OREANDA-NEWS. Forbes Energy Services Ltd. today announced financial and operating results for the three months ended March 31, 2016.

Selected financial information for the quarter ended March 31, 2016: 

  • Consolidated revenues were $31.9 million for the first quarter of 2016, compared to $41.4 million for the fourth quarter of 2015.
  • Gross margin decreased to $2.1 million in the first quarter of 2016, compared to $2.3 million in the fourth quarter of 2015.  Gross margin percentage increased to 6.4% of revenues in the first quarter of 2016, compared to 5.5% of revenues in the fourth quarter of 2015.
  • GAAP net loss attributable to common shares was $24.7 million, or $1.11 per diluted share, for the first quarter of 2016, compared to $19.6 million, or $0.88 per diluted share, for the fourth quarter of 2015.
  • Adjusted EBITDA totaled $(3.9) million in the first quarter of 2016, as compared to $(4.2) million in the fourth quarter of 2015. 

Overview

"This year’s first quarter results are indicative of our industry’s large-scale depressed operating environment,” stated John Crisp, president and CEO of Forbes Energy Services. “Reductions in capital budgets by our customers for 2016 have caused drilling- and production-related activity to substantially decline across most U.S. oil and gas regions. As a result, lower demand for completions and production services has produced an environment among our competitors of buying market share by unjustifiable pricing. While the pricing pressure may ease up after finding a bottom, the overall market disposition is expected to continue deteriorating over the next few quarters considering our customers have no major plans to resume activity in the near term.

“Our efforts have focused on preserving cash and balancing our operating costs with market demand by cutting spending, suspending operating yards and managing labor costs. Our success with these efforts and greater efficiencies in work flow are evident this quarter in the slight increase in gross margin as a percentage of revenue in both segments. Moving forward, we expect a fragmented and declining market to continue through the year, and consequently, will continue to operate as lean as possible, eliminating nonessential costs and resources.”

Results of Operations

Revenues for the Company declined 22.9% from $41.4 million in the fourth quarter of 2015 to $31.9 million in the current reporting quarter as a result of the continued decline in energy exploration and production activity.

On a year over year basis, the weekly average U.S. land rig count fell approximately 55.7% from 1,048 at the end of the first quarter of 2015 to 464 at the end of the first quarter of 2016.  The Company's primary state in which it operates – Texas – dropped 55.1% over the same period, from 461 at the end of the first quarter of 2015 to 207 at the end of the first quarter of 2016.  As a result, utilization and pricing pressures continued in the first quarter of 2016 reflective of the lower drilling and production related activity.

Gross margin decreased to $2.1 million, or 6.4% of revenues, in the first quarter of 2016 compared to $2.3 million, or 5.5% of revenues, in the fourth quarter of 2015.  Gross margin decreased in line with the decrease in revenues, while the gross margin percentage increased slightly, reflective of continued cost-reduction efforts. 

Well Servicing and Fluid Logistics hours decreased by 26.6% and 34.3%, respectively, from the fourth quarter of 2015 to the first quarter of 2016.  This decreased utilization and continued pricing pressures resulted in lower revenues for the current quarter.

Management continues to analyze and reduce labor and non-core expenses.  The Company has also closed and consolidated less strategic operating locations.  The Company intends to continue its efforts to reduce costs, streamline administrative and operations functions and align the asset base with market demand.

Consolidated direct operating expenses for the three months ended March 31, 2016 were $29.9 million, compared to $39.1 million in the prior quarter.

Uses of capital have been limited to funding critical operations and the absorption of previously leased equipment.