Forbes Energy Services Reports Third Quarter Financial Results
Conference Call to be held Monday, November 15 at 10:00 a.m. Eastern
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<p>ALICE, Texas, <span class="xn-chron">Nov. 12, 2010</span> /CNW/ -- Forbes Energy Services Ltd. (TSX: FRB) today announced financial and operating results for the three months ended <span class="xn-chron">September 30, 2010</span>.</p>
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<p>Revenues for the third quarter increased 66.4% to <span class="xn-money">$84.0 million</span> compared to <span class="xn-money">$50.5 million</span> in the third quarter of 2009. The increase was driven by significantly higher utilization and pricing in both divisions. Net loss attributable to common shareholders for the three months ended <span class="xn-chron">September 30, 2010</span> was <span class="xn-money">$2.4 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">$9.6 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 third quarter of 2010 was <span class="xn-money">$14.3 million</span> versus <span class="xn-money">$1.6 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, "The strong improvement in our results this quarter was driven by accelerating activity in South and West Texas, with the majority of this activity targeting oil or liquids-rich gas. We expect this growth trend to continue due to the strong oil price environment and a rig count in the Eagle Ford Shale that is expected to double over the next year.</p>
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<p>"We're also monitoring additional growth opportunities outside of those two core regions. I'm pleased to announce that we recently signed an agreement to mobilize two rigs to <span class="xn-location">Colombia</span>. We are still negotiating certain terms, and there are numerous details to be worked out, but I'm optimistic that we'll be able to take advantage of opportunities down there within the next few quarters. <span class="xn-location">Colombia</span> represents an exciting new growth opportunity for Forbes Energy Services."</p>
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Business Segment Results
Well Servicing
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<p>Well servicing revenue totaled <span class="xn-money">$40.8 million</span> in the third quarter of 2010 compared to <span class="xn-money">$23.9 million</span> in the prior year period and <span class="xn-money">$39.7 million</span> in the second quarter of 2010. Segment gross margin totaled <span class="xn-money">$8.2 million</span> (20.1% of revenues) in the third quarter compared to <span class="xn-money">$1.0 million</span> (4.1% of revenues) in the third quarter of 2009 and <span class="xn-money">$10.9 million</span> (27.6% of revenues) for the second quarter of 2010. The year-over-year increase is the result of customer price increases and higher utilization. The decline in gross margin between the second and third quarter of 2010 is primarily due to a decline in <span class="xn-location">Mexico</span> gross profit related to the Pemex imposed suspension in <span class="xn-chron">September 2010</span>.</p>
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<p>Forbes recorded approximately 98,337 rig hours for the third quarter of 2010, including 17,856 hours in <span class="xn-location">Mexico</span>, compared to 65,524 total hours in the third quarter of 2009 (14,136 in <span class="xn-location">Mexico</span>) and 96,601 total hours in the second quarter of 2010 (18,432 in <span class="xn-location">Mexico</span>). The Company had 173 rigs in its well service fleet at <span class="xn-chron">September 30, 2010</span>. Capital expenditures for the well servicing segment were approximately <span class="xn-money">$0.6 million</span> during the three months ended <span class="xn-chron">September 30, 2010</span>.</p>
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Fluid Logistics
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<p>Fluid logistics revenues in the third quarter of 2010 totaled <span class="xn-money">$43.1 million</span> compared to <span class="xn-money">$26.6 million</span> in the third quarter of 2009 and <span class="xn-money">$40.4 million</span> in the second quarter of 2010. Gross operating margins for the fluid logistics segment totaled <span class="xn-money">$10.9 million</span>(25.2% of revenues) in the third quarter of 2010 compared to <span class="xn-money">$4.8 million</span> (18.1% of revenues) in the prior year period and <span class="xn-money">$8.4 million</span> (20.7% of revenues) in the second quarter of 2010.</p>
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<p>Forbes recorded 293,488 truck hours during the third quarter of 2010 compared to 206,526 for the third quarter of 2009 and 276,940 hours in the second quarter of 2010. The Company's fluid transport segment heavy truck fleet totaled 363 as of <span class="xn-chron">September 30, 2010</span>. Total capital expenditures for the fluid logistics segment were approximately <span class="xn-money">$0.8 million</span> for the three months ended <span class="xn-chron">September 30, 2010</span>.</p>
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Liquidity and Capital Resources
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<p>Forbes generated <span class="xn-money">$9.0 million</span> of cash flow from operations during the third quarter. As of <span class="xn-chron">September 30</span>, the Company had <span class="xn-money">$21.2 million</span> of unrestricted cash and cash equivalents on hand.</p>
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Conference Call
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<p>Forbes Energy will host a conference call to discuss its third quarter 2010 results on <span class="xn-chron">Monday, November 15, 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) 629-9643 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">November 22, 2010</span>, and may be accessed by calling (303) 590-3030 and using the pass code 4384505. 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&L 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</span>, 2009(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&L
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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 September
30,
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2010 2009
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Revenues
Well servicing $40,847,610 $23,853,912
Fluid logistics 43,128,903 26,618,294
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Total revenues 83,976,513 50,472,206
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Expenses
Well servicing 32,632,654 22,869,209
Fluid logistics 32,262,539 21,812,340
General and administrative 5,535,451 4,644,809
Depreciation and
amortization 10,089,067 9,982,121
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Total expenses 80,519,711 59,308,479
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Operating loss 3,456,802 (8,836,273)
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Other income (expense)
Interest expense (6,758,856) (6,198,007)
Other income (expense) 116,137 (191,585)
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Loss before taxes (3,185,917) (15,225,865)
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Income tax expense
(benefit) (1,104,267) (5,616,145)
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Net loss (2,081,650) (9,609,720)
Preferred shares dividends (278,432) -
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Net loss attributable to
common shareholders $(2,360,082) $(9,609,720)
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Loss per share of common
stock attributable to
common shareholders
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)
September 30, December 31,
2010 2009
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Cash $21,248,063 $28,425,367
Accounts receivable -
trade (net) 78,546,759 52,765,601
Working Capital 58,781,624 34,350,226
Intangible assets (net) 34,452,884 36,598,781
Total assets 444,343,670 457,432,896
Total debt 215,111,658 226,898,229
Deferred tax liability 29,334,399 36,622,111
Shareholders' equity 135,629,556 146,507,477
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Selected Operating Data
Three Months Ended September 30,
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2010 2009
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Working Days 63 64
Rig Hours
U.S. 80,481 51,388
Mexico 17,856 14,136
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Total Rig Hours 98,337 65,524
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<p> Truck Hours 293,488 206,526</p>
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Reconciliation of Adjusted EBITDA to Net Income
(Unaudited)
Three Months Ended September 30,
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2010 2009
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Net loss $(2,081,650) $(9,609,720)
Depreciation and
amortization 10,089,067 9,982,121
Interest expense 6,758,856 6,221,304
Income tax benefit (1,104,267) (5,616,145)
Stock based compensation 674,238 622,419
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Adjusted EBITDA $14,336,244 $1,599,979
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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, +1-713-529-6600, both of DRG&L, for Forbes Energy Services Ltd. Web Site: http://www.forbesenergyservices.com
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