Superior Energy Services Reports Net Loss

Superior Energy Services, Inc. has announced that non-GAAP adjusted net income for the fourth quarter of 2013 was $48.3 million, or $0.30 per diluted share.

Including all the specific after-tax charges totaling $361.8 million, or $2.27 per diluted share, the Company recorded a net loss of $313.5 million, or $1.97 per share, on revenue of $1,128.0 million. This compares with net income of $76.3 million, or $0.48 per diluted share, on revenue of $1,178.2 million for the fourth quarter of 2012.

The specific charges incurred during the fourth quarter of 2013 that are excluded from adjusted net income were as follows:

– A non-cash, pre-tax charge of $419.4 million ($342.4 million after-tax) primarily attributable to a reduction in the value of assets and goodwill impairment in the Subsea and Technical Solutions segment and the diminished value of assets in Latin America, including the write down of assets in Venezuela due to the Company’s exit from this non-core market;

– A pre-tax charge of $23.6 million ($15.6 million after-tax) due to increases to the estimated total cost of an ongoing specialized platform decommissioning project in the Gulf of Mexico accounted for using the percentage-of-completion method;

– A pre-tax restructuring charge of $5.6 million ($3.7 million after-tax) primarily related to cost savings initiatives in certain U.S. land markets from which the Company anticipates annualized savings of approximately $20 million to $30 million.

The Company estimates that weather-related disruptions in the U.S. land market further adversely impacted adjusted earnings per diluted share by $0.02 for the fourth quarter of 2013. The charges and adverse impacts during the fourth quarter of 2013 were partially offset by an income tax benefit of approximately $4.0 million, excluding the impact of the reduction in value of assets, resulting from a lower-than-anticipated effective income tax rate.

During the fourth quarter of 2013, the Company repurchased and retired 427,000 shares of its common stock for a total purchase price of $10.6 million (average price of $24.82) pursuant to the Company’s $400 million share repurchase program.

The Company intends to pursue strategic alternatives for its Asia Pacific-based subsea construction business. In addition, at the conclusion of the ongoing specialized platform decommissioning project, the Company intends to no longer participate in the Gulf of Mexico structural decommissioning market. A significant portion of the specific charges were related to these businesses. These strategic changes will not impact the Company’s Gulf of Mexico plug and abandonment business, a core service since the Company’s founding.

David Dunlap, President and CEO of the Company, commented, “From an operational standpoint, our adjusted earnings were about what we expected despite U.S. weather disruptions, which impacted several of our completion and production-related services. Partially offsetting the weather-related disruptions was better-than-anticipated sequential growth in the Gulf of Mexico in our Drilling Products and Services segment, in certain international market areas in our Production Services segment, and in our Onshore Completions and Workover Services segment’s fluids management U.S. land business.

“Product-line portfolio optimization and critical evaluation of expansion strategies are ongoing efforts. We believe that this approach will produce more predictable results, enhanced returns and improved resource allocation and focus.

“We’ve pursued a subsea well intervention strategy for several years, which has included participation in the subsea construction business. To date, we have not advanced the strategy as expected and have decided to seek strategic alternatives with our subsea construction business.

“The Gulf of Mexico structural decommissioning business, which produced very good results for most of the ten years that the Company has offered the service, is now saturated with competitors and has not produced positive results in recent years. In addition, the international market has not developed as anticipated. The Company retains the specialized expertise to manage a large downed structure project, but will discontinue participating in the routine end-of-life decommissioning business.

“We believe that these two strategic decisions will not adversely impact our income from continuing operations in 2014.

“2013 certainly has been challenging. While 2013 earnings did not meet our expectations, we did achieve several notable financial goals that we outlined at the beginning of the year, including strong free cash flow generation, repayment of debt, share repurchases and announcement of a dividend. In addition, we are confident that our core strategies for growth are demonstrating good progress as we are positioned to take advantage of anticipated U.S. activity growth.”

For the year ended December 31, 2013, the Company’s loss from continuing operations was $111.4 million, or $0.70 per diluted share, on revenue of $4,611.8 million as compared with income from continuing operations of $383.1 million, or $2.54 per diluted share, on revenue of $4,568.1 million for the year ended December 31, 2012.

Excluding the specific charges, the Company had non-GAAP adjusted net income from continuing operations of $250.4 million, or $1.57 per diluted share, for the year ended December 31, 2013.