Forbes Energy Services Reports First Quarter Financial Results

ALICE, Texas, May 16, 2011 /PRNewswire/ -- Forbes Energy Services Ltd. (TSX: FRB) (the "Company") today announced financial and operating results for the three months ended March 31, 2011.

Revenues for the first quarter increased 59% to $107.0 million compared to $67.3 million in the first quarter of 2010.  The increase was driven by significantly higher utilization and pricing in both divisions as well as a $2.6 million increase in third party sub-contractor services revenue.  Net income attributable to common shareholders for the three months ended March 31, 2011 was $1.0 million, or $0.01 per share, compared to a net loss attributable to common shareholders of $8.2 million, or $0.10 per share, in the prior year period.

Adjusted EBITDA for the first quarter of 2011 increased to $21.0 million compared to $5.2 million for the same period in the prior year and $19.1 million for the fourth quarter of 2010.  This change represents more than a 300% increase compared to the prior year period.  Adjusted EBITDA is a non-GAAP financial measure, defined by the Company as net income before interest, taxes, depreciation, amortization, gain or loss on early extinguishment of debt, non-cash impairments and non-cash stock based compensation.  For a reconciliation of Adjusted EBITDA to net income, please see the disclosures at the end of this release and on the Company's website.

John Crisp, the Company's President and Chief Executive Officer, stated, "Our financial improvement continued in the first quarter in spite of challenging weather conditions. The last few months have been consistently at or near record activity levels in both divisions.  We expect further improvement in the second quarter due to increased rig utilization, more trucks in the field, and the full impact of recent price increases.

"Strong demand for our services continues to be driven by an unprecedented level unconventional oil activity in South and West Texas.  In spite of recent volatility in commodity prices, oil remains well above levels that should support increased drilling activity in these regions.

"Mexico continues to be a nice contributor to our well servicing segment.  Our 11 rigs currently operating there are back to essentially full utilization, and we expect to have two additional rigs operational within the next month."

Business Segment Results

Well Servicing

Well servicing revenue totaled $48.7 million in the first quarter of 2011 compared to $31.0 million in the prior year period and $43.8 million in the fourth quarter of 2010. Segment gross margin totaled $10.1 million (21% of revenues) in the first quarter compared to $2.4 million (8% of revenues) in the first quarter of 2010 and $10.4 million (24% of revenues) for the fourth quarter of 2010.  The sequential and year-over-year increase is the result of higher prices for our services and greater utilization, partially offset by rising labor, maintenance and fuel costs.

The Company recorded approximately 107,327 rig hours for the first quarter of 2011, including 17,712 hours in Mexico, compared to 84,290 total hours in the first quarter of 2010 (18,216 in Mexico) and 97,845 total hours in the fourth quarter of 2010 (15,192 in Mexico).  The Company had 173 rigs in its well service fleet at March 31, 2011.  Capital expenditures for the well servicing segment were approximately $4.4 million during the three months ended March 31, 2011.

Fluid Logistics and Other

Fluid logistics and other revenues in the first quarter of 2011 totaled $58.2 million compared to $36.2 million in the first quarter of 2010 and $59.0 million in the fourth quarter of 2010.  Excluding sub-contractor services, revenue for these periods was $55.1 million, $35.7 million, and $49.1 million, respectively.

Gross operating margins for the fluid logistics segment totaled $16.0 million (28% of revenues) in the first quarter of 2011 compared to $8.0 million (22% of revenues) in the prior year period and $13.5 million (23% of revenues) in the fourth quarter of 2010. Excluding revenues and costs associated with the sub-contractor services, gross operating margins for the fluid logistics segment totaled $15.9 million (29% of revenues), $7.8 million (22% of revenues) and $13.4 million (27% of revenues), respectively.

The Company recorded 313,445 truck hours during the first quarter of 2011 compared to 259,686 hours for the first quarter of 2010 and 305,113 hours in the fourth quarter of 2010.  The Company's fluid transport segment heavy truck fleet totaled 365 as of March 31, 2011 of which 289 were fluid transport trucks.  Total capital expenditures for the fluid logistics segment were approximately $0.1 million for the three months ended March 31, 2011.

Liquidity and Capital Resources

As of March 31, 2011, we had $21.7 million in unrestricted cash and cash equivalents, $20.0 million of first lien notes, $192.5 million in face value of second lien notes, and $8.7 million of equipment and insurance notes.  As previously announced, the Company has launched a tender offer and consent solicitation for the second lien notes.  We are also seeking to enter into a new secured credit facility with a maximum initial commitment amount of $75.0 million.

Conference Call

The Company will host a conference call to discuss its first quarter 2011 results on Monday, May 16, 2011, at 10:00 a.m. Eastern Time (9:00 a.m. Central). To access the call, please dial 480-629-9770 and ask for the Forbes Energy Services call at least 10 minutes prior to the start time. The conference call will also be broadcast live via the Internet and can be accessed through the "Investor Relations" page of the Company's website, www.forbesenergyservices.com.  

A telephonic replay of the conference call will be available until May 24, 2011, and may be accessed by calling (303) 590-3030 and using the pass code 4440748.  A webcast archive will be available at www.forbesenergyservices.com shortly after the call and will be accessible for approximately 30 days. For more information, please contact Donna Washburn at DRG&L at (713) 529-6600 or email at [email protected].

About the Company

Forbes Energy Services Ltd. is an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, Mississippi, Pennsylvania and Mexico.

Forward-Looking Statements and Regulation G Reconciliation

This press release contains "forward-looking statements," as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect its performance in the future. The accuracy of the Company's assumptions, expectations, beliefs and projections depend on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company's actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include: supply and demand for oilfield services and the level of oil and natural gas prices; the continued uncertainty in the global financial markets and its effect on domestic spending in the oil and natural gas industry; the Company's ability to maintain or improve pricing on its core services; the potential for excess capacity in the industry; and competition. Additional factors that you should consider are set forth in detail in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2010(the "Form 10-K"), which was previously filed, as well as other filings the Company has made with the Securities and Exchange Commission. Should one or more of the foregoing risks or uncertainties materialize, or should the Company's underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated in its forward-looking statements, and the Company's business, financial condition and results of operations could be materially and adversely affected.  

The Company's financial statements and management's discussion and analysis of financial condition and results of operations can be found in the Form 10-Q, which is being submitted for filing today with the Securities and Exchange Commission and posted on the Company's website.

This press release also contains references to the non-GAAP financial measure of adjusted EBITDA. For a reconciliation of adjusted EBITDA to net income, please see the table at the end of this release. Management's opinion regarding the usefulness of adjusted EBITDA to investors and a description of the ways in which management uses such measures can be found on the "Investor Relations" page of the Company's website, www.forbesenergyservices.com.

SOURCE Forbes Energy Services Ltd.