Surperior Energy's Quarterly Revenues Ride High in Q2



Superior Energy Services, Inc. has announced net income of $73.9 million and diluted earnings per share of $0.89 on revenues of $457.7 million for the second quarter of 2008, as compared to net income of $70.1 million, or $0.85 diluted earnings per share on revenues of $396.8 million for the second quarter of 2007.

Excluding a gain on sale of a business and non-cash, unrealized losses from hedging contracts impacting the Company's earnings (losses) from equity method investments, adjusted net income for the second quarter of 2008 was $84.7 million, or $1.02 diluted earnings per share.

Operating factors impacting the quarter as compared to the most recent quarter (first quarter 2008) include the following:
  • Well Intervention revenue increased 27% primarily due to increases in demand for production-related services such as electric line, coiled tubing and pumping and stimulation as well as a full quarter contribution from work on the previously announced $750 million wreck removal project.
  • Rental Tool revenue increased 3% largely due to increased rentals of drilling-related tools in the Gulf of Mexico and certain international market areas.
  • Marine revenues increased 13% due to higher utilization across most liftboat classes reflecting a seasonal increase in Gulf of Mexico activity.
  • International revenue increased 13% to a quarterly record of $86 million due to increases in well control work and rentals of drill pipe, specialty tubulars and stabilization equipment.
  • Gulf of Mexico revenue increased 8% to $246 million as a result of increases as revenue grew in all three segments. Domestic land revenue decreased 9% to $126 million due to the completion of certain well intervention and rental tools projects. Domestic land revenue from core well intervention services such as electric line and coiled tubing increased over the most recent quarter.
Terence Hall, Chairman and CEO of Superior, stated, "We grew our quarterly revenue and operating income (excluding adjustments) to all-time high levels while replacing the earnings from our divested oil and gas business with earnings from our core oilfield service businesses. Higher demand for existing products and services as well as the continued execution of our geographic diversification strategy drove our performance. This resulted in significant growth in our well intervention and rental tools segments sequentially and year-over-year. In addition, our quarterly international revenue was at an all-time high as we expanded into new markets in Latin America and Europe. The near-term outlook is extremely positive given the trend of increasing demand we experienced during the second quarter coupled with anticipated growth in domestic land drilling activity and capital spending by our customers in the second half of the year."
 
For the six months ended June 30, 2008, revenue was $899.0 million and net income was $176.0 million or $2.12 diluted earnings per share, as compared to revenue of $759.7 million and net income of $134.1 million or $1.63 diluted earnings per share for the six months ended June 30, 2007.
 
Well Intervention Group Segment
 
Second quarter revenue for the Well Intervention Group was a record $296.9 million, a 27% increase from the first quarter of 2008 and a 56% increase from the second quarter of 2007. Income from operations was $78.2 million, or 26% of segment revenue as compared to $50.8 million, or 22% of segment revenue, in the first quarter of 2008. The primary drivers for the sequential and year-over-year revenue growth was an increase in project management and marine engineering services as the Company completed its first full quarter of field operations associated with the previously announced wreck removal project. In addition, sequential improvement was due to higher utilization of coiled tubing and electric line services in certain domestic land markets, increased Gulf of Mexico activity for electric line, pumping and stimulation, hydraulic workover/snubbing, and plug and abandonment services, and increased well control work in international markets.
 
Rental Tools Segment
 
Revenue of $134.8 million was 3% higher than the first quarter of 2008 and 9% higher than the second quarter of 2007. Income from operations was $47.5 million, or 35% of segment revenue, compared to $45.8 million, or 35% of segment revenue in the first quarter of 2008. Excluding a $3.3 million gain on sale of business in the first quarter of 2008, the operating margin percentage increased sequentially by 3% due to the increase in higher margin rentals of stabilization equipment, drill pipe and accessories. The segment benefited from an increase in the number of rigs drilling for oil and natural gas. As a result, demand for stabilization equipment increased in all three major market areas (Gulf of Mexico, domestic land and international). Demand also increased for drill pipe and other specialty tubular products in the Gulf of Mexico and internationally in Brazil, Colombia and Venezuela.
 
Marine Segment
 
Superior's marine revenue was $26.0 million, a 13% increase from the first quarter of 2008 and a 26% decrease from the second quarter of 2007. Income from operations was $1.4 million, or 6% of segment revenue, down from $2.6 million, or 11% of segment revenue in the first quarter of 2008. Average daily revenue in the second quarter was approximately $286,000, inclusive of subsistence revenue, as compared to $254,000 per day in the first quarter of 2008. Average fleet utilization was 57% as compared to 49% in the first quarter of 2008 and 77% in the second quarter of 2007. Utilization increased each month during the quarter as most liftboat classes experienced higher utilization compared to the most recent quarter. However, operating expenses increased due to higher boat maintenance expense and labor costs.