USA: Superior Energy Services Releases Second Quarter 2013 Results

Superior Energy Services, Inc. announced net income of $68.6 million, or $0.43 per diluted share, on revenue of $1,159.7 million for the second quarter of 2013.

These results compare with the second quarter of 2012 net income from continuing operations of $142.8 million, or $0.90 per diluted share, and net income of $141.9 million, or $0.89 per diluted share, on revenue of $1,243.3 million.

For the six months ended June 30, 2013, the Company recorded net income of $132.3 million, or $0.82 per diluted share, on revenue of $2,295.2 million. For the six months ended June 30, 2012, the Company recorded net income from continuing operations of $213.0 million, or $1.49 per diluted share, and net income of $195.8 million, or $1.37 per diluted share, on revenue of $2,210.2 million.

David Dunlap, President and CEO of the Company, commented, “As previously announced, our decision to relocate pressure pumping equipment coupled with a slowdown in Mexico and weather in North Dakota impacted our results. However, this was partially offset by some underlying positives during the quarter including improved profit margins, increasing Gulf of Mexico activity and execution of our international growth strategy.

“We were able to slightly increase profit margins for the second consecutive quarter in the Onshore Completions and Workover segment despite downtime in pressure pumping related to equipment relocation and downtime for most services impacted by poor weather in North Dakota. This was achieved by our disciplined approach of maintaining margins rather than growing market share.

“Gulf of Mexico activity has increased at a rapid pace relative to last year with increases coming across our three business segments with operations in the Gulf. Our Gulf of Mexico revenue for the first six months of 2013 increased 34% over the first six months of 2012. Drilling Products and Services segment revenue in the first half of 2013 has increased 30% over the first half of 2012 due to increased deepwater drilling activity. In addition, our Subsea and Technical Solutions segment revenue in the Gulf is 29% higher as a result of a robust market for completion tools and products.

Finally, our international revenue for the first six months of 2013 has increased 13% over the first half of 2012 as growth plans in Brazil, Colombia and Argentina collectively performed as anticipated and in some cases, ahead of schedule.”

Second Quarter 2013 Geographic Breakdown

U.S. land market revenue was approximately $723.3 million in the second quarter of 2013, as compared with $883.0 million in the second quarter of 2012 and $732.8 million in the first quarter of 2013. Gulf of Mexico revenue was approximately $225.1 million, as compared with $170.8 million in the second quarter of 2012 and $208.0 million in the first quarter of 2013. International revenue was approximately $211.3 million, as compared with $189.5 million in the second quarter of 2012 and $194.7 million in the first quarter of 2013.

Drilling Products and Services Segment

Drilling Products and Services segment revenue was $205.4 million, a 4% increase from second quarter 2012 revenue of $198.2 million and a 6% increase from first quarter 2013 revenue of $194.0 million.

The primary factor driving the higher sequential revenue in this segment was a 12% increase in international market revenue to $56.1 million due to increased rentals of premium drill pipe in Asia Pacific and accommodations in Latin America. Gulf of Mexico market revenue increased 8% sequentially to $75.3 million due to increased rentals of premium drill pipe. U.S. land market revenue was unchanged at $74.0 million, as increased demand for bottom hole assemblies and accommodations were offset by a decrease in rentals of premium drill pipe.

Onshore Completion and Workover Services Segment

Onshore Completion and Workover Services segment revenue in the second quarter was $398.2 million, a 16% decrease from second quarter 2012 revenue of $475.4 million, and a 7% decrease from first quarter 2013 revenue of $426.0 million. Virtually all of the revenue in this segment is generated from U.S. land market areas.

On a sequential basis, revenue declined in pressure pumping due to the relocation of equipment from North Texas to other regions, where the equipment is currently working. Poor weather in North Dakota curtailed activity for pressure pumping, well service rigs and fluid management.

Income from operations as a percentage of revenue was 11.8% as compared with 11.7% in the first quarter of 2013, resulting from increased service intensity in pressure pumping.

Production Services Segment

Production Services segment revenue was $369.1 million, an 11% decrease from second quarter 2012 revenue of $413.7 million and a small increase from first quarter 2013 revenue of $367.4 million.

U.S. land market revenue increased 7% sequentially to $231.2 million, primarily due to increased demand for remedial pumping services and snubbing services. International revenue decreased 13% sequentially to $84.4 million primarily due to lower coiled tubing activity in Mexico and lower demand for snubbing services in the Asia Pacific market area. These were partially offset by increases in cementing activity and cased hole wireline services in Latin America. Gulf of Mexico revenue was slightly lower sequentially at $53.6 million with increases in coiled tubing and cased hole wireline services offset by decreases in pressure control tools.

 Subsea and Technical Solutions Segment

Subsea and Technical Solutions segment revenue was $187.0 million, a 20% increase from second quarter 2012 revenue of $156.1 million and a 26% increase from first quarter 2013 revenue of $148.1 million.

International revenue increased 48% sequentially to $70.9 million due to a seasonal increase in subsea construction and in sales of completions tools in Asia Pacific. Gulf of Mexico market revenue increased 14% sequentially to $96.2 million due to increased demand for plug and abandonment services and completion tools. U.S. land market revenue increased 23% sequentially to $19.9 million primarily related to increases in completion tools.

2013 Earnings Guidance Update

The Company’s earnings per share guidance for 2013 has narrowed to a range of $1.75 to $1.95. The prior range was $1.85 to $2.35. In addition, the Company has lowered its capital spending guidance for 2013 to a range of $600 million to $650 million.

Dunlap commented, “The changes to our earnings guidance reflect our belief that completions and production-related services activity in the U.S. will not change materially during the last half of 2013. We have adjusted our capital spending plans downward by lowering capital expenditures in the U.S. We don’t believe this reduction will inhibit our long-term market position.

“We are on pace to achieve and quite possibly exceed our Gulf of Mexico growth target. Internationally, we are pleased with the pace of growth for our production-related services in South America and downhole drilling tools in several regions.”

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Press Release, July 30, 2013