Nine Energy Service, Inc. (NINE) is a leading North American onshore completion services provider that targets unconventional oil and gas resource development. The company partners with its exploration and production (E&P) customers across all major onshore basins in both the U.S. and Canada, as well as abroad, to design and deploy downhole solutions and technology to prepare horizontal, multistage wells for production.
Business Overview and History
Nine Energy Service was formed in February 2013 through a combination of three service companies owned by SCF Partners, L.P. or its affiliates. The company has since grown to become a prominent player in the oilfield services industry, providing a comprehensive range of completion solutions to its customers.
Nine's core service offerings include cementing, completion tools, wireline, and coiled tubing. The company's success is driven by its intense focus on performance and wellsite execution, as well as its commitment to forward-leaning technologies that aid in the development of customized applications. Nine focuses on providing cost-effective and comprehensive completion solutions designed to maximize customer production levels and operating efficiencies.
In 2018, Nine entered the public market through an initial public offering, which marked a significant milestone in the company's growth trajectory. Over the years, Nine has expanded its service offerings and geographic reach to become a diversified oilfield services provider, operating in all major onshore basins in the U.S. and Canada, as well as internationally.
Throughout its history, Nine has demonstrated resilience in navigating the cyclical and volatile nature of the oil and gas industry. The company has adapted to changing commodity prices, customer preferences, and technological advancements by maintaining strong customer relationships, investing in its technological capabilities, and optimizing its cost structure to remain competitive. Nine's asset-light business model and variable cost structure have allowed it to quickly implement cost-cutting measures during industry downturns, ensuring its ability to weather challenging market conditions.
Financial Performance and Ratios
For the full year 2024, Nine Energy reported total revenues of $554.1 million, with service revenues accounting for $421.7 million and product revenues contributing $132.4 million. The company's adjusted gross profit for the year was $97.4 million. Nine reported a net loss of $41.1 million and adjusted EBITDA of $53.2 million. The company's gross profit margin for the year stood at 10.9%, while its operating profit margin was 1.6%.
Nine's balance sheet remains reasonably solid, with a current ratio of 2.09 and a quick ratio of 1.47 as of December 31, 2024. The company's debt-to-equity ratio was -5.43, indicating a highly leveraged capital structure. Nine's return on assets (ROA) and return on equity (ROE) for 2024 were -11.4% and 75.8%, respectively.
In terms of cash flow, Nine reported annual operating cash flow of $13.2 million and negative free cash flow of $1.6 million for the fiscal year 2024.
Liquidity
Nine Energy Service maintains a focus on liquidity management to support its operations and financial flexibility. As of December 31, 2024, the company had $27.9 million in cash and $24.2 million available under its ABL Credit Facility. Nine's liquidity position, including cash and available credit facilities, allows it to navigate market fluctuations and invest in growth opportunities. Nine's management team continuously monitors and adjusts its liquidity strategy to ensure the company can meet its financial obligations and capitalize on market opportunities.
Operational Highlights and Key Developments
Throughout 2024, Nine Energy executed a two-pronged strategy to drive profitability in a declining or flat rig count environment. This involved implementing cost-cutting measures and pursuing profitable market share gains across its service lines and basins.
The company's cementing division was a standout performer, increasing revenue by approximately 20% from Q2 to Q4 2024. Nine was able to exit the year with a cementing market share of around 19% within its operating regions, up from approximately 14% in Q4 2023. This was achieved through the team's focus on technology, execution, and servicing the most complex, technically demanding wells.
In the completion tools segment, Nine introduced new products such as the Pincer hybrid frac plug and enhanced its existing Scorpion plug with a frac start element. The company also continued to see growth in its international tools market, which remains a key strategic focus area.
Service Offerings and Operational Performance
Cementing Services: Nine Energy Service operates 4 high-quality laboratory facilities capable of designing and testing all current industry cement designs. These facilities operate 24 hours a day and are fully staffed by qualified technicians with the latest equipment and modeling software. The company deploys its cement slurries using customized design twin-pumping units, which are fully redundant to decrease the risk of downtime due to mechanical failure. From January 2018 through December 2024, Nine completed approximately 26,000 cementing jobs, with an on-time rate of approximately 89%.
Completion Tools: Nine provides a comprehensive portfolio of downhole solutions and technologies used for multistage completions. The company's tool portfolio includes composite, hybrid, and dissolvable frac plugs, liner hangers and accessories, fracture isolation packers, frac sleeves, stage one prep tools, casing flotation tools, specialty open hole float equipment, disk subs, composite cement retainers, and centralizers. From January 2018 through December 2024, Nine deployed approximately 557,700 isolation, stage one, and casing flotation tools.
Wireline Services: Nine operates a fleet of modern and fit-for-purpose cased hole wireline units designed for operating in unconventional completion operations. From January 2018 through December 2024, the company completed approximately 189,500 wireline stages with a success rate of over 99%.
Coiled Tubing Services: Nine's extended reach coiled tubing units are capable of reaching the toe of wells with total measured depths of 27,000 feet and beyond, including lateral lengths in excess of 12,500 feet. From January 2018 through December 2024, the company performed approximately 8,300 jobs and deployed more than 218 million running feet of coiled tubing, with a success rate of over 99%.
Geographic Performance
Nine Energy Service operates primarily in the United States, with some international operations. In 2024, 98.4% of the company's revenue was generated in the United States, highlighting the company's strong domestic focus.
Recent Financial Performance
For the fourth quarter of 2024, Nine reported revenue of $141.4 million, representing an increase of approximately 2% quarter-over-quarter despite a flat average US rig count. The cementing division saw revenue increase by approximately 7%, while completion tool revenue grew by about 6% quarter-over-quarter. The company reported a net loss of $8.8 million for Q4 2024.
Guidance and Outlook
For the first quarter of 2025, Nine is projecting revenue between $146 million and $152 million, representing a sequential increase from Q4 2024. The company anticipates both revenue and adjusted EBITDA will increase sequentially in Q1 2025 compared to Q4 2024, driven by sustained market share gains and ongoing cost-cutting measures. For the full year 2025, Nine expects total capital expenditures of $15 million to $25 million.
Risks and Challenges
Nine Energy operates in a highly competitive oilfield services industry, facing rivalry from major integrated companies as well as smaller, local players. The company's business is cyclical and dependent on capital spending and well completions by the onshore oil and natural gas industry, which is strongly influenced by volatile commodity prices.
Additionally, Nine is exposed to risks inherent in the oilfield services industry, such as equipment defects, accidents, and environmental liabilities. The company's operations are also subject to stringent federal, state, and local regulations, which could increase its compliance costs and operational challenges.
Conclusion
Despite the challenges faced in 2024, Nine Energy has demonstrated its ability to adapt and execute a strategy focused on cost optimization and market share gains. The company's Q4 2024 results, with revenue growth and relatively flat adjusted EBITDA despite seasonal headwinds, highlight its operational resilience.
Looking ahead, Nine is cautiously optimistic about the outlook for 2025, particularly in natural gas-levered basins, where it has a significant presence and sees potential for increased activity as commodity prices improve. The company's ongoing investments in technology, R&D, and operational excellence are expected to further strengthen its competitive position in the market.
Overall, Nine Energy Service's diversified service offerings, focus on operational efficiency, and strategic initiatives position the company well to navigate the cyclical nature of the oilfield services industry and capitalize on future growth opportunities.