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Nuverra Announces Fourth Quarter and Full Year 2018 Results

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--

- Q4 2018 revenue up 6% over the prior year driven by increased business activity and improved pricing -

- Company achieves 2018 full year revenue growth of 12% -

Nuverra Environmental Solutions, Inc. (NYSE American: NES) (“Nuverra” or the “Company”) today announced financial and operating results for the fourth quarter and full year ended December 31, 2018.

SUMMARY OF FINANCIAL RESULTS

  • Fourth quarter revenue was $49.2 million, a decrease of approximately 0.9%, or $0.5 million, when compared to the third quarter of 2018 which was primarily due to lower activity levels at the end of the year due to the holidays.
  • When compared to the same period in the prior year, fourth quarter revenue increased 6.0%, or $2.8 million, as a result of increases in both activity and pricing and the acquisition of Clearwater Solutions on October 5, 2018. These increases were offset by a decrease in revenue during the fourth quarter due to the exit of the Eagle Ford shale area in the first quarter of 2018.
  • Full year 2018 revenue was $197.5 million, an increase of $21.4 million, or 12.2%, when compared with $176.1 million for 2017. The increase was primarily due to a 14.4% improvement in activity and a 2.8% improvement in pricing, offset by a decrease in revenue due to the exit of the Eagle Ford shale area.
  • Net loss for the fourth quarter was $8.8 million as compared to $7.1 million in the third quarter of 2018 and $30.9 million in the fourth quarter of 2017.
  • Adjusted EBITDA for the fourth quarter was $6.1 million, an increase of 55.0% when compared with the $3.9 million reported in the third quarter of 2018. The acquisition of Clearwater Solutions represented $1.7 million of the increase, with the remaining increase attributable to increases in pricing, offset by decreases in activity.
  • Fourth quarter 2018 adjusted EBITDA increased by $1.0 million, or 18.6%, over the same period in the prior year which was mainly driven by the Clearwater Solutions acquisition, offset by a decrease in activity.
  • Total liquidity available for capital spending and other purposes of $25.5 million as of December 31, 2018.

“Nuverra enjoyed a stronger operating environment in 2018, reflecting increased activity and selected pricing improvement,” said Charlie Thompson, Chief Executive Officer. “Revenue and adjusted EBITDA increased meaningfully year over year. 2018 was a year of transition as we made management, business process and technology changes, the benefits of which we hope to see throughout 2019. We acquired three disposal wells in the Northeast region that better positions us to serve customers in that market, and we invested in 28 new trucks that will be in service by the end of the second quarter. We exited the year with a healthy leverage and liquidity position and hope to continue improving the business throughout 2019.”

FOURTH QUARTER 2018 RESULTS

Fourth quarter revenue was $49.2 million, a decrease of approximately 0.9%, or $0.5 million, when compared to the third quarter of 2018 which was primarily due to lower activity levels at the end of the year due to the holidays. When compared to the fourth quarter of 2017, fourth quarter revenue increased by $2.8 million, or 6.0%, as a result of increases in both activity and pricing and the acquisition of Clearwater Solutions on October 5, 2018. These increases were offset by a decrease in revenue during the fourth quarter due to the exit of the Eagle Ford shale area in the first quarter of 2018.

Total costs and expenses for the fourth quarter were $55.7 million. Total costs and expenses, adjusted for special items, were $52.9 million, or a $3.0 million decrease when compared with $55.9 million in the third quarter of 2018 due primarily to lower direct operating expenses as we were able to hire and retain more full time drivers versus using higher cost third party drivers. Total costs and expenses, adjusted for special items, decreased 15.0% compared with $62.3 million in the fourth quarter of 2017, driven primarily by lower depreciation expense.

Net loss for the fourth quarter was $8.8 million as compared to $7.1 million in the third quarter of 2018 and $30.9 million in the fourth quarter of 2017. For the fourth quarter of 2018, the Company reported a net loss, adjusted for special items, of $6.0 million. Special items in the fourth quarter primarily included the loss on the sale of underutilized assets, non-recurring legal and professional fees, stock-based compensation expense, $0.8 million in transaction costs incurred in connection with the Clearwater Solutions acquisition, $0.4 million in severance for the departure of the former CFO, as well as $0.3 million in long-lived asset impairment charges for assets held for sale in the Southern division. This compares with a net loss, adjusted for special items, of $7.4 million in the third quarter of 2018 and $17.3 million in the fourth quarter of 2017.

Adjusted EBITDA for the fourth quarter was $6.1 million, an increase of $2.2 million, or 55.0%, when compared with the third quarter of 2018. The acquisition of Clearwater Solutions represented $1.7 million of the increase, with the remaining increase attributable to increases in pricing, offset by decreases in activity. Fourth quarter adjusted EBITDA margin was 12.4%, compared with 7.9% in the third quarter of 2018. When compared with the fourth quarter of 2017, adjusted EBITDA increased by $1.0 million, or 18.6%, which was mainly driven by the Clearwater Solutions acquisition, offset by a decrease in activity. Fourth quarter adjusted EBITDA margin was 12.4%, compared with 11.1% in the fourth quarter of 2017.

FULL YEAR 2018 RESULTS

Revenue for the full year was $197.5 million, an increase of $21.4 million, or 12.2%, when compared with $176.1 million for 2017. Revenue growth was driven primarily by a 14.4% increase in activity levels including water transfer services in the Rocky Mountain and Northeast divisions, offset by a decrease in activity levels for water transfer services, including our permanent disposal water pipeline, in the Southern division. Pricing increases in all divisions also contributed to 2.8% of the increase in revenue during the current year. Offsetting the higher activity levels and price increases was the exit of the Eagle Ford shale area in the first quarter of 2018 which represented approximately 5.0% of the decline in revenues as compared to 2017.

Net loss for the full year was $59.3 million. When adjusted for special items, net loss for the full year was $36.0 million, compared with a net loss, adjusted for special items, of $79.6 million in 2017. 2018 special items primarily included $15.3 million in severance and stock-based compensation expense related to the departure of the former CEO and CFO, $4.8 million in long-lived asset impairment charges for assets held for sale in the Southern, Northeast and Corporate divisions, $1.3 million in transaction costs related to the acquisition of Clearwater Solutions, $1.1 million of exit costs related to management’s decision to exit the Eagle Ford shale area, $1.7 million of capital reorganization costs incurred after the chapter 11 filing recorded to “Reorganization items, net,” and non-routine litigation expenses and non-routine professional fees.

Adjusted EBITDA for the full year was $16.5 million, an increase of 24.1% when compared with $13.3 million in 2017. Pricing increases and the Clearwater Solutions acquisition drove the majority of the increase. Adjusted EBITDA margin for 2018 was 8.4%, compared with 7.6% in 2017.

CASH FLOW AND LIQUIDITY

Net cash provided by operating activities for the full year ended December 31, 2018 was $9.4 million, while asset sales net of capital expenditures provided proceeds of $6.9 million. Free cash flow, defined as cash from operations less net cash capital expenditures, totaled $16.3 million for 2018, up from negative $23.7 million in 2017. Asset sales were related to unused or underutilized assets and the proceeds are expected to continue to be reinvested in returns-driven growth projects during 2019, including the planned purchase of new water transfer trucks for our fleet. Capital expenditures in 2018 primarily consisted of new water transfer trucks in the Northeast division, new water transfer equipment in the Rocky Mountain division, as well as expenditures to extend the useful life and productivity on our existing fleet of trucks, tanks, equipment and disposal wells.

Total liquidity available for capital spending and other purposes as of December 31, 2018 was $25.5 million. This consisted of cash and restricted cash of $8.0 million, $11.8 million of net availability under the revolving facility and $5.7 million available as a delayed draw under the second lien term loan facility. As of December 31, 2018, total debt outstanding was $66.4 million, consisting of $21.9 million under our senior secured term loan facility, $10.1 million under our second lien term loan facility, $32.5 million under our bridge term loan, and $1.9 million of capital leases for vehicle financings. On January 2, 2019, we received aggregate gross proceeds of $32.5 million from a rights offering and repaid the bridge term loan in full.

BASIS OF PRESENTATION

As previously disclosed, the Company emerged from chapter 11 bankruptcy on August 7, 2017, or the “Effective Date,” and elected to apply fresh start accounting as of July 31, 2017 to coincide with the timing of the normal accounting period close. References to “Successor” relate to the financial position and results of operations of the reorganized Company subsequent to July 31, 2017, while references to “Predecessor” refer to the financial position and results of operations of the Company on and prior to July 31, 2017. The Successor and Predecessor GAAP results for the applicable periods are presented in the tables following this release.

For discussion purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017. However, because of various adjustments to the condensed consolidated financial statements in connection with the application of fresh start accounting, the results of operations for the Successor period are not comparable to those of the Predecessor period. The Company believes that, subject to consideration of the impact of fresh start accounting, combining the results of the Successor and Predecessor periods provides meaningful information about the financial results of the Company, including revenues and costs that assist a reader in understanding the financial results for the applicable periods.

About Nuverra

Nuverra Environmental Solutions, Inc. is a leading provider of water logistics and oilfield services to customers focused on the development and ongoing production of oil and natural gas from shale formations in the United States. Our services include the delivery, collection, and disposal of solid and liquid materials that are used in and generated by the drilling, completion, and ongoing production of shale oil and natural gas. We provide a suite of solutions to customers who demand safety, environmental compliance and accountability from their service providers. Find additional information about Nuverra in documents filed with the U.S. Securities and Exchange Commission (“SEC”) at http://www.sec.gov.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. You can identify these and other forward-looking statements by the use of words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “might,” “will,” “should,” “would,” “could,” “potential,” “future,” “continue,” “ongoing,” “forecast,” “project,” “target” or similar expressions, and variations or negatives of these words.

These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, and any forward-looking statements contained herein are based on information available to us as of the date of this press release and our current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. Future performance cannot be ensured, and actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include, among others: financial results that may be volatile and may not reflect historical trends due to, among other things, changes in commodity prices or general market conditions, acquisition and disposition activities, fluctuations in consumer trends, pricing pressures, transportation costs, changes in raw material or labor prices or rates related to our business and changing regulations or political developments in the markets in which we operate; risks associated with our indebtedness, including changes to interest rates, decreases in our borrowing availability, our ability to manage our liquidity needs and to comply with covenants under our credit facilities; the loss of one or more of our larger customers; difficulties in successfully executing our growth initiatives, including identifying and completing acquisitions and divestitures, successfully integrating acquired business operations, and identifying and managing risks inherent in acquisitions and divestitures, as well as differences in the type and availability of consideration or financing for such acquisitions and divestitures; our ability to attract and retain key executives and qualified employees in key areas of our business; our ability to attract and retain a sufficient number of qualified truck drivers in light of industry-wide driver shortages and high-turnover; the availability of less favorable credit and payment terms due to changes in industry condition or our financial condition, which could constrain our liquidity and reduce availability under our revolving credit facility; higher than forecasted capital expenditures to maintain and repair our fleet of trucks, tanks, equipment and disposal wells; control of costs and expenses; changes in customer drilling, completion and production activities, operating methods and capital expenditure plans, including impacts due to low oil and/or natural gas prices or the economic or regulatory environment; risks associated with the limited trading volume of our common stock on the NYSE American Stock Exchange, including potential fluctuation in the trading prices of our common stock; the effects of our completed restructuring on the Company and the interest of various constituents; risks and uncertainties associated with our completed restructuring process, including the outcome of a pending appeal of the order confirming the plan of reorganization; risks associated with the reliance on third-party analyst and expert market projections and data for the markets in which we operate; present and possible future claims, litigation or enforcement actions or investigations; risks associated with changes in industry practices and operational technologies and the impact on our business; risks associated with the operation, construction, development and closure of saltwater disposal wells, solids and liquids treatment and transportation assets, landfills and pipelines, including access to additional locations and rights-of-way, permitting and licensing, environmental remediation obligations, unscheduled delays or inefficiencies and reductions in volume due to micro- and macro-economic factors or the availability of less expensive alternatives; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; changes in economic conditions in the markets in which we operate or in the world generally, including as a result of political uncertainty; reduced demand for our services due to regulatory or other influences related to extraction methods such as hydraulic fracturing, shifts in production among shale areas in which we operate or into shale areas in which we do not currently have operations; the unknown future impact of changes in laws and regulation on waste management and disposal activities, including those impacting the delivery, storage, collection, transportation, treatment and disposal of waste products, as well as the use or reuse of recycled or treated products or byproducts; risks involving developments in environmental or other governmental laws and regulations in the markets in which we operate and our ability to effectively respond to those developments including laws and regulations relating to oil and natural gas extraction businesses, particularly relating to water usage, and the disposal, transportation and treatment of liquid and solid wastes; and natural disasters, such as hurricanes, earthquakes and floods, or acts of terrorism, or extreme weather conditions, that may impact our business locations, assets, including wells or pipelines, distribution channels, or which otherwise disrupt our or our customers’ operations or the markets we serve.

The forward-looking statements contained, or incorporated by reference, herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s views as of the date of this press release. The Company undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, changes in expectations or otherwise. Additional risks and uncertainties are disclosed from time to time in the Company’s filings with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 
  Successor
Three Months Ended
December 31,
2018   2017
Revenue:
Service revenue $ 45,252 $ 41,775
Rental revenue   3,949     4,655  
Total revenue 49,201 46,430
Costs and expenses:
Direct operating expenses 38,447 40,967
General and administrative expenses 7,327 5,687
Depreciation and amortization 9,703 21,230
Impairment of long-lived assets 252 2,500
Other, net   2      
Total costs and expenses   55,731     70,384  
Loss from operations (6,530 ) (23,954 )
Interest expense, net (2,278 ) (1,409 )
Other income, net 213 117
Reorganization items, net   (70 )   (6,037 )
Loss before income taxes (8,665 ) (31,283 )
Income tax (expense) benefit   (138 )   381  
Net loss $ (8,803 ) $ (30,902 )
 
Earnings per common share:    
Net loss per basic common share $ (0.72 ) $ (2.64 )
   
Net loss per diluted common share $ (0.72 ) $ (2.64 )
 
Weighted average shares outstanding:
Basic 12,226 11,696
Diluted 12,226 11,696
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 
  Successor     Predecessor
  Five Months Seven Months
Year Ended Ended Ended
December 31, December 31, July 31,
2018 2017 2017
Revenue:
Service revenue $ 181,793 $ 72,395 $ 86,564
Rental revenue 15,681   7,793   9,319  
Total revenue 197,474 80,188 95,883
Costs and expenses:
Direct operating expenses 158,896 67,077 81,010
General and administrative expenses 38,510 10,615 22,552
Depreciation and amortization 46,434 38,551 28,981
Impairment of long-lived assets 4,815 4,904
Other, net 1,119      
Total costs and expenses 249,774   121,147   132,543  
Operating loss (52,300 ) (40,959 ) (36,660 )
Interest expense, net (5,973 ) (2,187 ) (22,792 )
Other income, net 896 411 4,247
Reorganization items, net (1,679 ) (5,507 ) 223,494  
(Loss) income before income taxes (59,056 ) (48,242 ) 168,289
Income tax (expense) benefit (207 ) 347   322  
Net (loss) income $ (59,263 ) $ (47,895 ) $ 168,611  
 
Earnings per common share:      
Net (loss) income per basic common share $ (5.01 ) $ (4.09 ) $ 1.12  
     
Net (loss) income per diluted common share $ (5.01 ) $ (4.09 ) $ 0.97  
 
Weighted average shares outstanding:
Basic 11,829 11,696 150,940
Diluted 11,829 11,696 174,304
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands)

 
  Successor
December 31,
2018   2017
Assets
Cash $ 7,302 $ 5,488
Restricted cash 656 1,296
Accounts receivable, net 31,392 30,965
Inventories 3,358 4,089
Prepaid expenses and other receivables 2,435 8,594
Other current assets 1,582 226
Assets held for sale 2,782   2,765  
Total current assets 49,507   53,423  
Property, plant and equipment, net 215,640 229,874
Equity investments 41 48
Intangibles, net 1,112 547
Goodwill 29,518 27,139
Deferred income taxes 84
Other assets 118   207  

Total assets

$ 295,936   $ 311,322  
Liabilities and Shareholders’ Equity
Accounts payable $ 9,061 $ 7,946
Accrued liabilities 16,670 13,939
Current contingent consideration 500 500
Current portion of long-term debt 38,305 5,525
Derivative warrant liability 34   477  
Total current liabilities 64,570   28,387  
Deferred income taxes 181
Long-term debt 27,628 33,524
Other long-term liabilities 7,130   6,438  
Total liabilities 99,509   68,349  
Commitments and contingencies
Shareholders’ equity:
Preferred stock
Common stock 122 117
Additional paid-in capital 303,463 290,751
Accumulated deficit (107,158 ) (47,895 )
Total shareholders’ equity 196,427   242,973  
Total liabilities and shareholders’ equity $ 295,936   $ 311,322  
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 
  Successor     Predecessor
  Five Months Seven Months
Year Ended Ended Ended
December 31, December 31, July 31,
2018 2017 2017
Cash flows from operating activities:
Net (loss) income $ (59,263 ) $ (47,895 ) $ 168,611
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization of intangible assets 46,434 38,551 28,981
Amortization of debt issuance costs, net 186 2,135
Accrued interest added to debt principal 119 473 11,474
Stock-based compensation 12,717 677 457
Impairment of long-lived assets 4,815 4,904
Gain on sale of UGSI (75 ) (76 )
Loss (gain) on disposal of property, plant and equipment (895 ) 5,695 (258 )
Bad debt (recoveries) expense (328 ) 91 788
Change in fair value of derivative warrant liability (443 ) (239 ) (4,025 )
Deferred income taxes 265 (242 ) (337 )
Other, net 355 4,503 (11,295 )
Reorganization items, non-cash (218,600 )
Changes in operating assets and liabilities:
Accounts receivable 1,798 (3,521 ) (4,528 )
Prepaid expenses and other receivables 800 (312 ) 472
Accounts payable and accrued liabilities 3,634 (5,034 ) 3,682
Other assets and liabilities, net (670 ) (4,036 ) 3,494  
Net cash provided by (used in) operating activities 9,449   (6,461 ) (18,949 )
Cash flows from investing activities:
Proceeds from the sale of property, plant and equipment 19,140 4,034 3,083
Purchases of property, plant and equipment (12,241 ) (2,231 ) (3,149 )
Proceeds from the sale of UGSI 75 76
Cash paid for acquisitions, net of cash acquired (42,292 )    
Net cash (used in) provided by investing activities (35,318 ) 1,879   (66 )
Cash flows from financing activities:
Proceeds from Predecessor revolving credit facility 106,785
Payments on Predecessor revolving credit facility (129,964 )
Proceeds from Predecessor term loan 15,700
Proceeds from debtor in possession term loan 6,875
Proceeds from Successor First and Second Lien Term Loans 10,000 36,053
Payments on Successor First and Second Lien Term Loans (13,434 ) (1,241 )
Proceeds from Successor revolving facility 226,371 79,464
Payments on Successor revolving facility (226,371 ) (79,464 )
Proceeds from Bridge Term Loan 32,500
Payments for debt issuance costs (167 ) (1,053 )
Payments on vehicle financing and other financing activities (1,856 ) (2,391 ) (2,797 )
Net cash provided by (used in) financing activities 27,043   (3,632 ) 31,599  
Change in cash and restricted cash 1,174   (8,214 ) 12,584  
Cash, beginning of period 5,488 7,193 994
Restricted cash, beginning of period 1,296   7,805   1,420  
Cash and restricted cash, beginning of period 6,784   14,998   2,414  
Cash, end of period 7,302 5,488 7,193
Restricted cash, end of period 656   1,296   7,805  
Cash and restricted cash, end of period $ 7,958   $ 6,784   $ 14,998  
 

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS
(In thousands)
(Unaudited)

This press release contains non-GAAP financial measures as defined by the rules and regulations of the United States Securities and Exchange Commission. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations or balance sheets of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures are included in the attached financial tables.

These non-GAAP financial measures are provided because management of the Company uses these financial measures in evaluating the Company’s ongoing financial results and trends. Management uses this non-GAAP information as an indicator of business results, and evaluates overall performance with respect to such indicators. Management believes that excluding items such as acquisition expenses, amortization of intangible assets, stock-based compensation, asset impairments, restructuring charges, expenses related to litigation and resolution of lawsuits, and other charges, which may or may not be non-recurring, among other items that are inconsistent in amount and frequency (as with acquisition expenses), or determined pursuant to complex formulas that incorporate factors, such as market volatility, that are beyond our control (as with stock-based compensation), for purposes of calculating these non-GAAP financial measures facilitates a more meaningful evaluation of the Company’s current operating performance and comparisons to the past and future operating performance. The Company believes that providing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per share, in addition to related GAAP financial measures, provides investors with greater transparency to the information used by the Company’s management. These non-GAAP financial measures are not substitutes for measures of performance or liquidity calculated in accordance with GAAP and may not necessarily be indicative of the Company’s liquidity or ability to fund cash needs. Not all companies calculate non-GAAP financial measures in the same manner, and our presentation may not be comparable to the presentations of other companies.

For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017 for these non-GAAP reconciliations. The combination was generated by addition of comparable financial statement line item captions. However, because of various adjustments to the condensed consolidated financial statements in connection with the application of fresh start accounting, including asset valuation adjustments and liability adjustments, the results of operations for the Successor period are not comparable to those of the Predecessor period. The financial information preceding these non-GAAP reconciliations provides the Successor and Predecessor GAAP results for the applicable periods. The Company believes that subject to consideration of the impact of fresh start accounting, combining the results of the Successor and Predecessor periods provides meaningful information about the financial results of the Company, including revenues and costs that assist a reader in understanding the financial results for the applicable periods.

 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of Net (Loss) Income to EBITDA and Total Adjusted EBITDA

 
  Three Months Ended   Year Ended
December 31, December 31,
2018   2017 2018   2017 [1]
Net (loss) income $ (8,803 ) $ (30,902 ) $ (59,263 ) $ 120,716
Depreciation and amortization 9,703 21,230 46,434 67,532
Interest expense, net 2,278 1,409 5,973 24,979
Income tax expense (benefit) 138   (381 ) 207   (669 )
EBITDA 3,316 (8,644 ) (6,649 ) 212,558
Adjustments:
Transaction-related costs, including earnout adjustments, net 846 1,291
Stock-based compensation 1,225 496 12,717 1,134
Change in fair value of derivative warrant liability (120 ) (379 ) (443 ) (4,264 )
Capital reorganization costs [2] 9,448
Reorganization items, net [3] 70 6,036 1,679 (217,987 )
Legal and environmental costs, net 111 124 (341 ) 2,168
Impairment of long-lived assets 252 2,500 4,815 4,904
Restructuring, exit and other costs 2 1,119
Gain on the sale of UGSI (75 ) (76 )
Integration, severance and rebranding costs 371 3,308
Loss on disposal of assets 24   5,008   (895 ) 5,437  
Total Adjusted EBITDA $ 6,097   $ 5,141   $ 16,526   $ 13,322  
 
[1]   For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.
[2] Capital reorganization costs in 2017 represent costs related to the chapter 11 filing incurred prior to the May 1, 2017 filing date.
[3] Reorganization items, net represents the costs related to the chapter 11 filing incurred after the May 1, 2017 filing date.
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of QTD Segment Performance to Adjusted EBITDA

 
  Rocky        
Three months ended December 31, 2018 Mountain Northeast Southern Corporate Total
Revenue $ 30,424 $ 13,598 $ 5,179 $ $ 49,201
Direct operating expenses 24,153 10,964 3,330 38,447
General and administrative expenses 1,096 1,024 302 4,905 7,327
Depreciation and amortization 4,916 2,583 2,192 12 9,703
Loss from operations 259 (973 ) (899 ) (4,917 ) (6,530 )
Operating margin % 0.9 % (7.2 )% (17.4 )% NA (13.3 )%
Loss before income taxes 252 (1,063 ) (930 ) (6,924 ) (8,665 )
 
Net income (loss) 252 (1,055 ) (924 ) (7,076 ) (8,803 )
Depreciation and amortization 4,916 2,583 2,192 12 9,703
Interest expense, net 100 90 31 2,057 2,278
Income tax (benefit) expense       (8 )   (6 )   152     138  
EBITDA $ 5,268 $ 1,610 $ 1,293 $ (4,855 ) $ 3,316
 
Adjustments, net   112     (8 )   308     2,369     2,781  
Adjusted EBITDA $ 5,380   $ 1,602   $ 1,601   $ (2,486 ) $ 6,097  
Adjusted EBITDA margin % 17.7 % 11.8 % 30.9 % NA 12.4 %
 
 
Rocky
Three months ended December 31, 2017 Mountain Northeast Southern Corporate Total
Revenue $ 25,920 $ 10,075 $ 10,435 $ $ 46,430
Direct operating expenses 24,457 8,874 7,636 40,967
General and administrative expenses 1,362 696 745 2,884 5,687
Depreciation and amortization 10,088 5,982 5,112 48 21,230
Loss from operations (12,487 ) (5,477 ) (3,058 ) (2,932 ) (23,954 )
Operating margin % (48.2 )% (54.4 )% (29.3 )% NA (51.6 )%
Loss before income taxes (13,029 ) (5,792 ) (3,362 ) (9,100 ) (31,283 )
 
Net loss (13,029 ) (5,791 ) (3,361 ) (8,721 ) (30,902 )
Depreciation and amortization 10,088 5,982 5,112 48 21,230
Interest expense, net 102 113 114 1,080 1,409
Income tax benefit       (1 )   (1 )   (379 )   (381 )
EBITDA $ (2,839 ) $ 303 $ 1,864 $ (7,972 ) $ (8,644 )
 
Adjustments, net   7,026     97     1,095     5,567     13,785  
Adjusted EBITDA $ 4,187   $ 400   $ 2,959   $ (2,405 ) $ 5,141  
Adjusted EBITDA margin % 16.2 % 4.0 % 28.4 % NA 11.1 %
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of YTD Segment Performance to Adjusted EBITDA

 
  Rocky        
Year Ended December 31, 2018 Mountain Northeast Southern Corporate Total
Revenue $ 127,758 $ 43,564 $ 26,152 $ $ 197,474
Direct operating expenses 101,855 37,660 19,381 158,896
General and administrative expenses 5,859 2,746 1,237 28,668 38,510
Depreciation and amortization 22,826 12,148 11,397 63 46,434
Loss from operations (2,782 ) (9,059 ) (11,396 ) (29,063 ) (52,300 )
Operating margin % (2.2 )% (20.8 )% (43.6 )% NA (26.5 )%
Loss before income taxes (2,781 ) (9,370 ) (11,576 ) (35,329 ) (59,056 )
 
Net loss (2,781 ) (9,370 ) (11,576 ) (35,536 ) (59,263 )
Depreciation and amortization 22,826 12,148 11,397 63 46,434
Interest expense, net 370 312 187 5,104 5,973
Income tax expense               207     207  
EBITDA $ 20,415 $ 3,090 $ 8 $ (30,162 ) $ (6,649 )
 
Adjustments, net   (157 )     (1,857 )   6,409     18,780     23,175  
Adjusted EBITDA $ 20,258     $ 1,233   $ 6,417   $ (11,382 ) $ 16,526  
Adjusted EBITDA margin % 15.9 % 2.8 % 24.5 % NA 8.4 %
 
 
Rocky
Year Ended December 31, 2017 [1] Mountain Northeast Southern Corporate Total
Revenue $ 103,033 $ 37,985 $ 35,053 $ $ 176,071
Direct operating expenses 87,073 35,953 25,061 148,087
General and administrative expenses 6,517 3,073 3,258 20,319 33,167
Depreciation and amortization 34,072 16,168 17,075 217 67,532
Loss from operations (29,295 ) (17,209 ) (10,579 ) (20,536 ) (77,619 )
Operating margin % (28.4 )% (45.3 )% (30.2 )% NA (44.1 )%
(Loss) income before income taxes (35,073 ) 10,375 11,544 133,201 120,047
 
Net (loss) income (35,073 ) 10,376 11,545 133,868 120,716
Depreciation and amortization 34,072 16,168 17,075 217 67,532
Interest expense, net 363 333 257 24,026 24,979
Income tax benefit       (1 )   (1 )   (667 )   (669 )
EBITDA $ (638 ) $ 26,876 $ 28,876 $ 157,444 $ 212,558
 
Adjustments, net   15,542       (27,258 )   (20,694 )   (166,826 )   (199,236 )
Adjusted EBITDA $ 14,904     $ (382 ) $ 8,182   $ (9,382 ) $ 13,322  
Adjusted EBITDA margin % 14.5 % (1.0 )% 23.3 % NA 7.6 %
 
[1]   For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of Special Items to Adjusted Net Loss and to EBITDA and Adjusted EBITDA

 
  Three months ended December 31, 2018
As Reported   Special Items   As Adjusted
Revenue $ 49,201 $ $ 49,201
Direct operating expenses 38,447 (24 ) [A] 38,423
General and administrative expenses 7,327 (2,553 ) [B] 4,774
Total costs and expenses 55,731 (2,831 ) [C] 52,900
Loss from operations (6,530 ) 2,831 [C] (3,699 )
Net loss (8,803 ) 2,825 [D] (5,978 )
 
Net loss $ (8,803 ) $ (5,978 )
Depreciation and amortization 9,703 9,703
Interest expense, net 2,278 2,278
Income tax expense 138   94  
EBITDA and Adjusted EBITDA $ 3,316   $ 6,097  
 

Description of 2018 Special Items:

[A]   Special items primarily includes the loss on sale of underutilized assets.
[B] Primarily attributable to $0.8 million in transaction costs related to our acquisition of Clearwater Solutions on October 5, 2018, $1.3 million in severance and stock-based compensation costs for the departure of our former CFO, non-routine litigation expenses and non-routine professional fees.
[C] Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $0.3 million for assets classified as held-for-sale in the Southern division.
[D] Primarily includes the aforementioned adjustments along with $0.1 million of capital reorganization costs incurred after the chapter 11 filing recorded to “Reorganization items, net,” offset by a gain of $0.1 million associated with the change in fair value of the derivative warrant liability. Additionally, our effective tax rate for the three months ended December 31, 2018 was (1.6)% and has been applied to the special items accordingly.
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of Special Items to Adjusted Net Loss and to EBITDA and Adjusted EBITDA

 
  Three months ended December 31, 2017
As Reported   Special Items   As Adjusted
Revenue $ 46,430 $ $ 46,430
Direct operating expenses 40,967 (5,018 ) [E] 35,949
General and administrative expenses 5,687 (610 ) [F] 5,077
Total costs and expenses 70,384 (8,128 ) [G] 62,256
Loss from operations (23,954 ) 8,128 [G] (15,826 )
Net loss (30,902 ) 13,617 [H] (17,285 )
 
Net loss $ (30,902 ) $ (17,285 )
Depreciation and amortization 21,230 21,230
Interest expense, net 1,409 1,409
Income tax benefit (381 ) (213 )
EBITDA and Adjusted EBITDA $ (8,644 ) $ 5,141  
 

Description of 2017 Special Items:

[E]   Special items primarily includes the loss on sale of underutilized assets.
[F] Primarily attributable to stock-based compensation and non-routine litigation expenses.
[G] Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $2.5 million for assets classified as held-for-sale primarily in the Rocky Mountain division.
[H] Primarily includes the aforementioned adjustments along with $6.0 million of capital reorganization costs incurred after the chapter 11 filing recorded to “Reorganization items, net,” offset by a gain of $0.4 million associated with the change in fair value of the derivative warrant liability. Additionally, our effective tax rate for the three months ended December 31, 2017 was (1.2)% and has been applied to the special items accordingly.
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of Special Items to Adjusted Net Loss and to EBITDA and Adjusted EBITDA

 
  Year Ended December 31, 2018
As Reported   Special Items   As Adjusted
Revenue $ 197,474 $ $ 197,474
Direct operating expenses 158,896 694 [A] 159,590
General and administrative expenses 38,510 (16,774 ) [B] 21,736
Total costs and expenses 249,774 (22,014 ) [C] 227,760
Loss from operations (52,300 ) 22,014 [C] (30,286 )
Net loss (59,263 ) 23,256 [D] (36,007 )
 
Net loss $ (59,263 ) $ (36,007 )
Depreciation and amortization 46,434 46,434
Interest expense, net 5,973 5,973
Income tax expense 207   126  
EBITDA and Adjusted EBITDA $ (6,649 ) $ 16,526  
 

Description of 2018 Special Items:

[A]   Special items primarily includes the gain on the sale of underutilized assets.
[B] Primarily attributable to $15.3 million in severance and stock-based compensation expense related to the departure of former CEO and CFO, $1.3 million in transaction costs related to the acquisition of Clearwater Solutions, non-routine litigation expenses and non-routine professional fees.
[C] Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $4.8 million for assets classified as held-for-sale in the Southern, Northeast and Corporate divisions, as well as exit costs of $1.1 million for management’s decision to exit the Eagle Ford shale area as of March 1, 2018.
[D] Primarily includes the aforementioned adjustments along with $1.7 million of capital reorganization costs incurred after the chapter 11 filing recorded to “Reorganization items, net,” offset by a gain of $0.4 million associated with the change in fair value of the derivative warrant liability. Additionally, our effective tax rate for the year ended December 31, 2018 was (0.4)% and has been applied to the special items accordingly.
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of Special Items to Adjusted Net Loss and to EBITDA and Adjusted EBITDA

 
  Year Ended December 31, 2017 [1]
As Reported   Special Items   As Adjusted
Revenue $ 176,071 $ $ 176,071
Direct operating expenses 148,087 (6,032 ) [E] 142,055
General and administrative expenses 33,167 (12,155 ) [F] 21,012
Total costs and expenses 253,690 (23,091 ) [G] 230,599
Loss from operations (77,619 ) 23,091 [G] (54,528 )

Net income (loss)

120,716 (200,346 ) [H] (79,630 )
 

Net income (loss)

$ 120,716 $ (79,630 )
Depreciation and amortization 67,532 67,532
Interest expense, net 24,979 24,979

Income tax (benefit) expense

(669 ) 441  
EBITDA and Adjusted EBITDA $ 212,558   $ 13,322  
 
[1]   For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.
 

Description of 2017 Special Items:

[E]   Special items primarily includes capital reorganization costs incurring prior to the chapter 11 filing and the loss on the sale of underutilized assets.
[F] Primarily attributable to capital reorganization costs of $8.8 million incurred prior to the chapter 11 filing, as well as stock-based compensation, non-routine litigation expenses, and non-routine professional fees.
[G] Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $4.9 million for assets classified as held-for-sale primarily in the Rocky Mountain division.
[H] Primarily includes the aforementioned adjustments, along with $218.0 million of capital reorganization costs incurred in connection with the application of fresh start accounting and after emergence from chapter 11 recorded to “Reorganization items, net,” offset by a gain of $4.3 million associated with the change in fair value of the derivative warrant liability. Additionally, our effective tax rate for the year ended December 31, 2017 was (0.6)% and has been applied to the special items accordingly.
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of Free Cash Flow

 
  Year Ended
December 31,
2018   2017 [1]
Net cash used in operating activities from continuing operations $ 9,449 $ (25,410 )
Less: net cash capital expenditures [2] 6,899   1,737  
Free Cash Flow $ 16,348   $ (23,673 )
 
[1]   For illustrative purposes, the Company has combined the Successor and Predecessor periods to derive combined results for the year ended December 31, 2017.
[2] Purchases of property, plant and equipment, net of proceeds received from sales of property, plant and equipment
 
 

Sequential Revenue and Adjusted EBITDA (Decline) Growth by Price, Activity, Acquisition/Closure, and Corporate

 
  Revenue   Adjusted EBITDA
Q4 2018 vs Q3 2018 Q4 2018 vs Q3 2018
Breakdown of (Decline) Growth:    
Price $ 1,037 2.1 % $ 972 24.7 %
Activity (4,080 ) (8.2 ) (1,227 ) (31.2 )
Acquisition/Closure 2,588 5.2 1,698 43.2
Corporate     719   18.3  
Total Sequential (Decline) Growth $ (455 ) (0.9 )% $ 2,162   55.0 %
 
 

Year-Over-Year Revenue Growth by Price, Activity and Acquisition/Closure

 
  Three Months Ended   Year Ended
December 31, 2018 December 31, 2018 [1]
Breakdown of Total Revenue Growth:    
Price $ 71 0.2 % $ 4,851 2.8 %
Activity 3,722 8.0 25,354 14.4
Acquisition/Closure (1,022 ) (2.2 ) (8,802 ) (5.0 )
Total Revenue Growth $ 2,771   6.0 % $ 21,403   12.2 %
 
[1]   The annual 2018 growth was calculated based upon the combined the Successor and Predecessor periods for the year ended December 31, 2017.
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 
 

Year-Over-Year Adjusted EBITDA Growth by Price, Activity, Acquisition/Closure, and Corporate

 
  Three Months Ended   Year Ended
December 31, 2018 December 31, 2018 [1]
Breakdown of Total Adjusted EBITDA Growth:    
Price $ (36 ) (0.7 )% $ 4,072 30.6 %
Activity/Expense (564 ) (11.0 ) (101 ) (0.8 )
Acquisition/Closure 1,637 31.8 1,235 9.3
Corporate (81 ) (1.5 ) (2,002 ) (15.0 )
Total Adjusted EBITDA Growth $ 956   18.6 % $ 3,204   24.1 %
 
[1]   The annual 2018 growth was calculated based upon the combined the Successor and Predecessor periods for the year ended December 31, 2017.
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
SUPPLEMENTAL COMPANY AND INDUSTRY DATA

(Unaudited)

 

Company Assets and Utilization by Revenue Source

 
  Three Months Ended
December 31, 2018
Water Trucks:
Count (approximate) 470
% Utilized [1] 50.0 %
 
Salt Water Disposal Wells:
Count 48
% Utilized [2] 50.0 %
 
Haynesville Pipeline:
% Utilized [2] [3]

55% - 61

%

 
[1]   Trucking utilization assumes a five day work-week and running twelve hours per day.
[2] Salt Water Disposal Well and Pipeline utilization is calculated based on functional capacity rather than permitted capacity. Functional capacity reflects any factors limiting volume such as pressure limits, pump or tank capacity, etc. and can potentially be increased with additional capital investment.
[3] The range of utilization for the Haynesville Pipeline represents the high and low for the period.
 
 

Industry Statistics for the Basins in which Nuverra Operates

 
  Average for the  
Three Months Ended* Year-Over-Year
December 31, 2018   December 31, 2017 Growth %
Pricing:
Oil price per barrel [1] $ 59.97 $ 55.27 8.5 %
Natural gas price per tcf [2] $ 3.77 $ 2.91 29.6 %
 
Operating Rigs [3] 180 165 9.1 %
 
Oil Production (barrels in thousands) [4] 1,617 1,346 20.1 %
 
Natural Gas Production (Mcf/d) [4] 42,854 35,477 20.8 %
 
Wells Completed [4] 946 702 34.8 %
 
Drilled Uncompleted Ending Inventory [4] 1,453 1,605 (9.5 )%
*   Excludes the Eagle Ford shale area as the Company exited the basin during the first quarter of 2018.
[1] Source: West Texas Intermediate (“WTI”) Crude Oil Spot Price
[2] Source: Henry Hub (“HH”) Natural Gas Spot Price
[3] Source: Baker Hughes
[4] Source: US Energy Information Association (“EIA”)
 

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