Expro Announces Unconsolidated Third Quarter 2021 Results for Legacy Expro and Frank’s

Source: www.gulfoilandgas.com 11/8/2021, Location: North America

Expro Group Holdings N.V. reported financial and operational results for Expro Group Holdings International Limited, (“Legacy Expro”) and Frank’s International N.V. (“Frank’s”) for the three and nine months ended September 30, 2021.

Legacy Expro and Frank’s completed their merger on October 1, 2021 and consolidated combined company financial results under Expro Group Holdings N.V. will be reported beginning with the fiscal fourth quarter of 2021. However, the Company noted that third quarter pro forma combined company revenue was $312.5 million, an increase of 10% sequentially, driven primarily by higher activity and continued market growth across all regions.

Frank’s results are detailed in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 which will be filed with the Securities and Exchange Commission.

References in this earnings release to “Frank’s” are to the Company prior to the completion of the merger on October 1, 2021 and to “Legacy Expro” are to the Legacy Expro Group that combined with Frank’s in the merger.

Frank’s Third Quarter 2021 Financial Highlights
- Frank’s delivered third quarter revenue of $114.9 million, an improvement of 7% from the second quarter of 2021 and a significant improvement from the third quarter of 2020.
- Third quarter net loss totaled $15.1 million, as compared to the prior quarter net loss of $12.6 million driven by higher foreign currency losses.
- As defined by Frank’s, Adjusted EBITDA for the third quarter of 2021 was $13.8 million, a sequential improvement of 11% with improving revenue in the TRS and Tubulars product lines.

Legacy Expro Third Quarter 2021 Financial Highlights
- Legacy Expro’s third quarter revenue was $197.5 million, compared to revenue of $176.3 million in the second quarter of 2021, an increase of 12% sequentially.
- Net loss for the third quarter of 2021 was $11.9 million compared to a net loss of $8.4 million for the second quarter of 2021, primarily driven by incremental merger and integration related costs of $4.9 million incurred during the third quarter of 2021 as compared to the second quarter of 2021.
- As defined by Legacy Expro, Adjusted EBITDA for the third quarter of 2021 was $30.9 million, a sequential increase of 18%, driven by higher revenue, a more favorable activity mix and lower corporate costs.
- Legacy Expro achieved substantial growth in Production Services and Subsea, Completion and Intervention Services, capitalizing on improving industry fundamentals.

Michael Jardon, the Company’s Chief Executive Officer, noted, “Expro is a full-cycle energy services leader with scale, a broad offering of services and solutions, a global operating footprint, through-cycle resiliency and a strong financial profile. Frank’s and Legacy Expro ended the quarter in a strong position as we continued to experience growth across all areas of our business, supported by sustained customer demand and improving industry fundamentals.

“Our results this quarter are also a testament to the continued hard work, commitment and expertise of our talented employees from both Frank’s and Legacy Expro. Together, we believe that we are well positioned to accelerate growth, improve profitability and enhance value for shareholders, employees, customers and partners. The integration of Frank’s and Legacy Expro is on track, and we are looking forward to what we can achieve as we begin this new journey together.

“Looking ahead, we expect another quarter of solid financial performance. The Company’s current outlook for the fourth quarter of 2021 is for flat to mid-single digit revenue growth and an Adjusted EBITDA Margin, consistent with the definition used by Legacy Expro, of 15-17% of consolidated revenue, driven by improved business mix and continued discipline in regard to costs. While the fourth and first quarters are typically seasonally weaker quarters due to reduced activity in the Northern Hemisphere, we continue to see signals of a multi-year recovery, which is expected to gain momentum as 2022 progresses.

“With a backdrop of global economic recovery and improving industry fundamentals, Expro is also poised to benefit from increased activity as well as cost and revenue synergies. During the third quarter, we finalized many of our plans for the integration, and we are confident in our ability to achieve previously disclosed synergy targets. Our integration work has confirmed our expectations that we can strengthen our operating model, lower our cost structure and significantly expand margins. We continue to expect approximately $55 million in annual run-rate cost synergies within the first 12 months following the closing of the merger, with the objective of delivering $70 million of total cost savings in 24-36 months. We also expect that revenue synergies will result in $10 million to $30 million of incremental Adjusted EBITDA through complementary customer relationships and operating footprints, increased time on rig and greater exposure to the full life of field.

“We believe Expro has an exciting platform with the scale, diversity and financial profile to accelerate growth and provide through-cycle resiliency. Our strategy is already underway, and we look forward to creating significant value on behalf of our shareholders, employees, customers and partners.” concluded Mr. Jardon.

Notable Awards and Achievements
As a demonstration of the combined company’s commitment to produce technologies that improve the integrity of the well and decrease risk of injury to personnel, Frank’s was recognized as 2020 World Oil Award Finalist for two technologies and was the recipient of the 2021 Hart’s E&P Meritorious Award Engineering Innovation in the category of Health Safety and Environment. In the category of Best Well Integrity Technology, the 22” BRUTE® High-Pressure/High-Tensile Service Packer is the newest addition to the BRUTE® System.

For the category of Health, Safety, Environmental/Sustainable Development Offshore, Frank’s was also recognized for the Spring ARK™ Anti-Rotation Key (“Spring ARK™”), which is designed to impede vibration induced rotation (movement) of a fully made-up large OD connection that can occur during drilling operations. The Spring ARK™ functions completely hands free on the rig. It is pre-installed prior to shipment to the well site and self-energizes during makeup, thus eliminating the need for personnel on the rig floor to enter into the red zone around well center.

Further demonstrating our commitment to safety, VIGILANCE™ - truly a step change in safety during well construction operations - was the recipient of the 2021 Hart’s E&P Meritorious Award for Engineering Innovation. VIGILIANCE™ is a novel surveillance technology that tracks equipment as well as personnel movement through a unified real-time system with a high degree of accuracy and precision. An early deployment of the system in the Gulf of Mexico proved itself with increased safety measures when the system was able to stop the mechanized tong system twice during operations when personnel entered the critical area in the red zone with multiple moving equipment, thereby avoiding two potential incidents.

Frank’s announced during the third quarter that it has received the inaugural 2021 Most Valuable Partner (MVP) Award from a supermajor operator in recognition of its work in Guyana. The customer considered the outstanding performance of Frank's teams across several categories, including Safety, Security, Health and Environment (SSHE) Excellence, demonstrating "reliability; adaptability and proactivity and truly working as a partner" to provide the highest level of service and safety to lower the overall cost of the operator’s well ownership.

Known as one of the industry leaders in the deployment of large diameter tubulars utilized for conductor strings and surface casing strings in deepwater and ultra-deepwater environments, a new milestone was achieved with a first deployment of the 38” Xtreme3™ Super Duty (SD) & 22” XT4™ Gas Tight (GT) threaded connections for an operator in the Gulf of Mexico onboard a drillship operating in approximately 6,700 feet of water.

Highlighting the Company’s production optimization capabilities, Legacy Expro successfully completed an integrated Plug and Abandonment (P&A) contract in West Africa, utilizing its integrated Open Water Intervention Riser System (OWIRS), which was deployed from a drillship. This system performed over 250 functions during the project with 100% operational uptime and no non-productive time (NPT) incurred, leading to the successful intervention and barrier placement on 15 wells.

In addition, Legacy Expro’s Octopoda™ annulus intervention system achieved world record depth for annular intervention in the Piedemonte region of Colombia. The system successfully reached 300 meters in the annulus and sealed the C annulus of the well. This removed the risk of casing collapse and gas migration to enable the well to produce and significantly extend its production lifespan. Octopoda™ is the latest example of Expro’s commitment to investing in innovation, developing new technologies and working towards reducing its own and its clients’ carbon footprint.

Other Financial Information
In connection with the merger, on October 1, 2021, the Company and certain of its subsidiaries entered into a new credit facility with DNB Bank ASA, London Branch, as agent, and other financial institutions as lenders with an aggregate commitment of $200.0 million with up to $130.0 million available for drawdowns as loans and up to $70.0 million for bonds and guarantees (the “New Credit Facility”). Subject to the terms of the New Credit Facility, the Company has the ability to increase the commitments to $250.0 million. The New Credit Facility is available for general corporate purposes and replaces the credit facilities of Frank’s and Legacy Expro which were terminated on October 1, 2021 in connection with the merger.

Frank’s capital expenditures related to property, plant and equipment totaled $3.1 million in the third quarter of 2021 and year to date totaled $7.6 million. Frank’s currently plans for capital expenditures during 2021 of approximately $15 million.

Legacy Expro’s capital expenditures related to property, plant and equipment totaled $15.8 million in the third quarter of 2021 and year to date totaled $53.5 million. Legacy Expro continues to plan for capital expenditures during 2021 in the range of $70 to $75 million.

As of September 30, 2021, Frank’s consolidated cash and cash equivalents, including restricted cash, totaled $204.7 million. Frank’s had no outstanding debt as of September 30, 2021.

As of September 30, 2021, Legacy Expro’s consolidated cash and cash equivalents, including restricted cash, totaled $65.9 million. Legacy Expro had no outstanding debt as of September 30, 2021.

The combined company’s pro forma cash and cash equivalents, including restricted cash, and total liquidity as of September 30, 2021 was $270.6 million and $400.6 million, respectively. Total liquidity includes $130.0 million available for drawdowns as loans under the New Credit Facility.

Frank’s provision for income taxes for the current quarter was $4.0 million compared to $6.8 million in the prior quarter. The change in income taxes was primarily driven by the geographical mix of income.

Legacy Expro’s provision for income taxes for the current quarter was $5.1 million compared to $0.7 million in the prior quarter. The change in income taxes was primarily driven by changes in taxable profits in certain jurisdictions, the reduction of deferred tax liabilities due to amortization of intangible assets and derecognition of deferred tax assets in certain jurisdictions during the current quarter.


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