OIS - Oil States Announces Fourth Quarter 2018 Results of Operations

February, 13 2019 05:50 PM Oil States International Inc.

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

Services
157,575


154,323


103,177


586,311


366,825


274,118


274,594


183,710


1,088,133


670,627











Costs and expenses:









Product costs
90,331


87,822


59,214


366,453


219,466

Service costs
125,231


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 expenses
35,671


32,285


30,761


138,070


114,816

Depreciation and amortization expense
32,832


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 income
1,212


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:








Basic
59,032


59,026


49,987


58,712


50,139

Diluted
59,032


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, net
283,607


216,139

Inventories, net
209,393


168,285

Prepaid expenses and other current assets
21,715


18,054

Total current assets
534,031


455,937





Property, plant and equipment, net
540,427


498,890

Goodwill, net
647,018


268,009

Other intangible assets, net
255,301


50,265

Other noncurrent assets
27,044


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 payable
77,511


49,089

Accrued liabilities
60,730


45,889

Income taxes payable
3,072


1,647

Deferred revenue
14,160


18,234

Total current liabilities
181,034


115,270





Long-term debt
306,177


4,870

Deferred income taxes
53,831


24,718

Other noncurrent liabilities
23,011


23,940

Total liabilities
564,053


168,798





Stockholders' equity:



Common stock
718


627

Additional paid-in capital
1,097,758


754,607

Retained earnings
1,029,518


1,048,623

Accumulated other comprehensive loss
(71,397
)

(58,493
)
Treasury stock, at cost
(616,829
)

(612,651
)
Total stockholders' equity
1,439,768


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 expense
123,530


107,667

Stock-based compensation expense
22,649


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 costs
7,408


1,158

Other, net
1,411


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 liabilities
5,796


14,048

Income taxes payable
802


(4,126
)
Other operating assets and liabilities, net
(5,469
)

(9,961
)
Net cash flows provided by operating activities
103,170


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 equipment
3,659


2,134

Proceeds from flood insurance claims
3,850


–

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 notes
200,000


–

Revolving credit facility borrowings
835,467


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 activities
324,058


(65,060
)




Effect of exchange rate changes on cash and cash equivalents
4


1,952

Net change in cash and cash equivalents
(34,143
)

(15,341
)
Cash and cash equivalents, beginning of year
53,459


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 Services
18,000


16,920


15,342


69,235


54,462

Total Well Site Services
126,142


128,589


82,017


480,254


288,714

Downhole Technologies
52,187


56,571


–


213,813


–

Offshore/Manufactured Products⁽¹⁾ -









Project-driven products
22,593


22,277


37,345


120,894


126,960

Short-cycle products
32,431


34,170


36,591


144,367


147,463

Other products and services
40,765


32,987


27,757


128,805


107,490

Total Offshore/Manufactured Products
95,789


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 Technologies
566


6,485


–


26,705


–

Offshore/Manufactured Products
6,729


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 expense
17,333


16,884


15,128


66,415


63,528

Other income
1,209


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 expense
3,456


3,479


4,230


14,354


18,513

Other income
1


(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 expense
20,789


20,363


19,358


80,769


82,041

Other income
1,210


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 expense
5,651


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 expense
6,181


5,426


5,505


23,207


24,596

Other income
9


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 expense
211


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 expense
32,832


30,586


25,115


123,530


107,667

Interest income
(47
)

(70
)

(116
)

(319
)

(359
)
Interest expense
4,955


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 tickets
7,914


8,485


5,301

Average revenue per ticket ($ in thousands)
$
13.7


$
13.2


$
12.6







Land drilling operating statistics:





Average rigs available
34


34


34

Utilization
29.6
%

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.

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

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