Oil States Announces Third Quarter 2014 Earnings of $1.07 Per Share


HOUSTON, Oct. 30, 2014 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income from continuing operations for the third quarter ended September 30, 2014 of $58.4 million, or $1.07 per diluted share. These results compare to net income from continuing operations of $35.5 million, or $0.64 per diluted share, reported in the third quarter of 2013.

The Company generated revenues of $471.0 million and EBITDA (A) of $122.9 million during the third quarter of 2014, representing year-over-year growth rates of 7% and 26%, respectively. These results compare to revenues of $438.2 million and Adjusted EBITDA of $97.2 million reported in the third quarter of 2013.

EBITDA increased as a result of strong demand for the Company's completion services business offerings and higher utilization of its land drilling rigs, coupled with increased contributions from production facility and subsea product sales, improved manufacturing facility throughput and operational efficiencies in the offshore products segment.

Cindy B. Taylor, Oil States' President and Chief Executive Officer stated, "Operationally, our businesses performed extremely well in the third quarter. We reported record quarterly revenues and EBITDA in our well site services segment and generated record EBITDA margin percentages in our offshore products segment. Our well site services segment enjoyed a good product and service mix with an emphasis on our more proprietary offerings. Product mix and execution were good in our offshore products segment with most of our manufacturing locations generating improved results. Despite the recent pull back in commodity prices, demand for our products and services, both in the onshore and offshore markets, remains at very strong levels."

For the first nine months of 2014, the Company reported revenues of $1.3 billion and Adjusted EBITDA of $325.0 million (after elimination of $11.0 million of charges primarily associated with the May 30, 2014 spin-off of the accommodations segment into a stand-alone, publicly traded corporation, Civeo Corporation or Civeo). The results for the first nine months of 2014 included $111.4 million of losses on debt extinguishment and Civeo spin-off related charges. For the first nine months of 2013, the Company reported revenues of $1.2 billion and Adjusted EBITDA of $263.5 million (after elimination of $7.1 million of acquisition and transaction costs).

Income Taxes

The Company recognized an effective tax rate of 35.4% in the third quarter of 2014 compared to 35.0% in the third quarter of 2013.

Financial Condition

The Company invested $59.3 million in capital expenditures during the third quarter of 2014. Spending primarily related to the addition of completion services equipment deployed to service the active U.S. shale plays along with ongoing facility expansions in the offshore products segment.

During the third quarter, the Company repurchased 307,897 shares of its common stock under its authorized share repurchase program at an average price of $62.10 per share. In October, the Company repurchased an additional 843,478 shares of its common stock at an average price of $59.28 per share. The Company currently has $163.4 million remaining available under its share repurchase authorization which is scheduled to expire on September 1, 2015.

As of September 30, 2014, there was $171.7 million outstanding under the Company's revolving credit facility. Total availability as of September 30, 2014 was $391.9 million (net of standby letters of credit totaling $36.4 million).

BUSINESS SEGMENT RESULTS

(Unless otherwise noted, the following discussion compares the quarterly results from continuing operations for the third quarters of 2014 and 2013, respectively. The historical results of operations of the accommodations and tubular services segments through their respective transaction closing dates have been reported as discontinued operations for all periods reported herein.)

Well Site Services

Well site services generated record revenues and EBITDA of $224.4 million and $77.2 million, respectively, in the third quarter of 2014 compared to revenues and EBITDA of $195.9 million and $64.1 million, respectively, in the third quarter of 2013. Segmental revenues and EBITDA increased 15% and 20% year-over-year, respectively, primarily due to a 6% year-over-year increase in the number of completion services jobs performed and a 7% year-over-year increase in revenue per completion service job as a result of increased service intensity in the active shale basins. Increased utilization in the land drilling business, which averaged 90% during the third quarter of 2014 compared with 78% in the third quarter of 2013, also contributed to the record performance for this segment.

Offshore Products

Offshore products generated revenues of $246.6 million and EBITDA of $60.6 million in the third quarter of 2014 compared to revenues of $242.3 million and EBITDA of $45.7 million in the third quarter of 2013. Segmental revenues and EBITDA increased 2% and 33% year-over-year, respectively, primarily due to greater contributions from production facility product sales and continued strong demand for services on a global basis, along with margin improvement from product mix, operational efficiencies, and strong project execution by our major divisions. EBITDA margins increased to a record 24.6% in the third quarter of 2014 compared to 18.9% in the third quarter of 2013. Backlog declined 9% sequentially, totaling $543 million at September 30, 2014 compared to $599 million reported at June 30, 2014. There were no individual project awards in excess of $15 million booked during the third quarter of 2014 due to award timing and contract negotiations. Backlog additions in the fourth quarter of 2014 are currently expected to exceed third quarter 2014 bookings.

Conference Call Information

The call is scheduled for Friday, October 31, 2014 at 11:00 am EDT, is being webcast and can be accessed from the Company's website at http://www.oilstatesintl.com. Participants may also join the conference call by dialing (800) 446-1671 in the United States or by dialing +1 847 413 3362 internationally and using the passcode of 38296266. A replay of the conference call will be available one hour after the completion of the call by dialing (888) 843-7419 in the United States or by dialing +1 630 652 3042 internationally and entering the passcode of 38296266.

About Oil States

Oil States International, Inc. is an energy services company with a leading market position as a manufacturer of products for deepwater production facilities and certain drilling equipment, as well as a provider of completion services and land drilling services to the oil and gas industry. Oil States is publicly traded on the New York Stock Exchange under the symbol "OIS".

For more information on the Company, please visit Oil States International's website at http://www.oilstatesintl.com.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward-looking statements included therein are based on then current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the energy service industry and other factors discussed in the "Business" and "Risk Factors" sections of the Form 10-K for the year ended December 31, 2013 filed by Oil States with the Securities and Exchange Commission on February 25, 2014.

 

 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
 
  THREE MONTHS ENDED NINE MONTHS ENDED
  SEPTEMBER 30, SEPTEMBER 30,
  2014 2013 2014 2013
         
Revenues   $ 471,032 $ 438,176  $ 1,335,876  $ 1,207,824
         
Costs and expenses:        
Cost of sales and services    306,497 301,702   886,777  835,471
Selling, general and administrative expenses    43,734  38,531  128,181  110,600
Depreciation and amortization expense    31,076  28,206  92,970  80,035
Other operating (income) expense    (1,887)  3,981  9,524  6,329
   379,420  372,420  1,117,452  1,032,435
Operating income    91,612  65,756  218,424   175,389
         
Interest expense    (1,602)  (9,983)  (15,500)  (30,130)
Interest income    150  159  411  460
Loss on extinguishment of debt 30  (2,058)   (100,380)   (2,058) 
Equity in earnings (losses) of unconsolidated affiliates    74  73  292  (758)
Other income    161  617  2,279  1,765
Income from continuing operations before income taxes    90,425  54,564  105,526  144,668
Income tax expense    (32,048)  (19,081)  (36,545)  (51,692)
Net income from continuing operations    58,377  35,483  68,981  92,976
Net income (loss) from discontinued operations, net of tax (including a net gain on disposal of $84,209 in the third quarter of 2013)  
(1,467)
 
132,250
 
51,571
 
253,500
Net income    56,910  167,733  120,552  346,476
Less: Net income (loss) attributable to noncontrolling interest  (10)  (7)  8  22
Net income attributable to Oil States International, Inc.   $ 56,920 $ 167,740 $ 120,544 $ 346,454
         
         
Net income (loss) attributable to Oil States International, Inc.:        
Continuing operations $ 58,387 $ 35,490 $ 68,973 $ 92,954
Discontinued operations    (1,467)  132,250  51,571  253,500
Net income attributable to Oil States International, Inc. $ 56,920 $167,740 $ 120,544 $ 346,454
         
         
Basic net income (loss) per share attributable to Oil States International, Inc. common stockholders from:        
Continuing operations    $ 1.08 $ 0.64 $ 1.28 $ 1.69
Discontinued operations    (0.03)  2.40  0.95  4.61
Net income $ 1.05 $ 3.04 $ 2.23 $ 6.30
         
Diluted net income (loss) per share attributable to Oil States International, Inc. common stockholders from:        
Continuing operations   $ 1.07 $ 0.64 $ 1.27 $ 1.67
Discontinued operations    (0.02)  2.37  0.95  4.57
Net income $ 1.05 $ 3.01 $ 2.22 $ 6.24
         
Weighted average number of common shares outstanding:        
Basic    52,979  55,092  53,119  54,987
Diluted    53,294  55,672  53,422  55,542

 

 
 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(In Thousands)
 
  SEPTEMBER 30, DECEMBER 31,
ASSETS 2014 2013
  (UNAUDITED)  
     
Current assets:    
Cash and cash equivalents  $ 69,800  $ 599,306
Accounts receivable, net  506,508  620,333
Inventories, net  247,092   266,552
Prepaid expenses and other current assets  22,368  39,716
Total current assets  845,768  1,525,907
     
Property, plant, and equipment, net  627,465  1,902,789
Goodwill, net  252,880  513,650
Other intangible assets, net  52,238  133,531
Other noncurrent assets  25,118  55,384
Total assets  $ 1,803,469  $ 4,131,261
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Current liabilities:    
Accounts payable  $ 101,706  $ 149,079
Accrued liabilities  79,693  132,046
Income taxes  12,589  32,679
Current portion of long-term debt and capitalized leases  505  529
Deferred revenue  48,755   50,366
Other current liabilities  11,853  9,137
Total current liabilities  255,101  373,836
     
Long-term debt and capitalized leases (1)  178,040  972,692
Deferred income taxes  19,121  122,821
Other noncurrent liabilities  16,761  36,618
Total liabilities  469,023  1,505,967
     
Stockholders' equity:    
Oil States International, Inc. stockholders' equity:  
Common stock, $.01 par value, 200,000,000 shares authorized, 60,783,119 shares and 59,777,766 shares issued, respectively, and 54,017,285 shares and 54,767,284 shares outstanding, respectively  608  592
Additional paid-in capital  674,435  637,438
Retained earnings  1,080,955  2,320,453
Accumulated other comprehensive loss  (11,851)  (85,675)
Common stock held in treasury at cost, 6,765,834 and 5,010,482 shares, respectively  (409,875)  (249,391)
Total Oil States International, Inc. stockholders' equity  1,334,272  2,623,417
Noncontrolling interest  174  1,877
Total stockholders' equity  1,334,446  2,625,294
Total liabilities and stockholders' equity  $ 1,803,469  $ 4,131,261

(1) As of September 30, 2014, the Company had approximately $391.9 million available under its revolving credit facility. 

 
 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUING AND DISCONTINUED OPERATIONS
(In Thousands)
 
  NINE MONTHS
  ENDED SEPTEMBER 30,
    2014    2013 
     
Cash flows from operating activities:    
Net income  $ 121,119  $ 347,540
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  160,520  206,155
Deferred income tax provision  (1,735)  (707)
Excess tax benefits from share-based payment arrangements  (4,585)  (5,447)
Gain on sale of business  --  (84,209)
Gain on disposals of assets  (923)  (3,871)
Non-cash compensation charge  22,220  22,938
Amortization of deferred financing costs  2,896  5,937
Loss on extinguishment of debt  103,836  3,265
Other, net  5,183  640
Changes in operating assets and liabilities, net of effect from acquired businesses and net assets of Civeo that were distributed to stockholders:    
Accounts receivable  (68,106)  53,386
Inventories  (7,030)  34,028
Accounts payable and accrued liabilities  (14,463)  (24,449)
Taxes payable  (48,875)  16,603
Other operating assets and liabilities, net   32,423   10,868
Net cash flows provided by operating activities  302,480  582,677
     
Cash flows from investing activities:    
Capital expenditures, including capitalized interest  (262,619)  (355,639)
Acquisitions of businesses, net of cash acquired  193  (1,771)
Proceeds from sale of business  --  600,000
Proceeds from disposition of property, plant and equipment  4,077  8,535
Other, net   (1,462)   81
Net cash flows (used in) provided by investing activities  (259,811)  251,206
     
Cash flows from financing activities:    
Revolving credit borrowings and (repayments), net  171,734  (47,901)
Repayment of 6 1/2% Senior Notes  (630,307)  --
Repayment of 5 1/8% Senior Notes  (419,794)  --
Term loan repayments  --  (252,762)
Debt and capital lease repayments  (407)  (2,181)
Issuance of common stock from share-based payment arrangements  8,844  14,172
Purchase of treasury stock  (162,053)  (11,889)
Excess tax benefits from share-based payment arrangements  4,585  5,447
Payment of financing costs  (12,530)  (203)
Shares added to treasury stock as a result of net share settlements due to vesting of restricted stock    (5,048)   (4,161)
Term borrowings of Civeo  775,000  --
Cash balances of Civeo in Spin-Off   (298,536)   --
Net cash flows used in financing activities  (568,512)  (299,478)
     
Effect of exchange rate changes on cash   (3,663)   (11,598)
Net change in cash and cash equivalents  (529,506)  522,807
Cash and cash equivalents, beginning of period   599,306   253,172
     
Cash and cash equivalents, end of period  $ 69,800  $ 775,979
 
 
Oil States International, Inc.
Segment Data
(in thousands)
(unaudited)
 
  Three Months Ended September 30, Nine Months Ended September 30,
  2014 2013 2014 2013
         
Revenues         
Completion services  $ 171,990 $ 151,857 $ 474,106 $ 431,394
Drilling services   52,416  44,046  152,243  128,462
         
Well site services   224,406  195,903  626,349  559,856
Offshore products   246,626  242,273  709,527  647,968
Total revenues  $ 471,032 $ 438,176 $ 1,335,876 $ 1,207,824
         
EBITDA (A)         
Completion services (1)  $ 61,901 $ 52,633 $ 163,312 $ 140,347
Drilling services   15,251  11,472  43,884  34,840
         
Well site services   77,152  64,105  207,196  175,187
Offshore products   60,563  45,683  159,880  123,087
Corporate and eliminations (2)   (14,782)  (15,129)  (53,119)  (41,865)
Total EBITDA  $ 122,933 $ 94,659 $ 313,957 $ 256,409
         
Operating income / (loss)         
Completion services (1)  $ 43,242 $ 35,302 $ 106,760 $ 91,452
Drilling services   8,511  4,856  23,044  16,069
         
Well site services   51,753  40,158  129,804  107,521
Offshore products   54,899  40,951  142,508  110,416
Corporate and eliminations (2)   (15,040)  (15,353)  (53,888)  (42,548)
Total operating income  $ 91,612 $ 65,756 $ 218,424 $ 175,389

(1) The EBITDA and operating income for the completion services segment for the nine months ended September 30, 2013 were negatively impacted by $3.0 million from an increase in an acquisition related contingent liability.

(2) The EBITDA and operating expense related to the Company's corporate function for the nine months ended September 30, 2014 included transaction costs of $11.0 million. These costs primarily related to activities associated with the spin-off of Civeo. EBITDA and operating expense related to the Company's corporate function for the three and nine months ended September 30, 2013 included transaction costs of $2.6 million and $4.1 million, respectively. These costs primarily related to activities associated with the spin-off of Civeo.

 
Oil States International, Inc.
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands)
(unaudited)
 
  Three Months Ended September 30, Nine Months Ended September 30,
  2014 2013 2014 2013
         
Net income from continuing operations  $ 58,387 $ 35,490 $ 68,973 $ 92,954
Income tax provision   32,048  19,081  36,545  51,692
Depreciation and amortization   31,076  28,206  92,970  80,035
Interest income   (150)  (159)  (411)  (460)
Interest expense   1,602  9,983  15,500  30,130
Loss on extinguishment of debt   (30)  2,058  100,380  2,058
EBITDA (A)  $ 122,933 $ 94,659 $ 313,957 $ 256,409
         
Adjustments to EBITDA:         
Non-recurring items  -- 2,571 11,020 7,116
Adjusted EBITDA (A)  $ 122,933 $ 97,230 $ 324,977 $ 263,525

(A) The terms EBITDA and Adjusted EBITDA consist of net income from continuing operations plus interest, taxes, depreciation and amortization. EBITDA and Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA and Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA and Adjusted EBITDA provides useful information regarding our ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses EBITDA and Adjusted EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The table above sets forth a reconciliation of EBITDA and Adjusted EBITDA to net income, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

 
Oil States International, Inc.
Additional Quarterly Segment and Operating Data
(unaudited)
 
  Three Months Ended September 30,
  2014 2013
     
Supplemental operating data:     
     
Offshore products backlog ($ in millions)  $ 542.6 $ 569.0
     
Completion services job tickets   14,251  13,507
Average revenue per ticket ($ in thousands)  $ 12.1 $ 11.2
     
Land drilling operating statistics:     
Average rigs available  34 34
Utilization  90.1% 78.4%
Implied day rate ($ in thousands per day)  $ 18.6 $ 18.0
Implied daily cash margin ($ in thousands per day)  $ 5.7 $ 5.0

            

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