Nine Energy Service Navigates Flat Rig Market with Strong Q1 Results

Nine Energy Service, Inc. (NYSE: NINE) delivered a resilient performance in Q1 2025, defying a stagnant U.S. rig count environment to post revenue growth of 6% sequentially. The company’s earnings conference call on May 8, 2025, highlighted a mix of operational discipline, strategic capital moves, and cautious optimism about its ability to capitalize on a potentially improving market. Here’s what investors need to know.

Financial Highlights: Revenue Growth Amid Flat Rig Counts

The most striking takeaway from Nine Energy’s Q1 results is its ability to grow revenue to $150.5 million, the upper end of its $146–152 million guidance range, despite the average U.S. rig count remaining flat compared to Q4 2024. This outperformance reflects market share gains and operational efficiency, as CEO Ann Fox noted: “We increased revenue by approximately 6% while the rig count stayed flat, demonstrating execution in a stable environment.”

While the net loss widened slightly to $(7.1 million) (or $(0.18) per share), this marked a 20% sequential improvement over Q4’s net loss. Adjusted EBITDA also rose 17% sequentially to $16.5 million, signaling better cost control and margin management.

Strategic Moves: Liquidity Boost via New Credit Facility

A critical development was the closing of a $125 million senior secured ABL credit facility on May 1, 2025. This replaces the prior credit agreement and significantly boosts total liquidity to $53.8 million as of March 31. The facility provides flexibility for working capital needs, capital expenditures, and potential acquisitions, positioning the company to act opportunistically if rig counts rebound.

The Elephant in the Room: Why the Rig Count Matters

The U.S. rig count—a key indicator of drilling activity—has been a persistent headwind for energy service companies. While Nine’s revenue growth suggests it’s outperforming peers in a flat market, the company’s long-term success hinges on a sustained rise in rig activity.

Investors should monitor data from Baker Hughes, which tracks weekly rig counts. A sustained increase could validate Nine’s strategy of focusing on efficiency and cost discipline.

Management’s Tone: Cautious Optimism, No Forward Guidance

CEO Fox and CFO Guy Sirkes avoided providing explicit Q2 2025 guidance, a common defensive tactic in volatile markets. Instead, they emphasized the new credit facility’s role in strengthening financial flexibility. The lack of forward targets underscores uncertainty around oil prices and macroeconomic conditions.

Investor Takeaways

1. Resilience in a Flat Market: Nine’s Q1 results show it can grow revenue even when rig counts stall, thanks to operational improvements and market share wins.
2. Debt Management: The new credit facility reduces near-term liquidity risks and provides a financial buffer for growth opportunities.
3. Risks Ahead: The company’s fate remains tied to rig count trends. A prolonged stagnation or decline could pressure margins and profitability.

Conclusion: NINE’s Positioning in a Pivotal Sector

Nine Energy Service’s Q1 performance demonstrates its ability to navigate a challenging market, but its future hinges on external factors like oil prices and rig activity. The $125 million credit facility is a strategic win, offering flexibility to invest in growth or weather a downturn.

With adjusted EBITDA up 17% sequentially and revenue hitting the top of guidance, the company has shown it can outperform peers in a flat environment. However, investors must weigh this progress against the broader industry’s dependence on rig counts. If U.S. drilling activity rebounds—a possibility as oil prices stabilize—Nine could see significant upside. For now, it’s a hold, but one worth monitoring closely as macroeconomic data evolves.

Bottom line: Nine Energy Service is positioning itself for success in a sector that’s waiting for the next leg up. Stay tuned to rig count data and oil price trends for clues on what’s next.