Nine Energy Service (NINE) Q2 FY26 earnings call: guidance and Q&A

Asked about the implications of lost coiled tubing units on market slack and the broader attrition in the oilfield services sector beyond frac.

Ann Fox confirmed that there is little slack in the system, noting that the number of coiled tubing units available in the U.S. is down almost 40% compared to pre-COVID levels. She emphasized the significance of losing 17% of their specialized fleet and stated that investment in new units is considerably down, implying future pricing power if rig count increases.

“if you look at kind of end of 2019, let's just say pre-COVID, you're probably down almost 40% the number of coiled tubing units available in the United States.”

asked by John Daniel · answered by Ann Fox

Inquired about the progress of wireline operations in the Haynesville Basin and opportunities for pull-through of other services.

Ann Fox stated that the Haynesville Basin is attractive due to complex well completions (high temperatures, pressures). They repositioned assets from the Permian to capitalize on natural gas demand. She expects strong incremental plug use and cement services, making it a good offering for the company.

“We're looking forward to strong incremental plug use there. We've got cement services there. So this will be a really nice offering in a great basin for us moving forward.”

asked by John Daniel · answered by Ann Fox

Sought to quantify the impact of the lost coiled tubing units, their timing, and whether costs were absorbed without revenue.

Ann Fox explained that significant costs were moving upward throughout the quarter, and there's a lag in repricing customers. She indicated that a 'good significant chunk' of the Q3 revenue drop is attributable to the lost unit. She also highlighted the company's decision to retain the highly skilled workforce associated with the units, absorbing costs to avoid losing critical talent.

“You're also not sheltering your cost by getting rid of the collection of workforce that relates to that unit. That's a really important point to note and separate that from inflationary pressures due to geopolitical events and kind of the cost of crude.”

asked by Steve Ferazani · answered by Ann Fox

Asked if there was concern about similar issues affecting the remaining coiled tubing units.

Ann Fox assured that there is no concern for the remaining fleet, which is well-maintained. She attributed the specific incidents to unique circumstances: one unit sank in sand during transport, causing significant damage upon retrieval, and another experienced a very unusual maintenance failure. She reiterated that such a percentage of the fleet has never dropped before.

“No. We have a very good eye on maintenance. And one of these units, just to be specific, to give you an idea, like if you drive a pickup truck, you might have a gross weight somewhere a little over 10,000 pounds. Our coil units are getting up over 300,000 pounds of gross weight.”

asked by Steve Ferazani · answered by Ann Fox

Inquired about the level of activity growth needed to achieve pricing power and how it varies by service line.

Ann Fox stated that pricing power is easier in more differentiated service lines like tools and cement, followed by coiled tubing and then wireline. She noted that once the U.S. rig count approaches 600, the service sector gains more leverage and pricing power. She also highlighted challenges with repricing large-volume customers and dealing with sequential inflationary hits.

“Once you get towards that 600 rig count, you really start to take the slack out of the service sector and the service sector starts to get a lot more leverage and pricing power.”

asked by Steve Ferazani · answered by Ann Fox

Asked about the company's comfort level with the balance sheet and expectations for CapEx and cash conversion in the second half.

Heather Schmidt reaffirmed the full-year CapEx guidance of $20 million to $30 million but indicated it would likely be in the middle to lower end of that range. She expects cash flow neutrality through the second half of the year and expressed comfort with the balance sheet, noting the 7% interest rate on their ABL.

“I think you'll see cash flow neutrality through the second half of the year. I think we feel relatively comfortable with the balance sheet. We have a 7% interest rate. We have the ABL, but we're watching that very closely.”

asked by Steve Ferazani · answered by Heather Schmidt

Sought high-level macro commentary on whether the market is waiting for commodity prices to settle or if people are getting ahead of new volatility.

Ann Fox observed that rig count is moving, with privates increasing activity. She noted that increased production/CapEx announcements from customers are met with mixed results. She believes the geopolitical situation has highlighted the importance of North American shale. She expects inflationary pressures and price movement to stabilize by Q4, barring further geopolitical conflict, and expressed optimism about the rising rig count.

“But I do think we've got optimism around the rising rig count environment, and that's very exciting. And so again, this temporary issue with coil is just that, it's temporary.”

asked by David Storms · answered by Ann Fox