Nine Energy Service, Inc. ('Nine' or the 'Company') (NYSE: NINE) reported third quarter 2019 revenues of $202.3 million, net loss of $(20.6) million, which includes a loss on the sale of the Production Solutions segment of approximately $15.8 million and adjusted EBITDA of $24.2 million.
Third quarter 2019 net loss per basic share was $(0.70). Third quarter 2019 adjusted net lossD was $(4.7) million, or $(0.16) per adjusted basic share. During the third quarter of 2019, the Company generated ROIC of 4%. During the third quarter of 2019, the Company reported net cash provided by operating activities of $69.4 million compared to $11.5 million during the second quarter, an increase of approximately 6x.
The Company had provided original third quarter 2019 revenue guidance between $215.0 and $225.0 million and adjusted EBITDA guidance between $24.0 and $29.0 million, with actual results for revenue falling below Management's original guidance range and results for adjusted EBITDA falling within Management's original guidance. Revenue results came in lower than original guidance primarily due to the sale of the Production Solutions segment and the closure of wireline operations in Canada.
'Even with the restructuring of our service offerings and geographical footprint, adjusted EBITDA fell within the range of management's original guidance this quarter,' said Ann Fox, President and Chief Executive Officer, Nine Energy Service. 'Despite market conditions weakening throughout the quarter, we were able to grow cash flow from operations by over 6x compared to Q2, increasing our current cash position significantly to $93.3 million as of September 30th. We expect our cash generation to remain strong through the remainder of the year and into 2020 as we grow our completion tool business and materially reduce total capex.'
'During Q3 our customers remained extremely focused on staying within capital budgets, prompting many operators to reduce activity in the second half of the year. Activity declines, as well as irrational behavior from competitors, has led to increased pricing pressure, for which no service line is immune. The hardest hit region remains the Northeast where we have wireline and completion tool exposure, but rig count and frac crew curtailments are taking place across the U.S. Our cementing business remained steady this quarter despite rig count dropping by approximately 11% quarter over quarter.'
'At Nine, we have been focused on executing our 2019 strategic initiatives, including the evaluation of existing service lines and geographies, as well as the development of our new dissolvable and composite plug technologies. During the third quarter, we completed the sale of our Production Solutions segment, and closed down wireline operations in Canada. We expect the elimination of these offerings from our portfolio to be accretive to ROIC, adjusted EBITDA margins and cash generation. We also continue to make significant progress in the development of our new dissolvable and composite plug technology. The timeline for commercialization of our three new tools remains on-track. We still anticipate our low-temperature dissolvable plug will be commercial in Q1 of 2020 as we continue to have success with our trials throughout the U.S. and Canada.'
'We do expect further activity declines into Q4 with budget exhaustion, holidays and weather impacts. With current market conditions, we are managing costs very closely and actively working with our operational teams to ensure we are shielding margin wherever possible without fundamentally impeding our future earnings potential. Despite market conditions in 2020, at Nine we have a unique opportunity to increase profitability, expand margins and increase free cash flow with the introduction of our new technology.'
About Nine Energy Service
Nine Energy Service is an oilfield services company that offers completion solutions within North America and abroad. The Company brings years of experience with a deep commitment to serving clients with smarter, customized solutions and world-class resources that drive efficiencies. Serving the global oil and gas industry, Nine continues to differentiate itself through superior service quality, wellsite execution and cutting-edge technology. Nine is headquartered in Houston, Texas with operating facilities in the Permian, Eagle Ford, SCOOP/STACK, Niobrara, Barnett, Bakken, Marcellus, Utica and throughout Canada.
Forward Looking Statements
The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. Forward-looking statements also include statements that refer to or are based on projections, uncertain events or assumptions. The forward-looking statements included herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, the general energy service industry risks; volatility of crude oil and natural gas commodity prices; a decline in demand for the Company's services, including due to declining commodity prices; the Company's ability to implement price increases or maintain pricing of the Company's core services; pricing pressures, reduced sales, or reduced market share as a result of intense competition in the markets for the Company's dissolvable plug products; the Company's ability to implement and commercialize new technologies, services and tools; the Company's ability to grow its completion tool business; the Company's ability to reduce capital expenditures; the Company's ability to accurately predict customer demand; the loss of, or interruption or delay in operations by, one or more significant customers; the loss of or interruption in operations of one or more key suppliers; the adequacy of the Company's capital resources and liquidity; the incurrence of significant costs and liabilities resulting from litigation; the loss of, or inability to attract, key personnel; the Company's ability to successfully integrate recently acquired assets and operations and realize anticipated revenues, cost savings or other benefits thereof and other factors described in the 'Risk Factors' and 'Business' sections of the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and the subsequently filed 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, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.
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