Basic Energy Services plans to sell its pumping services assets, excluding coiled tubing, in multiple deals totaling $30–45 million.
“Despite the recent repositioning and restructuring in the pumping business, activity and pricing remain difficult, inhibiting the potential for positive free cash flow in the near- to medium-term,” the company said in a news release. “This divestiture is designed to bolster the company’s core remaining production-focused businesses of well servicing and water logistics. Furthermore, this non-core divestiture will fund the projected 2020 and 2021 capital budget of Agua Libre Midstream, the company’s rapidly growing, high return-on-assets business.”
The company said it will complete all pressure pumping work in progress before selling equipment and real estate in multiple deals during the fourth quarter of 2019 and first quarter of 2020.
“Unfortunately, these pumping business lines currently remain in a structurally-disadvantaged position, as they are our most capital-intensive businesses,” said Roe Patterson, president and chief executive officer of Basic Energy Services.
“Given current market conditions and appetite for pumping and ancillary equipment, we believe our plan limits execution risk and allows for greater proceeds than under a going-concern valuation and sale scenario,” he said.
The company also plans to immediately cut general and administrative expenses by $14 million/year.
Basic Energy Services expects its 2020 revenue in its well servicing segment and remaining completions and remedial services segment—which includes coiled tubing, snubbing, and rental and fishing tools—to be flat compared with 2019 revenue unless there is “a significant recovery in crude prices.”
However, it expects revenue from its water logistics segment—which includes Agua Libre Midstream and fluid services—to grow 5–10% year-over-year in 2020, with growth accelerating as new projects begin operations.
Basic Energy Services provides wellsite services with operations managed regionally and concentrated in Texas, New Mexico, Oklahoma, Arkansas, Kansas, Louisiana, Wyoming, North Dakota, California, and Colorado, including liquids-rich basins such as the Permian Basin and Powder River Basins and the Bakken, Eagle Ford, and Denver-Julesburg Shales.