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ENSERVCO Reports First Quarter 2017 Financial Results

Revenue increases 66% to $13.8 million from $8.3 million year over year
Net income improved to $50,000 versus a net loss of $1.1 million year over year
Adjusted EBITDA increases 281% to $2.5 million from $661,000 year over year
Well enhancement service revenue increases 67% to $12.0 million from $7.2 million year over year
New water transfer service revenue increases 393% to $752,000 in Q1 from $153,000 in Q4 2016
Revenue from Eagle Ford expansion increases 61% to $1.4 million from $867,000 year over year
Company strengthens Texas presence with move into Permian Basin
Company expects improved financial results in traditionally slower second and third quarters due to increased activity as well as geographic and service line expansion
ENSERVCO Corporation (NYSE MKT: ENSV), a diversified national provider of well-site services to the domestic onshore conventional and unconventional oil and gas industries, today reported improved financial results for its first quarter ended March 31, 2017.
"We are pleased to announce solid year over year growth in revenue and adjusted EBITDA in the first quarter," said Ian Dickinson, CEO. "After two difficult years for our industry, we are off to a strong start in 2017, which we expect to be a rebound year for ENSERVCO as industry activity continues to pick up and the investments we made in our business before and during the downturn yield increasingly positive results.
"The first quarter was highlighted by 66% year over year growth in revenue -- to $13.8 million from $8.3 million -- due to a combination of increased customer demand for our core well enhancement services and particularly strong demand for our new water transfer service, which we are now integrating with our frac water heating services to offer customers more convenience in procurement," Dickinson said. "Adjusted EBITDA grew 281% year over year to $2.5 million from $661,000 based on higher revenue that more than offset our fixed costs. We generated a gross profit in our two core service segments in the first quarter, including a $3.5 million gross profit in well enhancement services and a $76,000 gross profit in our new water transfer segment.
"We're encouraged by our return to profitable growth in the first quarter and optimistic about carrying this momentum into the typically slower second and third quarters. In addition to strength in our traditional operating areas and business segments, we see good opportunities for growth in our new Permian Basin expansion area and are moving forward with the introduction of our water transfer service into the Marcellus Shale. We are also aggressively working on plans to refinance our debt, strengthen our sales and marketing efforts in order to increase market share, and are looking for ways to operate more efficiently."
First Quarter Results
Total first quarter revenue increased 66% to $13.8 million from $8.3 million last year due primarily to increased drilling and completion activity by E&Ps and growth in the Company's new water transfer segment.
Well enhancement services revenue grew 67% to $12.0 million from $7.2 million in the first quarter last year and 140% from $5.0 million in the fourth quarter of 2016. This segment included $8.2 million in frac water heating, up 104% year over year; $3.3 million in hot oiling, up 12%; and $466,000 in acidizing, up 272% due primarily to the Company's move into the Eagle Ford basin and an overall increase in well maintenance activity. Gross profit in the well enhancement service segment increased to $3.5 million from $2.2 million year over year.
Combined Eagle Ford hot oiling and acidizing revenue increased 61% in the first quarter to $1.4 million from $867,000 year over year. 
Water transfer services, a new business line for ENSERVCO that was introduced in 2016, grew 393% to $752,000 from $153,000 in the fourth quarter of 2016. The Company began integrating water transfer with its frac water heating service in 2016 and expects this segment to continue growing in 2017. The water transfer business generated a $76,000 gross profit in the first quarter.
Water hauling revenue was $885,000 in the first quarter, down from $1.1 million a year ago due to the Company's decision to de-emphasize this lower margin service line in order to focus on core and more promising new business lines. Water hauling had a $28,000 gross loss in the first quarter as rain disrupted service activities in Central US region during January and February.
Construction services, also a new offering for ENSERVCO in 2016, generated $154,000 in revenue in the first quarter, down from $599,000 in Q4 last year when the Company substantially concluded a large dirt hauling contract.
Total operating expenses increased 36% year over year to $13.0 million from $9.6 million as direct costs of performing services in core segments increased in conjunction with higher revenue. General and administrative expenses declined slightly to $995,000 from $1.0 million due primarily to headcount reductions. Costs associated with patent litigation and defense increased slightly to $43,000 from $36,000. Depreciation and amortization expense decreased 10% to $1.6 million from $1.7 million.
The Company reported net income of $50,000, or less than one cent per diluted share, in the first quarter versus a net loss of $1.1 million, or $0.03 per diluted share, in the same quarter last year.
Adjusted EBITDA in the first quarter increased 281% to $2.5 million from $661,000 in the same quarter last year.
Conference Call Information
Management will hold a conference call today to discuss these results. The call will begin at 11:00 a.m. Mountain Time (1:00 p.m. Eastern) and will be accessible by dialing 877-407-8031 (201-689-8031 for international callers). No passcode is necessary. A telephonic replay will be available through May 18, 2017, by calling 877-481-4010 (919-882-2331 for international callers) and entering the Conference ID #10363. To listen to the webcast, participants should go to the ENSERVCO website at and link to the "Investors" page at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 90 days. The webcast also is available at the following link:
Through its various operating subsidiaries, ENSERVCO provides a wide range of oilfield services, including hot oiling, acidizing, frac water heating, water transfer, bacteria and scaling treatment, water hauling and oilfield support equipment rental. The Company has a broad geographic footprint covering seven major domestic oil and gas basins and serves customers in Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming and West Virginia. Additional information is available at
*Note on non-GAAP Financial Measures 
This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing ENSERVCO's operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Operations table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.
Cautionary Note Regarding Forward-Looking Statements
This news release contains information that is "forward-looking" in that it describes events and conditions ENSERVCO reasonably expects to occur in the future. Expectations for the future performance of ENSERVCO are dependent upon a number of factors, and there can be no assurance that ENSERVCO will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond ENSERVCO's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in ENSERVCO's annual report on Form 10-K for the year ended December 31, 2016, and subsequently filed documents with the SEC. Forward looking statements in this news release that are subject to risk include expectations for improved financial results in the second and third quarters of 2017; expectations for industry activity to continue picking up and for 2017 to be a rebound year; expectations for investments to yield positive results; expectations for growth in the Permian Basin and expansion of the water transfer business into the Marcellus; and expectations for refinancing debt. It is important that each person reviewing this release understand the significant risks attendant to the operations of ENSERVCO. ENSERVCO disclaims any obligation to update any forward-looking statement made herein.
Condensed Consolidated Statement of Operations  
    For the Quarter Ended  
    March 31,  
    2017     2016  
  Well enhancement services   $ 11,983,629     $ 7,159,823  
  Water transfer services     752,012       31,688  
  Water hauling services     885,005       1,115,548  
  Construction services     154,255       -  
    Total revenues   $ 13,774,901     $ 8,307,059  
  Well enhancement services     8,448,546       4,956,290  
  Water transfer services     675,788       458,937  
  Water hauling services     912,685       1,190,004  
  Construction services     144,161       -  
  Functional support     197,224       164,689  
  General and administrative expenses     994,683       1,026,740  
  Patent litigation and defense costs     42,688       36,166  
  Depreciation and amortization     1,576,429       1,747,972  
    Total expenses     12,992,204       9,580,798  
Income (loss) from operations     782,697       (1,273,739 )
Other income (expense)                
  Interest expense     (710,417 )     (372,668 )
  Other income     5,192       1,996  
    Total other expense     (705,225 )     (370,672 )
Income (loss) before income taxes     77,472       (1,644,411 )
Income tax (expense) benefit     (27,115 )     568,842  
Net Income (loss)   $ 50,357     $ (1,075,569 )
Income (loss) per common share - basic   $ -     $ (0.03 )
Income (loss) per common share - diluted   $ -     $ (0.03 )
Basic weighted average number of common shares outstanding     51,067,660       38,129,660  
Add: dilutive shares assuming exercise of options and warrants     -       -  
Diluted weighted average number of common shares outstanding     51,067,660       38,129,660  
Calculation of Adjusted EBITDA *  
    For the Quarter Ended  
    March 31,  
    2017     2016  
Adjusted EBITDA*                
  Net Income (Loss)   $ 50,357     $ (1,075,569 )
  Add Back (Deduct)                
    Interest expense     710,417       372,668  
    Provision for income taxes (benefit) expense     27,115       (568,842 )
    Depreciation and amortization     1,576,429       1,747,972  
  EBITDA*     2,364,318       476,229  
  Add Back (Deduct)                
    Stock-based compensation     115,827       150,433  
    Patent litigation and defense costs     42,688       36,166  
    Interest and other income     (5,192 )     (1,996 )
  Adjusted EBITDA*   $ 2,517,641     $ 660,832  
*Use of Non-GAAP Financial Measures: Non-GAAP results are presented only as a supplement to the financial statements and for use within management's discussion and analysis based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the reader's understanding of the Company's financial performance, but no non-GAAP measure should be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided herein.  
EBITDA is defined as net income (earnings), before interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA excludes stock-based compensation from EBITDA and, when appropriate, other items that management does not utilize in assessing the Company's ongoing operating performance as set forth in the next paragraph. None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure.  
All of the items included in the reconciliation from net income to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, warrants issued, etc.) or (ii) items that management does not consider to be useful in assessing the Company's ongoing operating performance (e.g., income taxes, gain on sale of investments, loss on disposal of assets, patent litigation and defense costs, etc.). In the case of the non-cash items, management believes that investors can better assess the company's operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company's ability to generate free cash flow or invest in its business.  
We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Additionally, our leverage and fixed charge ratio covenants associated with our 2014 Credit Agreement require the use of Adjusted EBITDA in specific calculations.  
Because not all companies use identical calculations, the Company's presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company's performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures.  
Condensed Consolidated Balance Sheets  
    March 31     December 31,  
ASSETS   2017     2016  
Current Assets                
  Cash and cash equivalents   $ 142,592     $ 620,764  
  Accounts receivable, net     9,984,250       4,814,276  
  Prepaid expenses and other current assets     861,574       970,802  
  Inventories     409,403       407,379  
  Income tax receivable     -       223,847  
    Total current assets     11,397,819       7,037,068  
Property and Equipment, net     33,662,516       34,617,961  
Other Assets     467,804       714,967  
TOTAL ASSETS   $ 45,528,139     $ 42,369,996  
Current Liabilities                
  Accounts payable and accrued liabilities   $ 4,075,260     $ 3,682,599  
  Current portion of long-term debt     217,054       318,499  
    Total current liabilities     4,292,314       4,001,098  
Long-Term Liabilities                
  Senior revolving credit facility     25,870,836       23,180,514  
  Long-term debt, less current portion     289,463       304,373  
  Deferred income taxes, net     493,896       468,565  
    Total long-term liabilities     26,654,195       23,953,452  
    Total Liabilities     30,946,509       27,954,550  
Commitments and Contingencies                
Stockholders' Equity                
  Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding     -       -  
  Common stock. $.005 par value, 100,000,000 shares authorized, 51,171,260 shares issued; 103,600 shares of treasury stock; and 51,067,660 shares outstanding.     255,337       255,337  
  Additional paid-in capital     18,983,529       18,867,702  
  Accumulated (deficit) earnings     (4,657,236 )     (4,707,593 )
    Total stockholders' equity     14,581,630       14,415,446  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 45,528,139     $ 42,369,996  
Condensed Consolidated Statements of Cash Flows  
    For the Quarter Ended  
    March 31,  
    2017     2016  
  Net Income (loss)   $ 50,357     $ (1,075,569 )
  Adjustments to reconcile net income (loss) to net cash provided by operating activities                
    Depreciation and amortization     1,576,429       1,747,972  
    Deferred income taxes     90,487       (568,842 )
    Stock-based compensation     115,827       150,433  
    Stock-issued for services     -       1,714  
    Amortization of debt issuance costs     255,734       35,571  
    Provision for bad debt expense     29,000       39,159  
  Changes in operating assets and liabilities                
    Accounts receivable     (5,198,974 )     3,233,204  
    Inventories     (2,024 )     12,319  
    Prepaid expense and other current assets     74,248       10,014  
    Income taxes receivable     223,847       (14,608 )
    Other assets     11,253       -  
    Accounts payable and accrued liabilities     392,661       (638,601 )
  Net cash provided by (used in) operating activities     (2,381,155 )     2,932,766  
    Purchases of property and equipment     (620,984 )     (4,504,676 )
  Net cash used in investing activities     (620,984 )     (4,504,676 )
    Proceeds from revolving credit facility     3,800,322       5,797,382  
    Payments related to revolving credit facility     (1,110,000 )     (3,355,901 )
    Repayment of long-term debt     (116,355 )     (35,529 )
    Payment of debt issuance costs     (50,000 )     (50,000 )
  Net cash provided by financing activities     2,523,967       2,355,952  
Net Increase (Decrease) in Cash and Cash Equivalents     (478,172 )     784,042  
Cash and Cash Equivalents, Beginning of Period     620,764       804,737  
Cash and Cash Equivalents, End of Period   $ 142,592     $ 1,588,779  
Supplemental cash flow information:                
  Cash paid for interest   $ 442,090       259,936  
  Cash paid (refunded) for taxes   $ (222,110 )   $ 1,400  


Jay Pfeiffer
Pfeiffer High Investor Relations, Inc.
Phone: 303-393-7044
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