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Superior Energy Services Announces Fourth Quarter and Full Year 2016 Results

HOUSTON, Feb. 21, 2017 (GLOBE NEWSWIRE) -- Superior Energy Services, Inc. (the “Company”) today announced a net loss from continuing operations for the fourth quarter of 2016 of $166.3 million, or $1.10 per share, on revenue of $354.4 million.  This compares to a net loss from continuing operations of $113.9 million, or $0.75 per share for the third quarter of 2016, on revenue of $326.2 million and a net loss from continuing operations of $214.5 million, or $1.43 per share for the fourth quarter of 2015, on revenue of $545.2 million

The Company recorded a pre-tax expense of $73.2 million in reduction in value of assets and other charges in the fourth quarter of 2016.  These charges included a $36.0 million impairment of long-lived assets, a $20.8 million write-down of inventory and $16.4 million of restructuring costs.  The resulting adjusted net loss from continuing operations for the fourth quarter of 2016 was $111.6 million, or $0.74 per share.  This compares to an adjusted net loss from continuing operations of $110.9 million, or $0.73 per share for the third quarter of 2016, and an adjusted net loss from continuing operations of $61.3 million, or $0.41 per share for the fourth quarter of 2015.

For the year ended December 31, 2016, the Company’s net loss from continuing operations was $833.3 million, or $5.50 per share, on revenue of $1,450.0 million as compared with a net loss from continuing operations of $1,807.8 million, or $12.02 per share, on revenue of $2,774.6 million for the year ended December 31, 2015.

“Our industry continued to transition toward recovery in U.S. land markets during the fourth quarter,” said David Dunlap, President and CEO.  “During the quarter, our customers gradually increased their activity levels and began to project a bias towards spending growth in 2017.  Our activation of idle equipment began in the third quarter of 2016 and accelerated in the fourth quarter. 

“Throughout the downturn, we conserved cash, retired debt, reduced our cost structure and positioned certain businesses to be responsive early in a recovery.  In addition to the competitive advantages of responding early, the ongoing expense associated with reactivating stacked equipment that can return to service is expected to decrease over time and be concluded during the second quarter of 2017.  The extended downturn our industry just experienced won’t reverse in one or two quarters, but it definitely seems that we have entered the early days of the next upcycle in U.S. land markets. 

“Elsewhere, our businesses operating in the Gulf of Mexico and internationally held up relatively well sequentially despite continued low levels of customer activity.  The forward outlook for recovery in these areas remains subdued with limited recovery expected to occur during 2017.  Accordingly, we intend to deploy capital selectively and maintain our focus on service quality in these markets.

“Each phase of a cycle presents unique challenges and we believe we are entering a period in which our emphasis on field level reliability and execution will be increasingly valued and recognized by our customers to the benefit of our stakeholders.”    

Fourth Quarter 2016 Geographic Breakdown

U.S. land revenue was $200.3 million in the fourth quarter of 2016, an 18% increase as compared with revenue of $170.2 million in the third quarter of 2016 and an 18% decrease compared to revenue of $243.5 million in the fourth quarter of 2015.  Gulf of Mexico revenue was $71.6 million, a sequential decrease of 2% from third quarter 2016 revenue of $73.4 million, and a 58% decrease from revenue of $169.7 million in the fourth quarter of 2015.  International revenue of $82.5 million was relatively unchanged as compared with $82.6 million in the third quarter of 2016 and decreased 38% as compared to revenue of $132.0 million in the fourth quarter of 2015.  

Drilling Products and Services Segment

The Drilling Products and Services segment revenue in the fourth quarter of 2016 was $69.3 million, a 16% increase from third quarter 2016 revenue of $59.6 million and a 34% decrease from fourth quarter 2015 revenue of $104.6 million.

U.S. land revenue increased 17% sequentially to $17.7 million as land drilling activity increased throughout the quarter.  Gulf of Mexico revenue increased 14% sequentially to $25.8 million and international revenue increased 18% sequentially to $25.8 million, primarily as a result of an increase in premium drill pipe rentals. 

Onshore Completion and Workover Services Segment

The Onshore Completion and Workover Services segment revenue in the fourth quarter of 2016 was $150.6 million, a 20% increase from third quarter 2016 revenue of $125.0 million and a 2% decrease from fourth quarter 2015 revenue of $153.8 million.  Sequentially, greater than 75% of the revenue increase was due to higher pressure pumping utilization resulting from increased completion activity in the Permian basin. 

During the quarter, the Company spent approximately $14.7 million related to capacity enhancement of its pressure pumping fleet, fleet start-up costs, and demobilization and relocation of equipment to the Permian basin following the shutdown of a facility in Pennsylvania.  In total during the second half of 2016, the Company spent approximately $23.1 million on activities associated with expanding and reactivating pressure pumping capacity due to current and anticipated increases in current customer demand.

Production Services Segment

The Production Services segment revenue in the fourth quarter of 2016 was $81.0 million, a 5% increase from third quarter 2016 revenue of $77.6 million and a 43% decrease from fourth quarter 2015 revenue of $142.7 million.

U.S. land revenue increased 4% sequentially to $20.0 million due to increased activity for coiled tubing and well testing.  Gulf of Mexico revenue increased 22% sequentially to $22.2 million as hydraulic workover and snubbing and electric line activity were both higher during the quarter.  International revenue decreased 3% sequentially to $38.8 million.

Technical Solutions Segment

The Technical Solutions segment revenue in the fourth quarter of 2016 was $53.5 million, a 17% decrease from third quarter 2016 revenue of $64.0 million and a 63% decrease from fourth quarter 2015 revenue of $144.1 million.

U.S. land revenue increased 13% sequentially to $12.0 million as well control activity and completion tools and products orders increased.  Gulf of Mexico revenue decreased 28% sequentially to $23.6 million, primarily as a result of an expected decline in subsea intervention revenue following the conclusion of a successful campaign during the third quarter of 2016.   International revenue decreased 14% to $17.9 million primarily due to lower well control activity.

Conference Call Information

The Company will host a conference call at 11:00 a.m. Eastern Standard Time on Wednesday, February 22, 2017.  The call can be accessed from the Company’s website at www.superiorenergy.com or by telephone at 888-312-3048.  For those who cannot listen to the live call, a telephonic replay will be available through March 8, 2017 and may be accessed by calling 844-512-2921 and using the pin number 4987340.

About Superior Energy Services

Superior Energy Services, Inc. (NYSE:SPN) serves major, national and independent oil and natural gas companies around the world and offers products and services with respect to the various phases of a well’s economic life cycle.  For more information, visit: www.superiorenergy.com.

The press release contains, and future oral or written statements or press releases by us and our management may contain, certain forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Generally, the words “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks” and “estimates,” variations of such words and similar expressions identify forward-looking statements, although not all forward-looking statements contain these identifying words. All statements other than statements of historical fact regarding the Company’s financial position, financial performance, liquidity, strategic alternatives, market outlook, future capital needs, capital allocation plans, business strategies and other plans and objectives of our management for future operations and activities are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and prevailing circumstances on the date such statements are made. Such forward-looking statements, and the assumptions on which they are based, are inherently speculative and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from such statements. Such uncertainties include, but are not limited to: the cyclicality and volatility of the oil and gas industry, including changes in prevailing levels of capital expenditures, exploration, production and development activity; changes in prevailing oil and gas prices or expectations about future prices; operating hazards, including the significant possibility of accidents resulting in personal injury or death, property damage or environmental damage for which we may have limited or no insurance coverage or indemnification rights; the effect of regulatory programs (including worker health and safety laws) and environmental matters on our operations or prospects, including the risk that future changes in the regulation of hydraulic fracturing could reduce or eliminate demand for our pressure pumping services, or that future changes in climate change legislation could result in increased operating costs or reduced commodity demand globally; counter-party risks associated with reliance on key suppliers; risks associated with the uncertainty of macroeconomic and business conditions worldwide; changes in competitive and technological factors affecting our operations; credit risk associated with our customer base; the potential inability to retain key employees and skilled workers; challenges with estimating our oil and natural gas reserves and potential liabilities related to our oil and natural gas property; risks inherent in acquiring businesses; risks associated with cyber-attacks; risks associated with business growth during an industry recovery outpacing the capabilities of our infrastructure and workforce; political, legal, economic and other risks and uncertainties associated with our international operations; potential changes in tax laws, adverse positions taken by tax authorities or tax audits impacting our operating results; risks associated with our outstanding debt obligations and the potential effect of limiting our future growth and operations; our continued access to credit markets on favorable terms; and the impact that unfavorable or unusual weather conditions could have on our operations. These risks and other uncertainties related to our business are described in our periodic reports filed with the Securities and Exchange Commission. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Investors are cautioned that many of the assumptions on which our forward-looking statements are based are likely to change after such statements are made, including for example the market prices of oil and gas and regulations affecting oil and gas operations, which we cannot control or anticipate. Further, we may make changes to our business strategies and plans (including our capital spending and capital allocation plans) at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise, any of which could or will affect our results. For all these reasons, actual events and results may differ materially from those anticipated, estimated, projected or implied by us in our forward-looking statements. We undertake no obligation to update any of our forward-looking statements for any reason and, notwithstanding any changes in our assumptions, changes in our business plans, our actual experience, or other changes.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

 
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three and Twelve Months Ended December 31, 2016 and 2015
(in thousands, except earnings per share amounts)
(unaudited)
 
    Three Months Ended    Twelve Months Ended 
    December 31,    December 31, 
      2016       2015       2016       2015  
                 
Revenues   $ 354,418     $ 545,150     $ 1,450,047     $ 2,774,565  
                 
Cost of services and rentals (exclusive of depreciation, depletion, amortization and accretion)     321,132       397,548       1,123,274       1,865,812  
Depreciation, depletion, amortization and accretion     117,954       144,818       509,971       612,147  
General and administrative expenses     78,122       106,896       346,606       510,708  
Reduction in value of assets     35,961       175,618       500,405       1,738,887  
                 
Loss from operations     (198,751 )     (279,730 )     (1,030,209 )     (1,952,989 )
                 
Other income (expense):                
Interest expense, net     (24,429 )     (26,105 )     (92,753 )     (97,318 )
Other income (expense)     519       1,144       22,621       (9,476 )
                 
Loss from continuing operations before income taxes     (222,661 )     (304,691 )     (1,100,341 )     (2,059,783 )
                 
Income taxes     (56,402 )     (90,144 )     (267,001 )     (252,020 )
                 
Net loss from continuing operations     (166,259 )     (214,547 )     (833,340 )     (1,807,763 )
                 
Loss from discontinued operations, net of income tax     (44,982 )     (22,848 )     (53,559 )     (46,955 )
                 
Net loss   $ (211,241 )   $ (237,395 )   $ (886,899 )   $ (1,854,718 )
                 
                 
Loss per share information:                
Basic and Diluted                
Net loss from continuing operations   $ (1.10 )   $ (1.43 )   $ (5.50 )   $ (12.02 )
Loss from discontinued operations     (0.30 )     (0.15 )     (0.35 )     (0.31 )
Net loss   $ (1.40 )   $ (1.58 )   $ (5.85 )   $ (12.33 )
                 
Weighted average common shares used                
in computing loss per share:                
Basic and diluted     151,741       150,726       151,558       150,461  
                 


   
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
December 31, 2016 and 2015  
(in thousands)  
           
    12/31/2016   12/31/2015  
ASSETS          
           
Current assets:          
Cash and cash equivalents   $ 187,591   $ 564,017  
Accounts receivable, net     297,164     428,514  
Income taxes receivable     101,578     -  
Prepaid expenses     37,288     42,298  
Inventory and other current assets     130,772     165,062  
Assets held for sale     27,158     95,234  
           
Total current assets     781,551     1,295,125  
           
Property, plant and equipment, net     1,605,365     2,123,291  
Goodwill     803,917     1,140,101  
Notes receivable     56,650     52,382  
Intangible and other long-term assets, net     222,772     303,345  
           
Total assets   $ 3,470,255   $ 4,914,244  
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Current liabilities:          
Accounts payable   $ 94,831   $ 114,475  
Accrued expenses     218,192     271,246  
Income taxes payable     694     9,185  
Current portion of decommissioning liabilities     22,164     19,052  
Current maturities of long-term debt     -     29,957  
Liabilities held for sale     8,653     4,661  
           
Total current liabilities     344,534     448,576  
           
Deferred income taxes     243,611     383,069  
Decommissioning liabilities     101,513     98,890  
Long-term debt, net     1,284,600     1,588,263  
Other long-term liabilities     192,077     184,634  
           
Total stockholders' equity     1,303,920     2,210,812  
           
Total liabilities and stockholders' equity   $ 3,470,255   $ 4,914,244  
           


 
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
REVENUE BY GEOGRAPHIC REGION BY SEGMENT
THREE MONTHS ENDED DECEMBER 31, 2016, SEPTEMBER 30, 2016 AND DECEMBER 31, 2015
(in thousands)
(unaudited)
 
    Three months ended,  
    December 31, 2016   September 30, 2016   December 31, 2015  
U.S. land              
Drilling Products and Services   $ 17,703   $ 15,191   $ 28,857  
Onshore Completion and Workover Services     150,578     125,022     153,819  
Production Services     19,984     19,254     48,523  
Technical Solutions     12,060     10,691     12,293  
Total U.S. land   $ 200,325   $ 170,158   $ 243,492  
               
Gulf of Mexico              
Drilling Products and Services     25,772     22,515     43,034  
Onshore Completion and Workover Services     -     -     -  
Production Services     22,256     18,174     21,062  
Technical Solutions     23,614     32,738     105,548  
Total Gulf of Mexico   $ 71,642   $ 73,427   $ 169,644  
               
International              
Drilling Products and Services   $ 25,855   $ 21,881   $ 32,678  
Onshore Completion and Workover Services     -     -     -  
Production Services     38,734     40,095     73,105  
Technical Solutions     17,862     20,664     26,231  
Total International   $ 82,451   $ 82,640   $ 132,014  
               
Total Revenues   $ 354,418   $ 326,225   $ 545,150  
               


   
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES  
SEGMENT HIGHLIGHTS  
THREE MONTHS ENDED DECEMBER 31, 2016, SEPTEMBER 30, 2016 AND DECEMBER 31, 2015  
(in thousands)  
(unaudited)  
               
    Three months ended,  
Revenues   December 31, 2016   September 30, 2016   December 31, 2015  
Drilling Products and Services   $ 69,330     $ 59,587     $ 104,569    
Onshore Completion and Workover Services     150,578       125,022       153,819    
Production Services     80,974       77,523       142,690    
Technical Solutions     53,536       64,093       144,072    
Total Revenues   $ 354,418     $ 326,225     $ 545,150    
               
               
Loss from Operations   December 31, 2016   September 30, 2016   December 31, 2015  
Drilling Products and Services   $ (29,864 )   $ (25,749 )   $ (33,436 )  
Onshore Completion and Workover Services     (77,681 )     (74,195 )     (88,147 )  
Production Services     (31,492 )     (31,320 )     (54,519 )  
Technical Solutions     (59,714 )     (10,730 )     (103,628 )  
Total Loss from Operations   $ (198,751 )   $ (141,994 )   $ (279,730 )  
               
Adjusted Income (Loss) from Operations (1)   December 31, 2016   September 30, 2016   December 31, 2015  
Drilling Products and Services   $ (15,935 )   $ (25,502 )   $ (8,417 )  
Onshore Completion and Workover Services     (74,867 )     (73,401 )     (64,831 )  
Production Services     (20,412 )     (28,634 )     (21,724 )  
Technical Solutions     (14,387 )     (10,210 )     27,079    
Total Adjusted Income (Loss) from Operations   $ (125,601 )   $ (137,747 )   $ (67,893 )  
               
(1)  Adjusted income (loss) from operations excludes the impact of reduction in value of assets, inventory write-down and restructuring costs for the three months ended December 31, 2016,  September 30, 2016 and December 31, 2015.  
               

Non-GAAP Financial Measures

The following tables reconcile consolidated net loss from continuing operations and income (loss) from operations by segment, which are the directly comparable financial results determined in accordance with Generally Accepted Accounting Principles (GAAP), to consolidated adjusted loss from continuing operations and adjusted income (loss) from operations by segment (non-GAAP financial measures).  Consolidated adjusted loss from continuing operations and income (loss) from operations by segment exclude the impact of reduction in value of assets and restructuring costs.  These financial measures are provided to enhance investors’ overall understanding of the Company’s current financial performance.

 
Reconciliation of As Reported Net Loss from Continuing Operations to Adjusted Net Loss From Continuing Operations
Three months ended December 31, 2016, September 30, 2016 and December 31, 2015
(in thousands)
(unaudited)
                         
    Three months ended,
    December 31, 2016   September 30, 2016   December 31, 2015
    Consolidated   Per Share   Consolidated   Per Share   Consolidated   Per Share
                         
Reported net loss from continuing operations   $ (166,259 )   $ (1.10 )   $ (113,913 )   $ (0.75 )   $ (214,547 )   $ (1.43 )
                         
Reduction in value of assets and other items     73,150       0.48       4,247       0.03       211,837       1.41  
Income taxes     (18,529 )     (0.12 )     (1,225 )     (0.01 )     (58,574 )     (0.39 )
                         
Adjusted net loss from continuing operations   $ (111,638 )   $ (0.74 )   $ (110,891 )   $ (0.73 )   $ (61,284 )   $ (0.41 )
                         


Reconciliation of As Reported Income (Loss) from Operations to Adjusted Income (Loss) From Operations
Three months ended December 31, 2016, September 30, 2016 and December 31, 2015
(in thousands)
(unaudited)
     
    Three months ended, December 31, 2016
    Drilling
Products and
Services
  Onshore
Completion
and Workover
Services
  Production
Services
 
Technical
Solutions
  Consolidated
                     
Reported loss from operations   $ (29,864 )   $ (77,681 )   $ (31,492 )   $ (59,714 )   $ (198,751 )
                     
Reduction in value of assets     1,244       2,094       7,023       25,600       35,961  
Inventory write-down     -       -       1,664       19,122       20,786  
Restructuring costs     12,685       720       2,393       605       16,403  
                     
Adjusted loss from operations   $ (15,935 )   $ (74,867 )   $ (20,412 )   $ (14,387 )   $ (125,601 )
                     
    Three months ended, September 30, 2016
    Drilling
Products and
Services
  Onshore
Completion
and Workover
Services
  Production
Services
 
Technical
Solutions
  Consolidated
                     
Reported loss from operations   $ (25,749 )   $ (74,195 )   $ (31,320 )   $ (10,730 )   $ (141,994 )
                     
Restructuring costs     247       794       2,686       520       4,247  
                     
Adjusted loss from operations   $ (25,502 )   $ (73,401 )   $ (28,634 )   $ (10,210 )   $ (137,747 )
                     
    Three months ended, December 31, 2015
    Drilling
Products and
Services
  Onshore
Completion
and Workover
Services
  Production
Services
 
Technical
Solutions
  Consolidated
                     
Reported loss from operations   $ (33,436 )   $ (88,147 )   $ (54,519 )   $ (103,628 )   $ (279,730 )
                     
Reduction in value of assets     24,440       2,966       23,308       124,904       175,618  
Restructuring costs     579       20,350       9,487       5,803       36,219  
                     
Adjusted income (loss) from operations   $ (8,417 )   $ (64,831 )   $ (21,724 )   $ 27,079     $ (67,893 )
                     


FOR FURTHER INFORMATION CONTACT:
Paul Vincent, VP of Investor Relations, (713) 654-2200

Superior Energy Services, Inc.