Ensign Energy Services Inc (ESVIF) Q2 2024 Earnings Call Highlights: Navigating Challenges with ...
Revenue: $391.8 million for Q2 2024, a 9% decrease from $432.8 million in Q2 2023.
Adjusted EBITDA: $100.2 million for Q2 2024, 14% lower than $116.6 million in Q2 2023.
Operating Days: U.S. decreased by 32% to 2,912 days; Canada increased by 15% to 2,451 days; International increased by 1% to 1,255 days.
Debt Reduction: $78.9 million repaid in Q2 2024; total of $307.9 million repaid from January 2023 to June 2024.
Depreciation Expense: $170.8 million for the first six months of 2024, a 12% increase from $152.7 million in the same period of 2023.
General and Administrative Expenses: $15.5 million in Q2 2024, up from $14.6 million in Q2 2023.
Interest Expense: Decreased by 19% to $25.5 million from $31.6 million.
Capital Expenditures: $40.3 million in Q2 2024, with $2.4 million in upgrade capital and $46.1 million in maintenance capital.
Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Ensign Energy Services Inc (ESVIF) achieved one of its strongest quarters in history, driven by a 15% year-over-year increase in demand for Canadian rigs.
The company successfully reduced $80 million of debt in the quarter, contributing to its goal of reducing $600 million of debt over the next three years.
International operations saw a marginal year-over-year increase in activity, with 100% utilization of high-spec rigs in the Middle East and Argentina.
The Canadian business unit is experiencing high demand for high-spec singles and triples, with 90% of the active fleet contracted until the end of Q1 2025.
Interest expenses decreased by 19% due to lower debt levels and reduced effective interest rates, providing financial relief.
Negative Points
Overall operating days declined in the second quarter of 2024, with a significant 32% decrease in the United States.
Revenue for the second quarter of 2024 decreased by 9% compared to the same period in the previous year.
Adjusted EBITDA for the second quarter of 2024 was 14% lower than the same quarter in 2023, reflecting declines in drilling activity.
Depreciation expenses increased by 12% compared to the first six months of 2023, impacting profitability.
The U.S. business unit faced challenges due to customer consolidation and depressed natural gas prices, leading to reduced activity.
Q & A Highlights
Q: Bob, given the debt repayment commitments, are you having to turn down growth capital opportunities? A: Robert Geddes, President and COO: No, we are keeping pace with customer needs. Operators are willing to invest in upgrades due to faster drilling, which supports growth CapEx.
Q: What's your appetite for moving rigs to international markets given your existing presence? A: Robert Geddes, President and COO: We have been expanding internationally for 20 years and are open to expanding in countries where we already operate. We are not interested in entering new countries but will continue to move rigs from North America to international markets as needed.
Q: How does the current U.S. rig count compare to historical averages? A: Robert Geddes, President and COO: We are maintaining about 7% market share in the U.S., down by about 10 rigs year-over-year for the quarter. Despite this, revenues have remained flat due to increased well servicing and ancillary services.
Q: Is the increase in well servicing and ancillary services sustainable in future quarters? A: Robert Geddes, President and COO: Yes, the increased demand for services like drill pipe management is expected to continue due to high penetration rates and long laterals.
Q: Are there any risks to achieving the $600 million debt repayment target by 2025? A: Michael Gray, CFO: No significant risks are foreseen. Interest savings and steady activity levels support the target, with additional contributions from asset sales and working capital movements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.