MIDLAND, Texas, July 29 /PRNewswire-FirstCall/ -- Basic Energy Services, Inc. (NYSE: BAS) ("Basic") today announced its financial and operating results for the second quarter and six months ended June 30, 2009.
Basic reported a net loss of $21.2 million, or $0.54 per diluted share for the second quarter of 2009 on revenues of $118.8 million. In the comparable quarter last year, Basic reported net income of $18.7 million, or $0.45 per diluted share, on revenues of $251.5 million. Last year's second quarter included $4.2 million of after-tax merger related charges; excluding those charges, net income was $22.9 million, or $0.55 per diluted share.
EBITDA (defined as net income before interest, taxes, depreciation and amortization) for the second quarter of 2009 was $3.1 million, or 2.6% of revenue, compared to $65.0 million, or 25.9% of revenue, in the same period in 2008. Adjusted EBITDA (defined as net income before interest, taxes, depreciation and amortization, and also excludes the 2009 pre-tax goodwill impairment charge and 2008 pre-tax merger cost) for the 2009 second quarter was $3.0 million compared to $71.6 million in the comparable quarter of 2008. EBITDA and Adjusted EBITDA, which are not measures determined in accordance with U.S. generally accepted accounting principles ("GAAP"), are defined and reconciled in note 2 under the accompanying financial tables.
For the six-month period ended June 30, 2009, Basic generated a net loss of $37.2 million, or 0.93 per diluted share, excluding the impact of a $166.9 million after-tax ($204.0 million pre-tax) non-cash goodwill impairment charge. Net loss as reported for the 2009 six-month period was $204.1 million. During the comparable period last year, Basic generated income of $42.6 million, or $1.02 per diluted share, before $4.2 million of after-tax merger-related costs. Including these merger-related charges, net income for the first six months of 2008 was $38.4 million, or $0.92 per diluted share. Revenues declined 43% to $273.5 million in the first six months of 2009, compared to $481.4 million in the same period of 2008.
Basic recognized an effective tax benefit rate of 22% in the first six months of 2009 compared to a tax rate of 38% in the first six months of 2008. The low effective tax benefit rate in the first half of 2009 was primarily due to the $204.0 million goodwill impairment charge. The tax deductibility of the impairment charge was determined by the taxable basis of the goodwill considered to be impaired. A portion of Basic's goodwill was not tax-deductible, which decreased the benefit of the effective tax rate. Excluding the impact of the goodwill impairment charge, the effective tax rate for the first half of 2009 would have been a benefit of 37%.
Ken Huseman, Basic's President and Chief Executive Officer, stated, "As previously disclosed, the second quarter proved to be challenging due to current economic conditions and volatile commodity prices. We experienced soft demand in all our geographic markets and service lines with revenue declining 23% sequentially. Although demand improved modestly toward the end of the quarter, pricing eroded as we aggressively matched our competitors' pricing in order to protect market share and our current labor force. We believe pricing has now stabilized in most markets as service companies have generally reduced pricing as low as current activity and cost structures allow.
"During the second quarter we made significant reductions to our labor force and cost structure to match the demand for our services. We have reduced headcount by more than 27% from the 2008 peak, reduced payroll expense by approximately 40% and driven down the cost of purchased goods and services. The full impact of those cost reductions will be reflected in our third quarter results.
"We also continued to reduce our capital expenditures as the relatively young age of our fleet allowed us to spend less than $4.7 million supporting our existing fleet. The remaining $8.8 million in capital spending was related to completing several projects commenced in 2008 and adding a few strategic assets such as new salt water disposal facilities to improve our competitive positioning. Capital spending for the remainder of the year will be similarly restricted.
"For the remainder of 2009, we expect modest improvement in our operating environment. Oil prices above $50 per barrel should support strong demand for oil well maintenance services and capital spending for oil-related projects will likely continue to expand. In fact, through July we have seen an increase in activity for oil-related drilling and workover projects. Natural gas prices however, are not likely to support a significant increase in activity until mid-2010. With that demand outlook, we expect utilization to trend gradually higher but pricing to remain soft as competition remains fierce in all markets.
"Despite the tough market conditions, we are pleased to have announced the pricing of a senior secured bond offering that is scheduled to close on July 31, 2009. Our June 30, 2009 cash balance pro forma for this offering is approximately $163 million and we will have no principal payments related to our long-term debt until August 2014. We believe this level of liquidity uniquely positions our company to withstand any reasonable projection of a protracted down cycle in the industry."
Business Segment Results
Well Servicing
Well servicing revenues declined approximately 59% to $36.4 million during the second quarter of 2009 compared to $89.0 million in the same period last year and $48.8 million in the first quarter of 2009. At June 30, 2009, the well servicing rig count was 414. The weighted average number of well servicing rigs was 414 during the second quarter of 2009 compared to 403 during the same period in 2008 and unchanged from the first quarter of 2009.
Revenue per well servicing rig hour declined to $329 during the second quarter of 2009 compared to $400 in the same period in 2008 and $369 in the first quarter of 2009. Well servicing rig utilization declined to 37% in the second quarter of 2009 compared to 77% in the second quarter of 2008 and 45% in the first quarter of 2009.
Well servicing segment profit in the second quarter of 2009 was $8.6 million compared to $33.7 million in the same period in 2008 and $11.9 million in the first quarter of 2009. Due to the well services operating team's focus on managing costs in a challenging environment, segment profit margins remained at 24% of revenue in the second quarter of 2009, consistent with the segment profit margin that was produced in the first quarter of 2009, but down from 38%, which was achieved in the second quarter of 2008. The year-over-year decrease was due mainly to declining utilization and reduced pricing for well servicing rig services.
Fluid Services
Fluid services revenue in second quarter of 2009 was $49.1 million compared to $72.6 million in the same period in 2008 and $65.0 million in the first quarter of 2009. Basic added nine new trucks and retired 17 trucks during the second quarter of 2009, bringing the total number of fluid services trucks to 805 as of June 30, 2009. Weighted average number of fluid services trucks increased 22% to 808 during the second quarter of 2009 compared to 663 during the same period in 2008, mainly due to the trucks acquired in the Azurite acquisition in September 2008.
Average revenue per fluid services truck was $61,000 in the second quarter of 2009, down 44% compared to $109,000 in the same period in 2008 and declining 24% compared to $80,000 in the first quarter of 2009. Segment profit in the second quarter of 2009 was $13.7 million, or 28% of revenue, compared to $24.0 million, or 33% of revenue, in the same period in 2008 and $20.4 million, or 31% of revenue, in the first quarter of 2009. Continued weakness in drilling activity during the second quarter resulted in lower truck utilization and pricing as well as a drop in well site construction services, which caused lower revenue and segment profit per fluid service truck.
Completion & Remedial Services
Completion and remedial services revenues during the second quarter of 2009 declined to $29.4 million from $79.6 million in the same period in 2008 and $37.3 million in the first quarter of 2009.
