Forbes Energy Services Reports Second Quarter Financial Results
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<p>ALICE, Texas, <span class="xn-chron">Aug. 16</span> /CNW/ -- Forbes Energy Services Ltd. (TSX: FRB) today announced financial and operating results for the three months ended <span class="xn-chron">June 30, 2010</span>.</p>
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<p>Revenues for the second quarter increased 61% to <span class="xn-money">$80.0 million</span> compared to <span class="xn-money">$49.8 million</span> in the second quarter of 2009. The increase was driven by significantly higher utilization and pricing in both divisions. Net loss for the three months ended <span class="xn-chron">June 30, 2010</span> was <span class="xn-money">$2.2 million</span>, or a loss of <span class="xn-money">$0.03</span> per share, compared to a net loss of <span class="xn-money">$9.0 million</span>, or <span class="xn-money">$0.15</span> per share, in the prior year period.</p>
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<p>Adjusted EBITDA for the second quarter of 2010 was <span class="xn-money">$13.4 million</span> versus <span class="xn-money">$2.8 million</span> for the same period in the prior year. Adjusted EBITDA is a non-GAAP financial measure, defined by the Company as net income before interest, taxes, depreciation, amortization, gain or loss on early extinguishment of debt, non-cash impairments and non-cash stock based compensation. For a reconciliation of Adjusted EBITDA to net income, please see the disclosures at the end of this release and on the Company's website.</p>
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<p><span class="xn-person">John Crisp</span>, Forbes Energy's President and Chief Executive Officer, stated, "We are pleased with the industry upturn we have been experiencing. As a result, we expect improvement in pricing and utilization to continue through the last half of this year, although at a little slower rate of increase and subject to the usual fourth quarter seasonal slowdown. In addition, we feel very fortunate to have such a significant presence in the natural gas liquids rich Eagle Ford shale play as we keep a watchful eye on the natural gas rig count. Even with a leveling off, or slight slowdown in the overall count, we feel the effects to Forbes' activity levels will be mitigated as exploration companies continue to announce new and expanded plans in the Eagle Ford."</p>
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Business Segment Results
Well Servicing
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<p>Well servicing revenue totaled <span class="xn-money">$39.7 million</span> in the second quarter of 2010 compared to <span class="xn-money">$25.5 million</span> in the prior year period and <span class="xn-money">$31.0 million</span> in the first quarter of 2010. Segment gross margin totaled <span class="xn-money">$10.9 million</span> (27.6% of revenues) in the second quarter compared to <span class="xn-money">$1.8 million</span> (7.0% of revenues) in the second quarter of 2009 and <span class="xn-money">$2.4 million</span> (7.7% of revenues) for the first quarter of 2010 as the result of customer price increases and higher utilization.</p>
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<p>Forbes recorded approximately 96,601 rig hours for the second quarter of 2010, including 18,432 hours in <span class="xn-location">Mexico</span>, compared to 65,453 total hours in the second quarter of 2009 (10,440 in <span class="xn-location">Mexico</span>) and 84,290 total hours in the first quarter of 2010 (18,216 in <span class="xn-location">Mexico</span>). The Company had 171 rigs in its well service fleet at <span class="xn-chron">June 30, 2010</span>. Capital expenditures for the well servicing segment were approximately <span class="xn-money">$0.3 million</span> during the three months ended <span class="xn-chron">June 30, 2010</span>.</p>
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Fluid Logistics
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<p>Fluid logistics revenues in the second quarter of 2010 totaled <span class="xn-money">$40.4 million</span> compared to <span class="xn-money">$24.2 million</span> in the second quarter of 2009 and <span class="xn-money">$36.2 million</span> in the first quarter of 2010. Gross operating margins for the fluid logistics segment totaled <span class="xn-money">$8.4 million</span> (20.7% of revenues) in the second quarter of 2010 compared to <span class="xn-money">$4.3 million</span> (17.8% of revenues) in the prior year period and <span class="xn-money">$8.0 million</span> (22.0% of revenues) in the first quarter of 2010.</p>
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<p>Forbes recorded 276,940 truck hours during the second quarter of 2010 compared to 199,662 for the second quarter of 2009 and 259,686 hours in the first quarter of 2010. The Company's fluid transport segment heavy truck fleet totaled 365 as of <span class="xn-chron">June 30, 2010</span>. Total capital expenditures for the fluid logistics segment were approximately <span class="xn-money">$0.6 million</span> for the three months ended <span class="xn-chron">June 30, 2010</span>.</p>
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Liquidity and Capital Resources
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<p>Forbes is pleased to report that the "going concern" footnote has not been included in the Company's Form 10-Q for the most recent quarter ended <span class="xn-chron">June 30, 2010</span>. The report of Forbes' independent registered accounting firm which accompanied the Company's Form 10-K for the twelve months ended <span class="xn-chron">December 31, 2009</span> included a "going concern" explanatory paragraph due to concerns over the Company's ability to meet cash obligations. A similar footnote was included in the Company's Form 10-Q for the quarter ended <span class="xn-chron">March 31, 2010</span>.</p>
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<p>As of <span class="xn-chron">August 16</span>, after interest payments totaling <span class="xn-money">$11.8 million</span>, the Company had <span class="xn-money">$9.9 million</span> of unrestricted cash on hand. Although there can be no assurances, management currently projects that the Company will be able to meet its foreseeable future capital expenditure requirements and first quarter 2011 interest payment obligations through cash on hand and cash generated by operations.</p>
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Conference Call
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<p>Forbes Energy will host a conference call to discuss its second quarter 2010 results on <span class="xn-chron">Tuesday, August 17, 2010</span>, at <span class="xn-chron">10:00 a.m. Eastern Time</span> (<span class="xn-chron">9:00 a.m.</span> Central). To access the call, please dial (480) 629-9835 and ask for the Forbes Energy Services call at least 10 minutes prior to the start time. The conference call will also be broadcast live via the Internet and can be accessed through the "Investor Relations" page of Forbes Energy's website, <a href="http://www.forbesenergyservices.com">www.forbesenergyservices.com</a>.</p>
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<p>A telephonic replay of the conference call will be available until <span class="xn-chron">August 24, 2010</span>, and may be accessed by calling (303) 590-3030 and using the pass code 4349871. A webcast archive will be available at <a href="http://www.forbesenergyservices.com">www.forbesenergyservices.com</a> shortly after the call and will be accessible for approximately 30 days. For more information, please contact <span class="xn-person">Donna Washburn</span> at DRG&E at (713) 529-6600 or email at <a href="mailto:[email protected]">[email protected]</a>.</p>
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About Forbes Energy
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<p>Forbes Energy Services Ltd. 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, 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"), which was previously filed, as well as other filings the Company has made with the Securities and Exchange Commission.</p>
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<p>Forbes Energy's financial statements and management's discussion and analysis of financial condition and results of operations can be found in the Form 10-Q, which is being filed today with the Securities and Exchange Commission and posted on the Company's website.</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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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
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Selected Statement of Operations Data
(Unaudited)
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Three Months Ended June 30,
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2010 2009
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Revenues
Well servicing $39,650,732 $25,515,071
Fluid logistics 40,393,056 24,237,506
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Total revenues 80,043,788 49,752,577
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Expenses
Well servicing 28,711,618 23,720,892
Fluid logistics 32,026,780 19,928,066
General and
administrative 6,552,668 3,896,576
Depreciation and
amortization 9,914,028 9,774,963
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Total expenses 77,205,094 57,320,497
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Operating loss 2,838,694 (7,567,920)
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Other income (expense)
Interest expense (6,894,946) (6,406,311)
Gain on extinguishment
of debt 18,591 447,842
Other income (expense) (16,511) 8,084
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Loss before taxes (4,054,172) (13,518,305)
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Income Tax Expense (1,812,826) (4,480,569)
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Net loss $(2,241,346) $(9,037,736)
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Loss per share of
common stock
Basic and Diluted $(0.03) $(0.15)
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Weighted average number of
shares outstanding
Basic and Diluted 83,673,700 62,111,200
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Selected Balance Sheet Data
(Unaudited)
June 30, December 31,
2010 2009
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Cash $16,509,774 $28,425,367
Accounts receivable -trade
(net) 80,034,811 52,765,601
Working Capital 52,327,296 34,350,226
Other intangible assets
(net) 35,168,183 36,598,781
Total assets 451,955,412 457,432,896
Total debt 216,740,844 226,898,229
Deferred tax liability 30,808,677 36,622,111
Shareholders' equity 137,113,704 146,507,477
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Selected Operating Data
Three Months Ended June 30,
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2010 2009
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Working Days 63 64
Rig Hours
U.S. 78,169 55,013
Mexico 18,432 10,440
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Total Rig Hours 96,601 65,453
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<p> Truck Hours 276,940 199,662</p>
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Reconciliation of Adjusted
EBITDA to Net Income
(Unaudited)
Three Months Ended June 30,
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2010 2009
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Net loss $(2,241,346) $(9,037,736)
Depreciation and
amortization 9,914,028 9,774,963
Interest expense 6,894,946 6,406,311
Income tax benefit (1,812,826) (4,480,569)
Stock based compensation 622,419 622,419
Gain on extinguishment of
debt (18,591) (447,842)
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Adjusted EBITDA $13,358,630 $2,837,546
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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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