Nine Energy Service, Inc. (NYSE:NINE) Q4 2023 Earnings Call Transcript
Nine Energy Service, Inc. (NYSE:NINE) Q4 2023 Earnings Call Transcript March 8, 2024
Nine Energy Service, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to Nine Energy Service Fourth Quarter and Full Year 2023 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Heather Schmidt, Vice President of Strategic Development and Investor Relations. Thank you. You may begin.
Heather Schmidt: Thank you. Good morning, everyone, and welcome to the Nine Energy Service earnings conference call to discuss our results for the fourth quarter and full year 2023. With me today are Ann Fox, President and Chief Executive Officer; and Guy Sirkes, Chief Financial Officer. We appreciate your participation. Some of our comments today may include forward-looking statements reflecting Nine’s views about future events. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC.
We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures. Additional details and a reconciliation to the most directly comparable GAAP financial measures are also included in our fourth quarter press release and can be found in the Investor Relations section of our website. I will now turn the call over to Anne.
Ann Fox: Thank you, Heather. Good morning, everyone. Thank you for joining us today to discuss our fourth quarter and full year results for 2023. The oil and gas market continued to be volatile in 2023. At the end of 2022, there were 779 rigs in the U.S. And by the end of 2023, the rig count was down to 622, a decline of approximately 20%. Most of these rig declines came out of the natural gas regions in conjunction with the average natural gas price declining by over 60% year-over-year and was compounded by a lower average WTI price, which declined by approximately 18% year-over-year from approximately $95 in 2022 to approximately $78 in 2023. Despite the market, we continue to differentiate with forward leaning technology coupled with excellent service.
I want to highlight some of the team's achievements during 2023. In January, we announced the redemption of our senior notes due 2023. In conjunction with the unit's offering, we amended and extended our existing asset based revolving credit facility to January of 2027. This new capital structure gives us additional flexibility and delevering continues to be a high priority for Nine. Operationally, we performed well and continued to be on the forefront of technology. I am extremely proud of our completion tool offering and what we have been able to accomplish this year with both our existing tools and the introduction of new tools in the domestic and international markets. Our Scorpion composite plug has surpassed over 370,000 plugs run since we acquired the technology in 2015.
Our dissolvable plugs continue to perform well and we increased our total number of dissolvable Stinger units sold by approximately 18% in 2023 over 2022. We have maintained a leading market share in the U.S. dissolvable market, while simultaneously selling dissolvable plugs into the international markets. In 2023, we increased our total international revenue by approximately 16% year-over-year. During 2023, our multi-cycle barrier valve performed very well in the Middle East and we anticipate demand will continue to increase our market share and customer base in that region. We also announced the commercialization of our new Pincer hybrid frac plug, the Pincer is comprised of 47% less material than our predecessor Scorpion fully composite frac plug and offers industry-leading drill out times.
We look forward to gaining market share with this tool in 2024. Our service lines did a good job of defending and justifying price in 2023. Despite a declining rig environment, our total cementing revenue was down by only 2% year-over-year and we were able to increase our average revenue per job by approximately 10% year-over-year. Despite significant exposure in the Haynesville Basin, our coil team increased total revenue by approximately 3% year-over-year and our wireline team also increased revenue by approximately 9%. We made significant progress this year with ESG. We quantified the company's greenhouse gas emissions for 2021 and 2022, and we will have 2023 data this year. Through this process, we are identifying gaps and procedures to make the collection of this data more accurate and efficient, as well as developing a strategy on how to potentially reduce our emissions moving forward.
We are in the process of formalizing our sustainability efforts for the market and continuing to provide the time and resources internally to improve. Company revenue for the year was $609.5 million. Net loss was $32.2 million or negative $0.97 per diluted share and negative $0.97 per basic share. Adjusted EBITDA for the year was $73 million. Now turning to Q4. Revenue for the quarter was $144.1 million, which was in the upper end of our original guidance of $137 million to $147 million. Adjusted EBITDA was $14.6 million, an increase of 26% over Q3 and reflected an adjusted EBITDA margin of 10%. Net loss was $10.3 million or negative $0.30 per diluted share and negative $0.30 per basic share. Adjusted ROIC for the fourth quarter was approximately 3.9%.
Activity levels and pricing were mostly stable quarter-over-quarter, but as anticipated, we did not have a recurrence of the operational inefficiencies in elevated white space that occurred in August. Additionally, we saw a significant increase in our international tool sales, almost doubling international revenue in Q4 versus Q3. I would now like to turn the call over to Guy to walk through detailed financial information.
Guy Sirkes: Thank you, Ann. As of December 31, 2023, Nine's cash and cash equivalents were $30.8 million, with $20.8 million of availability under the revolving credit facility, resulting in a total liquidity position of $58.9 million, as of December 31. On December 31, 2023, the company had $57 million of borrowings under the revolving credit facility. Subsequent to December 31, we paid down an additional $5 million of the revolving credit facility. And since our refinancing in January of 2023, we have reduced our borrowings under the revolving credit facility by approximately $20 million. Our liquidity position will continue to be impacted by our semi-annual interest payments of approximately $19.5 million, with our most recent payment taking place in January of 2024.
During the fourth quarter, revenue totaled $144.1 million with adjusted gross profit of $25.6 million. During the fourth quarter, we completed 974 cementing jobs, an increase of approximately 12% versus the third quarter. The average blended revenue per job decreased by approximately 10%. Cementing revenue for the quarter was $52.3 million, an increase of approximately 1%. During the fourth quarter, we completed 5,675 wireline stages, an increase of approximately 1%. The average blended revenue per stage decreased by approximately 2%. Wireline revenue for the quarter was $28 million, a decrease of approximately 1%. For completion tools, we completed 26,926 stages, an increase of approximately 4%. Completion tool revenue was $36.1 million, an increase of approximately 11%.
During the fourth quarter, our coiled tubing days worked decreased by approximately 5%, with the average blended day rate increasing by approximately 5%. Coiled tubing utilization during the quarter was 44%. Coiled tubing revenue for the quarter was $27.7 million, a decrease of approximately 1%. During the fourth quarter, the company reported general and administrative expense of $12.8 million with full year G&A of $59.8 million. Depreciation and amortization expense in the fourth quarter was $9.8 million, with full year D&A of $40.7 million. Our tax provision was approximately $0.6 million for 2023. The provision for 2023 is the result of our tax position and state and non-U.S. tax jurisdictions. For the year end 2023, the company reported net cash provided by operating activities of $45.5 million.
The average DSO for 2023 was 53 days. Our total CapEx spend for 2023 was approximately $22.3 million, which came in below management's original guidance of $25 million to $35 million. For 2024, we anticipate total CapEx of $15 million to $25 million, the vast majority of which is maintenance CapEx. At the end of last year, we put a $30 million ATM in place to provide flexibility for the company. During Q4, we did not sell any shares under the ATM program. I will now turn it back to Ann.
Ann Fox: Thank you, Guy. For 2024, most public operators are by and large, keeping activity and CapEx levels relatively flat year-over-year. As our customers continue to consolidate, this leads to larger more reliable D&C programs, which should help stabilize the market. Our long-term outlook remains positive for North America and the potential upside for activity levels. The decline curves in North American shale are significant, and many operators have worked through their Tier 1 acreage. In addition, planned LNG projects should spur future activity in some of the natural gas basins, specifically the Haynesville. For Q1, we have not seen any significant changes in the market conditions with the rig count relatively flat versus year end, and we anticipate overall pricing and activity levels to remain mostly flat.
Because of this, we expect Q1 to be relatively flat compared with Q4 with projected revenue between $135 million and $145 million. We will continue to focus on our strategy of being an asset and labor-light business that couples excellent service and forward-leaning technology to help our customers lower their cost to complete. Our team has been together for a long time, and given our experience through cycles, we are confident we can navigate market changes and quickly capitalize on improving markets. Our service and geographic diversity provides us a good balance and we remain focused on diversifying more of our top line revenue streams to cementing and completion tools, especially within the international markets. We will now open up the call for Q&A.
Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Waqar Syed with ATB Capital Markets. Please proceed with your question.
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