CISCO, Texas (KTAB/KRBC) – 50 employees have been laid off at the Basic Energy Services location in Cisco.
Eastland County Today reports the employees were given notice of the layoffs Thursday morning, and they were effective immediately.
It’s unknown if the employees were given any kind of severance package.
Employees at other Basic Energy locations, a total of 350, were also laid off.
Anyone affected by the layoffs is asked to call (325)795-4200 or visit 500 Chestnut Street in Abilene to receive assistance from Workforce Solutions.
Basic Energy Services drafted the following news release outlining their reason behind their decision to divest, which led to the layoffs:
Basic Energy Services, Inc. (OTCQX: BASX) (“Basic” or the “Company”) today announced a plan to divest of its pumping services assets (not inclusive of coiled tubing) in multiple transactions with expected proceeds of approximately $30 to $45 million. Despite the recent repositioning and restructuring in the pumping business, activity and pricing remain difficult, inhibiting the potential for positive free cash flow in the near- to medium-term. This divestiture is designed to bolster the Company’s core remaining production-focused businesses of well servicing and water logistics. Furthermore, this non-core divestiture will fund the projected 2020 and 2021 capital budget of Agua Libre Midstream, the Company’s rapidly growing, high return-on-assets business.
Given current market conditions, the Company believes it is appropriate to pivot away from completion-centric pumping services and toward its core production businesses. Basic plans to complete all work currently in-process, after which the Company will cease its pumping and pumping-related services. Real estate and equipment are expected to be sold in multiple transactions during Q4 2019 and Q1 2020. Basic’s coiled tubing business remains highly complementary to its well servicing operations and is not expected to be impacted by these divestitures.
Roe Patterson, President and CEO, stated, “While the overall energy service market remains highly competitive, we continue to see high value potential in our Agua Libre Midstream subsidiary; this business continues to outperform in this very challenging market. With additional disposal barrels from 2019 growth capital expenditures, we expect the midstream business to contribute significantly to incremental margins in 2020. In order to focus our capital resources most effectively to benefit free cash flow, we made the decision to cease pumping operations and divest of all non-core equipment and real estate. Given current market conditions and appetite for pumping and ancillary equipment, we believe our plan limits execution risk and allows for greater proceeds than under a going-concern valuation and sale scenario.
“The decision to exit the pumping services market in no way reflects on the employees that make up our pumping services team. This team has aggressively cut costs and continued to win business in a highly competitive market. Unfortunately, these pumping business lines currently remain in a structurally-disadvantaged position, as they are our most capital-intensive businesses. These divestitures will also reduce our capital lease exposure and the Company’s total debt. The transaction will allow us to focus our efforts in the production-focused businesses in which we excel and generate higher returns on capital.
“Looking ahead to the first half of 2020, we do not expect the sale of our pumping assets to negatively impact EBITDA, reflecting just how difficult the market has become. Due to a lower-capital intensity asset base, we expect our cash balance to be approximately $5 million higher, excluding proceeds from the pumping asset sales, at the end of the second quarter of 2020. Furthermore, in conjunction with this capital redeployment plan, we expect to immediately cut general and administrative expenses by approximately $14 million on an annualized basis, reaching an annual total company run-rate of approximately $100 million by the second quarter of 2020. Without a significant recovery in crude prices, we expect 2020 revenues in the Well Servicing segment and remaining Completions & Remedial Services segment (which includes coiled tubing, snubbing, and rental and fishing tools) to be flat compared to 2019, with our Water Logistics segment (which includes Agua Libre Midstream and fluid services) revenues to grow 5% to 10% year-over-year, with growth accelerating as our newer midstream projects come online with enhanced contribution margins for the segment.”
BigCountryHomepage will update this article if more information is released.
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