Allis-Chalmers' Revenues Down for 4Q 2009



Allis-Chalmers Energy reported a net loss attributed to common stockholders for the fourth quarter of 2009 of $9.5 million, or $0.13 per diluted share, after preferred stock dividend, compared to a net loss of $70.4 million, or $2.00 per diluted share in the fourth quarter of 2008. Results for the fourth quarter of 2008 include a $115.8 million non-cash impairment of goodwill charge. Revenues for the fourth quarter of 2009 decreased 29.1% to $128.6 million compared to $181.4 million for the fourth quarter of 2008.

Allis-Chalmers reported a net loss attributed to common stockholders for the full year ended December 31, 2009 of $22.5 million, or $0.42 per diluted share, after preferred stock dividend, compared to a net loss of $39.5 million, or $1.13 per diluted share for the full year ended December 31, 2008. Revenues for 2009 decreased 25.1% to $506.3 million compared to $675.9 million for 2008.

Results for the year ended December 31, 2009 include a pre-tax gain of $26.4 million on debt extinguishment associated with the repurchase of $74.8 million of senior notes in June 2009 and non-routine and restructuring charges totaling $6.5 million. These charges include $3.5 million in restructuring charges consisting of severance payments and the closing of certain yard locations, and a $3.0 million non-cash loss on asset dispositions and inventory writedowns. Results for 2008 include a $115.8 million charge for the impairment of goodwill.

The decrease in revenues and net income in the fourth quarter and the full year 2009, as compared to the fourth quarter and the full year 2008, excluding the impact of the goodwill charge in 2008, was due primarily to the drop in the U.S. rig count, reduced equipment utilization and increased pricing competition during 2009.

Adjusted EBITDA was $21.2 million for the fourth quarter of 2009, compared to $41.6 million for the fourth quarter of 2008. For the year ended December 31, 2009 Adjusted EBITDA was $84.9 million compared to $177.1 million for the year ended December 31, 2008. Adjusted EBITDA in 2009 does not include the $26.4 million pre-tax gain on debt extinguishment and certain non-routine and restructuring charges, and for 2008 does not include the $115.8 million goodwill impairment charge. EBITDA and Adjusted EBITDA are non-GAAP financial measures that are not necessarily comparable from one company to another. Additional information and a reconciliation of GAAP net income to EBITDA and Adjusted EBITDA are provided later in this release.

Weighted average shares of common stock outstanding on a diluted basis increased to 71.0 million for the fourth quarter of 2009 compared to 35.2 million for the fourth quarter of 2008. For the year ended December 31, 2009, weighted average shares of common stock outstanding on a diluted basis were 53.7 million compared to 35.1 million for the year ended December 31, 2008.

Micki Hidayatallah, Allis-Chalmers’ Chairman and Chief Executive Officer stated, “Our total revenues increased sequentially in each of the past two quarters, increasing in the fourth quarter by $8.6 million, or 7.2%, compared to the third quarter of 2009. Most notably, revenues for our Oilfield Services segment increased in the fourth quarter by 18.3%, compared to the third quarter of 2009. While the domestic pricing environment remains competitive, we have begun to successfully increase prices in certain service lines. With the improvement of the U.S. rig count we are also seeing the benefits of our strategy to redeploy assets and resources to the areas with the greatest growth potential such as the Haynesville, Marcellus and Eagle Ford shales and we are benefitting from our strong presence in the directional and horizontal drilling market in these areas. As the market improves we expect to realize the benefits in 2010 and 2011 of the investments in new equipment made in 2008 such as new coil tubing equipment, casing running tools and downhole directional equipment. While we were disappointed in the results of our Rental Services segment in the fourth quarter, we have seen notable improvement in revenues and improved pricing for certain rental items in 2010. We have also redeployed certain Rental and Oilfield Services assets to Brazil, Colombia, Mexico, Saudi Arabia and Egypt.”

Mr. Hidayatallah continued, “Our Drilling and Completion segment, with operations in Argentina, Brazil and Bolivia experienced a modest increase in revenues as we began to see improvements in utilization in Argentina. In the fourth quarter we mobilized two drilling rigs from Argentina to Brazil where we expect to grow our operations, not only for contract drilling, but also rental services and other oilfield services. In February 2010 we began a one year contract in Bolivia for a 3000hp drilling rig mobilized from Argentina. This is in addition to the 3000hp rig currently operating in Bolivia. We have also executed an additional contract for a 2000hp rig in Bolivia to commence operations in April of this year. We believe the improved pricing for oil and natural gas in Argentina will result in significantly improved utilization and pricing of our equipment in 2010, and we will benefit from the redeployment of rigs to Brazil and Bolivia from Argentina.”

Segment Results for Fourth Quarter 2009

  • Oilfield Services. Revenues for our Oilfield Services segment were $37.7 million for the three months ended December 31, 2009; a decrease of 46.8% compared to $70.9 million in revenues for the three months ended December 31, 2008. Income from operations increased to $1.0 million in the fourth quarter of 2009 compared to a loss from operations of $1.6 million in the fourth quarter of 2008. Results for the fourth quarter of 2008 include a non-cash goodwill impairment charge of $9.4 million. Depreciation and amortization expense for the Oilfield Services segment increased by $731,000 or 10.4% in the fourth quarter of 2009 compared to the fourth quarter of the previous year, due to capital expenditures completed during 2008, including six coiled tubing units delivered in the last half of 2008. We have not fully realized the benefits of these capital expenditures due to decreased utilization and pricing of our equipment as a result of the decline in U.S. drilling activity in 2009.
  • Drilling and Completion. Revenues for the quarter ended December 31, 2009 for the Drilling and Completion segment were unchanged at $80.7 million compared to revenues for the quarter ended December 31, 2008. Income from operations decreased to $4.8 million in the fourth quarter of 2009 compared to $10.6 million in the fourth quarter of 2008. This reduction was due to: (1) reduced rig utilization and rig rates in Argentina; (2) increased labor and other costs in Argentina; and (3) an increase of $2.1 million, or 52.2% in depreciation and amortization. The increase in depreciation and amortization expense was the result of the addition of new rigs in Argentina and the acquisition of BCH in Brazil in December 2008.

 

  • Rental Services. Revenues for the quarter ended December 31, 2009 for the Rental Services segment were $10.2 million, a decrease from $29.8 million in revenues for the quarter ended December 31, 2008. The loss from operations was $3.2 million in the fourth quarter of 2009 compared to a loss from operations of $98.4 million in the fourth quarter of 2008. Results for the fourth quarter of 2008 include a non-cash goodwill impairment charge of $106.4 million. Our Rental Services segment revenues and operating income for the fourth quarter of 2009 decreased compared to the prior year due to the decrease in utilization of our rental equipment and a more competitive pricing environment resulting from a decrease in drilling activity in the U.S. in 2009. Depreciation and amortization expense for our Rental Services segment decreased $758,000, or 9.5%, in the fourth quarter of 2009 compared to the fourth quarter of 2008.