Oil States Announces Third Quarter 2015 Adjusted Earnings Per Share of $0.11

Third Quarter Highlights:

• Reports adjusted earnings per diluted share of $0.11
• Offshore products EBITDA margins averaged 22.5%
• 50% sequential increase in offshore products orders
• Offshore products book-to-bill ratio totaled 0.98x
• Repurchased over 480,000 shares of common stock

HOUSTON, Oct. 29, 2015 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income for the third quarter ended September 30, 2015 of $1.7 million, or $0.03 per diluted share, which included the following significant items:

• Higher effective tax rate (69.9%) due to a $3.2 million, or $0.06 per diluted share, tax valuation allowance recorded against certain of the Company's deferred tax assets
• Pre-tax charges of $0.7 million, or $0.01 per diluted share after-tax, for severance related costs

Excluding the higher effective tax rate associated with the valuation allowance and severance related costs, net income for the third quarter of 2015 would have totaled $5.6 million, or $0.11 per diluted share. These results compare to net income from continuing operations of $58.4 million, or $1.07 per diluted share, reported in the third quarter of 2014.

During the third quarter of 2015, the Company generated revenues of $258.9 million and Adjusted EBITDA (A) of $39.5 million (excluding $0.7 million for severance related costs). These results compare to revenues of $471.0 million and EBITDA (A) of $122.9 million in the third quarter of 2014, representing year-over-year declines of 45% and 68%, respectively. The persistently low commodity price environment continued to negatively impact activity levels through further reductions in the U.S. land drilling rig count, proportionately higher than normal inventory of drilled but uncompleted wells, reduced pricing for completion service offerings, and a reduction in drilling related product sales and short-cycle revenues in the offshore products segment.

Oil States' President and Chief Executive Officer, Cindy B. Taylor, stated, "Oil States' third quarter results continued to be negatively impacted by low commodity prices and the ensuing dramatic decline in U.S. land drilling and completion-related activity. Despite operating in an extremely challenging market environment, our results for the third quarter benefitted from cost reduction measures implemented earlier this year and strong offshore products segment performance. Activity declines have been particularly severe in our well site services segment where the U.S. rig count is now down 59% from peak levels in 2014. Our offshore products segment reported strong EBITDA margins and solid order bookings notwithstanding the current low commodity price environment. We achieved a book-to-bill ratio in the offshore products segment of 0.98x for the third quarter, bringing the ratio to 0.87x year-to-date. We continue to assess opportunities to invest in our company for the long-term, while prudently managing our balance sheet and monitoring our financial position."

For the first nine months of 2015, the Company reported revenues of $865.5 million and Adjusted EBITDA of $151.6 million (excluding $4.5 million of severance and downsizing related charges). For the first nine months of 2014, the Company reported revenues of $1.3 billion and Adjusted EBITDA of $325.0 million (excluding $11.0 million of charges primarily associated with the May 30, 2014 spin-off of the accommodations segment into a stand-alone, publicly traded corporation, Civeo Corporation or Civeo). Excluding the severance and downsizing related charges in the nine months ended September 30, 2015 and the spin-off related charges in the nine months ended September 30, 2014, Adjusted EBITDA would have decreased 53% year-over-year.

Net income for the first nine months of 2015 included a total of $9.1 million, or $0.18 per diluted share after-tax, from the following significant items:

• Severance and other downsizing initiatives ($4.5 million pre-tax, or $3.3 million after-tax)
• Higher effective tax rate driven by a $2.3 million deferred tax adjustment recorded in the first quarter of 2015 for certain non-deductible items
• $3.5 million tax valuation allowance recorded against certain of the Company's deferred tax assets ($3.2 million of which was recorded in the third quarter of 2015)

The results for the first nine months of 2014 included $111.4 million, or $1.34 per diluted share after-tax, of losses on debt extinguishment and Civeo spin-off related charges.

BUSINESS SEGMENT RESULTS

(Unless otherwise noted, the following discussion compares the quarterly results from continuing operations for the third quarters of 2015 and 2014, respectively. The historical results of operations of the accommodations segment through the spin-off date have been reported as discontinued operations for all periods reported herein.)

Well Site Services

Well site services generated revenues of $83.2 million and EBITDA of $10.9 million in the third quarter of 2015 compared to revenues and EBITDA of $224.4 million and $77.2 million, respectively, in the third quarter of 2014. Segmental revenues and EBITDA decreased 63% and 86% year-over-year, respectively, primarily due to a 48% year-over-year decrease in the number of completion services jobs performed and a 26% year-over-year decrease in revenue per completion service job, resulting from competitive pressures and lower activity levels in the U.S. shale basins. Lower utilization in the land drilling business, which averaged 33% during the third quarter of 2015 compared with 90% in the third quarter of 2014, also negatively impacted the segmental results. Segmental EBITDA margins were 13.1% in the third quarter of 2015 compared to 12.9% in the second quarter of 2015, but were below the 34.4% reported in the third quarter of 2014.

Offshore Products

Offshore products generated revenues and EBITDA of $175.7 million and $39.5 million, respectively, in the third quarter of 2015 compared to revenues of $246.6 million and EBITDA of $60.6 million in the third quarter of 2014. Segmental revenues decreased 29% and EBITDA decreased 35% year-over-year, due to lower contributions across all of the Company's product lines, weighted primarily to drilling products and shorter cycle businesses such as elastomer products, coupled with a lower level of service activities and a backlog position that has trended lower during 2015. EBITDA margins remained strong at 22.5% in the third quarter of 2015 compared to 22.3% realized in the second quarter of 2015, but were below the 24.6% reported in the third quarter of 2014. Backlog declined 4% sequentially, totaling $394 million at September 30, 2015 compared to $409 million reported at June 30, 2015 and $543 million reported at September 30, 2014. Major backlog additions during the third quarter included orders for U.S. military products and pipeline repair products.

Income Taxes

The Company recognized an effective tax rate of 69.9% in the third quarter of 2015 compared to an effective tax rate of 35.4% in the third quarter of 2014. The higher effective tax rate in the third quarter of 2015 was due to a $3.2 million tax valuation allowance recorded against certain of the Company's deferred tax assets.

Financial Condition

The Company invested $23.6 million in capital expenditures during the third quarter of 2015. Capital expenditures related to ongoing facility expansions in the offshore products segment, primarily in the U.K., along with the addition of completion services equipment deployed to service the U.S. shale plays.

During the third quarter of 2015, the Company repurchased 482,564 shares under its authorized share repurchase program at an average price of $27.30 per share. A total of $136.8 million remains available under the current share repurchase authorization, which is scheduled to expire on July 29, 2016.

As of September 30, 2015, there was $153.8 million outstanding under the Company's revolving credit facility. Total availability under the facility as of September 30, 2015 was $406.7 million (net of standby letters of credit totaling $39.5 million).

Conference Call Information

The call is scheduled for Friday, October 30, 2015 at 11:00 am ET, is being webcast and can be accessed from the Company's website at http://www.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 of 40977241. 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 40977241.

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 and certain drilling equipment, 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 http://www.oilstatesintl.com.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning 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, 2014 filed by Oil States with the Securities and Exchange Commission on February 23, 2015.

(1) Adjustments to EBITDA and operating income for the three and nine months ended September 30, 2015 included severance and other related costs of $0.2 million and $2.0 million, respectively, related to the completion services business and $0.5 million and $2.5 million, respectively, related to the offshore products segment.

(2) Adjustments to EBITDA and operating income for the nine months ended September 30, 2014 included transaction costs of $11.0 million. These costs primarily related to activities associated with the spin-off of Civeo.

(A) The terms EBITDA and Adjusted EBITDA consist of net income from continuing operations plus interest, taxes, depreciation and amortization, and certain other non-recurring items. EBITDA and Adjusted 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 income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA and Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA and Adjusted 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 EBITDA and Adjusted 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 table above sets forth a reconciliation of EBITDA and Adjusted EBITDA to net income, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.