Newpark Resources(US:NR)2019-02-08 18:45Financial Data and Key Metrics Changes - Revenues for the full year 2018 improved by 27% year-over-year to $947 million, while EBITDA improved by 56% to $108 million [10] - Fourth quarter consolidated revenues were $248 million, representing a 5% improvement from Q3 and a 21% improvement year-over-year [43] - Net income from continuing operations for the fourth quarter was $0.11 per diluted share, compared to $0.04 in the previous quarter and $0.09 in the fourth quarter of last year [46] Business Line Data and Key Metrics Changes - In the Fluids segment, full year 2018 revenues were $716 million, reflecting a 16% year-over-year increase, while operating income improved by 46% [11] - Fourth quarter revenues for the Fluids segment came in at $178 million, a 2% sequential decrease, but a 9% improvement year-over-year [31] - The Mats segment posted $230 million in revenue for the full year 2018, with a 26% operating margin, and fourth quarter revenues achieved a record of $70 million, representing a 29% sequential improvement [20][29] Market Data and Key Metrics Changes - U.S. revenues in the Fluids segment were $107 million, flat sequentially, with a year-over-year increase of 19% [32] - In Canada, revenues were $15 million for the fourth quarter, reflecting an 11% sequential decline but an 11% year-over-year increase [34] - Revenues in the Eastern Hemisphere were $50 million in the fourth quarter, relatively flat to prior quarter levels, with a year-over-year improvement of 4% [35] Company Strategy and Development Direction - The company aims to become a global technology leader in Fluids Systems while building on its strong position in Mats and generating free cash flow for shareholders [58] - The focus is on expanding product offerings and penetrating key international oil companies (IOCs) and national oil companies (NOCs) [11][60] - The Mats division is diversifying its market presence, with revenues evenly split between exploration and production (E&P) and non-E&P markets [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2019 despite some near-term headwinds, focusing on the deepening relationships with IOCs and NOCs [58] - The company expects modestly softer revenues in the near term, primarily driven by transitory declines in international units [50] - Management highlighted the importance of maintaining a modest debt burden and protecting the balance sheet [25] Other Important Information - The company ended the year with a total debt balance of $162 million and a cash balance of $56 million, resulting in a total debt to capital ratio of 22% [48] - The Board of Directors expanded the share repurchase authorization to $100 million, providing flexibility to optimize the capital structure [49] Q&A Session Summary Question: Can you break down the sales on the mat side? - Management noted that there were more customers purchasing in Q4, with over half of the sales going to utility customers, indicating a diversification in the sales footprint [71][72] Question: How much do you estimate the weather-related impact in Q4? - The estimated impact was a high-single digit percentage, primarily due to the extension of planned jobs [73] Question: What actions are being taken to drive increased returns in the Fluids business? - Management emphasized covering the cost of capital and highlighted growth initiatives, cost optimization, pricing discipline, and working capital management as key levers [80][82] Question: Can you describe the volume and margin opportunity in stimulation and completion fluids? - Management indicated that the margin profile for stimulation chemicals is expected to be similar to drilling fluids, with significant volume potential from single frac fleets consuming substantial amounts of chemicals annually [90][94] Question: Is the new Kuwait oil contract a follow-on to the previous one? - Management confirmed that it is partially a follow-on, with new work in high-temperature, high-pressure regions expected to yield higher margins [102][105] Question: How does the company weigh paying down debt versus buying back stock? - The approach remains thoughtful and prudent, maintaining a modest debt load while using excess cash for share repurchases as part of a maintenance program [106]