Nine Energy Service's Q4 2024: Contradictions in Activity Outlook, Tariff Impacts, and Market Strategy
Thursday, Mar 6, 2025 3:17 pm ET
1min read These are the key contradictions discussed in Nine Energy Service's latest 2024Q4 earnings call, specifically including: Activity Outlook, Tariff Impacts, and Market Strategy:
Rig Count Decline and Pricing Pressure:
- The U.S. rig count ended the year at approximately 590 rigs, declining by around 30 rigs since the beginning of 2024.
- This decline was primarily driven by depressed natural gas prices, averaging $2.19 for the year, which led to lower activity levels and pricing pressure in gas-levered basins like Haynesville and Northeast, where Nine generates over 30% of its total revenue.
Profitability and Market Share Gains:
- Nine successfully increased adjusted EBITDA in Q3 by approximately 47%, despite a 3% decrease in the average rig count.
- The company's profitability was driven by implementing cost-cutting measures and achieving profitable market share gains across service lines and basins, particularly in the Cementing division.
Technology and Innovation:
- The company's technology initiatives resulted in significant improvements, with the introduction of the Pincer hybrid frac plug and the frac start element for Scorpion Plugs.
- These innovations, along with a focus on dissolving plug technology, are aimed at benefiting from the expansion of lateral lengths, particularly in natural gas wells.
Outlook for 2025:
- Nine anticipates an increase in both revenue and adjusted EBITDA in Q1 2025, driven primarily by cementing and completion tools.
- The company is optimistic about potential increases in natural gas levered activity due to supportive gas prices, which could reach around $4, benefiting the Haynesville and Appalachia regions.
Rig Count Decline and Pricing Pressure:
- The U.S. rig count ended the year at approximately 590 rigs, declining by around 30 rigs since the beginning of 2024.
- This decline was primarily driven by depressed natural gas prices, averaging $2.19 for the year, which led to lower activity levels and pricing pressure in gas-levered basins like Haynesville and Northeast, where Nine generates over 30% of its total revenue.
Profitability and Market Share Gains:
- Nine successfully increased adjusted EBITDA in Q3 by approximately 47%, despite a 3% decrease in the average rig count.
- The company's profitability was driven by implementing cost-cutting measures and achieving profitable market share gains across service lines and basins, particularly in the Cementing division.
Technology and Innovation:
- The company's technology initiatives resulted in significant improvements, with the introduction of the Pincer hybrid frac plug and the frac start element for Scorpion Plugs.
- These innovations, along with a focus on dissolving plug technology, are aimed at benefiting from the expansion of lateral lengths, particularly in natural gas wells.
Outlook for 2025:
- Nine anticipates an increase in both revenue and adjusted EBITDA in Q1 2025, driven primarily by cementing and completion tools.
- The company is optimistic about potential increases in natural gas levered activity due to supportive gas prices, which could reach around $4, benefiting the Haynesville and Appalachia regions.
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