OIS - Oil States Announces First Quarter 2019 Results of Operations

April, 24 2019 05:00 PM Oil States International Inc.

HOUSTON, April 24, 2019 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE: OIS) reported a net loss for the first quarter of 2019 of $14.6 million, or $0.25 per diluted share on revenues of $250.6 million and Consolidated EBITDA (Note A) of $21.4 million. The reported first quarter 2019 results included severance charges totaling $1.0 million ($0.8 million after-tax, or $0.01 per diluted share).

First quarter 2019 highlights included:

Offshore/Manufactured Products backlog increase of 31%, resulting in a 1.63x book-to-bill ratio for the quarter

Cash flow from operations totaling $34.3 million

Revolving credit facility net repayments totaling $15.9 million

Oil States’ President and Chief Executive Officer, Cindy B. Taylor, stated, "Following a volatile fourth quarter regarding commodity prices, we entered the first quarter with a heightened level of uncertainty. As the quarter progressed, our outlook improved given commodity price increases and a relatively stable, if not improving, level of customer spending activity. All of our business segments completed the quarter at or near the high-end of our previous guidance. Our Completion Services revenues declined 7% sequentially due to rig count reductions in the U.S. coupled with an adverse service mix in the quarter. Our land drilling operations declined at a disproportionate rate as customers temporarily shut-down their drilling programs following the decline in commodity prices in the fourth quarter of 2018. However, our Well Site Services and Downhole Technologies segments experienced improving product and service demand later in the quarter. We were particularly encouraged by our Offshore/Manufactured Products bookings, which led to a 1.63x book-to-bill ratio for the quarter, evidencing improving global offshore demand."

BUSINESS SEGMENT RESULTS
(See Segment Data tables)

Well Site Services
Well Site Services generated revenues of $108.4 million, Segment EBITDA (Note B) of $13.2 million and a Segment EBITDA margin of 12% in the first quarter of 2019. This compares to revenues of $126.1 million, Segment EBITDA of $19.0 million and a Segment EBITDA margin of 15% in the fourth quarter of 2018. Results in the first quarter of 2019 were negatively impacted by disproportionately lower utilization of the land drilling rigs as customers temporarily shut-down their drilling programs following the material decline in crude oil prices in the fourth quarter of 2018. Utilization in the land drilling business averaged only 12% in the first quarter of 2019 compared to 30% in the fourth quarter of 2018.

Downhole Technologies
Downhole Technologies generated revenues of $54.3 million and Segment EBITDA of $9.1 million in the first quarter of 2019 compared to revenues and Segment EBITDA of $52.2 million and $6.2 million, respectively, in the fourth quarter of 2018. Revenues and Segment EBITDA increased 4% and 47%, respectively, on a sequential basis due to increased demand for completion, intervention and perforating products. Segment EBITDA margin was 17% in the first quarter of 2019 compared to 12% in the fourth quarter of 2018. First quarter 2019 EBITDA margin benefited from improved manufacturing facility cost absorption due to higher levels of throughput and product demand, as well as the non-recurrence of $2.4 million of patent defense costs recorded in the fourth quarter of 2018.

Offshore/Manufactured Products
Offshore/Manufactured Products generated revenues and Segment EBITDA of $87.9 million and $10.9 million, respectively, in the first quarter of 2019 compared to revenues of $95.8 million and Segment EBITDA of $12.9 million in the fourth quarter of 2018. Revenues decreased 8% while Segment EBITDA decreased 16% sequentially, due to a decrease in other product and service revenues, partially offset by higher project-driven product sales. Segment EBITDA margin in the first quarter of 2019 was 12% compared to 13% in the fourth quarter of 2018.

Backlog increased 31% sequentially to total $234 million at March 31, 2019 compared to $179 million at December 31, 2018. First quarter 2019 bookings totaled $144 million, yielding a book-to-bill ratio of 1.63x.

Income Taxes
The Company recognized an effective tax rate benefit of 1.9% in the first quarter of 2019 which compared to an effective tax rate provision of 5.1% in the fourth quarter of 2018. The effective tax rate benefit in the first quarter of 2019 was lower than the statutory rate due to certain non-deductible items.

Financial Condition
As of March 31, 2019, $120.2 million was outstanding under the Company’s revolving credit facility, while cash totaled $15.3 million. The Company had access to $133.1 million of revolving credit facility availability as of March 31, 2019.

Conference Call Information
The call is scheduled for Thursday, April 25, 2019 at 9:00 am Central Time, 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 48533728. 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 48533728.

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, 2018, 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

March 31, 2019

December 31, 2018

March 31, 2018
Revenues:





Products
$
116,328


$
116,543


$
128,826

Services
134,283


157,575


124,750


250,611


274,118


253,576







Costs and expenses:





Product costs
89,268


90,331


92,976

Service costs
110,610


125,231


96,914

Cost of revenues (exclusive of depreciation and amortization expense presented below)
199,878


215,562


189,890

Selling, general and administrative expense
30,108


35,671


34,195

Depreciation and amortization expense
31,551


32,832


29,190

Other operating (income) expense, net
(86
)

(7
)

1,215


261,451


284,058


254,490

Operating loss
(10,840
)

(9,940
)

(914
)






Interest expense, net
(4,752
)

(4,908
)

(4,454
)
Other income
667


1,212


647

Loss before income taxes
(14,925
)

(13,636
)

(4,721
)
Income tax (provision) benefit
277


(700
)

1,229

Net loss
$
(14,648
)

$
(14,336
)

$
(3,492
)






Net loss per share:





Basic
$
(0.25
)

$
(0.24
)

$
(0.06
)
Diluted
$
(0.25
)

$
(0.24
)

$
(0.06
)






Weighted average number of common shares outstanding:







Basic
59,258


59,032


57,787

Diluted
59,258


59,032


57,787

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)


March 31, 2019

December 31, 2018

(Unaudited)


ASSETS



Current assets:



Cash and cash equivalents
$
15,309


$
19,316

Accounts receivable, net
262,296


283,607

Inventories, net
207,179


209,393

Prepaid expenses and other current assets
24,041


21,715

Total current assets
508,825


534,031





Property, plant, and equipment, net
533,994


540,427

Operating lease assets, net
49,171


—

Goodwill, net
647,185


647,018

Other intangible assets, net
248,911


255,301

Other noncurrent assets
29,141


27,044

Total assets
$
2,017,227


$
2,003,821





LIABILITIES AND STOCKHOLDERS’ EQUITY



Current liabilities:



Current portion of long-term debt
$
25,561


$
25,561

Accounts payable
78,688


77,511

Accrued liabilities
48,833


60,730

Current operating lease liabilities
8,712


—

Income taxes payable
4,934


3,072

Deferred revenue
12,899


14,160

Total current liabilities
179,627


181,034





Long-term debt
292,072


306,177

Long-term operating lease liabilities
40,311


—

Deferred income taxes
52,370


53,831

Other noncurrent liabilities
25,203


23,011

Total liabilities
589,583


564,053





Stockholders’ equity:



Common stock
725


718

Additional paid-in capital
1,102,176


1,097,758

Retained earnings
1,014,870


1,029,518

Accumulated other comprehensive loss
(68,931
)

(71,397
)
Treasury stock
(621,196
)

(616,829
)
Total stockholders’ equity
1,427,644


1,439,768

Total liabilities and stockholders’ equity
$
2,017,227


$
2,003,821

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)


Three Months Ended March 31,

2019

2018
Cash flows from operating activities:



Net loss
$
(14,648
)

$
(3,492
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:



Depreciation and amortization expense
31,551


29,190

Stock-based compensation expense
4,425


5,149

Amortization of debt discount and deferred financing costs
1,937


1,749

Deferred income tax provision (benefit)
(1,513
)

1,807

Gain on disposals of assets
(418
)

(493
)
Other, net
(340
)

2,061

Changes in operating assets and liabilities, net of effect from acquired businesses:



Accounts receivable
21,893


(27,094
)
Inventories
2,735


1,719

Accounts payable and accrued liabilities
(9,576
)

(19,905
)
Income taxes payable
1,878


645

Other operating assets and liabilities, net
(3,632
)

(3,587
)
Net cash flows provided by (used in) operating activities
34,292


(12,251
)




Cash flows from investing activities:



Capital expenditures
(17,922
)

(14,238
)
Acquisitions of businesses, net of cash acquired
—


(379,676
)
Proceeds from disposition of property, plant and equipment
368


540

Other, net
(304
)

(289
)
Net cash flows used in investing activities
(17,858
)

(393,663
)




Cash flows from financing activities:



Issuance of 1.50% convertible senior notes
—


200,000

Revolving credit facility borrowings
57,874


622,369

Revolving credit facility repayments
(73,774
)

(434,369
)
Other debt and capital lease repayments, net
(142
)

(132
)
Payment of financing costs
—


(6,712
)
Purchase of treasury stock
(757
)

—

Shares added to treasury stock as a result of net share settlements due to vesting of restricted stock
(3,610
)

(3,939
)
Net cash flows provided by (used in) financing activities
(20,409
)

377,217





Effect of exchange rate changes on cash and cash equivalents
(32
)

383

Net change in cash and cash equivalents
(4,007
)

(28,314
)
Cash and cash equivalents, beginning of period
19,316


53,459

Cash and cash equivalents, end of period
$
15,309


$
25,145

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA
(In Thousands)
(unaudited)


Three Months Ended

March 31, 2019

December 31, 2018

March 31, 2018
Revenues:





Well Site Services:





Completion Services
$
100,642


$
108,142


$
82,840

Drilling Services
7,750


18,000


17,559

Total Well Site Services
108,392


126,142


100,399

Downhole Technologies
54,290


52,187


45,781

Offshore/Manufactured Products⁽¹⁾:





Project-driven products
27,245


22,593


40,799

Short-cycle products
32,013


32,431


40,418

Other products and services
28,671


40,765


26,179

Total Offshore/Manufactured Products
87,929


95,789


107,396

Total revenues
$
250,611


$
274,118


$
253,576







Operating income (loss):





Well Site Services:





Completion Services^(2,3)
$
(3,494
)

$
(1,109
)

$
(4,471
)
Drilling Services
(4,559
)

(1,889
)

(2,311
)
Total Well Site Services
(8,053
)

(2,998
)

(6,782
)
Downhole Technologies^(3,4)
4,054


566


8,054

Offshore/Manufactured Products^(2,3,4)
5,259


6,729


12,452

Corporate^(3,4)
(12,100
)

(14,237
)

(14,638
)
Total operating loss
$
(10,840
)

$
(9,940
)

$
(914
)

(1) Disaggregated revenue data is provided to supplement the Segment Data.

(2) Operating income (loss) for the three months ended March 31, 2019 included severance charges of $0.8 million related to the Completion Services business and $0.3 million related to the Offshore/Manufactured Products segment.

(3) Operating income (loss) for the three months ended December 31, 2018 included severance and other downsizing charges of $0.2 million and $0.7 million related to the Completion Services business and Offshore/Manufactured Products segment, respectively, $2.4 million of patent defense costs related to the Downhole Technologies segment, and $0.1 million and $0.6 million of transaction costs related to the Downhole Technologies segment and Corporate, respectively.

(4) Operating income (loss) for the three months ended March 31, 2018 included transaction costs of $2.4 million and $0.2 million related to Corporate and the Downhole Technologies segment, respectively, as well as severance and other downsizing charges of $0.8 million related to the Offshore/Manufactured Products segment.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

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


Three Months Ended

March 31, 2019

December 31, 2018

March 31, 2018
Well Site Services:





*Completion Services:*





Operating loss
$
(3,494
)

$
(1,109
)

$
(4,471
)
Depreciation and amortization expense
17,286


17,333


15,382

Other income
581


1,209


269

EBITDA
$
14,373


$
17,433


$
11,180







*Drilling Services:*





Operating loss
$
(4,559
)

$
(1,889
)

$
(2,311
)
Depreciation and amortization expense
3,341


3,456


3,868

Other income
21


1


375

EBITDA
$
(1,197
)

$
1,568


$
1,932







Total Well Site Services:





Operating loss
$
(8,053
)

$
(2,998
)

$
(6,782
)
Depreciation and amortization expense
20,627


20,789


19,250

Other income
602


1,210


644

Segment EBITDA
$
13,176


$
19,001


$
13,112







Downhole Technologies:





Operating income
$
4,054


$
566


$
8,054

Depreciation and amortization expense
5,066


5,651


3,884

Other expense
—


(7
)

(13
)
Segment EBITDA
$
9,120


$
6,210


$
11,925







Offshore/Manufactured Products:





Operating income
$
5,259


$
6,729


$
12,452

Depreciation and amortization expense
5,587


6,181


5,814

Other income
65


9


16

Segment EBITDA
$
10,911


$
12,919


$
18,282







Corporate:





Operating loss
$
(12,100
)

$
(14,237
)

$
(14,638
)
Depreciation and amortization expense
271


211


242

EBITDA
$
(11,829
)

$
(14,026
)

$
(14,396
)

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

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


Three Months Ended

March 31, 2019

December 31, 2018

March 31, 2018






Net loss
$
(14,648
)

$
(14,336
)

$
(3,492
)
Income tax provision (benefit)
(277
)

700


(1,229
)
Depreciation and amortization expense
31,551


32,832


29,190

Interest income
(45
)

(47
)

(79
)
Interest expense
4,797


4,955


4,533

Consolidated EBITDA (A)
$
21,378


$
24,104


$
28,923

(A) The term Consolidated EBITDA consists of net loss 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 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, 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

March 31, 2019

December 31, 2018

March 31, 2018
Supplemental operating data:





Offshore/Manufactured Products backlog ($ in millions)
$
234.0


$
178.6


$
156.6







Land drilling operating statistics:





Average rigs available
34


34


34

Utilization
11.9
%

29.6
%

31.1
%
Implied day rate ($ in thousands per day)
$
21.2


$
19.5


$
18.5

Implied daily cash margin (loss) ($ in thousands per day)
$
(2.2
)

$
2.1


$
2.2

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.

Company Name:	Oil States International Inc.
Stock Symbol:	OIS
Market:	NYSE
Website:	oilstatesintl.com

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