ENSERVCO's Second Quarter Revenue Increases 44% to $7.9 Million on Continued Strong Demand for Well Enhancement Services; Six-Month Revenue Advances 76% to $26.5 Million

August 13, 2013

DENVER, CO--(Marketwired - Aug 13, 2013) - ENSERVCO Corporation ( OTCQB : ENSV

Selected Highlights:

  • Second quarter adjusted EBITDA improves 329% to $1.4 million versus Q2 2012
  • Six-month adjusted EBITDA up 261% to $8.7 million versus 2012 six-month period
  • Six-month net income improves to $4.1 million, or $0.12 per diluted share
  • Six-month cash flow from operations improves 337% to $8.5 million
  • Cash position increases to $5.7 million from $534,000 at December 31, 2012
  • Stockholders approve process for up-listing common stock to major exchange

ENSERVCO Corporation ( OTCQB : ENSV ), a provider of well-site services to the domestic onshore conventional and unconventional oil and gas industries, today announced revenue and earnings* for its second quarter ended June 30, 2013.

Second quarter revenue increased 44% to a record $7.9 million from $5.5 million in the second quarter last year. The increase resulted from continued strong demand for ENSERVCO's well enhancement services (frac heating, hot oiling, well acidizing and pressure testing), which increased 78% to $5.8 million from $3.2 million in last year's second quarter. The improvement is largely attributable to increased drilling activity by customers in the Company's Rocky Mountain and eastern U.S. service territories, new hydraulic fracturing designs, and increased hot oiling capacity. Revenue from ENSERVCO's fluid management services (water hauling/disposal and frac tank rentals) was relatively flat at $2.1 million versus $2.2 million in the 2012 second quarter.

From a geographic perspective, second quarter revenue from the Company's Rocky Mountain region increased 60% to $4.4 million from $2.8 million in the same quarter last year. Revenue from the eastern region increased 271% to $894,000 from $241,000, and revenue from the central U.S. region increased 4% to $2.6 million from $2.5 million in the second quarter last year.

Second quarter gross margin increased to 29% from 20% in the prior year's second quarter. The improvement is principally attributable to greater revenue from higher margin well enhancement services.

Second quarter operating income was $552,000, a positive swing of $935,000 when compared with an operating loss of $383,000 in the second quarter a year ago. Net Income was $191,000, or $0.01 per diluted share, on 35.7 million diluted shares outstanding, versus a net loss of $442,000, or $0.02 per diluted share, on 21.8 million diluted shares outstanding, in the comparable year-ago quarter.

Second quarter adjusted EBITDA* increased 329% to $1.4 million from $326,000 in the 2012 second quarter.

Six-month results
Revenue for the six-month period increased 76% to $26.5 million from $15.0 million in the same period a year ago, while gross margin increased to 40% from 27%.

Operating income increased to $7.2 million from $338,000 in the six-month period last year. Net income increased to $4.1 million, or $0.12 per diluted share, from a net loss of $162,000, or $0.01 per diluted share. Income in the 2013 six-month period reflected a $738,000 decrease in depreciation expense versus the same period last year. The decrease resulted from a reassessment of the estimated useful lives of the Company's trucks, equipment and disposal wells in April 2012.

Adjusted EBITDA in the year-to-date period increased 261% to $8.7 million from $2.4 million during the first six months of 2012. 

Operating cash flow during the first six months of 2013 was $8.5 million, up 325% from $2.0 million at the six-month mark last year. The increase was largely due to strong cash collections following the Company's record fourth quarter 2012 and first quarter 2013 revenue results, and was partially offset by reductions in accounts payable and accrued expenses. 

ENSERVCO closed the second quarter with cash and cash equivalents of $5.7 million, up from $534,000 at December 31, 2012. The Company's working capital position at June 30, 2013 improved to $7.8 million from $1.5 million at the end of 2012.

Management Commentary
"We have seen a significant increase in exploration and production activity in our service territories, particularly in Colorado and Wyoming's D-J Basin," said Rick Kasch, president. "This is fueling increased demand for our full suite of well enhancement services, and is driving much improved financial performance. On a trailing 12-month basis, we have reported revenue of $43.3 million and adjusted EBITDA of $11.1 million."

"Evolving frac designs being employed by several of our customers continue to extend our frac water heating season. Some of our customers have requested water temperatures of up to 25 degrees warmer than historic levels. These changes have somewhat tempered the seasonal slowdown we have historically seen during the summer months."

Kasch said that after a pause in frac heating work during July, the Company recently commenced a project for a large customer targeting Colorado's Niobrara formation. "This represents the earliest we have restarted our frac heating services after the summer break."

He added, "Our capital expenditure and equipment fabrication programs are proceeding on plan, and we expect several additional hot oiling and frac water heating units will enter the field before the fall start to our busy season." 

Kasch said the added capacity will come at an ideal time, as the Company is pursuing additional geographic expansion opportunities that would extend ENSERVCO's service territory farther into the western United States. "Active exploration of North America's unconventional shale formations is creating new opportunities for the energy industry, and we stand to be a direct beneficiary," Kasch said. "We are very optimistic about ENSERVCO's prospects for continued operational and financial growth." 

In other news, stockholders recently authorized the Company, at the board of directors' discretion, to execute a reverse split of the Company's stock for the purpose of up-listing ENSERVCO's shares to a major U.S. exchange. The reverse split was authorized within a range 1-for-2 to 1-for-3. The Company intends to begin the application process in the coming weeks for a listing on the NYSE-MKT Exchange. If approved by the Exchange, the reverse split could be executed within a six-month window following the authorization. 

Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 1 p.m. Eastern (11 a.m. Mountain) and will be accessible by dialing 877-407-8031 (201-689-8031 for international callers). No passcode is necessary. A telephonic replay will be available through August 21, 2013, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #418969. To listen to the webcast, participants should access the ENSERVCO website, located at www.enservco.com, and link to the "Investors" page at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 90 days.

About ENSERVCO
Through its various operating subsidiaries, ENSERVCO has 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 230 specialized trucks, trailers, frac tanks and related well-site equipment. ENSERVCO serves customers in six major domestic oil and gas fields, and operates in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia. Additional information 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.

*All revenue and earnings results discussed herein exclude discontinued operations, which resulted in pretax losses of (a) $2,000 and $151,000 for the second quarters of 2013 and 2012, respectively, and (b) $120,000 and $317,000 for the six-month periods of 2013 and 2012, respectively. 

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 28, 2013. 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 CORPORATION  
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)  
                         
    For the Three Months Ended     For the Six Months Ended  
    June 30,     June 30,  
    2013     2012     2013     2012  
                                 
Revenues   $ 7,947,635     $ 5,511,219     $ 26,516,027     $ 15,039,173  
                                 
Cost of Revenues     5,639,686       4,385,096       16,031,978       10,964,525  
                                 
Gross Profit     2,307,949       1,126,123       10,484,049       4,074,648  
                                 
Operating Expenses                                
  General and administrative expenses     1,169,620       944,538       2,086,769       1,847,898  
  Depreciation and amortization     586,365       564,581       1,150,200       1,888,377  
    Total Operating Expenses     1,755,985       1,509,119       3,236,969       3,736,275  
                                 
Income (Loss) from Operations     551,964       (382,996 )     7,247,080       338,373  
                                 
Other Income (Expense)                                
  Interest expense     (251,655 )     (217,841 )     (565,707 )     (426,833 )
  Gain on sale of equipment     -       1,536       306,457       1,536  
  Other income     10,215       9,613       24,827       79,838  
    Total Other Income (Expense)     (241,440 )     (206,692 )     (234,423 )     (345,459 )
                                 
Income (Loss) From Continued Operations, Before Tax     310,524       (589,688 )     7,012,657       (7,086 )
Income Tax (Expense) Benefit     (118,443 )     242,576       (2,814,004 )     38,730  
Income (Loss) From Continued Operations, Net of Tax     192,081       (347,112 )     4,198,653       31,644  
                                 
Discontinued Operations                                
  Loss From Discontinued Operations, Before Tax     (1,927 )     (151,786 )     (120,845 )     (317,147 )
  Income Tax Benefit     753       59,197       47,130       123,687  
  Loss From Discontinued Operations, Net of Tax     (1,174 )     (92,589 )     (73,715 )     (193,460 )
                                 
Net Income (Loss)   $ 190,907     $ (439,701 )   $ 4,124,938     $ (161,816 )
                                 
Other Comprehensive Income (Loss)                                
  Unrealized gain (loss) on interest rate swaps, net of tax     (4,135 )     -       6,097       -  
  Settlements - interest rate swap     6,838       -       13,592       -  
  Reclassification into earnings - interest rate swap     (6,838 )     -       (13,592 )     -  
  Unrealized loss on available-for-sale securities, net of tax     -       (1,858 )     -       (23,073 )
    Total Other Comprehensive Income (Loss)     (4,135 )     (1,858 )     6,097       (23,073 )
                                 
Comprehensive Income (Loss)   $ 186,772     $ (441,559 )   $ 4,131,035     $ (184,889 )
                                 
Earnings per Common Share - Basic                                
  Income (loss) from continuing operations   $ 0.01     $ (0.02 )   $ 0.13     $ -  
  Income (loss) from discontinued operations     -       -       -       (0.01 )
  Net Income   $ 0.01     $ (0.02 )   $ 0.13     $ (0.01 )
Earnings per Common Share - Diluted                                
  Income (loss) from continuing operations   $ 0.01     $ (0.02 )   $ 0.12     $ -  
  Income (loss) from discontinued operations     -       -       -       (0.01 )
  Net Income   $ 0.01     $ (0.02 )   $ 0.12     $ (0.01 )
                                 
Basic weighted average number of common shares outstanding     32,099,332       21,778,866       31,963,070       21,778,866  
Add: Dilutive shares assuming exercise of options and warrants     3,589,220       -       3,444,113       -  
Diluted weighted average number of common shares outstanding     35,688,552       21,778,866       35,407,183       21,778,866  
                                 
                                 
                         
ENSERVCO CORPORATION  
Calculation of Adjusted EBITDA *  
                         
    For the Three Months Ended     For the Six Months Ended  
    June 30,     June 30,  
    2013     2012     2013     2012  
                                 
EBITDA* from continuing operations:                                
  Income (Loss) from continuing operations   $ 192,081     $ (347,112 )   $ 4,198,653     $ 31,644  
  Add Back (Deduct)                                
    Interest Expense     251,655       217,841       565,707       426,833  
    Provision for income taxes     118,443       (242,576 )     2,814,004       (38,730 )
    Depreciation and amortization     586,365       564,581       1,150,200       1,888,377  
  EBITDA* from continuing operations     1,148,544       192,734       8,728,564       2,308,124  
  Add Back (Deduct)                                
    Stock-based compensation     260,054       144,651       328,776       189,287  
    (Gain) on sale and disposal of equipment     -       (1,536 )     (306,457 )     (1,536 )
    Interest and other income     (10,215 )     (9,613 )     (24,827 )     (79,838 )
  Adjusted EBITDA* from continuing operations   $ 1,398,383     $ 326,236     $ 8,726,056     $ 2,416,037  
                                 
EBITDA* from discontinued operations:                                
  Income (Loss) from discontinued operations   $ (1,174 )   $ (92,589 )   $ (73,715 )   $ (193,460 )
  Add Back (Deduct)                                
    Interest Expense     -       421       963       1,171  
    Income tax benefit     (753 )     (59,197 )     (47,130 )     (123,687 )
    Depreciation and amortization     -       16,669       -       94,064  
  EBITDA* and Adjusted EBITDA* from discontinued operations   $ (1,927 )   $ (134,696 )   $ (119,882 )   $ (221,912 )
                                 
                                 
   
ENSERVCO CORPORATION  
CONDENSED CONSOLIDATED BALANCE SHEETS  
           
    June 30,   December 31,  
ASSETS   2013   2012  
    (Unaudited)      
Current Assets              
  Cash and cash equivalents   $ 5,734,705   $ 533,627  
  Accounts receivable, net     5,177,737     7,791,342  
  Prepaid expenses and other current assets     1,198,662     802,020  
  Inventories     284,689     273,103  
  Deferred tax asset     145,319     153,466  
    Total current assets     12,541,112     9,553,558  
               
Property and Equipment, net     14,636,345     15,020,890  
Fixed Assets Held for Sale, net     -     304,429  
Non-Competition Agreements, net     -     30,000  
Goodwill     301,087     301,087  
Long-Term Portion of Interest Rate Swap     21,665     16,171  
Other Assets     646,123     630,891  
               
TOTAL ASSETS   $ 28,146,332   $ 25,857,026  
               
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current Liabilities              
  Accounts payable and accrued liabilities   $ 1,877,107   $ 3,606,645  
  Income tax payable     646,144     -  
  Line of credit borrowings     -     2,151,052  
  Current portion of long-term debt     2,220,256     2,236,343  
  Current portion of interest rate swap     19,563     24,048  
    Total current liabilities     4,763,070     8,018,088  
               
Long-Term Liabilities              
  Long-term debt, less current portion     9,542,234     10,570,928  
  Deferred income taxes, net     2,564,869     451,662  
    Total long-term liabilities     12,107,103     11,022,590  
    Total Liabilities     16,870,173     19,040,678  
               
Commitments and Contingencies              
               
Stockholders' Equity              
  Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding     -     -  
                 
  Common stock, $.005 par value, 100,000,000 shares authorized, 32,296,184 and 31,928,894 shares issued, respectively, 103,600 shares of treasury stock, and 32,192,584 and 31,825,294 shares outstanding, respectively     160,963     159,127  
  Additional paid-in capital     10,191,303     9,864,363  
  Accumulated earnings (deficit)     922,601     (3,202,337 )
  Accumulated other comprehensive income (loss)     1,292     (4,805 )
    Total stockholders' equity     11,276,159     6,816,348  
               
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 28,146,332   $ 25,857,026  
               
   
   
Enservco Corporation  
Condensed Consolidated Statement of Cash Flows  
(Unaudited)  
                         
   For the three months ended    For the six months ended  
    June 30,     June 30,  
    2013     2012     2013     2012  
OPERATING ACTIVITIES                                
  Net income (loss)   $ 190,907     $ (439,701 )   $ 4,124,938     $ (161,816 )
  Adjustments to reconcile net income to net cash provided by operating activities                                
    Depreciation and amortization (includes $16,669 and $94,064 from discontinued operations in 2012, respectively)     586,365       581,250       1,150,200       1,982,442  
    Gain on sale and disposal of equipment     -       (1,536 )     (306,457 )     (1,536 )
    Realized gain on sale of marketable securities     -       (12,891 )             (24,653 )
    Deferred income taxes     978,087       (305,136 )     2,117,472       (229,655 )
    Stock-based compensation     260,054       144,651       328,776       189,287  
    Amortization of debt issuance costs     76,945       -       153,888          
    Bad debt expense (recoveries)     44,163       -       170,397       (1,739 )
  Changes in operating assets and liabilities                                
    Accounts receivable     8,198,556       2,314,367       2,443,208       676,168  
    Inventories     (19,805 )     14,029       (11,586 )     (14,824 )
    Prepaid expense and other current assets     89,437       (67,205 )     (396,642 )     (276,486 )
    Other non-current assets     -       90,904       (169,120 )     15,039  
    Accounts payable and accrued liabilities     (1,663,196 )     (951,632 )     (1,729,538 )     (201,837 )
    Income taxes payable     (863,153 )     -       646,144       -  
      Net cash provided from operating activities     7,878,360       1,367,100       8,521,680       1,950,390  
                                 
INVESTING ACTIVITIES                                
  Purchases of property and equipment     (1,245,758 )     (516,854 )     (1,837,511 )     (1,938,766 )
  Proceeds from sale and disposal of equipment     -       3,500       1,802,333       3,500  
  Sales of available-for-sale securities     -       69,746       -       180,208  
    Net cash used by investing activities     (1,245,758 )     (443,608 )     (35,178 )     (1,755,058 )
                                 
FINANCING ACTIVITIES                                
  Net line of credit (payments) borrowings     (1,234,447 )     (330,350 )     (2,151,052 )     394,650  
  Proceeds from issuance of long-term debt     -       -       -       1,359,907  
  Repayment of long-term debt     (466,721 )     (877,422 )     (1,134,372 )     (1,731,781 )
  Payments upon interest rate swap settlements     -       -       -       -  
    Net cash (used) provided by financing activities     (1,701,168 )     (1,207,772 )     (3,285,424 )     22,776  
                                 
Net Increase (Decrease) in Cash and Cash Equivalents     4,931,434       (284,280 )     5,201,078       218,108  
                                 
Cash and Cash Equivalents, Beginning of Period     803,271       919,393       533,627       417,005  
                                 
Cash and Cash Equivalents, End of Period   $ 5,734,705     $ 635,113     $ 5,734,705     $ 635,113  
                                 
                                 
Supplemental cash flow information consists of the following:                                
    Cash paid for interest   $ 147,173     $ 207,209     $ 375,465     $ 405,898  
    Cash paid for taxes   $ 2,757     $ -     $ 3,257     $ -  
                                 
Supplemental Disclosure of Non-cash Investing and Financing Activities:                                
    Equipment purchased through installment loans   $ 89,591     $ -     $ 89,591     $ -  
    Cashless exercise of stock options and warrants   $ 1,836     $ -     $ 1,836     $ -  
    Increase (decrease) in fair value of available-for-sale securities   $ -     $ 317     $ -     $ 29,415