July 30, 2018 - 7:00 AM EDT
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Oil States Announces Second Quarter 2018 Results

HOUSTON, July 30, 2018 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income for the second quarter 2018 of $2.7 million, or $0.05 per diluted share. These results compare to a reported net loss for the second quarter of 2017 of $14.2 million, or $0.28 per diluted share, which included pre-tax charges of $0.8 million ($0.6 million after-tax, or $0.01 per diluted share) of severance and downsizing charges.

During the second quarter of 2018, the Company generated revenues of $285.8 million and Consolidated EBITDA (Note A) of $40.2 million. These results compare to revenues of $171.4 million and Adjusted Consolidated EBITDA (Note A) of $10.4 million reported in the second quarter of 2017 (excluding $0.8 million of severance and downsizing charges).

For the first half of 2018, the Company reported revenues of $539.4 million and Adjusted Consolidated EBITDA of $72.5 million (excluding $2.6 million of transaction-related charges and $0.8 million of severance and downsizing charges). The net loss for the first half of 2018 totaled $0.8 million and included $2.6 million ($2.0 million after-tax, or $0.03 per diluted share) of transaction-related charges and $0.8 million ($0.6 million after-tax, or $0.01 per diluted share) of severance charges. For the first half of 2017, the Company reported revenues of $322.9 million and Adjusted Consolidated EBITDA of $15.8 million (excluding $1.6 million of severance and downsizing charges). The net loss for the first half of 2017 totaled $31.9 million and included $1.6 million ($1.2 million after-tax, or $0.02 per diluted share) of severance and downsizing charges.

Oil States’ President and Chief Executive Officer Cindy B. Taylor commented, "We delivered second quarter revenues of $286 million, up 67% year-over-year, and quarterly EBITDA of $40 million, up 288% year-over-year. This vast improvement in our results was due to strong contributions from our two strategic acquisitions completed in the first quarter of this year, coupled with improved land completions activity in our key shale play regions. Our Offshore/Manufactured Products segment received a major project award for floating production facility content for a project in South America, resulting in a 1.2x book-to-bill ratio and a 6% sequential increase in total backlog."

BUSINESS SEGMENT RESULTS
(See Segment Data Tables)

Well Site Services
Well Site Services generated revenues of $125.1 million and Segment EBITDA (Note B) of $19.1 million in the second quarter of 2018 compared to revenues and Segment EBITDA of $69.4 million and $5.0 million, respectively, in the second quarter of 2017.  The 80% revenue increase was due to a 63% year-over-year increase in the number of Completion Services jobs performed, coupled with a 15% year-over-year increase in revenue per Completion Services job. Our improved results were driven by significantly increased completion-related activity levels in the United States, a continuing trend of customers utilizing more proprietary equipment and service offerings, and a full quarters' revenue contribution generated by Falcon Flowback Services, LLC (“Falcon”), which was acquired on February 28, 2018.

Downhole Technologies (acquisition of GEODynamics, Inc. closed on January 12, 2018)
In the second quarter of 2018, Downhole Technologies generated revenues of $59.3 million, Segment EBITDA of $16.1 million and a Segment EBITDA margin of 27%. The segment has performed very well compared to the acquisition economics on which the transaction was based. No results were included in the second quarter of 2017 given our acquisition of the business in January 2018.

Offshore/Manufactured Products
Offshore/Manufactured Products generated revenues and Segment EBITDA of $101.4 million and $18.5 million, respectively, in the second quarter of 2018 compared to revenues of $102.0 million and Segment EBITDA of $17.2 million in the second quarter of 2017. Revenues decreased 1% while Segment EBITDA increased 8% year-over-year. Project-driven revenues increased 2% year-over-year due to higher sales of connector products while revenues from other products and service increased 5% year-over-year. These results were partially offset by lower short-cycle product sales (elastomer and valve products), which decreased 7% year-over-year due to lower customer demand, likely due to stocking cycles. We recorded a $3.6 million insurance gain related to the settlement of a Hurricane Harvey facility claim in the second quarter of 2018, partially offset by foreign exchange losses, which impacted Segment EBITDA and margins. Excluding the insurance gain and foreign exchange losses, Segment EBITDA margin in the second quarter of 2018 was 15.5% compared to 16.8% in the second quarter of 2017. Backlog increased 6% sequentially to total $165 million at June 30, 2018 compared to $157 million at March 31, 2018 and $202 million at June 30, 2017. The second quarter book-to-bill ratio was 1.2x. During the second quarter of 2018, we received one notable major project award for floating production facility content destined for South America.

Income Taxes
The Company recognized an effective tax rate provision of 38.8% in the second quarter of 2018 which compared to an effective tax rate benefit of 26.2% in the second quarter of 2017.

Financial Condition
As of June 30, 2018, $157.9 million was outstanding under the Company’s revolving credit facility along with an additional $22.3 million of outstanding letters of credit, while cash totaled $29.1 million. The Company had access to $157.8 million of revolving credit facility availability as of June 30, 2018.

On July 25, 2018, the Company's Board of Directors extended the existing share repurchase program for one year to July 29, 2019. The amount remaining under the Company's share repurchase authorization as of June 30, 2018 was $120.5 million.

Conference Call Information
The call is scheduled for Monday, July 30, 2018 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 47304106. 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 47304106.

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. Through its recent acquisition of GEODynamics, Inc., 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 other things, risks and uncertainties relating to Oil States' ability to retain GEODynamics' and Falcon's customers and employees, the ability to successfully integrate GEODynamics' and Falcon's operations, product lines, technology and employees into Oil States' operations, and the ability to achieve the expected synergies as well as accretion in earnings; risks associated with the general nature of the energy service industry; and other factors 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

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)

 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
Revenues:       
Products$136,182  $82,750  $265,008  $155,930 
Service149,663  88,652  274,413  166,939 
 285,845  171,402  539,421  322,869 
        
Costs and expenses:       
Product costs95,324  59,309  188,300  109,659 
Service costs118,079  72,539  214,993  141,101 
Selling, general and administrative expense35,919  29,482  70,114  57,212 
Depreciation and amortization expense30,922  27,784  60,112  55,764 
Other operating (income) expense, net(3,099) 794  (1,884) 963 
 277,145  189,908  531,635  364,699 
Operating income (loss)8,700  (18,506) 7,786  (41,830)
        
Interest expense(4,913) (1,149) (9,446) (2,223)
Interest income123  85  202  170 
Other income571  273  1,218  270 
Income (loss) before income taxes4,481  (19,297) (240) (43,613)
Income tax (provision) benefit(1,739) 5,051  (510) 11,689 
Net income (loss)$2,742  $(14,246) $(750) $(31,924)
        
Net income (loss) per share:       
Basic$0.05  $(0.28) $(0.01) $(0.63)
Diluted$0.05  $(0.28) $(0.01) $(0.63)
        
Weighted average number of common shares outstanding:       
Basic59,005  50,232  58,396  50,296 
Diluted59,005  50,232  58,396  50,296 
            


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)

 June 30, 2018 December 31, 2017
 (Unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$29,102  $53,459 
Accounts receivable, net289,806  216,139 
Inventories, net205,057  168,285 
Prepaid expenses and other current assets22,592  18,054 
Total current assets546,557  455,937 
    
Property, plant, and equipment, net537,701  498,890 
Goodwill, net658,034  268,009 
Other intangible assets, net253,966  50,265 
Other noncurrent assets28,868  28,410 
Total assets$2,025,126  $1,301,511 
    
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Current portion of long-term debt and capitalized leases$535  $411 
Accounts payable69,416  49,089 
Accrued liabilities56,300  45,889 
Income taxes payable1,716  1,647 
Deferred revenue14,907  18,234 
Total current liabilities142,874  115,270 
    
Long-term debt and capitalized leases349,245  4,870 
Deferred income taxes57,066  24,718 
Other noncurrent liabilities25,288  23,940 
Total liabilities574,473  168,798 
    
Stockholders’ equity:   
Common stock718  627 
Additional paid-in capital1,085,927  754,607 
Retained earnings1,047,873  1,048,623 
Accumulated other comprehensive loss(67,192) (58,493)
Treasury stock(616,673) (612,651)
Total stockholders’ equity1,450,653  1,132,713 
Total liabilities and stockholders’ equity$2,025,126  $1,301,511 
 


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

 Six Months Ended June 30,
 2018 2017
Cash flows from operating activities:   
Net loss$(750) $(31,924)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation and amortization60,112  55,764 
Stock-based compensation expense10,861  10,954 
Deferred income tax provision (benefit)481  (14,917)
Provision for bad debt2,530  210 
Gain on disposals of assets(927) (210)
Amortization of debt discount and deferred financing costs3,613  405 
Other, net(10) 29 
Changes in operating assets and liabilities, net of effect from acquired businesses:   
Accounts receivable(19,134) 23,404 
Inventories(1,768) 8,689 
Accounts payable and accrued liabilities(2,251) (3,075)
Income taxes payable(31) (3,211)
Other operating assets and liabilities, net(5,792) (1,191)
Net cash flows provided by operating activities46,934  44,927 
    
Cash flows from investing activities:   
Capital expenditures(38,261) (13,291)
Acquisitions of businesses, net of cash acquired(379,676) (12,859)
Proceeds from disposition of property, plant and equipment1,197  742 
Other, net(985) (453)
Net cash flows used in investing activities(417,725) (25,861)
    
Cash flows from financing activities:   
Issuance of 1.50% convertible senior notes200,000   
Revolving credit facility borrowings704,469  127,929 
Revolving credit facility repayments(546,564) (123,104)
Other debt and capital lease repayments, net(266) (267)
Payment of financing costs(7,366)  
Purchase of treasury stock  (16,283)
Shares added to treasury stock as a result of net share settlements
due to vesting of restricted stock
(4,022) (5,200)
Net cash flows provided by (used in) financing activities346,251  (16,925)
    
Effect of exchange rate changes on cash and cash equivalents183  1,527 
Net change in cash and cash equivalents(24,357) 3,668 
Cash and cash equivalents, beginning of period53,459  68,800 
Cash and cash equivalents, end of period$29,102  $72,468 
 


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA
(In Thousands)
(unaudited)

 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
Revenues:       
Well Site Services:       
Completion Services$108,368  $57,890  $191,208  $106,562 
Drilling Services16,756  11,477  34,315  22,958 
Total Well Site Services125,124  69,367  225,523  129,520 
Downhole Technologies59,274    105,055   
Offshore/Manufactured Products101,447  102,035  208,843  193,349 
Total revenues$285,845  $171,402  $539,421  $322,869 
        
Operating income (loss):       
Well Site Services:       
Completion Services(2)$1,204  $(12,547) $(3,267) $(29,027)
Drilling Services(2,957) (3,787) (5,268) (8,004)
Total Well Site Services(1,753) (16,334) (8,535) (37,031)
Downhole Technologies(1)11,600    19,654   
Offshore/Manufactured Products(1,2)12,664  10,662  25,116  20,126 
Corporate(1)(13,811) (12,834) (28,449) (24,925)
Total operating income (loss)$8,700  $(18,506) $7,786  $(41,830)
 


        
Revenues:Well Site Services Downhole
Technologies
 Offshore /
Manufactured
Products
 Total
Three months ended June 30,2018 2017 2018 2017 2018 2017 2018 2017
Major revenue categories:               
Project-driven products$  $  $  $  $35,225  $34,582  $35,225  $34,582 
Short-cycle:               
Completion products and services108,368  57,890  59,274    29,783  31,117  197,425  89,007 
Drilling services16,756  11,477          16,756  11,477 
Other products        7,565  8,903  7,565  8,903 
Total short-cycle125,124  69,367  59,274    37,348  40,020  221,746  109,387 
Other products and services        28,874  27,433  28,874  27,433 
 $125,124  $69,367  $59,274  $  $101,447  $102,035  $285,845  $171,402 
 


        
Revenues:Well Site Services Downhole
Technologies
 Offshore /
Manufactured
Products
 Total
Six months ended June 30,2018 2017 2018 2017 2018 2017 2018 2017
Major revenue categories:               
Project-driven products$  $  $  $  $76,024  $66,917  $76,024  $66,917 
Short-cycle:               
Completion products and services191,208  106,562  105,055    62,755  56,966  359,018  163,528 
Drilling services34,315  22,958          34,315  22,958 
Other products        15,011  16,125  15,011  16,125 
Total short-cycle225,523  129,520  105,055    77,766  73,091  408,344  202,611 
Other products and services        55,053  53,341  55,053  53,341 
 $225,523  $129,520  $105,055  $  $208,843  $193,349  $539,421  $322,869 
 


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

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

    
 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
Well Site Services:       
Completion Services:       
Operating income (loss)$1,204  $(12,547) $(3,267) $(29,027)
Depreciation and amortization expense16,816  16,193  32,198  32,721 
Other income526  295  795  279 
EBITDA18,546  3,941  29,726  3,973 
Severance and downsizing charges  630    902 
Adjusted EBITDA$18,546  $4,571  $29,726  $4,875 
        
Drilling Services:       
Operating loss$(2,957) $(3,787) $(5,268) $(8,004)
Depreciation and amortization expense3,551  4,794  7,419  9,829 
Other income5  3  380  4 
EBITDA$599  $1,010  $2,531  $1,829 
        
Total Well Site Services:       
Operating loss$(1,753) $(16,334) $(8,535) $(37,031)
Depreciation and amortization expense20,367  20,987  39,617  42,550 
Other income531  298  1,175  283 
Segment EBITDA19,145  4,951  32,257  5,802 
Severance and downsizing charges  630    902 
Adjusted Segment EBITDA$19,145  $5,581  $32,257  $6,704 
        
Downhole Technologies:       
Operating income$11,600  $  $19,654  $ 
Depreciation and amortization expense4,532    8,416   
Other expense    (13)  
Segment EBITDA16,132    28,057   
Transaction-related charges    211   
Adjusted Segment EBITDA$16,132  $  $28,268  $ 
        
Offshore/Manufactured Products:       
Operating income$12,664  $10,662  $25,116  $20,126 
Depreciation and amortization expense5,786  6,534  11,600  12,687 
Other income (expense)40  (25) 56  (13)
Segment EBITDA18,490  17,171  36,772  32,800 
Severance and downsizing charges  186  783  693 
Adjusted Segment EBITDA$18,490  $17,357  $37,555  $33,493 
        
Corporate:       
Operating loss$(13,811) $(12,834) $(28,449) $(24,925)
Depreciation and amortization expense237  263  479  527 
Other expense       
EBITDA(13,574) (12,571) (27,970) (24,398)
Transaction-related charges    2,371   
Adjusted EBITDA$(13,574) $(12,571) $(25,599) $(24,398)
 


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

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

 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
        
Net income (loss)$2,742  $(14,246) $(750) $(31,924)
Income tax provision (benefit)1,739  (5,051) 510  (11,689)
Depreciation and amortization expense30,922  27,784  60,112  55,764 
Interest income(123) (85) (202) (170)
Interest expense4,913  1,149  9,446  2,223 
Consolidated EBITDA (A)40,193  9,551  69,116  14,204 
        
Adjustments to Consolidated EBITDA (1,2):       
Transaction-related charges    2,582   
Severance and downsizing charges  816  783  1,595 
Adjusted Consolidated EBITDA (A)$40,193  $10,367  $72,481  $15,799 
 

(1) Operating income (loss) and Segment and Consolidated EBITDA 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 severance charges of $0.8 million related to the Offshore/Manufactured Products segment.

(2) Operating income (loss) and Segment and Consolidated EBITDA for the three and six months ended June 30, 2017 included severance and downsizing charges of $0.6 million and $0.9 million, respectively, related to the Completion Services business and $0.2 million and $0.7 million, respectively, related to the Offshore/Manufactured Products segment.

(A) The terms Consolidated EBITDA and Adjusted Consolidated EBITDA consist of net income (loss) plus net interest expense, taxes, depreciation and amortization expense, and certain other items.  Consolidated EBITDA and Adjusted Consolidated 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 net income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity.  Additionally, Consolidated EBITDA and Adjusted Consolidated EBITDA may not be comparable to other similarly titled measures of other companies.  The Company has included Consolidated EBITDA and Adjusted Consolidated EBITDA as a supplemental disclosure because its management believes that Consolidated EBITDA and Adjusted Consolidated 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 Consolidated EBITDA and Adjusted 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 and Adjusted Consolidated EBITDA to net income (loss), which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

(B) The terms EBITDA, Adjusted EBITDA, Segment EBITDA and Adjusted Segment EBITDA consist of operating income (loss) plus depreciation and amortization expense, and certain other items.  EBITDA, Adjusted EBITDA, Segment EBITDA and Adjusted 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, Adjusted EBITDA, Segment EBITDA and Adjusted Segment EBITDA may not be comparable to other similarly titled measures of other companies.  The Company has included EBITDA, Adjusted EBITDA, Segment EBITDA and Adjusted Segment EBITDA as a supplemental disclosure because its management believes that EBITDA, Adjusted EBITDA, Segment EBITDA and Adjusted 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, Adjusted EBITDA, Segment EBITDA and Adjusted 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, Adjusted EBITDA, Segment EBITDA and Adjusted 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,
 2018 2017
Supplemental operating data:   
Offshore/Manufactured Products backlog ($ in millions)$165.3  $202.0 
    
Completion Services job tickets7,927  4,863 
Average revenue per ticket ($ in thousands)$13.7  $11.9 
    
Land drilling operating statistics:   
Average rigs available34  34 
Utilization30.1% 24.6%
Implied day rate ($ in thousands per day)$18.0  $15.1 
Implied daily cash margin ($ in thousands per day)$1.0  $1.9 
        

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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Source: GlobeNewswire (July 30, 2018 - 7:00 AM EDT)

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