Oil States Announces Fourth Quarter 2016 Results

Fourth Quarter Highlights:

• Reports net loss per diluted share of $0.21; $0.20 adjusted net loss per diluted share excluding severance and other downsizing charges
• Well site services generated positive EBITDA margins for the first time in three quarters
• Offshore products’ EBITDA margin averaged 22.1%
• Offshore products’ book-to-bill ratio totaled 0.98x; full year book-to-bill ratio totaled 0.74x
• Reduced total debt by $21 million during the quarter; total debt to total capitalization ratio ended the quarter at 3.7%

HOUSTON, Feb. 15, 2017 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE: OIS ) reported a net loss for the fourth quarter of 2016 of $10.6 million, or $0.21 per diluted share, which included pre-tax charges of $0.6 million ($0.4 million after-tax, or $0.01 per diluted share) for severance and other downsizing charges. These results compare to reported net income for the fourth quarter of 2015 of $1.1 million, or $0.02 per diluted share, which included a total of $5.3 million after-tax, or $0.11 per diluted share, of severance and other downsizing charges, a leasehold restoration provision for one of our offshore products facilities in the U.K. (charge was included as a component of depreciation and amortization expense), a higher quarterly effective tax rate due to deferred tax asset write-offs and tax valuation allowances.

During the fourth quarter of 2016, the Company generated revenues of $169.9 million and Adjusted Consolidated EBITDA (Note B) of $13.7 million (excluding $0.6 million for severance and other downsizing charges). These results compare to revenues of $234.5 million and Adjusted Consolidated EBITDA of $42.5 million reported in the fourth quarter of 2015 (excluding $1.9 million of severance and other downsizing charges). 

For the year ended December 31, 2016, the Company reported revenues of $694.4 million and Adjusted Consolidated EBITDA of $55.5 million (excluding $5.2 million of severance and other downsizing charges). The net loss for full year 2016 totaled $46.4 million, or $0.92 per diluted share, and included $5.2 million ($3.3 million after-tax, or $0.06 per diluted share) of severance and other downsizing charges. For the year ended December 31, 2015, the Company reported revenues of $1.1 billion and Adjusted Consolidated EBITDA of $194.1 million (excluding $6.4 million of severance and other downsizing charges). Net income for full year 2015 totaled $28.4 million, or $0.55 per diluted share, and included a total of $17.5 million ($14.7 million after-tax, or $0.29 per diluted share) of severance and other downsizing initiatives ($6.4 million pre-tax, or $0.09 per diluted share), a leasehold restoration provision for one of our offshore products facilities in the U.K. ($3.4 million pre-tax, or $0.05 per diluted share; charge was included as a component of depreciation and amortization expense), a higher effective tax rate driven by $3.6 million ($0.07 per diluted share) of deferred tax asset write-offs and $4.1 million ($0.08 per diluted share) of tax valuation allowances recorded against certain of the Company's deferred tax assets.

Oil States’ President and Chief Executive Officer, Cindy B. Taylor, stated, “We concluded the fourth quarter 2016 with results that reflect the benefit of existing backlog and sound project execution in our offshore products segment coupled with the beginnings of a recovery in U.S. onshore markets, which benefitted our well site services segment. Our quarterly book-to-bill ratio was 0.98x in our offshore products segment suggesting that a floor in backlog should emerge in early 2017. Nonetheless, we entered 2017 with backlog that is down 41% from the beginning of 2016, creating revenue headwinds for 2017. Commodity prices and U.S. land rig count trends are favorable for our well site services segment going into 2017.”

BUSINESS SEGMENT RESULTS

Offshore Products Offshore products generated revenues and Segment EBITDA (Note A) of $115.0 million and $25.4 million, respectively, in the fourth quarter of 2016 compared to revenues of $169.8 million and Segment EBITDA of $50.8 million in the fourth quarter of 2015. Offshore products revenues and Segment EBITDA decreased 32% and 50% year-over-year, respectively, due to lower contributions across most of the segment’s product and service lines, particularly those tied to major project sanctions. The lower quarterly revenues were primarily the result of weaker demand for drilling products, production and pipeline infrastructure products, lower levels of service activities and a backlog position that has trended lower since mid-2014, partially offset by an 82% improvement in elastomer product revenues which are benefitting from U.S. land based activity. Segment EBITDA margin was 22.1% in the fourth quarter of 2016 compared to an unusually high margin of 30.0% realized in the fourth quarter of 2015, due to the number of major projects that were nearing completion at the end of 2015.  Backlog declined 2% sequentially, totaling $199 million at December 31, 2016 compared to $203 million reported at September 30, 2016 and $340 million reported at December 31, 2015. Major backlog additions during the fourth quarter included an order for production riser equipment on a floating production system.  

Well Site Services Well site services generated revenues of $54.9 million and Segment EBITDA of $1.1 million in the fourth quarter of 2016 compared to revenues and Segment EBITDA of $64.7 million and $1.2 million, respectively, in the fourth quarter of 2015.  Well site services revenues and Segment EBITDA decreased 15% and 7% year-over-year, respectively, primarily due to a 39% year-over-year decrease in the number of completion services jobs performed, partially offset by a 40% year-over-year increase in revenue per completion service job primarily as a result of a mix shift to more long-duration jobs in international markets and longer-term project work in the U.S. Gulf of Mexico, in contrast to any significant market price improvements. The average U.S. rig count declined 164 rigs, or 22%, in the fourth quarter 2016 compared to the same quarter in 2015. Lower utilization in the land drilling business, which averaged 18% in the fourth quarter of 2016 compared to 22% in the fourth quarter of 2015, also impacted the quarterly results.

Income Taxes The Company recognized an effective tax rate benefit of 37.8% in the fourth quarter of 2016 and an annualized effective tax rate benefit of 36.7% for 2016. This compares to an unusually high effective tax rate provision of 76.1% in the fourth quarter of 2015 bringing the annualized effective tax rate provision for 2015 to 43.9%. The higher effective tax rate in the fourth quarter and full year 2015 was due to deferred tax adjustments, certain non-deductible items and tax valuation allowances recorded.

Financial Condition As of December 31, 2016, $42.2 million was outstanding under the Company’s revolving credit facility while cash totaled $68.8 million. Total availability under the facility as of December 31, 2016 was $153.1 million (net of standby letters of credit totaling $30.7 million), which is less than the full amount of the facility due to limitations imposed by the maintenance covenant of 3.25 times trailing twelve months Consolidated EBITDA, adjusted for certain non-cash items.

Conference Call Information The call is scheduled for Thursday, February 16, 2017 at 11:00 am ET, and is being webcast and can be accessed from the Company’s website at www.ir.oilstatesintl.com . Participants may also join the conference call by dialing (800) 446-2782 in the United States or by dialing +1 847 413 3235 internationally and using the passcode 44303503. A replay of the conference call will be available one and a half hours after the completion of the call by dialing (888) 843-7419 in the United States or by dialing +1 630 652 3042 internationally and entering the passcode 44303503.

About Oil States Oil States International, Inc. is an energy services company with a leading market position as a manufacturer of products for deepwater production facilities, certain drilling equipment and shorter-cycle consumable products, as well as a provider of completion services and land drilling services to the oil and gas industry.  Oil States is publicly traded on the New York Stock Exchange under the symbol “OIS”.

For more information on the Company, please visit Oil States International’s website at www.oilstatesintl.com .

Forward Looking Statements The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward-looking statements included therein are based on then current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the energy service industry and other factors discussed in the "Business" and "Risk Factors" sections of the Form 10-K for the year ended December 31, 2015 filed by Oil States with the Securities and Exchange Commission on February 22, 2016.

(1) As of December 31, 2016, the Company had $153.1 million available under its revolving credit facility (net of standby letters of credit totaling $30.7 million), which is less than the full amount of the facility due to the maintenance covenant of 3.25 times trailing twelve months Consolidated EBITDA, adjusted for certain non-cash items.

(1) Operating income (loss) and Consolidated EBITDA for the three and twelve months ended December 31, 2016 included severance and other downsizing charges of $0.2 million and $2.0 million, respectively, related to the completion services business, $0.1 million and $0.2 million, respectively, related to the drilling services business and $0.3 million and $3.0 million, respectively, related to the offshore products segment.

(2) Operating income (loss) and Consolidated EBITDA for the three and twelve months ended December 31, 2015 included severance and other downsizing charges of $1.1 million and $3.1 million, respectively, related to the completion services business and $0.8 million and $3.3 million, respectively, related to the offshore products segment.

(3) Operating income (loss) for the three and twelve months ended December 31, 2015 included a $3.4 million depreciation charge related to a leasehold restoration provision for one of our offshore products facilities in the U.K.

(A) The terms Segment EBITDA and Adjusted Segment EBITDA consist of operating income (loss) plus depreciation and amortization expense, and certain other items.  Segment EBITDA and Adjusted Segment EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for operating income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity.  Additionally, Segment EBITDA and Adjusted Segment EBITDA may not be comparable to other similarly titled measures of other companies.  The Company has included Segment EBITDA and Adjusted Segment EBITDA as a supplemental disclosure because its management believes that Segment EBITDA and Adjusted Segment EBITDA provide useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates.  The Company uses Segment EBITDA and Adjusted Segment EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan.  The tables above set forth reconciliations of Segment EBITDA and Adjusted Segment EBITDA to operating income (loss), which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

(B) The terms Consolidated EBITDA and Adjusted Consolidated EBITDA consist of net income (loss) plus net interest expense, taxes, depreciation and amortization expense, and certain other items.  Consolidated EBITDA and Adjusted Consolidated EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income (loss) from continuing operations or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity.  Additionally, Consolidated EBITDA and Adjusted Consolidated EBITDA may not be comparable to other similarly titled measures of other companies.  The Company has included Consolidated EBITDA and Adjusted Consolidated EBITDA as a supplemental disclosure because its management believes that Consolidated EBITDA and Adjusted Consolidated EBITDA provide useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates.  The Company uses Consolidated EBITDA and Adjusted Consolidated EBITDA to compare and to monitor the performance of the Company and its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan.  The table above sets forth a reconciliation of Consolidated EBITDA and Adjusted Consolidated EBITDA to net income (loss) from continuing operations, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

Company Contact:      Lloyd A. Hajdik Oil States International, Inc. Executive Vice President, Chief Financial Officer and Treasurer 713-652-0582 Patricia Gil Oil States International, Inc. Investor Relations 713-470-4860