Nine(US:NINE)2020-05-07 21:35Company Overview - Nine Energy Service, Inc. is a leading North American onshore completion services provider focusing on unconventional oil and gas resource development [94]. - The company generated revenue primarily through completion services provided to exploration and production customers across major onshore basins in the U.S. and Canada [98]. Market Conditions - The posted price for West Texas Intermediate (WTI) oil decreased from a high of $63 per barrel in early January 2020 to a low of $14 per barrel in late March 2020, significantly impacting demand for services [106]. - The company expects a significant decline in activity and downward pricing pressure for the remainder of 2020 due to the ongoing pandemic and oil price volatility [104]. - Future results may be influenced by OPEC+ production decisions, the severity of the coronavirus pandemic, and overall economic conditions [105]. Financial Performance - Revenues decreased by $83.1 million, or 36%, to $146.6 million for Q1 2020, primarily due to reduced activity and pricing pressure from the economic recession linked to the coronavirus pandemic [110]. - Completion Solutions revenue fell by $62.5 million, or 30%, to $146.6 million, with tools revenue down by $21.5 million, or 40%, and wireline revenue down by $18.5 million, or 29% [112]. - Adjusted gross profit for Completion Solutions decreased by $27.1 million to $20.6 million for Q1 2020, reflecting the revenue and cost pressures [118]. - Adjusted EBITDA decreased by $28.9 million to $10.3 million for Q1 2020, primarily driven by changes in revenues and expenses [127]. - The average closing price of oil was $45.34 per barrel in Q1 2020, down from $54.82 in Q1 2019, while natural gas prices fell to $1.91 per MMBtu from $2.92 [110]. - Goodwill impairment charges of $296.2 million were recorded for Q1 2020 due to declines in global crude oil demand and economic recession impacts [123]. - The company's Return on Invested Capital (ROIC) for Q1 2020 was -3.3%, a significant decline from 12.5% in Q1 2019 [137]. - Cash flows from operating activities decreased to $745,000 in Q1 2020 from $5,888,000 in Q1 2019, primarily due to a $26.7 million decrease in cash flow from continuing operations [156]. Cost Management - General and administrative expenses decreased by $3.5 million to $16.4 million, with a notable reduction in transaction and integration costs related to the Magnum Acquisition [119]. - The company has implemented cost-cutting measures in response to deteriorating market conditions due to the coronavirus pandemic [146]. Liquidity and Capital Structure - As of March 31, 2020, the company had $90.1 million in cash and cash equivalents and $93.5 million available under the 2018 ABL Credit Facility, totaling a liquidity position of $183.6 million [146]. - The company plans to use proceeds from the divestiture of the Production Solutions segment, approximately $17.1 million, to fund part of its 2020 capital expenditures [141]. - The 2018 ABL Credit Facility allows for aggregate borrowings of up to $200 million, with a maturity date of October 25, 2023 [151]. - The company repurchased approximately $13.8 million of Senior Notes for a repurchase price of $3.5 million in cash, resulting in a gain on extinguishment of debt of $10.1 million [144]. Safety and Compliance - The company emphasizes safety, tracking the total recordable incident rate (TRIR) as a measure of workplace safety performance [101]. - Contractual obligations did not change materially as of March 31, 2020, compared to previous disclosures [160]. - Recent accounting pronouncements are summarized in Note 3 of the Quarterly Report on Form 10-Q [162].