On this page of StockholderLetter.com we present the 3/8/2024 shareholder letter from Nine Energy Service, Inc. — ticker symbol NINE. Reading current and past NINE letters to shareholders can bring important insights into the investment thesis.
NINE ENERGY SERVICE > 2023 ANNUAL REPORT {constant}
Nine operates in an industry where market predictions are continually de ed, and extreme volatility is the norm. As expectations rise and fall, what hasn t changed is who we are - a solid company with a strong, experienced and committed team. The momentum of that commitment and dedication beyond self continues to carry us forward. Who we are has set the course for where we are headed. It is our constant.
Dear fellow shareholder, ONE = Building a completion services company that couples excellent service and forward-leaning technology to help our customers lower their cost to complete. TWO = Creating an asset and labor-light business with higher barriers to entry. OUR + CONSTANT OUR + CONSTANT I always start our communication with a reminder of Nine s three-tiered strategy: Providing technologies and services that create ef ciencies and reduce greenhouse gas (GHG) emissions for our customers. THREE = Nine Annual CapEx Spend ($MM) $62 $45 $53 $ 31 $ 10 REVENUE ($MM) CAPEX AS A % OF REV $ 10 $ 15 20 21 2016 2017 2018 2019 20 20 $282 $ 54 4 $ 8 27 $833 $ 311 4% 8% 6% 7% 8% $22 20 22 20 23 $ 34 9 $ 59 3 $ 610 4% 5% 4% 1
2023 > IN REVIEW 2023 > IN REVIEW The oil and gas market continued to be volatile in 2023. In Q3 of 2022, the oil eld services (OFS) space was very constrained, and industry consensus was that 50 or more rigs could come into the U.S. land market throughout 2023. At the end of 2022, there were 779 rigs in the U.S. and by the end of 2023, the rig count was down to 622 rigs, a decrease of approximately 20% and almost a 200 rig swing from what was originally anticipated. Most of these rig declines came out of the natural gas regions in conjunction with the average natural gas price declining from $6.45 in 2022 to $2.53 in 2023. The rig declines contributed to lower activity levels for OFS, as well as pricing pressure, most pronounced in the second half of the year. No matter what type of market we are facing, the oil and gas industry continues to evolve and improve. Operators are consolidating and OFS continues to innovate and drive ef ciencies for our customers. The industry is pushing towards longer laterals, and going beyond what the industry thought was possible. New technology is reducing the overall time to complete and increasing total stages completed per day, while also reducing GHG emissions. Despite a much lower rig count in 2023 versus 2018, U.S. production could reach all-time highs, illustrating the industry s ability to do more with less. I have no doubt the oil and gas industry will continue to nd new technologies and operational 20% 2 AVG RIG COUNT Y/Y approaches to drive operational ef ciencies and reduce GHG emissions, without sacri cing nancial returns, service execution and safety. We increased our total number of Dissolvable Stinger units sold by over ~18% in 2023 over 2022. TM Despite a dif cult market, I am proud of what the team accomplished during 2023. In January of 2023, we announced the redemption of our Senior Notes due 2023. In conjunction with the units offering, we amended and extended our existing asset-based revolving credit facility to January of 2027. An important part of this new capital structure was ensuring our ability to de-lever, whether it be through the Company paying down the ABL or the cash sweep component enabling us to pay down the bonds every six months. The asset-light nature of our business allowed us to reduce our capital requirements for full-year 2023 CapEx to $22 million coming below our original guidance of $25 - $35 million. This new capital structure provides increased optionality to unlock equity value, and we intend to focus on de-levering moving forward. Source: Baker Hughes, EIA 18% TOTAL STINGER DISSOLVABLE UNITS SOLD Y/Y TM
SCORPION MILESTONES = TM 370K+ TOTAL RUNS 37.5% LOWER PUMPDOWN RATES Celebrating Scorpion TM As wells become deeper and laterals become longer, operators are seeking faster, more reliable frac plug solutions for zonal isolation. Manufactured almost entirely of composite material, the Scorpion Composite Frac Plug from Nine is shorter than most plugs of its kind, allowing for a faster millout. 3
 • shareholder letter icon 3/8/2024 Letter Continued (Full PDF)
 • stockholder letter icon 3/13/2023 NINE Stockholder Letter
 • stockholder letter icon 3/6/2025 NINE Stockholder Letter
 • Benford's Law Stocks icon NINE Benford's Law Stock Score = 82


NINE 3/8/2024 Shareholder/Stockholder Letter Transcript:

NINE ENERGY SERVICE > 2023 ANNUAL REPORT
{constant}

Nine operates in an industry where market predictions
are continually de   ed, and extreme volatility is
the norm. As expectations rise and fall, what hasn   t
changed is who we are - a solid company with a strong,
experienced and committed team. The momentum
of that commitment and dedication beyond self
continues to carry us forward. Who we are has set the
course for where we are headed.
It is our constant.

Dear fellow shareholder,
ONE =
Building a completion services company that couples
excellent service and forward-leaning technology to
help our customers lower their cost to complete.
TWO =
Creating an asset and labor-light business
with higher barriers to entry.
OUR + CONSTANT
OUR + CONSTANT
I always start our communication with a
reminder of Nine   s three-tiered strategy:
Providing technologies and services that create
ef   ciencies and reduce greenhouse gas (GHG)
emissions for our customers.
THREE =
Nine Annual CapEx Spend ($MM)
$62
$45
$53
$ 31
$ 10
REVENUE
($MM)
CAPEX AS A
% OF REV
$ 10
$ 15
20 21
2016
2017
2018
2019
20 20
$282
$ 54 4
$ 8 27
$833
$ 311
4%
8%
6%
7%
8%
$22
20 22
20 23
$ 34 9
$ 59 3
$ 610
4%
5%
4%
1

2023 > IN REVIEW
2023 > IN REVIEW
The oil and gas market continued to be volatile in
2023. In Q3 of 2022, the oil   eld services (OFS)
space was very constrained, and industry consensus
was that 50 or more rigs could come into the U.S.
land market throughout 2023. At the end of 2022,
there were 779 rigs in the U.S. and by the end
of 2023, the rig count was down to 622 rigs, a
decrease of approximately 20% and almost a 200
rig swing from what was originally anticipated.
Most of these rig declines came out of the natural
gas regions in conjunction with the average natural
gas price declining from $6.45 in 2022 to $2.53 in
2023. The rig declines contributed to lower activity
levels for OFS, as well as pricing pressure, most
pronounced in the second half of the year.
No matter what type of market we are facing,
the oil and gas industry continues to evolve and
improve. Operators are consolidating and OFS
continues to innovate and drive ef   ciencies for our
customers. The industry is pushing towards longer
laterals, and going beyond what the industry
thought was possible. New technology is reducing
the overall time to complete and increasing total
stages completed per day, while also reducing GHG
emissions. Despite a much lower rig count in 2023
versus 2018, U.S. production could reach all-time
highs, illustrating the industry   s ability to do more with
less. I have no doubt the oil and gas industry will
continue to    nd new technologies and operational
20%

2
AVG RIG
COUNT Y/Y
approaches to drive operational ef   ciencies and
reduce GHG emissions, without sacri   cing    nancial
returns, service execution and safety.
We increased our total
number of Dissolvable
Stinger units sold by over
~18% in 2023 over 2022.
TM
Despite a dif   cult market, I am proud of what the
team accomplished during 2023. In January of
2023, we announced the redemption of our Senior
Notes due 2023. In conjunction with the units
offering, we amended and extended our existing
asset-based revolving credit facility to January of
2027. An important part of this new capital structure
was ensuring our ability to de-lever, whether it be
through the Company paying down the ABL or the
cash sweep component enabling us to pay down
the bonds every six months. The asset-light nature
of our business allowed us to reduce our capital
requirements for full-year 2023 CapEx to $22
million coming below our original guidance of
$25 - $35 million. This new capital structure provides
increased optionality to unlock equity value, and we
intend to focus on de-levering moving forward.
Source: Baker Hughes, EIA
18%

TOTAL STINGER DISSOLVABLE
UNITS SOLD Y/Y
TM

SCORPION MILESTONES =
TM
370K+
TOTAL RUNS
37.5%
LOWER PUMPDOWN RATES
Celebrating Scorpion
TM
As wells become deeper and laterals become
longer, operators are seeking faster, more
reliable frac plug solutions for zonal isolation.
Manufactured almost entirely of composite
material, the Scorpion    Composite Frac Plug
from Nine is shorter than most plugs of its kind,
allowing for a faster millout.
3


shareholder letter icon 3/8/2024 Letter Continued (Full PDF)
 

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