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
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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