Superior Energy Services, Inc. Reports Third Quarter 2011 Results

Record International and U.S. Land Performance Drives Earnings of $0.73 Per Diluted Share and Adjusted Earnings of $0.69 Per Diluted Share

Oct 26, 2011, 16:12 ET from Superior Energy Services, Inc.

NEW ORLEANS, Oct. 26, 2011 /PRNewswire/ -- Superior Energy Services, Inc. (NYSE: SPN) today announced net income of $59.6 million, or $0.73 per diluted share on record revenue of $565.3 million for the third quarter of 2011, and adjusted net income of $55.9 million, or $0.69 per diluted share, after excluding a non-cash, unrealized pre-tax gain of $5.8 million from hedging contracts at the Company's equity-method investments.

These results compare with third quarter of 2010 net income of $33.2 million, or $0.42 per diluted share, on revenue of $435.4 million.

For the nine months ended September 30, 2011, the Company recorded net income of $123.2 million, or $1.52 per diluted share, on revenue of $1,490.1 million, and adjusted net income of $113.7 million, or $1.40 per diluted share, after excluding a pre-tax gain of $8.6 million from the sale of liftboats and $6.2 million in non-cash, unrealized pre-tax gains from hedging contracts at the Company's equity-method investments.

For the nine months ended September 30, 2010, the Company's net income was $78.8 million, or $0.99 per diluted share, on revenue of $1,224.7 million, and adjusted net income was $89.3 million, or $1.12 per diluted share, after excluding pre-tax management transition expenses of $16.4 million.

David Dunlap, CEO of the Company, commented, "Our third quarter results were in line with our expectations primarily due to continued strength in activity levels in the U.S. land markets, ongoing execution of our international growth strategy and the steady increase in Gulf of Mexico activity.  These favorable trends helped offset weather-related downtime in the Gulf of Mexico and northeast U.S.

"Our U.S. land revenue increased 16% sequentially as compared to a 6% increase in the average number of drilling rigs working in the U.S., the seventh consecutive quarter that we grew at a faster pace than the rig count. The primary driver for our increased land revenue was an 18% sequential increase in revenue from the Subsea and Well Enhancement Segment. We experienced higher demand across all of our intervention services, led by coiled tubing and wireline. Customers have quickly absorbed new intervention equipment capacity introduced throughout the year, indicative of market dynamics where the supply chain for the end user remains exceedingly tight. Internationally, our revenue increased 4% as the Drilling Products and Services Segment increased 12% sequentially, the highest quarterly growth rate in eight quarters, driven by higher demand in Latin America.

"Our operating income as a percentage of revenue (operating margin) increased over the second quarter of 2011 as we experienced higher margins in the Drilling Products and Services and Marine Segments. In the Drilling and Products Services Segment, the high incremental margin reflects increased activity in all of our geographic market areas. In the Marine Segment, we benefitted from a combination of higher liftboat utilization and lower maintenance and repair expenses, despite lower revenue resulting from fewer liftboats in our fleet and weather-related disruptions in the Gulf of Mexico. The operating margin in the Subsea and Well Enhancement Segment had a slight sequential decline due to weather-related interruptions in the Gulf of Mexico and Pennsylvania as well as an increase in drydocking expenses at Hallin Marine, all of which are transitory and confined to the third quarter."

2011 Earnings Guidance Update

The Company expects 2011 adjusted earnings per share – which is exclusive of gains from the sale of liftboats and hedging activities at the Company's equity-method investments – to be in the range of $2.03 and $2.10. Prior adjusted earnings per share guidance was in the range of $1.96 to $2.16 per diluted share.

Mr. Dunlap commented, "We anticipate that activity levels will remain robust in the U.S. land markets throughout the fourth quarter and that international growth should continue at its measured pace. The guidance captures the range of uncertainty for activity levels in the shallow water Gulf of Mexico, where seasonal factors such as weather and holidays typically result in a reduction in optional well maintenance and decommissioning work performed late in the year."

Geographic Breakdown

For the third quarter of 2011, Gulf of Mexico revenue was approximately $193 million, U.S. land revenue was approximately $229 million, and international revenue was approximately $143 million.

Subsea and Well Enhancement Segment

Third quarter revenue for the Subsea and Well Enhancement Segment was $377.6 million, as compared with $289.0 million in the third quarter of 2010 and $336.0 million in the second quarter of 2011, which represents a 31% year-over-year increase and a 12% sequential increase.

Gulf of Mexico revenue in this segment increased 14% sequentially to $128 million. Gulf of Mexico revenue during the quarter included approximately $9.6 million for a project off the coast of Alaska.  Activity increased in the Gulf of Mexico for completion tools and stimulation services, pressure control and plug and abandonment services.

U.S. land revenue in this segment increased 18% sequentially to $154 million due to the addition of coiled tubing and pressure control products, as well as increased demand for cased hole wireline, hydraulic workover and snubbing, and remedial pumping services. International revenue increased 2% sequentially to $96 million due to increased activity for completion tools and hydraulic workover and snubbing services.

Drilling Products and Services Segment

Third quarter revenue for the Drilling Products and Services Segment was $163.5 million, as compared with $118.7 million in the third quarter of 2010 – a 38% year-over-year improvement – and $149.2 million in the second quarter of 2011, or 10% higher sequentially.

The primary factor driving the higher sequential revenue was a 12% increase in international revenue to $47 million as a result of increased demand for premium drill pipe in Latin America, particularly Brazil and Colombia. U.S. land revenue increased 11% sequentially to $75 million as a result of increased rentals of premium drill pipe and accommodations.  Gulf of Mexico revenue increased 4% sequentially to $41 million due to increased rentals of premium drill pipe and stabilization equipment and accessories in the deepwater market area.

Marine Segment

Marine Segment revenue in the third quarter was $24.3 million, a 12% decrease from the third quarter of 2010 and a 5% decrease from the second quarter of 2011. The Company had 18 liftboats in its rental fleet during the third quarter of 2011, as compared with an average of 24 in the third quarter of 2010 and an average of 20 in the second quarter of 2011.

Average fleet utilization in the third quarter of 2011 was 77% as compared with 88% in the third quarter of 2010 and 70% in the second quarter of 2011.  While weather-related downtime, highlighted by interruptions from Tropical Storm Lee, impacted third quarter 2011 utilization, operating margin improved as a result of lower repair and maintenance expenses.

Liftboat Average Dayrates and Utilization by Class Size

Three Months Ended September 30, 2011

($ actual)

Class

Liftboats

Average

Dayrate

Utilization

150'-175'

7

8,763

67.5%

200'

4

11,662

91.0%

230'-245'

3

21,201

81.9%

250'-265'

4

33,841

73.6%

Conference Call Information

The Company will host a conference call at 10 a.m. Central Time on Thursday, October 27, 2011.  The call can be accessed from Superior's website at www.superiorenergy.com, or by telephone at 480-629-9770.  For those who cannot listen to the live call, a telephonic replay will be available through Thursday, November 3, 2011 and may be accessed by calling 303-590-3030 and using the pass code 4478563. An archive of the webcast will be available after the call for a period of 60 days at 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.

FOR FURTHER INFORMATION CONTACT: David Dunlap, CEO; Robert Taylor, CFO; Greg Rosenstein, VP of Investor Relations, (504) 587-7374

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Three and Nine Months Ended September 30, 2011 and 2010

(in thousands, except earnings per share amounts)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2011

2010

2011

2010

Revenues

$ 565,342

$ 435,353

$ 1,490,129

$ 1,224,720

Cost of services (exclusive of items shown separately below)

301,065

232,308

806,280

661,276

Depreciation, depletion, amortization and accretion

64,875

56,805

187,552

162,152

General and administrative expenses

95,391

84,912

278,151

248,165

Gain on sale of businesses

-

-

8,558

-

Income from operations

104,011

61,328

226,704

153,127

Other income (expense):

 Interest expense, net

(19,115)

(12,456)

(47,940)

(39,174)

 Earnings from equity-method investments, net

8,198

3,030

13,724

9,185

Income before income taxes

93,094

51,902

192,488

123,138

Income taxes

33,514

18,685

69,296

44,330

Net income

$   59,580

$   33,217

$    123,192

$      78,808

Basic earnings per share

$       0.75

$       0.42

$          1.55

$          1.00

Diluted earnings per share

$       0.73

$       0.42

$          1.52

$          0.99

Weighted average common shares used

 in computing earnings per share:

   Basic

79,836

78,797

79,537

78,683

   Diluted

81,254

79,722

81,125

79,573

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2011 AND DECEMBER 31, 2010

(in thousands)

9/30/2011

12/31/2010

(Unaudited)

(Audited)

ASSETS

Current assets:

 Cash and cash equivalents

$    210,181

$      50,727

 Short-term investments

223,592

-

 Accounts receivable, net

481,921

452,450

 Prepaid expenses

35,651

25,828

 Inventory and other current assets

220,037

235,047

       Total current assets

1,171,382

764,052

Property, plant and equipment, net

1,440,852

1,313,150

Goodwill

591,715

588,000

Notes receivable

72,406

69,026

Equity-method investments

71,506

59,322

Intangible and other long-term assets, net

135,881

113,983

       Total assets

$ 3,483,742

$ 2,907,533

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

 Accounts payable

$    118,073

$    110,276

 Accrued expenses

198,795

162,044

 Income taxes payable

7,087

2,475

 Deferred income taxes

12,214

29,353

 Current portion of decommissioning liabilities

17,090

16,929

 Current maturities of long-term debt

396,433

184,810

       Total current liabilities

749,692

505,887

Deferred income taxes

269,802

223,936

Decommissioning liabilities

105,372

100,787

Long-term debt, net

810,337

681,635

Other long-term liabilities

113,348

114,737

Total stockholders' equity

1,435,191

1,280,551

       Total liabilities and stockholders' equity

$ 3,483,742

$ 2,907,533

Superior Energy Services, Inc. and Subsidiaries

Segment Highlights

Three months ended September 30, 2011, June 30, 2011 and September 30, 2010

(Unaudited)

(in thousands)

Three months ended

Revenue

September 30, 2011

June 30, 2011

September 30, 2010

Subsea and Well Enhancement

$                377,559

$          336,037

$                289,048

Drilling Products and Services

163,456

149,167

118,727

Marine

24,327

25,602

27,578

Total Revenues

$                565,342

$          510,806

$                435,353

Gross Profit (1)

September 30, 2011

June 30, 2011

September 30, 2010

Subsea and Well Enhancement

$                149,318

$          141,730

$                118,231

Drilling Products and Services

104,918

92,540

72,659

Marine

10,041

5,166

12,155

Total Gross Profit

$                264,277

$          239,436

$                203,045

Income from Operations

September 30, 2011

June 30, 2011 (2)

September 30, 2010

Subsea and Well Enhancement

$                  55,530

$            50,864

$                  40,026

Drilling Products and Services

43,029

29,662

15,419

Marine

5,452

5,599

5,883

Total Income from Operations

$                104,011

$            86,125

$                  61,328

(1)

Gross profit is calculated by subtracting cost of services (exclusive of depreciation, depletion, amortization and accretion) from revenue for each of the Company's segments.

(2)

Includes a gain on sale of liftboats of $5.9 million in the Marine Segment.

SOURCE Superior Energy Services, Inc.



RELATED LINKS

http://www.superiorenergy.com