HOUSTON, Feb. 19 /PRNewswire-FirstCall/ -- Today, Oil States International, Inc. reported net income for the quarter ended December 31, 2007 of $48.2 million, or $0.95 per diluted share compared to $49.4 million, or $0.98 per diluted share, reported in the fourth quarter of 2006. Oil States recognized year-over-year growth in revenues and EBITDA (defined as net income plus interest, taxes, depreciation and amortization) of 20% and 5%, respectively, in the fourth quarter of 2007.(A)
The Company generated $581.0 million of revenues and $94.7 million of EBITDA in the fourth quarter of 2007 compared to $484.3 million and $90.4 million, respectively, in the fourth quarter of 2006. Consolidated operating income in the fourth quarter of 2007 was $71.6 million compared to $73.2 million for the corresponding quarter of 2006. Increasing deepwater capital equipment sales in our Offshore Products segment and growth in our oil sands accommodations business along with contributions from two rental tool acquisitions completed during the third quarter of 2007 resulted in significant year-over-year improvements in revenue and EBITDA. However, consolidated EBITDA was negatively impacted by reduced margins in Drilling Services resulting from lower utilization due to extensive holiday downtime and lower margins in Tubular Services as record OCTG shipments were offset by lower OCTG prices.
The Company recognized an effective tax rate of 30.1% in the fourth quarter of 2007 compared to 31.3% in the fourth quarter of 2006. The effective tax rate in the fourth quarter of 2007 benefited from statutory tax rate changes in Canada; similarly the effective rate in the fourth quarter of 2006 benefited from tax return adjustments and the annualized benefit of lower state effective tax rates. During the fourth quarter, the Company spent $67.6 million in capital expenditures, primarily to expand its major oil sands lodges, and spent $23.4 million repurchasing 705,500 shares of its common stock.
The Company reported revenues of $2.1 billion and EBITDA of $385.5 million for the full year 2007 which resulted in net income of $203.4 million, or $3.99 per diluted share. For the same period in 2006, the Company reported revenues of $1.9 billion and EBITDA of $372.9 million, resulting in net income of $197.6 million, or $3.89 per diluted share. The results for 2007 include a $12.8 million pre-tax gain related to the sale of a portion of the Company's investment in Boots & Coots. Additionally, in 2006, the Company recognized an $11.3 million pre-tax gain from the sale of its workover business to Boots & Coots.
BUSINESS SEGMENT RESULTS
(Unless otherwise noted, the following discussion compares the quarterly results from the fourth quarter of 2007 to the results from the fourth quarter of 2006.)
Well Site Services
Well Site Services generated revenues of $209.1 million and EBITDA of $67.2 million in the fourth quarter of 2007, compared to $158.5 million and $62.9 million, respectively, in the fourth quarter of 2006, representing year-over-year increases of 32% and 7%, respectively. The increase in EBITDA was primarily due to the contributions from the two rental tool acquisitions closed in the third quarter of 2007 and improved results from the oil sands accommodations operations, partially offset by lower revenues and profits from the Company's drilling operations.
For the fourth quarter of 2007, the accommodations business reported revenues of $91.5 million and EBITDA of $29.0 million, compared to revenues and EBITDA of $70.4 million and $23.3 million, respectively, in the fourth quarter of 2006. Accommodations revenue and EBITDA increased 30% and 24%, respectively, primarily due to the significant increase in average available room capacity at the Company's three major oil sands lodges. EBITDA growth in accommodations was partially offset by weaker year-over-year accommodations activity related to conventional Canadian drilling activity and a $5.0 million reduction in EBITDA from accommodation unit sales. Drilling services generated revenues and EBITDA of $35.3 million and $10.1 million in the fourth quarter of 2007, respectively, compared to $37.2 million of revenues and $19.7 million of EBITDA in the fourth quarter 2006. These year-over-year declines in drilling services were primarily the result of reduced utilization due to extensive holiday downtime in West Texas, resulting in lower fixed cost absorption and profit margins. Subsequent to the end of the year, the majority of the Company's idle drilling rigs have gone back to work at comparable rates. Rental tools generated $82.3 million of revenues and $28.1 million of EBITDA in the fourth quarter of 2007 compared to revenue of $50.9 million and EBITDA of $19.9 million in the fourth quarter of 2006. This year-over-year growth was due to two acquisitions completed in the third quarter of 2007 coupled with organic growth in wireline equipment rentals, partially offset by holiday shutdowns, weather delays and declines in Canadian rental tool activity resulting from the 19% year-over-year decrease in industry-wide Canadian drilling and completion activity.
Offshore Products
Offshore Products, in the fourth quarter of 2007, continued to generate year-over-year growth, reporting $141.2 million of revenues and $21.3 million in EBITDA compared to $107.7 million of revenues and $17.1 million in EBITDA in the fourth quarter of 2006. The increase is primarily due to increased revenues and profits from bearing and connector products and drilling equipment deliveries partially offset by project cost overruns recognized in the fourth quarter totaling $5.0 million, before taxes, on a new drilling rig equipment project consisting of three separate systems. Two of the equipment systems were accepted by the customer and shipped prior to year end; the third system is expected to ship during the first quarter of 2008. Backlog totaled $362.2 million at December 31, 2007 which represented a 9% decrease from the $396.0 million reported as of September 30, 2007 due to contract award delays and record fourth quarter revenues.
Tubular Services
Tubular Services generated revenues and EBITDA of $230.6 million and $11.0 million, respectively, during the fourth quarter of 2007 compared to revenues of $218.1 million and EBITDA of $15.6 million in the fourth quarter of 2006. Tubular Services' OCTG shipments increased 16% to a quarterly record level of 137,000 tons from 118,400 tons in the fourth quarter of 2006. Gross margins in the fourth quarter of 2007 declined to 5.7% from 8.5% in the fourth quarter of 2006 because of lower year-over-year OCTG mill pricing and competitive factors. The Company's OCTG inventory declined 27% to $191.4 million at December 31, 2007 from the December 31, 2006 inventory level of $261.8 million. As of December 31, 2007, approximately 77% of Oil States' OCTG inventory was committed to customer orders.
"Our growth in 2007 was led by our deepwater capital equipment business and our accommodations supporting oil sands developments, augmented by two rental tool acquisitions," stated Cindy B. Taylor, Oil States' President and Chief Executive Officer. "The year 2007 marked records for our company in revenues and EBITDA despite reduced profitability from our Tubular Services and West Texas drilling operations and reductions in conventional Canadian drilling and completion activity."
"On February 15, 2008, we took a step to expand our operations and address potential capacity constraints in Offshore Products with the acquisition of a waterfront facility on the Houston ship channel. The new waterfront facility will expand our ability to manufacture, assemble, test and load out larger subsea production and drilling rig equipment thereby expanding our capabilities. Including the contribution from recent acquisitions, our current expectation for first quarter 2008 earnings is in a range of $1.10 to $1.20 per diluted share."
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 -- Offshore Products, Tubular Services and Well Site 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 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 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 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, 2006 filed by Oil States with the SEC on February 28, 2007.
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, 2007 2006 2007 2006 Revenues $580,971 $484,303 $2,088,235 $1,923,357 Costs and expenses: Cost of sales 456,331 373,062 1,602,213 1,467,988 Selling, general and administrative expenses 31,989 27,604 118,421 107,216 Depreciation and amortization expense 21,383 14,578 70,703 54,340 Other operating income (373) (4,180) (888) (4,124) Operating income 71,641 73,239 297,786 297,937 Interest expense (5,191) (4,859) (17,988) (19,389) Interest income 909 836 3,508 2,506 Equity in earnings of unconsolidated affiliates 1,307 2,523 3,350 7,148 Gain on sale of workover services business and resulting equity investment - - 12,774 11,250 Other income 333 86 928 2,195 Income before income taxes 68,999 71,825 300,358 301,647 Income tax provision (20,799) (22,464) (96,986) (104,013) Net income $48,200 $49,361 $203,372 $197,634 Net income per share Basic $0.97 $1.00 $4.11 $3.99 Diluted $0.95 $0.98 $3.99 $3.89 Weighted average number of common shares outstanding Basic 49,730 49,533 49,500 49,519 Diluted 50,994 50,367 50,911 50,773 Oil States International, Inc. Consolidated Balance Sheets (in thousands) Dec. 31, Sep. 30, Dec. 31, 2007 2007 2006 Assets (unaudited) (unaudited) (audited) Current assets Cash and cash equivalents $30,592 $29,201 $28,396 Accounts receivable, net 450,153 414,211 351,701 Inventories, net 349,347 355,704 386,182 Prepaid expenses and other current assets 35,575 33,967 17,710 Total current assets 865,667 833,083 783,989 Property, plant and equipment, net 586,910 538,842 358,716 Goodwill, net 391,644 390,741 331,804 Investments in unconsolidated affiliates 24,778 23,604 38,079 Other noncurrent assets 60,627 75,521 58,506 Total assets $1,929,626 $1,861,791 $1,571,094 Liabilities and stockholders' equity Current liabilities Accounts payable and accrued liabilities $239,119 $252,802 $199,842 Income taxes 43 4,062 11,376 Current portion of long-term debt 4,718 179,659 6,873 Deferred revenue 60,910 46,167 58,645 Other current liabilities 121 739 3,680 Total current liabilities 304,911 483,429 280,416 Long-term debt (B) 487,102 253,376 391,729 Deferred income taxes 40,550 40,482 38,020 Other liabilities 12,236 27,300 21,093 Total liabilities 844,799 804,587 731,258 Stockholders' equity Common stock 522 522 511 Additional paid-in capital 402,091 399,963 372,043 Retained earnings 690,713 642,512 487,627 Accumulated other comprehensive income 73,036 72,365 30,183 Treasury stock (81,535) (58,158) (50,528) Total stockholders' equity 1,084,827 1,057,204 839,836 Total liabilities and stockholders' equity $1,929,626 $1,861,791 $1,571,094 Oil States International, Inc. Segment Data (in thousands) (unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2007 2006 2007 2006 Revenues Accommodations $91,535 $70,389 $312,846 $313,966 Rental Tools 82,321 50,924 260,404 200,609 Drilling and Other 35,268 37,175 143,153 134,523 Workover Services - - - 8,544 Well Site Services 209,124 158,488 716,403 657,642 Offshore Products 141,209 107,699 527,810 389,684 Tubular Services 230,638 218,116 844,022 876,031 Total Revenues $580,971 $484,303 $2,088,235 $1,923,357 EBITDA (A) Accommodations $28,968 $23,268 $109,270 $92,559 Rental Tools 28,138 19,906 96,006 82,184 Drilling and Other (C) 10,092 19,690 66,983 68,458 Workover Services (D) - - - 13,828 Well Site Services 67,198 62,864 272,259 257,029 Offshore Products 21,342 17,092 93,444 66,931 Tubular Services 10,974 15,622 40,763 68,648 Corporate / Other (4,850) (5,152) (20,925) (19,738) Total EBITDA $94,664 $90,426 385,541 $372,870 Operating Income / (Loss) Accommodations $21,056 $18,900 $85,347 $73,643 Rental Tools 20,536 15,457 71,973 65,469 Drilling and Other 5,789 14,685 40,508 54,368 Workover Services - - - 1,872 Well Site Services 47,381 49,042 197,828 195,352 Offshore Products 18,572 14,365 82,460 55,957 Tubular Services 10,494 15,015 38,467 66,486 Corporate / Other (4,806) (5,183) (20,969) (19,858) Total Operating Income $71,641 $73,239 $297,786 $297,937 Oil States International, Inc. Additional Quarterly Segment and Operating Data (unaudited) Three Months Ended December 31, 2007 2006 Supplemental Operating Data Land Drilling Operating Statistics Average Rigs Available 34 32 Utilization 74.3% 85.9% Implied Day Rate ($ in thousands per day) $15.2 $14.7 Implied Daily Cash Margin ($ in thousands per day) $4.3 $7.1 Offshore Products Backlog ($ in millions) $362.2 $349.3 Tubular Services Operating Data Shipments (Tons in thousands) 137.0 118.4 Quarter end Inventory ($ in thousands) $191,374 $261,785 (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. 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 Ended December 31, December 31, 2007 2006 2007 2006 Net income $48,200 $49,361 $203,372 $197,634 Income tax expense 20,799 22,464 96,986 104,013 Depreciation and amortization 21,383 14,578 70,703 54,340 Interest income (909) (836) (3,508) (2,506) Interest expense 5,191 4,859 17,988 19,389 EBITDA $94,664 $90,426 $385,541 $372,870 (B) As of December 31, 2007, the Company had approximately $185.3 million available under its revolving credit facility. (C) Includes the $12.8 million gain from the sale of Boots & Coots stock completed in April 2007. (D) Reflects two months' results for the workover services business, which was sold to Boots & Coots International Well Control, Inc. effective on March 1, 2006 and also includes the $11.3 million non-cash, pre-tax gain from the sale of the workover services business to Boots & Coots International Well Control, Inc.
