Forbes Energy Services Reports Fourth Quarter Financial Results

ALICE, Texas, March 29, 2011 /PRNewswire/ -- Forbes Energy Services Ltd. (TSX: FRB) (the "Company") today announced financial and operating results for the three months ended December 31, 2010.

Revenues for the fourth quarter increased 96.7% to $102.8 million compared to $52.3 million in the fourth quarter of 2009.  The increase was driven by significantly higher utilization and pricing in both divisions as well as certain third party sub-contractor revenues as discussed in more detail in the fluid logistics and other business segment information below.  Net income for the three months ended December 31, 2010 was $1.2 million, compared to a net loss of $6.1 million, or $0.10 per share, in the prior year period.

Adjusted EBITDA for the fourth quarter of 2010 was $19.1 million versus a negative $0.1 million for the same period in the prior year and $14.3 million for the third quarter of 2010.  This change represents a $4.8 million increase compared to the third quarter of 2010, an increase of 34%.  Adjusted EBITDA increased $39.0 million, or 300%, from $13.0 million in 2009 to $52.0 million for the year ended December 31, 2010.  Adjusted EBITDA is a non-GAAP financial measure, defined by the Company as net income before interest, taxes, depreciation, amortization, gain or loss on early extinguishment of debt, non-cash impairments and non-cash stock based compensation.  For a reconciliation of Adjusted EBITDA to net income, please see the disclosures at the end of this release and on the Company's website.

John Crisp, the Company's President and Chief Executive Officer, stated, "We continued to see strong improvement in financial and operating results in the fourth quarter, driven by continued oil and natural gas liquids exploration in South and West Texas.  Activity remains strong in the first quarter of 2011, although our core Texas market was temporarily impacted by the unusually severe weather that occurred in February.  As long as oil prices remain strong and gas prices stable, we expect 2011 to be a very good year."

In Mexico, the term of the Company's contract with PEMEX has been extended until December 31, 2011 and approximately $102 million, based on today's exchange rate, in additional work has been added to the contract. To accommodate the additional work, PEMEX has requested three additional well service rigs.  The Company's Mexico operation contributed approximately $8.9 million in EBITDA to the Company's consolidated group in 2010, which was reduced by payments to C.C. Forbes LLC's U.S. operations in the amount of $2.7 million for well service equipment rentals.  John Crisp stated, "We are very pleased with our Mexico operation's performance as well as the confidence PEMEX has shown through the extension of our contract and their request for additional equipment."

In March, the Company terminated its previously announced plan to send two rigs to Columbia.  

Business Segment Results

Well Servicing

Well servicing revenue totaled $43.8 million in the fourth quarter of 2010 compared to $25.2 million in the prior year period and $40.8 million in the third quarter of 2010.  Segment gross margin totaled $10.4 million (24% of revenues) in the fourth quarter compared to $1.3 million (5% of revenues) in the fourth quarter of 2009 and $8.2 million (20% of revenues) for the third quarter of 2010.  The sequential and year-over-year increase is the result of higher prices for our services and greater utilization in the U.S.

The Company recorded approximately 97,845 rig hours for the fourth quarter of 2010, including 15,192 hours in Mexico, compared to 68,896 total hours in the fourth quarter of 2009 (15,792 in Mexico) and 98,337 total hours in the third quarter of 2010 (17,856 in Mexico).  The Company had 173 rigs in its well service fleet at December 31, 2010.  Capital expenditures for the well servicing segment were approximately $0.3 million during the three months ended December 31, 2010, and $1.8 million for the full year.

Fluid Logistics and Other

Fluid logistics and other revenues in the fourth quarter of 2010 totaled $59.0 million compared to $27.1 million in the fourth quarter of 2009 and $43.1 million in the third quarter of 2010.  The fourth and third quarters of 2010 include $9.9 million and $1.4 million, respectively, in sub-contractor service revenues provided by a related third party that provides site preparation services, which are outside the scope of the traditional services offered by the Company.  Without these services, fluid logistics revenues totaled $49.1 million in the fourth quarter of 2010 and $41.8 million in the third quarter of 2010.

Gross operating margins for the fluid logistics segment totaled $13.5 million (23% of revenues) in the fourth quarter of 2010 compared to $4.8 million (18% of revenues) in the prior year and $10.9 million (25% of revenues) in the third quarter of 2010. Without the revenues and costs associated with the sub-contractor services, gross operating margins for the fluid logistics segment totaled $13.4 million (27% of revenues) in the fourth quarter of 2010 and $10.4 (25% of revenues) in the third quarter of 2010.

The Company recorded 305,113 truck hours during the fourth quarter of 2010 compared to 228,099 hours for the fourth quarter of 2009 and 293,488 hours in the third quarter of 2010.  The Company's fluid transport segment heavy truck fleet totaled 361 as of December 31, 2010 of which 285 were fluid transport trucks.  Total capital expenditures for the fluid logistics segment were approximately $0.2 million for the three months ended December 31, 2010, and $1.8 for the full year.

Liquidity and Capital Resources

Our $2.4 million of cash flow from operations for the year was negatively impacted by an increase of approximately $30.6 million in accounts receivable from year end 2009 to year end 2010.  As of December 31, 2010, we had $30.5 million in unrestricted cash and cash equivalents, $20.0 million of first lien notes, $192.5 million in face value of second lien notes, and $9.6 million of equipment and insurance notes.  

Conference Call

The Company will host a conference call to discuss its fourth quarter 2010 results on Wednesday, March 30, 2011, at 10:00 a.m. Eastern Time (9:00 a.m. Central). To access the call, please dial 480-629-9724 and ask for the Forbes Energy Services call at least 10 minutes prior to the start time. The conference call will also be broadcast live via the Internet and can be accessed through the "Investor Relations" page of the Company's website, www.forbesenergyservices.com.  

A telephonic replay of the conference call will be available until April 6, 2011, and may be accessed by calling (303) 590-3030 and using the pass code 4428698.  A webcast archive will be available at www.forbesenergyservices.com shortly after the call and will be accessible for approximately 30 days. For more information, please contact Donna Washburn at DRG&L at (713) 529-6600 or email at [email protected].

About the Company

Forbes Energy Services Ltd. is an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, Mississippi, Pennsylvania and Mexico.

Forward-Looking Statements and Regulation G Reconciliation

This press release contains "forward-looking statements," as contemplated by the Private Securities Litigation Reform Act of 1995, in which the Company discusses factors it believes may affect its performance in the future. The accuracy of the Company's assumptions, expectations, beliefs and projections depend on events or conditions that change over time and are thus susceptible to change based on actual experience, new developments and known and unknown risks. The Company gives no assurance that the forward-looking statements will prove to be correct and does not undertake any duty to update them. The Company's actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include: supply and demand for oilfield services and the level of oil and natural gas prices; the continued uncertainty in the global financial markets and its effect on domestic spending in the oil and natural gas industry; the Company's ability to maintain or improve pricing on its core services; the potential for excess capacity in the industry; and competition. Additional factors that you should consider are set forth in detail in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2010 (the "Form 10-K"), which was previously filed, as well as other filings the Company has made with the Securities and Exchange Commission. Should one or more of the foregoing risks or uncertainties materialize, or should the Company's underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated in its forward-looking statements, and the Company's business, financial condition and results of operations could be materially and adversely affected.  

The Company's financial statements and management's discussion and analysis of financial condition and results of operations can be found in the Form 10-K, which is being submitted for filing today with the Securities and Exchange Commission and posted on the Company's website.

This press release also contains references to the non-GAAP financial measure of adjusted EBITDA.  For a reconciliation of adjusted EBITDA to net income, please see the table at the end of this release. Management's opinion regarding the usefulness of adjusted EBITDA to investors and a description of the ways in which management uses such measures can be found on the "Investor Relations" page of the Company's website, www.forbesenergyservices.com.

SOURCE Forbes Energy Services Ltd.

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