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Superior Energy Services Announces Third Quarter 2008 Results

Record Performance Despite Hurricane Interruptions

NEW ORLEANS, Oct. 30 /PRNewswire-FirstCall/ -- Superior Energy Services, Inc. (NYSE: SPN) today announced net income of $99.9 million and diluted earnings per share of $1.22 on record revenue of $490.3 million, as compared with net income of $75.1 million, or $0.91 diluted earnings per share on revenue of $398.9 million for the third quarter of 2007. Diluted earnings per share and revenue increased 34% and 23%, respectively, as compared with the third quarter of 2007.

Excluding pre-tax non-cash, unrealized earnings of $19.2 million ($12.3 million after-tax) from hedging contracts impacting the Company's earnings from equity-method investments, adjusted net income for the third quarter of 2008 was $87.6 million, or $1.07 diluted earnings per share.

Factors impacting the quarter include the following:

  • The Company estimates that the overall impact from the active 2008 hurricane season was a reduction in earnings for the third quarter in the range of $0.12 to $0.15 diluted earnings per share, including approximately $0.05 diluted earnings per share from shut-in oil and gas production at the Company's equity-method investments.
  • During the quarter, the Company repurchased 1.52 million shares of its common stock for $55.4 million as part of its $350 million repurchase program.
  • Well Intervention Group Segment revenue of $319.8 million increased 58% year-over-year and 8% sequentially. The sequential improvement was due to continued execution of the previously announced wreck removal project and increases in demand for production-related services such as coiled tubing, cased hole wireline, hydraulic workover and snubbing, well control.
  • Rental Tools Segment revenue was $136.6 million, a 15% increase year-over-year and 1% increase sequentially.
  • Marine Segment revenue of $33.9 million increased 29% year-over-year and 30% sequentially due to increased utilization across most liftboat classes.
  • Gulf of Mexico revenue was $276.9 million, revenue from domestic land market areas was $134.5 million and international revenue was $78.9 million.

For the nine months ended September 30, 2008, revenue was $1,389.3 million and net income was $275.9 million or $3.36 diluted earnings per share, as compared with revenues of $1,158.6 million and net income of $209.2 million or $2.53 diluted earnings per share for the nine months ended September 30, 2007.

Terence Hall, Chairman and CEO of Superior, stated, "Our diversification strategy continued to benefit us as we were able to record outstanding financial results despite significant business disruptions in the Gulf of Mexico because of hurricanes. From an operational standpoint, the first two months of the quarter were the best in Company history. In addition, strong activity levels continued in the domestic land and international market areas in September while our Gulf of Mexico businesses recovered.

"The Company is well positioned to manage through these volatile times as a result of our strong balance sheet, our focus on increasing geographic diversification, ongoing work from the wreck removal project, and anticipated new work for the well intervention and marine segments resulting from the recent hurricanes."

Well Intervention Group Segment

Third quarter revenue for the Well Intervention Group was a record $319.8 million, a 58% increase year-over-year and an 8% increase sequentially. Income from operations was $90.3 million, or 28% of segment revenue as compared with $47.6 million, or 23% of segment revenue, in the third quarter of 2007, and $78.2 million, or 26% of segment revenue, in the second quarter of 2008. Engineering and project management services increased over the second quarter of 2008 as a result of the wreck removal project. Other sequential revenue increases included coiled tubing in both the Gulf of Mexico and domestic land markets; hydraulic workover and snubbing in the Gulf of Mexico; and cased hole wireline and well control services in the domestic land market areas. These offset decreases in international revenue resulting primarily from the mobilization of the Company's derrick barge from the Asia Pacific market area to the Gulf of Mexico. Income from operations as a percentage of revenue ("operating margin") increased due to volume increases for several of our services.

Rental Tools Segment

Quarterly revenue for the Rental Tools Segment was $136.6 million, 15% higher year-over-year and 1% over the most recent quarter. Income from operations was $43.6 million, or 32% of segment revenue, as compared with $51.4 million, or 43% of segment revenue in the third quarter of 2007, and $47.5 million, or 35% of segment revenue in the second quarter of 2008. Income from operations in the third quarter of 2007 included a $7.5 million gain on sale of business. Sequentially, demand grew for accommodations and stabilization equipment in the Gulf of Mexico and domestic land market areas; drill pipe and specialty tubulars in international market areas; and connecting iron and handling tools in the Gulf of Mexico. This was partially offset by decreases in drill pipe rentals and on-site bolting services in the Gulf of Mexico due to hurricanes and a decrease in rentals of stabilization equipment in certain international market areas. The decrease in operating margin sequentially and year-over-year is due to business mix, highlighted by lower rentals of higher margin drill pipe and specialty tubulars in the Gulf of Mexico.

Marine Segment

Superior's Marine Segment quarterly revenue was $33.9 million, a 29% increase year-over-year and a 30% increase from the most recent quarter. Income from operations was $6.5 million, or 19% of segment revenue, compared with $8.1 million, or 31% of segment revenue for the third quarter of 2007, and $1.4 million, or 6% of segment revenue in the second quarter of 2008. Average daily revenue in the third quarter was approximately $368,000, inclusive of subsistence revenue, as compared with $286,000 per day in both the third quarter of 2007 and the second quarter of 2008. Average fleet utilization was 81% as compared with 62% in the third quarter of 2007 and 57% in the second quarter of 2008. The operating margin significantly increased sequentially as a result of higher utilization.



           Liftboat Average Dayrates and Utilization by Class Size
                    Three Months Ended September 30, 2008
                                  ($ actual)

    Class         Liftboats         Average Dayrate     Utilization
    145'-155'        11                  $7,920           78.3%
    160'-175'         8                  10,640           81.3%
    200'              5                  15,857           90.9%
    230'-245'         3                  25,386           85.5%
    250'              2                  35,239           67.9%


Equity-Method Investments

The $23.2 million income from equity-method investments in the third quarter of 2008 includes $19.2 million, pre-tax, of the Company's share of non-cash unrealized earnings associated with mark-to-market changes in the value of outstanding hedging contracts put in place by SPN Resources, LLC. The mark-to-market changes were due to significant decreases in natural gas and oil prices, the volatility of which makes these changes unpredictable. Prior to the hurricanes, production at SPN Resources, net to the Company's interest, was approximately 2,200 boe per day and production at Beryl Oil & Gas, net to the Company's interest, was approximately 3,600 boe per day. Approximately 50% of production remains shut-in. Restoration of full production is expected by year end.

Conference Call Information

The Company will host a conference call at 11 a.m. Central Time on Friday, October 31, 2008. The call can be accessed from Superior's website at http://www.superiorenergy.com, or by telephone at 303-205-0033. For those who cannot listen to the live call, a telephonic replay will be available through Friday, November 7, 2008 and may be accessed by calling 303-590-3000 and using the pass code 11120954#. An archive of the webcast will be available after the call for a period of 60 days at http://www.superiorenergy.com.

Superior Energy Services, Inc. serves the drilling and production needs of oil and gas companies worldwide through its brand name rental tools and its integrated well intervention services and tools, supported by an engineering staff who plan and design solutions for customers. Offshore projects are delivered by the Company's fleet of modern marine assets.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which involve known and unknown risks, uncertainties and other factors. Among the factors that could cause actual results to differ materially are: volatility of the oil and gas industry, including the level of exploration, production and development activity; risks associated with the Company's rapid growth; changes in competitive factors and other material factors that are described from time to time in the Company's filings with the Securities and Exchange Commission. Actual events, circumstances, effects and results may be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Consequently, the forward-looking statements contained herein should not be regarded as representations by Superior or any other person that the projected outcomes can or will be achieved.

     FOR FURTHER INFORMATION CONTACT:
     Terence Hall, CEO; Robert Taylor, CFO;
     Greg Rosenstein, VP of Investor Relations,
     504-362-4321



               SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
             Three and Nine Months Ended September 30, 2008 and 2007
                (in thousands, except earnings per share amounts)
                                   (unaudited)

                                   Three Months Ended    Nine Months Ended
                                     September 30,         September 30,
                                     2008      2007       2008        2007
    Oilfield service and rental
     revenues                      $490,282  $347,228  $1,334,256  $1,021,712
    Oil and gas revenues                  -    51,696      55,072     136,889
      Total revenues                490,282   398,924   1,389,328   1,158,601

    Cost of oilfield services and
     rentals                        236,610   159,683     649,839     465,085
    Cost of oil and gas sales             -    18,954      12,986      55,845
      Total cost of services,
       rentals and sales            236,610   178,637     662,825     520,930

    Depreciation, depletion,
     amortization and accretion      44,842    49,881     128,675     133,967
    General and administrative
     expenses                        68,379    57,150     204,411     161,833
    Gain on sale of businesses            -     7,483      40,946       7,483

    Income from operations          140,451   120,739     434,363     349,354

    Other income (expense):
     Interest expense, net           (7,593)   (7,402)    (22,665)    (22,635)
     Earnings (losses) from
      equity-method investments,
      net                            23,167     1,395      19,359      (2,447)

    Income before income taxes      156,025   114,732     431,057     324,272

    Income taxes                     56,169    39,682     155,181     115,116

    Net income                      $99,856   $75,050    $275,876    $209,156


    Basic earnings per share          $1.24     $0.92       $3.42       $2.58

    Diluted earnings per share        $1.22     $0.91       $3.36       $2.53

    Weighted average common shares
     used in computing earnings per
     share:
      Basic                          80,538    81,470      80,691      81,053
      Diluted                        81,845    82,793      82,041      82,521



                 SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 2008 AND DECEMBER 31, 2007
                                 (in thousands)

                                                9/30/2008         12/31/2007
                                                (unaudited)        (audited)
    ASSETS

    Current assets:
      Cash and cash equivalents                     $128,169           $51,649
      Accounts receivable, net                       383,813           343,334
      Current portion of notes receivable                  -            15,584
      Prepaid expenses                                19,888            19,641
      Other current assets                           110,403            40,797

            Total current assets                     642,273           471,005

      Property, plant and equipment, net           1,055,310         1,086,408
      Goodwill, net                                  483,266           484,594
      Notes receivable                                     -            16,732
      Equity-method investments                      108,153            56,961
      Intangible and other long-term assets, net     133,880           141,549

            Total assets                          $2,422,882        $2,257,249

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
      Accounts payable                               $78,394           $69,510
      Accrued expenses                               158,489           177,779
      Income taxes payable                            50,592             7,520
      Current portion of decommissioning
       liabilities                                         -            36,812
      Current maturities of long-term debt               810               810

            Total current liabilities                288,285           292,431

      Deferred income taxes                          198,584           163,338
      Decommissioning liabilities                          -            88,158
      Long-term debt                                 711,110           711,151
      Other long-term liabilities                     26,578            21,492

      Total stockholders' equity                   1,198,325           980,679

            Total liabilities and
             stockholders' equity                 $2,422,882        $2,257,249



               SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
                              Segment Highlights
 Three months ended September 30, 2008, June 30, 2008 and September 30, 2007
                                 (Unaudited)
                                (in thousands)

                                                 Three months ended,
                                      September 30,   June 30,   September 30,
    Revenue                               2008          2008          2007

    Well Intervention                   $319,798      $296,891      $202,807
    Rental Tools                         136,600       134,773       118,918
    Marine                                33,884        25,991        26,323
    Oil and Gas                                -             -        51,696
      Less: Oil and Gas Eliminations (2)       -             -          (820)

    Total Revenues                      $490,282      $457,655      $398,924


                                                 Three months ended,
    Gross Profit (1)                  September 30,   June 30,   September 30,
                                          2008          2008          2007

    Well Intervention                   $150,895      $135,410       $91,032
    Rental Tools                          90,178        93,438        83,776
    Marine                                12,599         6,710        12,737
    Oil and Gas                                -             -        32,742
    Total Gross Profit                  $253,672      $235,558      $220,287

                                                 Three months ended,
    Income from Operations            September 30,   June 30,   September 30,
                                          2008          2008          2007

    Well Intervention                    $90,349       $78,202       $47,613
    Rental Tools (3)                      43,628        47,531        51,446
    Marine                                 6,474         1,445         8,148
    Oil and Gas                                -         3,058        13,532

    Total Income from Operations        $140,451      $130,236      $120,739

    (1)  Gross profit is calculated by subtracting cost of services (exclusive
         of depreciation, depletion, amortization and accretion) from revenue
         for each of the Company's segments.

    (2)  Oil and gas eliminations represent products and services from the
         company's segments provided to the Oil and Gas Segment.

    (3)  Income from operations in the Rental Tools Segment for the three
         months ended September 30, 2007 includes a gain on sale of business
         of $7.5 million.

SOURCE Superior Energy Services, Inc.

CONTACT: Terence Hall, CEO, or Robert Taylor, CFO, or Greg Rosenstein,
VP of Investor Relations, all of Superior Energy Services, Inc.,
+1-504-362-4321
Web site: http://www.superiorenergy.com
(SPN)