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Jul 30, 2018

Oil States Announces Second Quarter 2018 Results

HOUSTON, July 30, 2018 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income for the second quarter 2018 of $2.7 million, or $0.05 per diluted share. These results compare to a reported net loss for the second quarter of 2017 of $14.2 million, or $0.28 per diluted share, which included pre-tax charges of $0.8 million ($0.6 million after-tax, or $0.01 per diluted share) of severance and downsizing charges.

During the second quarter of 2018, the Company generated revenues of $285.8 million and Consolidated EBITDA (Note A) of $40.2 million. These results compare to revenues of $171.4 million and Adjusted Consolidated EBITDA (Note A) of $10.4 million reported in the second quarter of 2017 (excluding $0.8 million of severance and downsizing charges).

For the first half of 2018, the Company reported revenues of $539.4 million and Adjusted Consolidated EBITDA of $72.5 million (excluding $2.6 million of transaction-related charges and $0.8 million of severance and downsizing charges). The net loss for the first half of 2018 totaled $0.8 million and included $2.6 million ($2.0 million after-tax, or $0.03 per diluted share) of transaction-related charges and $0.8 million ($0.6 million after-tax, or $0.01 per diluted share) of severance charges. For the first half of 2017, the Company reported revenues of $322.9 million and Adjusted Consolidated EBITDA of $15.8 million (excluding $1.6 million of severance and downsizing charges). The net loss for the first half of 2017 totaled $31.9 million and included $1.6 million ($1.2 million after-tax, or $0.02 per diluted share) of severance and downsizing charges.

Oil States’ President and Chief Executive Officer Cindy B. Taylor commented, "We delivered second quarter revenues of $286 million, up 67% year-over-year, and quarterly EBITDA of $40 million, up 288% year-over-year. This vast improvement in our results was due to strong contributions from our two strategic acquisitions completed in the first quarter of this year, coupled with improved land completions activity in our key shale play regions. Our Offshore/Manufactured Products segment received a major project award for floating production facility content for a project in South America, resulting in a 1.2x book-to-bill ratio and a 6% sequential increase in total backlog."

BUSINESS SEGMENT RESULTS
(See Segment Data Tables)

Well Site Services
Well Site Services generated revenues of $125.1 million and Segment EBITDA (Note B) of $19.1 million in the second quarter of 2018 compared to revenues and Segment EBITDA of $69.4 million and $5.0 million, respectively, in the second quarter of 2017.  The 80% revenue increase was due to a 63% year-over-year increase in the number of Completion Services jobs performed, coupled with a 15% year-over-year increase in revenue per Completion Services job. Our improved results were driven by significantly increased completion-related activity levels in the United States, a continuing trend of customers utilizing more proprietary equipment and service offerings, and a full quarters' revenue contribution generated by Falcon Flowback Services, LLC (“Falcon”), which was acquired on February 28, 2018.

Downhole Technologies (acquisition of GEODynamics, Inc. closed on January 12, 2018)
In the second quarter of 2018, Downhole Technologies generated revenues of $59.3 million, Segment EBITDA of $16.1 million and a Segment EBITDA margin of 27%. The segment has performed very well compared to the acquisition economics on which the transaction was based. No results were included in the second quarter of 2017 given our acquisition of the business in January 2018.

Offshore/Manufactured Products
Offshore/Manufactured Products generated revenues and Segment EBITDA of $101.4 million and $18.5 million, respectively, in the second quarter of 2018 compared to revenues of $102.0 million and Segment EBITDA of $17.2 million in the second quarter of 2017. Revenues decreased 1% while Segment EBITDA increased 8% year-over-year. Project-driven revenues increased 2% year-over-year due to higher sales of connector products while revenues from other products and service increased 5% year-over-year. These results were partially offset by lower short-cycle product sales (elastomer and valve products), which decreased 7% year-over-year due to lower customer demand, likely due to stocking cycles. We recorded a $3.6 million insurance gain related to the settlement of a Hurricane Harvey facility claim in the second quarter of 2018, partially offset by foreign exchange losses, which impacted Segment EBITDA and margins. Excluding the insurance gain and foreign exchange losses, Segment EBITDA margin in the second quarter of 2018 was 15.5% compared to 16.8% in the second quarter of 2017. Backlog increased 6% sequentially to total $165 million at June 30, 2018 compared to $157 million at March 31, 2018 and $202 million at June 30, 2017. The second quarter book-to-bill ratio was 1.2x. During the second quarter of 2018, we received one notable major project award for floating production facility content destined for South America.

Income Taxes
The Company recognized an effective tax rate provision of 38.8% in the second quarter of 2018 which compared to an effective tax rate benefit of 26.2% in the second quarter of 2017.

Financial Condition
As of June 30, 2018, $157.9 million was outstanding under the Company’s revolving credit facility along with an additional $22.3 million of outstanding letters of credit, while cash totaled $29.1 million. The Company had access to $157.8 million of revolving credit facility availability as of June 30, 2018.

On July 25, 2018, the Company's Board of Directors extended the existing share repurchase program for one year to July 29, 2019. The amount remaining under the Company's share repurchase authorization as of June 30, 2018 was $120.5 million.

Conference Call Information
The call is scheduled for Monday, July 30, 2018 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 47304106. 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 47304106.

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. Through its recent acquisition of GEODynamics, Inc., 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 other things, risks and uncertainties relating to Oil States' ability to retain GEODynamics' and Falcon's customers and employees, the ability to successfully integrate GEODynamics' and Falcon's operations, product lines, technology and employees into Oil States' operations, and the ability to achieve the expected synergies as well as accretion in earnings; risks associated with the general nature of the energy service industry; and other factors 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

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

  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Revenues:              
Products $ 136,182     $ 82,750     $ 265,008     $ 155,930  
Service 149,663     88,652     274,413     166,939  
  285,845     171,402     539,421     322,869  
               
Costs and expenses:              
Product costs 95,324     59,309     188,300     109,659  
Service costs 118,079     72,539     214,993     141,101  
Selling, general and administrative expense 35,919     29,482     70,114     57,212  
Depreciation and amortization expense 30,922     27,784     60,112     55,764  
Other operating (income) expense, net (3,099 )   794     (1,884 )   963  
  277,145     189,908     531,635     364,699  
Operating income (loss) 8,700     (18,506 )   7,786     (41,830 )
               
Interest expense (4,913 )   (1,149 )   (9,446 )   (2,223 )
Interest income 123     85     202     170  
Other income 571     273     1,218     270  
Income (loss) before income taxes 4,481     (19,297 )   (240 )   (43,613 )
Income tax (provision) benefit (1,739 )   5,051     (510 )   11,689  
Net income (loss) $ 2,742     $ (14,246 )   $ (750 )   $ (31,924 )
               
Net income (loss) per share:              
Basic $ 0.05     $ (0.28 )   $ (0.01 )   $ (0.63 )
Diluted $ 0.05     $ (0.28 )   $ (0.01 )   $ (0.63 )
               
Weighted average number of common shares outstanding:              
Basic 59,005     50,232     58,396     50,296  
Diluted 59,005     50,232     58,396     50,296  
                       


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)

  June 30, 2018   December 31, 2017
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 29,102     $ 53,459  
Accounts receivable, net 289,806     216,139  
Inventories, net 205,057     168,285  
Prepaid expenses and other current assets 22,592     18,054  
Total current assets 546,557     455,937  
       
Property, plant, and equipment, net 537,701     498,890  
Goodwill, net 658,034     268,009  
Other intangible assets, net 253,966     50,265  
Other noncurrent assets 28,868     28,410  
Total assets $ 2,025,126     $ 1,301,511  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Current portion of long-term debt and capitalized leases $ 535     $ 411  
Accounts payable 69,416     49,089  
Accrued liabilities 56,300     45,889  
Income taxes payable 1,716     1,647  
Deferred revenue 14,907     18,234  
Total current liabilities 142,874     115,270  
       
Long-term debt and capitalized leases 349,245     4,870  
Deferred income taxes 57,066     24,718  
Other noncurrent liabilities 25,288     23,940  
Total liabilities 574,473     168,798  
       
Stockholders’ equity:      
Common stock 718     627  
Additional paid-in capital 1,085,927     754,607  
Retained earnings 1,047,873     1,048,623  
Accumulated other comprehensive loss (67,192 )   (58,493 )
Treasury stock (616,673 )   (612,651 )
Total stockholders’ equity 1,450,653     1,132,713  
Total liabilities and stockholders’ equity $ 2,025,126     $ 1,301,511  
 


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

  Six Months Ended June 30,
  2018   2017
Cash flows from operating activities:      
Net loss $ (750 )   $ (31,924 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 60,112     55,764  
Stock-based compensation expense 10,861     10,954  
Deferred income tax provision (benefit) 481     (14,917 )
Provision for bad debt 2,530     210  
Gain on disposals of assets (927 )   (210 )
Amortization of debt discount and deferred financing costs 3,613     405  
Other, net (10 )   29  
Changes in operating assets and liabilities, net of effect from acquired businesses:      
Accounts receivable (19,134 )   23,404  
Inventories (1,768 )   8,689  
Accounts payable and accrued liabilities (2,251 )   (3,075 )
Income taxes payable (31 )   (3,211 )
Other operating assets and liabilities, net (5,792 )   (1,191 )
Net cash flows provided by operating activities 46,934     44,927  
       
Cash flows from investing activities:      
Capital expenditures (38,261 )   (13,291 )
Acquisitions of businesses, net of cash acquired (379,676 )   (12,859 )
Proceeds from disposition of property, plant and equipment 1,197     742  
Other, net (985 )   (453 )
Net cash flows used in investing activities (417,725 )   (25,861 )
       
Cash flows from financing activities:      
Issuance of 1.50% convertible senior notes 200,000      
Revolving credit facility borrowings 704,469     127,929  
Revolving credit facility repayments (546,564 )   (123,104 )
Other debt and capital lease repayments, net (266 )   (267 )
Payment of financing costs (7,366 )    
Purchase of treasury stock     (16,283 )
Shares added to treasury stock as a result of net share settlements
due to vesting of restricted stock
(4,022 )   (5,200 )
Net cash flows provided by (used in) financing activities 346,251     (16,925 )
       
Effect of exchange rate changes on cash and cash equivalents 183     1,527  
Net change in cash and cash equivalents (24,357 )   3,668  
Cash and cash equivalents, beginning of period 53,459     68,800  
Cash and cash equivalents, end of period $ 29,102     $ 72,468  
 


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA
(In Thousands)
(unaudited)

  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Revenues:              
Well Site Services:              
Completion Services $ 108,368     $ 57,890     $ 191,208     $ 106,562  
Drilling Services 16,756     11,477     34,315     22,958  
Total Well Site Services 125,124     69,367     225,523     129,520  
Downhole Technologies 59,274         105,055      
Offshore/Manufactured Products 101,447     102,035     208,843     193,349  
Total revenues $ 285,845     $ 171,402     $ 539,421     $ 322,869  
               
Operating income (loss):              
Well Site Services:              
Completion Services(2) $ 1,204     $ (12,547 )   $ (3,267 )   $ (29,027 )
Drilling Services (2,957 )   (3,787 )   (5,268 )   (8,004 )
Total Well Site Services (1,753 )   (16,334 )   (8,535 )   (37,031 )
Downhole Technologies(1) 11,600         19,654      
Offshore/Manufactured Products(1,2) 12,664     10,662     25,116     20,126  
Corporate(1) (13,811 )   (12,834 )   (28,449 )   (24,925 )
Total operating income (loss) $ 8,700     $ (18,506 )   $ 7,786     $ (41,830 )
 


               
Revenues: Well Site Services   Downhole
Technologies
  Offshore /
Manufactured
Products
  Total
Three months ended June 30, 2018   2017   2018   2017   2018   2017   2018   2017
Major revenue categories:                              
Project-driven products $     $     $     $     $ 35,225     $ 34,582     $ 35,225     $ 34,582  
Short-cycle:                              
Completion products and services 108,368     57,890     59,274         29,783     31,117     197,425     89,007  
Drilling services 16,756     11,477                     16,756     11,477  
Other products                 7,565     8,903     7,565     8,903  
Total short-cycle 125,124     69,367     59,274         37,348     40,020     221,746     109,387  
Other products and services                 28,874     27,433     28,874     27,433  
  $ 125,124     $ 69,367     $ 59,274     $     $ 101,447     $ 102,035     $ 285,845     $ 171,402  
 


               
Revenues: Well Site Services   Downhole
Technologies
  Offshore /
Manufactured
Products
  Total
Six months ended June 30, 2018   2017   2018   2017   2018   2017   2018   2017
Major revenue categories:                              
Project-driven products $     $     $     $     $ 76,024     $ 66,917     $ 76,024     $ 66,917  
Short-cycle:                              
Completion products and services 191,208     106,562     105,055         62,755     56,966     359,018     163,528  
Drilling services 34,315     22,958                     34,315     22,958  
Other products                 15,011     16,125     15,011     16,125  
Total short-cycle 225,523     129,520     105,055         77,766     73,091     408,344     202,611  
Other products and services                 55,053     53,341     55,053     53,341  
  $ 225,523     $ 129,520     $ 105,055     $     $ 208,843     $ 193,349     $ 539,421     $ 322,869  
 


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION – SEGMENT EBITDA AND ADJUSTED SEGMENT EBITDA (B)
(In Thousands)
(unaudited)

       
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Well Site Services:              
Completion Services:              
Operating income (loss) $ 1,204     $ (12,547 )   $ (3,267 )   $ (29,027 )
Depreciation and amortization expense 16,816     16,193     32,198     32,721  
Other income 526     295     795     279  
EBITDA 18,546     3,941     29,726     3,973  
Severance and downsizing charges     630         902  
Adjusted EBITDA $ 18,546     $ 4,571     $ 29,726     $ 4,875  
               
Drilling Services:              
Operating loss $ (2,957 )   $ (3,787 )   $ (5,268 )   $ (8,004 )
Depreciation and amortization expense 3,551     4,794     7,419     9,829  
Other income 5     3     380     4  
EBITDA $ 599     $ 1,010     $ 2,531     $ 1,829  
               
Total Well Site Services:              
Operating loss $ (1,753 )   $ (16,334 )   $ (8,535 )   $ (37,031 )
Depreciation and amortization expense 20,367     20,987     39,617     42,550  
Other income 531     298     1,175     283  
Segment EBITDA 19,145     4,951     32,257     5,802  
Severance and downsizing charges     630         902  
Adjusted Segment EBITDA $ 19,145     $ 5,581     $ 32,257     $ 6,704  
               
Downhole Technologies:              
Operating income $ 11,600     $     $ 19,654     $  
Depreciation and amortization expense 4,532         8,416      
Other expense         (13 )    
Segment EBITDA 16,132         28,057      
Transaction-related charges         211      
Adjusted Segment EBITDA $ 16,132     $     $ 28,268     $  
               
Offshore/Manufactured Products:              
Operating income $ 12,664     $ 10,662     $ 25,116     $ 20,126  
Depreciation and amortization expense 5,786     6,534     11,600     12,687  
Other income (expense) 40     (25 )   56     (13 )
Segment EBITDA 18,490     17,171     36,772     32,800  
Severance and downsizing charges     186     783     693  
Adjusted Segment EBITDA $ 18,490     $ 17,357     $ 37,555     $ 33,493  
               
Corporate:              
Operating loss $ (13,811 )   $ (12,834 )   $ (28,449 )   $ (24,925 )
Depreciation and amortization expense 237     263     479     527  
Other expense              
EBITDA (13,574 )   (12,571 )   (27,970 )   (24,398 )
Transaction-related charges         2,371      
Adjusted EBITDA $ (13,574 )   $ (12,571 )   $ (25,599 )   $ (24,398 )
 


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

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

  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
               
Net income (loss) $ 2,742     $ (14,246 )   $ (750 )   $ (31,924 )
Income tax provision (benefit) 1,739     (5,051 )   510     (11,689 )
Depreciation and amortization expense 30,922     27,784     60,112     55,764  
Interest income (123 )   (85 )   (202 )   (170 )
Interest expense 4,913     1,149     9,446     2,223  
Consolidated EBITDA (A) 40,193     9,551     69,116     14,204  
               
Adjustments to Consolidated EBITDA (1,2):              
Transaction-related charges         2,582      
Severance and downsizing charges     816     783     1,595  
Adjusted Consolidated EBITDA (A) $ 40,193     $ 10,367     $ 72,481     $ 15,799  
 

(1) Operating income (loss) and Segment and Consolidated EBITDA for the six months ended June 30, 2018 included transaction-related expenses of $2.4 million and $0.2 million related to Corporate and the Downhole Technologies segment, respectively, as well as severance charges of $0.8 million related to the Offshore/Manufactured Products segment.

(2) Operating income (loss) and Segment and Consolidated EBITDA for the three and six months ended June 30, 2017 included severance and downsizing charges of $0.6 million and $0.9 million, respectively, related to the Completion Services business and $0.2 million and $0.7 million, respectively, related to the Offshore/Manufactured Products segment.

(A) The terms Consolidated EBITDA and Adjusted Consolidated EBITDA consist of net income (loss) plus net interest expense, taxes, depreciation and amortization expense, and certain other items.  Consolidated EBITDA and Adjusted Consolidated 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 net income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity.  Additionally, Consolidated EBITDA and Adjusted Consolidated EBITDA may not be comparable to other similarly titled measures of other companies.  The Company has included Consolidated EBITDA and Adjusted Consolidated EBITDA as a supplemental disclosure because its management believes that Consolidated EBITDA and Adjusted Consolidated 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 Consolidated EBITDA and Adjusted 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 and Adjusted Consolidated EBITDA to net income (loss), which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

(B) The terms EBITDA, Adjusted EBITDA, Segment EBITDA and Adjusted Segment EBITDA consist of operating income (loss) plus depreciation and amortization expense, and certain other items.  EBITDA, Adjusted EBITDA, Segment EBITDA and Adjusted 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, Adjusted EBITDA, Segment EBITDA and Adjusted Segment EBITDA may not be comparable to other similarly titled measures of other companies.  The Company has included EBITDA, Adjusted EBITDA, Segment EBITDA and Adjusted Segment EBITDA as a supplemental disclosure because its management believes that EBITDA, Adjusted EBITDA, Segment EBITDA and Adjusted 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, Adjusted EBITDA, Segment EBITDA and Adjusted 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, Adjusted EBITDA, Segment EBITDA and Adjusted 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 June 30,
  2018   2017
Supplemental operating data:      
Offshore/Manufactured Products backlog ($ in millions) $ 165.3     $ 202.0  
       
Completion Services job tickets 7,927     4,863  
Average revenue per ticket ($ in thousands) $ 13.7     $ 11.9  
       
Land drilling operating statistics:      
Average rigs available 34     34  
Utilization 30.1 %   24.6 %
Implied day rate ($ in thousands per day) $ 18.0     $ 15.1  
Implied daily cash margin ($ in thousands per day) $ 1.0     $ 1.9  
               

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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