Nine Energy Service recorded more losses in the third quarter, and the company leader expects more of the same in the fourth quarter.
The Houston company, with offices and operations in Oklahoma, experienced a $10.1 million or 26 cent a share net loss on revenues of $138.2 million. Its adjusted EBITDA was $14.3 million.
Despite the loss, the company’s actual results came in more than the provide revenue guidance of between $127 million and $137 million.
“Despite the average US rig count declining quarter over quarter, we increased our revenue by approximately 4%, with revenue coming in above the originally provided guidance,” said Ann Fox, President and Chief Executive Officer, Nine Energy Service.
“Nine outperformed market drivers this quarter due in large part to market share gains across operating basins in our cementing division. Cementing revenue increased by approximately 12% over Q2, despite a declining rig count. Our cementing team has been able to differentiate itself in the market by offering what we believe to be the most advanced cementing slurries in the industry, coupled with excellent wellsite execution.”
Still, revenue was relatively flat on the company’s remaining service lines and Fox remains optimistic about the future productivity and earnings.
“We remain positive on demand and the outlook for oil and natural gas. It is too early to provide specifics on 2025 activity levels, but if we see supportive commodity prices, in conjunction with the resetting of customer budgets, we would anticipate a moderate activity pick up in 2025 over current levels.”
Fox commented natural gas prices are challenging and affected activity levels in basins like the Northeast and Haynesville “impacting all of Nine’s service lines.” As a result, she anticipates fourth quarter revenue and profitability “to be down compared to Q3.”
Operating Results
During the third quarter of 2024, the Company reported revenues of $138.2 million, gross profit of $16.1 million and adjusted gross profitB of $24.7 million. During the third quarter, the Company generated ROIC of (14.7)% and adjusted ROIC of 3.9%.
During the third quarter of 2024, the Company reported general and administrative expense of $12.4 million. Depreciation and amortization expense (“D&A”) in the third quarter of 2024 was $9.0 million.
The Company’s tax provision was approximately $0.4 million year to date. The provision for 2024 is the result of the Company’s tax position in state and non-U.S. tax jurisdictions.
Liquidity and Capital Expenditures
During the third quarter of 2024, the Company reported net cash used in operating activities of $(5.9) million. Capital expenditures totaled $3.6 million during the third quarter of 2024 and totaled $11.7 million for the full year through September 30, 2024. The Company’s full-year 2024 capex guidance is $10 to $15 million.
As of September 30, 2024, Nine’s cash and cash equivalents were $15.7 million, and the Company had $27.6 million of availability under the revolving credit facility, resulting in a total liquidity position of $43.3 million as of September 30, 2024. On September 30, 2024, the Company had $50.0 million of borrowings under the revolving credit facility. On October 10, 2024, the Company repaid $3.0 million of outstanding borrowings under the revolving credit facility.
Nine did not generate any Excess Cash Flow, as defined in the indenture, in the most recently ended two fiscal quarters (the six-month period ended September 30, 2024). As a result, no Excess Cash Flow offer will be made to noteholders this month.
During the third quarter of 2024, the Company sold approximately 1.2 million shares of common stock under its at-the-market equity offering program, which generated approximately $1.4 million in net proceeds. For the nine months ended September 30, 2024, a total of approximately 5.4 million shares have been sold, which generated net proceeds of $8.2 million.
