OilVoice - Superior Energy Services Posts Fourth Quarter 2007 Results

Superior Energy Services Posts Fourth Quarter 2007 Results

Tuesday, February 26, 2008

Superior Energy Services, Inc. has announced net income of $72.0 million and diluted earnings per share of $0.88 on revenues of $413.9 million, as compared to net income of $62.2 million and $0.76 diluted earnings per share on revenues of $319.1 million for the fourth quarter of 2006.

For the year ended December 31, 2007, net income was a record $281.1 million and $3.41 diluted earnings per share on record revenues of $1,572.5 million, as compared to net income of $188.2 million and $2.32 diluted earnings per share on revenues of $1,093.8 million for the year ended December 31, 2006.

Factors impacting the fourth quarter results as compared to the most recent quarter (third quarter of 2007) are as follows:

• Rental Tools Segment revenue increased 16% from the third quarter of 2007 primarily due to increased rentals of accommodations, drill pipe and stabilization tools in domestic land and offshore market areas.
• Marine Segment revenue increased 16% from the third quarter of 2007 as utilization increased to 70% from 62%.
• Oil and Gas Segment revenue increased 8% from the third quarter of 2007 due to increased oil and gas prices.
• Well Intervention Segment revenue decreased 6% from the third quarter of 2007 primarily due to a decrease in revenue from the derrick barge construction and charter contracts as the project nears completion and seasonal declines in production-related engineering and service activity in domestic land and offshore market areas.
• Revenue from domestic land and international markets represented approximately 52% of total revenue during the quarter as compared to 54% in the third quarter of 2007.
• General and administrative expenses increased $9.0 million, to $66.3 million over the third quarter of 2007, with the majority of the increase resulting from increased incentive compensation and insurance expense.
• Income from operations decreased to $116.5 million from $120.7 million as a result of a $7.5 million gain on the sale of a non-core rental tools business in the third quarter of 2007. Excluding this gain, income from operations would have increased $3.2 million.
• The Company's earnings from its equity investment in Beryl Oil and Gas (formerly Coldren Resources) was negatively impacted by $2.4 million, which reflects the Company's share of Beryl's non-cash charges related to a reduction in the value of its oil and gas reserves ($2.1 million ) and a charge for the early extinguishment of debt ($0.3 million).
• The Company's effective annual income tax rate decreased from 35.5% to 35.0%, resulting in an effective tax rate for the fourth quarter of 33.5%.

Terence Hall, Chairman and CEO of Superior, commented, "Fourth quarter activity gradually improved during the first two months for many of our products and services before our typical seasonal softness impacted business in December, especially in the Gulf of Mexico and domestic land markets. However, due to our product/service mix and geographic diversification, we were able to absorb activity declines in certain regions. For instance, increased rentals of accommodation units as a result of a project award in the Rocky Mountain market area offset weather issues and other seasonal factors that impacted demand for services and rentals in other domestic land markets.

"Overall, the fourth quarter caps off a record year for the Company in terms of financial performance. During the year, we exceeded several internal operational and safety goals; attracted additional management talent that we believe will advance our diversification strategy; and we integrated the Warrior Energy Services acquisition. We believe all of these accomplishments further position the Company to create value in the years to come," concluded Hall.

Well Intervention Group Segment

Fourth quarter revenue for the Well Intervention Group was $190.7 million, a 6% decrease from the third quarter of 2007 and a 43% increase from the fourth quarter of 2006. Income from operations was $37.0 million, or 19% of segment revenue as compared to $47.6 million, or 23% of segment revenue, in the third quarter of 2007. Lower revenue from the derrick barge construction contract accounted for about 60% of the segment's revenue decrease. The remainder of the decrease was due to lower production-related activity for engineering and certain services in both domestic land and offshore market areas. The segment's gross profit margin increased sequentially due to business mix, but the sequential operating margin decreased as a result of higher depreciation and general and administrative expenses.

Rental Tools Segment

Revenue for the Rental Tools segment was $137.5 million, 16% higher than the third quarter of 2007 and a 27% increase from the fourth quarter of 2006. Income from operations was $46.4 million, or 34% of segment revenue, down from $51.4 million, or 43% of segment revenue in the third quarter of 2007. Higher revenue is due to increased accommodation rentals in the Rocky Mountains market area, increased drill pipe rentals in the Gulf of Mexico and North Sea, and increased rentals of stabilizers in Mexico and the United Kingdom. Gross profit and operating margins were lower sequentially due to a higher mix of accommodations revenue, increased costs for upgrades at the Company's stabilizer facilities, and a decrease in non-rental sales.

Marine Segment

Superior's marine revenue was $30.5 million, a 16% increase over the third quarter of 2007 and a 24% decrease from the fourth quarter of 2006. Income from operations was $8.2 million, or 27% of segment revenue, up from $8.1 million, or 31% of segment revenue in the third quarter of 2007. Average daily revenue in the fourth quarter was approximately $332,000, inclusive of subsistence revenue, as compared to $286,000 per day in the third quarter of 2007. Average fleet utilization was 70% as compared to 62% in the third quarter of 2007 and 80% in the fourth quarter of 2006.

Oil and Gas Segment

Oil and gas revenue was $55.8 million, an 8% increase over third quarter 2007 levels and a 38% increase over the fourth quarter of 2006. Income from operations was a record $24.9 million, or 45% of segment revenue, up from $13.5 million, or 26% of segment revenue, in the third quarter of 2007. A 13% increase in the average realized price over the third quarter of 2007 more than offset a 9% decrease in total oil and gas production. Fourth quarter production was approximately 821,000 barrels of oil equivalent (boe), or about 8,900 boe per day, down from approximately 899,000 boe, or 9,800 boe per day in the third quarter of 2007. Production at South Pass 60, the Company's largest producing field, was shut-in for part of the quarter due to equipment and facility upgrades.