NGS braces for headwinds in 2020
April 21, 2020
Natural Gas Services Group (NGS) will slash capital expenditures about 75% this year due to the collapse in industry activity and the COVID-19 pandemic.
“There is little doubt that we are operating in an environment with significant headwinds and an unprecedented level of uncertainty,” said Stephen Taylor, NGS president and CEO. “Never my four decades in the oilfield have I seen such a violent decline in price and oilfield activities like in the last month.
“It is obvious at this point that nobody’s crystal ball is clear,” he said. “And they are likely to remain blurred for the next several weeks and potentially months.”
The Midland, Texas-based company manufactures compressors and also operates a rental fleet. Its largest customer, Occidental Petroleum, represents 36% of its revenues. Oxy has announced a 50% cut in its 2020 capex.
NGS predicted the utilization of its small and medium horsepower units would decline the rest the year and its new compressor sales would be minimal.
“We expect to continue to experience pricing pressure from our customers and competitors until industry and economic conditions improve. We are currently experiencing no issues with potential workforce and supply chain disruptions,” NGS said.
The company reported a fourth quarter 2019 net loss of US$1.7 million, compared to a loss of US$749,000 for the comparative period in 2018. Earnings before interest, taxes, depreciation and amortization were flat at US$5.2 million.
As of Dec. 31, NGS had a rental fleet of 2304 compressors totaling 429,650 hp (320 MW). Of those, 1419 units with 300,000 hp (171 MW) were rented to 95 customers, a 61% utilization rate. It added 82 units totaling 74,000 hp (55 MW) during 2019 but also retired 327 units totaling 40,000 hp (30 MW) for a loss of US$1.5 million.