Nine Energy Service, Inc. (NINE) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call revealed mixed results: strong international growth and increased market share in some segments, but overall revenue decline and lack of clear guidance for Q4. The Q&A highlighted management's cautious outlook due to market unpredictability, with some optimism for Q1. These factors suggest a neutral impact on the stock price, as positive developments are offset by uncertainties and a lack of strong guidance.
Key Financial Performance
Revenue $147.3 million, a decrease due to significant rig declines and pricing pressure, especially in the Permian Basin.
Adjusted EBITDA $14.1 million, impacted by lower commodity prices, increased costs due to tariffs, and reduced U.S. activity and CapEx plans.
Completion Tool Revenue $37 million, an increase of approximately 9% year-over-year, driven by increased sales in the Northeastern Haynesville and international markets.
Wireline Revenue $33 million, an increase of approximately 11% year-over-year, attributed to improved market conditions in the Northeast and increased market share.
Cementing Revenue $52.2 million, a decrease of approximately 9% year-over-year, due to activity and pricing declines in the Permian Basin.
Coiled Tubing Revenue $25.1 million, a decrease of approximately 16% year-over-year, driven by a 23% decrease in Coiled Tubing days despite a 9% increase in average blended day rate.
International Tools Revenue Increased by approximately 20% in the first half of 2025 compared to the first half of 2024, driven by sales of multi-cycle barrier valves in the Middle East and increased plug sales.
Cash and Cash Equivalents $14.2 million as of June 30, 2025, with a total liquidity position of $65.5 million.
Net Cash Provided by Operating Activities $10.1 million for the second quarter of 2025.
CapEx Spend $6.1 million for Q2 2025, with total CapEx for the first half of 2025 at $10.4 million.
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Operating Highlights
Completion Tool revenue growth: Completion Tool revenue grew by approximately 9%, driven by increased sales in the Northeastern Haynesville and an increase in International Tool sales.
Wireline revenue growth: Wireline team increased revenue by approximately 11% in Q2, capitalizing on an improving market in the Northeast with traditional pump down work and remedial side market share.
International Tools market expansion: International Tools revenue increased by approximately 20% in the first half of 2025 compared to 2024, driven by increased sales of multi-cycle barrier valves in the Middle East and overall plug sales.
Cost reduction initiatives: Implemented sustainable cost reductions, including fleet management improvements, reduction of corporate and field employees, elimination of consultants, and vendor rationalization.
Operational adjustments: Utilized Wireline equipment and personnel from West Texas to cover work in the Northeast, optimizing asset and personnel allocation.
Focus on international markets: Continuing to prioritize international market growth, with a 20% revenue increase in the first half of 2025 versus 2024.
Potential service line expansion: Evaluating expansion of service lines to new geographies and constructing a new Completion Tools facility.
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Risk or Challenges
Oil Price Decline: Oil prices dropped from an average of $72 in Q1 to $65 in Q2, with prices falling below $60 for the first time in 4 years. This decline has led to reduced U.S. activity and CapEx plans, significantly impacting revenue and earnings.
Rig Count Decline: Between March 28 and July 3, 53 rigs exited the U.S. market, a nearly 10% decline in 3 months. This has particularly affected the Permian Basin, where Nine generates approximately 40% of its revenue, leading to pricing pressure and revenue declines.
Tariffs and Increased Costs: New tariffs have increased operational costs, adding to the challenges posed by declining oil prices and global economic uncertainty.
Permian Basin Challenges: Activity and pricing declines in the Permian Basin have negatively impacted Cementing and Coil operations, which hold significant market share in this region.
Natural Gas Price Volatility: While natural gas prices remained mostly supportive, they declined from $4.14 in Q1 to $3.19 in Q2, creating uncertainty in natural gas-levered regions.
Calendar Gaps and Completion Delays: Operators are reducing activity, leading to calendar gaps, completion delays, and overall lower activity levels, which are expected to persist in the back half of the year.
International Expansion Risks: While international markets have shown growth, expanding into these markets involves risks such as geopolitical uncertainties and execution challenges.
Cost Reduction Measures: Efforts to reduce costs, including workforce reductions and vendor consolidation, may risk impacting the quality of technology, service, and safety.
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Guidance & Outlook
Natural Gas Outlook: Natural gas prices remain mostly supportive, helping to drive more efficient operations in the Northeast and Haynesville. The company remains positive on the medium- and long-term outlook for natural gas and natural gas-levered regions.
Revenue and EBITDA Projections for Q3 2025: The company anticipates Q3 revenue to be between $135 million and $145 million, with adjusted EBITDA expected to decline compared to Q2 due to activity and pricing declines.
Market Activity Expectations: There is a possibility of additional rig reductions in the back half of the year, particularly from private operators. Calendar gaps, completion delays, and lower activity levels are expected in conjunction with lower oil prices.
International Market Expansion: The company is focused on increasing exposure to international markets, with a 20% revenue increase in the first half of 2025 compared to 2024. This includes growing the International Tools business and potentially expanding service lines to new geographies.
Cost Reduction Initiatives: The company is working on reducing costs without compromising quality, including improvements in fleet management, reduction of employees, and vendor consolidation. These efforts are expected to continue.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Ann, you mentioned that there is some expectation that some private E&Ps may temper their work. Is that based on firm discussions with the customers? Or is that just your view based on -- what your view on commodity prices is?
A:It is not based on conversations. It is based on the knowledge that if commodity prices were to move very negatively for the remainder of the quarter or in Q4, private operators typically react more quickly than public ones. This is more commodity price driven for them.
Q:In terms of your visibility into Q4, do you have any visibility there where customers have mentioned anything about what they're going to be doing in Q4?
A:There is no visibility into Q4 in terms of major changes up or down. However, there have been customer conversations indicating increased activity in Q1, which is standard with budget refresh.
Q:Is the increased activity in Q1 a Permian comment or an all-over U.S. comment?
A:It is specifically with certain customers in the Permian.
Q:Is the increased activity in Q1 relative to where activity was in Q2 or relative to activity as of today?
A:It would be an increase relative to activity as of today.
Q:In terms of your international sales, how was the second half of '24 versus the first half of '24? And how does the first half of '25 compare to the second half of '24?
A:There was a 20% increase in the first half over the second half of '24. Internationally, traction has been gained in Argentina and the Middle East. The full year of '25 is expected to be up over 2024, though it is hard to predict by how much.
Q:What products are you seeing the most traction with in the international markets?
A:The most traction is being seen with plugs and MCBV valves, with large volume orders.
Q:Do you have any visibility into the second half for these international sales?
A:It will be lumpy, but the full year is anticipated to be up over last year.
Q:Can you tell us more about the Completion Tools facility that you highlighted?
A:The facility will be over 30,000 square feet, located next to the assembly and manufacturing location in Jacksboro. It will have multiple test wells, capabilities to test different pressures and temperatures, drill-out capabilities, flowback loop, and allow customers to log in and see test results. It is expected to be the largest state-of-the-art completion tools testing facility in the U.S. and will open next year.
Q:Would private operators in gassy markets be additive to margins due to less procurement rigor compared to larger public peers?
A:Yes, smaller privates are operationally driven, efficient, and grant engineers autonomy to pick the best service lines, vendors, and technology. This works well for the company. Additionally, gas markets like Haynesville and the Northeast are competitive but favorable, and the company is optimistic about the natural gas market's future.
Q:In the press release, you've highlighted the incremental market share in the remedial Wireline business. Is there any one thing in particular driving that?
A:The push to diversify the top line from the ups and downs of pump-down work, led by a well-versed leader in pump-down and remedial Wireline, has driven the incremental market share.
Q:Review of Unclear Management Responses
A:Management avoided providing specific visibility into Q4 activities and international sales for the second half of the year, citing the unpredictability and lumpiness of the market. Additionally, while they highlighted increased activity in Q1 and international traction, they did not provide detailed numerical forecasts or specifics on the extent of these increases.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ABL share
CEO Director
CFO Senior
Cementing Coil
Cementing job
Coil activity
Coiled Tubing
Completion Tool
Completion Tools
Conference result
Development Investor
Director Executive
Division Conference
ET Greetings
East increase
Executive VP
Fox President
Greetings Nine
Guy information
Haynesville increase
International Tool
International Tools
Nine Energy
Service Conference
Tool sale
activity pricing
benefit tax
commodity
job decrease
price average
tariff
tax benefit
NINE Transcript
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The earnings call reveals a mixed sentiment. The company faced significant Q1 challenges, including weather impacts and financial constraints, leading to weak results. However, management's optimistic guidance for Q2, driven by improved weather conditions and operational efficiencies, provides some positive outlook. The Q&A session highlights potential growth from DUC completions and refracs, but uncertainties remain around pricing strategies and cash flow normalization. Overall, the sentiment is neutral, reflecting both challenges and optimistic future prospects.
Nine Energy Service, Inc. (NINE) Q3 2025 Earnings Call Transcript
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The earnings call reveals a decline in revenue and EBITDA, driven by rig count reductions and pricing pressures. Market share losses, operational challenges, and liquidity constraints compound these issues. The Q&A session highlights complex market conditions without clear solutions. Despite international expansion efforts, the overall sentiment is negative due to disappointing financial results, competitive pressures, and lack of actionable guidance.
Nine Energy Service, Inc. (NINE) Q2 2025 Earnings Call Transcript
Unknown8-6
The earnings call revealed mixed results: strong international growth and increased market share in some segments, but overall revenue decline and lack of clear guidance for Q4. The Q&A highlighted management's cautious outlook due to market unpredictability, with some optimism for Q1. These factors suggest a neutral impact on the stock price, as positive developments are offset by uncertainties and a lack of strong guidance.
Nine Energy Service, Inc. (NINE) Q1 2025 Earnings Conference Call Transcript
Unknown5-10
The earnings call reveals several concerning factors: declining market activity, pricing pressures, and uncertainty in forward guidance. While some financial metrics show growth, the lack of guidance, tariff challenges, and potential revenue declines overshadow these positives. The Q&A section highlights management's inability to quantify pricing pressures and future oil prices, further increasing uncertainty. These factors suggest a negative sentiment, likely leading to a stock price decline of -2% to -8% over the next two weeks.
NINE Report
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