Nine Energy Service Faces Mixed Outlook Amid Growth and Challenges

Nine Energy Service ((NINE)) has held its Q1 earnings call. Read on for the main highlights of the call.

In the latest earnings call, Nine Energy Service reported a mixed sentiment. While the company celebrated revenue and EBITDA growth alongside a successful refinancing, it acknowledged significant challenges ahead. Pricing pressures, tariffs, and uncertain market conditions are expected to weigh heavily on future performance, with a projected decline in revenue and EBITDA for Q2 amidst economic and industry uncertainties.

Revenue and EBITDA Growth

Nine Energy Service reported a revenue of $150.5 million for Q1 2025, marking a 6% increase from the previous quarter. The adjusted EBITDA also saw a significant rise of approximately 17% quarter-over-quarter, with incremental adjusted EBITDA margins at around 26%. This growth highlights the company’s ability to enhance profitability despite challenging market conditions.

Market Share Gains in Cementing

The cementing division of Nine Energy Service experienced a revenue increase of approximately 4%, with jobs completed rising by 11%, even in a flat rig count environment. This growth underscores the company’s successful strategies in capturing market share and expanding its operations in the cementing sector.

Coiled Tubing Revenue Surge

Coiled tubing operations saw a remarkable 16% increase in revenue quarter-over-quarter, with utilization rates significantly higher than in Q4. This surge reflects the company’s effective utilization of its resources and strong demand for its coiled tubing services.

Successful Refinancing of ABL Credit Facility

Nine Energy Service successfully refinanced its asset-based revolving credit facility, securing $125 million in commitments and extending the maturity by approximately nine months to November 2027. This refinancing provides the company with greater financial flexibility to navigate future challenges.

Pricing Pressure in Wireline Operations

The company faced pricing pressures in its wireline operations, particularly in the Northeast, due to lower natural gas prices during the 2024 bidding process. This has led to stage price reductions, impacting the profitability of this segment.

Tariffs and Commodity Price Uncertainty

Tariffs on steel and aluminum have impacted the wireline and coiled tubing divisions, creating uncertainty for customer plans and U.S. activity levels. Additionally, declining oil prices further contribute to the unpredictable market environment, posing challenges for the company’s operations.

Expected Revenue and EBITDA Decline

For Q2, Nine Energy Service projects a revenue decline to between $138 million and $148 million, compared to Q1. The company also anticipates a decrease in adjusted EBITDA, reflecting ongoing market uncertainties and the impact of tariffs and fluctuating oil prices.

Increased Annual Cash Interest Expense

The new ABL facility is expected to increase Nine Energy Service’s annual cash interest expense by approximately $1 million. This additional expense will need to be managed carefully to maintain financial stability.

Forward-Looking Guidance

Nine Energy Service’s forward-looking guidance for Q2 reflects the challenges posed by market uncertainties, tariffs, and fluctuating oil prices. The company expects revenue to fall within the range of $138 million to $148 million, highlighting the cautious outlook for the upcoming quarter. Despite these challenges, the company remains focused on leveraging its strengths to navigate the turbulent market landscape.

In conclusion, Nine Energy Service’s earnings call presented a mixed outlook. While the company achieved notable revenue and EBITDA growth in Q1, it faces significant challenges ahead, including pricing pressures and market uncertainties. The forward-looking guidance suggests a cautious approach as the company navigates these hurdles, with a focus on maintaining its market position and financial stability.