Oil States Unveils Quarterly Results
Oil States International, Inc. reported net income for the quarter ended March 31, 2009 of $56.1 million, or $1.13 per diluted share, compared to $65.5 million, or $1.29 per diluted share, generated in the first quarter of 2008. Oil States recognized year-over-year growth in revenues of 11% and a 10% decline in EBITDA (defined as net income plus interest, taxes, depreciation and amortization) in the first quarter of 2009.(A)
The Company generated $667.1 million of revenues and $113.4 million of EBITDA during the quarter compared to revenue of $601.2 million and EBITDA of $125.8 million in the first quarter of 2008. Consolidated operating income in the first quarter of 2009 was $84.9 million compared to $101.3 million for the corresponding quarter of 2008. Significant year-over-year increases in Tubular Services pricing coupled with increased room capacity supporting oil sands development led to revenue growth in the first quarter of 2009. This growth was partially offset by revenue declines in Well Site Services due to significant year-over-year reductions in North American drilling and completion activity.
The Company recognized an effective tax rate of 31.1% in the first quarter of 2009 compared to 32.6% in the first quarter of 2008. The lower effective tax rate in the first quarter of 2009 was primarily due to increased foreign sourced income which is taxed at lower statutory rates. The results for the first quarters of 2009 and 2008 include $1.6 million and $1.5 million, respectively, of non-cash interest expense related to the accounting for the existing convertible notes under the requirements of APB 14-1. The Company spent $32.7 million in capital expenditures during the first quarter of 2009 primarily related to facility consolidation in the rental tool operations and for the previously announced expansion of the Wapasu Creek Lodge.
Business Segment Results
Well Site Services
Well Site Services generated revenues of $230.8 million and EBITDA of $73.3 million in the first quarter of 2009 compared to revenues and EBITDA of $265.6 million and $97.6 million, respectively, in the first quarter of 2008, representing year-over-year decreases of 13% and 25%, respectively. The decrease in EBITDA was primarily due to reductions in both activity and margins from the Company's North American drilling and rental tools operations as a result of the 27% year-over-year decrease in the North American rig count.
The accommodations business helped to mitigate the percentage declines in the Well Site Services segment by generating revenues of $141.8 million and EBITDA of $56.7 million, for the first quarter of 2009, compared to revenues and EBITDA of $146.3 million and $60.9 million, respectively, in the first quarter of 2008. Accommodations revenue decreased 3% and EBITDA decreased 7%, primarily due to the weakening of the Canadian dollar and the reduction in traditional Canadian drilling activity, partially offset by additional capacity at the Wapasu Creek Lodge and a $36.0 million year-over-year increase in revenues from third-party accommodation unit manufacturing and installation.
Rental tools generated $71.7 million of revenues and $13.6 million of EBITDA in the first quarter of 2009 compared to revenue of $82.5 million and EBITDA of $25.5 million in the first quarter of 2008. This 13% year-over-year revenue decline was primarily due to lower pricing and significant reductions in drilling and completion activity in both Canada and the U.S. The 47% year-over-year decline in EBITDA was primarily due to reduced revenues coupled with consolidation and severance costs.
Drilling services generated revenues and EBITDA of $17.3 million and $3.0 million in the first quarter of 2009, respectively, compared to $36.8 million of revenues and EBITDA of $11.2 million in the first quarter 2008. The year-over-year decline in revenue and EBITDA of 53% and 73%, respectively, was due to overall reduction in utilization from 74.5% in the first quarter of 2008 to 32.3% in the first quarter of 2009.
The Offshore Products segment reported revenue and EBITDA of $128.0 million and $23.9 million, respectively, in the first quarter of 2009, compared to $126.9 million of revenues and $24.1 million in EBITDA in the first quarter of 2008. Revenues and EBITDA were essentially flat year-over-year as Offshore Products reported higher contributions related to subsea pipeline products for West Africa and Brazil coupled with higher revenues year-over-year from winch, crane and vessel equipment, partially offset by a reduction in connector product revenue. Backlog totaled $317.8 million at March 31, 2009 which represented a 12% decrease from the $362.1 million reported as of December 31, 2008, as new orders for the first quarter declined by 44% year-over-year.
Tubular Services generated revenues of $308.3 million and EBITDA of $23.7 million during the first quarter of 2009 compared to revenues of $208.8 million and EBITDA of $10.1 million in the first quarter of 2008. Tubular Services' OCTG shipments decreased 18% to 104,900 tons shipped in the first quarter of 2009, down from 127,100 tons shipped in the first quarter of 2008 as a result of fewer wells drilled in the most recent quarter. However, gross margins improved to 8.7% in the first quarter of 2009 from 6.1% in the first quarter of 2008 due to customer purchase commitments made in the second half of 2008 at higher prices than that realized in the first quarter of 2008. The Company's OCTG inventory level at March 31, 2009 was $369.3 million, a $27.2 million decrease from the December 31, 2008 level of $396.5 million.
"Despite the significant slow down of our U.S.-based services businesses, we reported solid first quarter results,'' stated Cindy B. Taylor, Oil States' President and Chief Executive Officer. ``Our exposure to longer-term projects in both the oil sands region in Canada and the global deepwater infrastructure market allowed us to maintain a reasonable level of profitability despite the severe activity declines in North American drilling and completion oriented service work which accelerated as the quarter progressed. Our liquidity improved during the quarter due to $8.6 million in working capital reductions and $21.2 million collected from Boots and Coots. Our debt to capitalization ratio declined to 23% from 27% at December 31, 2008.''
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