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Feb 22, 2010

Oil States Announces Fourth Quarter Earnings of $0.78 Per Share

Oil States Announces Fourth Quarter Earnings of $0.78 Per ShareHOUSTON, Feb 22, 2010 (GlobeNewswire via COMTEX) -- Today, Oil States International, Inc. (NYSE:OIS) reported net income for the quarter ended December 31, 2009 of $39.9 million, or $0.78 per diluted share, on $528.7 million of revenues and $90.1 million of EBITDA (EBITDA is defined as net income plus interest, taxes, depreciation and amortization) (A). This compares to net income of $6.0 million, or $0.12 per diluted share, on $901.1 million of revenues and $77.3 of EBITDA reported in the fourth quarter of 2008. Excluding the impact of the $85.6 million in goodwill impairment charges taken in the fourth quarter of 2008, net income decreased 54% year over year, from $1.72 per share to $0.78 per share, primarily due to reduced North American drilling and completion activity which impacted both demand and pricing for our products and services.

"Our accommodations business continued to show substantial year-over-year growth due to investments in the Canadian oil sands region made over the last several years," stated Cindy B. Taylor, Oil States' President and Chief Executive Officer. "This strength in our accommodations business helped mitigate the severe declines in our tubular services, rental tool and drilling businesses."

Mrs. Taylor concluded, "We generated operating cash flow of $453 million in 2009 which was partially utilized to reduce outstanding borrowings under our credit agreement. As a result, we had no amounts outstanding under our revolving credit facility and had $90 million of cash at year end. Despite a very difficult year in 2009, we were able to generate free cash flow and make growth investments. We enter 2010 well positioned to take advantage of investment opportunities which may arise as well as fund our significant, planned Canadian oil sands expansion."

For the full year 2009, the Company reported revenues of $2.1 billion and EBITDA of $238.2 million which resulted in $59.1 million of net income, or $1.18 per diluted share. Excluding the goodwill impairment charges taken in the second quarter of 2009, the Company reported $332.7 million of Adjusted EBITDA (Adjusted EBITDA is defined as EBITDA excluding the goodwill impairment charges) (A) and $140.4 million of net income, or $2.79 per diluted share, for 2009. For the full year 2008, the Company reported revenues of $2.9 billion and Adjusted EBITDA of $581.3 million which resulted in net income of $298.6 million, or $5.81 per diluted share, excluding the impact of the fourth quarter 2008 goodwill impairment charges. Including the goodwill impairment, the Company reported EBITDA of $495.6 million which resulted in net income of $218.9 million, or $4.26 per diluted share, for the full year 2008.

BUSINESS SEGMENT RESULTS

(Unless otherwise noted, the following discussion compares the quarterly results from the fourth quarter of 2009 to the results from the fourth quarter of 2008. In order to present a more meaningful comparison of the Company's operating results, the fourth quarter 2008 results exclude the goodwill impairment charges in the drilling and tubular services business units.)

Well Site Services

Well site services generated revenues of $222.6 million and EBITDA of $66.4 million in the fourth quarter of 2009, compared to revenues of $235.7 million and Adjusted EBITDA of $80.1 million in the fourth quarter of 2008, representing year-over-year declines of 6% and 17%, respectively. The decrease in EBITDA was primarily due to the 42% reduction in U.S. drilling and completion activity and the resulting reduction in utilization and pricing for our rental tools and drilling rigs. These decreases were partially offset by increased activity in the Company's Canadian oil sands accommodations.

The accommodations business reported revenues of $140.9 million and EBITDA of $50.7 million for the fourth quarter of 2009 compared to revenues and EBITDA of $94.6 million and $35.3 million, respectively, in the fourth quarter of 2008. Accommodations revenue increased 49% and EBITDA increased 44%. The fourth quarter 2009 results included camp manufacturing revenues of $22.1 million and minimum contract guarantees of $10.4 million, compared to $1.5 million of camp manufacturing revenues and $8.3 million in minimum contract guarantees in the fourth quarter of 2008. The Company continues to operate certain of its oil sands lodges under firm, guaranteed occupancy contracts which generally contribute stronger margins when recognized. However, such minimum guarantee revenue is dependent on customer occupancy levels which are uncertain.

Rental tools generated $57.0 million of revenues and $11.7 million of EBITDA in the fourth quarter of 2009 compared to revenue of $97.0 million and EBITDA of $30.5 million in the fourth quarter of 2008. These year-over-year declines were due to decreased completion activity related to North American natural gas wells which was down 51% year-over-year, leading to decreased demand and pricing for our services. The fourth quarter 2009 EBITDA included $2.6 million in state gross receipt tax refunds and a favorable lawsuit settlement which occur infrequently.

Drilling services generated revenues of $24.7 million and EBITDA of $4.0 million in the fourth quarter of 2009 compared to $44.0 million and $14.2 million of revenues and Adjusted EBITDA, respectively, in the fourth quarter 2008. These year-over-year declines in drilling services were primarily the result of substantially reduced drilling activity in the Permian Basin and Rocky Mountain region leading to lower pricing, utilization and cash margins.

Offshore Products

Offshore products generated $127.1 million of revenues and $24.5 million in EBITDA in the fourth quarter of 2009 compared to $141.4 million of revenues and $25.6 million in EBITDA in the fourth quarter of 2008. The year-over-year declines in revenue and EBITDA are primarily due to reduced activity related to drilling rig products and services, partially offset by improved revenues and margins on connector and subsea products. Backlog totaled $206.3 million at December 31, 2009 down from $252.7 million at September 30, 2009 and from $362.1 million at December 31, 2008. The decline in backlog was primarily due to postponements, cancellations and deferrals in project awards as our customers managed through the global economic crisis in 2009.

Tubular Services

During the fourth quarter of 2009, tubular services generated revenues of $179.0 million and EBITDA of $6.9 million compared to revenues and Adjusted EBITDA of $524.0 million and $63.9 million, respectively, in the fourth quarter of 2008. Tubular services' OCTG shipments decreased 47% to 88,500 tons from 166,200 tons in the fourth quarter of 2008. Gross margins in the fourth quarter of 2009 decreased to 5.2% from 12.8% in the fourth quarter of 2008 primarily due to the 36% year-over-year decline in our recognized revenue per ton shipped. The Company's OCTG inventory decreased to $265.7 million compared to $289.4 million at September 30, 2009 and $396.5 million at December 31, 2008.

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 -- well site services, offshore products and tubular 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 Oil States International, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6058

The Company will be hosting a conference call to discuss the results for the fourth quarter of 2009 on Monday, February 22, 2010 at 11:00 am Eastern time. This call is being webcast and can be accessed at Oil States' web site at http://www.oilstatesintl.com. Participants may also join the conference call by dialing (800) 446-2782 and using the passcode of 26201391. A replay of the conference call will be available one hour after the completion of the call by dialing (888) 843-8996 and entering the passcode of 26201391.

This press release contains and the associated conference call will contain 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 therein will be based on then 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, 2009 filed by Oil States with the SEC on February 22, 2010 and within the Company's subsequent SEC filings.

                         Oil States International, Inc.
             Unaudited Condensed Consolidated Statements of Income
                   (in thousands, except per share amounts)
                                  (unaudited)


                                  Three Months Ended    Twelve Months Ended
                                     December 31,           December 31,
                                 --------------------  ----------------------

                                    2009       2008       2009        2008
                                 ---------  ---------  ----------  ----------

  Revenues                        $528,715   $901,056  $2,108,250  $2,948,457
  Costs and expenses:
   Cost of sales and services      404,451    702,100   1,640,198   2,234,974
   Selling, general and
    administrative expenses         36,916     37,504     139,293     143,080
   Depreciation and
    amortization expense            31,246     26,863     118,108     102,604
   Impairment of goodwill               --     85,630      94,528      85,630

   Other operating income          (2,424)      (928)     (2,606)     (1,586)
                                 ---------  ---------  ----------  ----------
  Operating income                  58,526     49,887     118,729     383,755

  Interest expense                 (3,551)    (5,169)    (15,266)    (23,585)
  Interest income                       30        805         380       3,561
  Equity in earnings of
   unconsolidated affiliates           268        868       1,452       4,035

  Other income / (expense)             220      (212)         414       5,684
                                 ---------  ---------  ----------  ----------
   Income before income taxes       55,493     46,179     105,709     373,450

  Income tax provision            (15,460)   (40,026)    (46,097)   (154,151)
                                 ---------  ---------  ----------  ----------
   Net income                       40,033      6,153      59,612     219,299
  Less: Net income attributable
   to noncontrolling interest          140        119         498         446
                                 ---------  ---------  ----------  ----------
   Net income attributable to
    Oil States International,
    Inc.                           $39,893     $6,034     $59,114    $218,853
                                 =========  =========  ==========  ==========

  Net income per share
   Basic                             $0.80      $0.12       $1.19       $4.41
   Diluted                           $0.78      $0.12       $1.18       $4.26

  Weighted average number of
   common shares outstanding
   Basic                            49,751     49,622      49,625      49,622
   Diluted                          51,218     49,806      50,219      51,414

                     Oil States International, Inc.
                       Consolidated Balance Sheets
                             (in thousands)

                                    December    September    December
                                      31,          30,         31,

                                      2009        2009       2008 (B)
                                   ----------  -----------  ----------
  Assets                            (audited)  (unaudited)   (audited)
   Current assets
    Cash and cash equivalents         $89,742      $61,281     $30,199
    Accounts receivable, net          385,816      361,549     575,982
    Inventories, net                  423,077      485,304     612,488
    Prepaid expenses and other
     current assets                    26,933       13,730      18,815
                                   ----------  -----------  ----------
     Total current assets             925,568      921,864   1,237,484
   Property, plant and equipment,
    net                               749,601      726,877     695,338
   Goodwill, net                      218,740      217,627     305,441
   Investments in unconsolidated
    affiliates                          5,164        4,893       5,899

   Other non-current assets            33,313       35,335      54,356
                                   ----------  -----------  ----------

  Total assets                     $1,932,386   $1,906,596  $2,298,518
                                   ==========  ===========  ==========

  Liabilities and stockholders'
   equity
   Current liabilities
    Accounts payable and accrued
     liabilities                     $208,541     $190,385    $371,789
    Income taxes                       14,419       10,555      52,546
    Current portion of long-term
     debt                                 464          446       4,943
    Deferred revenue                   87,412      117,872     105,640

    Other current liabilities           4,387          850       1,587
                                   ----------  -----------  ----------
     Total current liabilities        315,223      320,108     536,505
   Long-term debt (C)                 164,074      192,657     449,058
   Deferred income taxes               55,332       55,691      64,780

   Other noncurrent liabilities        15,691       12,445      12,634
                                   ----------  -----------  ----------
     Total liabilities                550,320      580,901   1,062,977

   Stockholders' equity
    Common stock                          531          530         526
    Additional paid-in capital        468,428      463,920     453,733
    Retained earnings                 960,115      920,222     901,001
    Accumulated other
     comprehensive income /
     (loss)                            44,115       32,403    (28,409)

    Treasury stock                   (92,341)     (92,341)    (91,831)
                                   ----------  -----------  ----------
     Total stockholder's equity     1,380,848    1,324,734   1,235,020


    Noncontrolling interest             1,218          961         521
                                   ----------  -----------  ----------

     Total equity                   1,382,066    1,325,695   1,235,541
                                   ----------  -----------  ----------

  Total liabilities and equity     $1,932,386   $1,906,596  $2,298,518
                                   ==========  ===========  ==========

                     Oil States International, Inc.
                               Segment Data
                             (in thousands)
                               (unaudited)


                             Three Months Ended   Twelve Months Ended
                                December 31,          December 31,
                             ------------------  ----------------------

                               2009      2008       2009        2008
                             --------  --------  ----------  ----------

  Revenues
    Accommodations           $140,871   $94,612    $481,402    $427,130
    Rental tools               57,046    97,041     234,121     355,809

    Drilling and other         24,651    44,023      71,175     177,339
                             --------  --------  ----------  ----------

   Well site services         222,568   235,676     786,698     960,278
   Offshore products          127,118   141,385     509,388     528,164

   Tubular services           179,029   523,995     812,164   1,460,015
                             --------  --------  ----------  ----------

  Total revenues             $528,715  $901,056  $2,108,250  $2,948,457
                             ========  ========  ==========  ==========

  Adjusted EBITDA (A)
    Accommodations            $50,725   $35,335    $178,559    $156,223
    Rental Tools (D)           11,693    30,535      37,477     111,224

    Drilling and other (D)      3,990    14,196      10,066      68,096
                             --------  --------  ----------  ----------

   Well site services (D)      66,408    80,066     226,102     335,543
   Offshore products           24,528    25,598      92,029     100,357
   Tubular services (D)         6,944    63,913      44,578     172,086
   Corporate and
    eliminations              (7,760)   (6,660)    (29,976)    (26,724)
                             --------  --------  ----------  ----------

  Total Adjusted EBITDA (D)   $90,120  $162,917    $332,733    $581,262
                             ========  ========  ==========  ==========

  Adjusted operating income / (loss)
   (D)
    Accommodations            $40,077   $27,210    $140,665    $120,972
    Rental Tools (D)            1,154    20,860     (3,316)      75,787

    Drilling and other (D)    (2,842)     8,521    (16,345)      40,200
                             --------  --------  ----------  ----------

   Well site services (D)      38,389    56,591     121,004     236,959
   Offshore products           21,763    22,624      81,049      89,280
   Tubular services (D)         6,300    62,800      41,758     169,333
   Corporate and
    eliminations              (7,926)   (6,498)    (30,554)    (26,187)
                             --------  --------  ----------  ----------
  Total adjusted operating
   income (D)                 $58,526  $135,517    $213,257    $469,385
                             ========  ========  ==========  ==========

                 Oil States International, Inc.
         Additional Quarterly Segment and Operating Data
                           (unaudited)


                                             Three Months Ended
                                                December 31,
                                             ------------------

                                               2009      2008
                                             --------  --------

  Supplemental operating data
   Land drilling operating statistics
    Average rigs available                         37        37
    Utilization                                 52.5%     79.1%
    Implied day rate ($ in thousands per
     day)                                       $13.8     $16.4
    Implied daily cash margin ($ in
     thousands per day)                          $2.7      $5.5

   Offshore products backlog ($ in
    millions)                                  $206.3    $362.1

   Tubular services operating data
    Shipments (tons in thousands)                88.5     166.2
    Quarter end inventory ($ in thousands)   $265,718  $396,462

(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. Adjusted EBITDA is a non-GAAP measure which excludes the goodwill impairment charges recognized in the fourth quarter of 2008 and the second quarter of 2009. 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     Twelve Months
                                December 31,     Ended December 31,
                             ------------------  ------------------

                               2009      2008      2009      2008
                             --------  --------  --------  --------

  Net income                  $39,893    $6,034   $59,114  $218,853
  Income tax expense           15,460    40,026    46,097   154,151
  Depreciation and
   amortization                31,246    26,863   118,108   102,604
  Interest income                (30)     (805)     (380)   (3,561)
  Interest expense              3,551     5,169    15,266    23,585
                             --------  --------  --------  --------

   EBITDA                     $90,120   $77,287  $238,205  $495,632

  Goodwill impairment              --    85,630    94,528    85,630
                             --------  --------  --------  --------


   Adjusted EBITDA            $90,120  $162,917  $332,733  $581,262
                             ========  ========  ========  ========



                             Three Months Ended     Twelve Months
                                December 31,     Ended December 31,
                             ------------------  ------------------

                               2009      2008      2009      2008
                             --------  --------  --------  --------

  Operating income            $58,526   $49,887  $118,729  $383,755

  Goodwill impairment              --    85,630    94,528    85,630
                             --------  --------  --------  --------

   Adjusted operating
    income                    $58,526  $135,517  $213,257  $469,385
                             ========  ========  ========  ========

(B) Adjusted to reflect the retrospective application of APB 14-1 accounting for existing convertible notes effective on January 1, 2009.

© As of December 31, 2009, the Company had approximately $479.7 million available under its revolving credit facility.

(D) The fourth quarter and full year 2008 results exclude (i) the $22.8 million goodwill impairment charge taken in the drilling business and (ii) the $62.9 million goodwill impairment charge taken in the tubular services business; and consolidated EBITDA and operating income for the fourth quarter and full year 2008 exclude the total $85.6 million goodwill impairment charge. In full year 2009 results, rental tools, well site services and consolidated EBITDA and operating income exclude $94.5 million goodwill impairment charge taken in the second quarter of 2009.

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Oil States International Inc.

CONTACT: Oil States International, Inc.
Bradley J. Dodson
713-652-0582
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