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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Forbes Energy Services Ltd (CE) | USOTC:FLSS | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0001 | 0.00 | 01:00:00 |
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
98-0581100
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
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3000 South Business Highway 281
Alice, Texas
|
|
78332
|
(Address of principal executive offices)
|
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(Zip Code)
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Title of each class
|
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Trading Symbol
|
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Name of each exchange on which registered
|
Common stock, $0.01 par value
|
|
FLSS
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OTCQX Best Market
|
Large accelerated filer
|
¨
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Accelerated filer
|
¨
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Non-accelerated filer
|
x
|
Smaller reporting company
|
x
|
|
|
|
|
|
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Emerging growth company
|
¨
|
|
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|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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Page
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||
Item 1.
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||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
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|
||
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
Other Information
|
|
Item 6.
|
Exhibits
|
|
|
Signatures
|
•
|
the impact of the termination of the Merger Agreement (as defined herein) on our business and financial results;
|
•
|
the effect of the continuing industry-wide downturn in and the cyclical nature of, energy exploration and development activities;
|
•
|
continuing incurrence of operating losses and unavailability of sources of liquidity due to such downturn;
|
•
|
oil and natural gas commodity prices;
|
•
|
market response to global demands to curtail use of oil and natural gas;
|
•
|
capital budgets and spending by the oil and natural gas industry;
|
•
|
the ability or willingness of the Organization of Petroleum Exporting Countries, or OPEC, to set and maintain production levels for oil;
|
•
|
oil and natural gas production levels by non-OPEC countries;
|
•
|
supply and demand for oilfield services and industry activity levels;
|
•
|
our ability to maintain stable pricing;
|
•
|
the impact on our markets of the outbreak of epidemic or pandemic disease, including COVID-19;
|
•
|
possible impairment of our long-lived assets;
|
•
|
potential for excess capacity;
|
•
|
competition;
|
•
|
substantial capital requirements;
|
•
|
significant operating and financial restrictions under the Revolving Loan Agreement and the Term Loan Agreement (each as defined herein);
|
•
|
technological obsolescence of operating equipment;
|
•
|
dependence on certain key employees;
|
•
|
concentration of customers;
|
•
|
substantial additional costs of compliance with reporting obligations, the Sarbanes-Oxley Act, the Term Loan Agreement, the Revolving Loan Agreement and the 5% Subordinated Convertible PIK Notes covenants;
|
•
|
seasonality of oilfield services activity;
|
•
|
collection of accounts receivable;
|
•
|
environmental and other governmental regulation;
|
•
|
the potential disruption of business activities caused by the physical effects, if any, of climate change;
|
•
|
risks inherent in our operations;
|
•
|
ability to fully integrate future acquisitions;
|
•
|
variation from projected operating and financial data;
|
•
|
variation from budgeted and projected capital expenditures;
|
•
|
volatility of global financial markets; and
|
•
|
the other factors discussed under “Risk Factors” beginning on page 10 of the Annual Report on Form 10-K for the year ended December 31, 2019.
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
8,120
|
|
|
$
|
5,224
|
|
Cash - restricted
|
73
|
|
|
73
|
|
||
Accounts receivable - trade, net
|
19,450
|
|
|
24,789
|
|
||
Accounts receivable - other
|
490
|
|
|
2,302
|
|
||
Prepaid expenses and other current assets
|
9,936
|
|
|
12,903
|
|
||
Total current assets
|
38,069
|
|
|
45,291
|
|
||
Property and equipment, net
|
81,101
|
|
|
125,409
|
|
||
Operating lease right-of-use assets
|
5,496
|
|
|
6,235
|
|
||
Intangible assets, net
|
8,044
|
|
|
12,339
|
|
||
Other assets
|
760
|
|
|
991
|
|
||
Total assets
|
$
|
133,470
|
|
|
$
|
190,265
|
|
|
|
|
|
||||
Liabilities and Stockholders’ (Deficit) Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable - trade
|
$
|
10,498
|
|
|
$
|
9,366
|
|
Accrued interest payable
|
2,383
|
|
|
3,034
|
|
||
Accrued expenses
|
12,766
|
|
|
12,734
|
|
||
Current portion of operating lease liabilities
|
790
|
|
|
1,476
|
|
||
Current portion of long-term debt
|
73,745
|
|
|
72,059
|
|
||
Total current liabilities
|
100,182
|
|
|
98,669
|
|
||
Long-term operating lease liabilities, net of current portion
|
4,706
|
|
|
4,759
|
|
||
Long-term debt, net of current portion and debt discount
|
64,110
|
|
|
62,636
|
|
||
Deferred tax liability
|
102
|
|
|
245
|
|
||
Total liabilities
|
169,100
|
|
|
166,309
|
|
||
Commitments and contingencies (Note 8)
|
|
|
|
||||
Stockholders’ (deficit) equity
|
|
|
|
||||
Common stock, $0.01 par value, 40,000 shares authorized, 5,523 shares issued and outstanding at March 31, 2020 and December 31, 2019
|
55
|
|
|
55
|
|
||
Additional paid-in capital
|
151,122
|
|
|
150,892
|
|
||
Accumulated deficit
|
(186,807
|
)
|
|
(126,991
|
)
|
||
Total stockholders’ (deficit) equity
|
(35,630
|
)
|
|
23,956
|
|
||
Total liabilities and stockholders’ (deficit) equity
|
$
|
133,470
|
|
|
$
|
190,265
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Revenues
|
|
|
|
||||
Well servicing
|
$
|
15,089
|
|
|
$
|
24,750
|
|
Coiled tubing
|
8,222
|
|
|
20,010
|
|
||
Fluid logistics
|
7,152
|
|
|
13,628
|
|
||
Total revenues
|
30,463
|
|
|
58,388
|
|
||
|
|
|
|
||||
Expenses
|
|
|
|
||||
Well servicing
|
13,354
|
|
|
17,549
|
|
||
Coiled tubing
|
8,303
|
|
|
17,938
|
|
||
Fluid logistics
|
7,029
|
|
|
10,652
|
|
||
General and administrative
|
5,911
|
|
|
6,825
|
|
||
Impairment of property and equipment
|
40,030
|
|
|
—
|
|
||
Impairment of intangible assets
|
3,887
|
|
|
—
|
|
||
Depreciation and amortization
|
6,119
|
|
|
9,439
|
|
||
Total expenses
|
84,633
|
|
|
62,403
|
|
||
Operating loss
|
(54,170
|
)
|
|
(4,015
|
)
|
||
|
|
|
|
||||
Other income (expense)
|
|
|
|
||||
Interest income
|
5
|
|
|
3
|
|
||
Interest expense
|
(5,753
|
)
|
|
(7,686
|
)
|
||
Pre-tax loss
|
(59,918
|
)
|
|
(11,698
|
)
|
||
Income tax benefit
|
(102
|
)
|
|
(64
|
)
|
||
Net loss
|
$
|
(59,816
|
)
|
|
$
|
(11,634
|
)
|
|
|
|
|
||||
Loss per share of common stock
|
|
|
|
||||
Basic and diluted
|
$
|
(10.83
|
)
|
|
$
|
(2.14
|
)
|
|
|
|
|
||||
Weighted average number of shares of common stock outstanding:
|
|
|
|
||||
Basic and diluted
|
5,523
|
|
|
5,442
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(59,816
|
)
|
|
$
|
(11,634
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
6,119
|
|
|
9,439
|
|
||
Share-based compensation
|
230
|
|
|
253
|
|
||
Deferred tax benefit
|
(143
|
)
|
|
(48
|
)
|
||
Gain on disposal of assets
|
(297
|
)
|
|
(1,117
|
)
|
||
Bad debt expense
|
70
|
|
|
120
|
|
||
Amortization of debt discount/deferred financing costs/premium conversion
|
2,489
|
|
|
2,154
|
|
||
Impairment of property and equipment
|
40,030
|
|
|
—
|
|
||
Impairment of intangible assets
|
3,887
|
|
|
—
|
|
||
Interest paid-in-kind
|
2,987
|
|
|
3,172
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
7,081
|
|
|
(2,999
|
)
|
||
Prepaid expenses and other assets
|
1,473
|
|
|
(597
|
)
|
||
Accounts payable - trade
|
1,132
|
|
|
(1,252
|
)
|
||
Accrued expenses
|
22
|
|
|
(1,588
|
)
|
||
Accrued interest payable
|
(651
|
)
|
|
(244
|
)
|
||
Net cash provided by (used in) operating activities
|
4,613
|
|
|
(4,341
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(801
|
)
|
|
(3,645
|
)
|
||
Proceeds from sale of property and equipment
|
330
|
|
|
3,272
|
|
||
Net cash used in investing activities
|
(471
|
)
|
|
(373
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Payments for finance leases
|
(1,246
|
)
|
|
(1,168
|
)
|
||
Proceeds from PIK Notes
|
—
|
|
|
4,422
|
|
||
Payments for Bridge Loan
|
—
|
|
|
(4,422
|
)
|
||
Net cash used in financing activities
|
(1,246
|
)
|
|
(1,168
|
)
|
||
Net increase (decrease) in cash, cash equivalents and cash - restricted
|
2,896
|
|
|
(5,882
|
)
|
||
Cash, cash equivalents and cash - restricted:
|
|
|
|
||||
Beginning of period
|
5,297
|
|
|
8,156
|
|
||
End of period
|
$
|
8,193
|
|
|
$
|
2,274
|
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Total
Stockholders’
(Deficit) Equity
|
|||||||||||
|
Shares
|
|
Amount
|
|
|
|
||||||||||||
Balance at December 31, 2019
|
5,523
|
|
|
$
|
55
|
|
|
$
|
150,892
|
|
|
$
|
(126,991
|
)
|
|
$
|
23,956
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
230
|
|
|
—
|
|
|
230
|
|
||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(59,816
|
)
|
|
(59,816
|
)
|
||||
Balance at March 31, 2020
|
5,523
|
|
|
$
|
55
|
|
|
$
|
151,122
|
|
|
$
|
(186,807
|
)
|
|
$
|
(35,630
|
)
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Total
Stockholders’ Equity |
|||||||||||
|
Shares
|
|
Amount
|
|
|
|
||||||||||||
Balance at December 31, 2018
|
5,439
|
|
|
$
|
54
|
|
|
$
|
149,968
|
|
|
$
|
(58,592
|
)
|
|
$
|
91,430
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
253
|
|
|
—
|
|
|
253
|
|
||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,634
|
)
|
|
(11,634
|
)
|
||||
Balance at March 31, 2019
|
5,439
|
|
|
$
|
54
|
|
|
$
|
150,221
|
|
|
$
|
(70,226
|
)
|
|
$
|
80,049
|
|
•
|
Significant reductions in the Company’s workforce, which created certain severance liabilities totaling $0.1 million.
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
|
•
|
Level 2 - Inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable. These inputs are either directly observable in the marketplace or indirectly observable through corroboration with market data for substantially the full contractual term of the asset or liability being measured.
|
•
|
Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
||||||||
Term Loan Agreement
|
$
|
59,602
|
|
|
$
|
57,926
|
|
|
$
|
57,506
|
|
|
$
|
56,895
|
|
|
|
March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Cash and cash equivalents
|
|
$
|
8,120
|
|
|
$
|
2,201
|
|
Cash - restricted
|
|
73
|
|
|
73
|
|
||
Cash and cash equivalents and cash - restricted as shown in the consolidated statement of cash flows
|
|
$
|
8,193
|
|
|
$
|
2,274
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Impairment of property and equipment
|
$
|
40,030
|
|
|
$
|
—
|
|
Impairment of intangible assets
|
3,887
|
|
|
—
|
|
||
|
$
|
43,917
|
|
|
$
|
—
|
|
|
Estimated
Life in Years
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Well servicing equipment
|
9-15 years
|
|
$
|
103,065
|
|
|
$
|
132,562
|
|
Autos and trucks
|
5-10 years
|
|
14,586
|
|
|
20,627
|
|
||
Autos and trucks - finance lease
|
5-10 years
|
|
20,387
|
|
|
22,136
|
|
||
Disposal wells
|
5-15 years
|
|
3,065
|
|
|
3,835
|
|
||
Building and improvements
|
5-30 years
|
|
4,620
|
|
|
6,216
|
|
||
Furniture and fixtures
|
3-15 years
|
|
3,066
|
|
|
3,154
|
|
||
Land
|
|
|
480
|
|
|
647
|
|
||
|
|
(2)
|
149,269
|
|
|
189,177
|
|
||
Accumulated depreciation (1)
|
|
|
(68,168
|
)
|
|
(63,768
|
)
|
||
|
|
|
$
|
81,101
|
|
|
$
|
125,409
|
|
|
Useful Life
(years)
|
|
Gross
Carrying Value
|
|
Impairment Expense
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
||||||||
March 31, 2020
|
|
|
|
|
|
|
|
|
|
||||||||
Customer relationships
|
6-15
|
|
$
|
11,378
|
|
|
$
|
(3,159
|
)
|
|
$
|
(2,330
|
)
|
|
$
|
5,889
|
|
Trade names
|
10-15
|
|
3,072
|
|
|
(580
|
)
|
|
(577
|
)
|
|
1,915
|
|
||||
Covenants not to compete
|
4
|
|
1,505
|
|
|
(148
|
)
|
|
(1,117
|
)
|
|
240
|
|
||||
|
|
|
$
|
15,955
|
|
|
$
|
(3,887
|
)
|
|
$
|
(4,024
|
)
|
|
$
|
8,044
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
||||||||
Customer relationships
|
6-15
|
|
$
|
11,378
|
|
|
$
|
—
|
|
|
$
|
(2,079
|
)
|
|
$
|
9,299
|
|
Trade names
|
10-15
|
|
3,072
|
|
|
—
|
|
|
(515
|
)
|
|
2,557
|
|
||||
Covenants not to compete
|
4
|
|
1,505
|
|
|
—
|
|
|
(1,022
|
)
|
|
483
|
|
||||
|
|
|
$
|
15,955
|
|
|
$
|
—
|
|
|
$
|
(3,616
|
)
|
|
$
|
12,339
|
|
2020
|
$
|
768
|
|
2021
|
860
|
|
|
2022
|
793
|
|
|
2023
|
793
|
|
|
2024
|
784
|
|
|
Thereafter
|
4,046
|
|
|
|
$
|
8,044
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Term Loan Agreement of $47.4 million, plus $14.1 million and $12.4 million of accrued interest paid-in-kind and net of debt discount of $1.9 million and $2.3 million as of March 31, 2020 and December 31, 2019, respectively
|
$
|
59,602
|
|
|
$
|
57,506
|
|
PIK Notes of $51.8 million, plus $2.2 million and $0.9 million of accrued interest paid-in-kind, and including $7.8 million and $6.0 million accretion of interest and conversion premium as of March 31, 2020 and December 31, 2019, respectively
|
61,802
|
|
|
58,646
|
|
||
Revolving Loan Agreement
|
4,000
|
|
|
4,000
|
|
||
Finance leases
|
9,622
|
|
|
10,045
|
|
||
Insurance notes
|
2,829
|
|
|
4,498
|
|
||
Total debt
|
137,855
|
|
|
134,695
|
|
||
Less: Current portion
|
(73,745
|
)
|
|
(72,059
|
)
|
||
Total long-term debt
|
$
|
64,110
|
|
|
$
|
62,636
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Components of lease expense:
|
|
|
|
||||
Finance lease cost:
|
|
|
|
||||
Amortization of right-of-use assets
|
$
|
1,068
|
|
|
$
|
1,214
|
|
Interest on lease liabilities
|
90
|
|
|
139
|
|
||
Operating lease cost:
|
|
|
|
|
|
||
Lease expense (1)
|
374
|
|
|
336
|
|
||
Short-term lease cost
|
558
|
|
|
374
|
|
||
Total lease cost
|
$
|
2,090
|
|
|
$
|
2,063
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Components of balance sheet:
|
|
|
|
||||
Operating leases:
|
|
|
|
||||
Operating lease right-of-use assets (non-current)
|
$
|
5,496
|
|
|
$
|
6,235
|
|
Current portion of operating lease liabilities
|
$
|
790
|
|
|
$
|
1,476
|
|
Long-term operating lease liabilities, net of current portion
|
$
|
4,706
|
|
|
$
|
4,759
|
|
Finance leases:
|
|
|
|
||||
Property and equipment, net
|
$
|
14,390
|
|
|
$
|
14,467
|
|
Current portion of long-term debt
|
$
|
5,115
|
|
|
$
|
4,915
|
|
Long-term debt, net of current portion
|
$
|
4,507
|
|
|
$
|
5,130
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Other supplemental information:
|
|
|
|
||||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
||||
Operating cash flows for operating leases
|
$
|
374
|
|
|
$
|
710
|
|
Operating cash flows for finance leases - interest
|
$
|
90
|
|
|
$
|
139
|
|
Financing cash flows for finance leases
|
$
|
1,246
|
|
|
$
|
1,168
|
|
Noncash activities from right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
||||
Operating leases
|
$
|
—
|
|
|
$
|
6,150
|
|
Finance leases
|
$
|
823
|
|
|
$
|
1,436
|
|
|
|
|
|
||||
|
March 31, 2020
|
|
|
||||
Weighted-average remaining lease term:
|
|
|
|
||||
Operating leases
|
7.8 years
|
|
|
|
|
||
Finance leases
|
3.6 years
|
|
|
|
|
||
Weighted-average discount rate:
|
|
|
|
||||
Operating leases
|
7.4
|
%
|
|
|
|
||
Finance leases
|
5.3
|
%
|
|
|
|
|
Debt
|
|
Operating Leases - Related Party
|
|
Operating Leases - Other
|
|
Finance Leases
|
||||||||
2020
|
$
|
60,831
|
|
|
$
|
23
|
|
|
$
|
858
|
|
|
$
|
4,088
|
|
2021
|
61,547
|
|
|
—
|
|
|
1,142
|
|
|
4,094
|
|
||||
2022
|
—
|
|
|
—
|
|
|
973
|
|
|
1,503
|
|
||||
2023
|
—
|
|
|
—
|
|
|
838
|
|
|
380
|
|
||||
2024
|
—
|
|
|
—
|
|
|
700
|
|
|
50
|
|
||||
Thereafter
|
—
|
|
|
—
|
|
|
2,782
|
|
|
—
|
|
||||
Total minimum lease payments
|
122,378
|
|
|
23
|
|
|
7,293
|
|
|
10,115
|
|
||||
Less imputed interest
|
—
|
|
|
(1
|
)
|
|
(1,819
|
)
|
|
(493
|
)
|
||||
Less debt discount
|
(1,945
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Debt premium
|
7,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total debt and lease liabilities per balance sheet
|
$
|
128,233
|
|
|
$
|
22
|
|
|
$
|
5,474
|
|
|
$
|
9,622
|
|
|
Three Months Ended
|
||||||
|
March 31, 2020
|
|
March 31, 2019
|
||||
Share based compensation expense recognized
|
$
|
230
|
|
|
$
|
253
|
|
|
|
|
|
||||
|
|
|
As of
|
||||
|
|
|
March 31, 2020
|
||||
Unrecognized compensation cost (in thousands)
|
|
|
$
|
1,401
|
|
||
Remaining weighted-average service period (years)
|
|
|
2.9
|
|
|
Number of Shares
|
|
Weighted Average Fair Value
|
|||
Unvested as of December 31, 2019
|
171,716
|
|
$
|
11.00
|
|
|
Granted
|
292,163
|
|
|
$
|
0.16
|
|
Vested
|
—
|
|
|
$
|
—
|
|
Forfeited
|
(8,021
|
)
|
|
$
|
9.04
|
|
Unvested as of March 31, 2020
|
455,858
|
|
|
$
|
4.09
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Basic and diluted:
|
|
|
|
||||
Net loss
|
$
|
(59,816
|
)
|
|
$
|
(11,634
|
)
|
Weighted-average common shares
|
5,523
|
|
|
5,442
|
|
||
Basic and diluted net loss per share
|
$
|
(10.83
|
)
|
|
$
|
(2.14
|
)
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Reconciliation of Operating Loss As Reported:
|
|
|
|
||||
Segment profits
|
$
|
1,777
|
|
|
$
|
12,249
|
|
Less:
|
|
|
|
||||
General and administrative expense
|
5,911
|
|
|
6,825
|
|
||
Impairment of property and equipment
|
40,030
|
|
|
—
|
|
||
Impairment of intangible assets
|
3,887
|
|
|
—
|
|
||
Depreciation and amortization
|
6,119
|
|
|
9,439
|
|
||
Operating loss
|
(54,170
|
)
|
|
(4,015
|
)
|
||
Other income (expenses), net
|
(5,748
|
)
|
|
(7,683
|
)
|
||
Pre-tax loss
|
$
|
(59,918
|
)
|
|
$
|
(11,698
|
)
|
|
|
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Cash paid for
|
|
|
|
||||
Interest
|
$
|
1,030
|
|
|
$
|
1,013
|
|
Income tax
|
$
|
—
|
|
|
$
|
—
|
|
Supplemental schedule of non-cash investing and financing activities
|
|
|
|
||||
Change in accounts payable related to capital expenditures
|
$
|
147
|
|
|
$
|
49
|
|
Exchange of Bridge Loan for PIK Notes
|
$
|
—
|
|
|
$
|
47,346
|
|
Finance leases on equipment
|
$
|
823
|
|
|
$
|
1,436
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Well Servicing. Our well servicing segment comprised 49.5% of our consolidated revenues for the three months ended March 31, 2020. Our well servicing segment utilizes our fleet of well servicing rigs, which at March 31, 2020 was comprised of 125 workover rigs and 7 swabbing rigs and other related assets and equipment. These assets are used to provide (i) well maintenance, including remedial repairs and removal and replacement of downhole production equipment, (ii) well workovers, including significant downhole repairs, re-completions and re-perforations, (iii) completion and swabbing activities, (iv) plugging and abandonment services, and (v) pressure testing of oil and natural gas production tubing and scanning tubing for pitting and wall thickness using tubing testing units.
|
•
|
Coiled Tubing. Our coiled tubing segment comprised 27.0% of our consolidated revenues for the three months ended March 31, 2020. This segment utilizes our fleet of 14 coiled tubing units, of which 11 are large diameter units (2 3/8” or larger). These units provide a range of services accomplishing a wide variety of goals including horizontal completions, well bore clean-outs and maintenance, nitrogen services, thru-tubing services, formation stimulation using acid and other chemicals, and other pre- and post-hydraulic fracturing well preparation services.
|
•
|
Fluid Logistics. Our fluid logistics segment comprised 23.5% of our consolidated revenues for the three months ended March 31, 2020. Our fluid logistics segment utilizes our fleet of owned or leased fluid transport trucks and related assets, including specialized vacuum, high-pressure pump and tank trucks, hot oil trucks, frac tanks, fluid mixing tanks, salt water disposal wells and facilities, and related equipment. These assets are used to provide, transport, store, and dispose of a variety of drilling and produced fluids used in, and generated by, oil and natural gas production. These services are required in most workover and completion projects and are routinely used in daily operations of producing wells.
|
Revenues
|
|
|
|
|
||||||||||||||
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||||||
|
2020
|
% of
revenue
|
|
2019
|
% of
revenue |
|
$ change
|
|
% change
|
|||||||||
Well Servicing
|
$
|
15,089
|
|
49.5
|
%
|
|
$
|
24,750
|
|
42.4
|
%
|
|
$
|
(9,661
|
)
|
|
(39.0
|
)%
|
Coiled Tubing
|
8,222
|
|
27.0
|
%
|
|
20,010
|
|
34.3
|
%
|
|
(11,788
|
)
|
|
(58.9
|
)%
|
|||
Fluid Logistics
|
7,152
|
|
23.5
|
%
|
|
13,628
|
|
23.3
|
%
|
|
(6,476
|
)
|
|
(47.5
|
)%
|
|||
Total
|
$
|
30,463
|
|
|
|
$
|
58,388
|
|
|
|
$
|
(27,925
|
)
|
|
(47.8
|
)%
|
||
|
|
|
|
|
|
|
|
|
|
|||||||||
Direct Operating Expenses(1)
|
|
|
|
|
||||||||||||||
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||||||
|
2020
|
% of segment revenue
|
|
2019
|
% of segment revenue
|
|
$ change
|
|
% change
|
|||||||||
Well Servicing
|
$
|
13,354
|
|
88.5
|
%
|
|
$
|
17,549
|
|
70.9
|
%
|
|
$
|
(4,195
|
)
|
|
(23.9
|
)%
|
Coiled Tubing
|
8,303
|
|
101.0
|
%
|
|
17,938
|
|
89.6
|
%
|
|
(9,635
|
)
|
|
(53.7
|
)%
|
|||
Fluid Logistics
|
7,029
|
|
98.3
|
%
|
|
10,652
|
|
78.2
|
%
|
|
(3,623
|
)
|
|
(34.0
|
)%
|
|||
Total
|
$
|
28,686
|
|
|
|
$
|
46,139
|
|
|
|
$
|
(17,453
|
)
|
|
(37.8
|
)%
|
||
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2020
|
|
2019
|
|
$ change
|
|
% change
|
|||||||
Well servicing direct operating expenses
|
$
|
13,354
|
|
|
$
|
17,549
|
|
|
$
|
(4,195
|
)
|
|
(23.9
|
)%
|
Coiled tubing direct operating expenses
|
8,303
|
|
|
17,938
|
|
|
(9,635
|
)
|
|
(53.7
|
)%
|
|||
Fluid logistics direct operating expenses
|
7,029
|
|
|
10,652
|
|
|
(3,623
|
)
|
|
(34.0
|
)%
|
|||
General and administrative
|
5,911
|
|
|
6,825
|
|
|
(914
|
)
|
|
(13.4
|
)%
|
|||
Impairment of property and equipment
|
40,030
|
|
|
—
|
|
|
40,030
|
|
|
100.0
|
%
|
|||
Impairment of intangible assets
|
3,887
|
|
|
—
|
|
|
3,887
|
|
|
100.0
|
%
|
|||
Depreciation and amortization
|
6,119
|
|
|
9,439
|
|
|
(3,320
|
)
|
|
(35.2
|
)%
|
|||
Total expenses
|
$
|
84,633
|
|
|
$
|
62,403
|
|
|
$
|
22,230
|
|
|
35.6
|
%
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2020
|
|
2019
|
|
$ change
|
|
% change
|
|||||||
Interest income
|
$
|
5
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
66.7
|
%
|
Interest expense
|
(5,753
|
)
|
|
(7,686
|
)
|
|
(1,933
|
)
|
|
25.1
|
%
|
|||
Other income (expense), net
|
$
|
(5,748
|
)
|
|
$
|
(7,683
|
)
|
|
$
|
(1,935
|
)
|
|
25.2
|
%
|
|
|
|
|
|
|
|
|
|||||||
Income tax benefit
|
$
|
(102
|
)
|
|
$
|
(64
|
)
|
|
$
|
(38
|
)
|
|
59.4
|
%
|
•
|
Adjusted EBITDA does not reflect our current or future requirements for capital expenditures or capital commitments;
|
•
|
Adjusted EBITDA does not reflect changes in, or cash requirements necessary to service interest or principal payments on our debt;
|
•
|
Adjusted EBITDA does not reflect income taxes;
|
•
|
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will have to be replaced in the future. Adjusted EBITDA does not reflect cash requirements for such replacements; and
|
•
|
Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
|||||||
(Unaudited)
|
|||||||
|
|
|
|
||||
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
(in thousands)
|
|
|
|
||||
Net loss
|
$
|
(59,816
|
)
|
|
$
|
(11,634
|
)
|
Interest income
|
(5
|
)
|
|
(3
|
)
|
||
Interest expense
|
5,753
|
|
|
7,686
|
|
||
Income tax (benefit) expense
|
(102
|
)
|
|
(64
|
)
|
||
Impairment of property and equipment
|
40,030
|
|
|
—
|
|
||
Impairment of intangible assets
|
3,887
|
|
|
—
|
|
||
Depreciation and amortization
|
6,119
|
|
|
9,439
|
|
||
Share-based compensation
|
230
|
|
|
253
|
|
||
Acquisition/merger related costs
|
1,318
|
|
|
1,060
|
|
||
Gain on disposal of assets
|
(297
|
)
|
|
(1,117
|
)
|
||
Adjusted EBITDA
|
$
|
(2,883
|
)
|
|
$
|
5,620
|
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net cash provided by (used in) operating activities
|
$
|
4,613
|
|
|
$
|
(4,341
|
)
|
Net cash used in investing activities
|
(471
|
)
|
|
(373
|
)
|
||
Net cash used in financing activities
|
(1,246
|
)
|
|
(1,168
|
)
|
||
Net increase (decrease) in cash, cash equivalents and cash - restricted
|
2,896
|
|
|
(5,882
|
)
|
||
Cash, cash equivalents and cash - restricted
|
|
|
|
||||
Beginning of period
|
5,297
|
|
|
8,156
|
|
||
End of period
|
$
|
8,193
|
|
|
$
|
2,274
|
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
our business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Mergers, without realizing any of the anticipated benefits of completing the Mergers;
|
•
|
the market price of our common stock may decline to the extent that the market price prior to termination of the Merger Agreement reflects a market assumption that the Mergers would be completed;
|
•
|
we may not be able to find a party willing to pay an equivalent or more attractive consideration than the consideration that would have been payable to the Company stockholders had the Mergers been consummated;
|
•
|
we may experience negative publicity and negative reactions from the financial markets and from our investors, creditors and employees;
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•
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we have incurred and may continue to incur certain significant costs relating to the Mergers, such as legal, accounting, financial advisor, printing, and other professional service fees, which may relate to activities that we would not have undertaken other than in connection with the Mergers; and
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•
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we have committed, and may be required to further commit, time and resources to defending legal proceedings commenced against us relating to the Mergers.
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Number
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Description of Exhibits
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—
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Amendment No. 1 to Agreement and Plan of Merger, dated February 20, 2020, by and among Superior Energy Services, Inc., New NAM Inc, Forbes Energy Services Ltd., Spieth Merger Sub, Inc. and Fowler Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to the Company's current report on Form 8-K filed February 26, 2020).
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—
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Second Amendment to Credit Agreement, dated as of February 3, 2020, by and among Forbes Energy Services Ltd., the borrowers party thereto, the lenders party thereto, and Regions Bank, as administrative agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed March 23, 2020).
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—
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Third Amendment to Credit Agreement, dated as of March 20, 2020, by and among Forbes Energy Services Ltd., the borrowers party thereto, the lenders party thereto, and Regions Bank, as administrative agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed March 23, 2020).
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—
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Amendment No. 3 to Loan and Security Agreement, dated as of March 23, 2020, by and among Forbes Energy Services LLC, the guarantors party thereto hereto, the lenders party thereto, and Wilmington Trust, National Association, as agent for the secured parties (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed March 23, 2020).
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Unsecured Note, dated as of May 15, 2020, by Forbes Energy Services LLC in favor of Texas Champion Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 21, 2020).
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Letter Agreement, dated as of May 20, 2020, by and among Forbes Energy Services Ltd., Superior Energy Services, Inc., and New NAM, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed May 21, 2020).
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Fourth Amendment to Credit Agreement, dated as of May 15, 2020, by and among Forbes Energy Services Ltd., the borrowers party thereto, the lenders party thereto, and Regions Bank, as administrative agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed May 21, 2020).
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Amendment No. 4 to Loan and Security Agreement, dated as of May 15, 2020, by and among Forbes Energy Services LLC, as borrower, the guarantors party thereto, the lenders party thereto, and Wilmington Trust, National Association, as agent for the secured parties (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed May 21, 2020).
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10.9*
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Fifth Amendment and Waiver to Credit Agreement, dated as of June 26, 2020, by and among Forbes Energy Services Ltd., the borrowers party thereto, the lenders party thereto, and Regions Bank, as administrative agent and collateral agent for the lenders.
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Amendment No. 5 and Waiver to Loan and Security Agreement, dated as of June 29, 2020, by and among Forbes Energy Services LLC, as borrower, the guarantors party thereto, the lenders party thereto, and Wilmington Trust, National Association, as agent for the secured parties.
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31.1*
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—
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Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
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31.2*
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—
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Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
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32.1*
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—
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Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2*
|
—
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Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101*
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—
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Interactive Data Files
|
104*
|
—
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Cover Page Interactive Data Files
|
*
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Filed herewith.
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FORBES ENERGY SERVICES LTD.
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||
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June 30, 2020
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By:
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/s/ JOHN E. CRISP
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John E. Crisp
Chairman, Chief Executive Officer and President
(Principal Executive Officer)
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June 30, 2020
|
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By:
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/S/ L. MELVIN COOPER
|
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L. Melvin Cooper
Senior Vice President,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
|
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