Grant Prideco Sees 21% Revenue Increase
Grant Prideco's second quarter 2007 net income increased 28% to $135.0 million ($1.04 per diluted share) on a 21% increase in revenues to $522.2 million. These results compare to net income of $105.6 million ($0.79 per diluted share) on revenues of $431.8 million in last year's second quarter.
"We are pleased to announce another record quarter for Grant Prideco. A recovery in our Tubular Technologies and Services segment drove this quarter's sequential improvement, complemented by continued strong performance by our Drilling Products and Services and ReedHycalog segments, the latter despite a larger than expected drop in the Canadian market," commented Michael McShane, Chairman, President, and CEO of Grant Prideco. "Our Drilling Products and Services segment continued its impressive results with revenues increasing 32% over the same period of the prior year. Our ReedHycalog segment benefited from the acquisition of Andergauge and increased international drilling activity. While our Tubular Technology and Services segment experienced a reduction in year-over-year quarterly revenues due to softening tubular markets, revenues in this segment increased 30% from the first quarter."
Operating Income Margins Increase
Consolidated revenues increased by $90.4 million, or 21%, compared to last year's second quarter, as worldwide drilling activity increased by 3%. Consolidated operating income margins increased to 32.3% from 30.1% for the same prior-year period as a result of higher activity levels and improved pricing.
Interest expense increased by $0.5 million compared to last year's second quarter reflecting prior year borrowings to fund the Andergauge acquisition. Equity income from the Company's investment in Voest-Alpine Tubulars (VAT) decreased $7.3 million primarily due to the timing of order deliveries.
The Company's effective tax rate was 29.3% for the second quarter of 2007 down from 32.7% in last year's second quarter. The reduction in the tax rate is primarily related to a lower tax rate for our Chinese operations and a $1.6 million ($0.01 per diluted share) benefit related to the reversal of a contingent tax liability in the second quarter 2007. For fiscal 2007, the Company expects its effective tax rate to be in the range of 29% - 30%.
Drilling Products and Services
Revenues for the Drilling Products and Services segment were a record $282.8 million during the quarter, representing a 32% increase over last year's second quarter. Operating income increased by 48% to $116.4 million and operating income margins increased to 41% from 37% in last year's second quarter. These results reflect increased volumes and a favorable product mix. Drill pipe footage sold and average sales price per foot both increased by 18% compared to last year's second quarter. Sequentially, total backlog for this segment remained flat at $1.1 billion at June 30, 2007.
Revenues for the ReedHycalog segment increased by 28% to $148.3 million primarily due to incremental revenues related to the Andergauge acquisition in October 2006. Revenues increased by 11%, including the Andergauge acquisition on a pro forma basis in last year's second quarter, as growth in international markets (especially Middle East and Europe/Africa) more than offset weakness in Canada. All product lines showed year-over-year revenue increases with the exception of coring services, which are heavily weighted to the Canadian market. Operating income increased by 15% to $46.8 million.
Tubular Technology and Services
Revenues for the Tubular Technology and Services segment decreased by 14% to $87.2 million. Operating income decreased by 28% to $21.0 million and operating income margins decreased to 24% from 29% in last year's second quarter. These results reflect a decline in domestic sales of OCTG tubular products and accessories primarily at this segment's TCA heat-treat facility. However, sequentially this segment's revenues and operating income increased by 30% and 61%, respectively, reflecting increased activity at TCA due to increased deep-water business and Tube-Alloy with increased sales of vacuum- insulated tubing.
Corporate and Other
Corporate and Other operating loss for the second quarter 2007 decreased by $3.4 million year-over-year, mostly due to improvement in the Company's IntelliServ division. Corporate costs decreased slightly due to lower incentive costs.
"While Canadian drilling activity continues to be softer than expected," commented Michael McShane, "we expect continued earnings growth in each of our three operating segments during the second half of the fiscal year. This will be partially offset by lower equity income from our VAT joint venture as it shuts down for its summer maintenance period. In total, we are increasing our earlier 2007 earnings guidance to between $4.20 and $4.25 per share, excluding unusual items."
Grant Prideco, headquartered in Houston, Texas, is the world leader in drill stem technology development and drill pipe manufacturing, sales and service; a global leader in drill bit and specialty tools, manufacturing, sales and service; and a leading provider of high-performance engineered connections and premium tubular products and services.
- Plexus Snags New Tech Company, POS-GRIP IP Rights for $2MM (Jul 23)
- GulfMark Names Quintin Kneen VP of Finance (Jun 10)
- NOV Completes Acquisition of Grant Prideco (Apr 21)