Houston, United States of America, November 8, 2018/ — National Energy Services Reunited Corp. (NESR), a national, industry-leading provider of integrated energy services in the Middle East and North Africa (MENA) and Asia Pacific region, today reported impressive results for the third quarter ended September 30, 2018.
Operating and Financial Highlights
Revenue on a combined basis grew by over 10% from the prior quarter and by more than 20% compared to the prior year quarter with new contract start-ups and product offerings as well as increases in market share in NESR’s key markets.
The company’s net income of $16.2 million for the successor quarter period compared to a net loss for the preceding period of $4 million.
It also adjusted EBITDA on a combined basis for the third quarter was $46.5 million, a sequential growth in excess of 30% on the back of increased service intensity and startup of new contracts as well as realization of integration synergies.
The company signed an agreement with Dhahran Techno Valley Company (“DTVC”), a wholly owned subsidiary of King Fahd University of Petroleum, to create a global center for the development of scientific research in DTVC.
This is in line with NESR’s vision to create an open source platform in the region to partner with innovative technology companies to create fit for purpose technologies for our customers in the region.
Acquired quality coiled tubing and pumping assets of North American service company to deploy in the MENA region.
“We are very pleased with our results for the third quarter,” said Sherif Foda, Chairman of the Board and CEO of NESR. “NESR is attractively positioned, with the ability to capitalize on its footprint across the MENA region.
We remain encouraged by the outlook for our key markets, and we believe the services industry in the region will continue to grow further over the coming quarters. Additionally, as MENA activity increases in the fourth quarter, we have been deploying our resources strategically to take advantage of this trend.”
Mr. Foda continued, “I am very proud of the employees of both companies we acquired as our integration efforts continue to exceed expectations and are showing significant results.
At NESR, we value agility, empowerment and fast decision making and this quarter’s operational and financial results are a testimony to the hard work of our personnel as well as the faith our customers have placed in our ability to deliver superior execution.
Our ability to respond quickly and efficiently to our customers’ needs has already distinguished us and will continue to be a competitive advantage. We are very excited about the future and we have talented, motivated teams to execute at the highest levels of quality.”
Production Services Segment Results
Production Services contributed $88.7 million to consolidated revenue for the 2018 Successor third quarter period. Segment EBITDA totaled $33.2 million in the quarter.
In addition to higher activity across all our product lines, this segment benefited from the redeployment of idle assets where operations overlapped as well as from contract start-up costs recorded in the second quarter which did not recur in the third quarter.
“Business Combination Accounting and Presentation of Results of Operations” section below for additional information on current reporting conventions
|
Successor (NESR) |
Predecessor (NPS) |
||||
| (in thousands) |
2018 |
2018 |
2017 |
||
|
July 1 to September 30 |
June 7 to September 30 |
January 1 to June 6 |
July 1 to September 30 |
January 1 to September 30 |
|
| Revenue |
$88,666 |
$117,268 |
$112,295 |
$59,164 |
$164,493 |
| Segment EBITDA |
$33,180 |
$41,952 |
$36,836 |
$21,252 |
$58,463 |
Drilling and Evaluation Services Segment Results
Drilling and Evaluation Services contributed $56.9 million to consolidated revenue for the 2018 Successor third quarter period. Segment EBITDA totaled $17.6 million in the quarter.
The improved performance of this segment was most noticeably impacted by new drilling contract start-ups with improved pricing along with the continued growth and expansion of our evaluation service offerings.
|
Successor (NESR) |
Predecessor (NPS) |
||||
| (in thousands) |
2018 |
2018 |
2017 |
||
|
July 1 to September 30 |
June 7 to September 30 |
January 1 to June 6 |
July 1 to September 30 |
January 1 to September 30 |
|
| Revenue |
$56,914 |
$73,298 |
$24,732 |
$11,289 |
$29,288 |
| Segment EBITDA |
$17,630 |
$18,905 |
$3,267 |
$1,618 |
$3,277 |
Offsetting our segment results were certain Corporate costs which are not yet allocated to segment operations.
Net Income and Consolidated Adjusted EBITDA Results
The Company had Successor period net income for the third quarter totaling $16.2 million, which includes the impact of $2.4 million of transaction and integration costs related to the combination transaction completed in June 2018 and $3.6 million of purchase accounting related amortization costs incurred in the quarter.
On a combined basis, the Company had Adjusted EBITDA of $111.8 million for the year to date period through September 30, 2018. Adjustments to EBITDA include transaction and integration costs of $25 million for the 2018 period.
Balance Sheet
Cash and cash equivalents were $67.6 million as of September 30, 2018 (Successor), compared to $27.5 million as of December 31, 2017 (Predecessor) and $36.9 million as of June 30, 2018.
The Company had $355.3 million in debt as of September 30, 2018 including a $50 million convertible loan facility with an implied conversion price of 11.244 per share.
During July, the Company completed a refinancing of its $50 million bridge loan facility to term out the debt. Additionally, in July the Company entered into a previously disclosed $50 million working capital facility and drew down $25 million under the facility.
During August, the Company drew down the remaining $25 million to provide the company with financial flexibility and seize growth opportunities as and when they arise.
The company purchased certain assets from a North American service company for $7 million in cash. Offsetting these asset additions were additional adjustments to the fixed asset values made as part of the company’s finalization of purchase price accounting.
Improvements to working capital efficiency were initiated post-combination and the Company anticipates additional benefits from these actions to be reflected in the year-end balance sheet.
Predecessor/Successor Accounting Treatment
NESR continues to report in a Predecessor/Successor format whereby the National Petroleum Services (“NPS”) legacy entity is the Predecessor for periods prior to the completion of the business combination on June 7, 2018 and NESR, including NPS and Gulf Energy Services (“GES”), is the Successor for post-transaction periods.
Conference Call Information
NESR hosted a conference call on Thursday, November 8, 2018, to discuss the third quarter 2018 financial results. The call began at 8:00 AM Central Time (9:00 AM Eastern Time) and 6:00 PM UAE time.
Investors, analysts and members of the media interested in listening to the call are encouraged to participate by dialing into the toll-free line at 1-877-407-0312 or the international line at 1-201-389-0899.
African Eye Report
