Forbes Energy Services Reports Third Quarter Financial Results


    



    
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<p>ALICE, Texas, <chron>Nov. 13</chron> /CNW/ -- Forbes Energy Services Ltd. (TSX: FRB) today announced financial and operating results for the third quarter ended <chron>September 30, 2009</chron>.</p>
<p/>
<p>Revenues for the third quarter increased to <money>$50.5 million</money> compared to <money>$49.8 million</money> in the second quarter of 2009 as a result of increases in utilization and average pricing in the fluid logistics segment, which were partially offset by lower utilization and pricing in the well servicing segment.  Net loss for the three months ended <chron>September 30, 2009</chron> was <money>$9.6 million</money>, or a loss of <money>$0.15</money> per share, compared to a net loss of <money>$9.0 million</money>, or <money>$0.15</money> per share, in the quarter ended <chron>June 30, 2009</chron>.</p>
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<p>In the third quarter of 2009, the Company corrected two accounting errors from prior periods.  The net impact to third quarter results was a reduction of <money>$2.0 million</money> in operating income and a reduction of <money>$1.3 million</money>, or <money>$0.02</money> per share, in net income.</p>
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<p>Adjusted EBITDA for the third quarter of 2009 totaled <money>$1.6 million</money> versus <money>$2.8 million</money> in the 2009 second quarter.  Adjusted EBITDA for the third quarter was negatively impacted by <money>$2.0 million</money> as a result of the accounting adjustments.  Adjusted EBITDA is a non-GAAP financial measure, defined by the Company as net income before interest, taxes, depreciation, amortization, gain or loss on extinguishment of debt, and non-cash stock based compensation.  For a reconciliation of Adjusted EBITDA to net income, please see the disclosures at the end of this release and on the Company's website.</p>
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<p><person>John Crisp</person>, Forbes Energy's President and Chief Executive Officer, stated, "The third quarter was weaker than expected in the well servicing segment, with activity in the U.S. trending downward through September.  However, recent trends in the U.S. rig count indicate that better days are ahead, and our October hours began showing signs of this improvement.  The fluid logistics segment has now experienced four consecutive months of increasing truck hours, leading to a small sequential increase in revenue this quarter.  Pricing still remains sluggish in both segments, with rates down 20% or more from year ago levels.  We anticipate upward price pressures as utilization continues to strengthen.</p>
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<p>"Highlights from the quarter include the deployment of our ninth rig in <location>Mexico</location>, expansion into the Marcellus Shale in Pennsylvania, and the raising of <money>$20 million</money> to pay off and terminate our revolving credit facility.  Looking ahead, we expect to see gradual improvement in both operating segments, although hours for November and December may be choppy due to the holiday schedule.  We have one additional rig in <location>Mexico</location> currently being 'rigged up' which will bring our total there to ten rigs by the end of the year.  We also recently hired a new business development manager in Pennsylvania to oversee and grow operations in an effort to expand our footprint in the Marcellus Shale.  Finally, we're beginning to see a significant ramp-up in Eagle Ford Shale activity in our core South Texas market.  We have a dominant position in that market and are ideally situated to capitalize on this developing play."</p>
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    Business Segment Results

    Well Servicing

    
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<p>Well servicing revenue decreased to <money>$23.9 million</money> for the third quarter of 2009 compared to <money>$25.5 million</money> in the second quarter.  Segment gross margin, which was negatively impacted by the accounting adjustments, totaled <money>$1.0 million</money> in the third quarter.  By comparison, well servicing gross margin for the second quarter of 2009 was <money>$1.8 million</money>.</p>
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<p>Forbes recorded approximately 65,524 rig hours for the third quarter of 2009, including 14,136 hours in <location>Mexico</location>, compared to 65,453 total hours in the second quarter of 2009 (10,440 in <location>Mexico</location>).  The Company had 170 rigs in its well service fleet at <chron>September 30, 2009</chron>, unchanged from <chron>June 30, 2009</chron>.  On average, the Company's U.S. rigs (160) were 45% utilized during the quarter.  Capital expenditures for the well servicing segment totaled <money>$3.7 million</money> during the three months ended <chron>September 30, 2009</chron>, primarily related to <location>Mexico</location>.</p>
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    Fluid Logistics

    
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<p>Fluid logistics revenues in the third quarter of 2009 increased to <money>$26.6 million</money> compared to <money>$24.2 million</money> in the second quarter of 2009.  Gross margins for the fluid logistics segment totaled <money>$4.8 million</money> compared to <money>$4.3 million</money> in the previous quarter.</p>
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<p>Forbes recorded 206,526 truck hours during the third quarter of 2009 compared to 199,662 for the second quarter.  The Company's fluid transport segment heavy truck fleet totaled 369 as of <chron>September 30, 2009</chron>, down one from <chron>June 30, 2009</chron>.  On average, the Company's truck fleet was 65% utilized during the quarter.  Total capital expenditures for the fluid logistics segment were <money>$0.2 million</money> for the three months ended <chron>September 30, 2009</chron>.</p>
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    Conference Call

    
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<p>Forbes Energy will host a conference call to discuss its third quarter 2009 results on <chron>Monday, November 16, 2009</chron>, at <chron>10:00 a.m. Eastern Time</chron> (<chron>9:00 a.m.</chron> Central). To access the call, please dial (480) 629-9645 and ask for the "Forbes Energy Services" call at least 10 minutes prior to the start time. The conference call will also be broadcast live via the Internet and can be accessed through the "Investor Relations" page of Forbes Energy's website, <a href="http://www.forbesenergyservices.com">www.forbesenergyservices.com</a>.</p>
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<p>A telephonic replay of the conference call will be available until <chron>November 23, 2009</chron>, and may be accessed by calling (303) 590-3030 and using the pass code 4183619.  A webcast archive will be available at <a href="http://www.forbesenergyservices.com">www.forbesenergyservices.com</a> shortly after the call and will be accessible for approximately 30 days. For more information, please contact <person>Donna Washburn</person> at DRG&E at (713) 529-6600 or email at <a href="mailto:dmw@drg-e.com">dmw@drg-e.com</a>.</p>
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    About Forbes Energy

    
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<p>Forbes Energy Services Ltd. is an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, Mississippi, Pennsylvania and <location>Mexico</location>.</p>
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    Forward-Looking Statements and Regulation G Reconciliation

    
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<p>This press release contains "forward-looking statements," as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect its performance in the future. The accuracy of the Company's assumptions, expectations, beliefs and projections depend on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company's actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include: supply and demand for oilfield services and the level of oil and natural gas prices; the continued uncertainty in the global financial markets and its effect on domestic spending in the oil and natural gas industry; the Company's ability to maintain pricing on its core services; the potential for excess capacity in the industry; and competition. Should one or more of the foregoing risks or uncertainties materialize, or should the Company's underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated in its forward-looking statements, and the Company's business, financial condition and results of operations could be materially and adversely affected.   Additional factors that you should consider are set forth in detail in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended <chron>December 31, 2008</chron> (the "Form 10-K") as well as other filings the Company has made with the Securities and Exchange Commission.</p>
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<p>Forbes Energy's financial statements and management's discussion and analysis of financial condition and results of operations can be found in the Form 10-Q, which is being filed with the Securities and Exchange Commission and posted on the Company's website.</p>
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<p>This press release also contains references to the non-GAAP financial measure of earnings, or net income, before interest, income taxes, depreciation and amortization, or EBITDA.  For a reconciliation of EBITDA to net income, please see the table at the end of this release. Management's opinion regarding the usefulness of  EBITDA to investors and a description of the ways in which management uses such measures can be found on the "Investor Relations" page of Forbes Energy's website, <a href="http://www.forbesenergyservices.com">www.forbesenergyservices.com</a>.</p>
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    Contacts:  Forbes Energy Services Ltd.
               L. Melvin Cooper, SVP & CFO
               361-664-0549
    
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               DRG&E
               Ken Dennard, Managing Partner
               Ben Burnham, AVP
               713-529-6600



    
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<p>                          -Tables to Follow-</p>
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                       Selected Statement of Operations Data
                                    (Unaudited)
    
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                             Three Months Ended          Nine Months Ended
                                September 30,              September 30,
                                -------------              -------------
                              2009         2008          2009          2008
                              ----         ----          ----          ----
    Revenues
    Well servicing       $23,853,912  $54,343,084   $80,907,991  $141,003,486
    Fluid logistics       26,618,294   50,802,304    82,748,174   123,265,951
                          ----------   ----------    ----------   -----------
      Total revenues      50,472,206  105,145,388   163,656,165   264,269,437
                          ----------  -----------   -----------   -----------
    
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    Expenses
    Well servicing        22,869,209   35,406,964    72,985,810    89,819,779
    Fluid logistics       21,812,340   36,281,048    64,972,027    86,739,998
    General and
     administrative        4,644,809    4,511,599    14,315,264    12,371,906
    Depreciation and
     amortization          9,982,121    9,075,266    29,448,456    23,546,370
                           ---------    ---------    ----------    ----------
      Total expenses      59,308,479   85,274,877   181,721,557   212,478,053
                          ----------   ----------   -----------   -----------
      Operating income
       (loss)             (8,836,273)  19,870,511   (18,065,392)   51,791,384
    
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    Other income (expense)
    Interest expense      (6,221,304)  (6,532,810)  (19,281,292)  (19,091,945)
    Gain on
     extinguishment of
     debt                          -            -     1,421,750             -
    Other income
     (expense)              (168,288)       2,493      (133,671)      109,061
                            --------        -----      --------       -------
      Income (loss)
       before taxes      (15,225,865)  13,340,194   (36,058,605)   32,808,500
    
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    Income tax expense
     (benefit)            (5,616,145)   5,066,839   (12,875,659)   60,224,259
                          ----------    ---------   -----------    ----------
      Net income (loss)  $(9,609,720)  $8,273,355  $(23,182,946) $(27,415,759)
                         ===========   ==========  ============  ============
    
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    Earnings (loss) per
     share of common stock
      Basic and diluted       $(0.15)       $0.15        $(0.37)       $(0.67)
    
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    Weighted average number
     of shares outstanding
      Basic and diluted   62,111,200   54,144,700    62,111,200    40,653,076
    
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    Pro forma earnings per
     share(1)
      Basic and diluted                     $0.15                       $0.38
    
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    Weighted average number of
     shares outstanding
      Basic and diluted                54,144,700                  54,144,700
    
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    (1) The pro forma earnings per share reflects the effects related to the
    Company's Bermuda reorganization from a limited liability company to a "C"
    corporation, this issuance of common stock in connection with Forbes'
    initial equity offering and an assumed effective tax rate of 37%.  See
    disclosures in the Company's 10-Q filing for additional information.
    
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    Selected Balance Sheet Data
    (Unaudited)
                                               September 30,   December 31,
                                                   2009           2008
                                                   ----           ----
       Cash                                    $23,707,762    $23,469,067
       Accounts receivable                      39,793,514     69,095,522
       Working Capital                          27,575,694     42,707,044
       Intangible assets (net)                  37,314,080     39,459,977
       Total assets                            430,717,502    482,801,391
       Total debt                              215,195,213    212,189,842
       Deferred tax liability                   48,544,648     62,068,620
       Shareholders'/members' equity           137,100,822    158,418,487
    
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    Selected Operating Data
                                Three Months Ended           Nine Months Ended
                                   September 30,               September 30,
                                   -------------               -------------
                                 2009         2008           2009        2008
                                 ----         ----           ----        ----
       Working days                64           64             191         192
       Rig Hours
         U.S.                  51,388      107,520         175,175     281,069
         Mexico                14,136            -          29,324           -
                               ------          ---          ------         ---
         Total rig hours       65,524      107,520         204,499     281,069
    
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<p>   Truck hours            206,526      313,750         635,407     806,573</p>
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    Reconciliation of Adjusted EBITDA to Net Income
    (Unaudited)
    
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                                            Three Months Ended
                                            --------------------
                               September 30,     June 30,        September 30,
                                   2009            2009               2008
                                   ----            ----               ----
      Net income (loss)        $(9,609,720)   $(9,037,736)         $8,273,355
      Depreciation and
       amortization              9,982,121      9,774,963           9,075,266
      Interest expense, net      6,221,304      6,406,311           6,532,810
      Income tax expense
       (benefit)                (5,616,145)    (4,480,569)          5,066,839
      Gain on extinguishment of
       debt                              -       (447,842)                  -
      Stock based compensation     622,420        622,418             620,928
                                   -------        -------             -------
        Adjusted EBITDA         $1,599,980     $2,837,545         $29,569,198
                                ==========     ==========         ===========
    
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                                             Nine Months Ended September 30,
                                             -------------------------------
                                                    2009           2008
                                                    ----           ----
      Net income (loss)                       $(23,182,946)  $(27,415,759)
      Depreciation and amortization             29,448,456     23,546,370
      Interest expense, net                     19,281,292     19,091,945
      Income tax expense (benefit)             (12,875,659)    60,224,259
      Gain on extinguishment of debt            (1,421,750)             -
      Stock based compensation                   1,869,575        824,356
                                                 ---------        -------
        Adjusted EBITDA                        $13,118,968    $76,271,171
                                               ===========    ===========






    

For further information: For further information: L. Melvin Cooper, SVP & CFO of Forbes Energy Services Ltd., +1-361-664-0549; or Ken Dennard, Managing Partner, or Ben Burnham, AVP, both of DRG&E, +1-713-529-6600, both for Forbes Energy Services Ltd. Web Site: http://www.forbesenergyservices.com

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