OIS - Oil States Announces Second Quarter 2019 Results of Operations

July, 29 2019 07:00 AM Oil States International Inc.

HOUSTON, July 29, 2019 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE: OIS) reported a net loss for the second quarter of 2019 of $9.7 million, or $0.16 per diluted share, on revenues of $264.7 million and Consolidated EBITDA (Note A) of $26.5 million. The reported second quarter 2019 results included severance and downsizing charges totaling $1.3 million ($1.0 million after-tax, or $0.02 per diluted share). These results compare to reported net income for the second quarter of 2018 of $2.7 million, or $0.05 per diluted share, on revenues of $285.8 million and Consolidated EBITDA of $40.2 million.

Second quarter 2019 highlights included:

Offshore/Manufactured Products backlog increase of 21%, resulting in a 1.6x book-to-bill ratio for the quarter
Cash flow from operations totaling $31.7 million
Revolving credit facility net repayments totaling $21.1 million

Oil States’ President and Chief Executive Officer, Cindy B. Taylor, stated, "Our second quarter results were supported by sequential improvements in commodity prices, well completions, and stronger demand for offshore production-related equipment. Our Offshore/Manufactured Products segment was a stand-out in the quarter, exceeding the upper-end of our previously provided revenue and EBITDA guidance ranges. We received two notable project awards during the quarter, leading to a 21% increase in backlog and a 1.6x book-to-bill ratio for the quarter, further evidencing improving demand for global offshore projects. As of June 30, 2019 our backlog totaled $283 million, the highest level reported since June 30, 2016. Our Well Site Services segment revenues increased 7% sequentially due to stronger international activity levels in our Completion Services business. Our Downhole Technologies segment results were negatively impacted by continued costs associated with the development of our integrated perforating gun system, the ongoing costs of field trials and $1.4 million of inventory write-offs due to product design changes."

BUSINESS SEGMENT RESULTS

(See Segment Data tables)

Offshore/Manufactured Products

Offshore/Manufactured Products generated revenues and Segment EBITDA of $102.0 million and $15.8 million, respectively, in the second quarter of 2019 compared to revenues of $87.9 million and Segment EBITDA of $10.9 million reported in the first quarter of 2019. Revenues increased 16% while Segment EBITDA increased 45% sequentially, due to an increase in project-driven and short-cycle product sales, coupled with improved facility cost absorption. Segment EBITDA margin in the second quarter of 2019 was 16% compared to 12% in the first quarter of 2019.

Notable backlog additions during the second quarter of 2019 included production facility equipment destined for Southeast Asia and connector products destined for the Middle East. Backlog increased 21% sequentially to total $283 million at June 30, 2019 compared to $234 million at March 31, 2019, and $165 million at June 30, 2018. Second quarter 2019 bookings totaled $163 million, yielding a book-to-bill ratio of 1.6x.

Well Site Services

Well Site Services generated revenues of $116.0 million, Segment EBITDA (Note B) of $18.3 million and a Segment EBITDA margin of 16% in the second quarter of 2019. This compares favorably to revenues of $108.4 million, Segment EBITDA of $13.2 million and a Segment EBITDA margin of 12% reported in the first quarter of 2019. Results in the second quarter of 2019 benefited from both improved international activity and improved margins in our U.S. operations.

Downhole Technologies

Downhole Technologies generated revenues of $46.7 million and Segment EBITDA of $3.8 million in the second quarter of 2019 compared to revenues and Segment EBITDA of $54.3 million and $9.1 million, respectively, in the first quarter of 2019. Sequential declines were realized as the segment continued to absorb costs associated with field trials for its integrated gun system coupled with $1.4 million of inventory write-offs due to product design changes. Segment EBITDA margin was 8% in the second quarter of 2019 compared to 17% in the first quarter of 2019.

Income Taxes

The Company recognized an effective tax rate benefit of 2.6% in the second quarter of 2019 which compared to an effective tax rate benefit of 1.9% in the first quarter of 2019. The effective tax rate benefit in the second quarter of 2019 was lower than the statutory rate due to certain non-deductible items.

Financial Condition

As of June 30, 2019, $99.2 million was outstanding under the Company’s revolving credit facility, while cash totaled $12.4 million. The Company repaid $21.1 million of outstanding borrowings under its revolving credit facility during the second quarter of 2019. As of June 30, 2019, the total amount available to be drawn under the revolving credit facility was $96.0 million.

Conference Call Information

The call is scheduled for Monday, July 29, 2019 at 10:00 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 48858900. 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 48858900.

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

Six Months Ended

June 30, 2019

March 31, 2019

June 30, 2018

June 30, 2019

June 30, 2018
Revenues:









Products
$
124,965


$
116,328


$
136,182


$
241,293


$
265,008

Services
139,720


134,283


149,663


274,003


274,413


264,685


250,611


285,845


515,296


539,421











Costs and expenses:









Product costs
95,289


89,268


95,324


184,557


188,300

Service costs
112,823


110,610


118,079


223,433


214,993

Cost of revenues (exclusive of depreciation and amortization expense presented below)
208,112


199,878


213,403


407,990


403,293

Selling, general and administrative expense
31,484


30,108


35,919


61,592


70,114

Depreciation and amortization expense
31,883


31,551


30,922


63,434


60,112

Other operating income, net
(399
)

(86
)

(3,099
)

(485
)

(1,884
)

271,080


261,451


277,145


532,531


531,635

Operating income (loss)
(6,395
)

(10,840
)

8,700


(17,235
)

7,786











Interest expense, net
(4,617
)

(4,752
)

(4,790
)

(9,369
)

(9,244
)
Other income
1,009


667


571


1,676


1,218

Income (loss) before income taxes
(10,003
)

(14,925
)

4,481


(24,928
)

(240
)
Income tax (provision) benefit
263


277


(1,739
)

540


(510
)
Net income (loss)
$
(9,740
)

$
(14,648
)

$
2,742


$
(24,388
)

$
(750
)










Net income (loss) per share:









Basic
$
(0.16
)

$
(0.25
)

$
0.05


$
(0.41
)

$
(0.01
)
Diluted
$
(0.16
)

$
(0.25
)

$
0.05


$
(0.41
)

$
(0.01
)










Weighted average number of common shares outstanding:








Basic
59,406


59,258


59,005


59,332


58,396

Diluted
59,406


59,258


59,005


59,332


58,396

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)


June 30, 2019

December 31, 2018

(Unaudited)


ASSETS



Current assets:



Cash and cash equivalents
$
12,406


$
19,316

Accounts receivable, net
263,453


283,607

Inventories, net
210,006


209,393

Prepaid expenses and other current assets
25,514


21,715

Total current assets
511,379


534,031





Property, plant, and equipment, net
520,324


540,427

Operating lease assets, net
48,235


—

Goodwill, net
646,984


647,018

Other intangible assets, net
242,886


255,301

Other noncurrent assets
27,893


27,044

Total assets
$
1,997,701


$
2,003,821





LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:



Current portion of long-term debt
$
25,583


$
25,561

Accounts payable
83,909


77,511

Accrued liabilities
53,478


60,730

Current operating lease liabilities
8,997


—

Income taxes payable
4,243


3,072

Deferred revenue
15,360


14,160

Total current liabilities
191,570


181,034





Long-term debt
272,784


306,177

Long-term operating lease liabilities
39,268


—

Deferred income taxes
50,224


53,831

Other noncurrent liabilities
24,127


23,011

Total liabilities
577,973


564,053





Stockholders' equity:



Common stock
726


718

Additional paid-in capital
1,106,340


1,097,758

Retained earnings
1,005,130


1,029,518

Accumulated other comprehensive loss
(71,260
)

(71,397
)
Treasury stock
(621,208
)

(616,829
)
Total stockholders' equity
1,419,728


1,439,768

Total liabilities and stockholders' equity
$
1,997,701


$
2,003,821

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)


Six Months Ended June 30,

2019

2018
Cash flows from operating activities:



Net loss
$
(24,388
)

$
(750
)
Adjustments to reconcile net loss to net cash provided by operating activities:



Depreciation and amortization expense
63,434


60,112

Stock-based compensation expense
8,590


10,861

Amortization of debt discount and deferred financing costs
3,894


3,613

Deferred income tax provision (benefit)
(3,495
)

481

Gain on disposals of assets
(1,245
)

(927
)
Other, net
141


2,520

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



Accounts receivable
19,884


(19,134
)
Inventories
(534
)

(1,768
)
Accounts payable and accrued liabilities
1,200


(2,251
)
Income taxes payable
943


(31
)
Other operating assets and liabilities, net
(2,421
)

(5,792
)
Net cash flows provided by operating activities
66,003


46,934





Cash flows from investing activities:



Capital expenditures
(31,577
)

(38,261
)
Acquisitions of businesses, net of cash acquired
—


(379,676
)
Proceeds from disposition of property, plant and equipment
2,151


1,197

Other, net
(1,459
)

(985
)
Net cash flows used in investing activities
(30,885
)

(417,725
)




Cash flows from financing activities:



Issuance of 1.50% convertible senior notes
—


200,000

Revolving credit facility borrowings
119,252


704,469

Revolving credit facility repayments
(156,208
)

(546,564
)
Other debt and finance lease repayments, net
(301
)

(266
)
Payment of financing costs
(8
)

(7,366
)
Purchase of treasury stock
(757
)

—

Shares added to treasury stock as a result of net share settlements due to vesting of restricted stock
(3,622
)

(4,022
)
Net cash flows provided by (used in) financing activities
(41,644
)

346,251





Effect of exchange rate changes on cash and cash equivalents
(384
)

183

Net change in cash and cash equivalents
(6,910
)

(24,357
)
Cash and cash equivalents, beginning of period
19,316


53,459

Cash and cash equivalents, end of period
$
12,406


$
29,102

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA
(In Thousands)
(unaudited)


Three Months Ended

Six Months Ended

June 30, 2019

March 31, 2019

June 30, 2018

June 30, 2019

June 30, 2018
Revenues:









Well Site Services:









Completion Services
$
103,320


$
100,642


$
108,368


$
203,962


$
191,208

Drilling Services
12,646


7,750


16,756


20,396


34,315

Total Well Site Services
115,966


108,392


125,124


224,358


225,523

Downhole Technologies
46,740


54,290


59,274


101,030


105,055

Offshore/Manufactured Products⁽¹⁾:









Project-driven products
38,517


27,245


35,225


65,762


76,024

Short-cycle products
35,011


32,013


37,348


67,024


77,766

Other products and services
28,451


28,671


28,874


57,122


55,053

Total Offshore/Manufactured Products
101,979


87,929


101,447


189,908


208,843

Total revenues
$
264,685


$
250,611


$
285,845


$
515,296


$
539,421











Operating income (loss):









Well Site Services:









Completion Services^(2,3,4)
$
(507
)

$
(3,494
)

$
1,204


$
(4,001
)

$
(3,267
)
Drilling Services
(2,601
)

(4,559
)

(2,957
)

(7,160
)

(5,268
)
Total Well Site Services
(3,108
)

(8,053
)

(1,753
)

(11,161
)

(8,535
)
Downhole Technologies⁽⁴⁾
(1,462
)

4,054


11,600


2,592


19,654

Offshore/Manufactured Products^(2,3,4)
9,809


5,259


12,664


15,068


25,116

Corporate⁽⁴⁾
(11,634
)

(12,100
)

(13,811
)

(23,734
)

(28,449
)
Total operating income (loss)
$
(6,395
)

$
(10,840
)

$
8,700


$
(17,235
)

$
7,786

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

(2) Operating income (loss) for the three months ended June 30, 2019 included severance and downsizing charges of $0.3 million related to the Completion Services business and $1.0 million related to the Offshore/Manufactured Products segment.

(3) 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.

(4) Operating income (loss) for the six months ended June 30, 2018 included transaction-related expenses of $2.4 million and $0.2 million related to Corporate and the Downhole Technologies segment, respectively, as well as $2.4 million of legal fees incurred for patent defense in the Downhole Technologies segment, severance and other downsizing charges of $0.8 million related to the Offshore/Manufactured Products segment, and $0.7 million in reserves for prior years' FLSA claims settlements related to the Completion Services business.



OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

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


Three Months Ended

Six Months Ended

June 30, 2019

March 31, 2019

June 30, 2018

June 30, 2019

June 30, 2018
Well Site Services:









*Completion Services:*









Operating income (loss)
$
(507
)

$
(3,494
)

$
1,204


$
(4,001
)

$
(3,267
)
Depreciation and amortization expense
17,248


17,286


16,816


34,534


32,198

Other income
809


581


526


1,390


795

EBITDA
$
17,550


$
14,373


$
18,546


$
31,923


$
29,726











*Drilling Services:*









Operating loss
$
(2,601
)

$
(4,559
)

$
(2,957
)

$
(7,160
)

$
(5,268
)
Depreciation and amortization expense
3,224


3,341


3,551


6,565


7,419

Other income
126


21


5


147


380

EBITDA
$
749


$
(1,197
)

$
599


$
(448
)

$
2,531











Total Well Site Services:









Operating loss
$
(3,108
)

$
(8,053
)

$
(1,753
)

$
(11,161
)

$
(8,535
)
Depreciation and amortization expense
20,472


20,627


20,367


41,099


39,617

Other income
935


602


531


1,537


1,175

Segment EBITDA
$
18,299


$
13,176


$
19,145


$
31,475


$
32,257











Downhole Technologies:









Operating income (loss)
$
(1,462
)

$
4,054


$
11,600


$
2,592


$
19,654

Depreciation and amortization expense
5,256


5,066


4,532


10,322


8,416

Other income (expense)
14


—


—


14


(13
)
Segment EBITDA
$
3,808


$
9,120


$
16,132


$
12,928


$
28,057











Offshore/Manufactured Products:









Operating income
$
9,809


$
5,259


$
12,664


$
15,068


$
25,116

Depreciation and amortization expense
5,973


5,587


5,786


11,560


11,600

Other income
60


65


40


125


56

Segment EBITDA
$
15,842


$
10,911


$
18,490


$
26,753


$
36,772











Corporate:









Operating loss
$
(11,634
)

$
(12,100
)

$
(13,811
)

$
(23,734
)

$
(28,449
)
Depreciation and amortization expense
182


271


237


453


479

Other expense
—


—


—


—


—

EBITDA
$
(11,452
)

$
(11,829
)

$
(13,574
)

$
(23,281
)

$
(27,970
)

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

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


Three Months Ended

Six Months Ended

June 30, 2019

March 31, 2019

June 30, 2018

June 30, 2019

June 30, 2018










Net income (loss)
$
(9,740
)

$
(14,648
)

$
2,742


$
(24,388
)

$
(750
)
Income tax provision (benefit)
(263
)

(277
)

1,739


(540
)

510

Depreciation and amortization expense
31,883


31,551


30,922


63,434


60,112

Interest expense, net
4,617


4,752


4,790


9,369


9,244

Consolidated EBITDA (A)
$
26,497


$
21,378


$
40,193


$
47,875


$
69,116

(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

June 30, 2019

March 31, 2019

June 30, 2018
Supplemental operating data:











Offshore/Manufactured Products backlog ($ in millions)
$
282.9


$
234.0


$
165.3













Land drilling operating statistics:











Average rigs available

34



34



34

Utilization

20.2
%


11.9
%


30.1
%
Implied day rate ($ in thousands per day)
$
20.2


$
21.2


$
18.0

Implied daily cash margin (loss) ($ in thousands per day)
$
1.8


$
(2.2
)

$
1.0

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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