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 third and fourth 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 
Services157,575  154,323  103,177  586,311  366,825 
 274,118  274,594  183,710  1,088,133  670,627 
          
Costs and expenses:         
Product costs90,331  87,822  59,214  366,453  219,466 
Service costs125,231  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 expenses35,671  32,285  30,761  138,070  114,816 
Depreciation and amortization expense32,832  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 income1,212  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:        
Basic59,032  59,026  49,987  58,712  50,139 
Diluted59,032  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, net283,607  216,139 
Inventories, net209,393  168,285 
Prepaid expenses and other current assets21,715  18,054 
Total current assets534,031  455,937 
    
Property, plant and equipment, net540,427  498,890 
Goodwill, net647,018  268,009 
Other intangible assets, net255,301  50,265 
Other noncurrent assets27,044  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 payable77,511  49,089 
Accrued liabilities60,730  45,889 
Income taxes payable3,072  1,647 
Deferred revenue14,160  18,234 
Total current liabilities181,034  115,270 
    
Long-term debt306,177  4,870 
Deferred income taxes53,831  24,718 
Other noncurrent liabilities23,011  23,940 
Total liabilities564,053  168,798 
    
Stockholders' equity:   
Common stock718  627 
Additional paid-in capital1,097,758  754,607 
Retained earnings1,029,518  1,048,623 
Accumulated other comprehensive loss(71,397) (58,493)
Treasury stock, at cost(616,829) (612,651)
Total stockholders' equity1,439,768  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 expense123,530  107,667 
Stock-based compensation expense22,649  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 costs7,408  1,158 
Other, net1,411  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 liabilities5,796  14,048 
Income taxes payable802  (4,126)
Other operating assets and liabilities, net(5,469) (9,961)
Net cash flows provided by operating activities103,170  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 equipment3,659  2,134 
Proceeds from flood insurance claims3,850   
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 notes200,000   
Revolving credit facility borrowings835,467  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 activities324,058  (65,060)
    
Effect of exchange rate changes on cash and cash equivalents4  1,952 
Net change in cash and cash equivalents(34,143) (15,341)
Cash and cash equivalents, beginning of year53,459  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 Services18,000  16,920  15,342  69,235  54,462 
Total Well Site Services126,142  128,589  82,017  480,254  288,714 
Downhole Technologies52,187  56,571    213,813   
Offshore/Manufactured Products(1) -         
Project-driven products22,593  22,277  37,345  120,894  126,960 
Short-cycle products32,431  34,170  36,591  144,367  147,463 
Other products and services40,765  32,987  27,757  128,805  107,490 
Total Offshore/Manufactured Products95,789  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) $(45,169)
Drilling Services(1,889) (2,206) (2,670) (9,363) (13,909)
Total Well Site Services(2,998) (5,477) (8,879) (17,010) (59,078)
Downhole Technologies566  6,485    26,705   
Offshore/Manufactured Products6,729  7,069  10,695  38,914  38,155 
Corporate(14,237) (11,799) (15,675) (54,485) (52,949)
Total operating loss$(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 expense17,333  16,884  15,128  66,415  63,528 
Other income1,209  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 expense3,456  3,479  4,230  14,354  18,513 
Other income1  (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 expense20,789  20,363  19,358  80,769  82,041 
Other income1,210  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 expense5,651  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 expense6,181  5,426  5,505  23,207  24,596 
Other income9  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) $(52,949)
Depreciation and amortization expense211  215  252  905  1,030 
EBITDA$(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 expense32,832  30,586  25,115  123,530  107,667 
Interest income(47) (70) (116) (319) (359)
Interest expense4,955  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 tickets7,914  8,485  5,301 
Average revenue per ticket ($ in thousands)$13.7  $13.2  $12.6 
      
Land drilling operating statistics:     
Average rigs available34  34  34 
Utilization29.6% 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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