Basic Energy Services Management Discusses Q2 2012 Results - Earnings Call Transcript

Basic Energy Services (BAS)

Q2 2012 Earnings Call

July 27, 2012 9:00 am ET

Executives

Sheila Stuewe

Kenneth V. Huseman - Chief Executive Officer, President and Director

Alan Krenek - Chief Financial Officer, Senior Vice President of Finance, Treasurer and Secretary

Analysts

James C. West - Barclays Capital, Research Division

Michael Cerasoli - Goldman Sachs Group Inc., Research Division

Jeffrey Spittel - Global Hunter Securities, LLC, Research Division

John R. Keller - Stephens Inc., Research Division

Joe Hill - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Luke M. Lemoine - Capital One Southcoast, Inc., Research Division

J. Marshall Adkins - Raymond James & Associates, Inc., Research Division

Neal Dingmann - SunTrust Robinson Humphrey, Inc., Research Division

Blake Allen Hutchinson - Howard Weil Incorporated, Research Division

Michael W. Urban - Deutsche Bank AG, Research Division

James Spicer

Travis Z. Bartlett - Simmons & Company International, Research Division

Douglas Garber - Dahlman Rose & Company, LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to Basic Energy's second quarter earnings conference call. [Operator Instructions] This conference is being recorded today, July 27, 2012. I would now like to turn the conference over to Sheila Stuewe. Please go ahead, ma'am.

Sheila Stuewe

Thank you, and good morning, everyone. Welcome to the Basic Energy Services 2012 Second Quarter Earnings Conference Call. We appreciate you joining us today.

Before I turn the call over to management, I have a few items to go over. If you'd like to listen to a replay of today's call, it is available via webcast by going to the Investor Relations section of the company's website at www.basicenergyservices.com, or by telephonic replay until August 10, 2012.

Information was provided in yesterday's earnings release. The information reported on this call speaks only as of today, July 27, 2012, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of the replay.

Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations, include known and unknown risks and uncertainties and other factors, many of which the company is unable to predict or control, that may cause the company's actual results or performance to materially differ from any future results or performance expressed or implied by those statements. These risks and uncertainties include risk factors disclosed by the company in its registration statement or its Form 10-Q for the year ended December 31, 2012 and subsequent Form 10-Q filed with the SEC. Furthermore, as we start this call, please also refer to the statements regarding forward-looking statements incorporated in our press release issued yesterday, and please note contents of this conference call are covered by these statements.

At this time, I'll turn the call over to Ken Huseman, President and Chief Executive Officer.

Kenneth V. Huseman

Thank you, Sheila. Welcome to those joining us on the call. Alan Krenek, our Senior Vice President and Chief Financial Officer, is joining me on the call today. Our earnings announcement released yesterday evening provided a fairly comprehensive discussion of our second quarter results.

Rather than we read that, I'll ask Alan to take us through the financial statements before coming back on to discuss operational details and our outlook.

Alan Krenek

Thanks, Ken, and good morning. Upfront, I wanted to review the special items that occurred in the second quarter. Included in G&A expense was a charge of $2.9 million for an accrual of an estimated liability for sales and use tax based on an audit by the state of Texas for the years 2006 through 2010. This $2.9 million charge represents 0.1% of the amount of sales and expenses that were subject to this audit for the 4-year period.

It also included an expense of $1 million of pro-rata cost for our headquarter's relocation to Fort Worth. We expect to incur an additional $6.2 million of costs in the second half of this year for this relocation.

Included in the tax provision is a $1.1 million -- or $1.9 million pretax reduction due to a refund of 2008 Texas margin tax. All further discussions will be based on results, excluding these special items unless, specifically identified. Next, I'm going to give an overview of the sequential changes for the second quarter, segment revenue and profit margins. Ken will come back later to talk in detail about each segment's performance.

Second quarter revenue was $362 million compared to $371 million in the first quarter, down 2.5%. Completion and Remedial Services revenue was down 5%, due mainly to lower frac pumping pricing during the quarter as well as lower pass-through revenue for sand, guar and chemicals.

Fluid Services revenue declined by 5% due to lower nontrucking revenue and lower activity in our Rocky Mountain region due to unseasonably warmer weather in the second quarter.

Well Servicing revenue increased by 3% because of increased revenue from our Taylor Rig manufacturing operation and an increase in plugging rig hours, which have a higher revenue per hour rate than workover rigs.

And finally, Contract Drilling was up 3% due to full utilization of our 2 largest drilling rigs, which started on contract in mid-January.

Second quarter segment profit margins were $129 million or 36% of revenue compared to $134 million or 36% in the first quarter. Fluid Services and Contract Drilling profit margins were both up, Fluid Services by 200 basis points to 36%; Contract Drilling, up by 400 basis points, 37%. Completion and Remedial Services profit margin was flat at 41%, and Well Servicing was down by 300 basis points to 27%.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Neel Kashkari: The Heart of Our Financial System Is More Radioactive Than Ever

Neel Kashkari: The Heart of Our Financial System Is More Radioactive Than Ever

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain