8-K: Expro Group Announces Strong Q4 and Full Year 2023 Results, Driven by NLA Rebound and Acquisition

Expro Group reported a 10% sequential increase in revenue for the fourth quarter of 2023, driven by a rebound in North and Latin America and the acquisition of PRT Offshore, alongside a 70% sequential increase in adjusted EBITDA.

Summary

• Expro Group Holdings N.V. announced its financial results for the fourth quarter and full year of 2023, showing significant improvements in several key areas.
• Fourth-quarter revenue reached $407 million, a 10% increase compared to the previous quarter, primarily due to increased activity in North and Latin America and the acquisition of PRT Offshore.
• Full-year revenue was $1,513 million, an 18% increase year-over-year.
• The company reported a net loss of $12 million for the fourth quarter, an improvement from the $14 million loss in the third quarter.
• The full-year net loss was $23 million, slightly higher than the $20 million loss in 2022.
• Adjusted EBITDA for the fourth quarter was $85 million, a 70% sequential increase, with an adjusted EBITDA margin of 21%, up from 14% in the previous quarter.
• Full-year adjusted EBITDA was $249 million, compared to $206 million in 2022, with an adjusted EBITDA margin of approximately 16% for both years.
• The company expects 2024 revenue to be between $1,600 million and $1,700 million, with adjusted EBITDA between $325 million and $375 million, and an adjusted EBITDA margin between 20% and 22%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, significant growth, and strategic acquisitions. While there are some challenges, the overall tone is optimistic and indicates a company on a positive trajectory.

Positives

• The company experienced a strong rebound in activity in North and Latin America, contributing to increased revenue.
• The acquisition of PRT Offshore positively impacted revenue and expanded Expro's subsea well access capabilities.
• Adjusted EBITDA and adjusted EBITDA margin showed significant sequential growth in the fourth quarter.
• The company's full-year revenue and adjusted EBITDA increased compared to the previous year.
• Expro has a positive outlook for 2024, with expected revenue and profitability growth.
• The company has secured strategically important contract wins and built a healthy order book.
• Expro has been recognized with multiple awards for its commitment to sustainable energy solutions and subsea well access.
• The company successfully completed an industry milestone in the U.S. Gulf of Mexico using a fully non-marking completion running package.
• Expro achieved a record for instantaneous tripping speed in the United Arab Emirates using its Automated Bucking and Catwalk system.
• The company completed the deepest deployment of MK VI CoilHose in the Asia Pacific region.

Negatives

• Expro reported a net loss of $12 million for the fourth quarter and $23 million for the full year, although these losses were reduced compared to previous periods.
• The company experienced a decrease in net cash provided by operating activities in the fourth quarter due to an increase in working capital.
• The company suspended vessel-deployed LWI operations in the third quarter of 2023 following a wire failure on a third-party vessel.
• The company incurred unrecoverable LWI-related costs, impacting adjusted EBITDA.
• Depreciation and amortization expense increased in the fourth quarter due to accelerated depreciation related to the subsea module of the LWI system.

Risks

• The company is still assessing the timing and potential cost of completing customer work scopes related to the suspended vessel-deployed LWI operations.
• The company faces risks associated with offshore operations, including the ability to recover and repair equipment located on the seabed.
• The company is subject to political, economic, and regulatory uncertainties in international operations.
• The company faces competition in the energy services industry.
• The company is exposed to the volatility of oil and gas prices.
• The company's first quarter 2024 results are expected to be negatively impacted by the winter season in the Northern Hemisphere and the budget cycles of national oil company customers.

Future Outlook

Expro anticipates strong growth in 2024, with revenue expected to be between $1,600 million and $1,700 million, adjusted EBITDA between $325 million and $375 million, and an adjusted EBITDA margin between 20% and 22%. The company expects improving profitability to drive improved cash flow generation. First quarter 2024 results are expected to be negatively impacted by the winter season in the Northern Hemisphere and the budget cycles of national oil company customers.

Management Comments

• Michael Jardon, Chief Executive Officer, noted Expro has delivered strong fourth quarter financial results with revenue and Adjusted EBITDA exceeding our most recent guidance ranges.
• Michael Jardon stated that the company begins 2024 in a strong position and sees a positive demand trend for its services and solutions.
• Michael Jardon believes that the energy services sector and Expro's business are in the early phase of a multi-year growth cycle.
• Michael Jardon highlighted the acquisition of Coretrax as a strategic move to bolster Expro's technology-enabled services and solutions.
• Michael Jardon expressed pride in the team of experts throughout the company and what they have accomplished.
• Michael Jardon stated that the business is well positioned to be a leading provider of services and solutions in the international and offshore markets while delivering on the financial and other objectives of the company in the years to follow.

Industry Context

This announcement reflects a positive trend in the energy services sector, with increased activity and demand for Expro's services. The acquisition of Coretrax aligns with the industry's focus on technology and innovation to improve efficiency and reduce costs. The company's success in securing contracts and achieving operational milestones demonstrates its competitiveness in the market.

Comparison to Industry Standards

• Expro's 18% year-over-year revenue growth is strong compared to some of its peers in the oilfield services sector, such as Halliburton and Schlumberger, which have also reported growth but may not have seen the same percentage increase.
• The 70% sequential increase in adjusted EBITDA for Q4 is a significant improvement, suggesting that Expro is effectively managing costs and capitalizing on increased activity. This is a positive sign compared to companies that have struggled with profitability in the sector.
• The adjusted EBITDA margin of 21% in Q4 is competitive, and the guidance for 20-22% in 2024 indicates a positive outlook for profitability. This is a key metric that investors will be watching closely.
• The acquisition of Coretrax is a strategic move that could give Expro a competitive edge by expanding its technology portfolio. This is similar to other companies in the sector that are looking to differentiate themselves through technology and innovation.
• Expro's focus on subsea well access and intervention is a key differentiator, and the awards and milestones achieved in this area demonstrate its expertise. This is an area of growth in the industry, and Expro is well-positioned to capitalize on it.
• The company's success in the Middle East and North Africa, with record tripping speeds, highlights its operational efficiency and ability to deliver results in challenging environments. This is a key factor for clients in the region.

Stakeholder Impact

• Shareholders will likely view the strong financial results and positive outlook favorably.
• Employees may be encouraged by the company's growth and success.
• Customers will benefit from the company's expanded capabilities and innovative solutions.
• Suppliers may see increased business opportunities with the company's growth.
• Creditors may view the company's improved financial performance positively.

Next Steps

• The company will continue to work with relevant stakeholders and independent experts to assess the LWI incident.
• The company will determine the path forward for its vessel-deployed LWI operations, including alternative service delivery options.
• The company will complete the acquisition of Coretrax, expected at the beginning of the third quarter of 2024.
• The company will continue to support its customers as activity ramps up across its regions and product lines.
• The company will host a conference call to discuss fourth quarter 2023 results on February 21, 2024.

Key Dates

Keywords

Expro, Oil and Gas, Energy Services, Financial Results, Adjusted EBITDA, Revenue, Subsea Well Access, Well Construction, Well Intervention, PRT Offshore, Coretrax, Light Well Intervention, LWI, Offshore Operations