CST: 31/08/2016 09:16:47   

EcoStim Energy Solutions Reports Fourth Quarter and Full Year 2015 Results

174 Days ago

Strong Operational Performance Creates Opportunities for Future Growth

HOUSTON, TX and NEUQUEN CITY, ARGENTINA--(Marketwired - Mar 10, 2016) - Eco-Stim Energy Solutions, Inc. (NASDAQ: ESES) ("EcoStim" or the "Company") announced its financial and operating results for the quarter and year ended December 31, 2015.

2015 HIGHLIGHTS

  • Annual revenues increased from less than $1 million in 2014 to ~$14 million in 2015;
  • First year of operations completed with no lost time incidents (safety) or down-time related to labor disruptions;
  • Strong operational track record; Diversified customer base and YPF is now a key customer;
  • Two successful public equity offerings secured ~$35 million to finance the Company's capacity expansion initiatives;
  • Recent 2015 presidential elections expected to be very positive for Argentina and the energy sector as the country encourages local resource development;
  • New Argentine president and his administration taking many positive steps to return Argentina to international capital markets.

J. Chris Boswell, President and Chief Executive Officer stated, "We have completed our first full year of operations in an emerging market which is now considered to be one of the most successful and promising shale developments outside of North America. In just a few short years, we have successfully positioned the Company by importing equipment and establishing an operating base; hiring a quality management and operational team; and maintaining a flawless reputation which has allowed the Company to secure substantial work with the largest oil and gas operator in the country. We are extremely proud of that effort, especially in this environment. Despite the extremely depressed energy and energy services markets around the world, we have also secured adequate capital to expand our capacity and position the Company to compete in the conventional, tight gas and unconventional well stimulation markets in Argentina. We have taken delivery of a significant portion of the new equipment that was built in Argentina and are now in the process of moving the recently upgraded turbine powered equipment package, data vans, and other equipment to the country."

Boswell continued, "As we discussed previously, we are increasing our working horsepower from 10,000 HHP to 50,000 HHP, which we expect to be in place by mid-year 2016. The Company recently secured approval from the U.S. State Department to export its Honeywell turbine engines to Argentina. This was an important license approval and now allows the Company to move forward in filing its importation documents in Argentina. We expect the importation documents will take approximately 45 days to be processed by the Argentine authorities at which point the equipment should be shipped to Argentina. Based on this timeline, we expect our turbine equipment package and data vans to arrive in Argentina in May and ready to work sometime in June. Most importantly, this additional capacity will open up new markets for us and allow us to perform the more complex, higher pressure jobs."

Carlos Fernandez, the Company's Executive Vice President of Corporate Business Development and General Manager Latin America added, "The recent presidential election in Argentina, which ushered in a new pro-business, free markets oriented president and administration, has significantly brightened the outlook for Argentina on the world stage. In the short-term, the depressed global commodity price environment and the new administration's belief in reduced subsidies has caused some concern and resulted in a slow-down in drilling and completion activities, particularly in the select areas of Argentina where oil is exported at international prices. This reduced our revenue opportunities in Q4 2015 and Q1 2016. However, oilfield activity in our region of the country seems to be improving as we move towards the end of Q1 2016."

Fernandez continued, "Our team continues to impress our customers and remains at or near the top in terms of equipment reliability, execution and safety. As a result, we have recently been invited to submit tenders on multiple jobs which we were previously unqualified for. As Chris stated, it is impossible to time capacity additions simultaneously with market uptrends, but we fully anticipate that there is a solid opportunity to grow our business as activity picks up in Argentina over the next few years."

Bjarte Bruheim, EcoStim's Chairman stated, "We are now seeing a major shift that we anticipated a few years ago whereby operators in Argentina are transitioning from vertical to horizontal wells. Some areas are also moving toward pad drilling techniques which again highlights that the operational experience from the shale revolution in the U.S. is being deployed in Argentina. This implies that efficiencies and economies of scale are taking hold, which will reduce drilling and completion costs, and we would expect that activity levels should increase over the coming years. Management continues to expect positive cash flow from operations in the near future and to reach profitability as soon as the new capacity is fully deployed. We are well positioned in this market and look forward to getting our remaining equipment package in the country and operational."

Year Ended December 31, 2015 Financial Results

For the year ended December 31, 2015, EcoStim reported a net loss of $13.4 million or a loss of $1.35 per basic and diluted share as compared to a net loss of $7.1 million, or a loss of $1.48 per basic and diluted share, reported for the year ended December 31, 2014. Net loss for the year ended 2015 includes approximately $5.2 million of non-cash expenses consisting of depreciation, debt amortization and stock compensation. The Company also recognized a gain of approximately $5.1 million related to the purchase and sale of Argentinian bonds as the mechanism to move funds into the country. The proceeds from the sale of these bonds in country were used primarily to fund capital expenditures and working capital in Argentina.

Fourth Quarter Financial Results

For the fourth quarter of 2015, EcoStim reported a net loss of $3.5 million, or a loss of $0.26 per basic and diluted share as compared to a net loss of $2.7 million, or a loss of $0.21 per basic and diluted share, reported in the third quarter of 2015. The net loss for the fourth quarter of 2014 was $3.0 million, or a loss of $0.53 per basic and diluted share. Net loss for the fourth quarter of 2015 includes approximately $1.2 million of non-cash expenses consisting of depreciation, debt amortization and stock compensation. The Company also recognized a cash gain of approximately $2.7 million related to the transfer of cash to Argentina through the bond market. The proceeds from the sale of these bonds were used primarily to fund capital expenditures in Argentina.

SG&A Expense

Selling, general and administrative ("SG&A") expense in the fourth quarter of 2015 was approximately $1.8 million compared to $1.7 million for the prior quarter and $1.4 million for the fourth quarter of 2014. The G&A expense is primarily related to the sales and administrative offices in Buenos Aires and Neuquén and the cost associated with being a public company, including our corporate office in Houston.

R&D Expense

Research & development ("R&D") expense in the fourth quarter of 2015 was $0.2 million compared to $0.3 million for the prior quarter. There was no R&D expense in Q4 2014. R&D expense for Q4 2015 was primarily related to expenditures in connection with the technology development agreement signed in Q4 2014 with YTEC, the technology arm of YPF. These expenditures related to research and development efforts around the use of fiber optic diagnostic tools and turbine-powered well stimulation equipment and the evaluation of optimal completion tools, including sliding sleeves.

Cash and Total Liquidity

On December 31, 2015, EcoStim had cash and cash equivalents of approximately $11.7 million, compared to $7.0 million at December 31, 2014 and $21.3 million on September 30, 2015. While our accounts receivable balance increased over the last half of 2015 and we consumed more working capital than planned, we did collect a substantial portion of this balance subsequent to year-end. The contract for our coiled tubing operation and any contracts we are able to secure for our well stimulation business should have the impact of reducing days outstanding.

During 2015, EcoStim completed two underwritten public equity offerings resulting in the sale of 7,216,066 shares of common stock at $4.75 per share and $5.75 per share with gross proceeds of $35.3 million. The Company also agreed to allow its largest investor and creditor, ACM Emerging Markets Master Fund I, L.P. (ACM) to convert approximately $2.5 million in accrued but unpaid interest into 523,192 shares of common stock for $4.75 per share. Thus in total, the Company issued equity for ~$38 million during 2015 to fund growth initiatives. We have dedicated the majority of the proceeds to fund the acquisition of additional equipment, some of which was fabricated in Argentina, and to upgrade 27,000 HHP of turbine powered stimulation equipment originally purchased late in 2014. The Company managed its liquidity very well during Q4 and was well prepared for the significant devaluation of the Argentine Peso in December, suffering only a small loss, which was more than offset by the trading gain recognized in the same period.

Capital Expenditures

Total capital expenditures during the fourth quarter of 2015 were approximately $6.1 million compared to $5.0 million in the third quarter of 2015 and $12.2 million in the fourth quarter of 2014, comprised mainly of additional pressure pumping equipment for the Company's second and third fleets, which are anticipated to be fully delivered and ready for operation during the second quarter of 2016. Most of the Company's capital expenditures for new capacity additions have now been completed.

Forward Guidance

The Company has a limited operating history and 2015 is essentially our initial year of operations. While the Company has not provided any official guidance for 2016, the Company's capacity expansion plans are progressing and management may provide such guidance once the new equipment is operational and the visibility in the market improves. Factors influencing our outlook and performance include the timing for new equipment readiness, utilization of the assets, the size of each job, the service and product components of each job, and the price charged and the distance between each job.

Conference Call

The Company will host a conference call on March 10, 2016 at 4:00 PM EST, 3:00 PM CST. The conference call will be webcast and include a slide presentation, which can be accessed through the following link: http://ecostim-es.equisolvewebcast.com/2015-year-end. For those unable to attend the webcast, please dial 877-900-9524 from the United States and Canada, and 412-902-0029 internationally. Participants should dial in five to ten minutes before the scheduled time and must be on a touchtone telephone to ask questions. A replay of the call will be available through March 31, 2016 by dialing 877-660-6853 from the U.S and Canada, and 201-612-7415 internationally. The replay passcode is 13597819.

About the Company

Eco-Stim Energy Solutions is an environmentally focused oilfield service and technology company providing proprietary field management technologies and well stimulation and completion services to oil and gas producers drilling in the rapidly expanding international unconventional shale market. EcoStim's proprietary methodology and technology offers the potential to decrease the number of stages stimulated in shale plays through a unique process that predicts high probability production zones while confirming those production zones using the latest generation down-hole diagnostic tools. In addition, EcoStim offers its clients completion techniques that can dramatically reduce horsepower requirements, emissions, surface footprint and water usage. EcoStim seeks to deliver well completion services with better technology, better ecology and significantly improved economics for unconventional oil and gas producers worldwide.

Forward-Looking Statements:

Certain statements and information in this press release concerning results for the fiscal periods ended December 31, 2015 may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "plan," "intend," "foresee," "should," "would," "could" or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the Company based on management's experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections.

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Financial Statements

   
ECO-STIM ENERGY SOLUTIONS, INC.  
   
CONDENSED CONSOLIDATED BALANCE SHEETS  
   
    December 31, 2015     December 31, 2014  
                 
Assets                
Current assets:                
  Cash and cash equivalents   $ 11,742,489     $ 7,013,556  
  Accounts receivable     8,155,264       264,192  
  Marketable securities     -       1,360,767  
  Inventory     1,546,463       1,619,778  
  Prepaids     3,328,265       2,496,805  
  Other assets     234,010       409,388  
Total current assets     25,006,491       13,164,486  
                 
Property, plant and equipment, net     37,142,578       27,949,347  
Other non-current assets     751,230       936,592  
Total assets   $ 62,900,299     $ 42,050,425  
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Accounts payable   $ 1,112,812     $ 1,947,371  
  Accrued expenses     3,843,497       3,164,250  
  Short-term notes payable     -       158,036  
  Current portion of long-term notes payable     3,010,790       475,000  
  Current portion of capital lease payable     686,624       597,406  
Total current liabilities     8,653,723       6,342,063  
                 
Non-current liabilities:                
  Long-term notes payable     22,000,000       25,625,000  
  Long-term capital lease payable     1,485,686       2,102,143  
Total non-current liabilities     23,485,686       27,727,143  
                 
Stockholders' equity                
  Common stock     13,572       5,709  
  Additional paid-in capital     57,302,953       21,116,100  
  Treasury stock     (20,294 )     -  
  Accumulated deficit     (26,535,341 )     (13,140,590 )
Total stockholders' equity     30,760,890       7,981,219  
                 
Total liabilities and stockholders' equity   $ 62,900,299     $ 42,050,425  
                 
                 
                 
ECO-STIM ENERGY SOLUTIONS, INC.  
   
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
   
    Three Months Ended
December 31,
    Year Ended
December 31,
 
    2015     2014     2015     2014  
Revenues   $ 2,496,657     $ 189,080     $ 13,755,140     $ 834,482  
                                 
Operating cost and expenses:                                
  Cost of services     3,013,518       2,096,458       14,527,201       4,303,784  
  Selling, general, and administrative     1,751,938       1,432,385       7,011,765       5,727,146  
  Research and development     217,329       -       979,893       -  
  Depreciation and amortization expense     877,927       297,581       3,414,452       473,359  
Total operating costs and expenses     5,860,712       3,826,424       25,933,311       10,504,289  
                                 
Operating loss     (3,364,055 )     (3,637,344 )     (12,178,171 )     (9,669,807 )
                                 
Other income (expense):                                
  Gain on sale of trading securities     2,675,780       1,797,742       5,091,387       4,723,815  
  Interest expense     (994,420 )     (922,907 )     (4,007,974 )     (2,013,024 )
  Other income (expenses)     (1,483,067 )     (286,586 )     (1,955,679 )     (183,366 )
Total other income (expense)     198,293       588,249       (872,266 )     2,527,425  
                                 
Provision for income taxes     (344,314 )     -       (344,314 )     -  
                                 
Net loss   $ (3,510,076 )   $ (3,049,095 )   $ (13,394,751 )   $ (7,142,382 )
                                 
Basic and diluted loss per share   $ (0.26 )   $ (0.53 )   $ (1.35 )   $ (1.48 )
                                 
Weighted average number of common shares outstanding-basic and diluted     13,555,679       5,709,283       9,888,191       4,812,656  
                                 
                                 
                                 
ECO-STIM ENERGY SOLUTIONS, INC.  
   
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
   
    Year Ended
December 31,
 
    2015     2014  
Operating Activities                
Net loss   $ (13,394,751 )   $ (7,142,382 )
  Depreciation and amortization     3,414,452       473,359  
  Amortization of debt discount and loan origination cost     255,535       210,906  
  Stock based compensation     1,480,435       1,252,061  
  Gain on the sale of trading securities     (5,091,387 )     (4,723,815 )
  Foreign currency gain     -       (25,749 )
  Changes in operating assets and liabilities:                
    Accounts receivable     (7,891,072 )     (264,192 )
    Inventory     (184,732 )     (1,619,778 )
    Prepaids and other assets     (860,538 )     (2,300,638 )
    Accounts payable and accrued expenses     3,656,899       2,587,260  
Net cash used in operating activities     (18,615,159 )     (11,552,968 )
Investing Activities                
  Purchase of equipment     (13,472,236 )     (23,974,650 )
  Proceeds from sale of trading securities     19,435,956       12,861,075  
  Purchase of trading securities     (12,983,801 )     (9,498,027 )
Net cash used in investing activities     (7,020,081 )     (20,611,602 )
Financing Activities                
  Proceeds from sale of common stock     35,329,038       10,302,400  
  Sale of common stock issuance cost     (3,099,919 )     (476,738 )
  Proceeds from convertible debt     -       22,000,000  
  Convertible debt cost     -       (741,449 )
  Proceeds from notes payable     400,000       4,295,002  
  Payments on notes payable     (1,647,246 )     (224,281 )
  Payments on capital lease     (597,406 )     (268,930 )
  Purchase of treasury stock     (20,294 )     -  
Net cash provided by financing activities     30,364,173       34,886,004  
                 
Net increase in cash and cash equivalents     4,728,933       2,721,434  
Cash and cash equivalents, beginning of period     7,013,556       4,292,122  
Cash and cash equivalents, end of period   $ 11,742,489     $ 7,013,556  
                 
Supplemental Disclosure of Cash Flow Information                
  Cash paid during the year for interest   $ 3,104,129     $ 990,358  
  Cash paid during the year for income taxes   $ 817,783     $ 428,837  
                 
Non-cash transactions                
  Fixed asset additions in accrued expenses   $ 139,607     $ 1,793,912  
  Interest converted to common stock   $ 2,485,162     $ -  
  Prepaids amortized to settle capital lease obligations   $ -     $ 250,851  
                   

Contact:
Jeffrey Freedman
Investor Relations
investorrelations@ecostim-es.com
281-531-7200