Global oilfield operator Forum Energy Technologies Inc. said Tuesday second quarter revenue is projected to plunge 37-40% sequentially because of the sharp decline in U.S. oil and gas drilling.
The Houston-based operator expects quarterly revenue to be $110-115 million, down by as much as 40% from the first three months of this year. Free cash flow after capital expenditures and interest expense now is forecast at minus $6 million.
“In the second quarter, our industry saw an unprecedented decrease in U.S. drilling and completion activity levels, as evidenced by the roughly 67% decline in the U.S. drilling rig count from the first quarter average to current levels,” CEO Cris Gaut said. “This extremely steep decline, and the resulting lack of spending by Forum’s drilling and completion services customers, adversely impacted Forum’s revenue.”
A continued slide in oil-directed activity pushed the U.S. rig count down by another five units to 258 as of last Friday (July 10), according to Baker Hughes Co. The U.S. rig count was down by 700 from 958 active rigs at this time a year ago, with the domestic tally off by 535 since mid-March.
Forum offers exploration and production (E&P) customers drilling, downhole, subsea, completions and production equipment and services. The company provides engineered capital equipment, as well as products that are used in well construction, production and transportation.
With revenue plunging in line with the Covid-19 pandemic and sharp pullback by E&Ps over the course of the second quarter, Forum began an “aggressive cost reduction plan,” Gaut said.
“Despite these cost reduction efforts, we expect the sharp decreases in revenue to have a significant negative impact on our financial results,” including the net income and operating income.
The focus now is to address Forum’s “impending long-term debt maturity through our recently announced debt exchange offer,” said the CEO. “We believe that sizing the company for the current market environment, while emphasizing our winning products, will position Forum for success once drilling and completion activity levels improve.”
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