million credit undrawn.

Looking forward we will monitor continue with demand. our ensure cost to aligned is to carefully structure it

benefit this realize of expect begin We year. the actions in of to to fourth business realignment the quarter our

cost of asset-light gain the to While tubing a control, range along personnel continuation spreads. with strengthening coiled join of free coiled through company's begun we balance be the customer have and spend of priority broad our levels major experienced to the recruiting tight as substantially deploy have in A tubing pulling flow share and new tubing by five receive we further also reduced we're greater services of strategy personnel continued our company large-diameter to and cash coiled expansion sheet. generation strategic XXXX company's will

quarter comment we current our call, on and XXXX our market; financial today's outlook. we discuss will services third On will will review performance; the oilfield we

spending. completely cut services oilfield exploration to off reviewing the continues current market and rein U.S. in, in under market all shale frac many activity, counts rig by counts an land spread sequential instead environment. cash in cases pressure basins. production across intense U.S. begin major free And on resulted companies maintain flow Let's and generation. quarterly declines This significant focus has in and be completion

balance the back or scaled operations for the of have many As either completely down year. E&Ps have shut

on in in is concerns even lows pronounced to prices and growing activity weigh gas as supply have continue multiyear natural Decline plays gas activities. the natural more

and quarter spread In in and gassier approximately active Marcellus, Specifically, declined to Niobrara spreads Ford second approximately declined shale the Basin's number Haynesville, frac decline XX%. third the And and the the Williston the of quarter in of basins Permian in including the XX%. active basins, spreads declined Utica, DJ, approximately the XX%. Eagle aggregate Woodford the number frac frac

the We E&Ps drilling activities, they intense activity on will focus back in their fourth quarter and expect Oregon completion decrease of as maintained further flow. our north their further the scaled cash as

In addition, impact quarter further we expect fourth activity. exhaustion to issues seasonal and budget

X Slide consolidated and XXXX to turn third our results. quarter review Let's

a adjusted approximately approximately $XX million of earnings revenues of a Third was Adjusted of million quarter Adjusted negative EBITDA second operating XX% second second approximately to XX% compared was approximately $X quarter the $XX.X to compared quarter as XXXX. XXXX operating million quarter loss revenues. of approximately XX% $XX billion. of $XXX to decreased million of compared revenues adjusted EBITDA or approximately or

million a diluted million negative negative was share $X.XX diluted loss net $XX quarter net for to per per $X.XX earnings $X share. compared quarter or third of the Adjusted adjusted or second

segment segment for Mid-Con Before we $X.X three ended Southwest million. review $X.X October company Northeast Cost each to $X.X through mention financial Rocky three-month and the costs we segment million; allocated whereas segment all allocates our like the segments. to that Mountain its XX million; segment follows: third results, would corporate quarter XXXX period

our Let's quarter now Four Rocky financial to turn Slide results. Mountains and third review

the segment lower operations decline approximately revenues The decreased the $X Third other customers. $XX to amongst activity primarily of or million balance a our million Rocky approximately levels with certain driven of of X%. along Mountain revenues by is by number in spending Quarter for year XXXX customers

spreads As declined DJ, aggregate approximately basis. in Williston the on sequential and previously Basins number quarterly Niobrara active the discussed, of frac XX% a

resulting an respectively. approximately Adjusted of XX% million quarter EBITDA $XX and margin EBITDA was adjusted EBITDA approximately of to and $XX million adjusted compared in second EBITDA margin XX%

performance. to Let's QX Northeast turn Slide and review Five segment Mid-Con

by customers particularly completely of a Northeast million percentage approximately there for the in customers. was customers operations as $XX revenues gas of balance highest natural decreased revenues well a natural as activity by Northeast customers. primarily other Mid-Con of of to Decline a lower from XX%. the XXXX Third Mid-Con gas levels segment substantially the as year number about exposure suspending has quarter of driven The number where revenues were

As in Haynesville, sequential previously discussed, basis. declined the the Woodford number a frac active and including a spreads on gassier Utica, the quarterly the basins of about XX% Marcellus,

quarter and adjusted EBITDA and was adjusted $X $XX loss respectively. to compares adjusted about million margin compared under EBITDA to $X operating XX% earnings XX% an was in of Adjusted that Adjusted operating of million about shade EBITDA adjusted margin second million. about of a breakeven EBITDA second quarter resulting

Let's take at our a look quick Southwest segment.

existing weak quarter XX% Permian-based decreased wireline customers the the segment third Southwest of due activity the company assets and to warm-stock elected about lower a its wireline revenues to primarily by the in majority decline For pricing as levels revenues vast by environment. driven

number basins previously the XX% declined frac discussed basis. quarterly the a about As in spreads Eagle on aggregate Ford sequential of shale Permian and

compared operating positive EBITDA negative negative operating loss $X.X as as compared second of a a quarter loss adjusted was million $X.X million. $X.X Adjusted million adjusted of And to a was $X.X million. to EBITDA second quarter adjusted

financial our position Take look quick at on Seven. a Slide

million. quarter as $XX is operations about reflecting the a $XX of about flow to spreads. new XXXX, Capital $XXX QX about on to the prior roughly million. CapEx the provided For Fourth or million million. free its cash by The $XX the $XX about ended balance quarter net expected increasing expenditures million was be October were of application generated cash company CT XX, deposits cash about flow same leased

period no debt net the X.Xx. Total outstanding million million the $XXX resulted for long-term company's were and net facility. about ended October debt was XX the net of approximately $XXX XX%. million under $XXX in about credit company's debt of capital There net ratio leverage less was adjusted the debt EBITDA cash ratio to And company's to borrowings a XX-month

shareholders it believe for third continue strong remain repurchases position quarter, capital the our generate combinations. the will program share the $X.X return of explore believe through to range to we Board or us will evaluating we've allow stock potential highest repurchased in repurchase of capital During investments We of about $XX and stock. million Directors common where and authorized our to deploying a service to to-date the lines committed strategic million financial up same we our Moreover, our product or debt lens. company's

outlook. our review Briefly

activity in decline cash flow issues. customer the seasonal due E&P customers to further expect to and our to on focus quarter addition budget exhaustion fourth We generation, free intense in

five our our begin the realize large-diameter we're we to we realize of early benefit activities fourth tubing quarter additional to the and fourth personnel receive the have company who as quarter, in While joined cost begun tubing coiled third experience the coiled the also reduction spreads. benefits deploy recruiting to in quarter or expect new

these to expected quarter be five the coiled spreads earnings. new fourth costs start-up our tubing of The drag related are to on deployment a

We XX of tubing expect first of our the XXXX. the coiled quarter to end all spreads in have operation large-diameter of by

remain by across preserving of sheet broad equipment managing We while spend services all healthy balance capital providing of a a of maintaining our on of our liquidity and basins will gaining serving share customer the prudently levels customers and focused a and needs portfolio expenditures. major solid

new of rollout our asset-light range that despite allow gain believe from tubing our industry positive the strength continue we with flow and share efforts In is services along free spend cost XXXX levels demand through us financial pull-through coiled an a to experiencing. where cash the and our the will resulting broad differentiator, operating anemic ongoing environment anticipated reduction key generate of that to of to impact the units five large-diameter customer is the of

will over I to turn the that back With Michael. call

Michael Perlman

provide to The to the turn instructions how I'll Thank questions. today's Amin. now operator will for you, the over Q&A operator portion of the on ask call call. the

Sonya?

Operator

[Operator Simmons Ben Thank question first Carl And Instructions] our of comes Energy. from you.

Your line is now open.

Ben Carl

guys. Thanks right. All

compared what First, -- of to given margins the offset have just kind other. the the to efforts, and for like about should activity expect to reduction cost quarters we over coming trajectory we decline should expectation I you said of with customer an your qualitatively expect mean each just wanted ask just those

there helpful. be Just would any color

Amin Khoury

is CapEx million focus out coiled new less a thing free be be tubing quarter. that on in now million a think we more dollars able to but I the give or carefully not quarter, dollars fourth free few flow expect or the will our flow on our right information our margins cash are is cash very introducing maybe Important fourth position We use assets. managing generate in breakeven to a in few

the So be position the should by we execute to can fourth year. strategy. company's strategy of this end quarter execute of our the We in a

execute X/X-inch essentially all operations have in are our [indiscernible] we during strategy all units so, asset-light broad And units range and operation services. of through we to are pulling of essentially a And where of should a of X, XXXX, finally in in which position X X new.

Our generate balance is, expectation position build a during will XXXX sheet. will not on we're to we cash but flow Expect our and in positive margins. give moderate, guidance any to further we free

Ben Carl

you break maybe down Thank as see is more performing. more in a expect that. broad strategy I of how for just wanted kind of your assets problem. kind on areas just us you concentrated rig maybe the phase around exposure. [indiscernible] certain do I if just phasing with No color And give and exposure just guess some moving to count your could contracts, the exposure And you variance secondly, and

Amin Khoury

followed are Our the businesses Mid-Con. Northeast by and strongest in Rockies

weakest. are businesses Southwestern

more Northeast, in better should plays sector in the have will in oil during or don't I do We to business segment overall the going as I Rockies strongest in that. basins rough be say little we compared than and in in of Mid-Con gassier the Now think the the terms coming weakest would the prior. visibility probably the will quarter coming the the expect the quarter see a Southwest the to two,

Ben Carl

for That's me. Great. all Thanks.

Operator

you. the Company. Wong from next of question Gabelli And Simon comes & Thank

Your line is open. now

Simon Wong

fourth currently? you that Hi, jobs have are in be Does bidding good commitments quarter. morning. The [indiscernible] those receiving customer or you'll for already the units

Amin Khoury

customers. received have -- received two, we this already The our gone in to two week. The week slated we'll this already has have one we've third that's coming We customer. the receive for actually

expect XX. We allocated end by receive our of the units to both are fiscal two January year, customers. of those the end to of by And last the

Simon Wong

the units of let's first How are to say those to half related pricing the 'XX? relative

A - Amin Khoury

'XX? in the of first half Pricing

Simon Wong

those of just or receiving received The pricing how of you're in process the units pricing… five you

Amin Khoury

where spot and of number we versus or are work. half a number a units the units depends units work to portion It smaller be are will that dedicated that And spot on more doing determined dedicated that remains the doing higher of and be down fleet can responses. doing work are work rates the we highest it so spot are The rates have than you higher they're the rates. another near spot get utilization work, for customers on utilization which doing dedicated that they're where on one

Simon Wong

Okay. tubing The cost much quarter the of XXXX, to in that startup costs quarter you fourth you of the that the can is? related drag mentioned how quantify first and coiled

Amin Khoury

We those time, to quarter. out in cost coil begin the rollout $XX and be But to of tubing to at our will we taken benefit about the in cost of realize in something in fourth the have million folks neighborhood same spread. reductions beginning hiring XX the XX additional will

growing same maintaining achieved be that reductions that tubing So, we're the the spreads close of won't get at of until through operative at time in pulling the we coil control which are pretty cost business and And we've the later for the should XXXX full time. benefit services, costs.

Simon Wong

to that your off million cost right, you've heard just annualized XX of want the out savings just I sure that make company? I pulled

Amin Khoury

right. That's

Simon Wong

And okay, annualized. that's

Okay. to spend your or It million have recently in Is third then, that looks spending year. $XXX for And timing about in quarter. reduced like to this ramped you it capital million you been down this related have planned have year? $XX CapEx to

Amin Khoury

on to year this it take will application about of we the If that $XX Our into the $XX CapEx the will be have million. about out deposits come spreads, tubing million. coil we account

Simon Wong

great. And then, number? have you CapEx XXXX, for a number Okay, the

Amin Khoury

number until a report give we from year. our than now. quarter very will we But won't fourth number It be that months lower out two obviously much this

Simon Wong

your release My press final buyback, even cash flow priority stock your rank and Okay. free well talk about repurchases as those is, in [indiscernible] strategic as your question Can like you in those? debt combinations. -- you

Amin Khoury

It'll time. for we depend uses the cash upon what at have alternative

know looking greatest we'll at. exactly them greatest we are gives right we're investment. now shareholders the the at looking our And what alternatives. the our for we the some So or buck can't determination on unless rank we And make what based on return bang

Simon Wong

Okay, great. Thank you.

Amin Khoury

You are welcome.

Operator

gentlemen does Perlman over question-and-answer remarks. ladies closing this session. conclude the you. like And and to now back turn Michael would our for Thank to any call I

Michael Perlman

you call. for Bye. Thank to you That morning's you, our Thank concludes speaking participating comments forward look next Sonya. quarter. to again today. everyone We on to this

Operator

for participating. Ladies Thank this and gentlemen, concludes call. today's conference you

now may disconnect. You

KLX Energy Services (KLXE) 5 Dec 192019 Q3 Earnings call transcript