HOUSTON and NEUQUEN CITY, Argentina, May 12, 2015 (GLOBE NEWSWIRE) -- Eco-Stim Energy Solutions, Inc. (Nasdaq:ESES) ("EcoStim" or the "Company") announced its financial and operating results for the first quarter ended March 31, 2015.
FIRST QUARTER 2015 HIGHLIGHTS
- Revenues of $2.9 million, reflecting the start-up of operations
- Well stimulation jobs performed for three different customers in four different provinces
- Field management services revenues were $191,000
- Coiled tubing revenues were $364,000
- Zero lost time incidents (safety)
- Zero down time as a result of labor disruptions
As previously noted, the Company began field operations in December 2014 after importing a well stimulation fleet, a coiled tubing unit, and establishing our operating base in the Neuquen province of Argentina. As a result, first quarter 2015 revenue increased substantially to $2.9 million from $0.2 million in the fourth quarter of 2014, with all product service lines contributing to this performance. First quarter 2015 revenue increased from $0.5 million generated in the first quarter of 2014. EcoStim's only activity in the first quarter of 2014 related to field management services using fiber optic diagnostic technology.
For the first quarter of 2015, EcoStim reported a net loss of $3.7 million, or a loss of $0.59 per basic and diluted share. This compares to a net loss of $3.0 million, or a loss of $0.46 per basic and diluted share, reported in the fourth quarter of 2014. In the first quarter of 2014, EcoStim reported a net loss of $1.8 million, or a loss of $0.46 per basic and diluted share. The loss of $3.7 million for the first quarter of 2015 includes approximately $1.2M of non-cash expenses such as depreciation, amortization and stock compensation. In addition, the majority of the Company's interest expense is paid once per year in May and therefore amounts reflected quarterly are accruals only until such time as the annual interest payment is made.
J. Chris Boswell, EcoStim's President and Chief Executive Officer, stated, "Our first quarter results reflect three years of hard work and our first full quarter with pumping and coiled tubing field operations. This first quarter was a start-up period and as a result our utilization was very low. We have now successfully qualified for several of the active operators in the basin which should lead to improved utilization in the future."
"In January 2012, we formed this Company with the specific goal of providing best-in-class oilfield services in undersupplied markets around the world. Specifically, we identified Argentina as the country most likely to repeat the shale revolution that has occurred in the United States. So far, it appears that Argentina is indeed on track to repeat the enormous success we have all witnessed in North America. Over the last nine months, our management has imported a well stimulation fleet, a coiled tubing unit and the tools we need to conduct low cost well diagnostic services for our customers. We hope to have our second well stimulation fleet ready to go early next year followed by the introduction of a larger unconventional spread in 2016. I am very proud of the outstanding team we have brought together in Argentina to make EcoStim a success. We have an excellent service record and one of the safest operations in the country."
Carlos Fernandez, the Company's Executive Vice President of Global Business Development added, "We are all very excited about the operation we have started in Argentina. We believe we have some of the best people and equipment in the country and that our performance on each job is at or near the top in terms of reliability, execution and safety. We have managed to qualify our company to work with YPF and other local operators and this will help us to improve the utilization of our assets moving forward. The work in March 2015 was largely related to trial programs and therefore each job was relatively small and limited in complexity. We are demonstrating our capabilities and hope to expand the scope of work allowing us to participate in more complex and higher horsepower jobs going forward. The global oil price collapse has resulted in some reduction in activity as most operators have exploration and production underway in other countries where their cash flow is impaired. YPF has shifted some of their efforts towards the tight gas fields and have requested price concessions from service companies which has put some pressure on margins. All in all, we are happy with the work we are getting and we believe there is a major opportunity to grow our business as activity picks up in the Vaca Muerta shale over the next few years."
Alexander Nickolatos, EcoStim's Chief Financial Officer added, "First quarter revenues were influenced by the start-up nature of our business and we were encouraged to see sequential revenue growth in each consecutive month during the quarter. We expect our results to improve as the year progresses for both pressure pumping and coiled tubing and we will leverage off of our existing overhead and fixed cost structure as we add new capacity in 2016. The shale rig count in Argentina is growing and this should support our growth. We expect to generate attractive margins once we achieve higher utilization and add more service capacity."
Miguel Di Vincenzo, EcoStim's VP of Sales and Technology, stated, "We have maintained our strategy of offering our customers technology solutions that include predictive seismic interpretations, downhole diagnostics, advanced completion systems and modern cutting edge pumping solutions. We think we are one of the few companies offering such tightly bundled services designed specifically for emerging shale plays with limited drilling history and high cost exploration / delineation wells. Our field management system allows EcoStim to establish a value-added technology relationship with our customers which generally helps us to differentiate ourselves from our pumping-only peers. We think there is interest among our customers in learning more about the subsurface and how the well stimulation process impacts production in different zones or even within the same zones."
Miguel went on to say, "Our current fleet configuration is limited and therefore can only address a small percentage of the overall market. We are currently reviewing several alternatives to increase our HHP in order to address the tight gas market later this year as well as opportunities to put together a larger unconventional fleet sufficient in size to satisfy customer needs in the ballooning Vaca Muerta shale formation. We are currently in discussions with multiple customers about providing such services in 2016, 2017 and beyond."
J. Chris Boswell continued, "Looking ahead, we currently anticipate our second quarter revenue to increase from first quarter levels as the coiled tubing unit, which was down with mechanical issues for a good portion of the first quarter, should be more active. We are also optimistic that we will see an increase in the number and size of jobs now that EcoStim has established a good local reputation. Generating positive free cash flow and preserving liquidity will remain a priority for the Company as we grow our revenue stream. We are excited to have the Company positioned to participate in the growth of one of the largest and richest shale oil and gas fields in the world."
Boswell concluded, "We hope to achieve positive cash flow from operations by Q3 2015 and hope to reach profitability shortly thereafter. Our success will very much depend on maintaining our equipment in good working order, retaining our excellent operations personnel, and continuing to maintain a positive dialogue with both our customers and the local labor unions. We have suffered no lost time as a result of labor related issues to date but we have recently experienced some mechanical downtime on our coiled tubing unit which was further hampered by the Chilean Volcano which erupted a few weeks ago. This will moderately impact our revenue growth in Q2 2015 but should not have a long term impact on our business."
G&A Expense
General and administrative ("G&A") expense in the first quarter of 2015 was $1.6 million compared to $1.4 million for the prior quarter and $1.4 million for the first quarter of 2014. The G&A expense is primarily related to the sales and administrative offices in Buenos Aires and Neuquén and the cost associated with being a public company, including our corporate office in Houston.
R&D Expense
Research & development ("R&D") expense in the first quarter of 2015 was $0.2 million, or 8% of revenue. The Company had no expense related to R&D in the past. The R&D expense was primarily due to expenditures in connection with the technology development agreement signed in Q4 2014 with YTEC, the technology arm of YPF. These expenditures related to research and development efforts around the use of fiber optic diagnostic tools and turbine-powered well stimulation equipment and the evaluation of optimal completion tools, including sliding sleeves.
Cash and Total Liquidity
On March 31, 2015, EcoStim had cash and cash equivalents of approximately $8.0 million, up from $7.0 million at December 31, 2014 and up from $2.5 million on March 31, 2014.
On February 13, 2015, EcoStim completed an underwritten stock offering resulting in the sale of 1,051,376 shares of common stock at $5.75 per share with gross proceeds of $6.0 million.
Capital Expenditures
Total capital expenditures during the first quarter of 2015 were approximately $2.1 million compared to $9.5 million in the prior quarter and $0.5 million in the first quarter of 2014, comprised mainly of additional pressure pumping equipment for the Company's second fleet, anticipated to be delivered during the fourth quarter of 2015.
Forward Guidance
Although the Company has a limited operating history, and is not providing earnings guidance for the remainder of the year, we believe that the equipment EcoStim currently has in Argentina is capable of generating between $18 million and $26 million in revenues for fiscal 2015, the Company's first full year of operations. Factors influencing this range include utilization of the assets, the size of each job, the service and product make up of each job and lastly the price charged and the distance between each job. Management intends to update this guidance if conditions in the market change in either direction.
Conference Call
The Company will host a conference call on May 12th, 2015 at 4:00 PM EDT, 3:00 PM CDT. To participate in the call please dial 877-900-9524 from the United States and Canada, and 412-902-0029 internationally. Participants should dial in five to ten minutes before the scheduled time and must be on a touchtone telephone to ask questions. A replay of the call will be available through May 31, 2015, by dialing 877-660-6853 from the U.S and Canada, and 201-612-7415 internationally. The replay passcode is 13597819.
About the Company
Eco-Stim Energy Solutions is an environmentally focused oilfield service and technology company providing proprietary field management technologies and well stimulation and completion services to oil and gas producers drilling in the rapidly expanding international unconventional shale market. EcoStim's proprietary methodology and technology offers the potential to decrease the number of stages stimulated in shale plays through a unique process that predicts high probability production zones while confirming those production zones using the latest generation down-hole diagnostic tools. In addition, EcoStim offers its clients completion techniques that can dramatically reduce horsepower requirements, emissions, surface footprint and water usage. EcoStim seeks to deliver well completion services with better technology, better ecology and significantly improved economics for unconventional oil and gas producers worldwide.
Forward-Looking Statements:
The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the Company based on management's experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Financial Statements
| ECO-STIM ENERGY SOLUTIONS, INC. | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| March 31, 2015 | December 31, 2014 | |
| (Unaudited) | ||
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 7,995,577 | $ 7,013,556 |
| Accounts receivable | 2,515,723 | 264,192 |
| Marketable securities | — | 1,360,767 |
| Inventory | 1,592,289 | 1,619,778 |
| Prepaids | 2,530,779 | 2,496,805 |
| Other assets | 338,212 | 409,388 |
| Total current assets | 14,972,580 | 13,164,486 |
| Property, plant and equipment, net | 28,078,058 | 27,949,347 |
| Other non-current assets | 890,251 | 936,592 |
| Total assets | $ 43,940,889 | $ 42,050,425 |
| Liabilities and stockholders' equity | ||
| Current liabilities: | ||
| Accounts payable | $ 1,364,056 | $ 1,947,371 |
| Accrued expenses | 3,923,765 | 3,164,250 |
| Short term notes payable | 99,494 | 158,036 |
| Current portion of long term notes payable | 4,025,000 | 475,000 |
| Current portion of capital lease payable | 618,561 | 597,406 |
| Total current liabilities | 10,030,876 | 6,342,063 |
| Non-current liabilities: | ||
| Long-term notes payable | 22,000,000 | 25,625,000 |
| Long-term capital lease payable | 1,956,882 | 2,102,143 |
| Total non-current liabilities | 23,956,882 | 27,727,143 |
| Stockholders' equity | ||
| Common stock | 6,785 | 5,709 |
| Additional paid-in capital | 26,749,880 | 21,116,100 |
| Accumulated deficit | (16,803,534) | (13,140,590) |
| Total stockholders' equity | 9,953,131 | 7,981,219 |
| Total liabilities and stockholders' equity | $ 43,940,889 | $ 42,050,425 |
| ECO-STIM ENERGY SOLUTIONS, INC. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (Unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2015 | 2014 | |
| Revenues | $ 2,891,693 | $ 500,124 |
| Operating cost and expenses: | ||
| Cost of services | 3,159,537 | 802,764 |
| Selling, general, and administrative expenses | 1,576,855 | 1,382,817 |
| Research and development | 241,546 | — |
| Depreciation and amortization expense | 746,284 | 2,157 |
| Total operating costs and expenses | 5,724,222 | 2,187,738 |
| Operating loss | (2,832,529) | (1,687,614) |
| Other income (expense): | ||
| Gain on sale of trading securities | 285,513 | — |
| Interest expense | (984,195) | (147,562) |
| Other income (expenses) | (131,733) | 11,743 |
| Total other expense | (830,415) | (135,819) |
| Provision for income taxes | — | — |
| Net loss | $ (3,662,944) | $ (1,823,433) |
| Basic and diluted loss per share | 0.59 | 0.46 |
| ECO-STIM ENERGY SOLUTIONS, INC. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (Unaudited) | ||
| Three Months Ended | ||
| March 31, | ||
| 2015 | 2014 | |
| Operating Activities | ||
| Net loss | $ (3,662,944) | $ (1,823,433) |
| Depreciation and amortization | 746,284 | 2,157 |
| Amortization of debt discount | 17,543 | 17,542 |
| Amortization of loan origination costs | 46,341 | — |
| Stock based compensation | 403,506 | 227,264 |
| Gain on the sale of trading securities | (285,513) | — |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | (2,251,531) | (456,690) |
| Inventory | 137,036 | — |
| Prepaids | (33,974) | 541,647 |
| Other current assets | (53,823) | (202,499) |
| Accounts payable | 596,256 | 144,688 |
| Accrued expenses | 825,602 | 328,105 |
| Net cash used in operating activities | (3,515,218) | (1,221,219) |
| Investing Activities | ||
| Purchase of equipment | (2,105,200) | (501,905) |
| Proceeds from sale of trading securities | 2,645,690 | — |
| Purchase of trading securities | (999,410) | — |
| Net cash used in investing activities | (458,920) | (501,905) |
| Financing Activities | ||
| Proceeds from sale of common stock | 6,045,412 | — |
| Sale of common stock cost | (814,062) | — |
| Proceeds from private placement | — | 315 |
| Proceeds from notes payable | 400,000 | 9,724 |
| Payments on notes payable | (533,542) | (39,634) |
| Payments on capital lease | (141,649) | — |
| Net cash provided by (used in) financing activities | 4,956,159 | (29,595) |
| Net increase (decrease) in cash and cash equivalents | 982,021 | (1,752,719) |
| Cash and cash equivalents, beginning of period | 7,013,556 | 4,292,122 |
| Cash and cash equivalents, end of period | $ 7,995,577 | $ 2,539,403 |
| Supplemental Disclosure of Cash Flow Information | ||
| Cash paid during the year for interest | $ 104,633 | $ — |
| Cash paid during the year for income taxes | $ — | $ — |
| Non-cash transactions | ||
| Fixed asset additions in accrued expenses | $ 71,529 | $ — |
| Prepaid balance withheld from sale lease-back | $ — | $ 123,244 |