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Pure Fracking play Keane Group reported better than expected fourth quarter earnings after the close Monday, however with lower revenue. $FRAC footprint is in the Permian Basin, Marcellus Shale/Utica Shale, the SCOOP/STACK Formation and the Bakken Formation. 

Keane Group Fracking

Image: Houston Chronicle - Houston's Keane Group $FRAC was the first IPO of 2017.

Keane Group Inc. (NYSE: $FRAC) Report Earnings After Close Monday

$0.06 Beat $0.01 EPS But $486.M Missed $489.87 million forecast in revenue 

Earnings

Keane Group (FRAC) reported fourth quarter on Monday with net income of $0.06 per share, compared to $0.28 per share reported for the third quarter of 2018 ahead of the expected to post quarterly earnings of $0.01 per share in, which represented a year-over-year change of -97.1%. The company reported fourth quarter 2018 revenue of $486.5 million, compared to third quarter 2018 of $558.9 million. Revenues were expected to be $489.87 million, down 2.3% from the year-ago quarter.  The fall reflects the drop in commodity prices in the fourth quarter and the affect on activity.

Realized fourth quarter 2018 net income of $6.1 million, compared to third quarter 2018 net income of $30.8 million. Achieved fourth quarter 2018 Adjusted EBITDA of $88.4 million, compared to third quarter 2018 of $100.9 million.  

Keane Group Inc NYSE: $FRAC

Market Reaction > After Hours $11.31 0.00 (0.00%)

Highlights

  • Reported annualized Adjusted Gross Profit per fleet of $20.9 million, compared to third quarter 2018 of $20.5 million
  • Delivered full-year 2018 revenue of $2.1 billion, compared to full-year 2017 revenue of $1.5 billion
  • Generated full-year 2018 net cash provided by operating activities of $350.3 million, compared to $79.7 million in 2017
  • Executed $105.0 million of stock repurchases in 2018; Board authorized third program capacity reset to $100.0 million

Outlook

For the first quarter of 2019, total revenue is expected to range between $400 million and $420 million. Keane’s hydraulic fracturing fleet for the first quarter of 2019 will include 29.0 deployable fleets, of which, 22.0 are expected to be deployed. Of this amount, Keane expects to achieve utilization of approximately 90%, resulting in the equivalent of approximately 20.0 fully-utilized hydraulic fracturing fleets during the quarter.

Annualized Adjusted Gross Profit per fleet, based on 20.0 fully-utilized fleets, is expected to range between $15.0 million and $17.0 million, including approximately $10 million of labor and maintenance costs associated with keeping a portion of our fleets market-ready.

Stock Repurchase Program Update

During the fourth quarter of 2018, Keane repurchased approximately 3.1 million of its common shares for $35.5 million. For the full-year 2018, Keane repurchased a total of 8.1 million of its common shares for $105.0 million, representing approximately 8% of outstanding shares. Effective February 25, 2019, Keane’s Board of Directors authorized a reset of capacity on its existing stock repurchase program back to $100.0 million and extended the program’s expiration to December 2019. The stock repurchase program does not obligate Keane to purchase any shares of common stock during any period and the program may be modified or suspended at any time at the Company's discretion.

Keane Group Q3 Earnings Recap

$0.28 Beat $0.19 EPS and $558.9 million Beat $55 in revenue 

Earnings

Keane Group (FRAC) reported third quarter realized net income of $30.8 million or $0.28 per share, unchanged from the $0.28 per share reported for the second quarter of 2018. 

Adjusted EBITDA of $100.9 million compared to second quarter 2018 of $111.3 million. FRAC beat the expectations of $0.19 per share on revenues of $556.91 million with revenue of $558.9 million, compared to second quarter 2018 of $578.5 million

Keane Group Inc NYSE: $FRAC

Market Reaction > After Hours $13.00 +0.43 (+3.42%)

Highlights

  • Reported annualized Adjusted Gross Profit per fleet of $20.5 million, compared to second quarter 2018 of $20.0 million
  • Averaged 27.0 hydraulic fracturing fleets deployed in third quarter 2018; equivalent of 24.0 fully-utilized fleets
  • Executed $88 million of stock repurchases to date, representing approximately 6% of outstanding shares
  • Board of Directors authorized second stock repurchase program capacity reset to $100 million

Outlook

  • For the fourth quarter of 2018, total revenue is expected to range between $470 million and $500 million.
  • Keane’s hydraulic fracturing fleet for the fourth quarter of 2018 will include 29.0 fleets, of which, 25.0 are expected to be deployed. Of this amount, Keane expects to achieve average utilization of approximately 90%, resulting in the equivalent of approximately 22.0 average fully-utilized hydraulic fracturing fleets during the quarter.
  • Annualized Adjusted Gross Profit per fleet, based on approximately 22.0 average fully-utilized fleets, is expected to range between $16.0 million and $18.0 million, including approximately $15 million of labor and maintenance costs associated with keeping our fleets market-ready.
  • Keane’s cementing business continues to ramp activity. By the end of 2018, Keane expects run-rate revenue of its cementing business of between $50 million and $60 million on margins of approximately 15%.
  • This compares to Keane’s previous forecast of run-rate revenue by the end of 2018 of between $70 million and $90 million and margins of 20% to 25%, which it now expects to achieve in the first half of 2019.

“While I am pleased with the efficiency we are seeing across our portfolio, driven by our partnership with high quality operators, we expect the fourth quarter to be impacted by the same efficiency-driven challenges faced in the third quarter, as well as customer budget exhaustion, some early-achievement of production targets, commodity price differentials and typical seasonality,” said CEO Mr. Drummond.

“While our business is not immune to these challenges, we believe they are temporary, and we’re utilizing the near-term market dynamics to invest in our people and equipment, ensuring that we are well-positioned to take advantage of the opportunities anticipated on the horizon. I am very optimistic about the long term fundamentals for our business over the next few years.” He added

 

About The Keane Group

The company is "one of the largest pure-play providers of integrated well completion services in the U.S., with a focus on complex, technically demanding completion solutions. Our primary service offerings include horizontal and vertical fracturing, wireline perforation and logging and engineered solutions, as well as other value-added service offerings." Keane website.

The FRAC IPO

The $FRAC IPO opened at $22 after pricing its initial public offering of 26,760,000 shares of its common stock at the high end of the expected range of the public offering price of $19.00 per share. 

15,700,000 of the shares were offered by the Company and 11,060,000 shares were being offered by the selling stockholder. The selling stockholder also granted the underwriters a 30-day over-allotment option to purchase an additional 4,014,000 shares of the Company's common stock.

The IPO was greater than 3 times larger than last year's oilfield services IPO Mammoth Energy $TUSK

Footprint located in the Permian Basin, Marcellus Shale/Utica Shale, the SCOOP/STACK Formation, the Bakken Formation and other active oil and gas basins.

Acquired by Cerberus in 2011, positioned to take advantage of a rebound in E&P spending.

Source: Keane Group

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