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Superior Energy Services, Inc. Reports First Quarter 2012 Results

April 26, 2012

HOUSTON, April 26, 2012 /PRNewswire/ — Superior Energy Services, Inc. (NYSE: SPN) today announced net income from continuing operations of $70.2 million, or $0.55 per diluted share, and net income of $53.9 million, or $0.42 per diluted share, on revenue of $966.8 million for the first quarter of 2012.

The Company completed its acquisition of Complete Production Services, Inc. on February 7, 2012. Financial results for the first quarter of 2012 include results from the legacy Complete business starting on February 8, 2012. The first quarter 2012 results also include a pre-tax charge for acquisition-related expenses of $29.0 million and unrealized pre-tax losses of $3.1 million from hedging contracts at the Company’s equity-method investment. Exclusive of these expenses, non-GAAP adjusted earnings from continuing operations was $90.4 million, or $0.71 per diluted share.

Discontinued operations reflect the operating results and the losses associated with the sale of the 18 liftboats and related assets comprising the marine segment and the sale of a derrick barge during the first quarter of 2012.

These results are compared with net income from continuing operations of $9.9 million, or $0.12 per diluted share, and net income of $15.5 million, or $0.19 per diluted share, on revenue of $385.0 million for the first quarter of 2011.

David Dunlap, CEO of Superior, commented, “The operating results surpassed our prior expectations as sequential growth in the Drilling Products and Services Segment and the contributions from the legacy Complete Production Services were greater than anticipated. We are extremely pleased that the post-merger operations have gotten off to an excellent start.

“The resurgence in drilling activity led to a 15% sequential increase in Gulf of Mexico revenue for our Drilling Products and Services Segment. In the Subsea Well Enhancement Segment, Gulf of Mexico revenue was slightly lower as compared to the fourth quarter of 2011 due to seasonal factors. However, the decline was less than anticipated as demand for intervention and end-of-life services was better than expected. We should continue to benefit from our broad exposure to operations across the lifecycle of the well in the Gulf of Mexico, especially during the second and third quarters when the traditional work season for intervention and end-of-life projects is in full swing.

“The industry’s continued emphasis on horizontal drilling – which oftentimes requires premium drill pipe and extensive use of other downhole tools – led to a 15% sequential increase in U.S. land revenue for our Drilling Products and Services Segment. Companywide, revenue from legacy Superior products and services operating in the U.S. land market areas increased 7% sequentially as compared with a 1% decline in the U.S. land drilling rig count, which supports our belief that operational execution and efficient deployment of capital are more important drivers for us than small changes in the drilling rig count.

“Income from continuing operations as a percentage of revenue (operating margin) – excluding transaction-related expenses – was essentially unchanged from the fourth quarter of 2011. The operating margin in the Drilling Products and Services Segment increased, which offset a lower operating margin in the Subsea and Well Enhancement Segment. This segment’s margin was lower primarily due to a small decline in margin for legacy Superior products and services.”

Geographic Breakdown

For the first quarter of 2012, U.S. land revenue was approximately $642.8 million (inclusive of approximately $375.7 million in revenue from the legacy Complete Production Services), international revenue was approximately $171.1 million (inclusive of approximately $21.7 million from the legacy Complete Production Services), and Gulf of Mexico revenue was approximately $153.0 million.

Subsea and Well Enhancement Segment

First quarter revenues in the Subsea and Well Enhancement Segment were $777.5 million, which includes results from the legacy Complete from February 8, 2012. Complete contributed $397.4 million of revenue and $83.7 million of income from continuing operations.

The products and services that comprise Superior’s legacy Subsea and Well Enhancement Segment contributed revenue of $380.1 million, compared with $256.7 million in the first quarter of 2011 and $392.2 million in the fourth quarter of 2011, which represents a 48% year-over-year increase and a 3% sequential decrease. Sequentially, U.S. land revenue for these products and services increased 3% due to increased demand for coiled tubing and pressure control tools and services. Gulf of Mexico revenue decreased 6% sequentially due to typical seasonal factors, which resulted in reduced activity levels for intervention and end-of-life services. International revenue decreased 10% due primarily to a seasonal reduction in activity for subsea construction services in southeast Asia.

Drilling Products and Services Segment

First quarter revenue for the Drilling Products and Services Segment was $189.4 million, as compared with $128.3 million in the first quarter of 2011 – a 48% year-over-year improvement – and $170.2 million in the fourth quarter of 2011, or 11% higher sequentially.

U.S. land revenue increased 15% sequentially primarily due to increased rentals of premium drill pipe. Demand for accommodations and ancillary equipment also increased. Gulf of Mexico revenue increased 15% sequentially due to increased rentals of bottom hole assemblies, premium drill pipe and other surface tools. International revenue was essentially unchanged as compared with the fourth quarter of 2011.

2012 Earnings Guidance Update

The Company has raised the lower end of its 2012 non-GAAP adjusted earnings from continuing operations guidance. The new range is $3.30 and $3.60 per diluted share, compared with $3.20 and $3.60 previously.

Mr. Dunlap commented, “The change in earnings guidance reflects the stronger-than-anticipated first quarter results. We are essentially leaving unchanged our expectations for the remaining nine months of 2012.

“Exposure in multiple geographic market areas, product and service diversification and business mix balance provide us a degree of confidence in our guidance range. We have solid committed contracting coverage in pressure pumping through the remainder of the year and we anticipate demand for fluid management, well servicing, intervention services and downhole drilling products will remain strong driven by high service intensity in certain U.S. land basins. We expect to benefit from the ongoing recovery in deep water Gulf of Mexico activity and seasonal improvements in shallow water Gulf of Mexico demand.”

Conference Call Information

The Company will host a conference call at 10 a.m. Central Time on Friday, April 27, 2012. The call can be accessed from Superior’s website at www.superiorenergy.com, or by telephone at 480-629-9645. For those who cannot listen to the live call, a telephonic replay will be available through Friday, May 4, 2012 and may be accessed by calling 303-590-3030 and using the pass code 4530425. An archive of the webcast will be available after the call for a period of 60 days on http://www.superiorenergy.com.

Superior Energy Services, Inc. serves the drilling, completion and production-related needs of oil and gas companies worldwide through its brand name drilling products and its integrated completion and well intervention services and tools, supported by an engineering staff who plan and design solutions for customers.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which involve known and unknown risks, uncertainties and other factors. Among the factors that could cause actual results to differ materially are volatility of the oil and gas industry, including the level of exploration, production and development activity; risks associated with the uncertainty of macroeconomic and business conditions worldwide, as well as the global credit markets; risks associated with the Company’s rapid growth; changes in competitive factors and other material factors that are described from time to time in the Company’s filings with the Securities and Exchange Commission. Actual events, circumstances, effects and results may be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Consequently, the forward-looking statements contained herein should not be regarded as representations by Superior or any other person that the projected outcomes can or will be achieved.

FOR FURTHER INFORMATION CONTACT:
David Dunlap, President and CEO, (281) 999-0047;
Robert Taylor, CFO or Greg Rosenstein, EVP, (504) 587-7374

             SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
                  Consolidated Statements of Operations
                Three Months Ended March 31, 2012 and 2011
            (in thousands, except earnings per share amounts)
                               (unaudited)

                                                  Three Months Ended
                                                      March 31,
                                                      ---------
                                                      2012           2011 *
                                                      ----           -----

    Revenues                                      $966,837                  $384,997

    Cost of services (exclusive of
     items shown separately below)                 546,767                   217,022
    Depreciation, depletion,
     amortization and accretion                    102,596                    55,824
    General and administrative
     expenses                                      176,021                    84,615

    Income from continuing
     operations                                    141,453                    27,536

    Other income (expense):
      Interest expense, net                        (29,806)                  (12,152)
      Earnings (losses) from equity-
       method investments, net                        (287)                       27

    Income from continuing
     operations before income
     taxes                                         111,360                    15,411

    Income taxes                                    41,203                     5,534
                                                    ------                     -----

    Net income from continuing
     operations                                     70,157                     9,877

    Income (loss) from
     discontinued operations, net
     of income tax                                 (16,237)                    5,626

    Net income                                     $53,920                   $15,503
                                                   =======                   =======

    Basic earnings per share:
    Net income from continuing
     operations                                      $0.56                     $0.13
    Income (loss) from
     discontinued operations                         (0.13)                     0.07
                                                     -----                      ----
    Net income                                       $0.43                     $0.20
                                                     =====                     =====

    Diluted earnings per share:
    Net income from continuing
     operations                                      $0.55                     $0.12
    Income (loss) from
     discontinued operations                         (0.13)                     0.07
                                                     -----                      ----
    Net income                                       $0.42                     $0.19
                                                     =====                     =====

    Weighted average common shares
     used
      in computing earnings per
       share:
        Basic                                      125,542                    79,021
                                                   =======                    ======
        Diluted                                    127,344                    80,759
                                                   =======                    ======

              * As adjusted for discontinued operations

                                          SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
                                                    CONSOLIDATED BALANCE SHEETS
                                                MARCH 31, 2012 AND DECEMBER 31, 2011
                                                           (in thousands)

                                                                             3/31/2012             12/31/2011
                                                                             ---------             ----------
                                                                  (Unaudited)             (Audited)

    ASSETS

    Current assets:
      Cash and cash equivalents                                               $135,758                $80,274
      Accounts receivable, net                                               1,035,985                540,602
      Prepaid expenses                                                          72,792                 34,037
      Inventory and other current assets                                       278,229                228,309
                                                                               -------                -------

            Total current assets                                             1,522,764                883,222
                                                                             ---------                -------

    Property, plant and equipment, net                                       2,766,310              1,507,368
    Goodwill                                                                 2,504,670                581,379
    Notes receivable                                                            74,750                 73,568
    Equity-method investments                                                   69,552                 72,472
    Intangible and other long-term
     assets, net                                                               530,312                930,136

            Total assets                                                    $7,468,358             $4,048,145
                                                                            ==========             ==========

    LIABILITIES AND STOCKHOLDERS'
     EQUITY

    Current liabilities:
      Accounts payable                                                        $312,985               $178,645
      Accrued expenses                                                         284,761                197,574
      Income taxes payable                                                      26,834                    717
      Deferred income taxes                                                     16,721                    831
      Current portion of decommissioning
       liabilities                                                              15,678                 14,956
      Current maturities of long-term
       debt                                                                     20,000                    810
                                                                                ------                    ---
            Total current liabilities                                          676,979                393,533
                                                                               -------                -------

    Deferred income taxes                                                      684,894                297,458
    Decommissioning liabilities                                                110,151                108,220
    Long-term debt, net                                                      1,978,508              1,685,087
    Other long-term liabilities                                                104,943                110,248

    Total stockholders' equity                                               3,912,883              1,453,599
                                                                             ---------              ---------

            Total liabilities and stockholders'
             equity                                                         $7,468,358             $4,048,145
                                                                            ==========             ==========

                 SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIESSEGMENT HIGHLIGHTSTHREE MONTHS ENDED MARCH 31, 2012, DECEMBER 31, 2011(1) AND MARCH
                                                                31, 2011(1)(Unaudited)(in thousands)
                                                                       Three months ended,
                                                                       -------------------
    Revenue                                                         March 31, 2012                    December 31, 2011                    March 31, 2011
                                                                    --------------                    -----------------                    --------------

    Subsea and Well Enhancement                                               $777,480                              $392,192                         $256,727

    Drilling Products and Services                                             189,357                               170,208                          128,270

    Total Revenues                                                            $966,837                              $562,400                         $384,997
                                                                              ========                              ========                         ========

    Gross Profit (2)                                                March 31, 2012                    December 31, 2011                    March 31, 2011
                                                                    --------------                    -----------------                    --------------

    Subsea and Well Enhancement                                               $293,279                              $157,381                          $86,402

    Drilling Products and Services                                             126,791                               111,423                           81,573

    Total Gross Profit                                                        $420,070                              $268,804                         $167,975
                                                                              ========                              ========                         ========

    Income from Continuing Operations                             March 31, 2012 (3)                 December 31, 2011(4)                  March 31, 2011
                                                                   -----------------                 -------------------                   --------------

    Subsea and Well Enhancement                                                $84,224                               $53,321                           $6,158

    Drilling Products and Services                                              57,229                                43,843                           21,378

                                                                                     -                                     -
                                                                                   ---                                   ---

    Total Income from Continuing
     Operations                                                               $141,453                               $97,164                          $27,536
                                                                              ========                               =======                          =======

    (1)            Adjusted for discontinued
                   operations.
    (2)            Gross profit is calculated by
                   subtracting cost of services
                   (exclusive of depreciation,
                   depletion, amortization and
                   accretion) from revenue for each
                   of the Company's segments.
    (3)            Includes $29.0 million of
                   transaction-related expenses
                   recorded in general and
                   administrative expenses of the
                   Subsea and Well Enhancement
                   Segment.
    (4)            Includes $4.1 million of
                   transaction-related expenses
                   recorded in general and
                   administrative expenses of the
                   Subsea and Well Enhancement
                   Segment.

NON-GAAP RECONCILIATION

We report our financial results in conformity with U.S. generally accepted accounting principles (GAAP). However, the Company provides non-GAAP adjusted net income and non-GAAP adjusted earnings per share because certain items are customarily excluded by analysts in published estimates and management believes, for purposes of comparability to financial performance in other periods and to evaluate the Company’s trends, that it is appropriate for these items to be excluded. Management uses adjusted net income and adjusted diluted earnings per share to evaluate the Company’s operational trends and historical performance on a consistent basis. The adjusted amounts are not measures of financial performance under GAAP.

A reconciliation of net income, the GAAP measure most directly comparable to non-GAAP adjusted earnings and non-GAAP adjusted earnings per share, is below. In making any comparisons to other companies, investors need to be aware that the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, or superior to, the Company’s reported results prepared in accordance with GAAP.

           Reconciliation of Net Income from Continuing Operations
        to Non-GAAP Adjusted Net Income from Continuing Operations and
                              Earnings per Share
                  For the three months ended March 31, 2012
                                (in thousands)

                                                     Three months
                                                         ended
                                                    March 31, 2012
                                                    --------------
    Net income from continuing operations as
     reported                                                   $70,157
    Pre-tax adjustments:
    --------------------
    Costs related to acquisitions, primarily
     Complete Production Services                                29,047
    Equity-method investments' hedging
     adjustments                                                  3,139

    Total pre-tax adjustments                                    32,186

    Income tax effect of adjustments                            (11,909)
                                                                -------

    Non-GAAP adjusted net income from
     continuing operations                                      $90,434
                                                                =======

    Non-GAAP adjusted diluted earnings per
     share                                                        $0.71
                                                                  =====

    Weighted average common shares used in
     computing
    diluted earnings per share                                  127,344
                                                                =======

SOURCE Superior Energy Services, Inc.


Source: PR Newswire