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Superior Energy Services, Inc. Announces Fourth Quarter and Full Year 2008 Results

NEW ORLEANS, Feb. 19 /PRNewswire-FirstCall/ -- Superior Energy Services, Inc. (NYSE: SPN) today announced net income of $85.8 million and diluted earnings per share of $1.09 on revenue of $491.8 million for the fourth quarter of 2008, as compared with net income of $72.0 million, or $0.88 diluted earnings per share on revenue of $413.9 million for the fourth quarter of 2007. Diluted earnings per share and revenue increased 24% and 19%, respectively, as compared with the fourth quarter of 2007.

For the year ended December 31, 2008, net income was a record $361.7 million and diluted earnings per share were $4.45 on record revenue of $1,881.1 million, as compared to net income of $281.1 million and $3.41 diluted earnings per share on revenue of $1,572.5 million for the year ended December 31, 2007.

Factors impacting the fourth quarter include the following:

  • Well Intervention Segment revenue of $304.4 million increased 60% over the fourth quarter of 2007 ("year-over-year") and decreased 5% as compared with the third quarter of 2008 ("sequential"). The sequential decrease was due to less activity for traditional well intervention services in the Gulf of Mexico resulting from seasonal
  • factors and customers' focus on hurricane-related recovery projects, including platform and facilities inspection and repairs as well as production restoration.
  • Rental Tools Segment revenue was $149.2 million, a 9% increase year-over-year and sequentially, primarily due to increased rentals of stabilization equipment, drill pipe, landing strings, specialty tubulars and other handling equipment.
  • Marine Segment revenue of $38.1 million increased 25% year-over-year and 13% sequentially. The sequential increase is due to higher dayrates across most liftboat classes.
  • Gulf of Mexico revenue was approximately $270 million, revenue from domestic land market areas was approximately $141 million and international revenue was approximately $81 million.
  • In October, the Company repurchased approximately 1.95 million shares of its common stock for $39.6 million as part of its authorized $350 million share repurchase program that will expire on December 31, 2009.
  • During the fourth quarter, the Company established a Supplemental Executive Retirement Plan, resulting in a charge of $11.3 million to general and administrative expenses.
  • Earnings from equity-method investments include unrealized earnings of $23.7 million from hedging contracts; non-cash charges of $12.2 million, net to the Company, for the reduction in value of oil and gas reserves due to the decrease in oil and gas prices; and hurricane-related reductions in oil and gas production, resulting in a reduction of earnings from equity-method investments of approximately$5.3 million, net to the Company.
  • The Company's effective annual income tax rate decreased to 35.25% from 36.00% in 2007.

Excluding the items impacting general and administrative expenses and earnings from equity-method investments, and applying the new effective income tax rate of 35.25%, fourth quarter adjusted net income was $85.9 million, or $1.10 adjusted diluted earnings per share.

Terence Hall, Chairman and CEO of Superior, commented, "The strong fourth quarter performance capped another record year for our Company. Despite the typical seasonality and lingering downtime in October for Gulf of Mexico well intervention services following the active 2008 hurricane season, we grew our overall revenue and gross profits over the third quarter of 2008 as activity improved during the period.

"Clearly, there is a lot of uncertainty in our industry. Declining commodity prices and falling domestic rig counts fueled by the global credit crisis and subsequent economic downturn will impact demand for our products and services as this year progresses, especially in North America. In response to changing market conditions, our 2009 capital expenditures budget is $272 million, a 40% reduction as compared with $454 million in 2008. Our capital expenditures plan can be adjusted based on market factors. Despite anticipated lower activity in domestic land markets, we believe we can maintain market share for production-related services, given our investments in new coiled tubing and cased hole wireline equipment during the past two years. Customers tend to put even more emphasis on efficient and successful project execution when reducing their spending plans.

"While we have a healthy respect for near-term market conditions, cyclical weakness has historically provided us with long-term growth opportunities. We have a history of judiciously deploying capital in uncertain market environments either through additional asset purchases or acquisitions that have enhanced the Company's profile and competitive position. With our strong balance sheet, backlog and diverse sources of cash flow, we plan to opportunistically take advantage of market weakness and emerge as an even stronger company when conditions improve."

Well Intervention Segment

Fourth quarter revenue for the Well Intervention segment was $304.4 million, a 60% increase year-over-year and a 5% decrease sequentially. Income from operations was $67.5 million, or 22% of segment revenue as compared with $37.0 million, or 19% of segment revenue, in the fourth quarter of 2007, and $90.3 million, or 28% of segment revenue, in the third quarter of 2008. A sequential decrease in Gulf of Mexico production-enhancement activity due to post-hurricane recovery work following Hurricanes Gustav and Ike more than offset increased production-related work in domestic land and international market areas. While Gulf of Mexico activity showed sequential decreases, domestic onshore activity for coiled tubing, hydraulic workover and snubbing and well control increased. Income from operations as a percentage of revenue ("operating margin") decreased due to the Gulf of Mexico activity decreases.

Rental Tools Segment

Quarterly revenue for the Rental Tools Segment was $149.2 million, 9% higher year-over-year and sequentially. Income from operations was $50.7 million, or 34% of segment revenue, as compared with $46.4 million, or 34% of segment revenue in the fourth quarter of 2007, and $43.6 million, or 32% of segment revenue in the third quarter of 2008. Sequentially, demand grew for drill pipe, specialty tubulars, stabilization equipment and connecting iron and handling tools in the Gulf of Mexico and domestic land market areas. Internationally, rentals increased for drill pipe, specialty tubulars and accommodations. The increase in operating margin sequentially and year-over-year is due to increased revenue as well as business mix, highlighted by an increase in rentals of higher margin drill pipe and specialty tubulars.

Marine Segment

Marine segment revenue was $38.1 million, a 25% increase year-over-year and a 13% increase sequentially. Income from operations was $13.1 million, or 34% of segment revenue, up from $8.2 million, or 27% of segment revenue in the fourth quarter of 2007, and $6.5 million, or 19% of segment revenue in the third quarter of 2008. Average daily revenue in the fourth quarter was approximately $415,000, inclusive of subsistence revenue, as compared with $332,000 per day in the fourth quarter of 2007 and approximately $368,000 in the third quarter of 2008. Average fleet utilization was 76% as compared with 70% in the fourth quarter of 2007 and 81% in the third quarter of 2008. The operating margin significantly increased sequentially as a result of higher dayrates and lower vessel maintenance and repair expenses.

          Liftboat Average Dayrates and Utilization by Class Size
                   Three Months Ended December 31, 2008
                               ($ actual)

                                            Average
                  Class        Liftboats    Dayrate    Utilization
                  -----        ---------    -------    -----------
               145'-155'           10        $9,632         62.1%
               160'-175'            8        12,972         81.5%
               200'                 5        15,872         79.6%
               230'-245'            3        28,674         87.7%
               250'                 2        38,927         96.7%

Equity-Method Investments

The $5.0 million in earnings from equity-method investments in the fourth quarter of 2008 includes $23.7 million of the Company's share of non-cash unrealized earnings associated with mark-to-market changes in the value of outstanding hedging contracts. The mark-to-market changes were due to significant decreases in natural gas and oil prices, the volatility of which makes these changes unpredictable. Also included in earnings from equity-method investments for the period are $12.2 million of non-cash charges for the reduction in value of oil and gas reserves due to the decrease in oil and gas prices. Shut-in production due to hurricanes reduced earnings by approximately $5.3 million. Prior to the hurricanes, production at the Company's equity-method investments, net to the Company's interest, was approximately 5,800 barrels of oil equivalent ("boe") per day. Fourth quarter production was approximately 3,200 boe per day, net to the Company's interest.

Conference Call Information

The Company will host a conference call at 11 a.m. Central Standard Time on Friday, February 20, 2009. The call can be accessed from Superior's website at 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, February 27, 2009 and may be accessed by calling 303-590-3000 and using the pass code 11125573#. An archive of the webcast will be available after the call for a period of 60 days at 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) 587-7374

                 SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
             Three and Twelve Months Ended December 31, 2008 and 2007
                (in thousands, except earnings per share amounts)
                                   (unaudited)

                                   Three Months Ended    Twelve Months Ended
                                      December 31,          December 31,
                                      ------------          ------------
                                     2008      2007        2008        2007
                                     ----      ----        ----        ----

    Oilfield service and
     rental revenues              $491,796  $358,055  $1,826,052  $1,379,767
    Oil and gas revenues                 -    55,811      55,072     192,700
                                       ---    ------      ------     -------
      Total revenues               491,796   413,866   1,881,124   1,572,467
                                   -------   -------   ---------   ---------

    Cost of oilfield
     services and rentals          235,469   166,460     885,308     631,545
    Cost of oil and gas sales            -    10,735      12,986      66,580
                                       ---    ------      ------      ------

Total cost of services,

       rentals and sales           235,469   177,195     898,294     698,125
                                   -------   -------     -------     -------

Depreciation, depletion,

     amortization and accretion     46,825    53,874     175,500     187,841
    General and
     administrative
     expenses                       78,173    66,313     282,584     228,146
    Gain on sale of businesses           -         -      40,946    7,483
                                       ---       ---      ------       -----

    Income from operations         131,329   116,484     565,692     465,838

    Other income (expense):
      Interest expense, net         (7,203)   (8,319)    (30,419)    (33,257)
      Interest income                  274       712       2,975       2,662
      Other income (expense)        (1,827)     (164)     (3,977)        189
      Earnings (losses) from
       equity-method investments,
       net                           5,014      (493)     24,373     (2,940)

                                     -----      ----      ------      ------
    Income before income taxes     127,587   108,220     558,644     432,492

    Income taxes                    41,741    36,256     196,922     151,372
                                    ------    ------     -------     -------

    Net income                     $85,846   $71,964    $361,722    $281,120
                                   =======   =======    ========    ========


    Basic earnings per share         $1.10     $0.89       $4.52       $3.47
                                     =====     =====       =====       =====
    Diluted earnings per share       $1.09     $0.88       $4.45       $3.41
                                     =====     =====       =====     =====

Weighted average common shares

used in computing earnings per

     share:
        Basic                       77,901    80,735      79,990      80,973
                                    ======    ======      ======      ======
        Diluted                     78,406    81,998      81,213      82,389
                                    ======    ======      ======      ======



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

                                                      12/31/2008 12/31/2007
                                                     (unaudited)  (audited)
                                                     -----------  ---------
    ASSETS

    Current assets:
      Cash and cash equivalents                          $44,853    $51,649
      Accounts receivable, net                           360,357    343,334
      Current portion of notes receivable                      -     15,584
      Prepaid expenses                                    18,041     19,641
      Other current assets                               223,598     40,797
                                                         -------     ------

            Total current assets                         646,849    471,005
                                                         -------    -------

    Property, plant and equipment, net                 1,114,941  1,086,408
    Goodwill, net                                        477,860    484,594
    Notes receivable                                           -     16,732
    Equity-method investments                            122,308     56,961
    Intangible and other long-term assets, net           129,675    141,549

            Total assets                              $2,491,633 $2,257,249
                                                      ========== ==========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
      Accounts payable                                   $87,207    $69,510
      Accrued expenses                                   152,536    177,779
      Income taxes payable                                20,861      7,520
      Current portion of decommissioning liabilities           -     36,812
      Deferred income taxes                               36,830          -
      Current maturities of long-term debt                   810        810
                                                             ---        ---

            Total current liabilities                    298,244    292,431
                                                         -------    -------

    Deferred income taxes                                226,421    163,338
    Decommissioning liabilities                                -     88,158
    Long-term debt                                       710,830    711,151
    Other long-term liabilities                           36,605     21,492

    Total stockholders' equity                         1,219,533    980,679
                                                       ---------    -------

            Total liabilities and stockholders'
             equity                                   $2,491,633 $2,257,249
                                                      ========== ==========



                Superior Energy Services, Inc. and Subsidiaries
                               Segment Highlights
          Three months ended December 31, 2008, September 30, 2008 and
                               December 31, 2007
                                  (Unaudited)
                                 (in thousands)

                                        Three months ended,
                                        -------------------
    Revenue           December 31, 2008  September 30, 2008 December 31, 2007
                      -----------------  ------------------ -----------------

    Well Intervention          $304,417            $319,798          $190,735

    Rental Tools                149,239             136,600           137,456

    Marine                       38,140              33,884            30,547

    Oil and Gas                       -                   -            55,811

      Less: Oil and Gas
       Eliminations (2)               -                   -              (683)
                                    ---                 ---              ----

    Total Revenues             $491,796            $490,282          $413,866
                               ========            ========          ========

                                        Three months ended,
                                        -------------------
    Gross Profit (1)  December 31, 2008  September 30, 2008 December 31, 2007
                      -----------------  ------------------ -----------------

    Well Intervention          $134,073            $150,895           $87,647

    Rental Tools                102,533              90,178            90,401

    Marine                       19,721              12,599            13,547

    Oil and Gas                       -                   -            45,076
                                    ---                 ---            ------

    Total Gross Profit         $256,327            $253,672          $236,671
                               ========            ========          ========


                                        Three months ended,
    Income from                         -------------------
     Operations       December 31, 2008  September 30, 2008 December 31, 2007
                      -----------------  ------------------ -----------------

    Well Intervention           $67,474             $90,349           $36,964

    Rental Tools                 50,709              43,628            46,396

    Marine                       13,146               6,474             8,192
    Oil and Gas                       -                   -            24,932
                                    ---                 ---            ------

    Total Income from
     Operations                $131,329            $140,451          $116,484
                               ========            ========          ========

  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.

NON-GAAP RECONCILIATION

We report our financial results in conformity with U.S. generally accepted accounting principles (GAAP). However, the Company provides non-GAAP adjusted net income and non-GAAP adjusted earnings per share because management believes that in order to properly understand the Company's operational trends and performance, investors may wish to consider the impact of adjustments for non-operating items (such as unrealized earnings from mark-to-market changes in hedging contracts, reduction in value of oil and gas reserves, financial impact of reduced oil and gas production and other non-recurring and/or non-cash charges) resulting from facts and circumstances, including acquisitions, divestitures, changes in commodity prices, and other non-recurring items. Management uses adjusted net income and adjusted diluted earnings per share to evaluate the Company's operational trends and historical performance on a consistent basis. Also, management believes adjusted net income and adjusted diluted earnings per share are more comparable to earnings estimates provided by research analysts. The adjusted amounts are not measures of financial performance under GAAP.

A reconciliation of net income, the GAAP measure most directly comparable to non-GAAP adjusted earnings per share, is below. Non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, or superior to, the Company's reported results prepared in accordance with GAAP.


                                                    For the Three Months Ended
                                                             December 31,
                                                                 2008
                                                                 ----
    Net income as reported                                      $85,846
    Adjustments for non-cash and/
     or non-recurring items
      Unrealized earnings from mark-to-
       market changes in hedging contracts                      (23,684)
      Reduction in value of oil and gas reserves                 12,200
      Hurricane-related reduction in oil and gas production       5,265
      Charge to general and administrative expenses
       for Supplemental Executive Retirement Plan                11,278
      Tax effect of non-cash and/or non-recurring items          (1,783)
      Cumulative effect of tax rate change from 36.00% to
       35.25% for the nine months ended September 30, 2008       (3,233)
                                                                 ------
    Net income as adjusted                                      $85,889
                                                                =======

    Diluted earnings per share as adjusted                        $1.10

    Weighted average common shares used in computing
     diluted earnings per share as adjusted                      78,406
                                                                 ======

SOURCE:
Superior Energy Services, Inc.
02/19/2009
CONTACT:
Terence Hall, CEO, Robert Taylor, CFO, or
Greg Rosenstein, VP of Investor Relations,
all of Superior Energy Services, Inc., +1-504-587-7374
Web Site: http://www.superiorenergy.com