Oil States Announces Second Quarter 2016 Results
During the second quarter of 2016, the Company generated revenues of $175.8 million and Adjusted Consolidated EBITDA (Note B) of $13.5 million (excluding $1.1 million for severance and other downsizing charges). These results compare to revenues of $269.3 million and Adjusted Consolidated EBITDA of $43.2 million reported in the second quarter of 2015 (excluding $1.7 million of severance and other downsizing charges).
For the first half of 2016, the Company reported revenues of $345.5 million and Adjusted Consolidated EBITDA of $25.7 million (excluding $2.7 million of severance and other downsizing charges). The net loss for the first half of 2016 totaled $24.9 million and included $2.7 million ($1.7 million after-tax, or $0.03 per diluted share) of severance and other downsizing charges. For the first half of 2015, the Company reported revenues of $606.6 million and Adjusted Consolidated EBITDA of $112.1 million (excluding $3.8 million of severance and other downsizing charges). Net income for the first half of 2015 totaled $25.6 million and included $3.8 million ($2.6 million after-tax, or $0.05 per diluted share) of severance and other downsizing charges in addition to a higher effective tax rate.
Oil States’ President and Chief Executive Officer, Cindy B. Taylor, stated, “Despite the 23% sequential quarterly decline in the average U.S. rig count, our well site services revenue was only down 7% and our consolidated revenue actually improved 4%. Starting later in the second quarter, we began to see some encouraging signs that activity was troughing for U.S. lower 48 drilling and completion work, and that activity could actually be starting to recover. Evidencing this trend, the average price per barrel of WTI improved 36% sequentially in the second quarter and the current U.S. rig count has increased 14% from its low point in May 2016. However, the WTI crude price has pulled back about 11% since the end of the quarter to its current level of approximately $43 per barrel. The impact of this recent decline in commodity prices on customer perception and spending will become apparent in the following months.”
Offshore Products
Offshore products generated revenues and Segment EBITDA (Note A) of $135.2 million and $27.2 million, respectively, in the second quarter of 2016 compared to revenues of $183.1 million and Segment EBITDA of $40.9 million in the second quarter of 2015. Offshore products revenues and Segment EBITDA decreased 26% and 33% year-over-year, respectively, due to lower contributions across most of the segment’s product and service lines. The lower quarterly revenues were primarily the result of reductions in production-related products, lower levels of service activities, weaker demand for drilling products and a backlog position that has trended lower since mid-2014, partially offset by improved subsea pipeline product revenues. Segment EBITDA margins were 20.1% in the second quarter of 2016 compared to 22.3% realized in the second quarter of 2015. Backlog declined 12% sequentially, totaling $268 million at June 30, 2016 compared to $306 million reported at March 31, 2016 and $409 million reported at June 30, 2015. Major backlog additions during the second quarter included orders for pipeline products destined for the Middle East and replacement equipment on a Gulf of Mexico production facility.
Well Site Services
Well site services generated revenues of $40.7 million and a Segment EBITDA loss of $3.6 million in the second quarter of 2016 compared to revenues and Segment EBITDA of $86.1 million and $11.1 million, respectively, in the second quarter of 2015. Well site services revenues and Segment EBITDA decreased 53% and 132% year-over-year, respectively, primarily due to a 57% year-over-year decrease in the number of completion services jobs performed, partially offset by a 25% year-over-year increase in revenue per completion service job primarily as a result of a mix shift to more long-duration jobs in international markets and longer-term project work in the U.S. Gulf of Mexico. The segment’s second quarter 2016 results continued to be negatively impacted by extreme competitive pressures and depressed activity levels in the U.S. shale basins. However, while still negative, second quarter 2016 Segment EBITDA improved sequentially in our completion services business line. Lower utilization in the land drilling business, which averaged 9% in the second quarter of 2016 compared to 34% in the second quarter of 2015, also negatively impacted results. However, we did experience a quarterly sequential improvement in our land drilling utilization for the first time since the second quarter of 2014.
Income Taxes
The Company recognized an effective tax rate benefit of 35.5% in the second quarter of 2016. This compares to an effective tax rate provision of 19.0% reported in the second quarter of 2015. The lower effective tax rate in the second quarter of 2015 was primarily due to significantly lower domestic earnings stemming from the industry downturn.
Financial Condition
The Company invested $8.1 million in capital expenditures during the second quarter of 2016. Capital expenditures made during the second quarter included expansionary investments for certain offshore products facilities along with maintenance capital spent on completion services equipment.
As of June 30, 2016, $80.4 million was outstanding under the Company’s revolving credit facility. Total availability under the facility as of June 30, 2016 was $283.2 million (net of standby letters of credit totaling $32.5 million).
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