Forbes Energy Services Reports First Quarter Financial Results

ALICE, Texas, May 17 /PRNewswire-FirstCall/ -- Forbes Energy Services Ltd. (TSX: FRB) today announced financial and operating results for the first quarter ended March 31, 2010.

Revenues for the first quarter increased 6.0% to $67.3 million compared to $63.4 million in the first quarter of 2009.  The increase was driven by increased trucking hours and Mexico rig hours, partially offset by lower U.S. well servicing activity and lower pricing in both divisions.  Net loss for the three months ended March 31, 2010 was $8.2 million, or a loss of $0.10 per share, compared to a net loss of $4.5 million, or $0.07 per share, in the prior year period.

Adjusted EBITDA for the first quarter of 2010 was $5.2 million versus $8.7 million for the same period in the prior year.  Adjusted EBITDA is a non-GAAP financial measure, defined by the Company as net income before interest, taxes, depreciation, amortization, gain or loss on 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, Forbes Energy's President and Chief Executive Officer, stated, "The first quarter continued to show signs of a recovery.  This was the third consecutive quarter of increasing revenues and the first quarter in more than a year with year-over-year top line growth.  The increase in revenues is primarily the result of higher utilization driven by increasing activity in South and West Texas supporting oil and natural gas liquids production.

"We also seem to have hit an inflection point during the first quarter where utilization rates achieved high enough levels to support price increases.  Pricing for our services began to firm in March, and I'm pleased to report that this trend has continued throughout the first half of the second quarter.  Some of this increase in pricing will be offset by rising labor costs, but we also expect to see some margin expansion in our second quarter financial results."

Business Segment Results

Well Servicing

Well servicing revenue totaled $31.0 million in the first quarter of 2010 compared to $31.5 million in the prior year period and $25.2 million in the fourth quarter of 2009.  Segment gross margin totaled $2.4 million in the first quarter compared to $5.1 million in the first quarter of 2009 and $1.3 million for the fourth quarter of 2009.

Forbes recorded approximately 84,290 rig hours for the first quarter of 2010, including 18,216 hours in Mexico, compared to 73,522 total hours in the first quarter of 2009 (4,748 in Mexico) and 68,896 total hours in the fourth quarter of 2009 (15,792 in Mexico).  The Company had 171 rigs in its well service fleet at March 31, 2010.  Capital expenditures for the well servicing segment were approximately $504,000 during the three months ended March 31, 2009.

Fluid Logistics

Fluid logistics revenues in the first quarter of 2010 totaled $36.2 million compared to $31.9 million in the first quarter of 2009 and $27.1 million in the fourth quarter of 2009.  Gross operating margins for the fluid logistics segment totaled $8.0 million in the first quarter of 2010 compared to $8.7 million in the prior year period and $4.8 million in the fourth quarter of 2009.

Forbes recorded 259,686 truck hours during the first quarter of 2010 compared to 229,219 for the first quarter of 2009 and 228,099 hours in the fourth quarter of 2009.  The Company's fluid transport segment heavy truck fleet totaled 368 as of March 31, 2010.  Total capital expenditures for the fluid logistics segment were approximately $201,000 for the three months ended March 31, 2010.

Liquidity and Capital Resources

The report of Forbes' independent registered accounting firm which accompanied the Company's form 10-K for the twelve months ended December 31, 2009 included a "going concern" explanatory paragraph. A similar footnote is included in the Company's Form 10-Q for the quarter ended March 31, 2010.  This footnote was included because we project, based on current market conditions, that additional funding may be required during 2010 in order to meet working capital requirements, including the interest payments required under our indentures and our required repurchase of $6.6 million of our 11% Senior Secured Notes. We anticipate meeting these requirements by effecting appropriate financings.

As discussed in the Company's report on Form 10-Q for the quarter ended March 31, 2010, the Company executed a subscription agreement on May 17, 2010 for the sale to certain private investment funds of Series B Preferred Shares for anticipated gross proceeds, before offering expenses, of $14,520,000.  The consummation of such sale is subject to customary closing conditions (the "Preferred Offering").  The Company continues to evaluate various other transactions.  To-date, however, the Preferred Offering has not been finalized and there can be no assurance that it or any other permitted transaction can be consummated, given current market conditions.  If a transaction is not completed, we project that we will not have sufficient cash resources to make our required interest payments under our indentures, which will allow all our indebtedness under our indentures to be accelerated. Such acceleration would have a material adverse effect on our business, financial condition, results of operations, and cash flows.  

Conference Call

Forbes Energy will host a conference call to discuss its first quarter 2010 results on Tuesday, May 18, 2010, at 10:00 a.m. Eastern Time (9:00 a.m. Central). To access the call, please dial (480) 629-9690 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 Forbes Energy's website, www.forbesenergyservices.com.  

A telephonic replay of the conference call will be available until May 25, 2010, and may be accessed by calling (303) 590-3030 and using the pass code 4303428.  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&E at (713) 529-6600 or email at [email protected].

About Forbes Energy

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; competition; the ability of the Company to successfully close the Series B Preferred Stock transaction; and the ability to obtain additional cash resources through any other financing or other permitted transactions. 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.   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, 2009 (the "Form 10-K"), which was previously filed, as well as other filings the Company has made with the Securities and Exchange Commission.

Forbes Energy'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 filed 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 Forbes Energy's website, www.forbesenergyservices.com.

SOURCE Forbes Energy Services Ltd.