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Superior Energy Services Announces Second Quarter 2008 Results

Posted on: Wednesday, 30 July 2008, 18:00 CDT

HARVEY, La., July 30 /PRNewswire-FirstCall/ -- Superior Energy Services, Inc. today announced net income of $73.9 million and diluted earnings per share of $0.89 on revenues of $457.7 million for the second quarter of 2008, as compared to net income of $70.1 million, or $0.85 diluted earnings per share on revenues of $396.8 million for the second quarter of 2007. Excluding a gain on sale of a business and non-cash, unrealized losses from hedging contracts impacting the Company's earnings (losses) from equity method investments, adjusted net income for the second quarter of 2008 was $84.7 million, or $1.02 diluted earnings per share.

Operating factors impacting the quarter as compared to the most recent quarter (first quarter 2008) include the following:

-- Well Intervention revenue increased 27% primarily due to increases in demand for production-related services such as electric line, coiled tubing and pumping and stimulation as well as a full quarter contribution from work on the previously announced $750 million wreck removal project.

-- Rental Tool revenue increased 3% largely due to increased rentals of drilling-related tools in the Gulf of Mexico and certain international market areas.

-- Marine revenues increased 13% due to higher utilization across most liftboat classes reflecting a seasonal increase in Gulf of Mexico activity.

-- International revenue increased 13% to a quarterly record of $86 million due to increases in well control work and rentals of drill pipe, specialty tubulars and stabilization equipment.

-- Gulf of Mexico revenue increased 8% to $246 million as a result of increases as revenue grew in all three segments. Domestic land revenue decreased 9% to $126 million due to the completion of certain well intervention and rental tools projects. Domestic land revenue from core well intervention services such as electric line and coiled tubing increased over the most recent quarter.

Terence Hall, Chairman and CEO of Superior, stated, "We grew our quarterly revenue and operating income (excluding adjustments) to all-time high levels while replacing the earnings from our divested oil and gas business with earnings from our core oilfield service businesses. Higher demand for existing products and services as well as the continued execution of our geographic diversification strategy drove our performance. This resulted in significant growth in our well intervention and rental tools segments sequentially and year-over-year. In addition, our quarterly international revenue was at an all-time high as we expanded into new markets in Latin America and Europe. The near-term outlook is extremely positive given the trend of increasing demand we experienced during the second quarter coupled with anticipated growth in domestic land drilling activity and capital spending by our customers in the second half of the year."

For the six months ended June 30, 2008, revenue was $899.0 million and net income was $176.0 million or $2.12 diluted earnings per share, as compared to revenue of $759.7 million and net income of $134.1 million or $1.63 diluted earnings per share for the six months ended June 30, 2007.

Well Intervention Group Segment

Second quarter revenue for the Well Intervention Group was a record $296.9 million, a 27% increase from the first quarter of 2008 and a 56% increase from the second quarter of 2007. Income from operations was $78.2 million, or 26% of segment revenue as compared to $50.8 million, or 22% of segment revenue, in the first quarter of 2008. The primary drivers for the sequential and year-over-year revenue growth was an increase in project management and marine engineering services as the Company completed its first full quarter of field operations associated with the previously announced wreck removal project. In addition, sequential improvement was due to higher utilization of coiled tubing and electric line services in certain domestic land markets, increased Gulf of Mexico activity for electric line, pumping and stimulation, hydraulic workover/snubbing, and plug and abandonment services, and increased well control work in international markets.

Rental Tools Segment

Revenue of $134.8 million was 3% higher than the first quarter of 2008 and 9% higher than the second quarter of 2007. Income from operations was $47.5 million, or 35% of segment revenue, compared to $45.8 million, or 35% of segment revenue in the first quarter of 2008. Excluding a $3.3 million gain on sale of business in the first quarter of 2008, the operating margin percentage increased sequentially by 3% due to the increase in higher margin rentals of stabilization equipment, drill pipe and accessories. The segment benefited from an increase in the number of rigs drilling for oil and natural gas. As a result, demand for stabilization equipment increased in all three major market areas (Gulf of Mexico, domestic land and international). Demand also increased for drill pipe and other specialty tubular products in the Gulf of Mexico and internationally in Brazil, Colombia and Venezuela.

Marine Segment

Superior's marine revenue was $26.0 million, a 13% increase from the first quarter of 2008 and a 26% decrease from the second quarter of 2007. Income from operations was $1.4 million, or 6% of segment revenue, down from $2.6 million, or 11% of segment revenue in the first quarter of 2008. Average daily revenue in the second quarter was approximately $286,000, inclusive of subsistence revenue, as compared to $254,000 per day in the first quarter of 2008. Average fleet utilization was 57% as compared to 49% in the first quarter of 2008 and 77% in the second quarter of 2007. Utilization increased each month during the quarter as most liftboat classes experienced higher utilization compared to the most recent quarter. However, operating expenses increased due to higher boat maintenance expense and labor costs.

Liftboat Average Dayrates and Utilization by Class Size Three Months Ended June 30, 2008 ($ actual) Average Class Liftboats Dayrate Utilization 145'-155' 11 $8,375 48.0% 160'-175' 7 11,296 40.4% 200' 5 16,704 73.0% 230'-245' 3 24,560 75.5% 250' 2 35,643 91.8% Equity-Method Investment

Income (losses) in equity-method investment includes the Company's remaining interest in SPN Resources, LLC and the Company's 40% investment in Beryl Oil and Gas. The $7.8 million loss from equity-method investments in the second quarter of 2008 includes $19.9 million, pre-tax, of the Company's share of non-cash unrealized losses associated with mark-to-market changes in the value of outstanding hedging contracts put in place by SPN Resources, LLC. The loss was due to significant increases in natural gas and oil prices, the volatility of which makes these changes unpredictable. The contracts were put in place subsequent to the sale of the Company's 75% interest in SPN Resources. The Company's equity-method investments performed as expected, exclusive of the unrealized loss.

Conference Call Information

The Company will host a conference call at 10 a.m. Central Time on Thursday, July 31, 2008. The call can be accessed from Superior's website at http://www.superiorenergy.com/, or by telephone at 303-262-2190. For those who cannot listen to the live call, a telephonic replay will be available through Friday, August 8, 2008 and may be accessed by calling 303-590-3000 and using the pass code 11116473#. 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 and production needs of oil and gas companies worldwide through its brand name rental tools and its integrated well intervention services and tools, supported by an engineering staff who plan and design solutions for customers. Offshore projects are delivered by the Company's fleet of modern marine assets.

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 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.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES Consolidated Statements of Operations Three and Six Months Ended June 30, 2008 and 2007 (in thousands, except earnings per share amounts) (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Oilfield service and rental revenues $457,655 $348,589 $843,974 $674,484 Oil and gas revenues - 48,164 55,072 85,193 Total revenues 457,655 396,753 899,046 759,677 Cost of oilfield services and rentals 222,097 162,973 413,229 305,402 Cost of oil and gas sales - 18,833 12,986 36,891 Total cost of services, rentals and sales 222,097 181,806 426,215 342,293 Depreciation, depletion, amortization and accretion 41,954 45,242 83,833 84,086 General and administrative expenses 66,426 53,824 136,032 104,683 Gain on sale of business 3,058 - 40,946 - Income from operations 130,236 115,881 293,912 228,615 Other income (expense): Interest expense, net (6,956) (7,534) (15,072) (15,233) Earnings (losses) from equity- method investments, net (7,765) 1,164 (3,808) (3,842) Income before income taxes 115,515 109,511 275,032 209,540 Income taxes 41,586 39,424 99,012 75,434 Net income $73,929 $70,087 $176,020 $134,106 Basic earnings per share $0.92 $0.86 $2.18 $1.66 Diluted earnings per share $0.89 $0.85 $2.12 $1.63 Weighted average common shares used in computing earnings per share: Basic 80,749 81,047 80,762 80,841 Diluted 82,942 82,562 82,918 82,379 SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 2008 AND DECEMBER 31, 2007 (in thousands) 6/30/2008 12/31/2007 (unaudited) (audited) ASSETS Current assets: Cash and cash equivalents $119,132 $51,649 Accounts receivable, net 391,400 343,334 Current portion of notes receivable - 15,584 Prepaid expenses 22,273 19,641 Other current assets 45,693 40,797 Total current assets 578,498 471,005 Property, plant and equipment, net 1,002,436 1,086,408 Goodwill, net 487,243 484,594 Notes receivable - 16,732 Equity-method investments 72,354 56,961 Intangible and other long-term assets, net 138,513 141,549 Total assets $2,279,044 $2,257,249 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $69,648 $69,510 Accrued expenses 135,189 177,779 Income taxes payable 36,367 7,520 Current portion of decommissioning liabilities - 36,812 Current maturities of long-term debt 810 810 Total current liabilities 242,014 292,431 Deferred income taxes 154,322 163,338 Decommissioning liabilities - 88,158 Long-term debt 710,987 711,151 Other long-term liabilities 26,178 21,492 Total stockholders' equity 1,145,543 980,679 Total liabilities and stockholders' equity $2,279,044 $2,257,249 SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES Segment Highlights Three months ended June 30, 2008, March 31, 2008, and June 30, 2007 (Unaudited) (in thousands) Three months ended, June 30, March 31, June 30, Revenue 2008 2008 2007 Well Intervention $296,891 $234,115 $190,542 Rental Tools 134,773 130,327 123,736 Marine 25,991 23,089 35,162 Oil and Gas - 55,072 48,164 Less: Oil and Gas Eliminations (2) - (1,212) (851) Total Revenues $457,655 $441,391 $396,753 Three months ended, June 30, March 31, June 30, Gross Profit (1) 2008 2008 2007 Well Intervention $135,410 $101,716 $81,093 Rental Tools 93,438 86,227 84,718 Marine 6,710 7,244 19,805 Oil and Gas - 42,086 29,331 Total Gross Profit $235,558 $237,273 $214,947 Three months ended, June 30, March 31, June 30, Income from Operations 2008 2008 2007 Well Intervention $78,202 $50,778 $42,111 Rental Tools (3) 47,531 45,757 46,640 Marine 1,445 2,578 15,212 Oil and Gas (4) 3,058 64,563 11,918 Total Income from Operations $130,236 $163,676 $115,881 (1) 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. (2) Oil and gas eliminations represent products and services from the company's segments provided to the Oil and Gas Segment. (3) Income from operations in the Rental Tools Segment for the three months ended March 31, 2008 includes a gain on sale of business of $3.3 million. (4) Income from operations in the Oil and Gas Segment for the three months ended June 30, 2008 includes a gain on sale of business of $3.1 million, and for the three months ended March 31, 2008 includes a gain on sale of business of $34.1 million, one-time incremental general and administrative expenses of $4.5 million, and a reduction of depreciation, depletion, and amortization of $9.7 million related to assets held for sale. FOR FURTHER INFORMATION CONTACT: Terence Hall, CEO; Robert Taylor, CFO; Greg Rosenstein, VP of Investor Relations, 504-362-4321

Superior Energy Services, Inc.

CONTACT: Terence Hall, CEO, or Robert Taylor, CFO, or Greg Rosenstein,VP of Investor Relations, all of Superior Energy Services, Inc.,+1-504-362-4321

Web site: http://www.superiorenergy.com/

Source: PRNewswire-FirstCall

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