ENSERVCO Reports First Quarter Financial Results

Marketwired

DENVER, CO--(Marketwire -05/14/12)- ENSERVCO Corporation (ENSV.OB) (OTC.BB: ENSV), a provider of well-site services to the domestic onshore conventional and unconventional oil and gas industries, today reported financial results for its first quarter ended March 31, 2012.

Revenue in the quarter increased to $9.5 million from $9.3 million in the first quarter last year. The improvement was due to a $3.8 million, or 212%, increase in revenue from the Company's Rocky Mountain service region, which benefited from the recent opening of operations centers in Killdeer, North Dakota and Cheyenne, Wyoming.

Despite the improvement in total revenue, management said top-line results were well below expectations due to record warm winter weather that persisted in the northern half of the United States during most of the first quarter, limiting demand for the Company's core frac heating and hot oiling services. While the warm weather restricted demand in North Dakota and Wyoming, the impact was most pronounced in ENSERVCO's Northeast service territory, where revenue declined by approximately $3.4 million, or 72%, versus the first quarter last year. Throughout the quarter, the Company continued to redeploy assets from Pennsylvania to its new service territories, which traditionally experience much longer winters and lower average annual temperatures.

First quarter revenue from well enhancement services (frac heating, acidizing and hot oiling) increased 10% to $7.3 million from $6.7 million in the first quarter last year. Revenue from fluid management services (water hauling/disposal and frac tank rentals) declined 11% to $2.1 million from $2.4 million in the comparable year-ago quarter.

Gross margin was 30% versus 37% in the 2011 first quarter. The decline was principally due to higher labor costs associated with the addition of seasonal drivers/operators in anticipation of a normal heating season, which did not materialize.

Operating income was $557,000 versus $1.6 million in the first quarter a year ago. The decline was primarily due to a 17% decrease in gross profit and a 21% increase in general and administrative expenses associated with the expansion of the Company's administrative and management staff. ENSERVCO also incurred higher non-cash expenses associated with stock option grants versus the 2011 first quarter.

Net income in the first quarter was $278,000, or $0.01 per share, versus net income of $885,000, or $0.04 per share, in the same period a year ago. First quarter adjusted EBITDA* was $2.0 million versus $2.8 million in the same quarter last year.

Management Commentary
"Despite the weather-related drop in demand for our heating services, our first quarter was marked by several developments that should position the Company for growth throughout the balance of fiscal 2012," said Rick Kasch, president and CFO. "In re-deploying many of our service assets into our Rocky Mountain territories, we have built a larger presence in a region focused more on oil production than natural gas, and where our customers' rig counts and exploration efforts continue to increase.

"Moreover, fracking techniques in the Bakken and Niobrara shale formations often require frac fluids to be heated to much higher temperatures than in eastern formations such as the Marcellus Shale. Under normal weather conditions, the heating season in our Rocky Mountain territories can last up to 10 months out of the year. This means that in 2012 and beyond, our traditionally slower second and third quarters should be stronger than in years past."

Kasch said temperatures across some of ENSERVCO's Rocky Mountain territories returned to more normal ranges late in the first quarter, and the Company has therefore seen an improvement in demand that has continued into the second quarter.

Kasch added, "We have made inroads on numerous new business opportunities in recent months. Many exploration and production companies have begun to streamline their vendor lists, and given the master service agreements we hold with a number of major E&Ps, we are well positioned to expand our existing relationships. We hope to provide more detail on our customer expansion initiatives later in the second quarter."

"In light of these and other growth opportunities, we anticipate our most significant near-term challenge will be equipment constraints," Kasch added. "We are in discussions with potential funding sources that could help us finance the expansion of our service vehicle fleet and pursue other growth initiatives."

About ENSERVCO
Through its various operating subsidiaries, ENSERVCO has rapidly emerged as one of the energy service industry's leading providers of hot oiling, acidizing, frac heating and fluid management services. The Company owns and operates a fleet of more than 245 specialized trucks, trailers, frac tanks and related well-site equipment. ENSERVCO operates in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Texas, Utah, Wyoming and West Virginia. ENSERVCO became a public company in July 2010 as a result of a merger transaction involving Aspen Exploration Corporation. Additional information about the Company is available at www.enservco.com.

*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing ENSERVCO's operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Operations table at the end of this release.

We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.

Cautionary Note Regarding Forward-Looking Statements
This news release contains information that is "forward-looking" in that it describes events and conditions ENSERVCO reasonably expects to occur in the future. Expectations for the future performance of ENSERVCO are dependent upon a number of factors, and there can be no assurance that ENSERVCO will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond ENSERVCO's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in a Form 10-K filed on March 30, 2012. It is important that each person reviewing this release understand the significant risks attendant to the operations of ENSERVCO. ENSERVCO disclaims any obligation to update any forward-looking statement made herein.

 
ENSERVCO Condensed
Consolidated
Statements of Operations

For the Three Months Ended
March 31,
----------------------------
2012 2011
------------- -------------


Revenues $ 9,537,994 $ 9,261,521

Cost of Revenue 6,676,684 5,797,434
------------- -------------

Gross Profit 2,861,310 3,464,087
------------- -------------

Operating Expenses
General and administrative expenses 903,360 748,904
Depreciation and amortization 1,401,192 1,080,607
------------- -------------
Total operating expenses 2,304,552 1,829,511
------------- -------------

Income from Operations 556,758 1,634,576
------------- -------------

Other Expense
Interest expense (209,741) (180,311)
Loss on disposals of equipment - (44,286)
Gain on sale of investments 11,762 -
Other income 58,464 4,744
------------- -------------
Total other expense (139,515) (219,853)
------------- -------------

Income Before Income Tax Expense 417,243 1,414,723

Income Tax Expense 139,356 529,635
------------- -------------

Net Income $ 277,887 $ 885,088
============= =============

Other Comprehensive Income
Unrealized loss on available-for-sale
securities, net of tax (21,215) (81,344)
------------- -------------

Comprehensive Income $ 256,672 $ 803,744
============= =============




Earnings per Common Share
Income per Common Share - Basic $ 0.01 $ 0.04
Income per Common Share - Diluted $ 0.01 $ 0.04

Basic weighted average number of common shares
outstanding 21,778,866 21,778,866
Add: Dilutive shares assuming exercise of
options and warrants 1,240,747 618,940
Diluted weighted average number of common
shares outstanding 23,019,613 22,397,806


ADJUSTED EBITDA
Net Income $ 277,887 $ 885,088
Add:
Interest expense 209,741 180,311
Income tax expense 139,356 529,635
Depreciation and amortization 1,401,192 1,080,607
------------- -------------
EBITDA $ 2,028,176 $ 2,675,641
Add (Deduct):
Stock-based compensation 44,636 49,681
Loss on disposals of equipment - 44,286
Gain on sale of investments (11,762) -
Other income (58,464) (4,744)
------------- -------------
ADJUSTED EBITDA $ 2,002,586 $ 2,764,864
============= =============


ENSERVCO Condensed
Consolidated
Balance Sheets

March 31, December 31,
------------- -------------
2012 2011
------------- -------------

ASSETS
Current Assets
Cash and cash equivalents $ 919,393 $ 417,005
Accounts receivable, net 6,145,192 4,505,254
Marketable securities 69,429 150,793
Prepaid expenses and other current assets 814,334 593,291
Inventories 578,285 549,432
Deferred tax asset 22,044 187,170
------------- -------------
Total current assets 8,548,677 6,402,945

Property and Equipment, net 15,252,590 15,171,870
Non-Competition Agreements, net 120,000 180,000
Goodwill 301,087 301,087
Other Assets 140,635 64,770
------------- -------------

TOTAL ASSETS $ 24,362,989 $ 22,120,672
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 3,704,776 $ 2,954,687
Line of credit borrowings 2,988,227 2,263,227
Current portion of long-term debt 3,825,657 3,867,658
------------- -------------
Total current liabilities 10,518,660 9,085,572
------------- -------------

Long-Term Liabilities
Deferred rent payable 21,748 22,044
Subordinated debt - related party 1,477,760 1,477,760
Long-term debt, less current portion 8,567,984 8,020,435
Deferred income taxes, net 348,155 387,487
------------- -------------
Total long-term liabilities 10,415,647 9,907,726
------------- -------------
Total liabilities 20,934,307 18,993,298
------------- -------------

Commitments and Contingencies

Stockholders' Equity
Common and preferred stock. $.005 par value
Authorized: 100,000,000 common shares and
10,000,000 preferred shares
Issued: 21,882,466 common shares and -0-
preferred shares
Treasury Stock: 103,600 common shares
Issued and outstanding: 21,778,866 common
shares and -0- preferred shares
each at March 31, 2012 and December 31, 2011 108,894 108,894
Additional paid-in-capital 6,157,310 6,112,674
Accumulated deficit (2,839,380) (3,117,267)
Accumulated other comprehensive income 1,858 23,073
------------- -------------
Total stockholders' equity 3,428,682 3,127,374
------------- -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,362,989 $ 22,120,672
============= =============
Contact:
CONTACT:
Geoff High
Pfeiffer High Investor Relations, Inc.
303-393-7044

View Comments (0)