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Nuverra Announces Third Quarter and Year-to-Date 2019 Results

Nuverra Environmental Solutions, Inc. (NYSE American: NES) (“Nuverra,” the “Company,” “we,” “us” or “our”) today announced financial and operating results for the third quarter and nine months ended September 30, 2019.

SUMMARY OF QUARTERLY RESULTS

  • Third quarter revenue was $43.1 million, a decrease of approximately 4.7%, or $2.1 million, when compared with revenue of $45.2 million in the second quarter of 2019.
  • When compared to the same period in the prior year, third quarter revenue decreased 13.2%, or $6.6 million.
  • Net loss for the third quarter was $6.1 million as compared to net losses of $5.0 million in the second quarter of 2019 and $7.1 million in the third quarter of 2018.
  • Adjusted EBITDA for the third quarter was $4.6 million, a decrease of $0.7 million compared with $5.3 million in the second quarter of 2019.
  • Adjusted EBITDA for the third quarter increased by $0.6 million over the same period in the prior year.
  • Total liquidity available as of September 30, 2019 was $19.9 million.

“In the third quarter of 2019, we are seeing more of the effects of the industry slowdown on our revenues,” said Charlie Thompson, Chief Executive Officer. “The biggest impacts were felt in the Rocky Mountain division third party trucking, lay flat and landfill businesses. Fewer fracs and flowbacks in our geographies impacted the third party business and we saw less drilling near our landfill. The Northeast division continued to be impacted by the reuse trend and the Haynesville market saw declining activity with the lower natural gas prices. Related to this decline in activity is greater pricing pressure from our customers and our competitors. We continue to work on cost reduction measures and operating efficiencies and are accelerating those measures as we start the fourth quarter. We have noticed an increase in Northeast disposal volumes since the middle of September and are optimistic that trend will continue in the fourth quarter. We expect continued pressure in the Rocky Mountain and the Southern divisions, but are focused on efficient customer service and safety to preserve customer relationships.”

THIRD QUARTER 2019 RESULTS

Third quarter revenue was $43.1 million, a decrease of $2.1 million, or 4.7%, from $45.2 million in the second quarter of 2019. Of this 4.7% decrease, approximately 3.4% is attributable to a decrease in activities and 1.3% to pricing decreases.

When compared to the third quarter of 2018, third quarter 2019 revenue decreased by 13.2%, or $6.6 million, primarily due to decreases in activity levels for water transfer services for all three divisions, partially offset by increases in disposal services in the Northeast and Southern divisions. In the Rocky Mountain division, the decrease in water transfer and disposal service revenues was primarily due to a $3.0 million decrease in water transfer revenues from lower trucking volumes outsourced to third parties, a $1.3 million reduction in water transfer revenues from lay flat temporary hose, and a $1.1 million decrease in disposal service revenues from our landfill. In the Northeast division, the reuse of production water in customer completion activities during the third quarter continued to negatively impact our activity levels for water transfer services with total billable hours down 12% from the prior year. Offsetting this decrease in the Northeast was an increase in disposal services primarily due to the acquisition of Clearwater Solutions in the fourth quarter of 2018, which contributed revenues of $2.2 million in the third quarter of 2019. In the Southern division, the lower activity levels for water transfer services is due to a decrease in trucking volumes primarily from one major customer.

Total costs and expenses for the third quarter were $48.1 million. Total costs and expenses, adjusted for special items, were $47.7 million, or a $1.6 million decrease when compared with $49.3 million in the second quarter of 2019. Total costs and expenses, adjusted for special items, decreased 14.6% compared with $55.9 million in the third quarter of 2018 as a result of lower activity levels, as well as a favorable service mix due to growth in higher margin disposal services and active cost reduction efforts over the past year.

Net loss for the third quarter was $6.1 million as compared to a net loss of $5.0 million in the second quarter of 2019. Net loss for the third quarter of 2018 was $7.1 million. For the third quarter of 2019, the Company reported a net loss, adjusted for special items, of $5.7 million. Special items in the third quarter primarily included gains on the sale of underutilized assets, offset by stock-based compensation expense and long-lived asset impairment charges for assets classified as held for sale in the Rocky Mountain division. This compares with a net loss, adjusted for special items, of $5.3 million in the second quarter of 2019 and $7.4 million in the third quarter of 2018.

Adjusted EBITDA for the third quarter of 2019 was $4.6 million, a decrease of $0.7 million compared with $5.3 million in the second quarter of 2019. Of the 13.7% decrease in adjusted EBITDA, 12.2% related to pricing decreases, 2.3% related to a decrease in activity levels, both of which were partially offset by a 0.8% reduction in corporate expenses. When compared to the third quarter of 2018, adjusted EBITDA increased $0.6 million, or 16.2%. The 16.2% increase is comprised of a benefit of 44.7% for acquisitions/closures and 23.3% for corporate items, partially offset by 39.0% for decreases in activity levels and 12.8% for decreases in pricing. Third quarter 2019 adjusted EBITDA margin was 10.6%, compared with 11.7% in the second quarter of 2019 and 7.9% in the third quarter of 2018.

YEAR-TO-DATE RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 (“YTD”)

YTD revenue was $131.0 million, a decrease of $17.3 million, or 11.7%, from $148.3 million for the same period in 2018. The decrease in revenues is primarily due to decreases in water transfer services in all three divisions, partially offset by increases in disposal services in all three divisions. Additionally, $1.8 million in revenues associated with the Eagle Ford Shale area were included in revenues in the prior year but did not reoccur in the current year due to management’s decision to exit the Eagle Ford Shale area as of March 1, 2018.

In the Rocky Mountain division, the decrease in water transfer service revenues was primarily due to a $9.9 million decrease in revenues from lower trucking volumes outsourced to third parties and a $4.8 million reduction in revenues from lay flat temporary hose. In the Northeast division, the reuse of production water in customer completion activities during 2019 negatively impacted our activity levels for water transfer services with total billable hours down 9% from the prior year. Offsetting this decrease in the Northeast was an increase in disposal services primarily due to the acquisition of Clearwater Solutions in the fourth quarter of 2018, which contributed revenues of $6.7 million in 2019. In the Southern division, the lower activity levels for water transfer services is due to a decrease in trucking volumes from several key customers in the division.

YTD net loss was $17.4 million, an improvement of $33.1 million when compared with a net loss of $50.5 million for the same period in 2018. YTD net loss, adjusted for special items, was $17.1 million, an improvement of $12.9 million when compared with a net loss, adjusted for special items, of $30.0 million for the same period in 2018. YTD special items primarily included gains on the sale of underutilized assets, offset by stock-based compensation expense, continued reorganization expenses related to our 2017 chapter 11 filing and long-lived asset impairment charges for assets classified as held for sale in the Northeast and Rocky Mountain divisions.

YTD adjusted EBITDA was $14.4 million, an increase of $3.9 million, or 37.8%, when compared with the same period in 2018. Adjusted EBITDA margin for the 2019 YTD period was 11.0%, compared with 7.0% in 2018.

CASH FLOW AND LIQUIDITY

Net cash provided by operating activities for the nine months ended September 30, 2019 was $4.6 million, while capital expenditures net of asset sales consumed cash of $2.5 million. Asset sales were related to unused or under-utilized assets. The proceeds have been reinvested in 2019 in returns-driven growth projects, including the purchase of new trucks for our fleet.

Total liquidity available as of September 30, 2019 was $19.9 million. This consisted of cash and available revolver borrowings of $14.2 million, plus an additional $5.7 million delayed draw borrowing capacity under our second lien term loan. As of September 30, 2019, total debt outstanding was $36.9 million, consisting of $18.8 million under our senior secured term loan facility, $9.5 million under our second lien term loan facility, and $8.6 million of finance leases.

About Nuverra

Nuverra Environmental Solutions, Inc. is a leading provider of water logistics and oilfield services to customers focused on the development and ongoing production of oil and natural gas from shale formations in the United States. Our services include the delivery, collection, and disposal of solid and liquid materials that are used in and generated by the drilling, completion, and ongoing production of shale oil and natural gas. We provide a suite of solutions to customers who demand safety, environmental compliance and accountability from their service providers. Find additional information about Nuverra in documents filed with the U.S. Securities and Exchange Commission (“SEC”) at http://www.sec.gov.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. You can identify these and other forward-looking statements by the use of words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “might,” “will,” “should,” “would,” “could,” “potential,” “future,” “continue,” “ongoing,” “forecast,” “project,” “target” or similar expressions, and variations or negatives of these words.

These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including statements regarding market and industry trends and developments, and any forward-looking statements contained herein are based on information available to us as of the date of this press release and our current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. Future performance cannot be ensured, and actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include, among others: financial results that may be volatile and may not reflect historical trends due to, among other things, changes in commodity prices or general market conditions, acquisition and disposition activities, fluctuations in consumer trends, pricing pressures, transportation costs, changes in raw material or labor prices or rates related to our business and changing regulations or political developments in the markets in which we operate; risks associated with our indebtedness, including changes to interest rates, decreases in our borrowing availability, our ability to manage our liquidity needs and to comply with covenants under our credit facilities; the loss of one or more of our larger customers; difficulties in successfully executing our growth initiatives, including identifying and completing mergers, acquisitions, combinations and divestitures, successfully integrating merged, acquired, or combined business operations, and identifying and managing risks inherent in mergers, acquisitions, combinations and divestitures, as well as differences in the type and availability of consideration or financing for such mergers, acquisitions, combinations and divestitures; our ability to attract and retain key executives and qualified employees in key areas of our business; our ability to attract and retain a sufficient number of qualified truck drivers in light of industry-wide driver shortages and high-turnover; the availability of less favorable credit and payment terms due to changes in industry condition or our financial condition, which could constrain our liquidity and reduce availability under our revolving credit facility; higher than forecasted capital expenditures to maintain and repair our fleet of trucks, tanks, equipment and disposal wells; control of costs and expenses; changes in customer drilling, completion and production activities, operating methods and capital expenditure plans, including impacts due to low oil and/or natural gas prices or the economic or regulatory environment; risks associated with the limited trading volume of our common stock on the NYSE American Stock Exchange, including potential fluctuation in the trading prices of our common stock; risks and uncertainties associated with our completed restructuring process, including the outcome of a pending appeal of the order confirming the plan of reorganization; risks associated with the reliance on third-party analysts, appraisers, engineers and other experts; present and possible future claims, litigation or enforcement actions or investigations; risks associated with changes in industry practices and operational technologies and the impact on our business; risks associated with the operation, construction, development and closure of saltwater disposal wells, solids and liquids transportation assets, landfills and pipelines, including access to additional locations and rights-of-way, permitting and licensing, environmental remediation obligations, unscheduled delays or inefficiencies and reductions in volume due to micro- and macro-economic factors or the availability of less expensive alternatives; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; changes in economic conditions in the markets in which we operate or in the world generally, including as a result of political uncertainty; reduced demand for our services due to regulatory or other influences related to extraction methods such as hydraulic fracturing, shifts in production among shale areas in which we operate or into shale areas in which we do not currently have operations; the unknown future impact of changes in laws and regulation on waste management and disposal activities, including those impacting the delivery, storage, collection, transportation, treatment and disposal of waste products, as well as the use or reuse of recycled or treated products or byproducts; risks involving developments in environmental or other governmental laws and regulations in the markets in which we operate and our ability to effectively respond to those developments including laws and regulations relating to oil and natural gas extraction businesses, particularly relating to water usage, and the disposal, transportation and treatment of liquid and solid wastes; and natural disasters, such as hurricanes, earthquakes and floods, or acts of terrorism, or extreme weather conditions, that may impact our business locations, assets, including wells or pipelines, distribution channels, or which otherwise disrupt our or our customers’ operations or the markets we serve.

The forward-looking statements contained, or incorporated by reference, herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s views as of the date of this press release. The Company undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, changes in expectations or otherwise. Additional risks and uncertainties are disclosed from time to time in the Company’s filings with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Revenue:

Service revenue

$

38,862

$

45,694

$

119,101

$

136,541

Rental revenue

4,236

3,962

11,864

11,732

Total revenue

43,098

49,656

130,965

148,273

Costs and expenses:

Direct operating expenses

34,297

39,753

101,371

120,449

General and administrative expenses

4,774

5,849

15,529

31,183

Depreciation and amortization

8,928

10,018

27,340

36,731

Impairment of long-lived assets

120

100

237

4,563

Other, net

(4

)

49

(10

)

1,117

Total costs and expenses

48,115

55,769

144,467

194,043

Operating loss

(5,017

)

(6,113

)

(13,502

)

(45,770

)

Interest expense, net

(1,279

)

(1,241

)

(3,997

)

(3,695

)

Other income, net

280

169

457

683

Reorganization items, net

10

137

(200

)

(1,609

)

Loss before income taxes

(6,006

)

(7,048

)

(17,242

)

(50,391

)

Income tax expense

(46

)

(69

)

(171

)

(69

)

Net loss

$

(6,052

)

$

(7,117

)

$

(17,413

)

$

(50,460

)

Earnings per common share:

Net loss per basic common share

$

(0.39

)

$

(0.61

)

$

(1.11

)

$

(4.31

)

Net loss per diluted common share

$

(0.39

)

$

(0.61

)

$

(1.11

)

$

(4.31

)

Weighted average shares outstanding:

Basic

15,715

11,696

15,657

11,696

Diluted

15,715

11,696

15,657

11,696

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

September 30,

December 31,

2019

2018

Assets

Cash and cash equivalents

$

3,028

$

7,302

Restricted cash

1,384

656

Accounts receivable, net

31,045

31,392

Inventories

3,137

3,358

Prepaid expenses and other receivables

3,224

2,435

Other current assets

386

1,582

Assets held for sale

4,502

2,782

Total current assets

46,706

49,507

Property, plant and equipment, net

197,911

215,640

Operating lease assets

3,133

Equity investments

38

41

Intangibles, net

765

1,112

Goodwill

29,518

29,518

Other assets

99

118

Total assets

$

278,170

$

295,936

Liabilities and Shareholders’ Equity

Accounts payable

$

6,745

$

9,061

Accrued and other current liabilities

13,023

16,704

Current portion of long-term debt

6,657

38,305

Current contingent consideration

500

500

Total current liabilities

26,925

64,570

Long-term debt

30,134

27,628

Noncurrent operating lease liabilities

1,479

Deferred income taxes

385

181

Other long-term liabilities

7,577

7,130

Total liabilities

66,500

99,509

Commitments and contingencies

Shareholders’ equity:

Common stock

158

122

Additional paid-in capital

337,342

303,463

Treasury stock

(436

)

Accumulated deficit

(125,394

)

(107,158

)

Total shareholders’ equity

211,670

196,427

Total liabilities and shareholders’ equity

$

278,170

$

295,936

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended

September 30,

2019

2018

Cash flows from operating activities:

Net loss

$

(17,413

)

$

(50,460

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

27,340

36,731

Amortization of debt issuance costs, net

287

Accrued interest added to debt principal

119

Stock-based compensation

1,740

11,492

Impairment of long-lived assets

237

4,563

Gain on sale of UGSI

(75

)

Gain on disposal of property, plant and equipment

(1,828

)

(919

)

Bad debt recoveries

(65

)

(164

)

Change in fair value of derivative warrant liability

(32

)

(323

)

Deferred income taxes

204

11

Other, net

322

541

Changes in operating assets and liabilities:

Accounts receivable

412

1,423

Prepaid expenses and other receivables

(689

)

487

Accounts payable and accrued liabilities

(7,240

)

1,028

Other assets and liabilities, net

1,320

(234

)

Net cash provided by operating activities

4,595

4,220

Cash flows from investing activities:

Proceeds from the sale of property, plant and equipment

4,826

19,066

Purchases of property, plant and equipment

(7,341

)

(9,687

)

Proceeds from the sale of UGSI

75

Net cash (used in) provided by investing activities

(2,515

)

9,454

Cash flows from financing activities:

Payments on First and Second Lien Term Loans

(3,600

)

(2,132

)

Proceeds from Revolving Facility

139,661

172,336

Payments on Revolving Facility

(139,661

)

(172,336

)

Payments on Bridge Term Loan

(31,382

)

Proceeds from the issuance of stock

31,057

Payments on finance leases and other financing activities

(1,701

)

(1,399

)

Net cash used in financing activities

(5,626

)

(3,531

)

Change in cash, cash equivalents and restricted cash

(3,546

)

10,143

Cash and cash equivalents, beginning of period

7,302

5,488

Restricted cash, beginning of period

656

1,296

Cash, cash equivalents and restricted cash, beginning of period

7,958

6,784

Cash and cash equivalents, end of period

3,028

15,077

Restricted cash, end of period

1,384

1,850

Cash, cash equivalents and restricted cash, end of period

$

4,412

$

16,927

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS

(In thousands)

(Unaudited)

This press release contains non-GAAP financial measures as defined by the rules and regulations of the United States Securities and Exchange Commission. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations or balance sheets of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures are included in the attached financial tables.

These non-GAAP financial measures are provided because management of the Company uses these financial measures in maintaining and evaluating the Company’s ongoing financial results and trends. Management uses this non-GAAP information as an indicator of business results, and evaluates overall performance with respect to such indicators. Management believes that excluding items such as acquisition expenses, amortization of intangible assets, stock-based compensation, asset impairments, restructuring charges, expenses related to litigation and resolution of lawsuits, and other charges, which may or may not be non-recurring, among other items that are inconsistent in amount and frequency (as with acquisition expenses), or determined pursuant to complex formulas that incorporate factors, such as market volatility, that are beyond our control (as with stock-based compensation), for purposes of calculating these non-GAAP financial measures facilitates a more meaningful evaluation of the Company’s current operating performance and comparisons to the past and future operating performance. The Company believes that providing non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per share, in addition to related GAAP financial measures, provides investors with greater transparency to the information used by the Company’s management. These non-GAAP financial measures are not substitutes for measures of performance or liquidity calculated in accordance with GAAP and may not necessarily be indicative of the Company’s liquidity or ability to fund cash needs. Not all companies calculate non-GAAP financial measures in the same manner, and our presentation may not be comparable to the presentations of other companies.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)

Reconciliation of Net loss to EBITDA and Total Adjusted EBITDA:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Net loss

$

(6,052

)

$

(7,117

)

$

(17,413

)

$

(50,460

)

Depreciation and amortization

8,928

10,018

27,340

36,731

Interest expense, net

1,279

1,241

3,997

3,695

Income tax expense

46

69

171

69

EBITDA

4,201

4,211

14,095

(9,965

)

Adjustments:

Transaction-related costs, net

65

393

(86

)

445

Stock-based compensation

325

98

1,740

11,492

Change in fair value of derivative warrant liability

(4

)

(34

)

(32

)

(323

)

Reorganization items, net [1]

(10

)

(137

)

200

1,609

Legal and environmental costs, net

(81

)

53

(452

)

Impairment of long-lived assets

120

100

237

4,563

Restructuring, exit and other costs

(4

)

49

(10

)

1,117

Gain on sale of UGSI

(75

)

Executive and severance costs

2,937

Gain on disposal of assets

(122

)

(665

)

(1,828

)

(919

)

Total Adjusted EBITDA

$

4,571

$

3,934

$

14,369

$

10,429

[1] Reorganization items, net represents the costs related to the chapter 11 filing incurred after the May 1, 2017 filing date.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)

Reconciliation of QTD Segment Performance to Adjusted EBITDA

Three months ended September 30, 2019

Rocky Mountain

Northeast

Southern

Corporate

Total

Revenue

$

27,996

$

10,605

$

4,497

$

$

43,098

Direct operating expenses

22,023

8,750

3,524

34,297

General and administrative expenses

1,377

647

72

2,678

4,774

Depreciation and amortization

4,191

2,667

2,063

7

8,928

Operating income (loss)

285

(1,459

)

(1,158

)

(2,685

)

(5,017

)

Operating margin %

1.0

%

(13.8

)%

(25.8

)%

N/A

(11.6

)%

Income (loss) before income taxes

136

(1,355

)

(1,215

)

(3,572

)

(6,006

)

Net income (loss)

136

(1,355

)

(1,215

)

(3,618

)

(6,052

)

Depreciation and amortization

4,191

2,667

2,063

7

8,928

Interest expense, net

192

129

57

901

1,279

Income tax expense

46

46

EBITDA

$

4,519

$

1,441

$

905

$

(2,664

)

$

4,201

Adjustments, net

204

(134

)

(76

)

376

370

Adjusted EBITDA

$

4,723

$

1,307

$

829

$

(2,288

)

$

4,571

Adjusted EBITDA margin %

16.9

%

12.3

%

18.4

%

N/A

10.6

%

Three months ended September 30, 2018

Rocky Mountain

Northeast

Southern

Corporate

Total

Revenue

$

33,399

$

11,247

$

5,010

$

$

49,656

Direct operating expenses

25,757

10,372

3,624

39,753

General and administrative expenses

1,605

442

106

3,696

5,849

Depreciation and amortization

5,698

1,976

2,331

13

10,018

Operating income (loss)

339

(1,543

)

(1,200

)

(3,709

)

(6,113

)

Operating margin %

1.0

%

(13.7

)%

(24.0

)%

N/A

(12.3

)%

Income (loss) before income taxes

372

(1,628

)

(1,240

)

(4,552

)

(7,048

)

Net income (loss)

372

(1,636

)

(1,246

)

(4,607

)

(7,117

)

Depreciation and amortization

5,698

1,976

2,331

13

10,018

Interest expense, net

102

85

40

1,014

1,241

Income tax expense

8

6

55

69

EBITDA

$

6,172

$

433

$

1,131

$

(3,525

)

$

4,211

Adjustments, net

(203

)

(264

)

(130

)

320

(277

)

Adjusted EBITDA

$

5,969

$

169

$

1,001

$

(3,205

)

$

3,934

Adjusted EBITDA margin %

17.9

%

1.5

%

20.0

%

N/A

7.9

%

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)

Reconciliation of YTD Segment Performance to Adjusted EBITDA

Nine months ended September 30, 2019

Rocky Mountain

Northeast

Southern

Corporate

Total

Revenue

$

81,866

$

33,165

$

15,934

$

$

130,965

Direct operating expenses

64,205

27,072

10,094

101,371

General and administrative expenses

3,629

2,222

825

8,853

15,529

Depreciation and amortization

12,797

8,152

6,359

32

27,340

Operating income (loss)

1,115

(4,398

)

(1,334

)

(8,885

)

(13,502

)

Operating margin %

1.4

%

(13.3

)%

(8.4

)%

N/A

(10.3

)%

Income (loss) before income taxes

819

(4,510

)

(1,500

)

(12,051

)

(17,242

)

Net income (loss)

819

(4,510

)

(1,500

)

(12,222

)

(17,413

)

Depreciation and amortization

12,797

8,152

6,359

32

27,340

Interest expense, net

488

345

166

2,998

3,997

Income tax expense

171

171

EBITDA

$

14,104

$

3,987

$

5,025

$

(9,021

)

$

14,095

Adjustments, net

(556

)

(590

)

(402

)

1,822

274

Adjusted EBITDA

$

13,548

$

3,397

$

4,623

$

(7,199

)

$

14,369

Adjusted EBITDA margin %

16.5

%

10.2

%

29.0

%

N/A

11.0

%

Nine months ended September 30, 2018

Rocky Mountain

Northeast

Southern

Corporate

Total

Revenue

$

97,334

$

29,966

$

20,973

$

$

148,273

Direct operating expenses

77,702

26,696

16,051

120,449

General and administrative expenses

4,763

1,722

935

23,763

31,183

Depreciation and amortization

17,910

9,565

9,205

51

36,731

Operating loss

(3,041

)

(8,086

)

(10,497

)

(24,146

)

(45,770

)

Operating margin %

(3.1

)%

(27.0

)%

(50.1

)%

N/A

(30.9

)%

Loss before income taxes

(3,033

)

(8,307

)

(10,646

)

(28,405

)

(50,391

)

Net loss

(3,033

)

(8,315

)

(10,652

)

(28,460

)

(50,460

)

Depreciation and amortization

17,910

9,565

9,205

51

36,731

Interest expense, net

270

222

156

3,047

3,695

Income tax benefit

8

6

55

69

EBITDA

$

15,147

$

1,480

$

(1,285

)

$

(25,307

)

$

(9,965

)

Adjustments, net

(269

)

(1,849

)

6,101

16,411

20,394

Adjusted EBITDA

$

14,878

$

(369

)

$

4,816

$

(8,896

)

$

10,429

Adjusted EBITDA margin %

15.3

%

(1.2

)%

23.0

%

N/A

7.0

%

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)

Reconciliation of Special Items to Net loss and to EBITDA and Adjusted EBITDA

Three months ended September 30, 2019

As Reported

Special Items

As Adjusted

Revenue

$

43,098

$

$

43,098

Direct operating expenses

34,297

118

[A]

34,415

General and administrative expenses

4,774

(386

)

[B]

4,388

Total costs and expenses

48,115

(384

)

[C]

47,731

Operating loss

(5,017

)

384

[C]

(4,633

)

Net loss

(6,052

)

373

[D]

(5,679

)

Net loss

$

(6,052

)

$

(5,679

)

Depreciation and amortization

8,928

8,928

Interest expense, net

1,279

1,279

Income tax expense

46

43

EBITDA and Adjusted EBITDA

$

4,201

$

4,571

Description of 2019 Special Items:

[A]

Special items relates to the gain on the sale of underutilized assets.

[B]

Primarily attributable to stock-based compensation.

[C]

Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $0.1 million for assets classified as held-for-sale in the Rocky Mountain division.

[D]

Primarily includes the aforementioned adjustments along with a gain of $4.0 thousand associated with the change in fair value of the derivative warrant liability. Additionally, our effective tax rate for the three months ended September 30, 2019 was (0.8%) percent and was applied to the special items accordingly.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)

Reconciliation of Special Items to Net loss and to EBITDA and Adjusted EBITDA

Three months ended September 30, 2018

As Reported

Special Items

As Adjusted

Revenue

$

49,656

$

$

49,656

Direct operating expenses

39,753

526

[E]

40,279

General and administrative expenses

5,849

(271

)

[F]

5,578

Total costs and expenses

55,769

106

[G]

55,875

Operating loss

(6,113

)

(106

)

[G]

(6,219

)

Net loss

(7,117

)

(280

)

[H]

(7,397

)

Net loss

$

(7,117

)

$

(7,397

)

Depreciation and amortization

10,018

10,018

Interest expense, net

1,241

1,241

Income tax expense

69

72

EBITDA and Adjusted EBITDA

$

4,211

$

3,934

Description of 2018 Special Items:

[E]

Special items primarily relates to the gain on the sale of underutilized assets.

[F]

Primarily attributable to transaction costs related to the acquisition of Clearwater Solutions that closed on October 5, 2018 and stock-based compensation.

[G]

Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $0.1 million for assets classified as held-for-sale in the Southern division.

[H]

Primarily includes the aforementioned adjustments along with a gain of $34 thousand associated with the change in fair value of the derivative warrant liability. Additionally, our effective tax rate for the three months ended September 30, 2018 was (1.0%) percent and was applied to the special items accordingly.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)

Reconciliation of Special Items to Net loss and to EBITDA and Adjusted EBITDA

Nine months ended September 30, 2019

As Reported

Special Items

As Adjusted

Revenue

$

130,965

$

$

130,965

Direct operating expenses

101,371

1,824

[A]

103,195

General and administrative expenses

15,529

(1,703

)

[B]

13,826

Total costs and expenses

144,467

(106

)

[C]

144,361

Operating loss

(13,502

)

106

[C]

(13,396

)

Net loss

(17,413

)

277

[D]

(17,136

)

Net loss

$

(17,413

)

$

(17,136

)

Depreciation and amortization

27,340

27,340

Interest expense, net

3,997

3,997

Income tax expense

171

168

EBITDA and Adjusted EBITDA

$

14,095

$

14,369

Description of 2019 Special Items:

[A]

Special items relates to the gain on the sale of underutilized assets.

[B]

Primarily attributable to stock-based compensation and non-routine legal expenses, offset by an adjustment to capitalize certain of our transaction costs for our acquisition of Clearwater Solutions in the fourth quarter of 2018.

[C]

Primarily includes the aforementioned adjustments along with long-lived asset impairment charges of $0.2 million for assets classified as held-for-sale in the Northeast and Rocky Mountain divisions.

[D]

Primarily includes the aforementioned adjustments along with continued reorganization costs from our 2017 chapter 11 filing, and a gain of $32.0 thousand associated with the change in fair value of the derivative warrant liability. Additionally, our effective tax rate for the nine months ended September 30, 2019 was (1.0%) percent and was applied to the special items accordingly.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)

Reconciliation of Special Items to Net loss and to EBITDA and Adjusted EBITDA

Nine months ended September 30, 2018

As Reported

Special Items

As Adjusted

Revenue

$

148,273

$

$

148,273

Direct operating expenses

120,449

718

[E]

121,167

General and administrative expenses

31,183

(14,221

)

[F]

16,962

Total costs and expenses

194,043

(19,183

)

[G]

174,860

Operating loss

(45,770

)

19,183

[G]

(26,587

)

Net loss

(50,460

)

20,422

[H]

(30,038

)

Net loss

$

(50,460

)

$

(30,038

)

Depreciation and amortization

36,731

36,731

Interest expense, net

3,695

3,695

Income tax expense

69

41

EBITDA and Adjusted EBITDA

$

(9,965

)

$

10,429

Description of 2018 Special Items:

[E]

Special items primarily relates to the gain on the sale of underutilized assets.

[F]

Primarily attributable to severance, transaction costs associated with the acquisition of Clearwater Solutions that closed on October 5, 2018, stock-based compensation and non-routine litigation expenses.

[G]

Primarily includes the aforementioned adjustments along with $1.1 million in restructuring costs related to the exit of the Eagle Ford Shale area, and long-lived asset impairment charges of $4.6 million for assets classified as held-for-sale in the Southern, Northeast and Corporate divisions.

[H]

Primarily includes the aforementioned adjustments along with $1.6 million of continued reorganization costs from our 2017 chapter 11 filing, offset by a gain of $0.3 million associated with the change in the fair value of the derivative warrant liability. Additionally, our effective tax rate for the nine months ended September 30, 2018 was (0.1%) percent and was applied to the special items accordingly.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)

Reconciliation of Free Cash Flow

Nine Months Ended

September 30,

2019

2018

Net cash provided by (used in) operating activities

$

4,595

$

4,220

Net cash capital expenditures [1]

(2,515

)

9,379

Free Cash Flow

$

2,080

$

13,599

[1]

Net cash capital expenditures is defined as proceeds received from sales of property, plant and equipment, net of purchases of property, plant and equipment.

Sequential Revenue and Adjusted EBITDA Decrease by Price, Activity, Acquisition/Closure and Corporate

Revenue

Adjusted EBITDA

Q3 2019 vs Q2 2019

Q3 2019 vs Q2 2019

Breakdown of Decrease:

Price

$

(626

)

(1.3

)%

$

(649

)

(12.2

)%

Activity

(1,516

)

(3.4

)

(123

)

(2.3

)

Acquisition/Closure

Corporate

45

0.8

Total Sequential Decrease

$

(2,142

)

(4.7

)%

$

(727

)

(13.7

)%

Year-Over-Year Revenue Decline by Price, Activity and Acquisition/Closure

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2019

Breakdown of Total Revenue Decline:

Price

$

(535

)

(1.1

)%

$

(1,504

)

(1.0

)%

Activity

(8,173

)

(16.4

)

(19,973

)

(13.5

)

Acquisition/Closure (a)

2,150

4.3

4,169

2.8

Total Revenue Decline

$

(6,558

)

(13.2

)%

$

(17,308

)

(11.7

)%

(a) Represents the combined impact of the Clearwater Solutions acquisition on October 5, 2018 and management’s decision to exit the Eagle Ford Shale area as of March 1, 2018.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS (continued)

(In thousands)

(Unaudited)

Year-Over-Year Adjusted EBITDA Growth by Price, Activity, Acquisition/Closure, and Corporate

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2019

Breakdown of Total Adjusted EBITDA Growth:

Price

$

(502

)

(12.8

)%

$

(1,454

)

(13.9

)%

Activity/Expense

(1,536

)

(39.0

)

(2,792

)

(26.8

)

Acquisition/Closure (a)

1,758

44.7

5,838

56.0

Corporate

917

23.3

2,348

22.5

Total Adjusted EBITDA Growth

$

637

16.2

%

$

3,940

37.8

%

(a) Represents the combined impact of the Clearwater Solutions acquisition on October 5, 2018 and management’s decision to exit the Eagle Ford Shale area as of March 1, 2018.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

SUPPLEMENTAL COMPANY AND INDUSTRY DATA

(Unaudited)

Company Assets and Utilization by Revenue Source

Three Months Ended

September 30, 2019

Water Trucks:

Count (approximate)

438

% Utilized [1]

50

%

Salt Water Disposal Wells:

Count

49

% Utilized [2]

53

%

Haynesville Pipeline:

% Utilized [2] [3]

57% - 62%

[1]

Trucking utilization assumes a five day work-week and running twelve hours per day.

[2]

Salt Water Disposal Well and Pipeline utilization is calculated based on daily functional capacity rather than permitted capacity. Functional capacity reflects any factors limiting volume such as pressure limits, pump or tank capacity, etc. and can potentially be increased with additional capital investment.

[3]

The range of utilization for the Haynesville Pipeline represents the high and low for the period.

NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

SUPPLEMENTAL COMPANY AND INDUSTRY DATA

(Unaudited)

Industry Statistics for the Basins in which Nuverra Operates

Average for the

Three Months Ended September 30,

Year-Over-Year

2019

2018

Growth (Decline) %

Pricing:

Oil price per barrel [1]

$

56.34

$

69.69

(19.2

)%

Natural gas price per tcf [2]

$

2.38

$

2.93

(18.8

)%

Total Operating Rigs [3]

171

179

(4.5

)%

Rocky Mountain Division

51

55

(7.3

)%

Northeast Division

69

76

(9.2

)%

Southern Division

50

49

2.0

%

Total Oil Production (barrels in thousands) [4]

1,648

1,485

11.0

%

Rocky Mountain Division

1,459

1,321

10.4

%

Northeast Division

147

123

19.5

%

Southern Division

42

41

2.4

%

Total Natural Gas Production (Mcf/d) [4]

46,607

40,686

14.6

%

Rocky Mountain Division

2,985

2,491

19.8

%

Northeast Division

32,297

28,911

11.7

%

Southern Division

11,325

9,285

22.0

%

Total Wells Completed [4]

899

923

(2.6

)%

Rocky Mountain Division

365

406

(10.1

)%

Northeast Division

395

394

0.3

%

Southern Division

140

123

13.8

%

Total Drilled Uncompleted Ending Inventory [4]

1,355

1,593

(14.9

)%

Rocky Mountain Division

652

759

(14.1

)%

Northeast Division

517

629

(17.8

)%

Southern Division

186

205

(9.3

)%

[1]

Source: West Texas Intermediate (“WTI”) Crude Oil Spot Price

[2]

Source: Henry Hub (“HH”) Natural Gas Spot Price

[3]

Source: Baker Hughes

[4]

Source: US Energy Information Association (“EIA”)

Contacts:

Nuverra Environmental Solutions, Inc.
Investor Relations
602-903-7802
ir@nuverra.com

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