Oil States Reports Second Quarter Profits

 

Oil States International, Inc. reported net income for the quarter ended June 30, 2008 of $60.2 million, or $1.14 per diluted share, compared to $52.2 million, or $1.03 per diluted share, reported in the second quarter of 2007.

"Each of our businesses contributed to significant year-over-year growth for Oil States in the second quarter of 2008," stated Cindy B. Taylor, Oil States' President and Chief Executive Officer. "Our Tubular Services group generated record revenues and EBITDA during the quarter and our oil sands lodges in Canada continue to be a significant driver of our growth. Our Offshore Products segment, which supports global deepwater infrastructure development, also posted another strong quarter with revenue growth and good margins. Our current expectation for third quarter 2008 earnings is in a range of $1.19 to $1.24."

Excluding the gains related to the partial sales of its investment in Boots & Coots, the Company generated $631.4 million of revenues and $117.7 million of Adjusted EBITDA (defined as net income plus interest, taxes, depreciation and amortization), during the second quarterof 2008, compared to $499.3 million and $85.6 million, respectively, in the second quarter of 2007. (A) Significantly improved activity and profitability in our Tubular Services segment, strong year-over-year growth in our oil sands accommodations capacity and contributions from two rental tool acquisitions completed during the third quarter of 2007 led to year-over-year increases in revenue and Adjusted EBITDA of 26% and 38%, respectively, in the second quarter of 2008. During the quarter, consolidated operating income was $91.0 million compared to $68.5 million for the second quarter of 2007.

During the second quarter of 2008, the Company recognized a $2.7 million pre-tax gain, or $0.03 per diluted share after-tax, related to the sale of a portion of its investment in Boots & Coots. During the second quarter of 2007, the Company recognized a $12.8 million pre-tax gain, or$0.17 per diluted share after-tax, related to the sale of a portion of its investment in Boots & Coots. The Company currently owns approximately 7% of Boots & Coots, and as a result, will account for its remaining investment in Boots & Coots as marketable securities available for sale (included in non-current assets), thereby ending its use of the equity method of accounting for this investment. This common stock ownership is in addition to a $21.2 million note receivable held by the Company payable by Boots & Coots.

In the second quarter of 2008, the Company recognized an effective tax rate of 33.9% compared to 34.1% in the second quarter of 2007. The Company spent $74.9 million in capital expenditures during the second quarter of 2008 primarily related to expansion efforts at Wapasu Creek Lodge and the continued construction of the Conklin Lodge, both of which serve customers in the oil sands region of Canada.

For the first half of 2008, the Company reported net income of $126.6 million, or $2.45 per diluted share, on revenues of $1.2 billion and operating income of $192.4 million. The Company reported net income of $104.7 million, or $2.08 per diluted share, on revenues of $979.8 millionand operating income of $151.4 million, for the first half of 2007. This represents year-over-year increases in revenue and operating income of 26% and 27%, respectively.

Well Site Services

Well Site Services generated revenues of $209.9 million and Adjusted EBITDA of $67.6 million in the second quarter 2008, compared to $149.5 million and $52.8 million, respectively, in the second quarter of 2007, representing year-over-year increases of 40% and 28%, respectively. Increases in revenues and Adjusted EBITDA were across all of the businesses but were primarily due to growth in oil sands accommodations and contributions from the two rental tool acquisitions closed in the third quarter of 2007.

For the second quarter of 2008, accommodations generated revenues of $80.9 million and EBITDA of $26.1 million compared to revenues and EBITDA of $61.9 million and $18.5 million, respectively, in the second quarter of 2007. The accommodations business revenue increased 31% and EBITDA increased 41%, primarily due to contributions from additional room capacity at our major oil sands lodges. Drilling services generated revenues of $44.4 million and Adjusted EBITDA of $16.4 million in the second quarter of 2008 compared to revenues and Adjusted EBITDA of $36.8 million and $15.1million, respectively, in the second quarter 2007.

The year-over-year improvement in revenue was due to higher pricing and the addition of four new drilling rigs. This revenue improvement was partially offset by increased labor, repair and maintenance costs. Rental tools generated $84.6million of revenues and $25.2 million of EBITDA in the second quarter of 2008 compared to revenue of $50.8 million and EBITDA of $19.3 million inthe second quarter of 2007. This year-over-year growth was substantially due to the two acquisitions completed in the third quarter of 2007.

Offshore Products

During the second quarter of 2008, the Offshore Products segment reported revenue and EBITDA of $139.9 million and $27.8 million, respectively, compared to $135.4 million of revenues and $27.0 million in EBITDA in the second quarter of 2007. Revenues improved year-over-year dueprimarily to increased after-market service work and deliveries of subsea pipeline equipment. Gross margin remained strong at 26.6% in the second quarter of 2008 compared to 26.2% in the second quarter of 2007. Backlog totaled $385.8 million at June 30, 2008 which was a slight increase fromthe $383.5 million reported as of March 31, 2008 and a 7% increase from the $362.2 million reported as of December 31, 2007.

Tubular Services

Tubular Services generated record quarterly revenues and EBITDA of $281.6 million and $29.2 million, respectively, during the second quarter of 2008 compared to revenues of $214.4 million and EBITDA of $11.3 million in the second quarter of 2007. These increases were due to price increases implemented by the domestic OCTG mills during the quarter coupled with a 22% increase in tons shipped. In the second quarter of 2008, Tubular Services' shipped a quarterly record of 146,200 tons up from 120,100 tons shipped in the second quarter of 2007. Gross margin percentages improved significantly to 11.6% in the second quarter of 2008 from 6.4% in the corresponding quarter of 2007. The Company's OCTG inventory level at June 30, 2008 was $227.2 million which was an increase from the March 31, 2008 level of $190.4 million.

 

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