Superior Energy Services Posts 2009 Financial Results

Superior Energy Services announced a net loss of $114.6 million, or $1.46 per share on revenue of $264.6 million for the fourth quarter of 2009, as compared with net income of $83.3 million, or $1.06 per diluted share, on revenue of $491.8 million for the fourth quarter of 2008.

Excluding the previously announced special charges and the impact of the wreck removal project cost increases, for the fourth quarter of 2009, the Company had adjusted net income of $16.5 million, or $0.21 per diluted share, compared with net income of $88.5 million, or $1.13 per diluted share, for the fourth quarter of 2008.

For the year ended December 31, 2009, the Company’s net loss was $102.3 million, or $1.31 per share on revenue of $1,449.3 million as compared with net income of $351.5 million, or $4.33 per diluted share on revenue of $1,881.1 million for the year ended December 31, 2008.

Excluding special charges taken during the year and the impact of the wreck removal project cost increases, for the year ended December 31, 2009, the Company had adjusted net income of $112.9 million, or $1.44 per diluted share, as compared with adjusted net income of $325.0 million, or $4.00 per diluted share for the year ended December 31, 2008.

Terence Hall, Chairman and CEO of Superior, stated, "During 2009, we generated positive core earnings in a very challenging market environment, had operating cash flow of $276 million, expanded into new international markets and further positioned the Company to participate in subsea markets worldwide. Looking ahead, we're excited about the additional opportunities we'll have as a result of the Hallin Marine and Bullwinkle Field acquisitions. We expect to build momentum throughout the year as seasonal factors in the Gulf of Mexico improve and activity increases."

Overview of Previously Announced Special Charges and Project Cost Increases in Fourth Quarter of 2009

The Company incurred a non-cash, pre-tax charge of $119.8 million, or $0.98 per share after tax, related to the impairment of domestic land well enhancement assets. The Company also incurred pre-tax charges of $15.9 million, or $0.13 per share after tax, in the aggregate for transaction-related expenses for the acquisition of Hallin Marine Subsea International plc, a write down of components from one of the Company’s 265-ft. class liftboats and a reduction of the net realizable value of accounts receivable as a result of continuing economic uncertainties in Venezuela.

The Company increased the estimated total cost to complete the wreck removal project, which negatively impacted the Company’s revenue and the associated pre-tax income by $68.7 million, or $0.56 per share after tax.

Two Segments Renamed

The Company has renamed two of its reporting segments to more accurately describe the markets and customers served by the businesses operating in each segment. The "Well Intervention Segment" will now be called the "Subsea and Well Enhancement Segment." The "Rental Tools Segment" will now be called the "Drilling Products and Services Segment."

Geographic Breakdown

For the fourth quarter of 2009, Gulf of Mexico revenue was approximately $104.5 million. Excluding the $68.7 million impact from cost adjustments to the wreck removal project, Gulf of Mexico revenue was $173.2 million, or 22% lower sequentially. Domestic land revenue was approximately $72.7 million, a sequential increase of 2%, and international revenue was approximately $87.4 million, a sequential decrease of 5%.

Subsea and Well Enhancement Segment

Fourth quarter revenue for the Subsea and Well Enhancement Segment was $145.8 million. Excluding the $68.7 million impact from cost adjustments to the wreck removal project, segment revenue was $214.5 million. Loss from operations was $176.6 million. Without the aforementioned charges that impacted this segment, income from operations would have been approximately $17.1 million as compared with $67.5 million in the fourth quarter of 2008 and $31.6 million in the third quarter of 2009. Sequentially, seasonal factors led to a decline in Gulf of Mexico activity across most product and service lines. In the domestic land market, revenue increased 2% sequentially due to increased demand for coiled tubing and cased hole wireline services. International revenue in this segment decreased 1% sequentially due to the suspension of an inspection, repair and maintenance project in Angola, which was partially offset by increased demand for well control services. As stated in the pre-earnings announcement, the Company estimates that the suspension of the Angola project reduced pre-tax income by approximately $4.0 million, or $0.03 per share after tax.

Drilling Products and Services Segment

Fourth quarter revenue for the Drilling Products and Services Segment was $97.6 million. Income from operations was $13.8 million, or 14% of segment revenue, as compared with $50.7 million, or 34% of segment revenue in the fourth quarter of 2008, and $17.9 million, or 18% of segment revenue in the third quarter of 2009. On a sequential basis, Gulf of Mexico revenue declined 4% due to decreased demand for specialty tubulars and accessories, while international revenue declined 5% due to decreased demand for accommodations. Revenue from domestic land markets increased 2% sequentially primarily as a result of increased rentals of accommodations and stabilization equipment.

Marine Segment

Marine Segment revenue was $21.2 million. Loss from operations was $2.9 million, as compared with income from operations of $13.1 million, or 35% of segment revenue in the fourth quarter of 2008, and compared with income from operations of $5.1 million, or 16% of segment revenue in the third quarter of 2009. As previously announced, the Company estimates that downtime associated with the removal of the Company's two 265-ft. class liftboats – the Superior Influence and the Superior Respect -- from the fleet in early November following Hurricane Ida reduced pre-tax income by $4.0 million, or $0.03 per share after tax. The Company anticipates that the Superior Influence will return to service during the second quarter of 2010 and that the Superior Respect will return to service during the third quarter of 2010.

Average daily revenue in the fourth quarter of 2009 was approximately $230,000, inclusive of subsistence revenue, as compared with approximately $415,000 per day in the fourth quarter of 2008 and approximately $340,000 in the third quarter of 2009. Average fleet utilization in the fourth quarter of 2009 was 45% as compared with 76% in the fourth quarter of 2008 and 62% in the third quarter of 2009. The Company sold four of its 145-ft. class liftboats during the fourth quarter.
 

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