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Press release from GlobeNewswire (a Nasdaq OMX company)

Oil States Announces Third Quarter Earnings of $1.67 Per Share

Thursday, November 03, 2011

Oil States Announces Third Quarter Earnings of $1.67 Per Share13:15 EDT Thursday, November 03, 2011HOUSTON, Nov. 3, 2011 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income for the quarter ended September 30, 2011 of $91.9 million, or $1.67 per diluted share, compared to $46.3 million, or $0.88 per diluted share, in the third quarter of 2010. The Company generated revenues of $902.6 million and EBITDA of $191.9 million during the quarter compared to revenues of $588.3 million and EBITDA of $100.8 million in the third quarter of 2010 (EBITDA defined as net income plus interest, taxes, depreciation and amortization).(A) The 53% increase in revenues and the 90% increase in EBITDA were primarily due to improved earnings from each of the Company's business segments and earnings from the acquisitions closed in the fourth quarter of 2010 which contributed approximately $70 million of revenues and $38 million of EBITDA. Consolidated operating income more than doubled to $144.5 million in the current quarter, up from $70.4 million in the third quarter of 2010, and our gross margins improved to 26% in the third quarter of 2011 from 24% a year ago. "Despite the recent turmoil in the equity markets which impacted our stock price, activity across all of our business lines remained strong in the third quarter," stated Cindy B. Taylor, Oil States' President and Chief Executive Officer. "Current commodity prices, particularly oil and met coal, are conducive to continued customer spending for our accommodations, offshore products and North American completion businesses. Our offshore products segment generated good order flow and maintained a strong backlog. We anticipate global deepwater spending to continue with particular opportunities coming from Brazil, West Africa, South East Asia and Australia over the next twelve months." The Company recognized an effective tax rate of 28.4% in the third quarter of 2011 compared to 30.7% in the third quarter of 2010. The lower effective tax rate in the third quarter of 2011 was primarily due to the mix of foreign and U.S. sourced income. The Company invested $140.9 million in capital expenditures during the third quarter of 2011 primarily related to the ongoing expansion of its accommodations business and additional rental equipment deployed to service the active U.S. shale plays. The Company currently expects to spend a total of $635 million in capital expenditures during 2011. Of the total, approximately 75% will be spent in the accommodations segment, the majority of which are supported by customer contract commitments. For the first nine months of 2011, the Company reported revenues of $2.5 billion, EBITDA of $492.4 million and net income of $228.2 million, or $4.15 per diluted share. For the first nine months of 2010, the Company reported revenues of $1.7 billion, EBITDA of $280.3 million and net income of $124.1 million, or $2.37 per diluted share. BUSINESS SEGMENT RESULTS (Unless otherwise noted, the following discussion compares the quarterly results from the third quarter of 2011 to the results from the third quarter of 2010.) Accommodations Accommodations generated revenues of $227.8 million and EBITDA of $99.5 million for the third quarter of 2011 compared to revenues and EBITDA of $127.7 million and $49.1 million, respectively, in the third quarter of 2010. Accommodations revenues increased 78% and EBITDA increased 103% year-over-year primarily due to contributions from The MAC and Mountain West acquisitions which closed during the fourth quarter of 2010 in addition to the 32% increase in average available rooms and higher RevPAR year-over-year at the Company's oil sands lodges. Well Site Services Well site services generated revenues of $172.8 million and EBITDA of $56.4 million in the third quarter of 2011 compared to revenues and EBITDA of $125.7 million and $30.6 million, respectively, in the third quarter of 2010.  Revenues increased 37% and EBITDA increased 85% year-over-year primarily due to higher revenues and margins in the rental tools business and stronger land drilling utilization and margins. Revenues and EBITDA from the rental tools business improved 38% and 78% year-over-year, respectively, due to service intensity driven by increases in drilling and completion activity, which was particularly strong in the Bakken, Eagle Ford, Marcellus and the Permian Basin regions. Service tickets and revenue per ticket both increased 18% year-over-year, favoring our higher specification and proprietary equipment. Drilling services revenues and EBITDA improved 34% and 109%, respectively, year-over-year. Utilization increased to 88% in the third quarter of 2011 from 73% in the third quarter of 2010. Dayrates and cash margins also improved year-over-year.  Offshore Products Offshore products generated revenues and EBITDA of $139.5 million and $27.9 million, respectively, in the third quarter of 2011 compared to $102.4 million of revenues and $17.3 million in EBITDA in the third quarter of 2010.  Revenues and EBITDA increased 36% and 61% year-over-year, respectively, primarily due to higher revenues from production equipment and connector products sales coupled with good project execution and contributions from the Acute acquisition which closed during the fourth quarter of 2010. Absent the impact of foreign currency reductions created by the strengthening U.S. dollar during the quarter, backlog was essentially flat sequentially with $513.9 million reported at September 30, 2011 compared to $518.6 million reported at June 30, 2011.  Tubular Services Tubular services generated revenues of $362.5 million and EBITDA of $18.8 million during the third quarter of 2011 compared to revenues of $232.5 million and EBITDA of $12.4 million in the third quarter of 2010. Revenues and EBITDA improved 56% and 52% year-over-year, respectively, primarily due to the 54% year-over-year increase in OCTG shipments, exceeding the 20% year-over-year increase in U.S. drilling activity. Gross margin as a percent of revenues in the third quarter of 2011 decreased to 6.3% from 6.9% in the third quarter of 2010 primarily due to product mix. The Company's OCTG inventory was modestly lower sequentially at $375.1 million as of September 30, 2011. During the third quarter of 2011, the Company repurchased 209,300 shares of its common stock at an average price of $60.35 for a total cost of $12.6 million. As of September 30, 2011 the Company had $87.4 million available under its authorized share repurchase program which expires on September 1, 2012. Oil States International, Inc. is a diversified oilfield services company with recently added exposure to the mining industry through The MAC acquisition. Oil States is a leading, integrated provider of remote site accommodations with prominent market positions in the Canadian oil sands and the Australian mining regions. Oil States is also a leading manufacturer of products for deepwater production facilities and subsea pipelines as well as a provider of completion-related rental tools, oil country tubular goods distribution 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. The Oil States International, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6058 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 will be 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 oilfield service industry and other factors discussed within the "Business" and "Risk Factors" sections of the Form 10-K for the year ended December 31, 2010 filed by Oil States with the SEC on February 22, 2011 and the "Risk Factors" section of the Form 10-Q for the three months ended June 30, 2011 filed by Oil States with the SEC on August 2, 2011. OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Amounts)            THREE MONTHS ENDED SEPTEMBER 30,NINE MONTHS ENDED SEPTEMBER 30,  2011201020112010                    Revenues  $902,621 $588,347 $2,483,379 $1,715,225           Costs and expenses:          Cost of sales and services  665,855 448,602 1,857,031 1,324,594  Selling, general and administrative expenses  45,430 37,142 131,902 109,479  Depreciation and amortization expense  46,929 30,410 137,318 92,088  Other operating (income) expense  (57) 1,803 2,724 1,116   758,157 517,957 2,128,975 1,527,277 Operating income  144,464 70,390 354,404 187,948           Interest expense, net of capitalized interest  (16,760) (3,534) (39,541) (10,505) Interest income  174 134 1,422 316 Equity in earnings (loss) of unconsolidated affiliates  (204) 80 (151) 144 Other income  885 17 1,515 587  Income before income taxes  128,559 67,087 317,649 178,490 Income tax expense  (36,487) (20,609) (88,757) (53,988) Net income  92,072 46,478 228,892 124,502 Less: Net income attributable to noncontrolling interest  221 132 721 436 Net income attributable to Oil States International, Inc.  $91,851 $46,346 $228,171 $124,066           Net income per share attributable to Oil States International, Inc. common stockholders           Basic  $1.79 $0.92 $4.46 $2.48  Diluted  $1.67 $0.88 $4.15 $2.37           Weighted average number of common shares outstanding:          Basic  51,264 50,282 51,144 50,108  Diluted  54,960 52,538 55,028 52,304   OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES       CONSOLIDATED BALANCE SHEETS (In Thousands)       ASSETSSeptember 30, 2011December 31, 2010  (UNAUDITED)         Current assets:      Cash and cash equivalents  $118,851 $96,350  Accounts receivable, net  579,449 478,739  Inventories, net  602,830 501,435  Prepaid expenses and other current assets  27,714 23,480  Total current assets  1,328,844 1,100,004       Property, plant, and equipment, net  1,455,807 1,252,657 Goodwill, net  465,624 475,222 Other intangible assets, net  125,164 139,421 Other noncurrent assets  61,573 48,695  Total assets  $3,437,012 $3,015,999        LIABILITIES AND STOCKHOLDERS' EQUITY           Current liabilities:      Accounts payable and accrued liabilities  $329,903 $304,739  Income taxes  6,883 4,604  Current portion of long-term debt and capitalized leases (B)  197,522 181,175  Deferred revenue  67,607 60,847  Other current liabilities  5,694 2,810  Total current liabilities  607,609 554,175        Long-term debt and capitalized leases (C)  900,476 731,732  Deferred income taxes  98,688 81,198  Other noncurrent liabilities  19,490 19,961  Total liabilities  1,626,263 1,387,066       Stockholders' equity:      Oil States International, Inc. stockholders' equity:      Common stock  547 541  Additional paid-in capital  538,783 508,429  Retained earnings  1,356,304 1,128,133  Accumulated other comprehensive income  23,179 84,549  Treasury stock  (108,917) (93,746)  Total Oil States International, Inc. stockholders' equity  1,809,896 1,627,906  Noncontrolling interest  853 1,027 Total stockholders' equity  1,810,749 1,628,933  Total liabilities and stockholders' equity  $3,437,012 $3,015,999     OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES       UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)        NINE MONTHS ENDED SEPTEMBER 30,  20112010       Cash flows from operating activities:     Net income  $228,892 $124,502 Adjustments to reconcile net income to net cash provided by operating activities:     Depreciation and amortization  137,318 92,088 Deferred income tax provision  16,281 920 Excess tax benefits from share-based payment arrangements  (7,966) (2,126) Non-cash compensation charge  10,829 9,687 Accretion of debt discount  5,787 5,388 Amortization of deferred financing costs  4,699 790 Other, net  (1,666) (1,667) Changes in operating assets and liabilities, net of effect from acquired businesses:     Accounts receivable  (109,415) 10,912 Inventories  (104,421) (81,146) Accounts payable and accrued liabilities  28,137 28,513 Taxes payable  11,343 (10,922) Other current assets and liabilities, net  3,256 (23,554) Net cash flows provided by operating activities  223,074 153,385       Cash flows from investing activities:     Acquisitions of businesses, net of cash acquired  (212) -- Capital expenditures, including capitalized interest  (371,165) (120,952) Other, net  (823) 1,925 Net cash flows used in investing activities  (372,200) (119,027)       Cash flows from financing activities:     Revolving credit borrowings and (repayments), net  (395,908) -- 6 ½% senior notes issued  600,000 -- Term loan repayments  (11,246) -- Debt and capital lease repayments  (966) (357) Issuance of common stock from share-based payment arrangements  11,559 14,165 Purchase of treasury stock  (12,632) -- Excess tax benefits from share-based payment arrangements  7,966 2,126 Payment of financing costs  (13,152) -- Other, net  (2,551) (1,406) Net cash flows provided by financing activities  183,070 14,528       Effect of exchange rate changes on cash  (11,325) (143) Net increase in cash and cash equivalents from continuing operations  22,619 48,743 Net cash used in discontinued operations – operating activities  (118) (105) Cash and cash equivalents, beginning of period  96,350 89,742 Cash and cash equivalents, end of period  $118,851  $ 138,380   Oil States International, Inc. Segment Data (in thousands) (unaudited)             Three Months Ended September 30, Nine Months Ended September 30,     2011 2010 2011 2010            Revenues           Rental tools  $127,217 $91,856 $347,406 $238,477  Drilling services   45,550  33,869  119,653  98,408            Well site services   172,767  125,725  467,059  336,885  Accommodations   227,783  127,719  627,824  395,208  Offshore products   139,525  102,376  399,709  311,375  Tubular services   362,546  232,527  988,787  671,757  Total revenues  $902,621 $588,347 $2,483,379 $1,715,225            EBITDA (A)           Rental tools  $43,297 $24,285 $112,878 $59,976  Drilling services   13,145  6,284  31,742  16,823            Well site services   56,442  30,569  144,620  76,799  Accommodations   99,461  49,107  258,641  148,433  Offshore products   27,875  17,286  69,871  51,636  Tubular services   18,838  12,424  50,011  28,776  Corporate and eliminations   (10,763)  (8,621)  (30,778)  (25,313)  Total EBITDA  $191,853 $100,765 $492,365 $280,331            Operating income / (loss)           Rental tools  $32,939 $14,446 $82,432 $29,219  Drilling services   7,973  487  16,578  (2,565)            Well site services   40,912  14,933  99,010  26,654  Accommodations   71,727  37,679  178,451  116,347  Offshore products   24,854  14,570  60,374  43,278  Tubular services   17,934  12,003  47,936  27,514  Corporate and eliminations   (10,963)  (8,795)  (31,367)  (25,845)  Total operating income  $144,464 $70,390 $354,404 $187,948     Oil States International, Inc. Additional Quarterly Segment and Operating Data (unaudited)         Three Months Ended September 30,   2011 2010              Supplemental operating data             Lodge/village revenues ($ in thousands)  $162,359 $75,322  Other accommodations revenues ($ in thousands)   65,424  52,397  Total accommodations revenues ($ in thousands)  $227,783 $127,719        Average available lodge/village rooms   15,931  7,253  Lodge/village revenues per available room  $111 $113        Offshore products backlog ($ in millions)  $513.9 $264.4        Rental tool job tickets   12,777  10,705  Average revenue per ticket ($ in thousands)  $10.0 $8.6        Tubular services operating data       Shipments (tons in thousands)  182.3 118.5  Quarter end inventory ($ in thousands)  $375,114 $340,965        Land drilling operating statistics       Average rigs available  34 36  Utilization  88.4% 72.9%  Implied day rate ($ in thousands per day)  $16.5 $14.0  Implied daily cash margin ($ in thousands per day)  $5.0 $3.0       (A)  The term EBITDA consists of net income plus interest, taxes, depreciation and amortization. EBITDA is not a measure of financial performance under generally accepted accounting principles. You should not consider it 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 may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA as a supplemental disclosure because its management believes that 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 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 following table sets forth a reconciliation of EBITDA to net income, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles:   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,     2011 2010 2011 2010            Net income / (loss)  $91,851 $46,346 $228,171 $124,066  Income tax provision   36,487  20,609  88,757  53,988  Depreciation and amortization   46,929  30,410  137,318  92,088  Interest income   (174)  (134)  (1,422)  (316)  Interest expense   16,760  3,534  39,541  10,505  EBITDA  $191,853 $100,765 $492,365 $280,331           (B)  As of September 30, 2011 and December 31, 2010, the Company's 2 3/8% Contingent Convertible Senior Notes, net of unamortized discount, were classified as a current liability because certain contingent conversion thresholds based on the Company's stock price were met at that date.  (C)  As of September 30, 2011, the Company had approximately $845.5 million available under its credit facilities.CONTACT: Bradley J. Dodson Oil States International, Inc. 713-652-0582