Nine Energy blames losses on labor shortage

Nine Energy Service

 

“Because of our inability to field labor, we were unable to complete all anticipated wireline jobs in the region.” CEO Ann Fox

The labor shortage caught up this week with Nine Energy Service’s bottom line as the Texas company reported a more than $16 million net loss in the third quarter 2021. Its revenues totaled $92.9 million and the company missed its projected guidance for the quarter.

The loss amounted to 53 cents a share as the Texas-based company, one with operations in Oklahoma, reported its adjusted EBITDA was $4.5 million. But its adjusted net loss was also $15.7 million or 51 a share.

The company had provided original third quarter 2021 revenue guidance between $95.0 and $103.0 million, with actual results falling slightly below the provided range, but still representing a sequential revenue increase of approximately 9% quarter over quarter.

“Sequential revenue increases this quarter of approximately 9% outpaced EIA US completions, which increased approximately 6% over the same time period, but was less than what we anticipated due mostly to labor constraints in the Permian Basin,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service.

Nine Energy Service prepares for slower activity levels

She said the firm struggled with labor challenges, something that hit the entire country following the COVID-19 pandemic and government programs that paid people to stay home.

“Because of our inability to field labor, we were unable to complete all anticipated wireline jobs in the region. By the end of the quarter, we were able to fill most of our labor needs for our Permian wireline operations but do anticipate labor shortages will continue to be a significant challenge for Nine and the collective OFS industry moving forward.”

Fox explained the company managed to see moderate activity of both US completions and active frac crews increasing between 5 and 6% quarter over quarter. But pricing for products and services remains low and she said most prices increases are being offset by simultaneous price inflation for labor and materials.

Operations for Nine Energy produced revenues of $92.9 million and a gross profit of $3.5 million along with an adjusted gross profit of $14 million during the quarter.

Fox expects the fourth quarter to product flat revenue results compared to the third quarter while costs will no doubt go up.

 

 

“With what we know today, we anticipate North American capex spending will increase in 2022, which coupled with the robust commodity price environment supports increased activity for 2022 over 2021.”

 

As of September 30, 2021, Nine’s cash and cash equivalents were $30.0 million, and the Company had $55.4 million of availability under the revolving credit facility, resulting in a total liquidity position of $85.4 million as of September 30, 2021.

Click here for Business Wire