Forbes Energy Services Reports Second Quarter Financial Results

ALICE, Texas, Aug. 15, 2011 /PRNewswire/ -- Forbes Energy Services Ltd. (NASDAQ: FES and TSX: FRB) (the "Company") today announced financial and operating results for the three months ended June 30, 2011.  All share and per share amounts have been adjusted to reflect the Company's recently completed four-to-one share consolidation.

Revenues for the second quarter increased 59% to $127.1 million compared to $80.0 million in the second quarter of 2010.  The increase was driven by significantly higher utilization and pricing in both divisions.

GAAP net loss attributable to common shareholders for the three months ended June 30, 2011 was $23.6 million, or $1.13 per share, compared to a net loss attributable to common shareholders of $2.3 million, or $0.11 per share, in the prior year period.  Excluding the non-recurring items described below, net income attributable to common shareholders for the three months ended June 30, 2011 would have been $5.5 million or $0.26 per share. For a reconciliation of net income attributable to common shareholders excluding non-recurring items to net income attributable to common shareholders, please see the disclosures at the end of this release and on the Company's website.

Adjusted EBITDA for the second quarter of 2011, excluding the non-recurring items described below, totaled $23.8 million compared to $13.4 million for the same period in the prior year and $21.0 million for the first quarter of 2011.  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 excluding non-recurring items to net income, please see the disclosures at the end of this release and on the Company's website.

Forbes Energy Services experienced several non-recurring events during the quarter which impacted earnings.  First, the Company completed a debt refinancing during the quarter which resulted in the recognition of a $35.4 million loss on early extinguishment of debt.  Second, the Company reached a legal settlement regarding certain outstanding patent infringement litigation which resulted in settlement costs and associated legal fees for the current quarter of $6.8 million.  Finally, the Company incurred legal expenses of $211,000 associated with the repurchase of its previously outstanding debt.

John Crisp, the Company's President and Chief Executive Officer, stated, "We produced the highest total revenue in company history driven by record rig hours and strong pricing.  Rising costs continue to weigh on margins, but overall, we're very pleased with our operating results.  Our outlook in both divisions remains positive.

"Over the last few months, we've refinanced all our debt at significantly lower interest rates, completed a reverse stock split and converted into a Texas corporation.  And I'm proud to announce that we will now officially have a U.S. stock listing as we are set to begin trading on the NASDAQ tomorrow morning under the ticker symbol FES."

Business Segment Results

Well Servicing

Well servicing revenue totaled $58.3 million in the second quarter of 2011 compared to $39.7 million in the prior year period and $48.7 million in the first quarter of 2011. Segment gross margin totaled $12.0 million (21% of revenues) in the second quarter compared to $11.0 million (28% of revenues) in the second quarter of 2010 and $10.1 million (21% of revenues) for the first quarter of 2011.  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 116,673 rig hours for the second quarter of 2011, including 19,032 hours in Mexico, compared to 96,601 total hours in the second quarter of 2010 (18,432 in Mexico) and 107,327 total hours in the first quarter of 2011 (17,712 in Mexico).  The Company had 172 rigs in its well service fleet at June 30, 2011.  Capital expenditures for the well servicing segment were approximately $16.0 million during the three months ended June 30, 2011.

Fluid Logistics and Other

Fluid logistics and other revenues in the second quarter of 2011 totaled $68.8 million compared to $40.4 million in the second quarter of 2010 and $58.2 million in the first quarter of 2011. Gross operating margins for the fluid logistics segment totaled $18.1 million (26% of revenues) in the second quarter of 2011 compared to $8.4 million (21% of revenues) in the prior year period and $16.0 million (28% of revenues) in the first quarter of 2011.

The Company recorded 367,397 truck hours during the second quarter of 2011 compared to 276,940 hours for the second quarter of 2010 and 313,445 hours in the first quarter of 2011.  The Company's fluid transport segment heavy truck fleet totaled 440 as of June 30, 2011.  Total capital expenditures for the fluid logistics segment were approximately $7.5 million for the three months ended June 30, 2011.

Liquidity and Capital Resources

As of June 30, 2011, the Company had $34.9 million in unrestricted cash and $280 million of 9% Senior Notes.  As of August 15, 2011, the Company had $29.2 million in unrestricted cash. We are also seeking to enter into a new secured credit facility with a maximum initial commitment amount of $75.0 million, although we cannot assure this will occur.

Conference Call

The Company will host a conference call to discuss its second quarter 2011 results on Tuesday, August 16, 2011, at 11:00 a.m. Eastern Time (10:00 a.m. Central). To access the call, please dial 480-629-9771 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 August 23, 2011, and may be accessed by calling (303) 590-3030 and using the pass code 4464386.  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.