Nuverra Environmental Solutions, Inc. (NYSE:NES) announced financial and operating results today for the second quarter and six months ended June 30, 2015.

 SUMMARY OF QUARTERLY RESULTS
  • Revenue from continuing operations for the second quarter of $92.4 million, a decrease of $26.7 million, or 22.4%, sequentially from the first quarter of 2015, and down $34.4 million, or 27.1%, from the second quarter of 2014.
  • Second-quarter net loss from continuing operations of $20.6 million, or a loss of $0.75 per diluted share, compared with a net loss of $24.7 million, or a loss of $0.97 per diluted share, in the second quarter of 2014.
  • Adjusted net loss from continuing operations, excluding special items, of $18.5 million, or a loss of $0.67 per diluted share, compared with adjusted net loss of $11.6 million, or a loss of $0.45 per diluted share, in the second quarter of 2014.
  • EBITDA from continuing operations of $10.1 million, an increase of $194,000, or 2.0%, from the second quarter of 2014.
  • Adjusted EBITDA from continuing operations of $12.3 million, a decrease of $10.6 million, or 46.3% from the second quarter of 2014.
  • Total costs and expenses in the second quarter down $38.8 million, or 28%, compared with the second quarter of 2014. On a year-to-date basis, total costs and expenses down by $53.0 million, or 19.5%, compared with the first half of 2014.
  • Year-to-date net cash provided by operating activities from continuing operations of $42.3 million; year-to-date free cash flow of $35.0 million.

Mark D. Johnsrud, Chairman of the Board and Chief Executive Officer, commented, “As expected, the industry environment proved to be challenging throughout the second quarter, with a further decline in overall drilling and completion activities coupled with pricing concessions that impacted the full quarter. The effect of the energy market downturn was more pronounced in the Bakken, where we have most recently seen a 62% drop in rig count from a year ago, compared with the overall decline in North American land rigs of 53%.

“In view of the current industry conditions, our expectation is for lower levels of drilling and completion activities to continue into the second half of the year,” Mr. Johnsrud said. “As such, we will remain consistent in our strategy to further proactively manage costs, drive operating efficiencies, preserve capital, optimize asset utilization and deliver the best services to our customers so that we can emerge a stronger company positioned for growth in the recovery.”

SECOND QUARTER 2015 RESULTS

Second-quarter 2015 revenue from continuing operations was $92.4 million, a decrease of approximately $34.4 million or 27.1%, compared with revenue from continuing operations of$126.9 million in the second quarter of 2014. Revenue was down 22.4% sequentially when compared to the 2015 first quarter. The decline was primarily due to the substantial quarterly decrease in overall water logistics, solids management and rental activities in the Rocky Mountain Division, as well as a decrease in water logistics and fresh water transfer services in the Southern Division. These decreases were partly offset by increases in water logistics and salt water recycling activities in the Northeast Division.

Proactive cost-management initiatives across the organization contributed to a 28% reduction in total costs and expenses in the second quarter when compared with the second quarter of 2014.  During the second quarter, total costs and expenses decreased by $38.8 million, primarily attributable to $11.5 million in lower payroll and related expenses with an associated 14.9% reduction in total personnel, $6.2 million in fuel savings, $12.4 million in lower legal and environmental costs and $8.7 million in all other savings. On a year-to-date basis, the Company’s cost-management efforts have contributed to a 19.5% reduction in total costs and expenses, including a 21.6% reduction in personnel.

Second-quarter 2015 net loss from continuing operations was $20.6 million, or a loss of $0.75 per diluted share, compared with a loss of $24.7 million, or a loss of $0.97 per diluted share, in the second quarter of 2014.  Adjusted net loss from continuing operations, excluding special items, was $18.5 million for the quarter, or a loss of $0.67 per diluted share, compared with adjusted net loss from continuing operations of $11.6 million, or a loss of $0.45 per share in the second quarter of 2014. Due to the valuation allowance against deferred tax assets, the Company does not record tax benefits attributable to its pre-tax loss.

Adjusted EBITDA from continuing operations for the second quarter was $12.3 million, a 46.3% year-over-year decrease when compared with $22.9 million in the second quarter of 2014. Adjusted EBITDA margin for the second quarter was 13.3%, compared with 18.0% in the second quarter of 2014. The decrease was due to the lower overall base of fluids logistics, solids management and rental revenue driven primarily by significant declines in the Rocky Mountain Division, offset in part by overall cost savings achieved in the second quarter. A reconciliation of excluded items and adjusted EBITDA to the most directly comparable GAAP financial measure can be found in the financial tables included with this press release.

YEAR-TO-DATE RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2015 (“YTD”)

YTD revenue from continuing operations was $211.5 million, a decrease of $43.3 million or 17.0%, compared with $254.9 million for the same period in 2014. The difference was primarily a result of lower overall levels of water logistics, solids management and rental activities in theRocky Mountain Division and a decline in water logistics and fresh water transfer services in the Southern Division. These decreases were partly offset by increases in water logistics and salt water recycling activities in the Northeast Division.

YTD net loss from continuing operations was $32.6 million, or a loss of $1.18 per diluted share, compared with a loss of $36.6 million, or a loss of $1.45 per diluted share, for the same period in 2014.  Excluding special items, YTD adjusted net loss from continuing operations was $29.8 million, or a loss of $1.08 per diluted share, compared with adjusted net loss from continuing operations of $20.7 million, or a loss of $0.82 per share in 2014.

YTD adjusted EBITDA from continuing operations was $31.0 million, a 25.8% decrease when compared with the same period in 2014. Adjusted EBITDA margin for the 2015 YTD period was 14.6%, compared with 16.4% in 2014. The decrease was due primarily to the lower overall base of water logistics, solids management and rental revenue, offset in part by cost savings achieved in the first half of the year.

CASH FLOW AND LIQUIDITY

Net cash provided by operating activities from continuing operations through June 30, 2015 was$42.3 million. Year-to-date net cash capital expenditures for continuing operations were $7.4 million, and related primarily to targeted investments in the Terrafficient solids recycling facility and other transportation-related equipment in the Rocky Mountain Division. The Company’s disciplined capital spending and measured cost controls generated $35.0 million in free cash flow during the six-month period.

As of June 30, 2015, total debt outstanding, excluding $0.5 million of discounts and premiums, was $524.0 million, consisting of $400.0 million of 2018 Notes, $101.8 million outstanding under the revolving credit facility, and $22.2 million in capital leases and notes. Total liquidity at June 30, 2015 was $63.8 million, including $34.6 million cash and $29.2 million of net availability under the Company’s credit facility.

DIVISION SUMMARY
Three Months Ended June 30, 2015 Rocky Mountain Northeast Southern Corporate Total
Revenue $           47,601 $  27,411 $ 17,415 $          – $92,427
Operating income (loss) 1,371 295 (2,468) (6,767) (7,569)
   Operating Margin % 2.9% 1.1% (14.2%) NA (8.2%)
Adjusted EBITDA 10,764 4,667 1,939 (5,087) 12,283
   Adjusted EBITDA Margin % 22.6% 17.0% 11.1% NA 13.3%
Three Months Ended June 30, 2014 Rocky Mountain Northeast Southern Corporate Total
Revenue $            77,479 $  22,484 $ 26,899 $          – $126,862
Operating income (loss) 9,958 (4,264) (6,875) (10,739) (11,920)
   Operating Margin % 12.9% (19.0%) (25.6%) NA (9.4%)
Adjusted EBITDA 22,997 2,000 2,367 (4,475) 22,889
   Adjusted EBITDA Margin % 29.7% 8.9% 8.8% NA 18.0%
Six Months Ended June 30, 2015 Rocky Mountain Northeast Southern Corporate Total
Revenue $            117,011 $  54,724 $ 39,804 $          – $211,539
Operating income (loss) 11,563 197 (5,482) (13,599) (7,321)
   Operating Margin % 9.9% 0.4% (13.8%) NA (3.5%)
Adjusted EBITDA 29,118 8,446 4,243 (10,818) 30,989
   Adjusted EBITDA Margin % 24.9% 15.4% 10.7% NA 14.6%
Six Months Ended June 30, 2014 Rocky Mountain Northeast Southern Corporate Total
Revenue $            159,385 $  41,659 $ 53,832 $          – $254,876
Operating income (loss) 18,753 (7,311) (9,109) (19,324) (16,991)
   Operating Margin % 11.8% (17.5%) (16.9%) NA (6.7%)
Adjusted EBITDA 44,728 3,513 3,908 (10,361) 41,788
   Adjusted EBITDA Margin % 28.1% 8.4% 7.3% NA 16.4%
Rocky Mountain Division (Bakken)

In the Rocky Mountain Division, second-quarter revenue was $47.6 million, a decrease of 38.6% when compared with the second quarter of 2014. The decrease was related to an accelerated decline in drilling and completion activities, which significantly reduced second-quarter demand for water logistics, solids management and equipment rentals. Additionally, the full-quarter impact of pricing concessions drove lower revenue in the second quarter. On a year-to-date basis, Rocky Mountain Division revenue was $117.0 million, a decrease of 26.6%, when compared with YTD revenue of $159.4 million for the same period in 2014.

Second-quarter adjusted EBITDA for the Rocky Mountain Division was $10.8 million, a 53.2% decrease compared with adjusted EBITDA of $23.0 million in the second quarter of 2014. Second-quarter adjusted EBITDA margin was 22.6%, compared with an adjusted EBITDA margin of 29.7% in the second quarter of 2014. On a YTD basis, adjusted EBITDA for the Rocky Mountain Division was $29.1 million with a margin of 24.9%, compared with adjusted EBITDA of $44.7 million and a margin of 28.1% in 2014. Margin declines were primarily due to the substantial reduction in revenue from drilling and completion activities, offset in part by the impact of cost-management initiatives.

Northeast Division (Marcellus, Utica)

In the Northeast Division, second-quarter revenue was $27.4 million, an increase of 21.9% compared with revenue of $22.5 million in the second quarter of 2014. The year-over-year increase was driven by higher overall water logistics and salt water disposal activities, primarily related to newer customers in the Utica and South Marcellus regions. On a YTD basis, Northeast Division revenue was $54.7 million, an increase of 31.4%, when compared with YTD revenue of$41.7 million in the same period of 2014.

Second-quarter adjusted EBITDA for the Northeast Division was $4.7 million, a 133.4% increase compared with adjusted EBITDA of $2.0 million in the second quarter of 2014. Second-quarter adjusted EBITDA margin was 17.0%, compared with adjusted EBITDA margin of 8.9% in the second quarter of 2014. On a YTD basis, adjusted EBITDA for the Northeast Division was $8.4 million, resulting in a margin of 15.4%, compared with $3.5 million and a margin of 8.4% in 2014. Margin improvements were primarily due to a higher overall revenue base combined with the impact of cost-management initiatives.

Southern Division (Haynesville, Eagle Ford, Mississippian, Permian)

In the Southern Division, second-quarter revenue was $17.4 million, a 35.3% decrease compared with revenue of $26.9 million in the second quarter of 2014. The difference was primarily related to the overall decline in drilling and completion activities throughout the region, which drove reduced demand for water logistics services. Haynesville Pipeline revenue was up slightly on a sequential basis when compared with the first quarter of 2015; however, this was offset by sequential decreases in disposal revenue in both the Haynesville and the Eagle Ford regions. On a year-to-date basis, Southern Division revenue was $39.8 million, a decrease of 26.1% when compared with YTD revenue of $53.8 million in the same period of 2014.

Second-quarter adjusted EBITDA for the Southern Division was $1.9 million, an 18.1% year-over-year decrease compared with adjusted EBITDA of $2.4 million in the second quarter of 2014. Adjusted EBITDA margin in the Southern Division increased 230 basis points to 11.1% when compared with an adjusted EBITDA margin of 8.8% in the second quarter of 2014. On a YTD basis, adjusted EBITDA was $4.2 million with a margin of 10.7%, compared with $3.9 million and a margin of 7.3% for the corresponding period in 2014. Margin improvements were primarily due to the impact of cost-savings initiatives. (Original Source)

Shares of Nuverra Environmental closed last Friday at $2.15. NES has a 1-year high of $17.33 and a 1-year low of $1.65. The stock’s 50-day moving average is $4.09 and its 200-day moving average is $4.00.

On the ratings front, Nuverra Environmental has been the subject of a number of recent research reports. In a report issued on May 12, Imperial analyst Scott Levine maintained a Hold rating on NES, with a price target of $5, which represents a potential upside of 132.6% from where the stock is currently trading. Separately, on the same day, Needham’s Sean Hannan reiterated a Buy rating on the stock and has a price target of $5.50.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Scott Levine and Sean Hannan have a total average return of -8.2% and 2.9% respectively. Levine has a success rate of 38.6% and is ranked #3556 out of 3728 analysts, while Hannan has a success rate of 47.2% and is ranked #1468.

Nuverra Environmental Solutions Inc formerly, Heckmann Corp provides environmental solutions to customers focused on the development and ongoing production of oil and natural gas from shale formations.