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KLX Energy Services Holdings Inc (NASDAQ:KLXE) Q2 2019 Results Earnings Conference Call August 21, 2019 9:00 AM ET
Michael Perlman - Treasurer and Senior Director, Investor Relations
Amin Khoury - Chairman and CEO
- Michael Perlman - 投资者关系部门的财务主管和高级总监
- Amin Khoury - 董事长兼首席执行官
Brad Handler - Jefferies
John Watson - Simmons Energy
Simon Wong - Gabelli & Company
- 布拉德汉德勒 - 杰弗里斯
- 约翰沃森 - 西蒙斯能源
- Simon Wong - Gabelli＆Company
Good day, ladies and gentlemen, and welcome to the KLX Energy Services Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded.
I would now like to introduce your host for today's conference, Mr. Michael Perlman, Treasurer and Senior Director of Investor Relations. Sir, you may begin.
美好的一天，女士们，先生们，欢迎参加KLX能源服务2019年第二季度收益电话会议。 此时，所有参与者都处于只听模式。 之后，我们将进行问答环节，届时将提供相关说明。 [操作员说明]。 提醒一下，此电话会议正在录制中。
我现在想介绍一下今天会议的主持人，Michael Perlman先生，财务主管和投资者关系高级总监。 先生，你可以开始吧。
Thank you, Joelle. Good morning and thank you for joining us. Today, we are here to discuss KLX Energy Services financial results for the second quarter period ended July 31, 2019. The company’s earnings news release which was issued earlier this morning presents these results. If you haven’t received it, you’ll find a copy on our website.
We will begin with remarks from Amin Khoury, Chairman and Chief Executive Officer of KLX Energy Services. Also on the call this morning is Tom McCaffrey, Senior Vice President and Chief Financial Officer.
For today’s call, we have prepared a few slides to help you follow our discussion. You can find a presentation on the Investor Relations page of the KLX Energy Services website at klxenergy.com. In addition, copies of the slides are posted on our website for you to refer to.
Before we begin, we have some additional information to cover. Any forward-looking statements that we make are subject to risks and uncertainties. And as always in our prepared remarks and our responses to your questions, we will rely on the Safe Harbor exemptions under the various securities acts, and our Safe Harbor statements in the company’s filings with the Securities and Exchange Commission. We will address questions following our prepared remarks. At that time, the operator will provide Q&A instructions.
Now, I’ll turn the call over to Amin Khoury.
我们将从KLX能源服务公司董事长兼首席执行官Amin Khoury的讲话开始。今天上午的电话会议还有Tom McCaffrey，高级副总裁兼首席财务官。
Thank you, Michael, and good morning, everyone. Thank you for joining us today to discuss our second quarter financial results. During the quarter, we made initial progress in rolling out new product service lines in all three of our geographical segments. We introduced large diameter coiled tubing services, in conjunction with the proprietary HydroPull tool and our own proprietary motor bearing assembly, in both the Northeast/Mid-Con and Rocky Mountains segments. And we’re pleased with the consistent pull-through effects for our complementary asset light services.
We also completed the training of the personnel required to roll out the flowback and testing PSL in one additional GEO region. In spite of these significant new PSL training and launch costs, we did manage to absorb all of these costs and still deliver a profitable quarter.
Second quarter 2019 revenues were up approximately 13% as compared to the first quarter of 2019, and we’re up approximately 40% as compared to the same period in the prior year. Organic revenue growth was approximately 8%. Our Rocky Mountains and Northeast/Mid-Con segments delivered sequential quarterly revenue growth of approximately 31% and 23% respectively, while our Southwest segment revenues declined approximately 8%. Organic revenue growth for our Rocky Mountains and Northeast/Mid-Con segments were very strong at approximately 25% and 13% respectively.
Our second quarter 2019 performance reflected lower activity levels, and reduced capital spending by exploration and production companies almost all of which intensified their focus on capital discipline in order to deliver announced levels of free cash flow. Additionally, severe weather conditions in the Mid-Con including severe flooding which led to impassable roads and highways began in the month of May and persisted through June, resulting in a significant decline in activity in the Mid-Con until the second half of our quarter ending July 31. The magnitude of the negative impact was approximately $8 million to $9 million of lost revenues.
Our second quarter performance was also impacted by lower coiled tubing revenues, due to delays in delivery of coiled tubing spreads and lower wireline revenues in the Permian, due to our decision to not deploy these assets at prices being offered by competitors.
On today’s call, we will review the current oilfield services market, discuss our second quarter 2019 financial performance, and update our guidance.
Let’s begin by reviewing the current oilfield services market environment. Following a strong start to the year, oil prices were volatile in the second quarter, with a price of WTI crude trading down to below $52 per barrel in early June, a 20% decline from the prior month. The decline in oil prices erased a significant portion of the gains from the beginning of the year as investors raised concerns over subdued global growth, causing weak near term oil demand. The magnitude and the speed of the move-lower was further exacerbated by growing concerns over strong U.S. oil and gas production and rising inventories.
As of today, oil and natural gas prices continued to be hampered by concerns about supply and demand imbalances resulting from slower global economic growth and robust production. North American land completion activity remains challenged, as exploration and production companies have intensified their focus on staying within their announced capital expenditure and free cash flow budgets. This has resulted in a decline in the average number of frac fleets operating nationally, and a 13% decline in the average quarterly rig count in North America since the first quarter.
While we have seen the price differential for crude prices narrow in recent months due to additional pipeline capacity coming online, our customers’ completion activities have also been negatively impacted by the lack of available pipeline capacity for natural gas, as well as regulatory limits on flaring. The additional pipeline capacity anticipated to come online in the Permian and in the Bakken within the next year is expected to alleviate some of the gas takeaway capacity issues impacting both regions.
Looking forward, we expect North American drilling and completion activity to decrease further in the third quarter as E&P companies scale back their activities to stay within their announced CapEx and cash flow guidance and for fourth quarter E&P activity to be somewhat further impacted as compared to Q3 by weather-related and seasonal issues as well as budget exhaustion. Despite the expected decline in activity in the third quarter, we expect KLX revenues and profitability to grow in the third quarter as compared to the second quarter. We will discuss this later as we address our guidance and the outlook for the balance of the year.
Let's turn to Slide 3 and review our second quarter 2019 consolidated results. Second quarter 2019 revenues of approximately $165 million increased approximately $19 million or 13%, as compared to Q1. Organic revenue growth was approximately 8%. On a product line basis, completion and intervention services increased approximately 11% and 39%, respectively, as compared to the first quarter, while production revenues declined approximately 5%.
Rocky Mountains segment revenue growth was approximately $15 million or 31%. Rocky Mountains’ organic revenue growth was approximately 25%, reflecting an increase in the number of customers served, increased activity across substantially all product lines and improved adoption rates of recently introduced proprietary tools, so a greater number of customers and a greater share of wallet.
The Rocky Mountains segment also benefited from approximately $3 million of inorganic growth from an additional six weeks of Tecton flowback and testing revenues, as compared to the first quarter 2019.
Northeast/Mid-Con segment delivered revenue growth of approximately 23%. Organic revenue growth was approximately 13%, again driven by a significant increase in the number of customers served and improved adoption rates of proprietary tools. The $4 million revenue contribution from an additional six weeks of Red Bone operations was more than offset by the $8 million to $9 million reduction in revenues caused by flooding and tornadoes in May and June in the Mid-Con, which resulted in six weeks of substantially reduced activity, particularly in Red Bone's primary Oklahoma market.
落基山脉的收入增长约为1500万美元或31％。 Rocky Mountains的有机收入增长率约为25％，这反映了服务客户数量的增加，几乎所有产品线的活动增加以及最近推出的专有工具的采用率提高，因此客户数量更多，钱包份额更大。
Northeast / Mid-Con分部的收入增长约为23％。有机收入增长约为13％，这主要得益于服务客户数量的显着增加以及专有工具采用率的提高。红骨业务额外六周的400万美元收入贡献被Mid-Con 5月和6月因洪水和龙卷风造成的800万至900万美元收入减少所抵消，导致六周大幅减少活动减少，特别是在Red Bone的主要俄克拉荷马州市场。
Our Southwest segment also experienced an increase in the number of customers served, but revenue growth from new customers was more than offset by lower activity levels by certain existing customers and the negative impact from the low utilization of our wireline assets as we chose not to deploy these assets at prices being offered by competitors.
Operating earnings and operating margin were $11 million and 6.7%, respectively. Adjusted EBITDA was $32 million and adjusted EBITDA margin was about 20%, adjusted only to exclude non-cash compensation expense.
Gross margin, operating margin and adjusted EBITDA margin were all negatively impacted by the six weeks of substantially reduced activity in the Mid-Con and costs incurred to roll out new product service lines in all three GEO segments. Adjusted net earnings and adjusted net earnings per diluted share, adjusted to exclude non-cash compensation and amortization expense, were $9.2 million and $0.41 per diluted share, respectively.
Despite aforementioned headwinds during the quarter, our operating earnings were up approximately 360%, while adjusted EBITDA was up approximately 48%. Adjusted net earnings were up approximately $8.9 million and adjusted net earnings per diluted share increased $0.40 to $0.41 per share.
Let’s now turn to Slide 4 and review second quarter 2019 segment financial results beginning with the Rocky Mountains segment.
Second quarter 2019 Rocky Mountains segment revenues of $63.5 million increased by approximately $15 million or 31%. Organic revenue growth was a very strong 25% driven by a significant increase in the number of customers served, increased activities across substantially all product lines and improved adoption rates of proprietary tools including the HydroPull in combination with our proprietary motor bearing assembly and dissolvable plugs. Our Rocky Mountains segment also benefited from approximately $3 million of inorganic growth from an additional six weeks of Tecton flowback and testing revenues.
The Rocky Mountains segment has also built on its differentiation in technology and efficiency by having completed the roll out of greaseless wireline and a fully addressable plug and play disposable gun system. Operating earnings and operating margin were approximately $9 million and 14%, increases of approximately 200% and 770 basis points respectively as compared to Q1. Adjusted EBITDA increased approximately 80% on the 31% increase in revenues, resulting in adjusted EBITDA margin of approximately 25%, that was up 690 basis points as compared to the first quarter of 2019.
Let’s turn to Slide 5 and review our second quarter Northeast/Mid-Con segment performance. Second quarter 2019 Northeast/Mid-Con segment revenues of $48.1 million increased by approximately 23%. Organic revenue growth was approximately 13% driven by an increase in the number of customers served and improved adoption rates of proprietary tools. The $4 million contribution to revenues from the additional six weeks of Red Bone operations was more than offset by flooding and tornadoes in May and June in the Mid-Con, which resulted in six weeks of substantially reduced activity and a negative impact on revenues of approximately $8 million to $9 million.
让我们转到幻灯片5并回顾我们的第二季度东北/中东部分业绩。 2019年第二季度东北/中西部分部门的收入为4810万美元，增长了约23％。由于服务客户数量的增加和专有工具的采用率提高，有机收入增长约为13％。红骨业务额外六周的收入贡献400万美元，远远超过5月和6月中旬的洪水和龙卷风，导致六周活动大幅减少，对收入产生负面影响。 800万美元到900万美元。
More importantly, operating efficiency and operating earnings were severely impacted by the near stoppage in activity for a number of customers during the flooding and its aftermath. And as a result, operating margin was a depressed 8.1%. Adjusted EBITDA did increase 14% to $11 million as compared to the first quarter but the adjusted EBITDA margin of 22.9% was also negatively impacted by the impact of the severe weather conditions. Exclusive of weather-related negative impacts, Northeast/Mid-Con segment operating margin and adjusted EBITDA margins were likely have approximated July operating and adjusted EBITDA margins that were in excess of 11% and 25%, respectively.
Let's turn to Slide 6 and review the second quarter results for the company's Southwest segment. For the second quarter, Southwest segment revenues decreased approximately 8%, driven primarily by lower activity levels by existing customers and lower utilization of wireline assets as we chose not to deploy these assets at prices being offered by competitors. The Southwest segment is also incurring the additional costs of rolling out flowback and testing services, greaseless wireline and the fully addressable plug and play disposable gun system in the Permian that we have already successfully rolled out in the Rocky Mountains segment.
The Southwest segment also continues to incur costs to support the rollout of the coiled tubing product service line in both the Mid-Con and in the Rockies. While quarter-over-quarter spend declined with a number of our existing customers due to their reduction in activity, we have successfully broadened our footprint within our customer base and have added approximately 30 new customers in the Southwest segment during the quarter.
Despite the lower Southwest segment revenues and significant new PSL rollout costs, operating loss of $1.6 million improved by approximately $2.4 million and adjusted EBITDA of $5.1 million improved by $1.9 million or approximately 59%, as compared to the first quarter of 2019.
Now, let's take a moment and review our financial position on Slide 7. As of July 31, cash on hand was approximately $92 million. Total long-term debt of $250 million less cash resulted in net debt of approximately $158 million and the company's net debt to net capital ratio was approximately 29%. Our net debt to adjusted EBITDA leverage ratio was approximately 1.3 times. There were no borrowings outstanding under the company's $100 million credit facility for the three months ended July 31, 2019.
Cash flow provided by operating activities was approximately $8 million, while capital expenditures in the current period were approximately $27 million, reflecting investments related to the company’s strategy to expand recently acquired product service lines in additional geographic segments.
In spite of expected further coiled tubing delivery delays, by the end of the fourth quarter, the company expects it will have received all on order large diameter coiled tubing spreads, and therefore, to have completed the intensive capital investment phase of our strategy to use large diameter coiled tubing in conjunction with certain proprietary tools to pull through a broad range of asset light services for the company's customers in all geographic segments.
As a result of the completion of the intensive capital investment phase of the company’s strategy, in 2019, we expect to generate strong free cash flow in 2020. In fact as we look towards 2020, we will be servicing a larger number of customers in each GEO region, delivering a broader range of services to those customers as we garner a larger percentage of customer spend, while delivering strong free cash flow.
Let’s now briefly review our guidance. We expect E&P spending to be somewhat lower in the third quarter, as customers remain focused on staying within their announced capital spending and free cash flow targets. We expect fourth quarter activity to somewhat lower than Q3 activity, due to weather-related and seasonal effects. Nevertheless, we expect KLX third quarter 2019 revenues to increase approximately 3% over the immediately preceding quarter.
We expect fourth quarter 2019 revenues to be slightly lower as compared to third quarter revenues due to weather-related and seasonal effects. Our revenue growth in 2019 has been negatively impacted by delays in delivery of large diameter coiled tubing spreads from the manufacturer. We expect further significant delays in the delivery of this equipment. However, all five of these new large diameter coiled tubing spreads are expected to be received by the end of the fourth quarter of 2019 bringing our total large diameter coiled tubing spread count to 13 units.
The start up, training and launch costs of the large diameter coiled tubing and flowback and testing PSLs have been a drag on margins, particularly in the Southwest segment which has supported coiled tubing launch costs in both the Rockies and the Mid-Con segments. While we expect a substantial pickup in margins in Q3 for the company overall, we will continue to incur the start up costs through the end of Q1 of 2020. Thereafter, we expect the significant improvement in margins and profitability as well as strong free cash flow throughout the year.
Let’s walk through our third quarter guidance in more detail, please turn to Slide 8. Revenues are expected to be approximately a $170 million in Q3, an increase of approximately 3% as compared to the second quarter of 2019 and an increase of approximately 38% as compared to the same period of the prior year. GAAP net earnings and GAAP net earnings per diluted share are expected to be approximately $9 million and $0.40 per diluted share with each increasing approximately a 150%. EBITDA is expected to be approximately $30 million while approximately 18% of revenues reflecting an increase in EBITDA of approximately 9%.
Adjusted EBITDA is expected to be approximately $35 million or approximately 21% of revenues, reflecting increases of approximately 10% and approximately a 100 basis points as compared to the second quarter of 2019. Net earnings and net earnings per diluted share, adjusted to exclude non-cash compensation and amortization expense are expected to be approximately $15 million and approximately $0.65 per diluted share increasing approximately 63% and approximately 59% respectively as compared to the second quarter of 2019. Return on invested capital is expected to be approximately 15%.
让我们更详细地了解我们的第三季度指引，请转到幻灯片8.第三季度的收入预计约为1.7亿美元，与2019年第二季度相比增长约3％，增幅约为38％与去年同期相比。 GAAP净收益和GAAP每股摊薄净收益预计约为900万美元，每股摊薄收益0.40美元，每股增加约150％。 EBITDA预计约为3,000万美元，而约18％的收入反映EBITDA增长约9％。
调整后的EBITDA预计约为3500万美元或约21％的收入，与2019年第二季度相比增加约10％和约100个基点。净收益和每股摊薄净收益，经调整以排除非 - 预计补偿和摊销费用约为1500万美元，每股摊薄收益约为0.65美元，与2019年第二季度相比分别增加约63％和约59％。预计投资资本回报率约为15％。
With that, I will now turn the call back over to Michael for the Q&A portion of this morning's call.
Thank you, Amin. I will now turn the call over to Joelle for the Q&A portion of today's call. Joelle will provide instructions on how to ask a question. Joelle?
谢谢你，阿明。 我现在将把这个电话转到Joelle，参加今天电话会议的Q＆A部分。 Joelle将提供如何提问的说明。小乔？
Thank you. [Operator Instructions]. Our first question comes from Brad Handler with Jefferies. Your line is now open.
谢谢。 [操作员说明]。 我们的第一个问题来自杰弗里斯的Brad Handler。 你的生产线现已开放。
Maybe I would appreciate if you could speak a little bit more to what's going on in the wireline business in your Southwest region. It does sound like there’s competitive threats and I guess I'm happy to tee up. What feels like is probably what you're offering as a solution to that by -- with greaseless wireline and then your preassembled perf guns. But if you could just kind of speak to that? And maybe in a sense what allows it to get better, more significantly enough better or do you foresee -- maybe in addition to what I was just suggesting from a more proprietary standpoint, do you foresee moving assets out of that region, because it’s simply -- it's just too competitive for the long run?
如果您能更多地谈谈您在西南地区的有线业务中发生的事情，也许我会感激不尽。 听起来确实存在竞争威胁，我想我很高兴能够开球。 感觉就像是你所提供的解决方案 - 使用无油脂电缆，然后是预装配的射孔枪。 但是，如果你可以这样说话呢？ 也许从某种意义上说，什么能让它变得更好，更显着更好或者你能预见到 - 除了我从一个更专有的观点提出的建议之外，你是否预见到将资产移出该地区，因为它只是简单的 - 从长远来看，它的竞争力太强了？
There is too much wireline supply and insufficient demand in the Permian and you got a lot of irrational prices for wireline services in the Permian. We've chosen not to deploy our assets at the prices being offered by competitors. We know a lot of folks that are basically running their equipment into the ground and generating cash flow. We are deploying some of those assets to other regions, where we have better capacity demand and better pricing environment. But we expect that in the long-term we will have to offer a complete range of our services to our customers in the Permian.
So we will return -- we will retain a certain amount of wireline capacity but we are going to choose to keep it sideline until such time as we can generate a reasonable return on our investment in those assets.
二叠纪的电缆供应过多，需求不足，二叠纪的有线电视服务价格也有很多不合理的价格。 我们选择不以竞争对手提供的价格部署我们的资产。 我们知道很多人基本上都在运行他们的设备并产生现金流。 我们正在将其中一些资产部署到其他地区，我们有更好的容量需求和更好的定价环境。 但我们预计，从长远来看，我们将不得不为二叠纪的客户提供全方位的服务。
所以我们将返回 - 我们将保留一定数量的有线容量，但我们将选择保持边线，直到我们能够为这些资产的投资产生合理的回报。
Got it. So, again you used the term running it into the ground, so you assume that after some period of time, it’s -- what is unsustainable, the pricing needs to move higher or else too many companies won't be able to offer the services long-term. Something along those lines?
得到它了。 所以，你再次使用了将它运行到地面的术语，所以你假设在一段时间之后，它是 - 不可持续的，定价需要提高，否则太多的公司将无法提供服务 长期。 沿着那条路线的东西？
Exactly, right. And then we have -- you know that there are a couple of companies teetering on the brink at this point in time and they are basically running their assets for cash flow and we choose not to do that. And we want a reasonable return on assets for our investors. And so we've got a couple of regions here where we have really strong organic growth, I mean 25% and 13% is very strong organic growth, and we are increasing our customer count. We are increasing our penetration and share of wallet. And customers are really growing market share and delivering excellent results.
In the Permian, there is -- particularly with respect to wireline, there is just way too much capacity, insufficient demand and the status of some of the competitors in that environment are such that they’re running those assets for cash flow.
非常正确。 然后我们 - 你知道有几家公司在这个时间点徘徊在边缘，他们基本上是为了现金流而运行他们的资产，我们选择不这样做。 我们希望为投资者提供合理的资产回报。 因此我们在这里有几个地区，我们的有机增长非常强劲，我的意思是25％和13％是非常强劲的有机增长，我们正在增加我们的客户数量。 我们正在增加我们的钱包渗透率和份额。 客户真正在增加市场份额并提供卓越的成果。
If I pivot to look at the second half of the year and get at your guidance a little bit, it’s easy to see potential weakness in natural gas and NGL-related activity in the second half, which would obviously address Northeast/Mid-Con region. You’re talking about weakness, that’s a lot of other different nature in the Permian. Maybe help us think a little bit about regions in terms of your guidance and nevertheless where your opportunity lies please?
如果我转向观察今年下半年并稍微指导一下，很容易看到下半年天然气和NGL相关活动的潜在弱点，这显然会解决东北/中部地区的问题。 你说的是弱点，这在二叠纪还有很多不同的性质。 也许可以帮助我们根据您的指导思考一些地区，然而您的机会在哪里呢？
I think -- so the gas play in the Northeast region quite are gas-related revenues for the company, are about 17% of revenues, and we do expect a significant reduction in activity related to gas in the Northeast. Our segment is the Northeast/Mid-Con segment offsetting that. We got really strong operations in the Mid-Con. I mean we have 13% organic growth in spite of having lost $8 million to $9 million in revenues. That’s negative revenue impact from the tornadoes and flooding during that six weeks during the quarter from May through mid-June. So very strong growth, a large increase in the number of customers and significant increase in share of wallet.
Now while rig count is way down in the Mid-Con as you know, we are doing pretty well there. We introduced coiled tubing services during this past quarter and the pull through that we’re getting from the coiled tubing service is consistent with our expectation and our strategy. So, we do expect the segment to do well during the quarter -- during the third quarter notwithstanding the substantially negative impact from the Utica and Marcellus gas plays.
我认为 - 所以东北地区的天然气业务与公司的天然气相关收入相当于收入的17％左右，而且我们预计东北地区的天然气活动将大幅减少。我们的细分市场是东北/中东部分，抵消了这一点。我们在Mid-Con获得了非常强大的运营。我的意思是，尽管已经损失了800万美元到900万美元的收入，但我们仍有13％的有机增长。这是5月至6月中旬季节期间六周内龙卷风和洪水造成的负收入影响。因此增长非常强劲，客户数量大幅增加，钱包份额显着增加。
现在，如你所知，虽然在Mid-Con的钻机数量有所下降，但我们在那里做得非常好。我们在上个季度推出了连续油管服务，我们从连续油管服务中得到的结果与我们的期望和我们的战略一致。因此，我们确实预计该季度在第三季度表现良好 - 尽管Utica和Marcellus天然气业务产生了显着的负面影响。
And then maybe just one more from me and I guess I feel like I should ask a little bit about bigger picture and from your relatively fresh out of the gate kind of look standpoint too, as a standalone entity anyway. So your initial guidance for 2019 was in the order of 200 million, I think it was $200 million of adjusted EBITDA. If I'm taking sort of a stab at fourth quarter based on your comments, you’re now reining that into something more like a 120 million, 125 million of adjusted EBITDA. The oil price hasn’t necessarily been that different than what you were outlining in terms of the basis of your guidance, right? But obviously a number of other things have happened this year. And so I guess maybe you could speak to, in a sense what -- and sort of how to reassure -- in a sense how to reassure us that your current guidance is really sort of on target, there’s something that we’re going not wake up six months from now and say “Oh, wow, that was wrong for X or Y or Z reasons as well,” but that it is just that much more solid I guess?
然后可能还有一个来自我，我想我觉得我应该问一些关于更大的图片以及从相对新鲜的门外观点来看，无论如何作为一个独立的实体。因此，您对2019年的初步指导大约为2亿，我认为这是2亿美元的调整后EBITDA。如果我根据你的意见在第四季度采取一些措施，你现在正在把它控制成更接近1.2亿，1.25亿调整后的EBITDA。根据您的指导原则，油价未必与您所概述的不同，对吧？但显然今年还发生了许多其他事情。所以我想也许你可以说话，从某种意义上说是什么 - 以及如何安抚 - 从某种意义上说如何向我们保证你当前的指导实际上是针对目标的，有些东西我们不会从现在起六个月后醒来并说“哦，哇，这对于X或Y或Z原因来说也是错的，”但是我认为这更加稳固了？
Oh, we should talk about X, Y and Z, right?
I guess, if you can, I mean it’s obviously the unknowns, right? But it’s…
So see we’ve got -- I mean coiled tubing spreads are a very large revenue generator and also is a great deal of pull through. We’ve had delivery delays which have already impacted revenues during the second quarter, but we've now pulled all the revenues from five coiled tubing spreads, large diameter coiled tubing spreads out of our guidance for the full year. Those spreads generate, when they are up and running and operating, something in the neighborhood of $1 million to $1.2 million per month per unit together with the pull through effect, okay? So, not having that resource in the company and we did discuss this by the way in the -- I think it's both in the news release and in the script, we will be receiving those and we are enthusiastic about that and we're also very happy with the quality of the equipment we're getting. But we’ve moved all of those revenues out of our guidance and we still have in our guidance the receipt of the five units but at the very end of the year. And we will have the negative impact of the use of cash to buy those assets, but the revenues from those assets really won't come in until 2020.
I would think that the good news there is that we would expect strong growth in both revenues, expanding margins and substantial free cash flow since the intensive capital investment phase of our strategy will have been completed. I mean what is our strategy about? It's about differentiating ourselves from the moms and pops that offer some of the services which we offer in order to -- by spending on capital assets that moms and pops are not necessarily able to do.
So, being able to offer our customers coiled tubing and wireline services along with non-frac pressure pumping, pulls through the thru-tubing business and it pulls through the nitrogen business and it pulls through a number of other services and it’s really important part of our strategy.
So, our expectation is that we will have completed, as I say, the intensive investment capital phase of our strategy and be in a different place in 2020, with all of our are GEO regions offering a broad range of services to our entire customer base in each of those regions.
The other impacts on revenues or our guidance for this year of course would be the weather impact. I mean there’s not much that we can do about that, it’s an $8 million to $9 million hit because of the tornadoes and that is why and why could happen at some other period in some other location. Hurricanes, tornadoes, flooding are not things that we can control, blizzards or whatever. We did try to quantitate the impact for you, it’s about $8 million to $9 million of revenues, but it’s a much more important impact on operating earnings and EBITDA margins.
And finally, the wireline thing is that that's our own issue. That's our decision not to deploy those assets, which negatively impacts revenues and that could happen in any GEO region at any time.
所以看看我们有 - 我的意思是连续油管涂料是一个非常大的收入来源，也是一个很大的拉动。我们的交货延迟已经在第二季度影响了收入，但我们现在已经从五个连续油管涂料中获得了所有收入，大直径连续油管在我们全年的指导范围内扩散。当它们启动并运行时，这些差价会产生每单位每月100万到120万美元的收益以及拉动效应，好吗？所以，在公司没有这个资源，我们确实通过以下方式讨论了这个问题 - 我认为无论是在新闻稿还是在剧本中，我们都会接受这些，我们对此充满热情，我们也是对我们所获得的设备质量非常满意。但是我们已将所有这些收入从我们的指导中移除，我们仍然在我们的指导下收到了五个单位，但是在年底。我们将使用现金购买这些资产产生负面影响，但这些资产的收入实际上要到2020年才能实现。
我认为好消息是，由于我们战略的密集资本投资阶段已经完成，我们预计收入将会出现强劲增长，扩大利润和大量自由现金流。我的意思是我们的策略是什么？这是为了区别于我们提供的一些服务的妈妈和流行音乐 - 通过花费在妈妈和流行音乐不一定能做的资本资产上。
Thank you. [Operator Instructions]. And our final question comes from John Watson with Simmons Energy. Your line is now open.
谢谢。 [操作员说明]。 我们的最后一个问题来自John Watson与Simmons Energy。 你的生产线现已开放。
On the coiled tubing side I wanted to follow up on your commentary for the five units that have been delayed. Do you have customers in place for those five units already? And can you also speak to the level of oversupply, undersupply in the large diameter coiled market and maybe compare and contrast that with what you’re seeing in wireline?
在连续油管方面，我想跟进你对延迟的五个单元的评论。 你有五个单位的客户吗？ 您是否也可以谈论大直径盘绕市场供过于求，供应不足的情况，并将其与您在电缆中看到的情况进行比较和对比？
Yes, the new coiled tubing assets do have very specific customers to which they are expected to be employed. The coiled tubing assets are -- some of those assets are used on a dedicated basis round the clock, 24/7, for certain customers and some of the coiled tubing assets are used on a spot basis for multiple customers that are close to one another geographically.
Obviously, the highest utilization comes from dedicated use of the large diameter coiled tubing spreads. There is a shortage of large diameter coiled tubing assets in the 2-5/8 inch range, undoubtedly. We’ve got customers who are begging us to bring that equipment online and we’re late with it because we just don’t have the equipment yet. We have one additional dedicated customer that we expect in the Permian who would like to have the assets, but there’s competition for the assets between regions that already have customers lined up. So the issue that we have right now is allocating our new coiled tubing assets, as they become available to us, to bring into the market. But it’s a very different picture than the wireline situation.
是的，新的连续油管资产确实有非常具体的客户，他们应该被雇用。连续油管资产 - 其中一些资产专门用于24/7全天候服务，对某些客户而言，一些连续油管资产可以在现场的基础上用于彼此接近的多个客户地理位置。
显然，最高利用率来自专用大直径连续油管涂料。毫无疑问，2-5 / 8英寸范围内的大直径连续油管资产短缺。我们有客户乞求我们将这些设备带到网上，我们迟到了，因为我们还没有设备。我们还有一个我们期望在二叠纪拥有资产的专门客户，但是已经有客户排队的地区之间的资产竞争激烈。因此，我们现在面临的问题是将新的连续油管资产分配给我们，以便进入市场。但这与电缆情况完全不同。
Okay, that’s helpful. I guess more near term, $8 million to $9 million of lost revenue from Mid-Con weather during the quarter. The revenue guidance implies your revenues are up somewhere around $5 million quarter-over-quarter. So the sequential increase that you’re contemplating for 3Q, the majority of that is making up for what you lost from the Mid-Con weather in 2Q. Am I thinking about that correctly?
好的，这很有帮助。 我估计这个季度的中期收入将损失800万至900万美元。 收入指导意味着您的收入比上一季度增加约500万美元。 因此，您正在考虑第三季度的顺序增长，其中大部分是弥补您在第二季度中秋季天气中失去的成果。 我正确地考虑了吗？
Well we do expect the Mid-Con to be stronger and the Mid-Con itself to be stronger in Q3, but we expect Northeast revenues to be down in Q3, right? So our Northeast/Mid-Con segment is -- comprises both the Northeast which is gas-related and the Mid-Con which is of course oil and gas, but primarily oil. And so, the increase that we’re forecasting in Q3, I think is, is in spite of what we expect to be substantially lower activity levels in terms of both drilling and completions in the third quarter and I think you probably heard that from all of the OFS companies that have reported.
我们确实预计Mid-Con会更强劲，而Mid-Con本身在第三季度会更强劲，但我们预计东北地区的收入将在第三季度下降，对吧？ 所以我们的东北/中东部分是 - 包括与天然气有关的东北部和Mid-Con，当然也是石油和天然气，但主要是石油。 因此，我认为，我们在第三季度预测的增长，尽管我们预计第三季度钻井和完井的活动水平将大大降低，我想您可能听说过 已报道的OFS公司。
Right, absolutely. To that point, we’re three weeks through August at this point. Can you give us an update on how August is trending relative to maybe the 2Q average monthly results?
对，绝对。 到目前为止，到目前为止，我们已经过了八个星期。 您能否向我们介绍8月相对于2Q平均月度结果的趋势？
August is not even finished yet, August is not finished yet. We don't see anything unusual in August but we won't report on August until it's finished, if we report on August as a single month at all. So, I can't comment on our August numbers, except to say, we don't see anything unusual in August that I know of.
八月尚未完成，八月尚未完成。 我们在8月份看不到任何异常，但如果我们将8月报告为单月，我们将不会在8月份报告，直到完成为止。 所以，我不能评论我们8月份的数据，只是说，我知道8月份我们看不到任何异常。
Okay. Okay. And then lastly, the Rockies were very strong and you gave some nice color on that in your prepared remarks. Obviously, just curious if there is anything else to share, anything else we should be aware of heading into the back half of the year in that region, given the strength you saw in 2Q?
好的。 好的。 最后，落基山脉非常坚固，你在准备好的评论中给出了一些不错的颜色。 显然，只是好奇是否有其他任何东西可以分享，我们应该注意到在该地区进入后半年的其他任何事情，鉴于你在第二季看到的实力？
Well we certainly have seasonal or weather-related issues in the Rockies in the fourth quarter, right? I mean you always have really tough weather, snow, maybe blizzards who knows what. So, we expect somewhat lower revenues in Q4 than we expect to report in Q3, but there's nothing else in particular that I would comment on that. And by the way, organic revenue growth in -- you’ve called out the Rockies because of the 25% organic revenue growth, which I guess is different than any other company that's reported, any other OFS company reporting anywhere but we had essentially the same result in the Mid-Con -- the Northeast/Mid-Con segment, because we had 13% organic revenue growth in spite of having lost $8 million to $9 million in revenues because of the tornadoes and floods, which really took us down for about six weeks.
So I mean we've got a very strong business and our strategy seems to be working. We've got the issues to deal with in the Permian, the wireline issues to deal with the Permian but we have got two of our three segments that are really humming right now.
那么我们肯定在第四季度在落基山脉有季节性或与天气有关的问题，对吗？我的意思是你总是有非常艰难的天气，下雪，也许暴风雪谁知道什么。因此，我们预计第四季度的收入会比第三季度的预期低一些，但我没有其他任何特别的评论。顺便说一句，有机收入的增长 - 你已经召集落基山脉，因为25％的有机收入增长，我猜这与任何其他报道的公司不同，任何其他OFS公司报告任何地方，但我们基本上同样的结果在Mid-Con - 东北/中东部分，因为我们有机收入增长了13％，尽管由于龙卷风和洪水导致我们损失了800万至900万美元的收入，这真的让我们失望了大约六个星期。
Thank you. And the final question will come from Simon Wong with Gabelli & Company. Your line is now open.
谢谢。 最后一个问题将来自Simon Wong和Gabelli＆Company。 你的生产线现已开放。
You mentioned that your capital adjustment program is coming to an end this year. Do you have a preliminary CapEx number for 2020?
No, not yet. We didn’t say it’s coming to an end. We said the intensive capital investment phase is coming to an end. So, this year we will spend close to $100 million in total, $20 million to $25 million in maintenance but the balance is all growth CapEx, which we won't experience the benefit from until 2020 and beyond. We will continue to offer new capital equipment to our customers and replace worn capital equipment and so on and so forth. But the level of expenditures will be dramatically lower than the level of expenditure which we have in 2019.
还没有。 我们没有说它即将结束。 我们说密集的资本投资阶段即将结束。 因此，今年我们将花费近1亿美元，维持2000万美元至2500万美元的维护，但余额是所有CapEx的增长，我们将无法从2020年及以后获益。 我们将继续为客户提供新的资本设备，并更换磨损的资本设备等等。 但支出水平将大大低于我们在2019年的支出水平。
Okay. And then in relation to the stock repurchase authorization you announced two or three weeks ago, do you have the timeline on that or what’s your thinking about that?
Yes. There is no specific start date or end date and there is no specific timeline on that program. But given that we expect strong free cash flow in 2020 and given that we now have a cash balance of $92 million and an unused $100 million credit line, we think that it’s a very good investment for the company to buy back its shares with the share price depressed as it is currently.
是。 没有特定的开始日期或结束日期，该计划没有具体的时间表。 但考虑到我们预计到2020年自由现金流强劲，并且我们现在拥有9200万美元的现金余额和未使用的1亿美元信贷额度，我们认为这是一项非常好的投资，公司用该股份回购其股份 目前价格低迷。
Okay, one more -- last question. Is there anything in the new product side in the pipeline that you can talk about?
好的，还有一个 - 最后一个问题。 您可以谈论新产品方面的任何内容吗？
It’s a good question. I think that given that we’re rolling out so many new tools as we speak, I think we just assume not to talk about additional ones. I mean we started up the sales of our dissolvable plugs, that’s going pretty well and contributed to growth in the quarter, particularly in the Rocky Mountains segment. They HydroPull tool together with our Havok motor bearing assembling in conjunction with our coiled tubing is pulling through a lot of additional service revenues. So we’ve got a lot of new stuff that we are working through currently. So, I just assume not to talk about things that we haven’t yet introduced into the market. By the way, the last quarter we did mention the toe sleeves and the liner hangers and some of those products which we sell as part of our DHPS product line together with the dissolvable plugs. So there’s a lot of -- there are a lot of new products which we are delivering into each of our GEO segments.
这是一个很好的问题。 我认为，鉴于我们正在推出如此多的新工具，我认为我们只是假设不再谈论其他工具。 我的意思是我们开始销售我们的可溶解插头，这种插头非常顺利，并有助于本季度的增长，特别是在落基山脉段。 他们的HydroPull工具与我们的Havok电机轴承组装在一起，与我们的连续油管一起提供了大量额外的服务收入。 所以我们现在有很多新的东西。 所以，我只是假设不谈论我们尚未引入市场的事情。 顺便说一句，上一季我们确实提到了鞋头套和衬里衣架以及我们作为DHPS产品系列的一部分与可溶解塞子一起销售的一些产品。 所以有很多 - 我们正在为每个GEO细分市场提供很多新产品。
I think with that our call has come to a close. We wish all of you a very good day and thanks for participating in our earnings call.
Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program and you may all disconnect. Everyone, have a wonderful day.
女士们，先生们，谢谢你们参加今天的会议。 这确实结束了今天的计划，你可能会断开连接。 每个人，都有美好的一天。
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