ENSERVCO Reports First Quarter Financial Results

DENVER, CO -- (Marketwired) -- 05/12/16 -- ENSERVCO Corporation (NYSE MKT: ENSV)

• Company continues to generate positive EBITDA and cash flow from operations despite industry downturn and impact of El Nino on frac water heating services.
  
  
• Maintains strong balance sheet; recent equipment appraisal affirms collateral position and borrowing availability under senior credit facility
  
  
• Expansion into Eagle Ford continues as Company grows hot oil service line and wins first acidizing business with major E&P customer
  
  
• Recently granted dirt hauling contract for $2.6 million will help offset normal seasonal decline in revenue during second and third quarters
  
  

ENSERVCO Corporation (NYSE MKT: ENSV), a diversified national provider of well-site services to the domestic onshore conventional and unconventional oil and gas industries, today reported financial results for its first quarter ended March 31, 2016.

"As we anticipated on our last earnings call, our first quarter performance continued to reflect the effects of reduced activity among E&Ps and a continuing El Nino warming trend which impacted our heating operations," said Rick Kasch, chairman and CEO. "Despite these challenges, we achieved positive adjusted EBITDA and cash flow from operations due to a combination of aggressive cost-cutting measures, redeployment of assets to more active basins, and strong relationships with existing customers.

"Our expansion into the Eagle Ford Basin in Texas continues to gain momentum," Kasch added. "In addition to steadily growing our hot oiling presence there with several E&P customers, we are now bidding on other opportunities that have the potential to test our overall hot oiling capacity if they come to fruition. We also won our first acidizing business in Eagle Ford with a major E&P. Following an initial project that significantly enhanced production at one well, the program has been expanded to additional wells resulting in us having to deploy a total of four acidizing units to the area.

"In another development subsequent to the end of the quarter, we were awarded a $2.6 million contract in Colorado to haul dirt for a construction project that will be monetized over the second and third quarters of this year. In addition to adding a new revenue stream with a good margin in what are traditionally our slower, off-season quarters, this contract enables us to utilize equipment that would otherwise be idle and to retain key personnel.

"We continue our focus on maintaining a strong balance sheet with solid debt to equity and working capital ratios. We are in compliance with terms of our credit facility and expect that to continue through year-end. In addition, a recently completed equipment appraisal reaffirmed our collateral position and actually resulted in a slight increase in our net borrowing availability under our senior credit facility. Overall, we are pleased with our performance under challenging circumstances, particularly our ability to generate new business opportunities and expand operations in this hypercompetitive environment.

"In addition, as previously disclosed, we added two new service lines in the first quarter -- water transfer and HydroFLOW® bacteria and scale treatment -- via asset acquisitions at what we believe were very favorable prices relative to the original cost of the equipment. Early marketing efforts for these lines have been challenging due to the industry downturn, but their addition to our services portfolio enhances our ability to offer customers bundled solutions in order to reduce costs and simplify the procurement process. As a result, we believe we are well positioned not only to weather the downturn but to capitalize on growth opportunities when activity begins to pick up."

First Quarter Results
Total first quarter revenue declined 57% year over year to $8.3 million from $19.1 million primarily due to an overall decline in drilling and completion activities stemming from low commodity prices and lower demand for heating services attributable to unseasonably warm weather from lingering effects of El Nino during the quarter. Revenue was also impacted by approximately $950,000 due to a year over year decline in propane prices.

By service line, the $10.8 million decline in total revenue included an $8.6 million, or 68%, decline in frac water heating; a $0.8 million, or 41%, decline in water hauling; and a $1.4 million, or 32%, decline in the Company's well maintenance services of hot oiling and acidizing. Hot oiling revenue declined $1.1 million year over year in spite of a $651,000, or 302%, increase in hot oiling revenue from the expansion into the Eagle Ford basin, where the Company continues to add personnel and equipment in support of growing customer relationships.

Gross profit in the first quarter was $1.5 million versus a gross profit of $7.9 million in the same quarter last year. The year over year decline in gross margin -- to 19% from 41% -- was attributable to lower revenue in the Company's higher margin frac water heating services and to the impact of fixed costs relative to lower revenue.

General and administrative expenses declined 16%, or $194,000, year over year and costs associated with patent litigation and defense declined 89%, or $303,000. These improvements were partially offset by a $425,000 increase in depreciation and amortization expense related to the larger fleet size and acquisition of water transfer assets in January 2016.

The Company reported a net loss of $1.1 million, or $0.03 per diluted share, versus net income of $2.9 million, or $0.07 per diluted share, in the same quarter last year. The impact of additional depreciation expense on EPS was $0.01 in the first quarter.

Adjusted EBITDA in the first quarter was $661,000 versus $6.7 million in the same quarter last year - a reflection of the significant decline in high margin frac water heating revenue.

ENSERVCO generated $2.9 million in cash from operations in the first quarter of 2016, down from $6.2 million in the same quarter last year. The Company has a long-term debt to equity ratio to 1.4:1 as compared to 1.2:1 at 2015 year-end. The Company closed the quarter with working capital of $4.2 million and a current ratio of 2.5:1.

Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 11:00 a.m. Mountain Time (1:00 p.m. Eastern) and will be accessible by dialing 877-407-8031 (201-689-8031 for international callers). No passcode is necessary. A telephonic replay will be available through May 19, 2016, by calling 877-660-6853 (201-612-7415 for international callers) and entering the Conference ID #13635680. To listen to the webcast, participants should go to the ENSERVCO website at www.enservco.com and link to the "Investors" page at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 90 days. The webcast also is available at the following link: http://www.investorcalendar.com/IC/CEPage.asp?ID=174948

About ENSERVCO
Through its various operating subsidiaries, ENSERVCO provides a wide range of oilfield services, including hot oiling, acidizing, frac water heating, water transfer, bacteria and scaling treatment, water hauling and oilfield support equipment rental. The Company has a broad geographic footprint covering seven major domestic oil and gas fields and serves customers in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia. Additional information is available at www.enservco.com

*Note on non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing ENSERVCO's operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Operations table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.

Cautionary Note Regarding Forward-Looking Statements
This news release contains information that is "forward-looking" in that it describes events and conditions ENSERVCO reasonably expects to occur in the future. Expectations for the future performance of ENSERVCO are dependent upon a number of factors, and there can be no assurance that ENSERVCO will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond ENSERVCO's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in ENSERVCO's annual report on Form 10-K for the year ended December 31, 2015, and subsequently filed documents. It is important that each person reviewing this release understand the significant risks attendant to the operations of ENSERVCO. ENSERVCO disclaims any obligation to update any forward-looking statement made herein.

ENSERVCO CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) For the Three Months Ended March 31, -------------------------- 2016 2015 ------------ ------------ Revenues $ 8,307,059 $ 19,139,497 Cost of Revenues 6,770,085 11,264,286 ------------ ------------ Gross Profit 1,536,974 7,875,211 ------------ ------------ Operating Expenses General and administrative expenses 1,026,575 1,220,353 Patent litigation and defense costs 36,166 339,017 Depreciation and amortization 1,747,972 1,322,934 ------------ ------------ Total operating expenses 2,810,713 2,882,304 ------------ ------------ Income (Loss) from Operations (1,273,739) 4,992,907 Other Income (Expense) Interest expense (372,668) (253,210) Other income 1,996 6,900 ------------ ------------ Total other expense (370,672) (246,310) ------------ ------------ Income (Loss) Before Tax Expense (1,644,411) 4,746,597 Income Tax Benefit (Expense) 568,842 (1,854,717) ------------ ------------ Net Income (loss) $ (1,075,569) $ 2,891,880 ============ ============ Other Comprehensive Income (Loss) - - ------------ ------------ Comprehensive Income (Loss) $ (1,075,569) $ 2,891,880 ============ ============ Earnings (Loss) per Common Share - Basic $ (0.03) $ 0.08 ============ ============ Earnings (Loss) per Common Share - Diluted $ (0.03) $ 0.07 ============ ============ Basic weighted average number of common shares outstanding 38,129,660 37,350,668 Add: Dilutive shares assuming exercise of options and warrants - 1,859,527 ------------ ------------ Diluted weighted average number of common shares outstanding 38,129,660 39,210,195 ============ ============ ENSERVCO CORPORATION Calculation of Adjusted EBITDA For the Three Months Ended March 31, -------------------------- 2016 2015 ------------ ------------ Adjusted EBITDA Income (Loss) $ (1,075,569) $ 2,891,880 Add Back (Deduct) Interest Expense 372,668 253,210 Provision for income taxes (benefit) expense (568,842) 1,854,717 Depreciation and amortization 1,747,972 1,322,934 ------------ ------------ EBITDA 476,229 6,322,741 Add Back (Deduct) Stock-based compensation 150,433 91,060 Patent Litigation and defense costs 36,166 339,017 Interest and other income (1,996) (6,900) ------------ ------------ Adjusted EBITDA $ 660,832 $ 6,745,918 ============ ============ ENSERVCO CORPORATION Condensed Consolidated Balance Sheets March 31, December 31, ASSETS 2016 2015 ------------ ------------ (Unaudited) Current Assets Cash and cash equivalents $ 1,588,779 $ 804,737 Accounts receivable, net 3,765,056 7,037,419 Prepaid expenses and other current assets 1,062,465 1,072,479 Inventories 295,978 308,297 Income tax receivable 237,055 222,447 ------------ ------------ Total current assets 6,949,333 9,445,379 Property and Equipment, net 39,251,365 36,494,661 Goodwill 301,087 301,087 Other Assets 180,730 180,730 ------------ ------------ TOTAL ASSETS $ 46,682,515 $ 46,421,857 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 2,401,258 $ 3,039,859 Current portion of long-term debt 387,751 314,263 ------------ ------------ Total current liabilities 2,789,009 3,354,122 ------------ ------------ Long-Term Liabilities Senior revolving credit facility, net of unamortized deferred loan costs of $547,299 and $532,870, respectively 22,600,423 20,173,371 Long-term debt, less current portion 481,488 590,505 Deferred income taxes, net 3,848,201 4,417,043 ------------ ------------ Total long-term liabilities 26,930,112 25,180,919 ------------ ------------ Total Liabilities 29,719,121 28,535,041 ------------ ------------ Commitments and Contingencies Stockholders' Equity Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding - - Common stock, $.005 par value, 100,000,000 shares authorized, 38,233,760 and 38,230,729 shares issued, respectively; 103,600 shares of treasury stock; and 38,130,160 and 38,127,129 shares outstanding, respectively 190,650 190,634 Additional paid-in capital 14,004,694 13,852,563 Accumulated earnings 2,768,050 3,843,619 ------------ ------------ Total stockholders' equity 16,963,394 17,886,816 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 46,682,515 $ 46,421,857 ============ ============ ENSERVCO CORPORATION Condensed Consolidated Statement of Cash Flows (Unaudited) For the Three Months Ended March 31, -------------------------- 2016 2015 ------------ ------------ OPERATING ACTIVITIES Net income (loss) $ (1,075,569) $ 2,891,880 Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization 1,747,972 1,322,934 Deferred income taxes (568,842) 1,661,682 Stock-based compensation 150,433 91,060 Stock issued for services 1,714 - Amortization of debt issuance costs 35,571 28,892 Bad debt expense 39,159 4,255 Changes in operating assets and liabilities Accounts receivable 3,233,204 (531,120) Inventories 12,319 46,244 Prepaid expense and other current assets 10,014 385,643 Income taxes receivable (14,608) - Accounts payable and accrued liabilities (638,601) 214,192 Income taxes payable - 56,205 ------------ ------------ Net cash provided by operating activities 2,932,766 6,171,867 ------------ ------------ INVESTING ACTIVITIES Purchases of property and equipment (4,504,676) (2,352,379) ------------ ------------ Net cash used in by investing activities (4,504,676) (2,352,379) ------------ ------------ FINANCING ACTIVITIES Net credit facility borrowings (payments) 2,441,481 (4,093,140) Repayment of long-term debt (35,529) (130,525) Payment of debt issuance costs (50,000) - Proceeds from exercise of warrants - 77,100 Proceeds from exercise of options - 14,634 Excess tax benefits from exercise of options and warrants - 136,831 ------------ ------------ Net cash provided by (used in) financing activities 2,355,952 (3,995,100) ------------ ------------ Net Increase (Decrease) in Cash and Cash Equivalents 784,042 (175,612) Cash and Cash Equivalents, Beginning of Period 804,737 954,058 ------------ ------------ Cash and Cash Equivalents, End of Period $ 1,588,779 $ 778,446 ============ ============ Supplemental cash flow information consists of the following: Cash paid for interest $ 259,936 $ 221,594 Cash paid for taxes $ 1,400 $ - Supplemental Disclosure of Non-cash Investing and Financing Activities: Cashless exercise of stock options and warrants $ - $ 2,968 

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