8-K: Nine Energy Service Announces Board Changes and Q4 2024 Results

Nine Energy Service reported Q4 2024 results with revenue at the upper end of guidance and announced changes to its Board of Directors to reduce its size and add new expertise.

Summary

• Nine Energy Service reported Q4 2024 revenue of $141.4 million, a net loss of $(8.8) million, and adjusted EBITDA of $14.1 million.
• Full year 2024 revenue was $554.1 million, with a net loss of $(41.1) million and adjusted EBITDA of $53.2 million.
• The company's Q4 revenue increased by approximately 2% quarter-over-quarter despite a flat average US rig count.
• The Board of Directors will be reduced from eight to six members by the end of the year.
• Julie A. Peffer and Richard A. Burnett have been appointed as new directors, effective March 1, 2025, and May 3, 2025, respectively.
• Scott E. Schwinger was elected as Chairman of the Board, effective March 1, 2025.
• Gary L. Thomas will resign from the Board on May 2, 2025, and Mark E. Baldwin will resign on August 1, 2025.
• The company expects Q1 2025 revenue and profitability to increase sequentially compared to Q4 2024.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company reported a net loss, revenue was at the high end of guidance, and there are positive trends in market share and safety. The board changes are presented as strategic and beneficial.

Positives

• Q4 2024 revenue increased sequentially despite a flat average US rig count.
• Cementing and completion tool revenues saw quarterly increases.
• The company's TRIR declined significantly, indicating improved safety performance.
• The company expects revenue and profitability to increase sequentially in Q1 2025.
• The company exited 2024 with a Q4 cementing market share within the regions they operate of approximately 19%, an increase of approximately 14% over their Q4 2023 market share.

Negatives

• The company reported a net loss of $(8.8) million for Q4 2024 and $(41.1) million for the full year 2024.
• ROIC was negative for both the quarter and the full year.

Risks

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
• The level of capital spending and well completions by the onshore oil and natural gas industry can be affected by geopolitical and economic developments.
• General economic conditions, inflation, equipment and supply chain constraints, and the company's ability to attract and retain key employees pose risks.
• Pricing pressures and intense competition in the markets for the company's products could reduce sales or market share.
• Conditions inherent in the oilfield services industry, such as equipment defects and accidents, can lead to significant costs and liabilities.

Future Outlook

The company anticipates both revenue and profitability to increase sequentially in Q1 2025 compared to Q4 2024, driven by market share gains and cost-cutting initiatives. They expect 2025 US activity levels to be mostly stable and believe the long-term demand for natural gas will increase.

Management Comments

• Ann Fox, President and Chief Executive Officer, stated that the company had a good Q4 with revenue increasing sequentially, despite a flat average US rig count and typical Q4 seasonality.
• Ann Fox noted that the company implemented a two-pronged strategy of market share gains and cost reductions to drive profitability in a declining rig count environment.
• Scott Schwinger, Chair of Nine's Board, stated that the Board concluded that new directors and perspectives would be beneficial to the Company, as would a reduction in the size of the Board.

Industry Context

The oilfield services sector has faced challenges due to declining US rig counts, particularly driven by depressed natural gas prices. Nine Energy Service is focusing on market share gains and cost reductions to navigate this environment. The company's exposure to natural gas basins positions it to benefit from potential increases in natural gas demand.

Comparison to Industry Standards

• It's difficult to directly compare Nine Energy Service's performance without specific competitor data for Q4 2024.
• However, companies like Halliburton, Schlumberger, and Baker Hughes are benchmarks in the oilfield services industry.
• Investors would typically compare Nine's revenue growth, EBITDA margins, and ROIC against these larger peers to assess its relative performance.
• The company's focus on technology and market share gains in specific service lines like cementing and completion tools is a common strategy in the competitive oilfield services market.

Management Changes

Stakeholder Impact

• Shareholders may be impacted by the Board changes and the company's strategic direction.
• Employees may be affected by cost-cutting initiatives and changes in leadership.
• Customers may benefit from the company's focus on technology and service quality.
• Suppliers may be impacted by changes in the company's operations and procurement strategies.

Next Steps

• The company will continue to execute its strategy of market share gains and cost-cutting initiatives.
• The company will focus on technology innovation, including the introduction of a new R&D and completion tools testing facility.
• The company will continue to monitor and adapt to activity levels in the oil and gas industry.
• The company will appoint a new director with expertise in upstream oil and gas later this year.

Key Dates