Superior Well Services' Operating Income Jumps 124%



Superior Well Services, Inc. on Tuesday announced its 2006 results. Revenues, operating income, EBITDA, and net income all reached record levels.

--Revenues totaled $244.6 million, an 86% increase over the prior year.
--Operating income increased 124% over the prior year and reached $53.0 million.
--EBITDA, a non-GAAP measure, increased 108% over the prior year to $67.6 million.
--Net income for 2006 totaled $31.9 million, while diluted earnings per share increased to $1.63.

Commenting on the results, David Wallace, Chief Executive Officer, stated, "We are extremely pleased with the 2006 performance. Revenue growth in 2006 allowed us to maintain strong earnings despite start-up costs associated with our new service centers. Completion of the Company's follow-on common stock offering in December 2006 provided the Company with a strong financial foundation to continue its growth in the future. We continued to see increased activity in each of our operating regions and solid growth opportunities within each operating region."

Revenue was $244.6 million for the year ended December 31, 2006 compared to $131.7 million for the year ended December 31, 2005, an increase of 86%. Each of our operating regions had revenue increases over the same period in 2005. Increased activity levels at new and existing service centers, coupled with pricing improvements, led to the increases in 2006. Stimulation, nitrogen, cementing and down-hole surveying revenues amounted to 58.4%, 10.4%, 21.0% and 10.2% of our revenues in 2006, respectively.

Cost of revenue increased 84% to $165.9 million for the year ended December 31, 2006 compared to $90.3 million for the year ended December 31, 2005. The increase in cost of revenues was due primarily to our increased activity levels. As a percentage of revenue, cost of revenue decreased to 67.8% in 2006 from 68.5% in the same period of 2005. The primary reason for this decrease was increased utilization at new and existing service centers, coupled with improved pricing.

SG&A expenses were $25.7 million for the year ended December 31, 2006 compared to $17.8 million for the year ended December 31, 2005, an increase of 44%. New centers amounted to $7.1 million of the increase in 2006 compared to 2005. The Company hired additional personnel during 2006 to manage the growth in our operations. As a percentage of revenue, the portion of labor expense included in SG&A expenses decreased from 7.1% in 2005 to 6.0% in 2006. Aggregate labor expense increased $3.6 million to $10.3 million in 2006.

Operating income was $53.0 million for the year ended December 31, 2006 compared to $23.7 million for the year ended December 31, 2005, an increase of 124%. As a percentage of revenue, operating income increased from 18.0% in 2005 to 21.7% in 2006. This increase in operating income was partially offset by the increases in the Company's cost of revenue and SG&A expenses as described above.

In December 2006, the Company completed its follow-on stock offering of 3,690,000 shares of its common stock. Proceeds to the Company, net of underwriting discount and offering expenses, were approximately $88.6 million. After completion of the offering, the Company had 23,352,567 shares of common stock outstanding. Proceeds from the offering were used to repay debt and fund capital expenditures. Capital expenditures totaled $75.1 million for the year ended December 31, 2006 as compared to $39.9 million for the year ended December 31, 2005.

In the fourth quarter 2006, the Company's revenues increased to $75.1 million, up 82% compared to $41.2 million in the prior year's fourth quarter and up 12% compared to $67.2 million reported in the previous quarter. Increased activity levels and pricing improvement led to the increases in fourth quarter of 2006 when compared to the prior year's fourth quarter.

Cost of revenue was $51.3 million, up 87% compared to $27.4 million in the prior year's fourth quarter and up 14% compared to $45.2 million in the previous quarter. Increased activity levels led to the increases in the fourth quarter of 2006. As a percentage of revenue, cost of revenue increased to 68% for fourth quarter of 2006 from 67% for the fourth quarter in the previous year. This percentage increase was primarily due to higher labor expenses as a percentage of revenues in the fourth quarter of 2006 versus the fourth quarter of 2005.

In the fourth quarter 2006, the Company's SG&A expenses increased to $7.2 million, up 17% compared to $6.2 million in the prior year's fourth quarter and up 6% compared to $6.8 million reported in the previous quarter. As a percentage of revenue, SG&A expenses decreased to 10% for the fourth quarter of 2006 from 15% in the previous year.

Operating income for the fourth quarter was $16.6 million, up 120% compared to $7.6 million in the prior year's fourth quarter and up 9% compared to $15.2 million in the previous quarter. Net income for fourth quarter totaled $9.8 million, while diluted earnings per share increased to $0.49.

Superior Well Services, Inc. is an oilfield services company operating in many of the major oil and natural gas producing regions in the United States.

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