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Feb 13, 2019

Oil States Announces Fourth Quarter 2018 Results of Operations

HOUSTON, Feb. 13, 2019 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE: OIS) reported a net loss for the fourth quarter 2018 of $14.3 million, or $0.24 per diluted share. During the fourth quarter of 2018, the Company generated revenues of $274.1 million and Consolidated EBITDA (Note A) of $24.1 million.

The fourth quarter 2018 results included:

  • Legal fees incurred for patent defense of $2.4 million ($1.9 million after-tax, or $0.03 per diluted share)
  • Transaction-related expenses of $0.7 million ($0.6 million after-tax, or $0.01 per diluted share)
  • Severance and other downsizing charges of $0.8 million ($0.7 million after-tax, or $0.01 per diluted share)

Oil States’ President and Chief Executive Officer, Cindy B. Taylor, stated, "During the fourth quarter, Oil States reported results largely in-line with prior guidance provided in connection with our third quarter earnings conference call. In our Well Site Services segment, we exceeded the upper-end of our EBITDA guided range. Further, our Offshore/Manufactured Products segment results improved sequentially and exceeded the high-end of our guided range, led by higher levels of service activity and military product sales. Backlog in our Offshore/Manufactured Products segment totaled $179 million at December 31, 2018, and our book-to-bill ratio for both the fourth quarter and full-year 2018 was 1.1x. Partially offsetting these positive results, our Downhole Technologies segment was negatively impacted by lower customer demand for our perforating products along with reduced downhole composite product sales.

"Our fourth quarter results were achieved in spite of the extreme volatility that we witnessed with respect to crude oil prices. The WTI spot price peaked at $76.40 per barrel early in the quarter only to subsequently fall to below $50 per barrel by year-end. While our fourth quarter activity held up reasonably well, the energy industry volatility has created uncertainty early in 2019 as our customers reassess their budgets and plans. However, crude oil prices have improved 16% since year-end 2018, indicating a more constructive commodity price environment."

For the year ended December 31, 2018, the Company reported a net loss of $19.1 million, or $0.33 per diluted share, revenues of $1.1 billion and Consolidated EBITDA of $120.8 million.

The full year 2018 results included:

  • Legal fees incurred for patent defense of $8.4 million ($6.6 million after-tax, or $0.11 per diluted share)
  • Transaction-related expenses of $3.3 million ($2.6 million after-tax, or $0.04 per diluted share)
  • Reserves for prior years' FLSA claim settlements of $3.0 million ($2.4 million after-tax, or $0.04 per diluted share)
  • Severance and other downsizing charges of $1.6 million ($1.3 million after-tax, or $0.02 per diluted share)

BUSINESS SEGMENT RESULTS

(See Segment Data Tables)

Well Site Services

Well Site Services generated revenues of $126.1 million and Segment EBITDA (Note B) of $19.0 million in the fourth quarter of 2018 compared to revenues and Segment EBITDA of $128.6 million and $15.5 million, respectively, in the third quarter of 2018. Excluding a $2.6 million provision for FLSA claim settlements recorded in the third quarter 2018, Segment EBITDA increased 5% quarter-over-quarter. Activity declines led to a 7% quarter-over-quarter decrease in the number of Completion Services jobs performed, partially offset by a 4% increase in revenue per Completion Services job. The revenue decline was concentrated in the Permian Basin and was likely driven by the significant decline in crude oil prices in the fourth quarter along with holiday downtime, partially offset by increased revenues from U.S. Gulf of Mexico projects. Segment EBITDA margins averaged 15% in the fourth quarter of 2018 compared to 12% in the third quarter of 2018.  Utilization in the land drilling business averaged 30% in the fourth quarter of 2018 which was flat sequentially.

Downhole Technologies (acquisition of GEODynamics, Inc. closed on January 12, 2018)

Downhole Technologies generated revenues of $52.2 million and Segment EBITDA of $6.2 million in the fourth quarter of 2018 compared to revenues and Segment EBITDA of $56.6 million and $11.1 million, respectively, in the third quarter of 2018. Downhole Technologies revenues and Segment EBITDA decreased 8% and 44%, respectively, on a sequential basis due to reduced demand for perforating and downhole composite products as well as increased manufacturing facility cost under-absorption due to the lower levels of throughput experienced late in the quarter. Segment EBITDA margin was 12% in the fourth quarter of 2018 compared to 20% in the third quarter of 2018. Both the fourth and third quarters of 2018 were negatively impacted by $2.4 million and $3.5 million, respectively, of patent defense costs. The legal actions were settled in the fourth quarter and the Company, therefore, does not expect these patent defense costs to recur in 2019.

Offshore/Manufactured Products

Offshore/Manufactured Products segment generated revenues and Segment EBITDA of $95.8 million and $12.9 million, respectively, in the fourth quarter of 2018 compared to revenues of $89.4 million and Segment EBITDA of $12.6 million in the third quarter of 2018. Revenues increased 7% sequentially due to a combined 24% increase in other products (primarily military related) and service revenues, partially offset by a 5% sequential decrease in sales of our shorter-cycle products (elastomer and valve products). Segment EBITDA margin was 13% in the fourth quarter of 2018 compared to a margin of 14% realized in the third quarter of 2018.  Backlog totaled $179 million at December 31, 2018 compared to $175 million at September 30, 2018 and $168 million reported at December 31, 2017. A backlog award exceeding $10 million was booked during the fourth quarter 2018 for connector products destined for Africa.

Income Taxes

The Company recognized an effective tax rate provision of 5.1% in the fourth quarter of 2018 bringing the overall annual effective tax rate to a benefit of 12.1% for 2018.

Financial Condition

As of December 31, 2018, $136.1 million was outstanding under the Company’s revolving credit facility, $22.6 million was outstanding under letters of credit, while cash on hand totaled $19.3 million. The Company had access to $156.2 million of revolving credit facility availability as of December 31, 2018.

Conference Call Information

The call is scheduled for Thursday, February 14, 2019 at 10:00 am CT, and is being webcast and can be accessed from the Company’s website at www.ir.oilstatesintl.com. Participants may also join the conference call by dialing (888) 771-4371 in the United States or by dialing +1 847 585 4405 internationally and using the passcode of 48185951.  A replay of the conference call will be available one and a half hours after the completion of the call by dialing (888) 843-7419 in the United States or by dialing +1 630 652 3042 internationally and entering the passcode of 48185951.

About Oil States

Oil States International, Inc. is a global oilfield products and services company serving the drilling, completion, subsea, production and infrastructure sectors of the oil and gas industry. The Company’s manufactured products include highly engineered capital equipment as well as products consumed in the drilling, well construction and production of oil and gas. The Company is also a leading researcher, developer and manufacturer of engineered solutions to connect the wellbore with the formation in oil and gas well completions. Oil States is headquartered in Houston, Texas with manufacturing and service facilities strategically located across the globe. 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 www.oilstatesintl.com.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of Section 27A 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 others, the level of supply of and demand for oil and natural gas, fluctuations in the prices therefor and the cyclical nature of the oil and natural gas industry and the other risks associated with the general nature of the energy service industry discussed in the “Business” and “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, Periodic Reports on Form 8-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)

  Three Months Ended   Year Ended December 31,
  December 31,
2018
  September 30,
2018
  December 31,
2017
  2018   2017
  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
Revenues:                  
Products $ 116,543     $ 120,271     $ 80,533     $ 501,822     $ 303,802  
Services 157,575     154,323     103,177     586,311     366,825  
  274,118     274,594     183,710     1,088,133     670,627  
                   
Costs and expenses:                  
Product costs 90,331     87,822     59,214     366,453     219,466  
Service costs 125,231     127,836     81,592     468,060     301,289  
Cost of revenues (exclusive of depreciation and amortization expense presented below) 215,562     215,658     140,806     834,513     520,755  
Selling, general and administrative expenses 35,671     32,285     30,761     138,070     114,816  
Depreciation and amortization expense 32,832     30,586     25,115     123,530     107,667  
Other operating (income) expense, net (7 )   (213 )   887     (2,104 )   1,261  
  284,058     278,316     197,569     1,094,009     744,499  
Operating loss (9,940 )   (3,722 )   (13,859 )   (5,876 )   (73,872 )
                   
Interest expense, net (4,908 )   (4,843 )   (1,188 )   (18,995 )   (4,315 )
Other income 1,212     709     298     3,139     775  
Loss before income taxes (13,636 )   (7,856 )   (14,749 )   (21,732 )   (77,412 )
Income tax (provision) benefit (700 )   3,837     (23,146 )   2,627     (7,438 )
Net loss $ (14,336 )   $ (4,019 )   $ (37,895 )   $ (19,105 )   $ (84,850 )
                   
Net loss per share from:                  
Basic $ (0.24 )   $ (0.07 )   $ (0.76 )   $ (0.33 )   $ (1.69 )
Diluted $ (0.24 )   $ (0.07 )   $ (0.76 )   $ (0.33 )   $ (1.69 )
                   
Weighted average number of common shares outstanding:                
Basic 59,032     59,026     49,987     58,712     50,139  
Diluted 59,032     59,026     49,987     58,712     50,139  
                             

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)

  December 31,
2018
  December 31,
2017
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 19,316     $ 53,459  
Accounts receivable, net 283,607     216,139  
Inventories, net 209,393     168,285  
Prepaid expenses and other current assets 21,715     18,054  
Total current assets 534,031     455,937  
       
Property, plant and equipment, net 540,427     498,890  
Goodwill, net 647,018     268,009  
Other intangible assets, net 255,301     50,265  
Other noncurrent assets 27,044     28,410  
Total assets $ 2,003,821     $ 1,301,511  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Current portion of long-term debt $ 25,561     $ 411  
Accounts payable 77,511     49,089  
Accrued liabilities 60,730     45,889  
Income taxes payable 3,072     1,647  
Deferred revenue 14,160     18,234  
Total current liabilities 181,034     115,270  
       
Long-term debt 306,177     4,870  
Deferred income taxes 53,831     24,718  
Other noncurrent liabilities 23,011     23,940  
Total liabilities 564,053     168,798  
       
Stockholders' equity:      
Common stock 718     627  
Additional paid-in capital 1,097,758     754,607  
Retained earnings 1,029,518     1,048,623  
Accumulated other comprehensive loss (71,397 )   (58,493 )
Treasury stock, at cost (616,829 )   (612,651 )
Total stockholders' equity 1,439,768     1,132,713  
Total liabilities and stockholders' equity $ 2,003,821     $ 1,301,511  
               

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

  Year Ended December 31,
  2018   2017
  (Unaudited)    
Cash flows from operating activities:      
Net loss $ (19,105 )   $ (84,850 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization expense 123,530     107,667  
Stock-based compensation expense 22,649     23,049  
Deferred income tax expense (benefit) (3,489 )   16,342  
Gain on disposals of assets (6,288 )   (700 )
Amortization of debt discount and deferred financing costs 7,408     1,158  
Other, net 1,411     288  
Changes in operating assets and liabilities, net of effect from acquired businesses:      
Accounts receivable (16,792 )   21,128  
Inventories (7,283 )   11,339  
Accounts payable and accrued liabilities 5,796     14,048  
Income taxes payable 802     (4,126 )
Other operating assets and liabilities, net (5,469 )   (9,961 )
Net cash flows provided by operating activities 103,170     95,382  
       
Cash flows from investing activities:      
Capital expenditures (88,024 )   (35,171 )
Acquisitions of businesses, net of cash acquired (379,676 )   (12,859 )
Proceeds from disposition of property, plant and equipment 3,659     2,134  
Proceeds from flood insurance claims 3,850      
Other, net (1,184 )   (1,719 )
Net cash flows used in investing activities (461,375 )   (47,615 )
       
       
Cash flows from financing activities:      
Issuance of 1.50% convertible senior notes 200,000      
Revolving credit facility borrowings 835,467     206,015  
Revolving credit facility repayments (699,322 )   (248,199 )
Other debt and capital lease repayments, net (537 )   (517 )
Payment of financing costs (7,372 )   (759 )
Purchase of treasury stock     (16,283 )
Shares added to treasury stock as a result of net share settlements due to vesting of restricted stock (4,178 )   (5,317 )
Net cash flows provided by (used in) financing activities 324,058     (65,060 )
       
Effect of exchange rate changes on cash and cash equivalents 4     1,952  
Net change in cash and cash equivalents (34,143 )   (15,341 )
Cash and cash equivalents, beginning of year 53,459     68,800  
Cash and cash equivalents, end of year $ 19,316     $ 53,459  
               

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA
(In Thousands)
(unaudited)

  Three Months Ended   Year Ended December 31,
  December 31,
2018
  September 30,
2018
  December 31,
2017
  2018   2017
Revenues:                  
Well Site Services -                  
Completion Services $ 108,142     $ 111,669     $ 66,675     $ 411,019     $ 234,252  
Drilling Services 18,000     16,920     15,342     69,235     54,462  
Total Well Site Services 126,142     128,589     82,017     480,254     288,714  
Downhole Technologies 52,187     56,571         213,813      
Offshore/Manufactured Products(1) -                  
Project-driven products 22,593     22,277     37,345     120,894     126,960  
Short-cycle products 32,431     34,170     36,591     144,367     147,463  
Other products and services 40,765     32,987     27,757     128,805     107,490  
Total Offshore/Manufactured Products 95,789     89,434     101,693     394,066     381,913  
Total revenues $ 274,118     $ 274,594     $ 183,710     $ 1,088,133     $ 670,627  
                   
                   
Operating income (loss):                  
Well Site Services -                  
Completion Services $ (1,109 )   $ (3,271 )   $ (6,209 )   $ (7,647 )   $ (45,169 )
Drilling Services (1,889 )   (2,206 )   (2,670 )   (9,363 )   (13,909 )
Total Well Site Services (2,998 )   (5,477 )   (8,879 )   (17,010 )   (59,078 )
Downhole Technologies 566     6,485         26,705      
Offshore/Manufactured Products 6,729     7,069     10,695     38,914     38,155  
Corporate (14,237 )   (11,799 )   (15,675 )   (54,485 )   (52,949 )
Total operating loss $ (9,940 )   $ (3,722 )   $ (13,859 )   $ (5,876 )   $ (73,872 )
                                       

(1) Disaggregated revenue data is provided to supplement the Segment Data.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
SEGMENT EBITDA (B)
(In Thousands)
(unaudited)

  Three Months Ended   Year Ended December 31,
  December 31,
2018
  September 30,
2018
  December 31,
2017
  2018   2017
Well Site Services:                  
Completion Services:                  
Operating loss $ (1,109 )   $ (3,271 )   $ (6,209 )   $ (7,647 )   $ (45,169 )
Depreciation and amortization expense 17,333     16,884     15,128     66,415     63,528  
Other income 1,209     620     171     2,624     583  
EBITDA $ 17,433     $ 14,233     $ 9,090     $ 61,392     $ 18,942  
                   
Drilling Services:                  
Operating loss $ (1,889 )   $ (2,206 )   $ (2,670 )   $ (9,363 )   $ (13,909 )
Depreciation and amortization expense 3,456     3,479     4,230     14,354     18,513  
Other income 1     (1 )   46     380     95  
EBITDA $ 1,568     $ 1,272     $ 1,606     $ 5,371     $ 4,699  
                   
Total Well Site Services:                  
Operating loss $ (2,998 )   $ (5,477 )   $ (8,879 )   $ (17,010 )   $ (59,078 )
Depreciation and amortization expense 20,789     20,363     19,358     80,769     82,041  
Other income 1,210     619     217     3,004     678  
Segment EBITDA $ 19,001     $ 15,505     $ 10,696     $ 66,763     $ 23,641  
                   
Downhole Technologies:                  
Operating income $ 566     $ 6,485     $     $ 26,705     $  
Depreciation and amortization expense 5,651     4,582         18,649      
Other expense (7 )   1         (19 )    
Segment EBITDA $ 6,210     $ 11,068     $     $ 45,335     $  
                   
Offshore/Manufactured Products:                  
Operating income $ 6,729     $ 7,069     $ 10,695     $ 38,914     $ 38,155  
Depreciation and amortization expense 6,181     5,426     5,505     23,207     24,596  
Other income 9     89     81     154     97  
Segment EBITDA $ 12,919     $ 12,584     $ 16,281     $ 62,275     $ 62,848  
                   
Corporate:                  
Operating loss $ (14,237 )   $ (11,799 )   $ (15,675 )   $ (54,485 )   $ (52,949 )
Depreciation and amortization expense 211     215     252     905     1,030  
EBITDA $ (14,026 )   $ (11,584 )   $ (15,423 )   $ (53,580 )   $ (51,919 )
                                       

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In Thousands)
(unaudited)

  Three Months Ended   Year Ended December 31,
  December 31,
2018
  September 30,
2018
  December 31,
2017
  2018   2017
Net loss $ (14,336 )   $ (4,019 )   $ (37,895 )   $ (19,105 )   $ (84,850 )
Income tax provision (benefit) 700     (3,837 )   23,146     (2,627 )   7,438  
Depreciation and amortization expense 32,832     30,586     25,115     123,530     107,667  
Interest income (47 )   (70 )   (116 )   (319 )   (359 )
Interest expense 4,955     4,913     1,304     19,314     4,674  
Consolidated EBITDA (A) $ 24,104     $ 27,573     $ 11,554     $ 120,793     $ 34,570  
                                       

(A) The term Consolidated EBITDA consists of net loss from continuing operations plus net interest expense, taxes, depreciation and amortization expense, and certain other items. Consolidated EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net loss from continuing operations or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, Consolidated EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included Consolidated EBITDA as a supplemental disclosure because its management believes that Consolidated EBITDA provides useful information regarding its 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 Consolidated EBITDA to compare and to monitor the performance of the Company and 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 table above sets forth a reconciliation of Consolidated EBITDA to net loss from continuing operations, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

(B) The terms EBITDA and Segment EBITDA consist of operating income (loss) plus depreciation and amortization expense, and certain other items. EBITDA and Segment EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for operating income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA and Segment EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA and Segment EBITDA as a supplemental disclosure because its management believes that EBITDA and Segment EBITDA provide useful information regarding its 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 and Segment 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 tables above set forth reconciliations of EBITDA and Segment EBITDA to operating income (loss), which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

ADDITIONAL QUARTERLY SEGMENT AND OPERATING DATA
(unaudited)

  Three Months Ended
  December 31,
2018
  September 30,
2018
  December 31,
2017
Supplemental operating data:          
Offshore/Manufactured Products backlog ($ in millions) $ 178.6     $ 174.6     $ 168.0  
           
Completion services job tickets 7,914     8,485     5,301  
Average revenue per ticket ($ in thousands) $ 13.7     $ 13.2     $ 12.6  
           
Land drilling operating statistics:          
Average rigs available 34     34     34  
Utilization 29.6 %   30.5 %   31.4 %
Implied day rate ($ in thousands per day) $ 19.5     $ 17.7     $ 15.6  
Implied daily cash margin (loss) ($ in thousands per day) $ 2.1     $ 1.8     $ 2.1  
                       

Company Contact:
Lloyd A. Hajdik
Oil States International, Inc.
Executive Vice President, Chief Financial Officer and Treasurer
713-652-0582

Patricia Gil
Oil States International, Inc.
Director, Investor Relations
713-470-4860

SOURCE: Oil States International, Inc.

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Source: Oil States International, Inc.

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