Lower frac fleet deployment in the US: NexTier Oilfield’s (NEX) management has lowered its deployed frac fleet outlook by up to three counts by Q3 2023. It expects higher downtime, leading to a slightly lower pumping hour per fleet. The industry frac equipment supply is expected to see attrition, which can limit the US energy production growth. Meanwhile, the company will look to strengthen its free cash flow. Investors may note that NEX is set to merge with Patterson UTI Energy by Q4 2023. Read more about the company in our recent article here.
Revenue and operating margin were steady in Q2: Quarter-over-quarter, NEX’s revenues increased marginally by 1% in Q2, while its adjusted EBITDA margin increased incrementally by 43 basis points. Better pricing and improved performance in wellsite integration led to a modest improvement in Q2, although a lower frac fleet deployment partially mitigated the growth. In 2024, the management expects higher service demand because of “higher drilling and completion activity” in the US onshore.
NEX’s cash flows and leverage: NEX’s cash flow from operations increased by 30% in Q3 2023 compared to a quarter ago. Free cash flow increased more steeply, by 68%, compared to a quarter ago. The company’s debt-to-equity declined to 0.3x from 0.35x a quarter ago.
Thanks for reading the NEX take three, designed to give you three critical takeaways from NEX’s earnings report. Soon we will present a second update on NEX earnings highlighting its current strategy, news, and notes we extracted from our deeper dive.
