Oil States Announces Fourth Quarter 2015 Adjusted Earnings Per Share of $0.13

Fourth Quarter Highlights:

• Reports adjusted earnings per diluted share of $0.13 ($0.02 per diluted share on an as reported basis)
• Offshore products EBITDA margins averaged 30.0%
• Offshore products book-to-bill ratio totaled 0.71x
• Total debt was reduced $31 million

HOUSTON, Feb. 17, 2016 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE:OIS) reported net income for the fourth quarter ended December 31, 2015 of $1.1 million, or $0.02 per diluted share, which included the following significant items:

• Pre-tax charges of $1.9 million, or $0.02 per diluted share after-tax, for severance and other downsizing charges
• Pre-tax charges of $3.4 million, or $0.04 per diluted share after-tax, for a leasehold restoration provision (charge was included as a component of depreciation and amortization expense) for one of our offshore products facilities in the U.K.
• Higher quarterly effective tax rate of 76.1% due to $1.2 million, or $0.02 per diluted share, of deferred tax asset write-offs and a $0.6 million, or $0.01 per diluted share, of tax valuation allowances recorded against certain of the Company’s deferred tax assets

Excluding the above significant items, adjusted net income for the fourth quarter of 2015 totaled $6.4 million, or $0.13 per diluted share. These results compare to net income from continuing operations of $58.3 million, or $1.09 per diluted share, reported in the fourth quarter of 2014.

During the fourth quarter of 2015, the Company generated revenues of $234.5 million and Adjusted EBITDA (A) of $42.5 million (excluding $1.9 million for severance and other downsizing costs). These results compare to revenues of $483.7 million and EBITDA (A) of $124.2 million reported in the fourth quarter of 2014, representing year-over-year declines of 52% and 66%, respectively. Persistently low commodity prices continued to negatively impact global activity levels but the impact was particularly acute in North America as evidenced by a very low U.S. land drilling rig count resulting in a proportionately higher than normal inventory of drilled but uncompleted wells and pricing pressure for our completion service offerings. 

Oil States’ President and Chief Executive Officer, Cindy B. Taylor, stated, “Oil States’ fourth quarter results were sequentially lower due to the ongoing low commodity price environment in which we are operating,  with the current U.S. rig count having declined 70% from the peak level attained in late 2014. International declines are evident as well, but have come at a bit slower pace than the U.S. activity declines. As a result, our offshore products segment continued to report relatively good results with respectable bookings. Our offshore products segment achieved a new quarterly record EBITDA margin and a book-to-bill ratio of 0.71x for the fourth quarter, bringing the full year ratio to 0.83x, in-line with our expectations for the year. As we progress into 2016, we are bracing for another difficult year as our customers aggressively reduce capex in order to protect their own liquidity.”

For the year ended December 31, 2015, the Company reported revenues of $1.1 billion and Adjusted EBITDA of $194.1 million (excluding $6.4 million of severance and other downsizing charges). For the year ended December 31, 2014, the Company reported revenues of $1.8 billion and Adjusted EBITDA of $449.3 million (excluding $11.2 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 charges in 2015 and the spin-off related charges in 2014, Adjusted EBITDA decreased 57% year-over-year.

Net income for the year ended December 31, 2015 included a total of $14.7 million, or $0.29 per diluted share after-tax, from the following significant items:

• Pre-tax charges of $6.4 million, or $0.09 per diluted share after-tax, for severance and other downsizing charges
• Pre-tax charges of $3.4 million, or $0.05 per diluted share after-tax, for a leasehold restoration provision (charge was included as a component of depreciation and amortization expense) for one of our offshore products facilities in the U.K.
• $3.6 million, or $0.07 per diluted share, of deferred tax asset write-offs ($2.3 million recorded in the first quarter of 2015 and $1.2 million recorded in the fourth quarter of 2015)
• $4.1 million, or $0.08 per diluted share, of tax valuation allowances recorded against certain of the Company’s deferred tax assets ($0.3 million of which was recorded in the second quarter of 2015, $3.2 million recorded in the third quarter of 2015 and $0.6 million recorded in the fourth quarter of 2015)

The results for the year ended December 31, 2014 included $111.6 million, or $1.35 per diluted share after-tax, primarily related to losses on debt extinguishment and Civeo spin-off related charges. Excluding these significant charges in 2014, net income from continuing operations totaled $199.6 million, or $3.69 per diluted share.

BUSINESS SEGMENT RESULTS

(Unless otherwise noted, the following discussion compares the quarterly results from continuing operations for the fourth 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.)

Offshore Products

Offshore products generated revenues and EBITDA of $169.8 million and $50.8 million, respectively, in the fourth quarter of 2015 compared to revenues of $252.1 million and EBITDA of $61.9 million in the fourth quarter of 2014. Segmental revenues decreased 33% and EBITDA decreased 18% year-over-year, due to lower contributions across most of the segment’s product lines, weighted primarily to reductions in drilling products and shorter cycle businesses such as elastomer products and valves, a lower level of service activities and a backlog position that has trended lower throughout 2015, partially offset by improved subsea product revenues. Despite the weakening energy market, EBITDA margins achieved a new quarterly record of 30.0% in the fourth quarter of 2015, compared to 24.6% realized in the fourth quarter of 2014.  Strong project execution on several jobs completed during the fourth quarter along with favorable percentage-of-completion contract adjustments and a lower cost structure contributed to improvements in the EBITDA margin. Backlog declined 14% sequentially, totaling $340 million at December 31, 2015 compared to $394 million reported at September 30, 2015 and $490 million reported at December 31, 2014. Major backlog additions during the fourth quarter included orders for pipeline and connector products destined for various global markets and replacement equipment on a Gulf of Mexico production facility.

Well Site Services

Well site services generated revenues of $64.7 million and EBITDA of $1.2 million in the fourth quarter of 2015 compared to revenues and EBITDA of $231.7 million and $74.9 million, respectively, in the fourth quarter of 2014. Segmental revenues and EBITDA decreased 72% and 98% year-over-year, respectively, primarily due to a 56% year-over-year decrease in the number of completion services jobs performed and a 34% year-over-year decrease in revenue per completion service job. The segment’s fourth quarter 2015 results were negatively impacted by the extreme competitive pressures and depressed activity levels in the U.S. shale basins. Lower utilization in the land drilling business, which averaged only 22% during the fourth quarter of 2015, also negatively impacted results.

Income Taxes

The Company recognized an unusually high effective tax rate of 76.1% in the fourth quarter of 2015 bringing the annualized effective tax rate for the year to 43.9%. This compared with an effective tax rate of 35.9% reported in the fourth quarter of 2014 and 35.2% for the full year 2014. The higher effective tax rate in the fourth quarter and full year 2015 was due to the aforementioned deferred tax adjustments, certain non-deductible items and tax valuation allowances recorded.

Financial Condition

The Company invested $22.4 million in capital expenditures during the fourth quarter of 2015. Capital expenditures made during the fourth quarter related to ongoing facility expansions in the offshore products segment, primarily in the U.K., along with maintenance and replacement of completion services equipment.

During the fourth quarter of 2015, the Company did not repurchase any shares under its authorized share repurchase program. 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 December 31, 2015, there was $122.9 million outstanding under the Company’s revolving credit facility. Total availability under the facility as of December 31, 2015 was $439.4 million (net of standby letters of credit totaling $37.7 million).

Conference Call Information

The call is scheduled for Thursday, February 18, 2016 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) 447-0521 in the United States or by dialing +1 847 413 3238 internationally and using the passcode 41741067. 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 41741067.

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) As of December 31, 2015, the Company had approximately $439.4 million available under its revolving credit facility.

(1) Adjustments to EBITDA and operating income (loss) for the three and twelve months ended December 31, 2015 included severance and other downsizing costs 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.               

(2) Adjustments to EBITDA and operating income (loss) for the twelve months ended December 31, 2014 included transaction costs of $11.2 million. These costs primarily related to activities associated with the spin-off of Civeo.

(3) Adjustments to operating income (loss) for the three 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 EBITDA and Adjusted EBITDA consist of net income from continuing operations plus net interest expense, 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 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 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.