BASX Basic Energy Services Inc.

Basic Energy Services Announces Divestment and Capital Redeployment Plan

Basic Energy Services, Inc. (OTCQX: BASX) (“Basic” or the “Company”) today announced a plan to divest of its pumping services assets (not inclusive of coiled tubing) in multiple transactions with expected proceeds of approximately $30 to $45 million. Despite the recent repositioning and restructuring in the pumping business, activity and pricing remain difficult, inhibiting the potential for positive free cash flow in the near- to medium-term. This divestiture is designed to bolster the Company’s core remaining production-focused businesses of well servicing and water logistics. Furthermore, this non-core divestiture will fund the projected 2020 and 2021 capital budget of Agua Libre Midstream, the Company’s rapidly growing, high return-on-assets business.

Given current market conditions, the Company believes it is appropriate to pivot away from completion-centric pumping services and toward its core production businesses. Basic plans to complete all work currently in-process, after which the Company will cease its pumping and pumping-related services. Real estate and equipment are expected to be sold in multiple transactions during Q4 2019 and Q1 2020. Basic’s coiled tubing business remains highly complementary to its well servicing operations and is not expected to be impacted by these divestitures.

Roe Patterson, President and CEO, stated, “While the overall energy service market remains highly competitive, we continue to see high value potential in our Agua Libre Midstream subsidiary; this business continues to outperform in this very challenging market. With additional disposal barrels from 2019 growth capital expenditures, we expect the midstream business to contribute significantly to incremental margins in 2020. In order to focus our capital resources most effectively to benefit free cash flow, we made the decision to cease pumping operations and divest of all non-core equipment and real estate. Given current market conditions and appetite for pumping and ancillary equipment, we believe our plan limits execution risk and allows for greater proceeds than under a going-concern valuation and sale scenario.

“The decision to exit the pumping services market in no way reflects on the employees that make up our pumping services team. This team has aggressively cut costs and continued to win business in a highly competitive market. Unfortunately, these pumping business lines currently remain in a structurally-disadvantaged position, as they are our most capital-intensive businesses. These divestitures will also reduce our capital lease exposure and the Company’s total debt. The transaction will allow us to focus our efforts in the production-focused businesses in which we excel and generate higher returns on capital.

“Looking ahead to the first half of 2020, we do not expect the sale of our pumping assets to negatively impact EBITDA, reflecting just how difficult the market has become. Due to a lower-capital intensity asset base, we expect our cash balance to be approximately $5 million higher, excluding proceeds from the pumping asset sales, at the end of the second quarter of 2020. Furthermore, in conjunction with this capital redeployment plan, we expect to immediately cut general and administrative expenses by approximately $14 million on an annualized basis, reaching an annual total company run-rate of approximately $100 million by the second quarter of 2020. Without a significant recovery in crude prices, we expect 2020 revenues in the Well Servicing segment and remaining Completions & Remedial Services segment (which includes coiled tubing, snubbing, and rental and fishing tools) to be flat compared to 2019, with our Water Logistics segment (which includes Agua Libre Midstream and fluid services) revenues to grow 5% to 10% year-over-year, with growth accelerating as our newer midstream projects come online with enhanced contribution margins for the segment.”

About Basic Energy Services

Basic Energy Services provides wellsite services essential to maintaining production from the oil and gas wells within its operating areas. The Company’s operations are managed regionally and are concentrated in major United States onshore oil-producing regions located in Texas, New Mexico, Oklahoma, Arkansas, Kansas, Louisiana, Wyoming, North Dakota, California and Colorado. Our operations are focused in liquids-rich basins that have historically exhibited strong drilling and production economics in recent years with a significant presence in the Permian Basin, Powder River Basin, and the Bakken, Eagle Ford, and Denver-Julesburg shales. We provide our services to a diverse group of over 2,000 oil and gas companies. Additional information is available on the Company’s website at .

Safe Harbor Statement

This release includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and reflect Basic’s current views about future events. The words "believe," "estimate," "expect," "anticipate," "project," "intend," "seek," "could," "should," "may," "potential" and similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. Although Basic believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions and estimates, certain risks and uncertainties could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release and the presentation. These risks and uncertainties include, without limitation, our ability to successfully execute, manage and integrate acquisitions, reductions in our customers’ capital budgets, our own capital budget, limitations on the availability of capital or higher costs of capital, volatility in commodity prices for crude oil and natural gas, the negative impacts of the delisting of the Company’s common stock from the NYSE and any impacts from the divestment of our pressure pumping assets. Additional important risk factors that could cause actual results to differ materially from expectations are disclosed in Item 1A of the Company’s most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. While Basic makes these statements and projections in good faith, neither Basic nor its management can guarantee that the transactions will be consummated or that anticipated future results will be achieved. Any forward-looking statement speaks only as of the date on which such statement is made and Basic assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by Basic, whether as a result of new information, future events, or otherwise, except as required by applicable law.

EN
12/12/2019

Underlying

To request access to management, click here to engage with our
partner Phoenix-IR's CorporateAccessNetwork.com

Reports on Basic Energy Services Inc.

 PRESS RELEASE

Basic Energy Services Announces Forbearance Agreements and Super Prior...

FORT WORTH, Texas--(BUSINESS WIRE)-- Basic Energy Services, Inc. (OTCQX: BASX) (“Basic” or the “Company”) today announced that the termination date in the existing Forbearance Agreement with its ABL lenders and the existing Ascribe Consent Letter has been extended to May 23, 2021, and that the lenders under its recently announced Super Priority Credit Agreement have agreed to extend the maturity date of that agreement to May 23, 2021 (in each case, with corresponding adjustments to certain interim milestones contained therein). In addition, Basic also announced that it had entered into agreeme...

 PRESS RELEASE

Basic Energy Services Announces Completion of Sale-Leaseback Transacti...

FORT WORTH, Texas--(BUSINESS WIRE)-- Basic Energy Services, Inc. (OTCQX: BASX) (“Basic” or the “Company”) today announced that it has completed a sale-leaseback transaction related to certain real property in Los Angeles County, California. The purchase price for the property consisted of $10.5 million, subject to a holdback of approximately $2.6 million for certain improvements to be constructed at the property. The Company is entitled to reimbursement of any remaining balance of said holdback funds to the extent not fully expended for the intended purpose. The Company has entered into a simu...

 PRESS RELEASE

Basic Energy Services Agrees to Sell Non-Core Assets

FORT WORTH, Texas--(BUSINESS WIRE)-- Basic Energy Services, Inc. (OTCQX: BASX) (“Basic” or the “Company”) today announced it has entered into a purchase and sale agreement for the sale of certain non-core assets for a purchase price of $6.6 million, not including the assumption of certain capital leases with a remaining balance of approximately $0.7 million and earn-out payment of up to $1.0 million payable one year after closing. The closing date is anticipated to occur approximately thirty days after the execution of the purchase and sale agreement. The sale includes heavy duty trucks, light...

 PRESS RELEASE

Basic Energy Services Elects to Utilize Interest Payment Grace Period ...

FORT WORTH, Texas--(BUSINESS WIRE)-- Basic Energy Services, Inc. (OTCQX: BASX) (“Basic” or the “Company”) today announced it has elected to utilize the 30-day grace period under the terms of the indenture governing its 10.75% senior secured notes due 2023 (the “Notes”) with respect to a $16.335 million interest payment due today. Basic believes it is in the best interests of all stakeholders to use the grace period to continue its ongoing discussions with its debtholders regarding strategic alternatives to improve Basic’s long-term capital structure. Basic also announced today it has entered ...

 PRESS RELEASE

Basic Energy Services Announces Extension of Deadlines for Private Exc...

FORT WORTH, Texas--(BUSINESS WIRE)-- Basic Energy Services, Inc. (OTCQX: BASX) (“Basic” or the “Company”) today announced that it has extended certain deadlines in connection with its previously announced private offer to exchange (the “Exchange Offer”) its 10.75% Senior Secured Notes due 2023 (the “Existing Notes”) for newly issued 11.00% Senior Secured Notes due 2025 (the “New Notes”), the related offering (the “Rights Offering”) of rights to subscribe (each, a “Subscription Right”) to purchase 9.75% Super Priority Lien Senior Secured Notes due 2025 (the “New Super Priority Notes”) to be iss...

ResearchPool Subscriptions

Get the most out of your insights

Get in touch