HOUSTON and NEUQUEN CITY, Argentina, Aug. 6, 2015 (GLOBE NEWSWIRE) -- Eco-Stim Energy Solutions, Inc. (NASDAQ:ESES) ("EcoStim" or the "Company") announced its financial and operating results for the second quarter ended June 30, 2015.
SECOND QUARTER 2015 HIGHLIGHTS
- Revenues of $4.0 million, a sequential increase of $1.1 million, or 38%, over Q1 2015 results
- Coiled tubing revenues of $1.1 million, a sequential increase of $744,000, or 204% over Q1 2015 results
- YPF has now become the Company's largest customer
- Zero lost time incidents (safety)
- Zero down time as a result of labor disruptions
- Delivery of higher capacity sand equipment late in second quarter enhances future service capability
- June 2015 revenue was highest revenue month to date; July 2015 was more than 20% higher than June
As discussed in the first quarter 2015, the Company began field operations in December 2014 after importing a well stimulation fleet, a coiled tubing unit, and establishing our operating base in Argentina. Since the beginning of the year, we have experienced strong revenue growth as the Company has qualified to work for multiple customers, including YPF, and our equipment was deployed to the field. Second quarter 2015 revenue increased to $4.0 million from $2.9 million in the first quarter of 2015, with the Company's pressure pumping and coiled tubing product service lines contributing to this performance. We did not complete any field management projects during the second quarter of 2015. Last year in the second quarter, our revenues were $0.07 million, given that EcoStim's only activity in that period related to field management services.
For the second quarter of 2015, EcoStim reported a net loss of $3.5 million, or a loss of $0.52 per basic and diluted share as compared to a net loss of $3.7 million, or a loss of $0.59 per basic and diluted share, reported in the first quarter of 2015. The net loss for the second quarter of 2014 was $2.0 million, or a loss of $0.50 per basic and diluted share. The loss of $3.5 million for the second quarter of 2015 includes approximately $1.4 million of non-cash expenses such as depreciation, debt amortization and stock compensation. In addition, the majority of the Company's interest expense is paid once per year in May and therefore interest expense is accrued quarterly. In May 2015, Albright Capital Management LLC, our largest shareholder and debt holder, requested and the Company approved the deferral of the annual interest payment due on May 28, 2015 and the deferred interest of $2.5 million was subsequently converted into 523,192 unregistered shares of the Company's common stock subsequent to Company's equity public offering that was completed in July 2015.
The work in the first quarter was largely related to trial programs and therefore each job was relatively small and limited in complexity. The Company's operations team has now demonstrated their capabilities and successfully expanded the scope of work to include more complex and higher horsepower jobs. The global oil price collapse has resulted in a reduction in activity for many local operators who have exploration and production underway in other countries where their cash flow has been impaired. As discussed last quarter, YPF has maintained its capital spending plans at 2014 levels, although they have shifted some of their efforts towards natural gas.
Argentina remains one of the few markets outside of North America to successfully develop its shale resources. The government is supportive of shale development and has put numerous measures in place to support the industry, including higher commodity prices, uniform concession terms, currency control relief and a reduction in tariffs for certain drilling equipment. Argentina desperately needs to reduce its energy imports and preserve dollars. Therefore, the activity levels should remain high and investments in the Vaca Muerta shale should continue to increase, providing strong growth opportunities for the Company.
J. Chris Boswell, EcoStim's President and Chief Executive Officer, stated, "Our second quarter results continue to build on the efforts put forth by the outstanding organization we have created in the Neuquen province of Argentina. Our well stimulation operation continues to perform larger and more complex jobs, with revenues increasing $0.6 million, or 28% sequentially. Importantly, the Company did not take delivery of its new sand equipment until late June and this prevented us from completing several larger jobs that were available during the quarter. We have already seen a meaningful increase in jobs following the delivery of this equipment, contributing to record revenues in July. Following some mechanical difficulties in April, our coiled tubing unit performed reliably for the remainder of the quarter allowing for an increase in revenues from $0.4 million in the first quarter to $1.1 million in the second quarter, an increase of over 200%. We continue to broaden our customer base through the qualification process and YPF has now become our largest customer."
"With the proceeds from our recent stock offering, we are planning to increase our working horsepower from 10,000 HHP to 52,000 HHP by early next year. This will give us the flexibility and capacity to operate in 2016 with three crews (as opposed to one currently) and to address the conventional, tight gas, and unconventional markets simultaneously. I continue to be very proud of the outstanding team we have brought together in Argentina and based on the feedback we are receiving from customers, their excellent work is not going unnoticed. We have maintained 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 very excited about the operation we have started in Argentina. Our team remains at or near the top in terms of reliability, execution and safety. 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, "Second quarter revenues showed nice improvement over the first quarter and we expect that trend to continue over the next several quarters as additional capacity is deployed and our customer base expands. With the exception of April where we were hampered by the coiled tubing repair issues, we have seen sequential revenue growth in each consecutive month since the start of our operations. Most importantly, we do not expect the need to increase our overhead and fixed cost structure as we add new capacity in 2016 which should enhance our margins."
J. Chris Boswell continued, "Generating positive free cash flow and preserving liquidity will remain a priority for the Company as we continue to grow our revenue. We hope to achieve positive cash flow from operations over the next six months and hope to reach profitability early next year. As I stated last quarter, our success will very much depend on maintaining our equipment in good working order, retaining our excellent operations personnel, while maintaining a positive dialogue with both our customers and the local labor unions. We have suffered no lost time as a result of these issues to date and are excited about our ability to participate in the growth of one of the largest and richest shale oil and gas fields in the world."
G&A Expense
General and administrative ("G&A") expense in the second quarter of 2015 was $1.9 million compared to $1.6 million for the prior quarter and $1.2 million for the second quarter of 2014. The G&A expense is primarily related to the sales and administrative offices in Buenos Aires and Neuquen and the cost associated with being a public company, including our corporate office in Houston. G&A expense in the second quarter was approximately $0.2 million higher than normal due to the legal and administrative costs associated with filing the Company's first proxy and conducting the first shareholder meeting as a public company. The Company expects these costs to be reduced in the future as it begins to perform much of this work internally.
R&D Expense
Research & development ("R&D") expense in the second quarter of 2015 was $0.3 million. 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 June 30, 2015, EcoStim had cash and cash equivalents of approximately $3.6 million, down from $7.0 million at December 31, 2014 and up from $3.2 million on June 30, 2014.
On July 15, 2015, EcoStim completed an underwritten public stock offering resulting in the sale of 6,164,690 shares of common stock at $4.75 per share with gross proceeds of $29.3 million. We expect that the majority of the proceeds from this offering will be used to fund the acquisition of additional equipment currently being fabricated in Argentina and the deployment of a significant portion of the turbine powered stimulation equipment we purchased last fall.
Capital Expenditures
Total capital expenditures during the second quarter of 2015 were approximately $0.3 million compared to $2.1 million in the first quarter of 2015 and $8.6 million in the second 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 $22 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.
Conference Call
The Company will host a conference call on August 7th, 2015 at 11:30 EDT, 10:30AM 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 August 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:
Certain statements and information in this press release concerning results for the fiscal period ended June 30, 2015 may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "plan," "intend," "foresee," "should," "would," "could" or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. 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. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections.
For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. 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 | ||||
| June 30, 2015 | December 31, 2014 | |||
| (Unaudited) | ||||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ 3,593,271 | $ 7,013,556 | ||
| Accounts receivable | 4,536,308 | 264,192 | ||
| Marketable securities | — | 1,360,767 | ||
| Inventory | 1,612,351 | 1,619,778 | ||
| Prepaids | 3,356,960 | 2,496,805 | ||
| Other assets | 434,828 | 409,388 | ||
| Total current assets | 13,533,718 | 13,164,486 | ||
| Property, plant and equipment, net | 27,721,065 | 27,949,347 | ||
| Other non-current assets | 843,911 | 936,592 | ||
| Total assets | $ 42,098,694 | $ 42,050,425 | ||
| Liabilities and stockholders' equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ 1,982,390 | $ 1,947,371 | ||
| Accrued expenses | 4,840,844 | 3,164,250 | ||
| Short-term notes payable | 40,090 | 158,036 | ||
| Current portion of long-term notes payable | 3,965,116 | 475,000 | ||
| Current portion of capital lease payable | 640,464 | 597,406 | ||
| Total current liabilities | 11,468,904 | 6,342,063 | ||
| Non-current liabilities: | ||||
| Long-term notes payable | 22,000,000 | 25,625,000 | ||
| Long-term capital lease payable | 1,805,857 | 2,102,143 | ||
| Total non-current liabilities | 23,805,857 | 27,727,143 | ||
| Stockholders' equity | ||||
| Common stock | 6,793 | 5,709 | ||
| Additional paid-in capital | 27,160,621 | 21,116,100 | ||
| Accumulated deficit | (20,343,481) | (13,140,590) | ||
| Total stockholders' equity | 6,823,933 | 7,981,219 | ||
| Total liabilities and stockholders' equity | $ 42,098,694 | $ 42,050,425 | ||
| ECO-STIM ENERGY SOLUTIONS, INC. | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (Unaudited) | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||
| 2015 | 2014 | 2015 | 2014 | |
| Revenues | $ 3,985,419 | $ 73,951 | $ 6,877,112 | $ 557,296 |
| Operating cost and expenses: | ||||
| Cost of services | 3,839,345 | 436,480 | 6,998,882 | 1,222,465 |
| Selling, general, and administrative | 1,933,092 | 1,234,191 | 3,509,947 | 2,617,124 |
| Research and development | 251,816 | -- | 493,362 | -- |
| Depreciation and amortization expense | 900,845 | 85,613 | 1,647,129 | 87,770 |
| Total operating costs and expenses | 6,925,098 | 1,756,284 | 12,649,320 | 3,927,359 |
| Operating loss | (2,939,679) | (1,682,333) | (5,772,208) | (3,370,063) |
| Other income (expense): | ||||
| Gain on sale of trading securities | 587,407 | -- | 872,920 | -- |
| Interest expense | (1,018,481) | (337,825) | (2,002,676) | (485,386) |
| Other income (expenses) | (169,194) | 9,209 | (300,927) | 21,068 |
| Total other expense | (600,268) | (328,616) | (1,430,683) | (464,318) |
| Provision for income taxes | -- | -- | -- | -- |
| Net loss | $ (3,539,947) | $ (2,010,949) | $ (7,202,891) | $ (3,834,381) |
| Basic and diluted loss per share | $ (0.52) | $ (0.50) | $ (1.11) | $ (0.96) |
| Weighted average number of common shares outstanding-basic and diluted | 6,791,088 | 3,988,706 | 6,502,362 | 3,988,247 |
| ECO-STIM ENERGY SOLUTIONS, INC. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (Unaudited) | ||
|
Six Months Ended June 30, |
||
| 2015 | 2014 | |
| Operating Activities | ||
| Net loss | $ (7,202,891) | $ (3,834,381) |
| Depreciation and amortization | 1,647,129 | 87,770 |
| Amortization of debt discount | 35,084 | 67,695 |
| Amortization of loan origination costs | 92,681 | — |
| Stock based compensation | 814,255 | 484,954 |
| Gain on the sale of trading securities | (872,920) | — |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | (4,272,116) | (518,338) |
| Inventory | 237,475 | (241,770) |
| Prepaids | (860,155) | 809,886 |
| Other current assets | (231,203) | (1,686,766) |
| Accounts payable | 925,995 | 758,188 |
| Accrued expenses | 1,742,681 | 586,554 |
| Net cash used in operating activities | (7,943,985) | (3,486,208) |
| Investing Activities | ||
| Purchase of equipment | (2,400,194) | (9,066,085) |
| Proceeds from sale of trading securities | 5,232,067 | — |
| Purchase of trading securities | (2,998,379) | — |
| Net cash used in investing activities | (166,506) | (9,066,085) |
| Financing Activities | ||
| Proceeds from sale of common stock | 6,045,412 | — |
| Sale of common stock issuance cost | (814,062) | — |
| Proceeds from convertible debt | — | 11,863,885 |
| Capitalized loan origination costs | — | (300,000) |
| Proceeds from exercise of stock options | — | 315 |
| Proceeds from notes payable | 400,000 | 15,015 |
| Payments on notes payable | (652,831) | (79,895) |
| Payments on capital lease | (288,313) | — |
| Net cash provided by financing activities | 4,690,206 | 11,499,320 |
| Net decrease in cash and cash equivalents | (3,420,285) | (1,052,973) |
| Cash and cash equivalents, beginning of period | 7,013,556 | 4,292,122 |
| Cash and cash equivalents, end of period | $ 3,593,271 | $ 3,239,149 |
| Supplemental Disclosure of Cash Flow Information | ||
| Cash paid during the year for interest | $ 293,503 | $ 3,462 |
| Cash paid during the year for income taxes | $ — | $ — |
| Non-cash transactions | ||
| Fixed asset additions in accrued expenses | $ 426,536 | $ 790,542 |
| Debt issuance cost | $ — | $ 536,702 |
| Prepaid balance withheld from sale lease-back | $ — | $ 250,850 |