Allis-Chalmers Predicting Weak Results for Q4
Allis-Chalmers reported that for the full year 2007 it expects to report revenues of $574 million, operating income of $125 million and net income of approximately $50.3 million, or $1.45 per fully diluted share. For the fourth quarter 2007 it expects to report revenues of approximately $147 million, operating income of $21 million and net income of approximately $5.6 million or $0.16 per fully diluted share. Adjusted EBITDA is expected to be $185.4 million and $38.6 million for the full year and fourth quarter of 2007, respectively. These results are preliminary and subject to completion of the year-end audit. Allis-Chalmers plans to release results for the fourth quarter and the year ended December 31, 2007 on March 4, 2008.
Operating results in the fourth quarter of 2007 were primarily impacted by: weakness in demand for drill pipe in the Gulf of Mexico due to the hurricane season and the departure of rigs to the international market; severe flooding in Villahermosa, the largest operating yard in our Mexican tubular services operation; labor strikes in Argentina for 15 days, because of the October presidential elections, affecting our International Drilling segment. Additionally, the new Argentine government imposed a corporate tax on all employees; and start up costs and low utilization for our coil tubing units.
Micki Hidayatallah, Allis-Chalmers' Chairman and Chief Executive Officer, stated "While we are disappointed in our current operating results, we believe that we have positioned the company for substantial future growth. We are actively analyzing additional geographical market opportunities to deploy our rental fleet. We believe that our plan to expand our rental fleet footprint will take six to nine months. The Mexican casing and tubing business outlook is excellent, and we have added more advanced handling tools to accommodate the growth in the market. Additionally, the start up expenses associated with our coiled tubing business will no longer penalize operating results, and we are currently experiencing high utilization. We have committed to deliver 18 rigs to Argentina under five year contracts and we expect to have all of the units operating by the third quarter of this year. Pan American has recently announced a major discovery in the Patagonia province, and we expect that discovery to strengthen our operations in Argentina. We continue to be extremely excited about our growth prospects in Central and South America. It is our intention in 2008 to actively pursue international markets and provide additional products and services in these markets."
The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. These statements do not include the potential effect of any future capital transactions, such as business combinations, divestitures and financings, which may be completed after the date of this press release. Any material change in market conditions in any of Allis-Chalmers' business segments could affect guidance. Our earnings guidance for 2008 assumes that the Gulf of Mexico and onshore drilling activity in the U.S. will not be materially different from current market conditions. We expect delivery of new casing tools in the first quarter and six new coil tubing units in the fourth quarter. We expect all of the new drilling and service rigs under contract in Argentina to be deployed by the third quarter of 2008.