Stabilis Energy, Inc. — Q2 2020 Form 10-Q
The filing is for the quarter and six months ended June 30, 2020. The registrant name in the filing is Stabilis Energy, Inc. (ticker SLNG); the business produces, markets and sells LNG and provides rental, service and power-delivery solutions. Comparisons with 2019 are affected by the 2019 American Electric business combination and Diversenergy acquisition.
Financial results and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $5.0 million | $11.1 million | $18.8 million | $24.1 million |
| Operating loss before equity income | $4.0 million | $0.7 million | $4.6 million | $0.9 million |
| Net loss attributable to Stabilis | $3.5 million | $1.1 million | $4.5 million | $1.8 million |
| Net loss per share, basic and diluted | $0.21 | $0.08 | $0.27 | $0.14 |
- Q2 LNG product revenue fell 67% year over year to $2.9 million. Total revenue declined 55%; the company attributed the decrease mainly to reduced oilfield and other customer activity amid COVID-19 and lower natural gas prices.
- Rental, service and other revenue was $2.1 million in Q2, down 12%. For the six months it rose 33% to $6.8 million, principally reflecting the acquired American Electric business; LNG segment revenue declined 31%.
- Q2 gross profit was approximately $0.7 million, or 13% of revenue, compared with approximately $3.8 million, or 34%, a year earlier. The filing says lower utilization reduced George West plant efficiency; LNG product cost was 88% of product revenue in Q2 versus 65% a year earlier.
- Cash from operations was $4.3 million for the six months, versus $4.9 million in 2019. It included $2.1 million of BOMAY distributions; capital expenditures were $0.3 million. Cash increased $3.1 million to $7.1 million.
- At June 30, cash was $7.1 million, current assets $10.9 million and current liabilities $12.2 million, implying negative working capital of approximately $1.4 million. Total assets were $81.6 million and equity $63.0 million.
- Debt principal was $8.5 million; finance lease obligations were $2.4 million. Management reported $10.9 million of debt and finance lease obligations combined, with $5.2 million due within 12 months. Expected 2020 interest payments were approximately $0.9 million. The company was in compliance with debt covenants.
Outlook, risks and unusual items
- Management issued no quantified revenue or earnings guidance. It cited increased Mexico pipeline and utility opportunities and believes operating cash flows will fund the business for the next 12 months. This assessment comes amid recurring operating losses, negative working capital and uncertain LNG demand.
- The company implemented headcount and temporary salary reductions, travel cuts, consultant reductions and other cost controls. Management warned these actions may not be sufficient; pandemic duration and financial impact could not be reasonably estimated.
- The company received a $1.1 million Paycheck Protection Program loan in May, at 1% interest and due May 2022. Some or all may qualify for forgiveness, but forgiveness is not assured.
- BOMAY equity income was $0.8 million for the first half, and the company received $2.1 million in distributions. Foreign currency translation reduced the investment balance.
- A potential $4.3 million working-capital adjustment dispute with Myers Power Products remained unresolved; the company said there had been no update as of June 30 and believed resolution would not materially affect it. A subsidiary was also named in an environmental-exposure class action; insurance-appointed counsel is defending the claims.
- Management concluded the company could continue as a going concern for the next 12 months. It reported effective disclosure controls at June 30.
Key facts investors should verify
- Whether LNG customer demand and plant utilization recover, particularly in oilfield markets, and whether Mexico opportunities convert into revenue and cash.
- Whether operating cash generation remains adequate after separating recurring operations from BOMAY distributions and working-capital movements.
- Debt and lease maturities, refinancing or additional financing needs, and the status of PPP loan forgiveness.
- Developments, potential exposure and insurance coverage relating to the Myers dispute and Arkema-related litigation.
- Comparability of reported trends given acquisitions and the changing contribution of LNG and Power Delivery segments.