Oil States Announces Third Quarter Earnings of $0.97 per Share
HOUSTON, Nov. 1 /PRNewswire-FirstCall/ -- Oil States International, Inc.
(NYSE: OIS) today reported net income for the quarter ended September 30, 2007
of $50.5 million, or $0.97 per diluted share. These results compare to $50.1
million, or $0.99 per diluted share, reported in the third quarter of 2006.
Improvements in deepwater and oil sands activity coupled with
contributions from acquisitions completed in the quarter generated improved
year-over-year revenues. However, lower margins at our Tubular Services segment,
which led to a $7.1 million year-over-year decrease in that segment's EBITDA,
resulted in relatively flat year-over-year EBITDA for the Company. The Company
generated $527.4 million of revenues and $94.6 million of EBITDA (defined as net
income plus interest, taxes, depreciation and amortization) in the third quarter
of 2007 compared to $479.5 million and $93.9 million, respectively, in the third
quarter of 2006.(A) Offshore Products EBITDA increased 29% year-over-year due to
strong shipments of deepwater capital equipment across its product lines. Well
Site Services reported higher revenues and EBITDA due primarily to contributions
from two rental tool acquisitions completed in the quarter and increased
activity supporting the Canadian oil sands developments. Well Site Services
growth was partially offset by some regional weakness in its U.S. and Canadian
drilling related operations. Tubular Services reported flat revenues
year-over-year but lower EBITDA due to flattening U.S. drilling activity and a
competitive OCTG pricing environment, negatively impacting margins. Operating
income in the third quarter of 2007 was $74.8 million compared to $75.5 million
for the third quarter of 2006. The Company recognized an effective tax rate of
30.3% in the third quarter of 2007 compared to 34.1% recognized in the third
quarter of 2006. The Company currently expects the effective tax rate to
approximate 34% during the fourth quarter of 2007.
The Company reported net income of $155.2 million, or $3.05 per diluted
share, on revenues of $1.5 billion and EBITDA of $290.9 million for the first
nine months of 2007. For the same period in 2006, the Company reported net
income of $148.3 million, or $2.91 per diluted share, on revenues of $1.4
billion and EBITDA of $282.4 million. This represents a 5% year-over-year
increase in revenue and a 3% increase in EBITDA. However, increased depreciation
related to higher capital spending over the last twelve months led to relatively
flat operating income year-over-year. The results for 2007 include a $12.8
million pre-tax gain, or an after-tax gain of $0.17 per diluted share, related
to the sale of a portion of its investment in Boots & Coots. Conversely, in
2006, the Company recognized an $11.3 million pre-tax gain, or $0.12 per diluted
share, from the initial sale of its workover business to Boots & Coots.
BUSINESS SEGMENT RESULTS
(Unless otherwise noted, the following discussion compares the quarterly
results from the third quarter of 2007 to the results from the third quarter of
2006 in order to present a more meaningful comparison of the Company's results.)
Well Site Services
For the third quarter of 2007, Well Site Services generated revenues of
$179.7 million and EBITDA of $65.4 million compared to $154.4 million and $62.0
million, respectively, in the third quarter of 2006. The 16% year-over-year
increase in revenues and 6% increase in EBITDA were primarily due to organic
growth in support of the Canadian oil sands developments, expansion in rental
tool operations and the contributions from the Well Testing and Schooner
acquisitions closed during the quarter. Partially offsetting this growth was
lower utilization and margins on the Company's drilling rigs and lower margins
reported by the Company's existing rental business.
The accommodations business reported revenues and EBITDA of $65.9 million
and $22.7 million for the third quarter of 2007, respectively, compared to
revenues of $64.0 million and EBITDA of $20.3 million in the third quarter of
2006. The accommodations business improved as activity and margins continued to
expand in our oil sands support operations in Canada coupled with the
strengthening of the Canadian dollar; however, these gains were partially offset
by lower revenues and margins in the Company's traditional Canadian drilling and
Gulf of Mexico accommodations. Drilling services recognized revenues of $40.2
million and EBITDA of $16.3 million in the third quarter of 2007 compared to
$37.1 million of revenues and $18.6 million of EBITDA in the third quarter 2006.
Drilling services benefited from additional capacity from three rigs added to
the fleet since the third quarter of 2006. However, this capacity growth was
offset by reduced utilization and higher costs, primarily in its Texas
operations. Rental tools generated $73.6 million of revenues and $26.4 million
of EBITDA in the third quarter of 2007 compared to revenue and EBITDA in the
third quarter of 2006 of $53.3 million and $23.0 million, respectively. This
year-over-year growth was due to combined contributions of $18.8 million of
revenue and $5.2 million of EBITDA from the two acquisitions closed during the
quarter, as noted above, partially offset by some regional reductions in
drilling and completion activity, primarily in the Permian Basin and Canada.
Offshore Products
During the third quarter of 2007, Offshore Products continued to generate
improved year-over-year results, reporting $132.1 million of revenues and $24.7
million of EBITDA compared to $110.0 million and $19.1 million, respectively, in
the third quarter of 2006. The growth was primarily due to increased volumes and
margins from bearing and connector products. EBITDA margin increased to 19% in
the quarter from 17% in the third quarter of 2006. Backlog was relatively flat
sequentially, totaling $396.0 million at September 30, 2007 compared to $402.2
million at June 30, 2007, but was up significantly from the $349.3 million of
backlog reported as of December 31, 2006.
Tubular Services
Tubular Services generated revenues of $215.6 million and EBITDA of $10.2
million during the third quarter of 2007 compared to $215.0 million and $17.3
million, respectively, in the third quarter of 2006. Tubular Services' OCTG
shipments increased 6% to 126,800 tons from 120,000 tons shipped in the third
quarter of 2006. Gross margin in the third quarter of 2007, while down
year-over-year, was essentially flat sequentially at 6.0% from the 6.4% reported
in the second quarter of 2007 due to competitive pricing. The Company's OCTG
inventory as of September 30, 2007 was $208.6 million compared to $221.7 million
as of June 30, 2007 and $261.8 million as of December 31, 2006. As of September
30, 2007, approximately 67% of Oil States' OCTG inventory was committed to
customer orders.
"With strong deepwater and oil sands activity coupled with contributions
from two acquisitions closed during the quarter, we were able to generate record
quarterly revenue in the third quarter of 2007," stated Cindy B. Taylor, Oil
States' President and Chief Executive Officer. "Regional reductions in drilling
and completion activity in the U.S. and Canada put some pressure on our North
American leveraged businesses. Looking forward, fundamentals for both deepwater
capital spending and oil sands activity continue to look promising in the fourth
quarter and throughout 2008. We expect U.S. activity in the fourth quarter to be
flat to down sequentially due to pockets of regional activity weakness and
holiday slowdowns which are typical for the fourth quarter. Our current
expectation for fourth quarter 2007 earnings is in a range of $0.92 to $0.98 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)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Revenues $ 527,440 $ 479,463 $ 1,507,264 $ 1,439,053
Costs and expenses:
Cost of sales 403,369 363,007 1,145,882 1,094,926
Selling, general and
administrative expenses 30,884 27,414 86,433 79,611
Depreciation and
amortization expense 18,788 13,880 49,320 39,762
Other operating expense
(income) (374) (330) (516) 56
Operating income 74,773 75,492 226,145 224,698
Interest expense (4,217) (4,797) (12,798) (14,531)
Interest income 890 714 2,599 1,670
Equity in earnings of
unconsolidated affiliates 753 2,637 2,043 4,624
Sale of workover services
business -- -- -- 11,250
Gain on sale of investment -- -- 12,774 --
Other income 243 1,866 595 2,111
Income before income taxes 72,442 75,912 231,358 229,822
Income tax provision (21,964) (25,860) (76,186) (81,549)
Net income $ 50,478 $ 50,052 $ 155,172 $ 148,273
Net income per share
Basic $ 1.02 $ 1.01 $ 3.14 $ 2.99
Diluted $ 0.97 $ 0.99 $ 3.05 $ 2.91
Weighted average number of
common shares outstanding
Basic 49,661 49,736 49,423 49,514
Diluted 51,822 50,475 50,883 50,909
Oil States International, Inc.
Consolidated Balance Sheets
(in thousands)
Sep. 30, Jun. 30, Dec. 31,
2007 2007 2006
Assets (unaudited) (unaudited) (audited)
Current assets
Cash and cash equivalents $ 29,201 $ 21,121 $ 28,396
Accounts receivable, net 414,211 366,456 351,701
Inventories, net 355,704 365,880 386,182
Prepaid expenses and other
current assets 33,967 28,430 17,710
Total current assets 833,083 781,887 783,989
Property, plant and equipment, net 538,842 444,978 358,716
Goodwill, net 390,741 337,026 331,804
Investments in unconsolidated
affiliates 23,604 22,711 38,079
Other noncurrent assets 75,521 57,304 58,506
Total assets $ 1,861,791 $ 1,643,906 $ 1,571,094
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term
debt $ 179,659 $ 176,545 $ 6,873
Accounts payable and accrued
liabilities 252,802 212,470 199,842
Income taxes 4,062 912 11,376
Deferred revenue 46,167 46,192 58,645
Other current liabilities 739 1,592 3,680
Total current liabilities 483,429 437,711 280,416
Long-term debt (B) 253,376 167,103 391,729
Deferred income taxes 40,482 38,513 38,020
Other liabilities 27,300 26,413 21,093
Total liabilities 804,587 669,740 731,258
Stockholders' equity
Common stock 522 517 511
Additional paid-in capital 399,963 385,940 372,043
Retained earnings 642,512 592,034 487,627
Accumulated other
comprehensive income 72,365 53,827 30,183
Treasury stock (58,158) (58,152) (50,528)
Total stockholders' equity 1,057,204 974,166 839,836
Total liabilities and stockholders'
equity $ 1,861,791 $ 1,643,906 $ 1,571,094
Oil States International, Inc.
Segment Data
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Revenues
Accommodations $ 65,894 $ 63,973 $ 221,311 $ 243,577
Rental Tools 73,602 53,320 178,082 149,685
Drilling and Other 40,216 37,126 107,886 97,349
Workover Services -- -- -- 8,544
Well Site Services 179,712 154,419 507,279 499,155
Offshore Products 132,124 110,038 386,601 281,984
Tubular Services 215,604 215,006 613,384 657,914
Total Revenues $ 527,440 $ 479,463 $ 1,507,264 $ 1,439,053
EBITDA (A)
Accommodations $ 22,712 $ 20,339 $ 80,302 $ 69,291
Rental Tools 26,393 23,021 67,869 62,279
Drilling and Other (C) 16,318 18,626 56,892 48,769
Workover Services (D) -- -- -- 13,828
Well Site Services 65,423 61,986 205,063 194,167
Offshore Products 24,687 19,130 72,102 49,839
Tubular Services 10,165 17,256 29,789 53,026
Corporate / Other (5,718) (4,497) (16,077) (14,587)
Total EBITDA $ 94,557 $ 93,875 $ 290,877 $ 282,445
Operating Income / (Loss)
Accommodations $ 16,147 $ 13,802 $ 64,291 $ 54,743
Rental Tools 19,825 18,775 51,437 49,785
Drilling and Other 12,908 14,473 34,719 39,860
Workover Services -- -- -- 1,922
Well Site Services 48,880 47,050 150,447 146,310
Offshore Products 22,074 16,342 63,889 41,592
Tubular Services 9,529 16,629 27,973 51,470
Corporate / Other (5,710) (4,529) (16,164) (14,674)
Total Operating Income $ 74,773 $ 75,492 $ 226,145 $ 224,698
Oil States International, Inc.
Additional Quarterly Segment and Operating Data
(unaudited)
Three Months Ended September 30,
2007 2006
Supplemental Operating Data
Land Drilling Operating
Statistics
Average Rigs Available 33 30
Utilization 87.2% 94.3%
Implied Day Rate ($ in
thousands per day) $ 15.2 $ 14.3
Implied Daily Cash Margin ($ in
thousands per day) $ 6.2 $ 6.7
Offshore Products Backlog ($ in millions) $ 396.0 $ 321.2
Tubular Services Operating Data
Shipments (Tons in thousands) 126.8 120.0
(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 Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Net income $ 50,478 $ 50,052 $ 155,172 $ 148,273
Income tax expense 21,964 25,860 76,186 81,549
Depreciation and amortization 18,788 13,880 49,320 39,762
Interest income (890) (714) (2,599) (1,670)
Interest expense 4,217 4,797 12,798 14,531
EBITDA $ 94,557 $ 93,875 $ 290,877 $ 282,445
(B) As of September 30, 2007, the Company had approximately $142.9 million
available under its revolving credit facility.
(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.