Strenuous Outlook In 2023: In Q2 2023, Nine Energy’s (NINE) management was “cautiously optimistic” about a rig count recovery in the US in early 2024. However, for Q3, it expects a lower rig and frac spread count to keep the activity level subdued. It also expects continued pricing pressure, leading to lower revenue in Q3. Read more about this in our recent article here.
EBITDA margin contracted in Q2: Quarter-over-quarter, NINE’s revenues decreased by 1.2% in Q2, while its adjusted EBITDA margin contracted by 185 basis points. Lower cementing operations in the Haynesville and Eagle Ford shales following a sharp decline in the US rig count resulted in performance deterioration in Q2. However, Stinger dissolvable plugs sales and steady demand for completion tools in the international markets mitigated much of the US revenue loss in Q2.
NINE’s cash flows and negative equity: NINE’s cash flow from operations increased substantially, by 5.8x, in Q2 2023 compared to a quarter ago. As a result, free cash flow turned positive in Q1 compared to a negative FCF a quarter ago. Due to negative shareholders’ equity, its debt-to-equity remained negative as of June 30, 2023. So, a reasonably high net debt ($292 million) and negative equity render the stock financially risky.
Thanks for reading the NINE take three, designed to give you three critical takeaways from NINE’s earnings report. Soon we will present a second update on NINE earnings highlighting its current strategy, news, and notes we extracted from our deeper dive.
