Pure-play completions expert FTS International Inc. is off to a hot start in 2021, with 13 fracture fleets now in operation, versus 10.5 in the fourth quarter.
In reporting results for 4Q2020 and last year, CEO Michael Doss said prices for the U.S. hydraulic fracturing (fracking) services are stagnant, but there are signs of a stronger recovery ahead.
“While market pricing for frack services remains low, we are seeing modest improvements,” Doss said.
The company saw fracking activity slump sharply last month during the severe winter weather, and it lost about 760 frack stages that had been planned. However, the Fort Worth-based operator is “optimistic for the remainder of the year and expects activity levels and pricing to continue increasing,” the CEO said.
Activity early on appears to be moving higher. The active number of U.S. frack spreads jumped nearly 15% month/month in February, driven by strength in the Permian Basin, even as a winter storm last month shut in wells and sent crews packing, according to Tudor, Pickering, Holt & Co.
FTS emerged from Chapter 11 bankruptcy protection in November after taking a bruising as the pandemic reduced exploration development. The restructuring eliminated $488 million of debt and other liabilities.
FTS’s “great team, vendors and customers…helped us continue normal business operations during the financial restructuring process,” Doss said. “We are now debt-free with strong liquidity, making us a considerably stronger, more nimble company.”
Average active fleets during 4Q2020 numbered 10.5, versus 7.3 in the third quarter. Active fleet use was on average 79% in the final three months, resulting in 8.3 fully utilized fleets. By comparison, utilization during 3Q2020 was 77% with 5.6 full fleets used.
“We exited the fourth quarter with 12 active fleets,” Doss said. “Today, we have 13 fleets active with seven of these fleets being dual-fuel capable.”
Two fleets are working with exploration and production customers using a “simul-frac” technique that involves stimulating two horizontal wells at the same time, the CEO noted. “This technique is gaining increased interest across the industry as a way to further reduce completion costs.”
Knowledge Is Power
Also on the technology front, FTS has launched KFC Technologies’ MachineIQ (MIQ) on an active frack site. In the last five years, FTS has collected more than one billion “equipment health data points” and contextualized thousands of failure events to build a knowledge base.
By integrating the MIQ engine with FTS frack software and pump control, the system is capable of “mimicking the accuracy and precision of highly trained operators, while reducing time to execute from minutes to milliseconds,” management said. MIQ is able to monitor fluid ends, power ends, transmissions, engines, grease systems and more.
“When an equipment operator identifies a problem with a pump, they need to adjust rate,” COO Buddy Petersen said. “This is time consuming because they must assess which of the remaining pumps are healthy and available before acting. MIQ is constantly monitoring equipment health and assessing hundreds of parameters; it already knows which pumps to use and automatically optimizes operations across available units. MIQ turns a 90-second reaction into a nearly instantaneous action.”
In the first production run of its kind at a Devon Energy Corp. site in Oklahoma, MIQ identified the sources of equipment issues and executed corrective actions to rebalance the system to healthy pumps, FTS noted. MIQ ran for more than 44 hours, “preventing failures with no downtime or loss of rate.” The system dropped gears and rebalanced to healthy pumps over four separate events in the time period.
During 4Q2020, FTI completed 5,243 stages, or 632 stages/fleet. That compares to 3,243 stages in 3Q2020, or 579/fleet. In addition, the fleets pumped on average 15.1 hours/day in the final three months, versus 14.9 in 3Q2020.
Capital expenditures (capex) during 2020 totaled $21.1 million, with the bulk of spending directed to 1Q2020. Capex for each average active fleet was $2.2 million in 2020.
“For 2021, we expect maintenance capital expenditures will be approximately $2.5 million per average active fleet.” Management said. “Separately, we are actively considering investments in lower-emissions equipment to assist our customers” to achieve environmental, social and governance initiatives.
Results for 4Q2020 and for 2020 were issued based on when the bankruptcy petition was filed in October and emerging from bankruptcy in November. The predecessor period was from October through Nov. 19, with the successor period to the end of the year.
Net income for the combined period of 4Q2020 was $93.3 million, with a predecessor loss of $13.4 million (minus 96 cents/share) and profit in the successor period of $106.7 million ($19.83). During 4Q2019, FTI lost $12.9 million (minus 13 cents).
For 2020, including the predecessor/successor results, FTI lost $37.8 million, versus a 2019 loss of $72.9 million.
Revenue in 4Q2020 was $49.8 million, versus year-ago revenue of $142.3 million. For 2020, revenue totaled $262.9 million, compared with $776.6 million in 2019.
As a result of the restructuring, FTS terminated its sand supply contracts. It paid $18.8 million of supply commitment payments in the first half of 2020 before terminating the contracts. No future charges or payments related to the cancellations are expected.
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