Superior Energy Services, Inc. Reports Fourth Quarter and Full Year 2010 Results and Provides 2011 Earnings Guidance

NEW ORLEANS, Feb. 23, 2011 /PRNewswire/ -- Superior Energy Services, Inc. (NYSE: SPN) today announced net income of $3.0 million, or $0.04 per share on revenue of $456.9 million for the fourth quarter of 2010. The results included the following special items, which are primarily non-cash:

• Pre-tax impairment charge of $32.0 million for components primarily related to two liftboats under construction that the Company has determined are impracticable to complete;
• Pre-tax expense of $12.2 million for incremental management transition expenses in excess of the Company’s original guidance primarily due to accelerated vesting of equity awards and other compensation as a result of Terence Hall’s early transition in December 2010 from his role as Executive Chairman to Chairman and senior advisor;
• Pre-tax impairment charge of $7.0 million for oil and gas assets at the Company’s equity-method investments; and,
• Pre-tax gain of $1.1 million from the sale of a 175-ft. class liftboat.

In addition, the Company had a benefit of $1.7 million from a change in its effective annual income tax rate to 34.6% from 36% in during the fourth quarter. Excluding these special items, non-GAAP adjusted net income was $34.1 million, or $0.42 non-GAAP adjusted diluted earnings per share.

These results are compared with a net loss of $114.6 million, or $1.46 per share, on revenue of $264.6 million for the fourth quarter of 2009. Excluding special charges of $136.2 million and the $68.7 million impact of the wreck removal project cost increases, the Company had fourth quarter 2009 non-GAAP adjusted net income of $16.5 million, or $0.21 non-GAAP adjusted diluted earnings per share.

For the year ended December 31, 2010, the Company’s net income was $81.8 million, or $1.03 per diluted share on revenue of $1,681.6 million as compared with a net loss of $102.3 million, or $1.31 per share on revenue of $1,449.3 million for the year ended December 31, 2009.

David Dunlap, CEO of Superior commented, “The fourth quarter operating results were a positive ending to a solid year for the Company.  For the year, we generated a record $1 billion in revenue from non-Gulf of Mexico markets. We benefitted from phenomenal growth in the U.S. land markets and worked to overcome the challenges of the Gulf of Mexico, while expanding internationally and making sound, strategic investments and acquisitions to position the Company for long-term growth and geographic balance.  We remained focused on executing the Company’s geographic expansion strategy and successfully navigated potential distractions associated with the events in the Gulf of Mexico and the management transition.

“Our fourth quarter operating results fell at the midpoint of our operational earnings guidance.  Results were driven in large part by continued strength in the domestic land markets for coiled tubing and downhole drilling products, particularly premium drill pipe, offset by continued weakness in the Gulf of Mexico related to a lack of permitting.

“We established another quarterly record for non-Gulf of Mexico revenue with $297 million coming from the domestic land and international markets. Sequentially, our international revenue increased 9%, domestic land revenue increased 8%, and Gulf of Mexico revenue was essentially flat.

“Our gross profit as a percentage of revenue was 290 basis points lower than the third quarter primarily resulting from full quarter losses incurred by the Gulf of Mexico-based stimulation vessels that were part of the sand control completion tools acquisition in September. The stimulation vessel business contributed a loss of about $0.04 per share to earnings.”

2011 Earnings Guidance and Capital Expenditures Plan

The Company has established a 2011 earnings guidance range of $1.80 to $2.20 per share and planned capital expenditures of up to $500 million.  The Company anticipates funding its capital expenditures with its operating cash flow.

Mr. Dunlap commented, “Our geographic diversification strategy is on track as we anticipate growing faster than the 2011 rig count in the domestic land and international markets. We expect to continue to benefit from incremental demand for our coiled tubing, premium drill pipe and other products and services in the domestic land markets as horizontal drilling remains robust.  We should also benefit from ongoing expansion in certain international markets where we have made progress in establishing local management teams and operating locations.

“We have confidence about activity levels and our ability to grow in both of those areas. The wide range of guidance, however, is necessitated by the lack of visibility in Gulf of Mexico activity resulting from the lack of deepwater drilling and the associated slow pace of permitting for virtually all categories of work in shallower waters.

“The lower end of our guidance reflects little to no deep water Gulf of Mexico drilling, while the upper end assumes 15 to 20 rigs drilling in the deep water Gulf of Mexico during the last half of the year.  Further, our guidance indicates a conservative view of the shallow water Gulf of Mexico and minimal incremental work from the 'idle iron' initiative that the Bureau of Ocean Energy Management issued in September of 2010.  While additional demand for end-of-life services (plug and abandonment and decommissioning work) from this initiative is a likely outcome, we do not expect significant activity changes until mid-year.”

By geography, the Company has allocated $185 million in capital expenditures to the international markets and $315 million to the U.S., including $100 million to support deepwater drilling in the Gulf of Mexico or other markets as opportunities materialize. By segment, the Company has allocated $305 million to the Subsea and Well Enhancement Segment, including $60 million for ongoing construction of the Compact Semi-Submersible vessel, $190 million to the Drilling Products and Services Segment and $5 million to the Marine Segment. Approximately 75% of the capital expenditures plan is deemed expansionary.

“Our capital expenditures, particularly those in the Drilling Products and Services Segment, have a fair amount of flexibility, meaning we could move capital to different geographic markets as opportunities arise,” Mr. Dunlap said.

Geographic Breakdown

For the fourth quarter of 2010, Gulf of Mexico revenue was approximately $159.5 million, domestic land revenue was approximately $170.4 million, and international revenue was approximately $126.9 million.  The domestic land and international revenues were each record highs for a quarter.

Subsea and Well Enhancement Segment

Fourth quarter revenue for the Subsea and Well Enhancement Segment was $306.5 million, as compared with $145.8 million in the fourth quarter of 2009 and $289.0 million in the third quarter of 2010, which represents increases of 110% and 6%, respectively. Excluding the $68.7 million impact from cost adjustments to the wreck removal project, segment revenue was $214.5 million in the fourth quarter of 2009.

Sequentially, international revenue in this segment increased 15% due to increased demand for subsea services. Gulf of Mexico revenue increased 4% sequentially as a result of a full quarter contribution from sand control completion services and stimulation vessels, increased demand for coiled tubing and hydraulic workover services, and an increase in diving equipment sales. These were partially offset by a seasonal decline for plug and abandonment services. Domestic land revenue increased 2% due to increases in coiled tubing and pressure control services, partially offset by a decline in cased hole wireline services.

Drilling Products and Services Segment

Fourth quarter revenue for the Drilling Products and Services Segment was $120.4 million as compared with $97.6 million in the fourth quarter of 2009 – a 23% year-over-year improvement – and $118.7 million in the third quarter of 2010, or 1% higher sequentially.

Domestic land revenue increased 24% sequentially primarily due to increased rentals of premium drill pipe, accommodations, specialty tubulars and accessories, and stabilization equipment. International revenue was unchanged from the prior quarter, while Gulf of Mexico revenue declined 28% sequentially due to a lack of drilling.

Marine Segment

Marine Segment revenue was $30.0 million, a 42% increase over the $21.2 million of revenue in the fourth quarter of 2009 and 9% higher over the $27.6 million of revenue in the third quarter of 2010. Average fleet utilization in the fourth quarter of 2010 was 72% as compared with 45% in the fourth quarter of 2009 and 88% in the third quarter of 2010. The Company’s two 265-ft. class liftboats returned to service in October and November. The Company sold a 175-ft. class liftboat at the end of the fourth quarter.

Conference Call Information

The Company will host a conference call at 10 a.m. Central Time on Thursday, February 24, 2011.  The call can be accessed from Superior’s website at www.superiorenergy.com, or by telephone at 480-629-9723.  For those who cannot listen to the live call, a telephonic replay will be available through Thursday, March 3, 2011 and may be accessed by calling 303-590-3030 and using the pass code 4404808.  An archive of the webcast will be available after the call for a period of 60 days on http://www.superiorenergy.com.

Superior Energy Services, Inc. serves the drilling and production-related needs of oil and gas companies worldwide through its brand name rental tools and its integrated well intervention services and tools, supported by an engineering staff who plan and design solutions for customers.  Offshore projects are delivered by the Company’s fleet of modern marine assets.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which involve known and unknown risks, uncertainties and other factors.  Among the factors that could cause actual results to differ materially are volatility of the oil and gas industry, including the level of exploration, production and development activity; risks associated with the uncertainty of macroeconomic and business conditions worldwide, as well as the global credit markets; risks associated with the Company’s rapid growth; changes in competitive factors and other material factors that are described from time to time in the Company’s filings with the Securities and Exchange Commission. Actual events, circumstances, effects and results may be materially different from the results, performance or achievements expressed or implied by the forward-looking statements.  Consequently, the forward-looking statements contained herein should not be regarded as representations by Superior or any other person that the projected outcomes can or will be achieved.

NON-GAAP RECONCILIATION

($ in thousands)

We report our financial results in conformity with U.S. generally accepted accounting principles (GAAP). However, the Company provides non-GAAP adjusted net income and non-GAAP adjusted earnings per share because certain items are customarily excluded by analysts in published estimates and management believes, for purposes of comparability to financial performance in other periods and to evaluate the Company’s trends, that it is appropriate for these items to be excluded. Management uses adjusted net income and adjusted diluted earnings per share to evaluate the Company’s operational trends and historical performance on a consistent basis. The adjusted amounts are not measures of financial performance under GAAP.

A reconciliation of net income, the GAAP measure most directly comparable to non-GAAP adjusted earnings and non-GAAP adjusted earnings per share, is below. In making any comparisons to other companies, investors need to be aware that the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, or superior to, the Company's reported results prepared in accordance with GAAP.

SOURCE Superior Energy Services, Inc.