Keane Group Expects Futher Ramping in Fracking Activity

Pure Fracking play Keane Group reported in-line second quarter earnings after the close Monday. $FRAC footprint is in the Permian Basin, Marcellus Shale/Utica Shale, the SCOOP/STACK Formation and the Bakken Formation.

Pure Fracking play Keane Group reported better than expected second quarter earnings after the close Monday. $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) Met Earnings After Close Monday

$0.28 In-Line $0.28 EPS and $578.5 million in revenue 

Earnings

Revenue for the second quarter of 2018 of $578.5 million, an increase of 13% compared to revenue for the first quarter of 2018 of $513.0 million. Net income for the second quarter of 2018 was $0.28 per share, compared to net loss of $0.07 per share for the first quarter of 2018. Excluding one-time items and other adjustments further discussed below, net income for the second quarter of 2018 was $38.5 million, compared to net income of $21.1 million for the first quarter of 2018.

Keane Group Inc NYSE: $FRAC

Market Reaction > After Hours $13.68 +$0.08 (0.07%)

Highlights

  • Averaged 26.3 deployed hydraulic fracturing fleets during second quarter 2018; exited quarter with 27 deployed fleets
  • Newbuild fleet 28 deployed in July; entered dedicated agreement for fleet 29 to be deployed in fourth quarter of 2018
  • Completed second quarter 2018 stock repurchases of $40.1 million;
  • Board authorized program reset to $100 million
  • In July 2018, acquired approximately 90,000 HHP for cash consideration of $34.6 million

Outlook

  • Keane expects to average approximately 27 deployed hydraulic fracturing fleets during the third quarter of 2018.
  • Keane will integrate a portion of the recently acquired horsepower to enable the reactivation of the partially damaged fleet, expected by the end of the third quarter of 2018.
  • Total revenue is expected to range between $565 million and $590 million for the third quarter of 2018.
  • Annualized Adjusted Gross Profit per fleet is expected to be in-line with the second quarter of 2018.
  • Keane expects to further ramp activity in its cementing business during the third quarter of 2018 and the remainder of the year.
  • y the end of 2018, Keane continues to expect from the cementing business run-rate revenue of between $70 million and $90 million on margins of between 20% and 25%.

 

Keane Group Q1 Earnings Recap

Earnings: 

Q1 EPS of -$0.07, with adjustments consensus was $0.22. Excluding one-time items and other adjustments net income for the first quarter of 2018 was $21.1 million, Revenue of $513M (+113.6% Y/Y) beats consensus by $10.95M.

Keane Group Inc NYSE: $FRAC

  • Market Reaction >After hours 15.60 +0.12 (+0.77%)

“Keane executed exceptionally well in the face of first quarter transitory challenges, stemming from extreme winter weather in late 2017 and early 2018,” said James Stewart, Chairman and Chief Executive Officer of Keane.

Highlights

  • Achieved first quarter 2018 Adjusted EBITDA of $91.3 million, compared to fourth quarter 2017 of $93.8 million
  • Reported annualized Adjusted Gross Profit per fleet of $17.0 million, compared to fourth quarter 2017 of $17.3 million
  • Remain at full utilization on all hydraulic frac fleets; averaged 26.0 deployed fleets during first quarter 2018
  • Updating delivery timing for newbuild frac fleet 27 to late-May, up from end of second quarter 2018
  • Entered into dedicated agreement for newbuild frac fleet 28 with expected delivery by end of second quarter 2018

Outlook

  • Total revenue is expected to increase to between $555 million and $575 million for the second quarter of 2018, driven by improvements in efficiency, price, and contribution from our first newbuild fleet in late-May.
  • Annualized Adjusted Gross Profit per fleet is expected to exit the second quarter of 2018 at approximately $20 million dollars.
  • Keane expects to maintain full utilization on its existing 26 hydraulic fracturing fleets throughout the quarter, and forecasts an increase to 27 active fleets upon the deployment of the first of its newbuild fleets in late-May 2018.
  • Keane expects to further ramp activity in its cementing business during the second quarter of 2018 and the remainder of the year.
  • By the end of 2018, Keane continues to expect run-rate revenue of between $70 million and $90 million on margins of between 20% and 25%.

“Completions services fundamentals remain attractive, and we expect further growth from higher pricing and improved efficiency,” said Greg Powell. “We continue to execute on our growth initiatives, including the successful addition of newbuild fleets under dedicated agreements. Our exit-rate performance during the first quarter establishes our confidence in achieving cash flow growth and improved profitability going forward.”

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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