C&J Energy Services Management Discusses Q2 2012 Results - Earnings Call Transcript

C&J Energy Services (CJES)

Q2 2012 Earnings Call

August 09, 2012 10:00 am ET


Lisa Elliott - Vice President

Joshua E. Comstock - Founder, Chairman, Chief Executive Officer and President

Randall C. McMullen - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer and Director

Theodore R. Moore - Vice President, General Counsel and Corporate Secretary

Donald Jeffrey Gawick - Chief Executive Officer and President


Robin E. Shoemaker - Citigroup Inc, Research Division

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

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

David Anderson

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



Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 C&J Energy Services Earnings Conference Call. My name is Tony and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Lisa Elliott with DRG&L. Please proceed, ma'am

Lisa Elliott

Thank you, operator, and good morning, everyone. We are pleased to have you joining us on this conference call to discuss C&J Energy Services Second Quarter Results for 2012.

Before we get started, I'd like to direct your attention to the forward-looking statement disclaimer contained in the news release that C&J put out yesterday afternoon and in this quarterly report on Form 10-Q that was filed with the SEC yesterday afternoon. A copy of that release and quarterly report is available on the company's website at www.cjenergy.com.

In summary, the cautionary note states that information provided in the news release and on this conference call that speaks to the company's expectations or predictions of the future, including projections, assumptions and guidance, are considered forward-looking statements, intended to be covered by the Safe Harbor provision under the federal securities law. Although these forward-looking statements reflect management's current views and assumptions regarding future events, future business conditions and outlook based on current available information, these forward-looking statements are subject to certain risks and uncertainties, some of which are beyond the company's control that could impact the company's operations and financial results and cause C&J's actual results to differ materially from those expressed in or implied by these statements.

I refer you to C&J's disclosure regarding risk factors and forward-looking statements in its SEC filings, including in the previously mentioned quarterly report for a discussion of the known material factors that could cause the actual results to differ materially from those in the forward-looking statements. Please note that the company undertakes no obligation to publicly update or revise any forward-looking statements and as such, these statements speak only as of today, the day that they were made. Also as a reminder, today's call is being webcast live and a replay will be available at the C&J's website. Please note that information related on this call speaks only as of today, August 9, 2012, so any time sensitive information may no longer be accurate at the time of any replay.

With that, I'd like to turn the call over to Josh Comstock, C&J's CEO and Chairman.

Joshua E. Comstock

Thank you, Lisa. Good morning, everyone. We appreciate you joining us for our earnings call today. With me is Randy McMullen, our Chief Financial Officer, who will review our financial results momentarily; Don Gawick, President of our newly acquired business, Casedhole Solutions, is also here with us and he will be available during the Q&A session at the end of the call. And on that note, let me begin by saying that we are excited about the addition of Casedhole, a leading multiregional provider of wireline and other complementary completion services. On June 7, we closed the acquisition of Casedhole for a total consideration of $271.9 million in cash, net of cash acquired of approximately $7.3 million.

Since C&J's inception in 1997, our long-term goal has been to become a large-scale, geographically diversified provider of the most technologically advanced completion services. We are executing an aggressive growth strategy and the acquisition of Casedhole is a significant step in the furtherance of this goal. Since the Casedhole closing, we have executed on our plans to grow our combined organizations by leveraging our strengths. The integration process has gone smoothly and our sales force is successfully marketing our expanded range of services. We'll talk more about Casedhole later in the call.

Now on the results for the second quarter. Our team generated another solid quarter. Revenue is up 16% and our earnings rose almost 8% sequentially. Despite the impact of increased competition on utilization and pricing, our adjusted EBITDA rose 10% sequentially and our adjusted EBITDA margin hold relatively firm at 33%, just a slight decline from 35% last quarter. This growth, once again, demonstrates that our emphasis on the highest level of efficiency and superior execution generates value for our customers, as well as our shareholders.

We're pleased with this quarter's results given the headwinds we, like our peers, have faced. The considerable decline in natural gas prices over the first half of the year caused a relocation of equipment from gas-nominated markets to the oily regions. The surplus of equipment increased competition and put pressure on pricing. Fortunately, even with the influx of equipment, which had a particularly notable impact on the Eagle Ford Shale and Permian Basin, we have seen solid activity levels across these plays. While we anticipate the remainder of the year will continue to be highly competitive, it appears that the migration has run its course and that pricing may be stabilized. Additionally, the vast majority of our assets are operating in oily basins and we have plans to expand in the new unconventional resource plays as we expand our asset base. The Casedhole acquisition has provided us entry in the key areas such as the Bakken and has strengthened our position in our existing areas of operations. Our integrated sales force has already received positive customer feedback on our competitive positioning as an independent provider offering comprehensive completion services where each product stands on its own merits. When we offer our services in a combined package, we believe that we have a competitive advantage due to the best-in-class performance of each service line.

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