Exhibit 99.1
July 31, 2007
Press Release
SOURCE: Oil States International, Inc.
Oil States Announces Second Quarter Earnings of $1.03 per Share
HOUSTON, Texas, July 31 -- Oil States International, Inc. (NYSE: OIS) today reported net income for the quarter ended June 30, 2007 of $52.2 million, or $1.03 per diluted share. These results compare to $45.3 million, or $0.88 per diluted share, reported in the second quarter of 2006. Net income for the second quarter of 2007 included a pre-tax gain of $12.8 million on the sale of 14.95 million shares of common stock in Boots & Coots International Well Control, Inc. (“Boots & Coots”), or an after-tax gain of $0.17 per diluted share.
Driven by record results in Offshore Products and continuing contributions from capital expenditures particularly made in support of Canadian oil sands operations, the Company generated $499.3 million of revenues and $98.4 million of EBITDA (defined as net income plus interest, taxes, depreciation and amortization) in the second quarter of 2007 compared to $463.4 million and $84.1 million, respectively, in the second quarter of 2006. (A) Offshore Products EBITDA increased 51% year-over-year due to continued deepwater development spending by its customers. In addition, the outlook for Offshore Products continued to improve as backlog increased 8% sequentially during the quarter to $402.2 million. Well Site Services reported slightly lower revenues and EBITDA due to decreased Canadian drilling related activity, partially offset by increases in oil sands accommodations and U.S. rental tool activity. Tubular Services reported flat revenues year-over-year but lower EBITDA due to higher industry inventory levels and more competitive pricing. Operating income in the second quarter of 2007 was $68.5 million compared to $70.0 million for the second quarter of 2006. The Company recognized an effective tax rate of 34.1% in the quarter compared to 32.2% in the second quarter of last year.
The Company reported net income of $104.7 million, or $2.08 per diluted share, on revenues of $979.8 million and EBITDA of $196.3 million for the first half of 2007. For the first half of 2006, the Company reported net income of $98.2 million, or $1.92 per diluted share, on revenues of $959.6 million and EBITDA of $188.6 million. This represents year-over-year revenue and EBITDA increases of 2% and 4%, respectively. As a result, operating income increased $2.2 million to $151.4 million in the first half of 2007 from $149.2 million in the first half of 2006. During the first half of 2007, the Company recognized a $12.8 million pre-tax gain related to the sale of a portion of its investment in Boots & Coots. During the first half of 2006, the Company recognized an $11.3 million pre-tax gain, or $0.12 per diluted share, from the sale of its workover business to Boots & Coots.
BUSINESS SEGMENT RESULTS
(Unless otherwise noted, the following discussion compares the quarterly results from the second quarter of 2007 which excludes the aforementioned gain on the sale of Boots & Coots stock to the results from the second quarter of 2006 in order to present a more meaningful comparison of the Company’s results.)
Well Site Services
For the second quarter of 2007, Well Site Services generated revenues of $149.5 million and EBITDA of $52.8 million (excluding the Boots & Coots gain) compared to $154.0 million and $54.3 million, respectively, in the second quarter of 2006. The 3% year-over-year decline in both revenues and EBITDA resulted primarily from softer demand for services tied to Canadian drilling activity and lower utilization and margin on the Company’s drilling rigs, partially offset by contributions from capital expenditures made over the last year in oil sands accommodations, rental equipment and drilling rigs.
The accommodations business generated $61.9 million of revenues and $18.5 million of EBITDA compared to $75.0 million and $19.7 million, respectively, in the second quarter of 2006. The accommodations business was negatively impacted by reduced accommodations demand for traditional Canadian drilling activity and lower U.S. accommodations rental activity, partially offset by increases in activity and profitability in the oil sands region of northern Canada. Drilling services reported revenues and EBITDA of $36.8 million and $15.1 million, respectively, in the second quarter of 2007 compared to $32.2 million of revenues and $15.4 million of EBITDA in the second quarter 2006. Drilling services benefited from additional capacity from four rigs added to the fleet over the past twelve months, offset by reduced utilization and higher costs, primarily associated with rig moves and repair and maintenance. Rental tools generated $50.8 million of revenues and $19.3 million of EBITDA in the second quarter of 2007 compared to $46.8 million of revenues and $18.4 million of EBITDA during the second quarter of 2006. This year-over-year growth was due to strong activity levels in the United States, partially offset by weaker drilling and completion activity in Canada.
Offshore Products
During the second quarter of 2007, Offshore Products generated record quarterly results, reporting $135.4 million of revenues and $27.0 million in EBITDA compared to $93.7 million and $17.9 million, respectively, in the second quarter of 2006. EBITDA margin increased to 20% in the quarter from 19% in the second quarter of 2006 due to improved volumes and gross margins from bearing and connector products partially offset by reduced pipeline service work from 2006 levels. Backlog continued to increase, totaling a new record of $402.2 million at June 30, 2007 compared to $373.4 million at March 31, 2007 and $349.3 million as of December 31, 2006.
Tubular Services
Tubular Services generated revenues of $214.4 million and EBITDA of $11.3 million during the second quarter of 2007 compared to $215.7 million and $17.5 million, respectively, in the second quarter of 2006. Tubular Services’ OCTG shipments increased 3% to 120,100 tons from 116,800 tons in the second quarter of 2006. Gross margins in the second quarter of 2007 declined to 6.4% from 9.3% in the second quarter of 2006 because of higher industry-wide inventory levels and more competitive pricing. The Company’s OCTG inventory as of June 30, 2007 was $221.7 million compared to $251.4 million as of March 31, 2007 and $261.8 million as of December 31, 2006. As of June 30, 2007, approximately 76% of Oil States’ OCTG inventory was committed to customer orders.
“We continue to focus on expansion opportunities and execution initiatives in our high growth markets supporting deepwater development and Canadian oil sands spending,” stated Cindy B. Taylor, Oil States’ President and Chief Executive Officer. “Deepwater infrastructure spending and capital equipment upgrades drove record financial results in our Offshore Products segment and provided the business with yet another record quarter end backlog of over $400 million, which is up over 43% from the June 30, 2006 level. In addition, our commitment to support the oil sands activity continues to increase with our investments in large scale accommodations in the oil sands region of northern Alberta, Canada. We have spent approximately $60 million over the past twelve months in developing our three major lodges in the oil sands region. We see continued growth in activity for our accommodations business in the oil sands region as labor needs in the region are expected to double over the next three to five years.”
“Subsequent to the end of the second quarter, we completed two rental tool acquisitions. These investments are consistent with our strategy to expand our suite of production and completion products and services in our North American operations. We believe that demand for these services has strong growth potential given the decline rates of onshore wells and the increasing complexity of completions in the high activity basins. Our strategic focus continues to be centered on increasing our exposure to deepwater and oil sands exploration and production activities while expanding our service capabilities in the North American resource plays. Looking forward, our current expectation for third quarter 2007 earnings including the impact of our recently announced acquisitions is in a range of $0.95 to $1.01 per diluted share.”
Oil States International, Inc. is a diversified oilfield services company with locations around the world. Oil States is a leading manufacturer of products for deepwater production facilities and subsea pipelines, and a leading supplier of a broad range of services to the oil and gas industry, including production-related rental tools, work force accommodations and logistics, oil country tubular goods distribution and land drilling services. Oil States is organized in three business segments - Offshore Products, Tubular Services and Well Site Services, and 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 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 herein are based on 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” section of the Form 10-K for the year ended December 31, 2006 filed by Oil States with the SEC on February 28, 2007.
| Oil States International, Inc. |
| Unaudited Condensed Consolidated Statements of Income |
| (in thousands, except per share amounts) |
| (unaudited) |
| | | | | | | | | | |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | | |
| Revenues | | $ | 499,308 | | $ | 463,359 | | $ | 979,824 | | $ | 959,590 | |
| Costs and expenses: | | | | | | | | | | | | | |
| Cost of sales | | | 386,710 | | | 353,686 | | | 742,513 | | | 731,919 | |
| Selling, general and administrative expenses | | | 28,225 | | | 26,753 | | | 55,548 | | | 52,197 | |
| Depreciation and amortization expense | | | 16,113 | | | 12,995 | | | 30,532 | | | 25,881 | |
| Other operating expense | | | (221 | ) | | (78 | ) | | (141 | ) | | 387 | |
| Operating income | | | 68,481 | | | 70,003 | | | 151,372 | | | 149,206 | |
| | | | | | | | | | | | | | |
| Interest expense | | | (3,739 | ) | | (4,938 | ) | | (8,581 | ) | | (9,734 | ) |
| Interest income | | | 784 | | | 683 | | | 1,710 | | | 956 | |
| Equity in earnings of unconsolidated affiliates | | | 748 | | | 1,303 | | | 1,290 | | | 1,987 | |
| Sale of workover services business | | | - | | | (244 | ) | | - | | | 11,250 | |
| Gain on sale of investment | | | 12,774 | | | - | | | 12,774 | | | - | |
| Other income | | | 237 | | | (1 | ) | | 351 | | | 245 | |
| Income before income taxes | | | 79,285 | | | 66,806 | | | 158,916 | | | 153,910 | |
| Income tax provision | | | (27,052 | ) | | (21,501 | ) | | (54,222 | ) | | (55,689 | ) |
| Net income | | $ | 52,233 | | $ | 45,305 | | $ | 104,694 | | $ | 98,221 | |
| | | | | | | | | | | | | | |
| Net income per share | | | | | | | | | | | | | |
| Basic | | $ | 1.06 | | $ | 0.91 | | $ | 2.12 | | $ | 1.99 | |
| Diluted | | $ | 1.03 | | $ | 0.88 | | $ | 2.08 | | $ | 1.92 | |
| | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding | | | | | | | | | | | | | |
| Basic | | | 49,341 | | | 49,598 | | | 49,305 | | | 49,403 | |
| Diluted | | | 50,833 | | | 51,230 | | | 50,414 | | | 51,126 | |
| Oil States International, Inc. |
| Consolidated Balance Sheets |
| (in thousands) |
| | | | | | | | |
| | | Jun. 30, 2007 | | Mar. 31, 2007 | | Dec. 31, 2006 | |
| Assets | | (unaudited) | | (unaudited) | | (audited) | |
| Current assets | | | | | | | |
| Cash and cash equivalents | | $ | 21,121 | | $ | 22,461 | | $ | 28,396 | |
| Accounts receivable, net | | | 366,456 | | | 361,663 | | | 351,701 | |
| Inventories, net | | | 365,880 | | | 383,209 | | | 386,182 | |
| Prepaid expenses and other current assets | | | 28,430 | | | 23,190 | | | 17,710 | |
| Total current assets | | | 781,887 | | | 790,523 | | | 783,989 | |
| Property, plant and equipment, net | | | 444,978 | | | 383,567 | | | 358,716 | |
| Goodwill, net | | | 337,026 | | | 332,718 | | | 331,804 | |
| Investments in unconsolidated affiliates | | | 22,711 | | | 38,641 | | | 38,079 | |
| Other noncurrent assets | | | 57,304 | | | 58,157 | | | 58,506 | |
| Total assets | | $ | 1,643,906 | | $ | 1,603,606 | | $ | 1,571,094 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Liabilities and stockholders' equity | | | | | | | | | | |
| Current liabilities | | | | | | | | | | |
| Current portion of long-term debt | | $ | 176,545 | | $ | 6,487 | | $ | 6,873 | |
| Accounts payable and accrued liabilities | | | 212,470 | | | 184,686 | | | 199,842 | |
| Income taxes | | | 912 | | | 15,491 | | | 11,376 | |
| Deferred revenue | | | 46,192 | | | 53,024 | | | 58,645 | |
| Other current liabilities | | | 1,592 | | | 5,427 | | | 3,680 | |
| Total current liabilities | | | 437,711 | | | 265,115 | | | 280,416 | |
| Long-term debt (B) | | | 167,103 | | | 382,567 | | | 391,729 | |
| Deferred income taxes | | | 38,513 | | | 39,233 | | | 38,020 | |
| Other liabilities | | | 26,413 | | | 24,898 | | | 21,093 | |
| Total liabilities | | | 669,740 | | | 711,813 | | | 731,258 | |
| | | | | | | | | | | |
| Stockholders' equity | | | | | | | | | | |
| Common stock | | | 517 | | | 513 | | | 511 | |
| Additional paid-in capital | | | 385,940 | | | 376,249 | | | 372,043 | |
| Retained earnings | | | 592,034 | | | 539,801 | | | 487,627 | |
| Accumulated other comprehensive income | | | 53,827 | | | 33,245 | | | 30,183 | |
| Treasury stock | | | (58,152 | ) | | (58,015 | ) | | (50,528 | ) |
| Total stockholders' equity | | | 974,166 | | | 891,793 | | | 839,836 | |
| Total liabilities and stockholders' equity | | $ | 1,643,906 | | $ | 1,603,606 | | $ | 1,571,094 | |
| Oil States International, Inc. |
| Segment Data |
| (in thousands) |
| (unaudited) |
| | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | | |
| Revenues | | | | | | | | | |
| Accommodations | | $ | 61,864 | | $ | 75,015 | | $ | 155,417 | | $ | 179,604 | |
| Rental Tools | | | 50,842 | | | 46,777 | | | 104,481 | | | 96,365 | |
| Drilling and Other | | | 36,752 | | | 32,205 | | | 67,669 | | | 60,223 | |
| Workover Services | | | - | | | - | | | - | | | 8,544 | |
| | | | | | | | | | | | | | |
| Well Site Services | | | 149,458 | | | 153,997 | | | 327,567 | | | 344,736 | |
| Offshore Products | | | 135,437 | | | 93,675 | | | 254,477 | | | 171,946 | |
| Tubular Services | | | 214,413 | | | 215,687 | | | 397,780 | | | 442,908 | |
| Total Revenues | | $ | 499,308 | | $ | 463,359 | | $ | 979,824 | | $ | 959,590 | |
| | | | | | | | | | | | | | |
| EBITDA (A) | | | | | | | | | | | | | |
| Accommodations | | $ | 18,512 | | $ | 19,745 | | $ | 57,589 | | $ | 48,951 | |
| Rental Tools | | | 19,254 | | | 18,399 | | | 41,476 | | | 39,258 | |
| Drilling and Other (C) | | | 27,824 | | | 16,382 | | | 40,574 | | | 30,141 | |
| Workover Services (D) | | | - | | | (244 | ) | | - | | | 13,828 | |
| | | | | | | | | | | | | | |
| Well Site Services | | | 65,590 | | | 54,282 | | | 139,639 | | | 132,178 | |
| Offshore Products | | | 26,979 | | | 17,915 | | | 47,415 | | | 30,709 | |
| Tubular Services | | | 11,272 | | | 17,472 | | | 19,624 | | | 35,770 | |
| Corporate / Other | | | (5,488 | ) | | (5,613 | ) | | (10,359 | ) | | (10,088 | ) |
| Total EBITDA | | $ | 98,353 | | $ | 84,056 | | $ | 196,319 | | $ | 188,569 | |
| | | | | | | | | | | | | | |
| Operating Income / (Loss) | | | | | | | | | | | | | |
| Accommodations | | $ | 13,152 | | $ | 15,581 | | $ | 48,144 | | $ | 40,940 | |
| Rental Tools | | | 14,131 | | | 14,193 | | | 31,613 | | | 31,010 | |
| Drilling and Other | | | 11,816 | | | 13,664 | | | 21,810 | | | 25,387 | |
| Workover Services | | | - | | | - | | | - | | | 1,922 | |
| | | | | | | | | | | | | | |
| Well Site Services | | | 39,099 | | | 43,438 | | | 101,567 | | | 99,259 | |
| Offshore Products | | | 24,207 | | | 15,186 | | | 41,815 | | | 25,251 | |
| Tubular Services | | | 10,710 | | | 17,023 | | | 18,444 | | | 34,842 | |
| Corporate / Other | | | (5,535 | ) | | (5,644 | ) | | (10,454 | ) | | (10,146 | ) |
| Total Operating Income | | $ | 68,481 | | $ | 70,003 | | $ | 151,372 | | $ | 149,206 | |
| Oil States International, Inc. |
| Additional Quarterly Segment and Operating Data |
| (unaudited) |
| | | Three Months Ended June 30, | |
| | | 2007 | | 2006 | |
| | | | | | |
| Supplemental Operating Data | | | | | |
| Land Drilling Operating Statistics | | | | | |
| Average Rigs Available | | | 32 | | | 28 | |
| Utilization | | | 83.2 | % | | 91.5 | % |
| Implied Day Rate ($ in thousands per day) | | $ | 15.1 | | $ | 13.8 | |
| Implied Daily Cash Margin ($ in thousands per day) | | $ | 6.3 | | $ | 6.9 | |
| | | | | | | | |
| Offshore Products Backlog ($ in millions) | | $ | 402.2 | | $ | 280.6 | |
| | | | | | | | |
| Tubular Services Operating Data | | | | | | | |
| Shipments (Tons in thousands) | | | 120.1 | | | 116.8 | |
| Quarter end Inventory ($ in thousands) | | $ | 221,702 | | $ | 269,803 | |
| (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 June 30, | | Six Months Ended June 30, | |
| | | 2007 | | 2006 | | 2006 | | 2005 | |
| | | | | | | | | | |
| Net income | | $ | 52,233 | | $ | 45,305 | | $ | 104,694 | | $ | 98,221 | |
| Income tax expense | | | 27,052 | | | 21,501 | | | 54,222 | | | 55,689 | |
| Depreciation and amortization | | | 16,113 | | | 12,995 | | | 30,532 | | | 25,881 | |
| Interest income | | | (784 | ) | | (683 | ) | | (1,710 | ) | | (956 | ) |
| Interest expense | | | 3,739 | | | 4,938 | | | 8,581 | | | 9,734 | |
| EBITDA | | $ | 98,353 | | $ | 84,056 | | $ | 196,319 | | $ | 188,569 | |
| (B) | As of June 30, 2007, the Company had approximately $223.8 million available under its revolving credit facility. Subsequent to June 30, 2007, the Company borrowed approximately $41.0 million to complete the previously announced Well Testing acquisition. In addition, the Company expects to close the previously announced Schooner transaction during the third quarter of 2007 and will, as a result, draw an additional $61.0 million on its revolving credit facility to fund that transaction. |
| (C) | Includes the $12.8 million gain from the sale of Boots & Coots stock completed in April 2007. |
| (D) | Reflects two months’ results for the workover services business, which was sold to Boots & Coots International Well Control, Inc. effective on March 1, 2006 and also includes the $11.3 million non-cash, pre-tax gain from the sale of the workover services business to Boots & Coots International Well Control, Inc. |
Company Contact:
Bradley J. Dodson
Oil States International, Inc.
713-652-0582
SOURCE: Oil States International, Inc.
