Calfrac Well Services ((TSE:CFW)) has held its Q4 earnings call. Read on for the main highlights of the call.
Calfrac Well Services’ recent earnings call revealed a mixed sentiment, highlighting both achievements and challenges. The company celebrated significant safety milestones and operational expansion in Argentina, yet faced financial declines in North America due to market difficulties and asset write-offs. While fleet modernization and Argentina’s growth present positive outlooks, tariff uncertainties and U.S. market pressures remain hurdles.
Record Safety Performance
Calfrac Well Services achieved a new record in safety performance, with a Total Recordable Incident Frequency (TRIF) of 0.92, improved from 1.05 in 2023. This milestone underscores the company’s commitment to maintaining a strong safety culture across its operations.
Fleet Modernization and Expansion
The company concluded the year with 66 Tier IV pumps and plans to operate five Tier IV fleets in North America by the end of Q1 2025. Additionally, Calfrac expanded its operations in Argentina, deploying a second large fracturing fleet into the Vaca Muerta shale play ahead of schedule.
Argentina Growth Prospects
Calfrac reported record financial results in Argentina, driven by increased fracturing activity. The company plans further expansion in the Vaca Muerta shale play, supported by a $50 million capital investment funded locally, highlighting Argentina’s promising growth prospects.
Balance Sheet Strength
Calfrac ended Q4 2024 with $273.9 million in working capital, including $44 million in cash. The company maintained a net debt to adjusted EBITDA ratio of 1.57, demonstrating financial stability and compliance with bank covenants.
Revenue and EBITDA Decline
The company experienced a 10% decline in revenue, totaling $381.2 million for Q4 2024, compared to the previous year. Adjusted EBITDA fell by 45% to $34.5 million, attributed to lower utilization in North America and weaker pricing in the U.S.
Net Loss and Asset Write-off
Calfrac reported a net loss of $6.4 million in Q4 2024, contrasting with a net income of $13.2 million in Q4 2023. This was primarily due to a $12.7 million write-off of obsolete fracturing assets in the U.S. and a one-time depreciation expense adjustment.
Challenges in U.S. Market
The U.S. market faced lower activity and pricing, resulting in a 10% revenue decline from the previous year. The start of Q1 2025 also proved challenging, reflecting ongoing market difficulties.
Tariff Impact and Cost Pressures
The introduction of tariffs is expected to affect the costs of imported items, such as sand and chemicals, from the U.S., adding uncertainty to the supply chain and increasing cost pressures.
Forward-Looking Guidance
Looking ahead, Calfrac plans to operate five Tier IV fracturing fleets in North America by the end of the first quarter of 2025 and continue its expansion in Argentina with two large fracturing fleets in the Vaca Muerta shale play. Despite challenges like tariffs affecting input costs and seasonal slowdowns, the company remains optimistic about its prospects in 2025.
In summary, Calfrac Well Services’ earnings call highlighted a mix of achievements and challenges. While the company made significant strides in safety and expansion, particularly in Argentina, it faced financial setbacks in North America. The forward-looking guidance suggests optimism for 2025, with strategic plans to overcome current market hurdles.