Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nyse  >  Nine Energy Service, Inc.    NINE

NINE ENERGY SERVICE, INC.

(NINE)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsPress ReleasesOfficial PublicationsSector news

NINE ENERGY SERVICE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

share with twitter share with LinkedIn share with facebook
11/12/2019 | 08:43am EDT
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the accompanying unaudited
Condensed Consolidated Financial Statements for the three and nine months ended
September 30, 2019, included in Item 1 of Part I of this Quarterly Report on
Form 10-Q and the Consolidated Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations, including
Critical Accounting Policies, included in our Annual Report on Form 10-K for the
year ended December 31, 2018.
This section contains forward-looking statements based on our current
expectations, estimates, and projections about our operations and the industry
in which we operate. Our actual results may differ materially from those
discussed in any forward-looking statement because of various risks and
uncertainties, including those described in the section titled "Cautionary Note
Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q and
"Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K for the
year ended December 31, 2018.
OVERVIEW
Company Description
Nine Energy Service, Inc. (either individually or together with its
subsidiaries, as the context requires, the "Company," "Nine," "we," "us," and
"our") is a leading North American onshore completion services provider that
targets unconventional oil and gas resource development. We partner with our
exploration and production ("E&P") customers across all major onshore basins in
both the U.S. and Canada as well as abroad to design and deploy downhole
solutions and technology to prepare horizontal, multistage wells for production.
We focus on providing our customers with cost-effective and comprehensive
completion solutions designed to maximize their production levels and operating
efficiencies. We believe our success is a product of our culture, which is
driven by our intense focus on performance and wellsite execution as well as our
commitment to forward-leaning technologies that aid us in the development of
smarter, customized applications that drive efficiencies.
Recent Events
Production Solutions Divestiture
On August 30, 2019 (the "Divestiture Date"), we entered into a Membership
Interest Purchase Agreement ("Production Solutions Purchase Agreement") with
Brigade Energy Services LLC ("Brigade"). Pursuant to the Production Solutions
Purchase Agreement, on such date, through the sale of all of the limited
liability interests of our wholly owned subsidiary, Beckman Holding Production
Services, LLC, we sold our Production Solutions segment to Brigade for
approximately $17.4 million in cash. The closing consideration is subject to
working capital and other customary post-closing adjustments. We recorded a loss
of $15.8 million in connection with this divestiture during the third quarter of
2019. For additional information on this divestiture, see Note 4 - Business
Acquisitions and Divestitures included in Item 1 of Part I of this Quarterly
Report on Form 10-Q.
Magnum Acquisition
On October 25, 2018, pursuant to the terms of a Securities Purchase Agreement
dated October 15, 2018 (as amended on June 7, 2019, the "Magnum Purchase
Agreement"), we acquired all of the equity interests of Magnum Oil Tools
International, LTD, Magnum Oil Tools GP, LLC, and Magnum Oil Tools Canada Ltd.
(such entities collectively, "Magnum" and such acquisition, the "Magnum
Acquisition") for approximately $334.5 million in upfront cash consideration,
subject to customary adjustments, and 5.0 million shares of our common stock,
which were issued to the sellers of Magnum in a private placement. The Magnum
Purchase Agreement also includes the potential for additional future payments in
cash of (i) up to 60% of net income (before interest, taxes, and certain gains
or losses) for the "E-Set" tools business in 2019 through 2026 and (ii) up to
$25.0 million based on sales of certain dissolvable plug products in 2019. For
additional information on the Magnum Acquisition, see Note 4 - Business
Acquisitions and Divestitures included in Item 1 of Part I of this Quarterly
Report on Form 10-Q.
Senior Notes
On October 25, 2018, we issued $400.0 million principal amount of 8.750% Senior
Notes due 2023 (the "Senior Notes"). The proceeds from the Senior Notes,
together with cash on hand and borrowings under the 2018 ABL Credit Facility (as
defined below), were used to (i) fund a portion of the upfront cash purchase
price of the Magnum Acquisition, (ii) repay all indebtedness under the credit
facility entered into in conjunction with our initial public offering (the
"IPO"), and (iii) pay fees and expenses associated with the issuance of the
Senior Notes, the Magnum Acquisition, and the 2018 ABL Credit Facility (as

                                       23
--------------------------------------------------------------------------------


described below). For additional information on the Senior Notes, see Note 8 -
Debt Obligations included in Item 1 of Part I of this Quarterly Report on Form
10-Q.
2018 ABL Credit Facility
On October 25, 2018, we entered into a credit agreement dated as of October 25,
2018 (the "2018 ABL Credit Agreement") that permits aggregate borrowings of up
to $200.0 million, subject to a borrowing base, including a Canadian tranche
with a sub-limit of up to $25.0 million and a sub-limit of $50.0 million for
letters of credit (the "2018 ABL Credit Facility"). Concurrent with the
effectiveness of the 2018 ABL Credit Facility, we borrowed approximately $35.0
million to fund a portion of the upfront cash purchase price of the Magnum
Acquisition. During the first six months of 2019, we fully repaid the
outstanding revolver balance. For additional information on the 2018 ABL Credit
Facility, see Note 8 - Debt Obligations included in Item 1 of Part I of this
Quarterly Report on Form 10-Q.
Initial Public Offering
In January 2018, we completed our IPO of 8,050,000 shares of common stock
(including 1,050,000 shares pursuant to an over-allotment option) at a price to
the public of $23.00 per share.
Business Segments
The Completion Solutions segment provides services integral to the completion of
unconventional wells through a full range of tools and methodologies. Through
the Completion Solutions segment, we provide (i) cementing services, which
consist of blending high-grade cement and water with various solid and liquid
additives to create a cement slurry that is pumped between the casing and the
wellbore of the well, (ii) an innovative portfolio of completion tools,
including those that provide pinpoint frac sleeve system technologies as well as
a portfolio of completion technologies used for completing the toe stage of a
horizontal well and fully-composite, dissolvable, and extended range frac plugs
to isolate stages during plug and perf operations, (iii) wireline services, the
majority of which consist of plug-and-perf completions, which is a multistage
well completion technique for cased-hole wells that consists of deploying
perforating guns to a specified depth, and (iv) coiled tubing services, which
perform wellbore intervention operations utilizing a continuous steel pipe that
is transported to the wellsite wound on a large spool in lengths of up to 30,000
feet and which provides a cost-effective solution for well work due to the
ability to deploy efficiently and safely into a live well.
On the Divestiture Date, we sold the Production Solutions segment to Brigade.
For additional information on the Production Solutions divestiture, see Note 4 -
Business Acquisitions and Divestitures. Prior to the Divestiture Date, we
reported our results in two segments, the Completions Solutions segment and the
Production Solutions segment. The Production Solutions segment provided a range
of production enhancement and well workover services that were performed with a
well servicing rig and ancillary equipment. Our well servicing business
encompassed a full range of services performed with a mobile well servicing rig
(or workover rig) and ancillary equipment throughout a well's life cycle from
completion to ultimate plug and abandonment. Our rigs and personnel installed
and removed downhole equipment and eliminated obstructions in the well to
facilitate the flow of oil and natural gas.
How We Generate Revenue and the Costs of Conducting Our Business
We generate our revenues by providing completion services to E&P customers
across all major onshore basins in both the U.S. and Canada as well as abroad.
We primarily earn our revenues pursuant to work orders entered into with our
customers on a job-by-job basis. We typically will enter into a Master Service
Agreement ("MSA") with each customer that provides a framework of general terms
and conditions of our services that will govern any future transactions or jobs
awarded to us. Each specific job is obtained through competitive bidding or as a
result of negotiations with customers. The rate we charge is determined by
location, complexity of the job, operating conditions, duration of the contract,
and market conditions. In addition to MSAs, we have entered into a select number
of longer-term contracts with certain customers relating to our wireline and
cementing services, and we may enter into similar contracts from time to time to
the extent beneficial to the operation of our business. These longer-term
contracts address pricing and other details concerning our services, but each
job is performed on a standalone basis.
The principal expenses involved in conducting our business include labor costs,
materials and freight, the costs of maintaining our equipment, and fuel costs.
Our direct labor costs vary with the amount of equipment deployed and the
utilization of that equipment. Another key component of labor costs relates to
the ongoing training of our field service employees, which improves safety rates
and reduces employee attrition.

                                       24
--------------------------------------------------------------------------------


How We Evaluate Our Operations
We evaluate our performance based on a number of financial and non-financial
measures, including the following:
•            Revenue: We compare actual revenue achieved each month to the most
             recent projection for that month and to the annual plan for the
             month established at the beginning of the year. We monitor our
             revenue to analyze trends in the performance of our operations
             compared to historical revenue drivers or market metrics. We are
             particularly interested in identifying positive or negative trends
             and investigating to understand the root causes.


•            Adjusted Gross Profit (Excluding Depreciation and

Amortization):

             Adjusted gross profit (excluding depreciation and 

amortization) is a

             key metric that we use to evaluate operating performance. We 

define

             adjusted gross profit (excluding depreciation and 

amortization) as

             revenues less direct and indirect costs of revenues (excluding
             depreciation and amortization). Costs of revenues include direct and
             indirect labor costs, costs of materials, maintenance of equipment,
             fuel, transportation freight costs, contract services, crew cost,
             and other miscellaneous expenses. For additional information, see
             "Non-GAAP Financial Measures" below.


•            Adjusted EBITDA: We define Adjusted EBITDA as net income (loss)
             before interest expense, taxes, and depreciation and

amortization,

             further adjusted for (i) property and equipment, goodwill, and/or
             intangible asset impairment charges, (ii) transaction and
             integration costs related to acquisitions and our IPO, (iii) loss or
             gain from discontinued operations, (iv) loss or gain on revaluation
             of contingent liabilities, (v) loss or gain on equity method
             investment, (vi) stock-based compensation expense, (vii) loss or
             gain on sale of property and equipment, (viii) restructuring
             charges, (ix) loss or gain on the sale of subsidiaries, and (x)
             other expenses or charges to exclude certain items which we believe
             are not reflective of ongoing performance of our business, such as
             legal expenses and settlement costs related to litigation outside
             the ordinary course of business and restructuring costs. For
             additional information, see "Non-GAAP Financial Measures" below.


•            Return on Invested Capital ("ROIC"): We define ROIC as

after-tax net

             operating profit (loss), divided by average total capital. We define
             after-tax net operating profit (loss) as net income (loss) plus (i)
             transaction and integration costs related to acquisitions and our
             IPO, (ii) property and equipment, goodwill, and/or intangible asset
             impairment charges, (iii) interest expense (income), (iv)
             restructuring charges, (v) loss or gain on the sale of

subsidiaries,

             and (vi) the provision or benefit for deferred income taxes. We
             define total capital as book value of equity plus the book value of
             debt less balance sheet cash and cash equivalents. We compute the
             average of the current and prior period-end total capital for use in
             this analysis. For additional information, see "Non-GAAP Financial
             Measures" below.


•            Safety: We measure safety by tracking the total recordable incident
             rate ("TRIR"), which is reviewed on a monthly basis. TRIR is a
             measure of the rate of recordable workplace injuries, defined below,
             normalized and stated on the basis of 100 workers for an annual
             period. The factor is derived by multiplying the number of
             recordable injuries in a calendar year by 200,000 (i.e., the total
             hours for 100 employees working 2,000 hours per year) and dividing
             this value by the total hours actually worked in the year. A
             recordable injury includes occupational death, nonfatal

occupational

             illness, and other occupational injuries that involve loss of
             consciousness, restriction of work or motion, transfer to another
             job, or medical treatment other than first aid.


Factors Affecting the Comparability of Our Results of Operations
Our future results of operations may not be comparable to our historical results
of operations for the periods presented, and our historical results of
operations among the periods presented may not be comparable to each other,
primarily due to the Magnum Acquisition and partially due to our divestiture of
the Production Solutions segment.

                                       25
--------------------------------------------------------------------------------


The historical results of operations for the three and nine months ended
September 30, 2019 included in this Quarterly Report on Form 10-Q include
activity related to the Magnum Acquisition whereas the historical results of
operations for the three and nine months ended September 30, 2018 do not include
activity related to the Magnum Acquisition. As a result, the historical results
of operations for the three and nine months ended September 30, 2018 may not
give an accurate indication of what our actual results would have been if the
Magnum Acquisition had been completed at the beginning of the period presented,
or of what our future results of operations are likely to be for the following
reasons:

•            As a result of the Magnum Acquisition and the application of
             purchase accounting, these identifiable net assets have been
             adjusted to their estimated fair value as of October 25, 2018, the
             closing date of the Magnum Acquisition (the "Closing Date"). These
             adjusted valuations increase our operating expenses in periods after
             the Closing Date primarily due to an increase in the

amortization of

             intangible assets with definite lives.



•            Transaction and integration costs associated with the Magnum
             Acquisition increase operating expenses in periods after the Closing
             Date.



•            Our completion tools line constitutes a larger portion of our
             business, due in large part to the Magnum Acquisition. We expect
             that the Magnum Acquisition will generate additional free cash flow,
             reduce overall capital intensity, and improve our margins. We also
             expect that the Magnum Acquisition will further diversify our basin
             exposure and add significant size and scale.



•            We incurred significant indebtedness in connection with the
             consummation of the Magnum Acquisition, and our related interest
             expense is expected to be significantly higher than in prior
             periods.



In addition, the historical results of operations for the three and nine months
ended September 30, 2019 included in this Quarterly Report on Form 10-Q include
activity related to the Production Solutions segment only through August 30,
2019 (which is the Divestiture Date) whereas the historical results of
operations for the three and nine months ended September 30, 2018 include
activity related to the Production Solutions segment for the entire periods.
Furthermore, future results of operations will not include activity related to
the Production Solutions segment. For additional information on the Magnum
Acquisition and on the divestiture of the Production Solutions segment, see Note
4 - Business Acquisitions and Divestitures included in Item 1 of Part I of this
Quarterly Report on Form 10-Q.
Industry Trends and Outlook
Our business depends, to a significant extent, on the level of unconventional
resource development activity and corresponding capital spending of oil and
natural gas companies onshore in North America. These activity and spending
levels are strongly influenced by the current and expected oil and natural gas
prices. During 2018, oil prices rose to their highest levels since the downturn
that began in late 2014. However, during the fourth quarter of 2018, oil prices
declined approximately 40%, which is generally believed to be due to concerns
over a worldwide oversupply of oil as well as concerns over the possible slowing
of global demand growth. In response, at the beginning of 2019, OPEC members and
some nonmembers, including Russia, renewed pledges to reduce planned production
in an effort to draw down a global oversupply and to rebalance supply and
demand. These and other events provided support for an increase in oil prices
during the first several months of 2019. Since then, due to, among other things,
global geopolitical tensions, oil prices have slightly decreased, despite
renewed pledges by OPEC members and some non-members, including Russia, to
extend production cuts into 2020. We expect ongoing oil price volatility as
compliance with the output reduction agreements, changes in oil inventories, GDP
growth, and actual demand growth are reported. Similarly, natural gas prices
have decreased significantly throughout 2019 and are expected to continue to be
volatile, causing many operators in the more gas-exposed regions to curtail
activity. Significant factors that are likely to affect 2019 commodity prices
include the effect of U.S. energy, monetary, and trade policies; the pace of
economic growth in the U.S. and throughout the world, including the potential
for macro weakness; geopolitical and economic developments in the U.S. and
globally; the extent to which members of OPEC and other oil exporting nations
adhere to and agree to further extend the agreed oil production cuts; and
overall North American natural gas supply and demand fundamentals, including the
pace at which export capacity grows.

Customer budgets for 2019 were set at the end of 2018. As discussed above, there
was a sharp decline in oil price during the fourth quarter of 2018. As a result,
customer budgets for 2019 are more limited than previously anticipated, and on
average, customers have decreased E&P investments in 2019 as compared to 2018,
which could adversely affect our business. With this overall reduction, there
has been a strong commitment from E&P operators to stay within capital budgets,
prompting many of them to begin to scale back activity in the third quarter of
2019 and likely into the fourth quarter of 2019. Even if there

                                       26
--------------------------------------------------------------------------------


is price improvement in oil and natural gas during the remainder of 2019, it is
expected that operator activity would not materially increase, as operators
would likely remain focused on operating within their previously set capital
plans.

Operators have continued to improve operational efficiencies in completions
design, increasing the complexity and difficulty, making oilfield service
selection more important. This increase in high-intensity, high-efficiency
completions of oil and gas wells further enhances the demand for our services.
We compete for the most complex and technically demanding wells in which we
specialize, which are characterized by extended laterals, increased stage
spacing, multi-well pads, cluster spacing, and high proppant loads. These well
characteristics lead to increased operating leverage and returns for us, as we
are able to complete more jobs and stages with the same number of units and
crews. Service providers for these projects are selected based on their
technical expertise and ability to execute safely and efficiently, rather than
only price.
Results of Operations
Results for the Three Months Ended September 30, 2019 Compared to the Three
Months Ended September 30, 2018
                                                    Three Months Ended September 30,
                                                        2019                 2018             Change
                                                             (in thousands)
Revenues
Completion Solutions                             $       186,252$       196,608$  (10,356 )
   Production Solutions (1)                               16,053                21,819         (5,766 )
                                                 $       202,305$       218,427$  (16,122 )
Cost of revenues (exclusive of depreciation and
amortization shown separately below)
Completion Solutions                             $       152,679$       147,178$    5,501
   Production Solutions (1)                               14,170                18,704         (4,534 )
                                                 $       166,849$       165,882$      967
Adjusted gross profit
Completion Solutions                             $        33,573$        49,430$  (15,857 )
   Production Solutions (1)                                1,883                 3,115         (1,232 )
                                                 $        35,456$        52,545$  (17,089 )

General and administrative expenses              $        19,222$        21,816$   (2,594 )
(Gain) loss on revaluation of contingent
liabilities                                               (5,771 )                  45         (5,816 )
Loss on sale of subsidiaries                              15,834                     -         15,834
Depreciation                                              12,196                13,661         (1,465 )
Amortization of intangibles                                4,609                 1,857          2,752
Gain on sale of property and equipment                      (466 )              (1,190 )          724
Income (loss) from operations                            (10,168 )              16,356        (26,524 )
Non-operating expenses                                     9,732                 1,568          8,164
Income (loss) before income taxes                        (19,900 )              14,788        (34,688 )
Provision (benefit) for income taxes                         727                 1,130           (403 )
Net income (loss)                                $       (20,627 )$        13,658$  (34,285 )



(1)We sold the Production Solutions segment to Brigade on August 30, 2019. For
additional information on the Production Solutions divestiture, see Note 4 -
Business Acquisitions and Divestitures.


                                       27
--------------------------------------------------------------------------------

Revenues

Revenues decreased $16.1 million, or 7%, to $202.3 million for the third quarter
of 2019 which is primarily related to pricing pressure across the company. The
Completion Solutions segment and the historical Production Solutions segment
depend, to a significant extent, on the level of unconventional resource
development activity and corresponding capital spending of oil and natural gas
companies onshore in North America. In turn, activity and capital spending are
strongly influenced by current and expected oil and natural gas prices. During
the third quarter of 2019, the average closing price of oil was $56.34 per
barrel, and the average closing price of natural gas was $2.38 per MMBtu. During
the third quarter of 2018, the average closing price per barrel of oil was
$69.69, and the average closing price of natural gas was $2.93 per MMBtu. The
overall decrease is partially offset with an increase in completion tools
revenue from the first nine months of 2018, due in large part to the Magnum
Acquisition in the fourth quarter of 2018.
Additional information with respect to revenues by reportable segment is
discussed below.
Completion Solutions: Revenues decreased $10.4 million, or 5%, to $186.3 million
for the third quarter of 2019. The decrease was primarily related to a decrease
in coiled tubing revenue of $16.8 million, or 35%, as total job count decreased
by 39% in comparison to the third quarter of 2018. In addition, the decrease was
partly related to a decrease in wireline revenue of $8.9 million, or 13%, mainly
related to pricing pressure. Total completed wireline stages increased 10% in
comparison to the third quarter of 2018. The overall decrease in Completions
Solutions revenues was partially offset by an increase in completion tools
revenue of $12.6 million, or 45%. The increase was primarily due to an increase
of 10% in completion tool stages with a corresponding increase of 32% in
completion tools revenues by stage due in large part to the Magnum Acquisition
in the fourth quarter of 2018. Cementing revenues (including pump downs) also
increased by $2.6 million, or 5%, which is in conjunction with the increase in
cement job count of 4% quarter-over-quarter.
Production Solutions: Revenues decreased $5.8 million, or 26%, to $16.1 million
for the third quarter of 2019. The overall decrease in revenue was primarily
related to the fact that the Production Solutions segment was sold on August 30,
2019 and therefore only recorded two months of revenue in the third quarter of
2019 compared to recording three months of revenue in the third quarter of 2018.
Cost of Revenues (Exclusive of Depreciation and Amortization)
Cost of revenues increased $1.0 million, or 1%, to $166.8 million for the third
quarter of 2019. The increase was primarily related to additional costs of $5.8
million for materials installed and consumed while performing services. The
increase in these costs was due in large part to the Magnum Acquisition in the
fourth quarter of 2018. In addition, the overall increase in cost of revenues
was partly related to an increase in severance and other cost of revenue type
restructuring charges of $1.8 million mainly associated with the third quarter
of 2019 wind-down of our wireline service offerings in Canada. The overall
increase in cost of revenues was partially offset by a decrease of $5.4 million
in other employee-related costs, as well as a decrease of $1.2 million in other
costs, which was mainly driven by reductions in repairs and maintenance, travel
and meals and entertainment expenses in comparison to the third quarter of 2018.
Additional information with respect to cost of revenues by reportable segment is
discussed below.
Completion Solutions: Cost of revenues increased $5.5 million, or 4%, to $152.7
million for the third quarter of 2019 primarily related to additional costs of
$7.0 million for materials installed and consumed while performing services. The
increase in these costs was due in large part to the Magnum Acquisition in the
fourth quarter of 2018. In addition, the overall increase in cost of revenues
was partly related to an increase in severance and other cost of revenue type
restructuring charges of $1.8 million mainly associated with the third quarter
of 2019 wind-down of our wireline service offerings in Canada. The overall
increase in cost of revenues was partially offset by a decrease of $2.8 million
in other employee-related costs, as well as a decrease of $0.5 million in other
costs, which was mainly driven by reductions in repairs and maintenance, travel
and meals and entertainment in comparison to the third quarter of 2018.
Production Solutions: Cost of revenues decreased $4.5 million, or 24%, to $14.2
million for the third quarter of 2019. Employee-related costs decreased by $2.6
million while costs related to materials consumed while performing services
decreased by $1.3 million, and other costs such as repairs and maintenance,
vehicle and facilities expenses, decreased by $0.7 million in the third quarter
of 2019. The primary driver behind the reduction of these costs of revenues
related to the sale of the Production Solutions segment on August 30, 2019 as
only two months of cost of revenues was recorded in the third quarter of 2019
compared to three months of cost of revenues recorded in the third quarter of
2018.

                                       28
--------------------------------------------------------------------------------


Adjusted Gross Profit
Completion Solutions: Adjusted gross profit (excluding depreciation and
amortization) decreased $15.9 million to $33.6 million for the third quarter of
2019 due to the factors described above under "Revenues" and "Cost of Revenues."
Production Solutions: Adjusted gross profit (excluding depreciation and
amortization) decreased $1.2 million to $1.9 million for the third quarter of
2019 as a result of the factors described above under "Revenues" and "Cost of
Revenues."
General and Administrative Expenses
General and administrative expenses decreased $2.6 million to $19.2 million for
the third quarter of 2019. The decrease was primarily related to a decrease of
$1.9 million in employee-related costs in comparison to the third quarter of
2018. The decrease is also partly related to a third quarter of 2018 settlement
of $1.5 million associated with the Fair Labor Standards Act ("FLSA") that did
not recur in the third quarter of 2019, coupled with certain transaction costs
recorded in the third quarter of 2018 associated with the Magnum Acquisition
that also did not recur in the third quarter of 2019. The overall decrease in
general and administrative expenses was partially offset by an increase in
severance and other general and administrative type restructuring charges of
$1.4 million mainly associated with the third quarter of 2019 wind-down of our
wireline service offerings in Canada. General and administrative expenses as a
percentage of revenue was 9.5% for the third quarter of 2019, compared to 10.0%
for the third quarter of 2018.
(Gain) Loss on Revaluation of Contingent Liabilities
(Gain) loss on the revaluation of contingent liabilities changed $5.8 million
from a loss of less than $0.1 million to a gain of $5.8 million for the third
quarter of 2019. The change was primarily related to a reduction in the
estimated sales of certain dissolvable plug products in 2019 associated with the
Magnum Acquisition, which contributed to the reduction in fair value during the
current quarter.
(Gain) Loss on Sale of Subsidiaries
Loss on the sale of subsidiaries was approximately $15.8 million for the third
quarter of 2019 and was related to the sale of the Production Solutions segment
on August 30, 2019. We did not record a loss on the sale of subsidiaries for the
third quarter of 2018.
Depreciation
Depreciation expense decreased $1.5 million to $12.2 million for the third
quarter of 2019. The overall decrease was primarily within service offerings in
the Production Solutions segment as we recorded a property and equipment
impairment charge recorded in the fourth quarter of 2018. Furthermore, the
remaining property and equipment associated with the Production Solutions
segment was sold on August 30, 2019.
Amortization of Intangibles
Amortization of intangibles increased $2.8 million to $4.6 million for the third
quarter of 2019, primarily due to a $3.1 million increase in amortization
associated with intangible assets acquired as part of the Magnum Acquisition and
the acquisition of Frac Technology AS, a Norwegian private limited company (the
"Frac Tech Acquisition"). The overall increase was partially offset by a
reduction in amortization of $0.3 million associated with intangible assets in
the Production Solutions segment, which were fully impaired in the fourth
quarter of 2018.
Non-Operating Expenses
Non-operating expenses increased $8.2 million to $9.7 million for the third
quarter of 2019. The increase in comparison to the third quarter of 2018 was
primarily related to an increase in interest expense related to higher
indebtedness and an increased interest rate in conjunction with the Senior
Notes, which were entered into in the fourth quarter of 2018 in connection with
the Magnum Acquisition.
Provision (Benefit) for Income Taxes
Our tax provision for the third quarter of 2019 was approximately $0.7 million
as compared to a tax provision of $1.1 million for the third quarter of 2018.
The $0.4 million decrease in the tax provision was primarily a result of the
discrete tax impact from the sale of the Production Solutions segment on August
30, 2019, coupled with changes in pre-tax income between periods.

                                       29
--------------------------------------------------------------------------------


Adjusted EBITDA
Adjusted EBITDA decreased $14.1 million to $24.2 million for the third quarter
of 2019. The Adjusted EBITDA decrease is primarily due to the changes in
revenues and expenses discussed above. See "Non-GAAP Financial Measures" below
for further explanation.
Results for the Nine Months Ended September 30, 2019 Compared to the Nine Months
Ended September 30, 2018
                                                     Nine Months Ended September 30,
                                                        2019                 2018             Change
                                                             (in thousands)
Revenues
Completion Solutions                             $       611,255$       536,363$   74,892
   Production Solutions (1)                               58,272                61,363         (3,091 )
                                                 $       669,527$       597,726$   71,801
Cost of revenues (exclusive of depreciation and
amortization shown separately below)
Completion Solutions                             $       480,140$       414,606$   65,534
   Production Solutions (1)                               49,854                53,094         (3,240 )
                                                 $       529,994$       467,700$   62,294
Adjusted gross profit
Completion Solutions                             $       131,115$       121,757$    9,358
   Production Solutions (1)                                8,418                 8,269            149
                                                 $       139,533$       130,026$    9,507

General and administrative expenses              $        60,979$        51,837$    9,142
(Gain) loss on revaluation of contingent
liabilities                                              (20,701 )               1,715        (22,416 )
Loss on sale of subsidiaries                              15,834                     -         15,834
Depreciation                                              39,572                39,982           (410 )
Amortization of intangibles                               13,925                 5,653          8,272
Gain on sale of property and equipment                      (799 )              (1,701 )          902
Income from operations                                    30,723                32,540         (1,817 )
Non-operating expenses                                    29,501                 6,313         23,188
Income before income taxes                                 1,222                26,227        (25,005 )
Provision (benefit) for income taxes                      (1,548 )               1,875         (3,423 )
Net income                                       $         2,770       $        24,352$  (21,582 )


(1)We sold the Production Solutions segment to Brigade on August 30, 2019. For
additional information on the Production Solutions divestiture, see Note 4 -
Business Acquisitions and Divestitures.
Revenues
Revenues increased $71.8 million, or 12%, to $669.5 million for the first nine
months of 2019. The increase is primarily related to an increase in completion
tools revenue from the first nine months of 2018, due in large part to the
Magnum Acquisition in the fourth quarter of 2018. The overall increase is
partially offset with pricing pressure across the company. The Completion
Solutions segment and the historical Production Solutions segment depend, to a
significant extent, on the level of unconventional resource development activity
and corresponding capital spending of oil and natural gas companies onshore in
North America. In turn, activity and capital spending are strongly influenced by
current and expected oil and natural gas prices. During the first nine months of
2019, the average closing price of oil was $57.04 per barrel, and the average
closing price of natural gas was $2.62 per MMBtu. During the first nine months
of 2018, the average closing price per barrel of oil was $66.93, and the average
closing price of natural gas was $2.95 per MMBtu.
Additional information with respect to revenues by reportable segment is
discussed below.

                                       30
--------------------------------------------------------------------------------


Completion Solutions: Revenues increased $74.9 million, or 14%, to $611.3
million for the first nine months of 2019. The increase was primarily related to
an increase in completion tools revenue of $78.0 million, or 107%, with a
corresponding increase of 65% in completion tool stages and 26% in completion
tools revenues by stage due in large part to the Magnum Acquisition in the
fourth quarter of 2018. In addition, the increase was partly attributable to an
increase in wireline revenue of $7.8 million, or 4%, as total wireline stages
completed increased 19% due to an increase in activity in comparison to the
first nine months of 2018. Furthermore, cementing revenues (including pump
downs) increased by $19.0 million, or 13%, primarily due to a 12% increase in
cement job count during the first nine months of 2019. The increase was
partially offset with a decrease in coiled tubing revenue of $29.8 million, or
22%, as total job count decreased by 34% in comparison to the first nine months
of 2018.
Production Solutions: Revenues decreased $3.1 million, or 5%, to $58.3 million
for the first nine months of 2019 primarily related to a reduction of activity.
The Production Solutions segment was sold on August 30, 2019.
Cost of Revenues (Exclusive of Depreciation and Amortization)
Cost of revenues increased $62.3 million, or 13%, to $530.0 million for the
first nine months of 2019. The increase was primarily related to increased
revenues described above in comparison to the first nine months of 2018, which
was due in large part to the Magnum Acquisition in the fourth quarter of 2018.
Additional information with respect to cost of revenues by reportable segment is
discussed below.
Completion Solutions: Cost of revenues increased $65.5 million, or 16%, to
$480.1 million for the first nine months of 2019. Costs related to materials
installed and consumed while performing services increased $53.4 million and
other employee-related costs increased $8.0 million in comparison to the first
nine months of 2018, due in large part to the Magnum Acquisition in the fourth
quarter of 2018. In addition, Magnum integration costs associated with cost of
revenues was approximately $3.2 million in the third quarter of 2019. These
costs did not occur in the third quarter of 2018. Furthermore, the increase in
cost of revenues was partly related to an increase in severance and other cost
of revenue type restructuring charges of $1.8 million mainly associated with the
third quarter of 2019 wind-down of our wireline service offerings in Canada. The
overall increase in cost of revenues was partially offset by a decrease of $0.9
million in other costs, which was mainly driven by reductions in repairs and
maintenance, travel and meals and entertainment in comparison to the first nine
months of 2018.
Production Solutions: Cost of revenues decreased $3.2 million, or 6%, to $49.9
million for the first nine months of 2019. Costs related to materials consumed
while performing services decreased $1.7 million, employee-related costs
decreased $1.2 million, and other costs such as repairs and maintenance, vehicle
and facilities expenses, decreased $0.3 million in the third quarter of 2019.
The primary drivers behind the reduction of these costs of revenues related to a
reduction in activity for the first nine months of 2019 coupled with the
ultimate sale of the Production Solutions segment on August 30, 2019.
Adjusted Gross Profit
Completion Solutions: Adjusted gross profit (excluding depreciation and
amortization) increased $9.4 million to $131.1 million for the first nine months
of 2019 due to the factors described above under "Revenues" and "Cost of
Revenues."
Production Solutions: Adjusted gross profit (excluding depreciation and
amortization) increased $0.1 million to $8.4 million for the first nine months
of 2019 as a result of the factors described above under "Revenues" and "Cost of
Revenues."
General and Administrative Expenses
General and administrative expenses increased $9.1 million to $61.0 million for
the first nine months of 2019. The increase in comparison to the first nine
months of 2018 was primarily related to additional general and administrative
costs, including integration, compensation, and benefits costs, associated with
the Magnum Acquisition in the fourth quarter of 2018. General and administrative
expenses as a percentage of revenue was 9.1% for the first nine months of 2019,
compared to 8.7% for the first nine months of 2018.
(Gain) Loss on Revaluation of Contingent Liabilities
(Gain) loss on the revaluation of contingent liabilities changed $22.4 million
from a loss of $1.7 million for the first nine months of 2018 to a gain of $20.7
million for the first nine months of 2019. The change was primarily related to a
reduction in the estimated sales of certain dissolvable plug products in 2019
associated with the Magnum Acquisition, which contributed to the reduction in
fair value during the first nine months of 2019.

                                       31
--------------------------------------------------------------------------------


(Gain) Loss on Sale of Subsidiaries
Loss on the sale of subsidiaries was approximately $15.8 million for the first
nine months of 2019 and was related to the sale of the Production Solutions
segment. We did not record a loss on the sale of subsidiaries for the first nine
months of 2018.
Depreciation
Depreciation expense decreased $0.4 million to $39.6 million for the first nine
months of 2019. The decrease was primarily within service offerings in the
Production Solutions segment as we recorded a property and equipment impairment
charge recorded in the fourth quarter of 2018. Furthermore, the remaining
property and equipment associated with the Production Solutions segment was sold
in the third quarter of 2019. The overall decrease is partially offset with an
increase in depreciation expense in other lines of service where capital
expenditure activity was larger in the first nine months of 2019 in comparison
to the first nine months of 2018.
Amortization of Intangibles
Amortization of intangibles increased $8.3 million to $13.9 million for the
first nine months of 2019, primarily due to a $9.4 million increase in
amortization associated with intangible assets acquired as part of the Magnum
Acquisition and Frac Tech Acquisition. The overall increase was partially offset
by a reduction in amortization of $0.8 million associated with intangible assets
in the Production Solutions segment, which were fully impaired in the fourth
quarter of 2018.
Non-Operating Expenses
Non-operating expenses increased $23.2 million to $29.5 million for the first
nine months of 2019. The increase in comparison to the first nine months of 2018
was primarily related to an increase in interest expense related to higher
indebtedness and an increased interest rate in conjunction with the Senior
Notes, which were entered into in the fourth quarter of 2018 in connection with
the Magnum Acquisition.
Provision (Benefit) for Income Taxes
Our tax benefit for the first nine months of 2019 was approximately $1.5 million
as compared to a tax provision of $1.9 million for the first nine months of
2018. The $3.4 million decrease in our tax provision was primarily related to
changes in pre-tax income between periods coupled with the discrete tax impact
from the sale of the Production Solutions segment during the first nine months
of 2019.
Adjusted EBITDA
Adjusted EBITDA increased $8.3 million to $101.4 million for the first nine
months of 2019. The Adjusted EBITDA increase is primarily due to the changes in
revenues and expenses discussed above. See "Non-GAAP Financial Measures" below
for further explanation.
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are supplemental non-GAAP financial measures that are
used by management and external users of our financial statements, such as
industry analysts, investors, lenders, and rating agencies.
We define EBITDA as net income (loss) before interest expense, depreciation,
amortization of intangibles, and provision (benefit) for income taxes.
We define Adjusted EBITDA as EBITDA further adjusted for (i) property and
equipment, goodwill, and/or intangible asset impairment charges, (ii)
transaction and integration costs related to acquisitions and our IPO, (iii)
loss or gain from discontinued operations, (iv) loss or gain on revaluation of
contingent liabilities, (v) loss or gain on equity method investment, (vi)
stock-based compensation expense, (vii) loss or gain on sale of property and
equipment, and (viii) restructuring charges, (ix) loss or gain on the sale of
subsidiaries, and (x) other expenses or charges to exclude certain items which
we believe are not reflective of ongoing performance of our business, such as
legal expenses and settlement costs related to litigation outside the ordinary
course of business and restructuring costs.

                                       32
--------------------------------------------------------------------------------


Management believes EBITDA and Adjusted EBITDA are useful because they allow us
to more effectively evaluate our operating performance and compare the results
of our operations from period to period without regard to our financing methods
or capital structure. We exclude the items listed above from net income in
arriving at these measures because these amounts can vary substantially from
company to company within our industry depending upon accounting methods and
book values of assets, capital structures, and the method by which the assets
were acquired. These measures should not be considered as an alternative to, or
more meaningful than, net income as determined in accordance with accounting
principles generally accepted in the United States of America ("GAAP") or as an
indicator of our operating performance. Certain items excluded from these
measures are significant components in understanding and assessing a company's
financial performance, such as a company's cost of capital and tax structure, as
well as the historic costs of depreciable assets, none of which are components
of these measures. Our computations of these measures may not be comparable to
other similarly titled measures of other companies. We believe that these are
widely followed measures of operating performance.
The following table presents a reconciliation of the non-GAAP financial measures
of EBITDA and Adjusted EBITDA to the GAAP financial measure of net income (loss)
for the three and nine months ended September 30, 2019 and 2018:
                                          Three Months Ended September 30,           Nine Months Ended September 30,
                                              2019                  2018                2019                  2018
                                                                        (in thousands)
EBITDA reconciliation:
Net income (loss)                      $        (20,627 )$       13,658     $          2,770       $       24,352
Interest expense                                  9,843                1,756               29,940                6,763
Interest income                                    (111 )               (188 )               (439 )               (450 )
Depreciation                                     12,196               13,661               39,572               39,982
Amortization of intangibles                       4,609                1,857               13,925                5,653
Provision (benefit) for income taxes                727                1,130               (1,548 )              1,875
EBITDA                                 $          6,637       $       

31,874 $ 84,220 $ 78,175


Adjusted EBITDA reconciliation:
EBITDA                                 $          6,637       $       31,874     $         84,220       $       78,175
Transaction and integration costs                 1,418                2,320                8,864                2,697
Loss on equity method investment                      -                   77                    -                  270
(Gain) loss on revaluation of
contingent liabilities (1)                       (5,771 )                 45              (20,701 )              1,715
Loss on sale of subsidiaries                     15,834                    -               15,834                    -
Restructuring charges                             3,263                    -                3,263                    -
Stock-based compensation expense                  3,286                3,508               10,553                9,719
Gain on sale of property and equipment             (466 )             (1,190 )               (799 )             (1,701 )
Legal fees and settlements (2)                       22                1,721                  165                2,203
Adjusted EBITDA                        $         24,223       $       38,355$        101,399$       93,078


(1)Amounts relate to the revaluation of contingent liabilities associated with
our 2018 acquisitions. The impact is included in our Condensed Consolidated
Statements of Income and Comprehensive Income (Loss). For additional information
on contingent liabilities, see Note 10 - Commitments and Contingencies included
in Item 1 of Part I of this Quarterly Report on Form 10-Q.
(2)Amounts represent fees and legal settlements associated with legal
proceedings brought pursuant to the FLSA and/or similar state laws.

                                       33
--------------------------------------------------------------------------------


Return on Invested Capital
ROIC is a supplemental non-GAAP financial measure. We define ROIC as after-tax
net operating profit (loss), divided by average total capital. We define
after-tax net operating profit (loss) as net income (loss) plus (i) transaction
and integration costs related to acquisitions and our IPO, (ii) property and
equipment, goodwill, and/or intangible asset impairment charges, (iii) interest
expense (income), (iv) restructuring charges, (v) loss or gain on the sale of
subsidiaries, and (vi) the provision or benefit for deferred income taxes. We
define total capital as book value of equity plus the book value of debt less
balance sheet cash and cash equivalents. We then take the average of the current
and prior period-end total capital for use in this analysis.
Management believes ROIC is a meaningful measure because it quantifies how well
we generate operating income relative to the capital we have invested in our
business and illustrates the profitability of a business or project taking into
account the capital invested. Management uses ROIC to assist them in capital
resource allocation decisions and in evaluating business performance. Although
ROIC is commonly used as a measure of capital efficiency, definitions of ROIC
differ, and our computation of ROIC may not be comparable to other similarly
titled measures of other companies.
The following table provides an explanation of our calculation of ROIC for the
three and nine months ended September 30, 2019:
                                                         Three Months Ended     Nine Months Ended
                                                         September 30, 2019     September 30, 2019
                                                                      (in thousands)
Net income (loss)                                       $       (20,627 )      $         2,770
Add back:
Interest expense                                                  9,843                 29,940
Interest income                                                    (111 )                 (439 )
Transaction and integration costs                                 1,418                  8,864
Restructuring charges                                             3,263                  3,263
Loss on sale of subsidiaries                                     15,834                 15,834
Provision (benefit) for deferred income taxes                       143                 (2,876 )
After-tax net operating profit                          $         9,763        $        57,356
Total capital as of prior period-end/year-end:
Total stockholders' equity                              $       624,309$       594,823
Total debt                                                      400,000                435,000
Less cash and cash equivalents                                  (16,886 )              (63,615 )
Total capital as of prior period-end/year-end           $     1,007,423$       966,208
Total capital as of period-end:
Total stockholders' equity                              $       606,779$       606,779
Total debt                                                      400,000                400,000
Less cash and cash equivalents                                  (93,321 )              (93,321 )
Total capital as of period-end                          $       913,458$       913,458
Average total capital                                   $       960,441$       939,833
ROIC                                                            4.1%                   8.1%



Adjusted Gross Profit (Excluding Depreciation and Amortization)
GAAP defines gross profit as revenues less cost of revenues and includes
depreciation and amortization in costs of revenues. We define adjusted gross
profit (excluding depreciation and amortization) as revenues less cost of
revenues (excluding depreciation and amortization). This measure differs from
the GAAP definition of gross profit because we do not include the impact of
depreciation and amortization, which represent non-cash expenses.
Management uses adjusted gross profit (excluding depreciation and amortization)
to evaluate operating performance. We prepare adjusted gross profit (excluding
depreciation and amortization) to eliminate the impact of depreciation and
amortization because we do not consider depreciation and amortization indicative
of our core operating performance. Adjusted gross profit (excluding depreciation
and amortization) should not be considered as an alternative to gross profit
(loss), operating income (loss), or any other measure of financial performance
calculated and presented in accordance with GAAP. Adjusted gross profit
(excluding depreciation and amortization) may not be comparable to similarly
titled measures of other

                                       34
--------------------------------------------------------------------------------


companies because other companies may not calculate adjusted gross profit
(excluding depreciation and amortization) or similarly titled measures in the
same manner as we do.
The following table presents a reconciliation of adjusted gross profit
(excluding depreciation and amortization) to GAAP gross profit (loss) for the
three and nine months ended September 30, 2019 and 2018:
                                       Three Months Ended September
                                                   30,                 Nine Months Ended September 30,
                                           2019            2018              2019              2018
                                                                (in thousands)
Calculation of gross profit
Revenues                               $   202,305$  218,427$        669,527$  597,726
Cost of revenues (exclusive of
depreciation and amortization shown
separately below)                          166,849        165,882              529,994        467,700
Depreciation (related to cost of
revenues)                                   11,994         13,434               38,916         39,319
Amortization of intangibles                  4,609          1,857               13,925          5,653
Gross profit                           $    18,853$   37,254     $         86,692     $   85,054
Adjusted gross profit (excluding
depreciation and amortization)
reconciliation:
Gross profit                           $    18,853$   37,254     $         86,692     $   85,054
Depreciation (related to cost of
revenues)                                   11,994         13,434               38,916         39,319
Amortization of intangibles                  4,609          1,857               13,925          5,653
Adjusted gross profit (excluding
depreciation and amortization)         $    35,456$   52,545     $     

139,533 $ 130,026



Liquidity and Capital Resources
Sources and Uses of Liquidity
Historically, we have met our liquidity needs principally from cash flows from
operating activities, external borrowings, proceeds from the IPO, and capital
contributions (prior to the IPO). Our principal uses of cash are to fund capital
expenditures and acquisitions, to service our outstanding debt, and to fund our
working capital requirements. In 2018, we issued $400.0 million of Senior Notes
to, together with cash on hand and borrowings under the 2018 ABL Credit
Facility, fund the Magnum Acquisition as well as fully repay and terminate the
term loan borrowings and the outstanding revolving credit commitments under our
prior credit facility. For additional information regarding the Senior Notes,
see Note 8 - Debt Obligations included in Item 1 of Part I of this Quarterly
Report on Form 10-Q. In the third quarter of 2019, we divested the Production
Solutions segment for approximately $17.4 million in cash. The closing
consideration is subject to working capital and other customary post-closing
adjustments. We plan to use such proceeds to fund our working capital
requirements and capital expenditures.
We continually monitor potential capital sources, including equity and debt
financing, to meet our investment and target liquidity requirements. Our future
success and growth will be highly dependent on our ability to continue to access
outside sources of capital. In addition, our ability to satisfy our liquidity
requirements depends on our future operating performance, which is affected by
prevailing economic conditions, the level of drilling, completion and production
activity for North American onshore oil and natural gas resources, and financial
and business and other factors, many of which are beyond our control.
Although we do not budget for acquisitions, pursuing growth through acquisitions
is a significant part of our business strategy. Our ability to make significant
additional acquisitions for cash will require us to obtain additional equity or
debt financing, which we may not be able to obtain on terms acceptable to us or
at all.
At September 30, 2019, we had $93.3 million of cash and cash equivalents and
$118.0 million of availability under the 2018 ABL Credit Facility, which
resulted in a total liquidity position of $211.3 million.

                                       35
--------------------------------------------------------------------------------


2018 ABL Credit Facility
On October 25, 2018, we entered into the 2018 ABL Credit Agreement. The 2018 ABL
Credit Agreement permits aggregate borrowings of up to $200.0 million, subject
to a borrowing base, including a Canadian tranche with a sub-limit of up
to $25.0 million and a sub-limit of $50.0 million for letters of credit. The
2018 ABL Credit Facility will mature on October 25, 2023 or, if earlier, on the
date that is 180 days before the scheduled maturity date of the Senior Notes if
they have not been redeemed or repurchased by such date.
Loans to us and our domestic related subsidiaries (the "U.S. Credit Parties")
under the 2018 ABL Credit Facility may be base rate loans or LIBOR loans; and
loans to Nine Energy Canada Inc., a corporation organized under the laws of
Alberta, Canada, and its restricted subsidiaries (the "Canadian Credit Parties")
under the Canadian tranche may be CDOR loans or Canadian prime rate loans. The
applicable margin for base rate loans and Canadian prime rate loans vary from
0.75% to 1.25%, and the applicable margin for LIBOR loans or CDOR loans vary
from 1.75% to 2.25%, in each case depending on our leverage ratio. In addition,
a commitment fee of 0.50% per annum will be charged on the average daily unused
portion of the revolving commitments. The weighted average interest rate was
2.63% during the first nine months of 2019.
The 2018 ABL Credit Agreement contains various affirmative and negative
covenants, including financial reporting requirements and limitations on
indebtedness, liens, mergers, consolidations, liquidations and dissolutions,
sales of assets, dividends and other restricted payments, investments (including
acquisitions) and transactions with affiliates. In addition, the 2018 ABL Credit
Agreement contains a minimum fixed charge ratio covenant that is tested
quarterly when the availability under the 2018 ABL Credit Facility drops below a
certain threshold or a default has occurred until the availability exceeds such
threshold for 30 consecutive days and such default is no longer outstanding. We
were in compliance with all covenants under the 2018 ABL Credit Agreement at
September 30, 2019.
All of the obligations under the 2018 ABL Credit Facility are secured by first
priority perfected security interests (subject to permitted liens) in
substantially all of the personal property of U.S. Credit Parties, excluding
certain assets. The obligations under the Canadian tranche are further secured
by first priority perfected security interests (subject to permitted liens) in
substantially all of the personal property of Canadian Credit Parties excluding
certain assets. The 2018 ABL Credit Facility is guaranteed by the U.S. Credit
Parties, and the Canadian tranche is further guaranteed by the Canadian Credit
Parties and the U.S. Credit Parties.
Concurrent with the effectiveness of the 2018 ABL Credit Facility, we borrowed
approximately $35.0 million to fund a portion of the upfront cash purchase price
of the Magnum Acquisition. During the second quarter of 2019, we repaid our
outstanding revolver borrowings in full.
At September 30, 2019, our availability under the 2018 ABL Credit Facility was
approximately $118.0 million, net of an outstanding letter of credit of $0.2
million.

                                       36
--------------------------------------------------------------------------------


Cash Flows
Cash flows provided by (used in) operations by type of activity were as follows
for the nine months ended September 30, 2019 and 2018:
                                           Nine Months Ended September 30,
                                              2019                 2018
                                                   (in thousands)
Operating activities                    $       86,808$       50,756
Investing activities                           (19,593 )            (26,011 )
Financing activities                           (37,546 )             44,559
Impact of foreign exchange rate on cash             37                 (283 )

Net change in cash and cash equivalents $ 29,706$ 69,021



 Operating Activities
Net cash provided by operating activities was $86.8 million for the first nine
months of 2019 compared to $50.8 million in net cash provided by operating
activities for the first nine months of 2018. The $36.0 million increase in net
cash provided by operating activities was primarily a result of a $52.9 million
increase in net cash provided through our working capital. The overall increase
in net cash provided by operating activities was partially offset by a $16.9
million increase in cash flow used by continuing operations, adjusted for any
non-cash items, primarily due to revenue growth for the first nine months of
2019 in comparison to the first nine months of 2018.
Investing Activities
Net cash used in investing activities was $19.6 million for the first nine
months of 2019 compared to $26.0 million in net cash used in investing
activities for the first nine months of 2018. The $6.4 million decrease in net
cash used in investing activities was primarily related to $17.2 million in
proceeds received from the sale of subsidiaries as well as $7.6 million in
proceeds received from notes receivable payments, both of which occurred in the
first nine months of 2019 and did not occur in the first nine months of 2018.
The overall decrease in net cash used in investing activities was partially
offset by an increase of $19.4 million in cash purchases of property and
equipment for the first nine months of 2019.
Financing Activities
Net cash used in financing activities was $37.5 million for the first nine
months of 2019 compared to $44.6 million in net cash flow provided by financing
activities for the first nine months of 2018. The $82.1 million decrease in net
cash provided by financing activities was primarily related to $171.8 million in
proceeds received from the IPO and issuances of common stock and $125.0 million
in proceeds received from our term loan entered into in conjunction with the IPO
in the first nine months of 2018 that did not recur in the first nine months of
2019 as well as an increase in cash used of $2.7 million related to the vesting
of restricted stock in the first nine months of 2019 compared to the first nine
months of 2018. The overall decrease in net cash provided by financing
activities was partially offset by $155.7 million in payments made on prior term
loans and $1.4 million in deferred financing costs in the first nine months of
2018 that did not recur in the first nine months of 2019 as well as a reduction
in net payments of $61.2 million on our revolving credit facilities in the first
nine months of 2019 compared to the first nine months of 2018.
Contractual Obligations
Our contractual obligations at September 30, 2019 did not change materially,
outside the normal course of business, from those disclosed under "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Contractual Obligations" in Item 7 of Part II of our Annual Report on Form 10-K
for the year ended December 31, 2018.
Off-Balance Sheet Arrangements
At September 30, 2019, we had a letter of credit of $0.2 million, which
represented an off-balance sheet arrangement as defined in Item 303(a)(4)(ii) of
Regulation S-K. As of September 30, 2019, no liability has been recognized in
our Condensed Consolidated Balance Sheets for the letter of credit.

                                       37
--------------------------------------------------------------------------------

Recent Accounting Pronouncements See Note 3 - New Accounting Standards included in Item 1 of Part I of this Quarterly Report on Form 10-Q for a summary of recently issued accounting pronouncements.

© Edgar Online, source Glimpses

share with twitter share with LinkedIn share with facebook
Latest news on NINE ENERGY SERVICE, INC.
07/08NINE ENERGY SERVICE : Announces Timing of Second Quarter 2020 Earnings Release a..
BU
06/03NINE ENERGY SERVICE, INC. : Regains Compliance with NYSE Minimum Price Listing S..
BU
05/08NINE ENERGY SERVICE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIO..
AQ
05/07NINE ENERGY SERVICE : First Quarter 2020 Earnings Call
PU
05/07NINE ENERGY SERVICE, INC. : Results of Operations and Financial Condition, Submi..
AQ
05/07NINE ENERGY SERVICE : Announces First Quarter 2020 Results
BU
05/05NINE ENERGY SERVICE : 2020 Annual Meeting of Stockholders
PU
04/23NINE ENERGY SERVICE, INC. : Notice of Delisting or Failure to Satisfy a Continue..
AQ
04/22NINE ENERGY SERVICE : Inc. Receives Notice from NYSE Regarding Continued Listing..
BU
04/21NINE ENERGY SERVICE, INC. : to Hold 2020 Annual Meeting of Stockholders Virtuall..
BU
More news