Exhibit 99.1

 

LOGO     NEWS RELEASE
        Contacts:    Quintana Energy Services
             Keefer M. Lehner, EVP & CFO
             832-518-4094
             ir@qesinc.com
             Dennard Lascar Investor Relations
             Ken Dennard / Natalie Hairston
             713-529-6000
             QES@dennardlascar.com

QUINTANA ENERGY SERVICES REPORTS 2017 FOURTH QUARTER RESULTS

HOUSTON, TX – March 28, 2018 – Quintana Energy Services Inc. (NYSE: QES) (“QES” or the “Company”) today reported financial and operating results for the fourth quarter ended December 31, 2017.

The information in this earnings release includes the results of Quintana Energy Services LP, the Company’s accounting predecessor. In February 2018, in connection with the reorganization transactions entered into upon the closing of the Company’s initial public offering, the Company acquired all of the outstanding equity of Quintana Energy Services LP from its existing investors.

Fourth Quarter 2017 Financial Highlights

Fourth quarter 2017 revenue grew 16% to $130.9 million, up from $113.3 million in the third quarter of 2017. Fourth quarter 2017 net income was $2.1 million and Adjusted EBITDA was $18.8 million, compared to a net loss of $8.4 million and Adjusted EBITDA of $6.8 million for the third quarter of 2017. In the fourth quarter of 2016, revenue was $58.3 million, net loss was $35.9 million and Adjusted EBITDA was a loss of $3.8 million. See the section of this release entitled “Non-GAAP Financial Measures” for a discussion of Adjusted EBITDA and its reconciliation to the most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”).

Rogers Herndon, QES’ President and Chief Executive Officer, stated, “We are very pleased to be reporting our first quarterly results after having successfully closed on our initial public offering in February. We are proud of the strong results we have achieved in the fourth quarter of 2017 and look forward to a very productive 2018 as the macroeconomic environment for drilling and completion activities, though subject to near-term volatility, continues to gain traction, with healthy demand and a strong need for our services.”


Business Segment Results

The following business segments comprise the Company’s primary services: Directional Drilling Services; Pressure Pumping Services; Pressure Control Services; and Wireline Services.

Directional Drilling Services

The Directional Drilling Services segment provides the highly-technical and essential services of guiding horizontal and directional drilling operations for exploration and production (“E&P”) companies. Revenue was $38.3 million in the fourth quarter of 2017, flat as compared to $38.7 million in the third quarter of 2017. Fourth quarter 2017 Adjusted EBITDA was $5.5 million, compared to Adjusted EBITDA of $3.4 million for the third quarter of 2017. In the fourth quarter of 2016, revenue was $22.6 million and Adjusted EBITDA was $1.8 million.

Pressure Pumping Services

The Pressure Pumping Services segment primarily provides hydraulic fracturing services to E&P companies. Revenue for the segment grew 26% to $49.5 million in the fourth quarter of 2017, up from $39.4 million in the third quarter of 2017, due to the reactivation of our third unconventional frac spread in the Mid-Continent region. Fourth quarter 2017 Adjusted EBITDA was $10.5 million, compared to Adjusted EBITDA of $5.8 million for the third quarter of 2017. In the fourth quarter of 2016, revenue was $11.8 million and Adjusted EBITDA was a loss of $1.8 million.

Pressure Control Services

The Pressure Control Services segment consists of coiled tubing, rig-assisted snubbing, nitrogen, fluid pumping and well control services. Revenue for the segment grew approximately 18% to $26.5 million in the fourth quarter of 2017, up from $22.5 million in the third quarter of 2017, primarily due to stronger utilization and pricing gains. Fourth quarter 2017 Adjusted EBITDA was $4.1 million, compared to Adjusted EBITDA of $0.8 million for the third quarter of 2017. In the fourth quarter of 2016, revenue was $15.1 million and Adjusted EBITDA was a loss of $0.5 million.


Wireline Services

The Wireline Services segment provides cased-hole wireline services to E&P companies. Revenue for the segment grew 32% to $16.6 million in the fourth quarter of 2017, up from $12.6 million in the third quarter of 2017. Fourth quarter 2017 Adjusted EBITDA was $1.5 million, compared to Adjusted EBITDA loss of $1.2 million for the third quarter of 2017. In the fourth quarter of 2016, revenue was $8.9 million and Adjusted EBITDA was a loss of $1.2 million.

Other Financial Information

General and administrative expense for the fourth quarter of 2017 was $18.8 million, compared to $19.4 million for the third quarter of 2017 and $19.0 million for the fourth quarter of 2016. Depreciation and amortization expense in the fourth quarter of 2017 was $11.4 million, compared to $11.2 million for the third quarter of 2017 and $19.2 million in the fourth quarter of 2016.

Capital expenditures totaled $7.7 million during the fourth quarter of 2017, compared to $4.8 million in the third quarter of 2017, and $3.2 million in the fourth quarter of 2016.

In connection with the Company’s initial public offering, which closed on February 13, 2018, QES converted $33.6 million of outstanding indebtedness under its term loan into shares of common stock of the Company, fully repaid and terminated the revolving credit facility and term loan and entered into a new $100 million senior secured asset-based revolving credit facility.

Conference Call Information

QES has scheduled a conference call for 9:00 a.m. Central Time (10:00 a.m. Eastern Time) on Thursday, March 29, 2018, to review reported results. You may access the call by telephone at 1-201-389-0867 by asking for the QES 2017 Fourth Quarter Conference Call. The webcast of the call may also be accessed through the Investor Relations section of the Company’s website at https://ir.quintanaenergyservices.com/ir-calendar. A replay of the call can be accessed on the Company’s website for twelve months and will be available by telephone through April 5, 2018, at (201) 612-7415, access code 13677321#.


About Quintana Energy Services

QES is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas exploration and production companies operating in both conventional and unconventional plays in all of the active major basins throughout the U.S. QES’s primary services include: directional drilling, pressure pumping, pressure control and wireline services. The Company offers a complementary suite of products and services to a broad customer base that is supported by in-house manufacturing, repair and maintenance capabilities. More information is available at www.quintanaenergyservices.com.

Forward-Looking Statements and Cautionary Statements

This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) contains certain statements and information that may constitute “forward-looking statements.” All statements, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words “anticipate,” “believe,” “expect,” “plan,” “forecasts,” “will,” “could,” “may,” and similar expressions that convey the uncertainty of future events or outcomes, and the negative thereof, are intended to identify forward-looking statements. Forward-looking statements contained in this news release, which are not generally historical in nature, include those that express a belief, expectation or intention regarding our future activities, plans and goals and our current expectations with respect to, among other things: our operating cash flows, the availability of capital and our liquidity; our future revenue, income and operating performance; our ability to sustain and improve our utilization, revenue and margins; our ability to maintain acceptable pricing for our services; future capital expenditures; our ability to finance equipment, working capital and capital expenditures; our ability to execute our long-term growth strategy; our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements; and the timing and success of strategic initiatives and special projects.

Forward-looking statements are not assurances of future performance and actual results could differ materially from our historical experience and our present expectations or projections. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for our existing operations, experience, expectations and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Our forward-looking statements involve significant risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks associated with the following: a decline in demand for our services, including due to declining commodity prices, overcapacity and other competitive factors affecting our industry; the cyclical nature and volatility of the oil and gas industry, which impacts the level of exploration, production and development activity and spending patterns by E&P companies; a decline in, or substantial volatility of, crude oil and gas commodity prices, which generally leads to decreased spending by our customers and negatively impacts drilling, completion and production activity; and other risks and uncertainties listed in our filings with the U.S. Securities and Exchange Commission, including our Current Reports on Form 8-K that we file from time to time, Quarterly Reports on Form 10-Q and Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by law.


CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of dollars, except per unit data)

(Unaudited)

 

     Three Months Ended     Year Ended  
     December 31,
2017
    September 30,
2017
    December 31,
2016
    2017     2016  

Revenue

   $ 130,863     $ 113,274     $ 58,252     $ 438,033     $ 210,428  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and expenses:

          

Direct operating expenses

     95,841       89,082       46,257       332,695       182,928  

General and administrative expenses

     18,829       19,441       19,038       72,770       73,600  

Depreciation and amortization

     11,423       11,238       19,224       45,687       78,661  

Fixed asset impairment

     —         —         1,380       —         1,380  

Goodwill impairment

     —         —         —         —         15,051  

Loss (gain) on disposition of assets, net

     (339     (310     5,595       (2,639     5,375  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     5,109       (6,177     (33,242     (10,480     (146,567

Interest expense

     (2,961     (2,901     (2,476     (11,251     (8,015

Other (loss) income

     (58     724       —         666       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before tax

     2,090       (8,354     (35,718     (21,065     (154,582

Income tax expense

     (22     (84     (140     (91     (167
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 2,068     $ (8,438   $ (35,858   $ (21,156   $ (154,749
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common unit:

          

Basic

         $ (0.05   $ (0.37
        

 

 

   

 

 

 

Diluted

         $ (0.05   $ (0.37
        

 

 

   

 

 

 

Weighted average common units outstanding:

          

Basic

           417,441       417,032  
        

 

 

   

 

 

 

Diluted

           417,441       417,032  


CONSOLIDATED BALANCE SHEETS

(In thousands)

 

     Year Ended  
     December 31, 2017     December 31, 2016  

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 8,751     $ 12,219  

Accounts receivable, net of allowance for doubtful accounts of $776 and $880, respectively

     83,325       36,745  

Unbilled receivables

     9,645       7,692  

Assets held for sale

     —         27,278  

Inventories

     22,693       19,549  

Prepaid expenses and other current assets

     9,520       5,547  
  

 

 

   

 

 

 

Total current assets

   $ 133,934     $ 109,030  

Property, plant and equipment, net

     128,518       150,706  

Intangible assets, net

     10,832       13,228  

Other assets

     2,375       967  
  

 

 

   

 

 

 

Total assets

   $ 275,659     $ 273,931  
  

 

 

   

 

 

 

LIABILITIES AND PARTNERS’ EQUITY

    

Current liabilities:

    

Current portion of debt and capital lease obligations

   $ 79,443     $ 291  

Accounts payable

     36,027       28,124  

Accrued liabilities

     33,825       18,511  
  

 

 

   

 

 

 

Total current liabilities

   $ 149,295     $ 46,926  

Deferred tax liability

     185       135  

Long-term debt, net of deferred financing costs of $1,709 and $2,284, respectively

     37,199       116,463  

Long-term capital lease obligations

     3,829       4,044  

Other long-term liabilities

     183       239  
  

 

 

   

 

 

 

Total liabilities

   $ 190,691     $ 167,807  

Commitments and contingencies

    

Partners’ equity

    

Common units, 417,441

     212,630       212,630  

Retained deficit

     (127,662     (106,506
  

 

 

   

 

 

 

Total liabilities and partners’ equity

   $ 275,659     $ 273,931  
  

 

 

   

 

 

 


CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars)

(Unaudited)

 

     Year Ended  
     December 31, 2017     December 31, 2016  

Cash flows from operating activities:

    

Net loss

   $ (21,156   $ (154,749

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation and amortization

     45,687       78,661  

(Gain) loss on disposition of assets, net

     (10,500     1,268  

Non-cash interest expense

     5,960       845  

Fixed asset impairment

     —         1,380  

Goodwill impairment

     —         15,051  

Provision for doubtful accounts

     289       142  

Deferred income tax expense (benefit)

     50 5050       (42

Changes in operating assets and liabilities:

    

Accounts receivable

     (46,869     9,688  

Unbilled receivables

     (1,953     (4,213

Inventories

     (3,144     1,559  

Prepaid expenses and other current assets

     1,812       3,894  

Other noncurrent assets

     (1,439     632  

Accounts payable

     6,969       8,842  

Accrued liabilities

     12,810       (5,778

Other long-term liabilities

     (56     (15
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (11,540     (42,835
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property, plant and equipment

     (21,244     (7,340

Proceeds from sale of property, plant and equipment

     35,754       9,606  
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     14,510       2,266  
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from revolving debt

     11,035       35,159  

Payments on revolving debt

     (21,964     (22,000

Proceeds from term loan

     5,000       28,600  

Proceeds from warrants, net of issuances costs

     —         5,961  

Payments on capital lease obligations

     (315     (317

Issuances of units

     —         1,000  

Payments of deferred financing costs

     (194     (1,878
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (6,438     46,525  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (3,468     5,956  
  

 

 

   

 

 

 

Cash and cash equivalents

    

Beginning of period

     12,219       6,263  
  

 

 

   

 

 

 

End of period

   $ 8,751     $ 12,219  
  

 

 

   

 

 

 

Supplemental cash flow information

    

Cash paid for interest

     5,755       5,935  

Income taxes paid

     77       198  

Supplemental non-cash investing and financing activities

    

Prepaid insurance financed through note payable

     1,666       950  

Fixed asset purchase in accounts payable and accrued liabilities

     934       93  

Supplemental non-cash investing and financing activities

    

Equity issued as payment in kind for professional services

     —         2,000  

Conversion of accrued interest to debt

     4,202       126  

Non cash payment for property, plant and equipment

     711       —    

Non cash proceeds from sale of assets held for sale

     3,990       —    


ADDITIONAL SELECTED OPERATING DATA

(Unaudited)

 

     Three Months Ended      Year Ended  
     December 31,
2017
     September 30,
2017
     December 31,
2016
     December 31,
2017
     December 31,
2016
 

Rig days(1)

     3,798        3,711        2,113        14,407        7,001  

Average rigs on revenue(2)

     59        61        34        58        31  

Total hydraulic fracturing stages

     1,056        636        335        2,993        1,567  

Average revenue per stage

     43,700        56,530        29,431        47,189        23,338  

 

(1) Rig days represent the number of days we are providing services to rigs and are earning revenues during the period, including days that standby revenues are earned.
(2) Rigs on revenue represents the number of rigs earning revenues during a given time period, including days that standby revenues are earned.

Non-GAAP Financial Measures

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies.

Adjusted EBITDA is not a measure of net income or cash flows as determined by GAAP. We define Adjusted EBITDA as net income plus income taxes, net interest expense, depreciation and amortization, impairment charges, net loss on disposition of assets, transaction expenses, rebranding expenses, one-time settlement expenses, severance expenses, and equipment standup expense, and less gain on bargain purchase.

We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP, or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.


The following tables present reconciliations of Adjusted EBITDA to the most directly comparable GAAP financial measure for the periods indicated:

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(In thousands of dollars)

(Unaudited)

 

     Three Months Ended     Year Ended  
     December 31,
2017
    September 30,
2017
    December 31,
2016
    December 31,
2017
    December 31,
2016
 

Net income (loss)

   $ 2,068     $ (8,438   $ (35,858   $ (21,156   $ (154,749

Income tax expense

     22       84       140       91       167  

Interest expense

     2,961       2,901       2,476       11,251       8,015  

Other (income)/expenses

     58       (724     —         (666     —    

Depreciation and amortization expense

     11,423       11,238       19,224       45,687       78,661  

Fixed asset impairment

     —         —         1,380       —         1,380  

Goodwill impairment(1)

     —         —         —         —         15,051  

Loss (gain) on disposition of assets, net

     (339     (310     5,595       (2,639     5,375  

Transaction expense(2)

     822       —         914       1,091       4,358  

Rebranding expense(3)

     —         7       1,480       9       2,237  

Settlement expense(4)

     339       1,191       678       3,566       1,740  

Severance expense(5)

     41       —         152       243       1,075  

Equipment standup expense(6)

     1,387       823       11       3,749       11  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 18,782     $ 6,772     $ (3,808   $ 41,226     $ (36,679
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) For the year ended December 31, 2016, represents a non-cash impairment charge related to our directional drilling services segment.
(2) For the year ended December 31, 2016, and three months ended December 31, 2016 represents professional fees related to investment banking, accounting and legal services associated with entering into the term loan that were recorded in general and administrative expenses. For the three months ended September 30, 2017 we incurred no transaction expense and for the year ended December 31, 2017 we incurred investment banking fees.
(3) Relates to expenses incurred in connection with rebranding our business segments in 2016 and 2017. In our actual performance for the years ended December 31, 2017 and 2016, $0.01 million and $2.2 million was recorded in general and administrative expenses, respectively. In our actual performance for the three months ended September 30, 2017 and December 31, 2016, $0.01 million and $1.4 million was recorded in general and administrative expenses, respectively.
(4) Relates to the settlement of lease termination costs and retention payments in 2016 and 2017. In our actual performance for the years ended December 31, 2017 and 2016, $0.5 million was recorded in direct operating expenses, and $3.1 million and $1.2 million was recorded in general and administrative expenses, respectively. In our actual performance for the three months ended September 30, 2017 and December 31, 2017, $(0.3) million and $0.3 million was recorded in direct operating expenses, respectively. For the three months ended September 30, 2017, December 31, 2017 and December 31, 2016, $1.5 million, $0.2 million and $0.7 million was recorded in general and administrative expenses, respectively.
(5) Relates to severance expenses in 2016 and 2017 incurred in connection with the integration of the Archer Acquisition as well as a program implemented to reduce head count in connection with the industry downturn. In our actual performance for the years ended December 31, 2017 and 2016, $0.2 million and $0.7 million was recorded in direct operating expenses, respectively, and the remainder was recorded in general and administrative expenses. In our actual performance for the three months ended December 31, 2017 and December 31, 2016, $0.04 million and $0.13 million was recorded in direct operating expenses, respectively, and the remainder was recorded in general and administrative expenses.
(6) Relates to equipment standup costs. In our actual performance for the year ended December 31, 2017, approximately $3.6 million was recorded in direct operating expenses and approximately $0.18 million was recorded in general and administration expenses. For the year ended December 31, 2016, all costs were recorded in general and administration expenses. For the three months ended September 30, 2017 and December 31, 2017 approximately $0.7 million and $1.4 million was recorded in direct operating expenses, respectively.


RECONCILIATION OF NET INCOME (LOSS) TO SEGMENT ADJUSTED EBITDA

(In thousands of dollars)

(Unaudited)

 

     Three Months Ended     Year Ended  
     December 31,
2017
    September 30,
2017
    December 31,
2016
    December 31,
2017
    December 31,
2016
 

Segment Adjusted EBITDA

          

Directional drilling services

   $ 5,532     $ 3,423     $ 1,802     $ 17,498     $ (76

Pressure pumping services

     10,500       5,791       (1,821     27,784       (19,372

Pressure control services

     4,105       835       (501     6,539       (5,804

Wireline services

     1,535       (1,166     (1,203     (1,794     (6,161

Corporate and other

     (5,537     (3,408     (5,320     (16,793     (14,687

Income tax expense

     (22     (84     (140     (91     (167

Interest expense

     (2,961     (2,901     (2,476     (11,251     (8,015

Depreciation and amortization

     (11,423     (11,238     (19,224     (45,687     (78,661

Fixed asset impairment

     —         —         (1,380     —         (1,380

Goodwill impairment(1)

     —         —         —         —         (15,051

Gain (Loss) on disposition of assets, net

     339       310       (5,595     2,639       (5,375
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 2,068     $ (8,438   $ (35,858   $ (21,156   $ (154,749
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) For the year ended December 31, 2016, represents a non-cash impairment charge related to our directional drilling services segment.