KLXE Looks To A 2024 Recovery: During Q3 2023, KLX Energy Services (KLXE) executed a 12-month frac contract with a leading operator. KLXE’s management expects margins to “hold up” in Q4 2023 despite the impact of seasonality and operators’ budget constraints. It expects the US onshore drilling, completion, and production markets to improve in 2024. Read more about KLXE in our recent article here.
Revenue Fell But Margin Stabilized In Q3: Quarter-over-quarter, KLXE’s revenues decreased by 5.7% in Q3, while its adjusted EBITDA margin remained resilient, falling by 40 basis points. The activity slowdown in the Rocky Mountains (DJ Basin and Wyoming) and Northeast/Mid-Con primarily accounted for the revenue loss. Lower utilization in completions and intervention businesses and softness in coiled tubing and directional drilling led to margin pressure. However, increased Bakken activity and strong PhantM Dissolvable Frac Plug performance offset the adverse effects.
KLXE’s Cash Flows And Leverage: KLXE’s cash flow from operations declined by 57% in Q3 2023 compared to a quarter ago. Its free cash flow also fell steeply during this period (82% down). It reduced net debt by 4% in Q3 over Q2. However, due to low shareholders’ equity (accumulated deficit), its debt-to-equity was high at 5.9x as of September 30, 2023.
Thanks for reading the KLXE Take Three, designed to give you three critical takeaways from KLXE’s earnings report. Soon, we will present a second update on KLXE’s earnings, highlighting its current strategy, news, and notes we extracted from our deeper dive.
