Superior Energy Services Announces First Quarter 2022 Results and Conference Call

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Superior Energy Services Announces First Quarter 2022 Results and Conference Call

HOUSTON, May 04, 2022 (GLOBE NEWSWIRE) -- Superior Energy Services, Inc. (the “Company”) filed its Form 10-Q for the period ending March 31, 2022 on May 4, 2022. In accordance with the Company’s Shareholders Agreement, it will host a conference call with shareholders on Wednesday, May 11, 2022.

The Company reported net income from continuing operations for the first quarter of 2022 of $24.0 million, or $1.20 per share, on revenue of $197.9 million. This compares to a net loss from continuing operations of $23.2 million, or $1.16 per share, for the fourth quarter of 2021, on revenues of $198.4 million. Net income from continuing operations includes $13.9 million of “Other income” primarily related to favorable foreign exchange rate changes during the quarter totaling $5.6 million and both realized and unrealized gains of $8.2 million on the value of our stock holdings in Select Energy Services.

The Company’s Adjusted EBITDA (a non-GAAP measure) was $53.0 million for the quarter, an increase of 32% compared to $40.1 million in fourth quarter 2021. Refer to page 10 for a Reconciliation of Adjusted EBITDA to GAAP results.

Brian Moore, Chief Executive Officer, commented, “Our positive first quarter results showcase the strength of our brands, their leaders, and teams as well as our continued execution of last year’s transformation initiatives. These efforts narrowed our operational focus to businesses with strong market positions, particularly in our Rentals segment, and enabled us to significantly reduce our cost structure, which has had a meaningful impact on margin expansion in these times of labor and supply chain costs inflation. We remain encouraged by our prospects for near-term and longer-term market opportunities and will continue to increase pricing as market capacity is absorbed, while remaining disciplined in our capital expenditure and market participation decisions.”

“The strategic transformation resulting from our Business Unit Review in 2021 weighted our product offerings toward businesses critical to our customer’s oil and gas operations. These businesses have limited competition with the three largest global oilfield service companies; require deep technical expertise, specifically in premium drill pipe and bottom hole assembly rentals; and have strong cash flow generating capacity as was delivered in our first quarter results.”

First Quarter 2022 Geographic Breakdown

U.S. land revenue was $38.5 million in the first quarter of 2022, an increase of 12% compared to revenue of $34.5 million in the fourth quarter of 2021 driven by both increased utilization and pricing in our Rentals Segment. Our premium drill pipe and downhole assemblies businesses benefited from increased customer demand and a tightening of the tool rental market where the most desirable assets within our substantial tool inventories were near full utilization.  

U.S. offshore revenue was $61.1 million in the first quarter of 2022, up 17% compared to revenue of $52.0 million in the fourth quarter of 2021. U.S. offshore results were positively impacted by increased activity and pricing for both our premium drill pipe and hydraulic workover and snubbing businesses. We look forward to increased activity levels where we have the capacity for the highly specialized equipment required for deep water drilling and completion applications.

International revenue was $98.3 million in the first quarter of 2022, a decrease of 12% compared to revenue of $111.9 million in the fourth quarter of 2021. International results were negatively impacted by the completion of a project in Brazil and generally lower levels of activity in certain key geographies. We continue to assess our international footprint and will be focusing our efforts on servicing those markets where we can generate a competitive return and support longstanding customer relationships.

Segment Reporting

The Rentals segment revenue in the first quarter of 2022 was $88.8 million, a 7% increase compared to revenue of $82.8 million in the fourth quarter of 2021. Adjusted EBITDA of $49.7 million contributed 75% of the Company’s total Adjusted EBITDA before including Corporate costs. First quarter Adjusted EBITDA Margin (a non-GAAP measure further defined on page 9) within Rentals was 56% benefiting from increasing pricing and higher utilization.

The Well Services segment revenue in the first quarter of 2022 was $109.2 million, a 6% decrease compared to revenue of $115.6 million in the fourth quarter of 2021. Adjusted EBITDA for the first quarter was $16.5 million for an Adjusted EBITDA Margin of 15%. Although revenues were lower sequentially, our margins increased primarily due to the revenue mix in our hydraulic workover and snubbing business, with higher margin service revenue replacing mobilization revenue and pass-through work with lower margins. Also, the strategic shift of our more labor-intensive service businesses to U.S. offshore and International operations reduces our exposure to the most significant wage inflation pressures in this segment given our lower U.S. Land headcount.

Both segments are experiencing supply chain tightness and inflation, particularly for raw materials associated with downhole completion and drilling bottom hole accessory components. This primarily impacts our ability to bring new tools to market in late 2022 and beyond as we experience long delivery lead times and increased pricing for capital expenditures.

Liquidity

As of March 31, 2022, the Company had cash, cash equivalents, and restricted cash of approximately $439.1 million and the availability remaining under our ABL Credit Facility was approximately $84.4 million, assuming continued compliance with the covenants under our ABL Credit Facility. The Board of Directors continues to evaluate optimal uses of cash on hand, including potential returns of capital to shareholders.

Total cash proceeds received from the sale of non-core assets during the quarter were $13.4 million. Additionally, at March 31, 2022, the Company owned 3.1 million shares of Select Energy Services Class A common stock (NYSE: WTTR).

First quarter capital expenditures were $11.3 million. The Company expects total capital expenditures for 2022 to be approximately $75 million with substantially all of the remaining spend occurring in the second and third quarters. Approximately 65% of total 2022 capital expenditures are targeted for the replacement of existing assets. Of the total capital expenditures, over 60% will be invested in the Rentals segment.

Engagement of Strategic Advisor

The Company has engaged Evercore to review potential strategic alternatives focused on maximizing shareholder value.

The Board has not set a timetable for the conclusion of this review, nor has it made any decisions related to any further actions or potential strategic alternatives at this time. There can be no assurance that the review will result in any transaction or other strategic change or outcome. The Company does not intend to comment further unless and until it determines that further disclosure is appropriate or necessary.

Conference Call Information

The Company will host a conference call on Wednesday, May 11, 2022 at 10:00 a.m. Eastern Time. To listen to the call via a live webcast, please visit Superior’s website at ir.superiorenergy.com and use access code 2779221. You may also listen to the call by dialing in at 1-877-800-3682 in the United States and Canada or 1-615-622-8047 for International calls and using access code 2779221. The call will be available for replay until June 3, 2022 on Superior’s website at ir.superiorenergy.com. If you are a shareholder and would like to submit a question, please email your question beforehand to Wendell York at ir@superiorenergy.com.

About Superior Energy Services

Superior Energy Services serves the drilling, completion and production-related needs of oil and gas companies worldwide through a diversified portfolio of specialized oilfield services and equipment that are used throughout the economic life cycle of oil and gas wells. For more information, visit: www.superiorenergy.com.

Non-GAAP Financial Measure

To supplement Superior’s consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company also uses Adjusted EBITDA and Adjusted EBITDA Margin. Management uses Adjusted EBITDA and Adjusted EBITDA Margin internally for financial and operational decision-making and as a means to evaluate period-to-period comparisons. The Company also believes these non-GAAP measures provide investors useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Non-GAAP financial measures are not recognized measures for financial statement presentation under U.S. GAAP and do not have standardized meanings and may not be comparable to similar measures presented by other public companies. Adjusted EBITDA and Adjusted EBITDA Margin should be considered as supplements to, and not as substitutes for, or superior to, the corresponding measures calculated in accordance with GAAP. We define Adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit) and depreciation, amortization and depletion, adjusted for reduction in value of assets and other charges, which management does not consider representative of our ongoing operations. We define Adjusted EBITDA Margin as Adjusted EBITDA by segment as a percentage of segment revenues. For a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, please see the tables under “―Superior Energy Services, Inc. and Subsidiaries Reconciliation of Adjusted EBITDA” included on pages 10 through 11 of this press release.

Forward-Looking Statements

This press release contains, and future oral or written statements or press releases by the Company and its 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, depreciation expense, liquidity, strategic alternatives (including dispositions and the timing thereof), 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 the Company’s 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, including but not limited to conditions in the oil and gas industry and the availability of third party buyers, that could cause the Company’s actual results to differ materially from such statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside the control of the Company, which could cause actual results to differ materially from such statements.

While the Company believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business.

These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in the Company’s Form 10-K for the year ended December 31, 2021 and Form 10-Q filed on May 4, 2022 and those set forth from time to time in the Company’s other periodic filings with the Securities and Exchange Commission, which are available at www.superiorenergy.com. Except as required by law, the Company expressly disclaims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events or otherwise.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share amounts)
(unaudited)
   
  Three Months Ended
  March 31,   December 31,   March 31,
    2022       2021     2021(1)
           
Revenues $ 197,930     $ 198,436     $ 151,771  
           
Cost of revenues   112,380       125,099       97,810  
Depreciation, depletion, amortization and accretion   34,085       61,603       48,388  
General and administrative expenses   32,018       33,158       29,490  
Restructuring expenses   1,555       2,419       9,653  
Other (gains) and losses, net   1,147       17,459       (169 )
           
Income (loss) from operations   16,745       (41,302 )     (33,401 )
           
Other income (expense):          
Interest income, net   1,179       937       414  
Reorganization items, net   -       -       335,560  
Other income (expense)   13,947       (629 )     (4,950 )
           
Income (loss) from continuing operations before income taxes   31,871       (40,994 )     297,623  
           
Income tax benefit (expense)   (7,884 )     17,748       (55,718 )
           
Net income (loss) from continuing operations   23,987       (23,246 )     241,905  
           
Income (loss) from discontinued operations, net of income tax   1,739       (6,102 )     (9,758 )
           
Net income (loss) $ 25,726     $ (29,348 )   $ 232,147  
           
           
Income (loss) per share -basic          
Net income (loss) from continuing operations $ 1.20     $ (1.16 )    
Income (loss) from discontinued operations, net of income tax   0.09       (0.31 )    
Net income (loss) $ 1.29     $ (1.47 )    
           
Income (loss) per share - diluted:          
Net income (loss) from continuing operations $ 1.20     $ (1.16 )    
Income (loss) from discontinued operations, net of income tax   0.08       (0.31 )    
Net income (loss) $ 1.28     $ (1.47 )    
           
Weighted-average shares outstanding - basic   19,999       19,999      
Weighted-average shares outstanding - diluted   20,056       19,999      
           

(1) Combines results from Predecessor periods prior to our emergence from bankruptcy on February 2, 2021 and Successor periods subsequent to emergence which is a non-GAAP financial measure. For further information regarding the breakdown of results, see our Annual Report on see our Quarterly Report on Form 10-Q for the three months ended March 31, 2022.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
         
    3/31/2022   12/31/2021
ASSETS        
         
Current assets:        
Cash and cash equivalents   $ 359,511     $ 314,974  
Accounts receivable, net     197,602       182,432  
Income taxes receivable     5,578       5,099  
Prepaid expenses     16,037       15,861  
Inventory     59,830       60,603  
Investment in equity securities     26,605       25,735  
Other current assets     5,748       6,701  
Assets held for sale     28,491       37,528  
         
Total current assets     699,402       648,933  
         
Property, plant and equipment, net     331,499       356,274  
Notes receivable     61,566       60,588  
Restricted cash     79,561       79,561  
Other long-term assets, net     52,331       54,152  
         
Total assets   $ 1,224,359     $ 1,199,508  
         
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)        
         
Current liabilities:        
Accounts payable   $ 43,573     $ 43,080  
Accrued expenses     107,027       108,610  
Income taxes payable     12,990       8,272  
Liabilities held for sale     3,678       5,607  
         
Total current liabilities     167,268       165,569  
         
Decommissioning liabilities     193,041       190,380  
Deferred income taxes     9,725       12,441  
Other long-term liabilities     86,281       89,385  
Total Liabilities     456,315       457,775  
         
Total stockholders' equity (deficit)     768,044       741,733  
Total liabilities and stockholders' equity   $ 1,224,359     $ 1,199,508  
                 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
       
  Three Months Ended
  March 31,   March 31,
    2022     2021(1)
Cash flows from operating activities      
Net income $ 25,726     $ 232,147  
Adjustments to reconcile net income to net cash provided by operating activities      
Depreciation, depletion, amortization and accretion   34,085       63,304  
Reorganization items, net   -       (354,279 )
Other non-cash items   (17,251 )     43,840  
Changes in operating assets and liabilities   (7,470 )     41,772  
Net cash from operating activities   35,090       26,784  
       
Cash flows from investing activities      
Payments for capital expenditures   (11,297 )     (7,154 )
Proceeds from sales of assets   13,379       7,923  
Proceeds from sales of equity securities   7,365       -  
Net cash from investing activities   9,447       769  
       
Cash flows from financing activities      
Other   -       (1,934 )
Net cash from financing activities   -       (1,934 )
Effect of exchange rate changes on cash   -       311  
Net change in cash, cash equivalents and restricted cash   44,537       25,930  
Cash, cash equivalents and restricted cash at beginning of period   394,535       268,184  
Cash, cash equivalents and restricted cash at end of period $ 439,072     $ 294,114  
       

(1) Combines results from Predecessor periods prior to our emergence from bankruptcy on February 2, 2021 and Successor periods subsequent to emergence which is a non-GAAP financial measure. For further information regarding the breakdown of results, see our Quarterly Report on Form 10-Q for the three months ended March 31, 2022.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
REVENUE BY GEOGRAPHIC REGION BY SEGMENT
(in thousands, except per share data)
(unaudited)
           
  Three Months Ended
  March 31,   December 31,   March 31,
    2022       2021       2021  
           
U.S. land          
Rentals $ 33,962     $ 29,907     $ 16,026  
Well Services   4,548       4,588       5,505  
Total U.S. land   38,510       34,495       21,531  
           
U.S. offshore          
Rentals   32,753       27,356       28,599  
Well Services   28,321       24,661       26,792  
Total U.S. offshore   61,074       52,017       55,391  
           
International          
Rentals   22,041       25,530       16,162  
Well Services   76,305       86,394       58,687  
Total International   98,346       111,924       74,849  
Total Revenues $ 197,930     $ 198,436     $ 151,771  
                       

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
SEGMENT HIGHLIGHTS
(in thousands)
(unaudited)
           
           
  Three Months Ended
  March 31,   December 31,   March 31,
    2022       2021       2021  
Revenues          
Rentals $ 88,756     $ 82,793     $ 60,787  
Well Services   109,174       115,643       90,984  
Corporate and other   -       -       -  
Total Revenues $ 197,930     $ 198,436     $ 151,771  
           
Income (Loss) from Operations          
Rentals $ 28,785     $ 2,311     $ (180 )
Well Services   4,135       (25,560 )     (10,898 )
Corporate and other   (16,175 )     (18,053 )     (22,323 )
Total Income (Loss) from Operations $ 16,745     $ (41,302 )   $ (33,401 )
           
Adjusted EBITDA          
Rentals $ 49,774     $ 44,179     $ 32,149  
Well Services   16,502       9,511       3,931  
Corporate and other   (13,252 )     (13,581 )     (11,440 )
Total Adjusted EBITDA $ 53,024     $ 40,109     $ 24,640  
           
Adjusted EBITDA Margin          
Rentals   56 %     53 %     53 %
Well Services   15 %     8 %     4 %
Corporate and other   n/a       n/a       n/a  
Total Adjusted EBITDA   27 %     20 %     16 %
           

We define EBITDA as income (loss) from continuing operations excluding the impact of depreciation, depletion, amortization and accretion, interest and income taxes. Additionally, our definition of Adjusted EBITDA adjusts for the impact of restructuring expenses, other gains and losses, other (income) expenses and other adjustments.

Adjusted EBITDA Margin represents Adjusted EBITDA by segment as a percentage of segment revenues.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA
(in thousands)
(unaudited)
             
    Three Months Ended
    March 31,   December 31,   March 31,
      2022       2021     2021(1)
             
Net income (loss) from continuing operations   $ 23,987     $ (23,246 )   $ 241,905  
Depreciation, depletion, amortization and accretion     34,085       61,603       48,388  
Interest income, net     (1,179 )     (937 )     (414 )
Income taxes     7,884       (17,748 )     55,718  
Reorganization items, net     -       -       (335,560 )
Restructuring expenses     1,555       2,419       9,653  
Other (gains) and losses, net (2)     1,147       17,459       (169 )
Other (income) expense     (13,947 )     629       4,950  
Other adjustments (3)     (508 )     (70 )     169  
Adjusted EBITDA   $ 53,024     $ 40,109     $ 24,640  
             

We define EBITDA as income (loss) from continuing operations excluding the impact of depreciation, depletion, amortization and accretion, interest and income taxes. Additionally, our definition of Adjusted EBITDA adjusts for the impact of restructuring expenses, other gains and losses, other (income) expenses and other adjustments.

(1) Combines results from Predecessor periods prior to our emergence from bankruptcy on February 2, 2021 and Successor periods subsequent to emergence. For further information regarding the breakdown of results, see our Quarterly Report on Form 10-Q for the three months ended March 31, 2022.

(2) Other gains and losses for the fourth quarter comprised $15.2 million related to our Wells Services segment, which includes approximately $11.7 million from exit activities related to SES Energy Services India Pvt. Ltd, and $2.3 million related to our Rentals segment. Other gains and losses primarily relate to charges recorded as part of our strategic disposal of low margin assets in line with our Transformation Project strategy and includes gains/losses on asset sales, as well as impairments primarily related to long-lived assets.

(3) Other adjustments relate to costs associated with our Transformation Project which are included in cost of revenues in our condensed consolidated statements of operations. These costs primarily relate to shut down costs incurred at certain locations and include severance of personnel and the write-down of inventory.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA BY SEGMENT
(in thousands)
(unaudited)
               
  Three months ended March 31, 2022
      Well   Corporate   Consolidated
  Rentals   Services   and Other   Total
               
Income (loss) from operations $ 28,785     $ 4,135     $ (16,175 )   $ 16,745  
Depreciation, depletion, amortization and accretion   20,989       11,728       1,368       34,085  
Restructuring expenses   -       -       1,555       1,555  
Other gains and losses (1)   -       639       -       639  
Adjusted EBITDA $ 49,774     $ 16,502     $ (13,252 )   $ 53,024  
               
  Three months ended December 31, 2021
      Well   Corporate   Consolidated
  Rentals   Services   and Other   Total
               
Income (loss) from operations $ 2,311     $ (25,560 )   $ (18,053 )   $ (41,302 )
Depreciation, depletion, amortization and accretion   40,467       19,083       2,053       61,603  
Restructuring expenses   -       -       2,419       2,419  
Other gains and losses and other adjustments (1)(2)   1,401       15,988       -       17,389  
Adjusted EBITDA $ 44,179     $ 9,511     $ (13,581 )   $ 40,109  
               
  Three months ended March 31, 2021 (3)
      Well   Corporate   Consolidated
  Rentals   Services   and Other   Total
               
Income (loss) from operations $ (180 )   $ (10,898 )   $ (22,323 )   $ (33,401 )
Depreciation, depletion, amortization and accretion   32,329       14,829       1,230       48,388  
Restructuring expenses           9,653       9,653  
Other gains and losses (1)   -       -       -       -  
Adjusted EBITDA $ 32,149     $ 3,931     $ (11,440 )   $ 24,640  
               

We define EBITDA as income (loss) from continuing operations excluding the impact of depreciation, depletion, amortization and accretion, interest and income taxes. Additionally, our definition of Adjusted EBITDA adjusts for the impact of restructuring expenses, other gains and losses, other (income) expenses and other adjustments.

(1) Other gains and losses for the fourth quarter comprised $15.2 million related to our Wells Services segment, which includes approximately $11.7 million from exit activities related to SES Energy Services India Pvt. Ltd, and $2.3 million related to our Rentals segment. Other gains and losses primarily relate to charges recorded as part of our strategic disposal of low margin assets in line with our Transformation Project strategy and includes gains/losses on asset sales, as well as impairments primarily related to long-lived assets.

(2) Other adjustments relate to costs associated with our Transformation Project which are included in cost of revenues in our condensed consolidated statements of operations. These costs primarily relate to shut down costs incurred at certain locations and include severance of personnel and the write-down of inventory.

(3) Combines results from Predecessor periods prior to our emergence from bankruptcy on February 2, 2021 and Successor periods subsequent to emergence. For further information regarding the breakdown of results, see our Quarterly Report on Form 10-Q for the three months ended March 31, 2022.

FOR FURTHER INFORMATION CONTACT:
Wendell York, VP – IR, Corporate Development & Treasury
1001 Louisiana St., Suite 2900
Houston, TX 77002
Investor Relations, ir@superiorenergy.com, (713) 654-2200