Hello, and welcome to Enservco's 2020 third quarter conference call. Presenting on behalf of the company today are Rich Murphy, Executive Chairman; and Marjorie Hargrave, President and CFO.

As a reminder, matters discussed during this call may include forward-looking statements that are based on management's estimates, projections and assumptions as of today's date and are subject to risks uncertainties disclosed in the company's most recent 10-K, as well as other filings with the SEC. The company's business is subject to certain risks that could cause actual results to differ materially from those anticipated in the forward-looking statements.

Enservco assumes no obligation to update forward-looking statements that become untrue because of subsequent events. I'll also point out that management's ability to respond to questions during this call is limited by SEC Reg FD, which prohibits like the disclosure of material non-public information.

A webcast replay of today's call will be available at enservco.com after the call. In addition, the telephone replay will be available beginning approximately 2 hours after the call.

Instructions for accessing the webcast or replay are available in today's news release. With that, I'll turn the call over to Rich Murphy.

Rich, please go ahead.

Thanks, Jay. Welcome, everyone, and thanks for joining our call today.

Before getting into our financial results, I want to recognize that we continue to live in unprecedented times with the pandemic, which has affected the way we and our customers do business and affected all of us as individuals in one way or another. Since March, our focus has been on the safety of all our staff and customers, and we certainly hope that you are all staying safe and well.

I also want to take a minute to congratulate Marjorie Hargrave on our appointment to the President of Enservco. In her role as CFO, a position she'll continue to hold, Marjorie took the lead in engineering our successful refinancing and has also played a key role in driving cost reductions and reorganizing our field operations to be more efficient without sacrificing our ability to serve customers in markets across the U.S.

Marjorie is a very talented all around manager, whose had a hand in all facets of our turnaround program and has the depth and breadth of experience to execute effectively in her new role as President. As you probably know, our second and third quarter are traditionally our slower quarters.

Again with the warm temperatures, we're not doing any frac water heating, which is by far our largest revenue and profit generator. Our revenues in Q2 and Q3 are primarily derived from acidizing and hot oiling services.

Demand for frac water heating picked up consistently heading into late fall and consequently, in the fourth and first quarters, which we refer to as our heating season, traditionally our strongest quarters in terms of revenue and profitability. We are progressing nicely in the current fourth quarter and very hopeful for a very cold winter that lasts well into the spring.

Marjorie will recap our Q3 and nine-month financial results in just a few minutes. But first, I'd like to recap some highlights from the first 10 months of 2020 that I believe position Enservco for improved financial results going forward.

As we related in our press release today, we entered 2020 facing some real challenges. The industry downturn due to lower commodity prices and the COVID-19 pandemic that resulted in an ultra-competitive business landscape with increased pricing and margin pressure.

A request from our lender to refinance a debt load that frankly had become unsustainable in this lower revenue environment. A burdensome cost structure, the need to raise additional capital to fund increased activity in our heating season; and finally, our non-compliance with a NYSE American listing requirements.

Earlier in the year, those challenges look fairly daunting, and we did our best to keep you appraised of our efforts to meet and solve each of them. Well today, I'm happy and proud to say that with recent developments, we have answered each of these challenges and in the process, created a more stable and sustainable business model that we believe is positioned to deliver improved financial results and enhanced shareholder value.

I'll start with our refinancing, which consumed a lot of management's time and attention throughout the year and finally culminated in the successful closure of a new loan agreement with our lender East West Bank in September. The refinancing includes a $17 million term loan and a $1 million working capital revolving line of credit, both of which have October 15, 2021 maturity dates.

The term loan is interest-only with potential for principal payments in the event if Enservco reaches certain profit metrics. This transformative refinancing estimated eliminated $16 million in debt and added $12.5 million to stockholders' equity.

In exchange for the debt relief, we issued our lender equity that makes them a significant shareholder of Enservco and brings our interest even more closely into alignment than before, eliminating nearly half our total debt and return for restricted stock and warrants was a major step for improving our cash flow and ensuring the viability of our business. We also viewed it as a nice endorsement by our lender, which we appreciate very much.

Concurrent with the refinancing, my investment fund, across our partners also put more skin in the game by converting $1.4 million in sub debt and accrued interest into Enservco restricted common stock. Cross River is by far Enservco's largest shareholder today.

Again, this lengthy and complex process consumed an enormous amount of your management's time. And now that is behind us, we have refocused our attention on running the business to the benefit of our customers and stockholders.

Another big challenge we faced during the year was the industry downturn that manifested in reduced drilling and completion activity, which, in turn, led to a more competitive market with price and margin pressure. We respond to that challenge by conducting an intense review of our cost structure.

And over the course of the year, led to more than 4 million in cost reductions to bring us in-line with the new realities of the oilfield services industry. We made significant reductions in both COGS at the corporate level.

And in COGS, we focus on headcount reductions, personnel management and more strategic hiring practices. In SG&A, we focus on consolidation of physical locations and infrastructure, as well as corporate staff size, which has been reduced from 17 at the beginning of the year to 9 today.

We have subleased our Downtown Denver corporate headquarters, and corporate staff is now situated at our largest equipment staging facility in Longmont, Colorado. The move yielded significant cost savings and has the added benefit of bringing our corporate staff close to one of our key field teams, as well as many of our end customer operating areas.

The broad intent of our cost-cutting program was to identify fundamental structural savings that could be sustainable even as the industry rebounded. Having cut 4 million in costs out of our business, we now feel we're positioned to grow our business more profitably as the industry recovers.

In the third quarter, we closed in our bank refinancing. It became apparent that we would need to raise some additional equity that complement our smaller revolving amount of credit and fund increased operations in 2021 heating season.

Accordingly, we engaged a capital partner and to date have raised approximately 1.3 million in equity to help ensure we can respond to the increased customer demand in the fourth and first quarters. Going forward, we may seek to raise additional equity as the season progresses, where depending on the magnitude of increased demand for our services.

Finally, I'm pleased to announce that we are successfully working through our lifting efficiencies with the New York Stock Exchange. You'll recall that we felt of compliance with two NYSE requirements: share price and stockholders equity levels.

The latter issue was resolved when our refinancing flipped stockholder equity by 12.5 million to the positive. The former issue was addressed earlier this week when we announced a [1 for 15] reverse stock split, which is expected to result in a higher share price that will satisfy the NYSE requirement.

The reverse split was approved by you, our stockholders, at the June annual meeting, and we appreciate your support on that issue. We believe the reverse split may have the added benefit of helping us attract new investors who here to go have been unable to buy and [surface] stock to the various minimum price restrictions.

With that, I'll turn the call over to Marjorie to recap a few financial results. Marjorie?

Thank you, Rich. Enservco reported Q3 revenue of $1.8 million, down from revenue of $3.8 million in the same quarter last year due to lower commodity prices and COVID-19 impact on our industry.

What's notable about the revenue results are the gains we made in our revenue segment profit metrics despite the fact that segment revenue was down significantly year-over-year. Case in point, in the third quarter, our Production Services segment revenue declined to $1.4 million from $3.3 million, yet generated a $16,000 segment profit versus a $17,000 segment loss a year ago.

So, the transition to profitability on significantly lower revenue in the third quarter highlighted the company's success in reducing costs of providing services in 2020. Similarly, our Completion Services segment revenue declined to $401,000 from $510,000 year-over-year, but we were able to reduce our segment loss to $725,000, which is a substantial improvement over the prior year segment loss of $1.2 million.

This again illustrates the power of our cost reduction initiative. On the corporate side, we reduced SG&A expenses to $1 million in Q3, down from $1.7 million in the year ago third quarter, primarily reflecting savings derived from consolidation of physical locations and lower corporate staffing levels.

In all, total operating expenses in the third quarter declined to $4.8 million from $8.2 million year-over-year, due primarily to the aforementioned cost reductions, as well as lower severance and transition costs, lower depreciation and amortization and reduced activity. We reported net income of $8.4 million or $0.14 per share in the third quarter compared to a net loss of $5.4 million or $0.10 per share in the same quarter last year.

This reflected an $11.9 million gain on our bad debt restructuring. Adjusted EBITDA in the third quarter was a negative $1.7 million, compared to a negative $2.7 million in the same quarter last year.

Turning to our nine month results, total revenue for the nine month period ended September 30, 2020, was $13.3 million versus $35 million in the same period a year ago. In addition to low commodity prices and COVID impact warmer than normal temperatures during the 2020 first quarter heating season stayed apart in this decline.

Production services revenue through nine months was $5.9 million versus $11.2 million year-over-year and generated a segment loss of $707,000 compared to a segment profit of $1.2 million in the prior nine month period. Completion services revenue through nine months came in at $7.3 million compared to a $23.7 million figure in the same period last year and generated segment loss of $270,000 versus a segment profit of $6.9 million year-over-year.

The segment losses were largely attributable to a 69% reduction in the company's higher-margin frac water heating service due to the decline in drilling and completion activity resulting from lower commodity prices and the pandemic. Total operating expenses in the first nine months were reduced to $22 million from $36.1 million in the same period last year due to lower work volumes and our cost-cutting program.

Sales, general and administrative expenses improved to $4.1 million from $4.8 million year-over-year, reflecting cost cuts. Depreciation and amortization expense decreased to $4 million from $4.2 million due to the disposal of assets, primarily in the second quarter of 2020.

Net income for the nine month period, which again reflected impact of the third quarter gain on debt restructuring, was $1.2 million or $0.02 per diluted share, compared to a net loss of $4.3 million or $0.04 per diluted share in the same period a year ago. Adjusted EBITDA through nine months was a negative $4.3 million versus a positive $3.7 million in the comparable period – prior year period.

I'll give it back to Rich now for some closing comments. Rich?

Thanks, Marjorie. So, in closing, we entered our heating season in a much better shape than we were at this time a year ago, with a lot of distractions behind us, a leaner operating model, an improved balance sheet, and as always, an impressive base of blue-chip customers, we're excited about our prospects going forward.

Thank you again for your patience and continued support of Enservco. Operator, please open up for questions.

Hey, good afternoon Rich and Marjorie. Thank you for taking my questions, and congrats on all the transformative work during the third quarter.

Thanks Andrew.

My first question is around completion activity. As oil seems to be firming up around the lower $40 per barrel range, we're definitely seeing some E&P companies turning towards their DUC completion activity and even looking at some development plans.

While you move through your busier heating season, I was just wondering whether you've seen or expect to see the completion side of the business picking up as well.

So Andrew, we don't give guidance, obviously, but bid activity is – I've always felt our bid activity is more relying on the weather than the actual activity levels. So, if you look at last year, I would say, a lot of our downside of last year's first quarter was so warm, particularly in our Pennsylvania yard, but we're starting – I would say, as you sit here in November, we're starting to see the bid activity.

Particularly in the East or Pennsylvania are starting to pick up. It doesn't mean we'll win all the bids, but we're bidding on more stuff than we thought we would have.

Okay. Okay.

That's helpful. And there has certainly been a lot of discussion among producers around discounted services costs throughout the year, given all the depressed activity levels.

And it seems like, at least on the E&P side that the consensus is that completion costs are down at least 25% this year. So, I just wanted to get your higher-level thoughts on those discounts?

And how sustainable you think they might be as activity seems to be picking up as you head into next year?

Yes. There's definitely pressure on pricing, which is – I don't think that's a new thing.

That's something that's going on for a while. The nice thing about what we do for living is, we're very niche, so we're not a big part of the overall frac job, completion activity.

So, it's – so the pressure on us is not felt as acutely. But yes, we have to – when we're looking at bidding for jobs, we definitely – we're sharpening our pencil, but we are the biggest player in [Seating], for example.

So, we're the price leader, and we don't want to do something that we're not going to make good margin on. And quite frankly, the margins in our business are pretty – have always been pretty strong.

Again that’s great. Thank you.

That’s it from me. Thanks again.

Well, as always, I appreciate your time, attention on the call today, everyone. We look forward to talking to everyone on our next quarterly call and hopefully report on some nice cold weather and positive cash flow.

Talk to you soon.