Forbes Energy Services Provides Selected Financial Information
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<p>ALICE, Texas, <span class="xn-chron">July 20</span> /CNW/ -- Forbes Energy Services Ltd. (TSX: FRB) (collectively with its subsidiaries, the "Company"), in connection with the recently announced consent solicitation of the 11% Senior Secured Notes due 2015 issued by two of its subsidiaries, is releasing the following selected financial information today.</p>
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<p>The Company is benefiting from strengthened activity across all of its markets, particularly in South Texas. This activity has allowed the industry, and the Company, to implement gradual customer price increases beginning in the first quarter of 2010. <span class="xn-person">John Crisp</span>, the President and Chief Executive Officer of Forbes Energy Services Ltd., stated, "These increases have now allowed the Company to establish a more normalized gross margin."</p>
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<p><span class="xn-person">Mr. Crisp</span> further stated, "Beginning in the second quarter most Company employees were granted rate increases in response to these improving industry conditions and tighter labor markets. Even with these increased costs, the Company has been able to retain the majority of the customer price increases in the form of expanded margins as it realigned its revenues and costs."</p>
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<p>Gross revenues for the months of April and <span class="xn-chron">May 2010</span> are approximately <span class="xn-money">$24 million</span> and <span class="xn-money">$27 million</span>, respectively. Once all the numbers are finalized, the Company expects <span class="xn-chron">June 2010</span> revenues to be in line with May. The Company estimates adjusted EBITDA for the second quarter will be in excess of <span class="xn-money">$10.5 million</span> as compared with adjusted EBITDA for the first quarter of 2010 of <span class="xn-money">$5 million</span>. It is anticipated that U.S. operations will contribute approximately 80% of the second quarter adjusted EBITDA with <span class="xn-location">Mexico</span> contributing the balance.</p>
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<p>Accounts receivable as of <span class="xn-chron">May 31, 2010</span> amounted to <span class="xn-money">$73 million</span> as compared to <span class="xn-chron">December 31, 2009</span> accounts receivable of <span class="xn-money">$53 million</span>. The <span class="xn-chron">May 31, 2010</span> balance was comprised of approximately <span class="xn-money">$51 million</span> from the <span class="xn-location">United States</span> and <span class="xn-money">$22 million</span> from <span class="xn-location">Mexico</span>. This resulted in Days Sales Outstanding ("DSO") of 68 and 71 in the <span class="xn-location">United States</span> as of <span class="xn-chron">December 31, 2009</span> and <span class="xn-chron">May 31, 2010</span>, respectively, and days sales outstanding of 243 and 187 in <span class="xn-location">Mexico</span> as of <span class="xn-chron">December 31, 2009</span> and <span class="xn-chron">May 31, 2010</span>, respectively.</p>
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<p>The <span class="xn-location">United States</span> DSO reflects the rapid ramp-up in revenues from December through May. Future months should see the <span class="xn-location">United States</span> DSO begin to decline, more in line with industry averages.</p>
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<p>The new management team in <span class="xn-location">Mexico</span> has implemented new systems to ensure timely billings to Pemex, which we believe will begin to improve our DSO. Although the new team has developed a closer working relationship with Pemex and now better understands the billing process, <span class="xn-location">Mexico</span> DSO will continue to lag behind those in the <span class="xn-location">United States</span> due to the extended approval and billing process required by Pemex.</p>
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<p>During 2009 and, to a lesser degree, the first quarter of 2010, the Company provided additional working capital to <span class="xn-location">Mexico</span>. Since mid-March, with the new billing processes and more efficient field operations, <span class="xn-location">Mexico</span> has generated adequate cash flow from which to pay its expenses. The Company believes its <span class="xn-location">Mexico</span> operation will soon begin generating adequate cash flow to begin distributions to the <span class="xn-location">United States</span>.</p>
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Unrestricted cash on deposit as of the following dates was:
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March 31, 2010 $12.6 million
May 31, 2010 $17.3 million (adjusted for bond repurchase
of $7.2 million)
July 19, 2010 $15.5 million
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<p>A statement of cash flows through <span class="xn-chron">March 31, 2010</span> was provided in our Report on Form 10-Q for the quarter ended <span class="xn-chron">March 31, 2010</span>, and can be found on the Company's website (<a href="http://www.ForbesEnergyServices.com">www.ForbesEnergyServices.com</a>) or at <a href="http://www.sec.gov">www.sec.gov</a>. The following update provides selected information relative to the quarter ending <span class="xn-chron">June 30, 2010</span>. During the second quarter a preferred stock offering was completed for net proceeds of approximately <span class="xn-money">$14 million</span>. Additionally, it is projected that the Company generated in excess of <span class="xn-money">$10.5 million</span> in adjusted EBITDA during the second quarter. During this same quarter, the Company repurchased approximately <span class="xn-money">$7 million</span> in bonds, increased accounts receivable by approximately <span class="xn-money">$10 million</span>, increased cash by approximately <span class="xn-money">$2 million</span>, paid approximately <span class="xn-money">$2 million</span> on installment loans, and purchased approximately <span class="xn-money">$1 million</span> in equipment.</p>
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<p>The Company has a cash interest payment in the amount of <span class="xn-money">$1.2 million</span> due on <span class="xn-chron">August 1, 2010</span>, and another cash interest payment in the amount of <span class="xn-money">$10.6 million</span> due <span class="xn-chron">August 12, 2010</span>.</p>
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<p>The Company cautions that several factors other than those discussed above may impact the Company's operating results and that a particular trend regarding the factors above may or may not be indicative of the Company's current or future financial performance.</p>
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<p>The Company is an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, Mississippi, Pennsylvania and <span class="xn-location">Mexico</span>.</p>
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Forward-Looking Statements and Regulation G Reconciliation
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<p>This press release contains "forward-looking statements," as contemplated by the Private Securities Litigation Reform Act of 1995 and the applicable securities laws of <span class="xn-location">Canada</span>, in which the Company discusses factors it believes may affect its performance in the future. The accuracy of the Company's assumptions, expectations, beliefs and projections depend on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company's actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include: supply and demand for oilfield services and the level of oil and natural gas prices; the continued uncertainty in the global financial markets and its effect on domestic spending in the oil and natural gas industry; the Company's ability to maintain or improve pricing on its core services; the potential for excess capacity in the industry; and competition. Should one or more of the foregoing risks or uncertainties materialize, or should the Company's underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated in its forward-looking statements, and the Company's business, financial condition and results of operations could be materially and adversely affected. Additional factors that you should consider are set forth in detail in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended <span class="xn-chron">December 31, 2009</span> (the "Form 10-K") as well as other filings the Company has made with the Securities and Exchange Commission and the securities commissions or similar regulatory authorities in each of the provinces of <span class="xn-location">Canada</span>, other than <span class="xn-location">Quebec</span>.</p>
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<p>This press release also contains references to the non-GAAP financial measure of adjusted EBITDA. For a reconciliation of adjusted EBITDA to net income, please see the table at the end of this release. Management's opinion regarding the usefulness of adjusted EBITDA to investors and a description of the ways in which management uses such measures can be found on the "Investor Relations" page of Forbes Energy's website, <a href="http://www.forbesenergyservices.com">www.forbesenergyservices.com</a>.</p>
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Reconciliation of Adjusted EBITDA to Net Income
(Unaudited)
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Three Months Ended
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March 31, 2010 June 30, 2010
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(projected)
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Net loss $(8,171,517) $(4,483,050)
Depreciation and
amortization 9,924,064 9,925,000
Interest expense 6,847,731 6,850,000
Income tax benefit (4,000,607) (2,413,950)
Stock based compensation 622,420 622,000
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Adjusted EBITDA $5,222,091 $10,500,000
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Contacts: Forbes Energy Services Ltd.
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L. Melvin Cooper, SVP & CFO
361-664-0549
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DRG&E
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Ken Dennard, Managing Partner
Ben Burnham, AVP
713-529-6600
For further information: L. Melvin Cooper, SVP & CFO of Forbes Energy Services Ltd., +1-361-664-0549; or Ken Dennard, Managing Partner, or Ben Burnham, AVP, both of DRG&E, +1-713-529-6600, for Forbes Energy Services Ltd. Web Site: http://www.ForbesEnergyServices.com
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