Oil States Announces Fourth Quarter 2018 Results of Operations

HOUSTON, Feb. 13, 2019 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE: OIS) reported a net loss for the fourth quarter 2018 of $14.3 million, or $0.24 per diluted share. During the fourth quarter of 2018, the Company generated revenues of $274.1 million and Consolidated EBITDA (Note A) of $24.1 million.

The fourth quarter 2018 results included:

• Legal fees incurred for patent defense of $2.4 million ($1.9 million after-tax, or $0.03 per diluted share)
• Transaction-related expenses of $0.7 million ($0.6 million after-tax, or $0.01 per diluted share)
• Severance and other downsizing charges of $0.8 million ($0.7 million after-tax, or $0.01 per diluted share)

Oil States’ President and Chief Executive Officer, Cindy B. Taylor, stated, "During the fourth quarter, Oil States reported results largely in-line with prior guidance provided in connection with our third quarter earnings conference call. In our Well Site Services segment, we exceeded the upper-end of our EBITDA guided range. Further, our Offshore/Manufactured Products segment results improved sequentially and exceeded the high-end of our guided range, led by higher levels of service activity and military product sales. Backlog in our Offshore/Manufactured Products segment totaled $179 million at December 31, 2018, and our book-to-bill ratio for both the fourth quarter and full-year 2018 was 1.1x. Partially offsetting these positive results, our Downhole Technologies segment was negatively impacted by lower customer demand for our perforating products along with reduced downhole composite product sales.

"Our fourth quarter results were achieved in spite of the extreme volatility that we witnessed with respect to crude oil prices. The WTI spot price peaked at $76.40 per barrel early in the quarter only to subsequently fall to below $50 per barrel by year-end. While our fourth quarter activity held up reasonably well, the energy industry volatility has created uncertainty early in 2019 as our customers reassess their budgets and plans. However, crude oil prices have improved 16% since year-end 2018, indicating a more constructive commodity price environment."

For the year ended December 31, 2018, the Company reported a net loss of $19.1 million, or $0.33 per diluted share, revenues of $1.1 billion and Consolidated EBITDA of $120.8 million.

The full year 2018 results included:

• Legal fees incurred for patent defense of $8.4 million ($6.6 million after-tax, or $0.11 per diluted share)
• Transaction-related expenses of $3.3 million ($2.6 million after-tax, or $0.04 per diluted share)
• Reserves for prior years' FLSA claim settlements of $3.0 million ($2.4 million after-tax, or $0.04 per diluted share)
• Severance and other downsizing charges of $1.6 million ($1.3 million after-tax, or $0.02 per diluted share)

BUSINESS SEGMENT RESULTS

(See Segment Data Tables)

Well Site Services

Well Site Services generated revenues of $126.1 million and Segment EBITDA (Note B) of $19.0 million in the fourth quarter of 2018 compared to revenues and Segment EBITDA of $128.6 million and $15.5 million, respectively, in the third quarter of 2018. Excluding a $2.6 million provision for FLSA claim settlements recorded in the third quarter 2018, Segment EBITDA increased 5% quarter-over-quarter. Activity declines led to a 7% quarter-over-quarter decrease in the number of Completion Services jobs performed, partially offset by a 4% increase in revenue per Completion Services job. The revenue decline was concentrated in the Permian Basin and was likely driven by the significant decline in crude oil prices in the fourth quarter along with holiday downtime, partially offset by increased revenues from U.S. Gulf of Mexico projects. Segment EBITDA margins averaged 15% in the fourth quarter of 2018 compared to 12% in the third quarter of 2018.  Utilization in the land drilling business averaged 30% in the fourth quarter of 2018 which was flat sequentially.

Downhole Technologies (acquisition of GEODynamics, Inc. closed on January 12, 2018)

Downhole Technologies generated revenues of $52.2 million and Segment EBITDA of $6.2 million in the fourth quarter of 2018 compared to revenues and Segment EBITDA of $56.6 million and $11.1 million, respectively, in the third quarter of 2018. Downhole Technologies revenues and Segment EBITDA decreased 8% and 44%, respectively, on a sequential basis due to reduced demand for perforating and downhole composite products as well as increased manufacturing facility cost under-absorption due to the lower levels of throughput experienced late in the quarter. Segment EBITDA margin was 12% in the fourth quarter of 2018 compared to 20% in the third quarter of 2018. Both the fourth and third quarters of 2018 were negatively impacted by $2.4 million and $3.5 million, respectively, of patent defense costs. The legal actions were settled in the fourth quarter and the Company, therefore, does not expect these patent defense costs to recur in 2019.

Offshore/Manufactured Products

Offshore/Manufactured Products segment generated revenues and Segment EBITDA of $95.8 million and $12.9 million, respectively, in the fourth quarter of 2018 compared to revenues of $89.4 million and Segment EBITDA of $12.6 million in the third quarter of 2018. Revenues increased 7% sequentially due to a combined 24% increase in other products (primarily military related) and service revenues, partially offset by a 5% sequential decrease in sales of our shorter-cycle products (elastomer and valve products). Segment EBITDA margin was 13% in the fourth quarter of 2018 compared to a margin of 14% realized in the third quarter of 2018.  Backlog totaled $179 million at December 31, 2018 compared to $175 million at September 30, 2018 and $168 million reported at December 31, 2017. A backlog award exceeding $10 million was booked during the fourth quarter 2018 for connector products destined for Africa.

Income Taxes

The Company recognized an effective tax rate provision of 5.1% in the fourth quarter of 2018 bringing the overall annual effective tax rate to a benefit of 12.1% for 2018.

Financial Condition

As of December 31, 2018, $136.1 million was outstanding under the Company’s revolving credit facility, $22.6 million was outstanding under letters of credit, while cash on hand totaled $19.3 million. The Company had access to $156.2 million of revolving credit facility availability as of December 31, 2018.

Conference Call Information

The call is scheduled for Thursday, February 14, 2019 at 10:00 am CT, 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 (888) 771-4371 in the United States or by dialing +1 847 585 4405 internationally and using the passcode of 48185951.  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 of 48185951.

About Oil States

Oil States International, Inc. is a global oilfield products and services company serving the drilling, completion, subsea, production and infrastructure sectors of the oil and gas industry. The Company’s manufactured products include highly engineered capital equipment as well as products consumed in the drilling, well construction and production of oil and gas. The Company is also a leading researcher, developer and manufacturer of engineered solutions to connect the wellbore with the formation in oil and gas well completions. Oil States is headquartered in Houston, Texas with manufacturing and service facilities strategically located across the globe. 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 herein are based on 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 others, the level of supply of and demand for oil and natural gas, fluctuations in the prices therefor and the cyclical nature of the oil and natural gas industry and the other risks associated with the general nature of the energy service industry discussed in the “Business” and “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, Periodic Reports on Form 8-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA
(In Thousands)
(unaudited)

(1) Disaggregated revenue data is provided to supplement the Segment Data.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
SEGMENT EBITDA (B)
(In Thousands)
(unaudited)

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In Thousands)
(unaudited)

(A) The term Consolidated EBITDA consists of net loss from continuing operations plus net interest expense, taxes, depreciation and amortization expense, and certain other items. Consolidated EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net 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 may not be comparable to other similarly titled measures of other companies. The Company has included Consolidated EBITDA as a supplemental disclosure because its management believes that Consolidated EBITDA provides 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 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 to net loss from continuing operations, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

(B) The terms EBITDA and Segment EBITDA consist of operating income (loss) plus depreciation and amortization expense, and certain other items. EBITDA and 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, EBITDA and Segment EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA and Segment EBITDA as a supplemental disclosure because its management believes that EBITDA and 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 EBITDA and 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 EBITDA and Segment EBITDA to operating income (loss), which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

ADDITIONAL QUARTERLY SEGMENT AND OPERATING DATA
(unaudited)

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.
Director, Investor Relations
713-470-4860

SOURCE: Oil States International, Inc.