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Oil States Announces Third Quarter 2014 Earnings of $1.07 Per Share

HOUSTON, Oct. 30, 2014 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income from continuing operations for the third quarter ended September 30, 2014 of $58.4 million, or $1.07 per diluted share. These results compare to net income from continuing operations of $35.5 million, or $0.64 per diluted share, reported in the third quarter of 2013.

The Company generated revenues of $471.0 million and EBITDA (A) of $122.9 million during the third quarter of 2014, representing year-over-year growth rates of 7% and 26%, respectively. These results compare to revenues of $438.2 million and Adjusted EBITDA of $97.2 million reported in the third quarter of 2013.

EBITDA increased as a result of strong demand for the Company's completion services business offerings and higher utilization of its land drilling rigs, coupled with increased contributions from production facility and subsea product sales, improved manufacturing facility throughput and operational efficiencies in the offshore products segment.

Cindy B. Taylor, Oil States' President and Chief Executive Officer stated, "Operationally, our businesses performed extremely well in the third quarter. We reported record quarterly revenues and EBITDA in our well site services segment and generated record EBITDA margin percentages in our offshore products segment. Our well site services segment enjoyed a good product and service mix with an emphasis on our more proprietary offerings. Product mix and execution were good in our offshore products segment with most of our manufacturing locations generating improved results. Despite the recent pull back in commodity prices, demand for our products and services, both in the onshore and offshore markets, remains at very strong levels."

For the first nine months of 2014, the Company reported revenues of $1.3 billion and Adjusted EBITDA of $325.0 million (after elimination of $11.0 million of charges primarily associated with the May 30, 2014 spin-off of the accommodations segment into a stand-alone, publicly traded corporation, Civeo Corporation or Civeo). The results for the first nine months of 2014 included $111.4 million of losses on debt extinguishment and Civeo spin-off related charges. For the first nine months of 2013, the Company reported revenues of $1.2 billion and Adjusted EBITDA of $263.5 million (after elimination of $7.1 million of acquisition and transaction costs).

Income Taxes

The Company recognized an effective tax rate of 35.4% in the third quarter of 2014 compared to 35.0% in the third quarter of 2013.

Financial Condition

The Company invested $59.3 million in capital expenditures during the third quarter of 2014. Spending primarily related to the addition of completion services equipment deployed to service the active U.S. shale plays along with ongoing facility expansions in the offshore products segment.

During the third quarter, the Company repurchased 307,897 shares of its common stock under its authorized share repurchase program at an average price of $62.10 per share. In October, the Company repurchased an additional 843,478 shares of its common stock at an average price of $59.28 per share. The Company currently has $163.4 million remaining available under its share repurchase authorization which is scheduled to expire on September 1, 2015.

As of September 30, 2014, there was $171.7 million outstanding under the Company's revolving credit facility. Total availability as of September 30, 2014 was $391.9 million (net of standby letters of credit totaling $36.4 million).

BUSINESS SEGMENT RESULTS

(Unless otherwise noted, the following discussion compares the quarterly results from continuing operations for the third quarters of 2014 and 2013, respectively. The historical results of operations of the accommodations and tubular services segments through their respective transaction closing dates have been reported as discontinued operations for all periods reported herein.)

Well Site Services

Well site services generated record revenues and EBITDA of $224.4 million and $77.2 million, respectively, in the third quarter of 2014 compared to revenues and EBITDA of $195.9 million and $64.1 million, respectively, in the third quarter of 2013. Segmental revenues and EBITDA increased 15% and 20% year-over-year, respectively, primarily due to a 6% year-over-year increase in the number of completion services jobs performed and a 7% year-over-year increase in revenue per completion service job as a result of increased service intensity in the active shale basins. Increased utilization in the land drilling business, which averaged 90% during the third quarter of 2014 compared with 78% in the third quarter of 2013, also contributed to the record performance for this segment.

Offshore Products

Offshore products generated revenues of $246.6 million and EBITDA of $60.6 million in the third quarter of 2014 compared to revenues of $242.3 million and EBITDA of $45.7 million in the third quarter of 2013. Segmental revenues and EBITDA increased 2% and 33% year-over-year, respectively, primarily due to greater contributions from production facility product sales and continued strong demand for services on a global basis, along with margin improvement from product mix, operational efficiencies, and strong project execution by our major divisions. EBITDA margins increased to a record 24.6% in the third quarter of 2014 compared to 18.9% in the third quarter of 2013. Backlog declined 9% sequentially, totaling $543 million at September 30, 2014 compared to $599 million reported at June 30, 2014. There were no individual project awards in excess of $15 million booked during the third quarter of 2014 due to award timing and contract negotiations. Backlog additions in the fourth quarter of 2014 are currently expected to exceed third quarter 2014 bookings.

Conference Call Information

The call is scheduled for Friday, October 31, 2014 at 11:00 am EDT, is being webcast and can be accessed from the Company's website at http://www.oilstatesintl.com. Participants may also join the conference call by dialing (800) 446-1671 in the United States or by dialing +1 847 413 3362 internationally and using the passcode of 38296266. A replay of the conference call will be available one hour 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 38296266.

About Oil States

Oil States International, Inc. is an energy services company with a leading market position as a manufacturer of products for deepwater production facilities and certain drilling equipment, as well as a provider of completion services and land drilling services to the oil and gas industry. 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 http://www.oilstatesintl.com.

Forward Looking Statements

The foregoing contains 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 are 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 energy service industry and other factors discussed in the "Business" and "Risk Factors" sections of the Form 10-K for the year ended December 31, 2013 filed by Oil States with the Securities and Exchange Commission on February 25, 2014.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2014 2013 2014 2013
Revenues $ 471,032 $ 438,176 $ 1,335,876 $ 1,207,824
Costs and expenses:
Cost of sales and services 306,497 301,702 886,777 835,471
Selling, general and administrative expenses 43,734 38,531 128,181 110,600
Depreciation and amortization expense 31,076 28,206 92,970 80,035
Other operating (income) expense (1,887) 3,981 9,524 6,329
379,420 372,420 1,117,452 1,032,435
Operating income 91,612 65,756 218,424 175,389
Interest expense (1,602) (9,983) (15,500) (30,130)
Interest income 150 159 411 460
Loss on extinguishment of debt 30 (2,058) (100,380) (2,058)
Equity in earnings (losses) of unconsolidated affiliates 74 73 292 (758)
Other income 161 617 2,279 1,765
Income from continuing operations before income taxes 90,425 54,564 105,526 144,668
Income tax expense (32,048) (19,081) (36,545) (51,692)
Net income from continuing operations 58,377 35,483 68,981 92,976
Net income (loss) from discontinued operations, net of tax (including a net gain on disposal of $84,209 in the third quarter of 2013)
(1,467)

132,250

51,571

253,500
Net income 56,910 167,733 120,552 346,476
Less: Net income (loss) attributable to noncontrolling interest (10) (7) 8 22
Net income attributable to Oil States International, Inc. $ 56,920 $ 167,740 $ 120,544 $ 346,454
Net income (loss) attributable to Oil States International, Inc.:
Continuing operations $ 58,387 $ 35,490 $ 68,973 $ 92,954
Discontinued operations (1,467) 132,250 51,571 253,500
Net income attributable to Oil States International, Inc. $ 56,920 $167,740 $ 120,544 $ 346,454
Basic net income (loss) per share attributable to Oil States International, Inc. common stockholders from:
Continuing operations $ 1.08 $ 0.64 $ 1.28 $ 1.69
Discontinued operations (0.03) 2.40 0.95 4.61
Net income $ 1.05 $ 3.04 $ 2.23 $ 6.30
Diluted net income (loss) per share attributable to Oil States International, Inc. common stockholders from:
Continuing operations $ 1.07 $ 0.64 $ 1.27 $ 1.67
Discontinued operations (0.02) 2.37 0.95 4.57
Net income $ 1.05 $ 3.01 $ 2.22 $ 6.24
Weighted average number of common shares outstanding:
Basic 52,979 55,092 53,119 54,987
Diluted 53,294 55,672 53,422 55,542

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
SEPTEMBER 30, DECEMBER 31,
ASSETS 2014 2013
(UNAUDITED)
Current assets:
Cash and cash equivalents $ 69,800 $ 599,306
Accounts receivable, net 506,508 620,333
Inventories, net 247,092 266,552
Prepaid expenses and other current assets 22,368 39,716
Total current assets 845,768 1,525,907
Property, plant, and equipment, net 627,465 1,902,789
Goodwill, net 252,880 513,650
Other intangible assets, net 52,238 133,531
Other noncurrent assets 25,118 55,384
Total assets $ 1,803,469 $ 4,131,261
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 101,706 $ 149,079
Accrued liabilities 79,693 132,046
Income taxes 12,589 32,679
Current portion of long-term debt and capitalized leases 505 529
Deferred revenue 48,755 50,366
Other current liabilities 11,853 9,137
Total current liabilities 255,101 373,836
Long-term debt and capitalized leases (1) 178,040 972,692
Deferred income taxes 19,121 122,821
Other noncurrent liabilities 16,761 36,618
Total liabilities 469,023 1,505,967
Stockholders' equity:
Oil States International, Inc. stockholders' equity:
Common stock, $.01 par value, 200,000,000 shares authorized, 60,783,119 shares and 59,777,766 shares issued, respectively, and 54,017,285 shares and 54,767,284 shares outstanding, respectively 608 592
Additional paid-in capital 674,435 637,438
Retained earnings 1,080,955 2,320,453
Accumulated other comprehensive loss (11,851) (85,675)
Common stock held in treasury at cost, 6,765,834 and 5,010,482 shares, respectively (409,875) (249,391)
Total Oil States International, Inc. stockholders' equity 1,334,272 2,623,417
Noncontrolling interest 174 1,877
Total stockholders' equity 1,334,446 2,625,294
Total liabilities and stockholders' equity $ 1,803,469 $ 4,131,261

(1) As of September 30, 2014, the Company had approximately $391.9 million available under its revolving credit facility.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CONTINUING AND DISCONTINUED OPERATIONS
(In Thousands)
NINE MONTHS
ENDED SEPTEMBER 30,
2014 2013
Cash flows from operating activities:
Net income $ 121,119 $ 347,540
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 160,520 206,155
Deferred income tax provision (1,735) (707)
Excess tax benefits from share-based payment arrangements (4,585) (5,447)
Gain on sale of business -- (84,209)
Gain on disposals of assets (923) (3,871)
Non-cash compensation charge 22,220 22,938
Amortization of deferred financing costs 2,896 5,937
Loss on extinguishment of debt 103,836 3,265
Other, net 5,183 640
Changes in operating assets and liabilities, net of effect from acquired businesses and net assets of Civeo that were distributed to stockholders:
Accounts receivable (68,106) 53,386
Inventories (7,030) 34,028
Accounts payable and accrued liabilities (14,463) (24,449)
Taxes payable (48,875) 16,603
Other operating assets and liabilities, net 32,423 10,868
Net cash flows provided by operating activities 302,480 582,677
Cash flows from investing activities:
Capital expenditures, including capitalized interest (262,619) (355,639)
Acquisitions of businesses, net of cash acquired 193 (1,771)
Proceeds from sale of business -- 600,000
Proceeds from disposition of property, plant and equipment 4,077 8,535
Other, net (1,462) 81
Net cash flows (used in) provided by investing activities (259,811) 251,206
Cash flows from financing activities:
Revolving credit borrowings and (repayments), net 171,734 (47,901)
Repayment of 6 1/2% Senior Notes (630,307) --
Repayment of 5 1/8% Senior Notes (419,794) --
Term loan repayments -- (252,762)
Debt and capital lease repayments (407) (2,181)
Issuance of common stock from share-based payment arrangements 8,844 14,172
Purchase of treasury stock (162,053) (11,889)
Excess tax benefits from share-based payment arrangements 4,585 5,447
Payment of financing costs (12,530) (203)
Shares added to treasury stock as a result of net share settlements due to vesting of restricted stock (5,048) (4,161)
Term borrowings of Civeo 775,000 --
Cash balances of Civeo in Spin-Off (298,536) --
Net cash flows used in financing activities (568,512) (299,478)
Effect of exchange rate changes on cash (3,663) (11,598)
Net change in cash and cash equivalents (529,506) 522,807
Cash and cash equivalents, beginning of period 599,306 253,172
Cash and cash equivalents, end of period $ 69,800 $ 775,979
Oil States International, Inc.
Segment Data
(in thousands)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Revenues
Completion services $ 171,990 $ 151,857 $ 474,106 $ 431,394
Drilling services 52,416 44,046 152,243 128,462
Well site services 224,406 195,903 626,349 559,856
Offshore products 246,626 242,273 709,527 647,968
Total revenues $ 471,032 $ 438,176 $ 1,335,876 $ 1,207,824
EBITDA (A)
Completion services (1) $ 61,901 $ 52,633 $ 163,312 $ 140,347
Drilling services 15,251 11,472 43,884 34,840
Well site services 77,152 64,105 207,196 175,187
Offshore products 60,563 45,683 159,880 123,087
Corporate and eliminations (2) (14,782) (15,129) (53,119) (41,865)
Total EBITDA $ 122,933 $ 94,659 $ 313,957 $ 256,409
Operating income / (loss)
Completion services (1) $ 43,242 $ 35,302 $ 106,760 $ 91,452
Drilling services 8,511 4,856 23,044 16,069
Well site services 51,753 40,158 129,804 107,521
Offshore products 54,899 40,951 142,508 110,416
Corporate and eliminations (2) (15,040) (15,353) (53,888) (42,548)
Total operating income $ 91,612 $ 65,756 $ 218,424 $ 175,389

(1) The EBITDA and operating income for the completion services segment for the nine months ended September 30, 2013 were negatively impacted by $3.0 million from an increase in an acquisition related contingent liability.

(2) The EBITDA and operating expense related to the Company's corporate function for the nine months ended September 30, 2014 included transaction costs of $11.0 million. These costs primarily related to activities associated with the spin-off of Civeo. EBITDA and operating expense related to the Company's corporate function for the three and nine months ended September 30, 2013 included transaction costs of $2.6 million and $4.1 million, respectively. These costs primarily related to activities associated with the spin-off of Civeo.

Oil States International, Inc.
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Net income from continuing operations $ 58,387 $ 35,490 $ 68,973 $ 92,954
Income tax provision 32,048 19,081 36,545 51,692
Depreciation and amortization 31,076 28,206 92,970 80,035
Interest income (150) (159) (411) (460)
Interest expense 1,602 9,983 15,500 30,130
Loss on extinguishment of debt (30) 2,058 100,380 2,058
EBITDA (A) $ 122,933 $ 94,659 $ 313,957 $ 256,409
Adjustments to EBITDA:
Non-recurring items -- 2,571 11,020 7,116
Adjusted EBITDA (A) $ 122,933 $ 97,230 $ 324,977 $ 263,525

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

Oil States International, Inc.
Additional Quarterly Segment and Operating Data
(unaudited)
Three Months Ended September 30,
2014 2013
Supplemental operating data:
Offshore products backlog ($ in millions) $ 542.6 $ 569.0
Completion services job tickets 14,251 13,507
Average revenue per ticket ($ in thousands) $ 12.1 $ 11.2
Land drilling operating statistics:
Average rigs available 34 34
Utilization 90.1% 78.4%
Implied day rate ($ in thousands per day) $ 18.6 $ 18.0
Implied daily cash margin ($ in thousands per day) $ 5.7 $ 5.0

CONTACT: Company Contact: Lloyd A. Hajdik Oil States International, Inc. Senior Vice President, Chief Financial Officer and Treasurer 713-652-0582 Patricia Gil Oil States International, Inc. Investor Relations 713-470-4860

Source:Oil States International, Inc.