NCS Multistage(US:NCSM)2024-05-02 20:14Industry Activity and Market Conditions - The company expects annual average industry drilling and completion activity in Canada to be flat to slightly lower compared to 2023, with U.S. activity expected to decline by 5% to 10%[74]. - Oil prices remained volatile in 2023, with WTI crude averaging $77.50 per barrel in Q1 2024, a slight decrease from $78.53 in Q4 2023[80]. - Natural gas prices averaged $2.15 per MMBtu in Q1 2024, down from $2.74 in Q4 2023, influenced by warm winter conditions and high storage levels[81]. - The average U.S. land rig count was 602 in Q1 2024, flat compared to Q4 2023 but down 19% from Q1 2023[85]. - The average rig count in the United States decreased by 19% in Q1 2024 compared to Q1 2023, while the average rig count in Canada decreased by only 6%[98]. Financial Performance - Total revenues for the three months ended March 31, 2024, were $43.9 million, a 0.7% increase from $43.6 million in the same period of 2023[98]. - Product sales for the three months ended March 31, 2024, were $31.8 million, up 1.0% from $31.4 million in the same period of 2023[98]. - Services revenues totaled $12.1 million for both the three months ended March 31, 2024, and 2023, reflecting a slight decrease of 0.2%[98]. - Cost of sales increased to $26.9 million, or 61.3% of revenues, for the three months ended March 31, 2024, compared to $25.5 million, or 58.6% of revenues, for the same period in 2023[99]. - Selling, general and administrative expenses decreased to $13.8 million for the three months ended March 31, 2024, down 14.4% from $16.2 million in the same period of 2023[100]. - Net income for the three months ended March 31, 2024, was $2.6 million, a significant increase from a net loss of $15.0 million in the same period of 2023, representing a 117.0% improvement[97]. Cost Management and Savings - In 2024, the company expects to realize annualized cost savings of approximately $4.0 million due to several cost reduction initiatives implemented in 2023[94]. - Competitive pressure has negatively impacted market share and operating margins, constraining the ability to raise prices in an inflationary environment[76]. - Supply chain disruptions and higher raw material prices have persisted, although steel prices have begun to moderate[77]. Cash Flow and Liquidity - As of March 31, 2024, the company had cash and cash equivalents of $14.0 million and total outstanding indebtedness of $8.9 million[105]. - The company believes its cash on hand, cash flows from operations, and potential borrowings will be sufficient to fund capital expenditures and liquidity requirements for the next twelve months[108]. - Net cash used in operating activities was $1.9 million in Q1 2024 compared to $1.6 million in Q1 2023, reflecting higher trade receivable balances[112]. - Net cash used in investing activities decreased to $0.1 million in Q1 2024 from $0.5 million in Q1 2023, indicating reduced investment in property and equipment[114]. - Net cash used in financing activities increased to $0.6 million in Q1 2024 from $0.4 million in Q1 2023, primarily due to principal payments related to finance leases and treasury shares[115]. - The net change in cash and cash equivalents was a decrease of $2.716 million in Q1 2024 compared to a decrease of $2.601 million in Q1 2023[111]. - The company anticipates potential liquidity needs to fund capital requirements and may seek additional debt or equity financing, though there are no assurances of favorable terms[110]. Strategic Investments and Future Outlook - The company owns a 50% interest in Repeat Precision, which sells composite frac plugs and related products[72]. - The company anticipates international sales to increase over time, particularly in markets such as the Middle East and China[91]. - Capital expenditures for Q1 2024 were $0.3 million, down from $0.6 million in Q1 2023, with plans to incur $1.5 million to $2.5 million in 2024 for various upgrades and new equipment[109]. Risks and Reporting - The company faces various risks, including oil and natural gas price fluctuations and competition, which could impact future performance[124]. - The company remains classified as a "smaller reporting company," allowing it to take advantage of reduced reporting requirements[119]. - There have been no significant changes in material cash requirements or critical accounting estimates since the last annual report[116][117]. - The company recorded a net loss in Q1 2023 due to a $17.5 million litigation provision, which was reversed in Q4 2023, impacting year-over-year comparisons[112].