Yahoo Finance KLX Energy Services Holdings, Inc. (KLXE) Q2 2019 Earnings Call Transcript
Image source: The Motley Fool.
KLX Energy Services Holdings, Inc. (NASDAQ: KLXE)
Q2 2019 Earnings Call
Aug 21, 2019, 9:00 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Good day, ladies and gentlemen, and welcome to the KLX Energy Services second-quarter 2019 earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Michael Perlman, treasurer and senior director of investor relations.
Sir, you may begin.
Michael Perlman -- Treasurer and Senior Director of Investor Relations
Thank you, Joel. Good morning, and thank you for joining us. Today, we are here to discuss KLX Energy Services' financial results for the second-quarter period ended July 31, 2019. The company's earnings news release, which was issued earlier this morning presents these results.
If you haven't received it, you'll find a copy on our website. We will begin with remarks from Amin Khoury, chairman and chief executive officer of KLX Energy Services. Also on the call this morning is Tom McCaffrey, senior vice president and chief financial officer. For today's call, we prepared a few slides to help you follow our discussion.
More From The Motley Fool
You can find our presentation on the Investor Relations page of the KLX Energy Services website at klxenergy.com. In addition, copies of the slides are posted on our website for you to refer to. Before we begin, we have some additional information to cover. Any forward-looking statements that we make are subject to risks and uncertainties.
And as always, our prepared remarks and our responses to your questions, we will rely on the safe harbor exemptions under the various securities acts and our safe harbor statements in the company's filings with the Securities and Exchange Commission. We will address questions following our prepared remarks. At that time, the operator will provide Q&A instructions. Now I will turn the call over to Amin Khoury.
Amin Khoury -- Chairman and Chief Executive Officer
Thank you, Michael, and good morning, everyone. Thank you for joining us today to discuss our second-quarter financial results. During the quarter, we made initial progress rolling out new product service lines in all three of our geographical segments. We introduced large-diameter coiled tubing services in conjunction with the proprietary HydroPull tool and our own proprietary motor bearing assembly in both the Northeast/Mid-Con and Rocky Mountains segments, and we're pleased with the consistent pull-through effects for our complementary asset-light services.
We also completed the training of the personnel required to roll out the flowback and testing services PSL in one additional geo region. In spite of these significant new PSL training and launch cost, we did manage to absorb all of these cost and still deliver a profitable quarter. Second-quarter 2019 revenues were up approximately 13% as compared to the first quarter of 2019, and were up approximately 40% as compared to the same period in the prior year. Organic revenue growth was approximately 8%.
Our Rocky Mountains and Northeast/Mid-Con segments delivered sequential quarterly revenue growth of approximately 31% and 23%, respectively, while our Southwest segment revenues declined approximately 8%. Organic revenue growth for our Rocky Mountains and Northeast/Mid-Con segments were very strong at approximately 25% and 13%, respectively. Our second-quarter 2019 performance reflected lower activity levels and reduced capital spending by exploration and production companies, almost all of which intensified their focus on capital discipline in order to deliver the announced levels of free cash flow. Additionally, severe weather conditions in Mid-Con, including severe flooding, which led to impassable roads and highways began in the month of May and persisted through June, resulting in a significant decline in activity in the Mid-Con until this second half of our quarter ending July 31.
The magnitude of the negative impact was approximately $8 million to $9 million of lost revenues. Our second-quarter performance was also impacted by lower coiled tubing revenues due to delays in delivery of coiled tubing spreads and lower wireline revenues in the Permian due to our decision to not deploy these assets at prices being offered by competitors. On today's call, we will review the current oilfield services market, discuss our second-quarter 2019 financial performance and update our guidance. Let's begin by reviewing the current oilfield services market environment.
Following our strong start to the year, oil prices were volatile in the second quarter with the price of WTI crude trading down to below $52 per barrel in early June, a 20% decline from the prior month. The decline in oil prices erased the significant portion of the gains from the beginning of the year as investors raised concerns over subdued global growth causing weak near-term oil demand. The magnitude in speed of the move lower was further exacerbated by growing concerns over strong U.S. oil and gas production and rising inventories.
As of today, oil and natural gas prices continue to be hampered by concerns about supply and demand imbalances, resulting from slower global economic growth and robust production. North American land completion activity remains challenged as exploration and production companies have intensified their focus on staying within their announced capital expenditure and free cash flow budgets. This resulted in a decline in the average number of frac fleets operating nationally and a 13% decline in the average quarterly rig count in North America since the first quarter. While we have seen the price differential for crude prices narrow in recent months due to additional pipeline capacity coming online, our customers' completion activities have also been negatively impacted by the lack of available pipeline capacity for natural gas as well as regulatory limits on flaring.
The additional pipeline capacity anticipated to come online in the Permian and in the Bakken within the next year is expected to alleviate some gas takeaway capacity issues impacted both regions. Looking forward, we expect North American drilling and completion activity to decrease further in the third quarter as E&P companies scale back their activities to stay within their announced capex and cash flow guidance and for fourth-quarter E&P activity to be somewhat further impacted as compared to Q3 by weather-related and seasonal issues as well as budget exhaustion. Despite the expected decline in activity in the third quarter, we expect KLX revenues and profitability to grow in the third quarter as compared to the second quarter. We will discuss this later as we address our guidance and the outlook for the balance of the year.
Let's turn to Slide 3 and review our second-quarter 2019 consolidated results. Second-quarter 2019 revenues of approximately $165 million increased approximately $19 million or 13% as compared to Q1. Organic revenue growth was approximately 8%. On a product-line basis, completion and intervention services increased approximately 11% and 39%, respectively, as compared to the first quarter while production revenues declined approximately 5%.
Rocky Mountains segment revenue growth was approximately $15 million or 31%. Rocky Mountains organic revenue growth was approximately 25%, reflecting an increase in the number of customers served, increased activity across substantially all our product lines and improved adoption rates of recently introduced proprietary tools. So a greater number of customers and a greater share of wallet. The Rocky Mountains segment benefited from approximately $3 million of inorganic growth from an additional six weeks of Tecton flowback and testing revenues as compared to the first quarter of 2019.
Northeast/Mid-Con segment delivered revenue growth of approximately 23%. Organic revenue growth was approximately 13%, again driven by a significant increase in the number of customers served and improved adoption rates on proprietary tools. The $4 million revenue contribution from an -- sorry, from an additional six weeks of Red Bone operations was more than offset by the $8 million to $9 million reduction in revenues caused by flooding and tornadoes in May and June in the Mid-Con, which resulted in six weeks of substantially reduced activity, particularly in Red Bone's primary Oklahoma market. Our Southwest segment also experienced an increase in the number of customers served, but revenue growth from new customers was more than offset by lower activity levels by certain existing customers and the negative impact from a low utilization of our wireline assets as we chose not to deploy these assets at prices being offered by competitors.
Operating earnings and operating margin were $11 million and 6.7%, respectively. Adjusted EBITDA was $32 million and adjusted EBITDA margin was about 20%, adjusted only to exclude noncash compensation expenses. Gross margin, operating margin and adjusted EBITDA margin were all negatively impacted by six weeks of substantially reduced activity in the Mid-Con and cost incurred to roll out new product service lines in all the three geo segments. Adjusted net earnings and adjusted net earnings per diluted share adjusted to exclude noncash compensation in amortization expense, were $9.2 million and $0.41 per diluted share, respectively.
Despite aforementioned headwinds during the quarter, our operating earnings were up approximately 360%, while adjusted EBITDA was up approximately 48%. Adjusted net earnings were up approximately $8.9 million and adjusted net earnings per diluted share increased $0.40 to $0.41 per share. Let's now turn to Slide 4 and review second-quarter 2019 segment financial results beginning with our Rocky Mountains segment. Second-quarter 2019 Rocky Mountains segment revenues of $63.5 million increased by approximately $15 million or 31%.
Organic revenue growth was very strong, 25% driven by a significant increase in the number of customers served, increased activities across substantially all product lines and improved adoption rates of proprietary tools, including the HydroPull in combination with our proprietary motor bearing assembly and dissolvable plugs. Our Rocky Mountains segment also benefited from approximately $3 million of inorganic growth from an additional six weeks of Tecton flowback and testing revenues. The Rocky Mountains segment has also built on its differentiation and technology and efficiency by having completed the rollout of greaseless wireline and a fully addressable plug-and-play disposable gun system. Operating earnings and operating margin were approximately $9 million and 14%, increases of approximately 200% and 770 basis points, respectively, as compared to Q1.
Adjusted EBITDA increased approximately 80% on a 31% increase in revenues, resulting in adjusted EBITDA margin of approximately 25%, that was up 690 basis points as compared to the first quarter of 2019. Let's turn to Slide 5 and review our second-quarter Northeast/Mid-Con segment performance. Second-quarter 2019 Northeast/Mid-Con segment revenues of $48.1 million increased by approximately 23%. Organic revenue growth was approximately 13%, driven by an increase in the number of customers served and improved adoption rates of proprietary tools.
Our $4 million contribution to revenues from additional six weeks of Red Bone operations was more than offset by flooding and tornadoes in May and June in the Mid-Con, which resulted in six weeks of substantially reduced activity and a negative impact on revenues of approximately $8 million to $9 million. More importantly, operating efficiency and operating earnings were severely impacted by the near stoppage in activity for a number of customers during the flooding and its aftermath. And as a result, operating margin was a depressed 8.1%. Adjusted EBITDA did increase 14% to $11 million as compared to the first quarter, but the adjusted EBITDA margin of 22.9% was also negatively impacted by the impact of the severe weather conditions.
Exclusive of weather-related negative impacts, Northeast/Mid-Con segment operating margin and adjusted EBITDA margins would likely have approximated July operating and adjusted EBITDA margins that were in excess of 11% and 25%, respectively. Let's turn to Slide 6 and review the second-quarter results with the company's Southwest segment. For the second quarter, Southwest segment revenues decreased approximately 8%, driven primarily by lower activity levels by existing customers and low utilization of wireline assets as we chose to not to deploy these assets at prices being offered by competitors. The Southwest segment is also incurring the additional cost of rolling out flowback and testing services, greaseless wireline and a fully addressable plug-and-play disposable gun system in the Permian that we have already successfully rolled out in the Rocky Mountains segment.
The Southwest segment also continues to incur costs to support our rollout of the coiled tubing product service line in both the Mid-Con and in the Rockies. While quarter-over-quarter spend declined with a number of our existing customers due to their reduction in activity, we have successfully broadened our footprint within our customer base and have added approximately 30 new customers in the Southwest segment during the quarter. Despite lower Southwest segment revenues and significant new PSL rollout cost, operating loss of $1.6 million improved by approximately $2.4 million and adjusted EBITDA of $5.1 million improved by $1.9 million or approximately 59% as compared to the first quarter of 2019. Now let's take a moment and review our financial position on Slide 7.
As of July 31, cash on hand was approximately $92 million. Total long-term debt of $250 million less cash resulted in net debt of approximately $158 million, and the company's net debt to net capital ratio was approximately 29%. Our net debt-to-adjusted EBITDA leverage ratio was approximately 1.3 times. There were no borrowings outstanding under the company's $100 million credit facility for the three months ended July 31, 2019.
Cash flow provided by operating activities was approximately $8 million, while capital expenditures in the current period were approximately $27 million, reflecting investments related to the company's strategy to expand recently acquired product service lines in additional geographic segments. In spite of expected further coiled tubing delivery delays, by the end of the fourth quarter, the company expects it will have received all on-order large diameter tubing spreads, and therefore, to have completed the intensive capital investment phase of our strategy to use large diameter coiled tubing in conjunction with certain proprietary tools to pull through a broad range of asset-light services for the company's customers in all geographic segments. As a result of the completion of the intensive capital investment phase of the company's strategy, we expect to generate -- in 2019. We expect to generate strong free cash flow in 2020.
In fact, as we look toward 2020, we will be serving a larger number of customers in each geo region, delivering a broader range of services to those customers as we garner a larger percentage of customer spend, while delivering strong free cash flow. Let's now briefly review our guidance. We expect the E&P spending to be somewhat lower in the third quarter as customers remain focused on staying within their announced capital spending and free cash flow targets. We expect fourth-quarter activity to somewhat lower than Q3 activity due to weather-related and seasonal fix.
Nevertheless, we expect KLX third-quarter 2019 revenues to increase approximately 3% over the immediately preceding quarter. We expect fourth-quarter 2019 revenues to be slightly lower as compared to third-quarter revenues due to weather-related and seasonal effects. Our revenue growth in 2019 has been negatively impacted by delays in delivery of large diameter coiled tubing spreads from the manufacturer. We expect further significant delays in the delivery of this equipment.
However, all five of these new large-diameter coiled tubing spreads are expected to be received by the end of the fourth quarter of 2019, bringing our total large-diameter coiled tubing spring count to 13 units. The start-up in training and launch cost of the large-diameter coiled tubing and flowback and testing PSLs have been a drag on margins, particularly in the Southwest segment, which has supported coiled tubing launch cost in both the Rockies and the Mid-Con segments. While we expect the substantial pickup in margins in Q3 for the company overall, we will continue to incur the start-up costs through the end of Q1 of 2020. Thereafter, we expect a significant improvement in margins and profitability as well as strong free cash flow throughout the year.
Let's walk through our third-quarter guidance in more detail. Please turn to Slide 8. Revenues are expected to be approximately $170 million in Q3, an increase of approximately 3% as compared to the second quarter of 2019 and an increase of approximately 38% as compared to the same period of the prior year. GAAP net earnings and GAAP net earnings per diluted share are expected to be approximately $9 million and $0.40 per diluted share with each increasing approximately 150%.
EBITDA is expected to be approximately $30 million or approximately 18% of revenues, reflecting an increase in EBITDA of approximately 9%. Adjusted EBITDA is expected to be approximately $35 million or approximately 21% of revenues, reflecting increases of approximately 10% and approximately 100 basis points as compared to the second quarter of 2019. Net earnings and net earnings per diluted share were adjusted to exclude noncash compensation and amortization expense are expected to be approximately $15 million and approximately $0.65 per diluted share, increasing approximately 63% and approximately 59%, respectively, as compared to the second quarter of 2019. Return on invested capital as expected to be approximately 15%.
And with that, I will turn the call back over to Michael for the Q&A portion of this morning's call.
Michael Perlman -- Treasurer and Senior Director of Investor Relations
Thank you, Amin. I'll now turn the call over to Joel for the Q&A portion of today's call. Joelle will provide instructions on how to ask a question. Joel?
Questions & Answers:
Operator
[Operator instructions] Our first question comes from Brad Handler with Jefferies. Your line is now open.
Brad Handler -- Jefferies -- Analyst
Thanks. Good morning, guys.
Amin Khoury -- Chairman and Chief Executive Officer
Good morning, Brad.
Brad Handler -- Jefferies -- Analyst
Maybe I would appreciate it if you could speak a little bit more to what's going on in the wireline business in your Southwest region. It does sound like there's competitive threats. And I guess, I'm happy to key up what feels like is probably what you're offering as a solution to that by -- with greaseless wireline and then your preassembled perf guns. But if you could just kind of speak to that, and then maybe, in a sense, what allows it to get better or significantly enough better? Or do you foresee and maybe in addition to what I was just suggesting from a more proprietary standpoint, do you foresee moving assets out of that region because it's simply that it's just too competitive for the long run?
Amin Khoury -- Chairman and Chief Executive Officer
There is too much wireline supply and insufficient demand in the Permian. And you got a lot of irrational prices for wireline services in the Permian. We've chosen not to deploy our assets at the prices being offered by competitors. A lot of folks that are basically running their equipment into the ground and generating cash flow.
We are deploying some of those assets to other regions where we have better capacity demand and better pricing environments, but we expect that in the long term, we will have to offer the complete range of our services to our customers in the Permian. So we will return -- we will retain a certain amount of wireline capacity, but we are going to choose to keep it sidelined until such time that we can generate a reasonable return on our investment in those assets.
Brad Handler -- Jefferies -- Analyst
Got it. So again, you used the term running it into the ground. So you assume that after some period of time, what is unsustainable, the pricing needs to move higher or else too many companies won't be able to offer the services long term, something along those lines?
Amin Khoury -- Chairman and Chief Executive Officer
Exactly, right. I mean, we have -- you know that there are a couple of companies teetering on the brink at this point in time, and they are basically running their assets for cash flow. And we choose not to do that, and we would want a reasonable return on assets for our investors. And so we've got a couple of regions here where we have really strong organic growth.
I mean, 25% and 13% is very strong organic growth, and we are increasing the customer count, we're increasing our penetration and share of wallet in customers. We're really growing market share and delivering excellent results. In the Permian, there is, particularly with respect to wireline, there is just way too much capacity, insufficient demand and the status of some of the competitors in that environment are such that they're running those assets for cash flow.
Brad Handler -- Jefferies -- Analyst
OK. Yes. Makes sense. If I pivot to look at the second half of the year and your -- and get at your guidance a little bit, it's easy to see potential weakness in natural gas and NGL-related activity in the second half, which would obviously address Northeast/Mid-Con region.
You're talking about weakness that's a -- of a different nature in the Permian. Maybe help us think a little bit about regions in terms of your guidance and nevertheless, where your opportunity lies, please?
Amin Khoury -- Chairman and Chief Executive Officer
Yes, I think -- so the gas play in the Northeast region, in fact, our gas-related revenues for the company near about 17% of revenues, and we do expect a significant reduction in activity related to gas in the Northeast. Our segment is the Northeast/Mid-Con segment. Offsetting that, we have really strong operations in the Mid-Con. And we have 13% organic growth in spite of having lost $8 million to $9 million in revenues, maybe the revenue impact from the tornadoes and flooding during that six weeks during the quarter from May through mid-June so with very strong growth, a large increase and the number of customers and significant increase in share of wallet.
Now while rig count is way down in the Mid-Con, as you know, we are doing pretty well there. We introduced coiled tubing services during this past quarter and the pull-through that we're getting from the coiled tubing service is consistent with our expectation and our strategy. So we do expect the segment to do well during the quarter, during the third quarter, notwithstanding the substantially negative impact from the Utica and Marcellus gas plays.
Brad Handler -- Jefferies -- Analyst
That's helpful. That's helpful color you're divvying up. Thank you. And maybe just one more for me and I guess I feel like I should ask a little bit of a bigger picture from your relatively fresh, out-of-the-gate kind of public standpoint, too, as a stand-alone entity anyway. So your initial guidance for 2019 was in the order of 200.
I think it was $200 million of adjusted EBITDA. If I'm taking a sort of a stab at fourth quarter based on your comments, you'd now reining that into something like more $120 million, $125 million of adjusted EBITDA. The oil price hasn't necessarily been that different than what you were outlying in terms of the basis of your guidance, right? But obviously, a number of other things have happened this year. And so I guess, maybe you could speak to, in a sense, what -- and sort of how to reassure.
In a sense of how to reassure us that your current guidance is really sort of on target, is something that we're going to not wake up six months from now and say, "Oh, wow, that was wrong for X or Y or Z reasons as well," but that it is just that much more solid, I guess.
Amin Khoury -- Chairman and Chief Executive Officer
Oh, we should talk about X, Y and Z, right?
Brad Handler -- Jefferies -- Analyst
I guess, if you can. I mean it's obviously the unknowns, right, but it's --
Amin Khoury -- Chairman and Chief Executive Officer
We've got -- I mean, coiled tubing spreads are very large revenue generator and also is a great deal of pull-through. We've had delivery delays, which have already impacted revenues during the second quarter, but we've now pulled all the revenues from five coiled tubing spreads, large diameter coiled tubing spreads out of our guidance for the full year. Those spreads generate, when they're up and running and operating, something in the neighborhood of $1 million to $1.2 million per month per unit, together with the pull-through effect, OK? So not having that resource in the company -- and we did discuss this by the way, in the, I think it's both in the news release and in the script, we will be receiving those, and we're enthusiastic about that, and we're also very happy with the quality of the equipment that we're getting. But we've moved all of those revenues out of our guidance and we still have in our guidance, the receipt of the five units at the very end of the year.
And we will have the negative impact of the use of cash to buy those assets, but the revenues from those assets really won't come in until 2020. I would think that the good news there is that we would expect strong growth in both revenues, expanding margins and substantial free cash flow since the intensive capital investment phase of our strategy will have been completed. And I guess -- and our strategy -- I mean, what is our strategy about? It's about differentiating ourselves from the moms and pops that offer some of the services, which we offer, in order to -- by spending on capital assets that moms and pops are not necessarily able to do. So being able to offer our customers coiled tubing and wireline services, along with non-frac pressure pumping, pull through the thru-tubing business and pull through the nitrogen business and pull through a number of other services, and that's really important part of our strategy.
And so our expectation is that we will have completed, as I say, the intensive investment capital phase of our strategy and be in a different place in 2020 with all of our geo regions offering a broad range of services to our entire customer base in each of those regions. And the other impacts on revenues or our guidance for this year, of course, would be the weather impact. I mean, there's not much that we can do about that, it's an $8 million to $9 million hit because of the tornadoes and that is why, and why it could happen that some other period in some other location. Hurricanes, tornadoes, flooding are not things that we can control, blizzards or whatever.
We did try to quantitate the impact for you, it's about $8 million to $9 million of revenues, but it's a much more important impact on operating earnings and EBITDA margins. And finally, the wireline thing, it's -- that's our own issue, that's our decision not to deploy those assets, which negatively impacts revenue, and that could happen in any geo region at any time.
Brad Handler -- Jefferies -- Analyst
That's helpful. It's helpful to walk through it. Great. Thank you.
I will turn it back and let some others ask.
Amin Khoury -- Chairman and Chief Executive Officer
You're welcome.
Operator
Thank you. [Operator instructions] And our final question comes from John Watson with Simmons Energy. Your line is now open.
John Watson -- Simmons Energy
Thank you. Good morning.
Amin Khoury -- Chairman and Chief Executive Officer
Good morning.
John Watson -- Simmons Energy
On the coiled tubing side, I wanted to follow up on your commentary for the five units that have been delayed. Do you have customers in place for those five units already? And can you also speak to the level of oversupply/undersupply in the large diameter coiled market or maybe compare and contrast that with what you're seeing at wireline?
Amin Khoury -- Chairman and Chief Executive Officer
Yes. The new coiled tubing assets do have very specific customers to which they are expected to be employed. The coiled tubing assets are -- some of those assets are used on a dedicated basis around the clock, 24/7 for certain customers. And some of the coiled tubing assets are used on a spot basis for multiple customers that are close to one and geographically.
Obviously, the highest utilization comes from dedicated use of the large diameter coiled tubing spreads. There is a shortage of large diameter coiled tubing assets in the 2 5/8 inch range, undoubtedly. We've got customers begging us to bring that equipment online, and we were late with it because we just don't have the equipment yet. We have one additional dedicated customer that we expect in the Permian who would like to have the assets but there's competition for the assets between regions that already have customers lined up.
So the issue that we have right now is allocating our new coiled tubing assets as they become available to us to bring in to the market. It's a very different picture than the wireline situation.
John Watson -- Simmons Energy
OK. That's helpful. I guess, more near term. $8 million to $9 million of lost revenue from Mid-Con weather during the quarter.
I mean, and -- the revenue guidance implies your revenues are up somewhere around $5 million quarter over quarter. So this sequential increase that you're contemplating for 3Q, the majority of that is making up for what you lost from the Mid-Con weather in 2Q. Am I thinking about that correctly?
Amin Khoury -- Chairman and Chief Executive Officer
Well, we do expect the Mid-Con to be stronger -- the Mid-Con itself to be stronger in Q3, but we expect the Northeast revenues to be down in Q3, right? So our Northeast/Mid-Con segment is -- comprises both the Northeast, which is gas-related and the Mid-Con, which is, of course, oil and gas but primarily oil. And so the increase that we're forecasting in Q3, think, is in spite of what we expect to be substantially lower activity levels in terms of both drilling and completions in the third quarter. And I think you probably heard that from all of the OFS companies that have reported.
John Watson -- Simmons Energy
Right. Absolutely. To that point, we're three weeks through August at this point, can you give us an update on how August is trending relative to maybe the 2Q average monthly results?
Amin Khoury -- Chairman and Chief Executive Officer
August is not even finished yet. August is not finished yet. We don't see anything unusual in August, but we won't report on August until it's finished, if we report on August as a single month at all. So I can't comment on August numbers, except to say we don't see anything unusual in August that I know of.
John Watson -- Simmons Energy
OK. And then lastly, the Rockies were very strong and you gave some nice color on that in your prepared remarks. I was just curious if there's anything else to share, anything else we should be aware of heading into the back half of the year in that region given the strength you saw in 2Q?
Amin Khoury -- Chairman and Chief Executive Officer
We'll certainly have seasonal or weather-related issues in the Rockies in the fourth quarter, right? And I mean, you always have really tough weather, snow, maybe blizzard, who knows what? So we expect somewhat lower revenues in Q4 than we expect to report in Q3, but there's nothing else in particular that I would comment on. And so by the way, organic revenue growth -- you called out the Rockies because of the 25% organic revenue growth, which I get it, it's different than any other company that's reporting, any other OFS company reporting anywhere. I guess -- but we had the same -- we had essentially the same result in the Mid-Con, the Northeast/Mid-Con segment because we had 13% organic revenue growth in spite of having lost $8 million to $9 million in revenues because of the tornadoes and floods, which really took us down for about six weeks. And so I mean, we've got very strong business in our strategy seems to be working.
We've got the issues to deal with in the Permian, the wireline issues to deal with the Permian, but we've got two of our three segments that are really humming right now.
John Watson -- Simmons Energy
Yes. OK. Thank you for the additional color. I'll turn it back.
Amin Khoury -- Chairman and Chief Executive Officer
Thank you.
Operator
And the final question will come from Simon Wong with Gabelli & Company. Your line is now open.
Simon Wong -- Gabelli and Company -- Analyst
Good morning.
Amin Khoury -- Chairman and Chief Executive Officer
Good morning.
Simon Wong -- Gabelli and Company -- Analyst
You mentioned that your capital investment program is coming to an end this year. Do you have a preliminary capex number for our 2020?
Amin Khoury -- Chairman and Chief Executive Officer
No, not yet. We didn't say it's coming to an end. We said the intensive capital investment phase is coming to an end. So this year, we'll spend close to $100 million in total, $20 million to $25 million in maintenance.
But the balance is all growth capex, which we won't experience the benefit from until 2020 and beyond. We will continue to offer new capital equipment to our customers and replace worn capital equipment and so on and so forth, but the level of expenditures will be dramatically lower than the level of expenditure which we have in 2019.
Simon Wong -- Gabelli and Company -- Analyst
OK. And then in relation to the stock repurchase authorization you announced about two or three weeks ago, do you have a timeline on that? Or what's your thinking about that?
Amin Khoury -- Chairman and Chief Executive Officer
Yes. There's no specific start date or end date and there's no specific timeline on that program. But given that we expect a strong free cash flow in 2020 and given that we now have a cash balance of $92 million and an unused $100 million credit line, we think that it's a very good investment for the company to buy back its shares with the share price pressed as it is currently.
Simon Wong -- Gabelli and Company -- Analyst
OK. One more, last question. Is there anything in the new product side that in the pipeline that you can talk about?
Amin Khoury -- Chairman and Chief Executive Officer
It's a good question. I think that given that we're rolling out so many new tools as we speak, I think we just assure to not talk about additional ones. I mean, we are -- we started up the sales of our deposit -- of our dissolvable plugs, that's going pretty well and contributed to growth in the quarter, particularly in the Rocky Mountains segment. The HydroPull tool, together with our Havok motor bearing assembly and in conjunction with our coiled tubing, is pulling through a lot of additional service revenues.
So we've got a lot of new stuff that we are working through currently. So I just assume not talk about things that we hadn't yet introduced into the market. By the way, last quarter, we did mention the toe sleeves and the liner hangers and some of those products, which we sell as part of our DHPS product line, together with dissolvable plugs. So there's a lot of -- there are a lot of new products, which we are delivering into each of our geo segments.
Simon Wong -- Gabelli and Company -- Analyst
OK. Great. Thank you.
Amin Khoury -- Chairman and Chief Executive Officer
I think with that, our call has come to a close. We wish all of you a very good day, and thanks for participating in our earnings call.
Operator
[Operator signoff]
Duration: 45 minutes
Call participants:
Michael Perlman -- Treasurer and Senior Director of Investor Relations
Amin Khoury -- Chairman and Chief Executive Officer
Brad Handler -- Jefferies -- Analyst
John Watson -- Simmons Energy
Simon Wong -- Gabelli and Company -- Analyst
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
Motley Fool Transcribing has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
This article was originally published on Fool.com
