UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 001-34037

SUPERIOR ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		75-2379388 (I.R.S. Employer Identification No.)

601 Poydras, Suite 2400 New Orleans, Louisiana (Address of principal executive offices)		70130 (Zip Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if the smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares of the registrant’s common stock outstanding on April 29, 2011 was 79,655,451.

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q for
the Quarterly Period Ended March 31, 2011

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures about Market Risk			30
Item 4. Controls and Procedures			32
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 6. Exhibits			34
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
March 31, 2011 and December 31, 2010
(in thousands, except share data)

		3/31/2011				12/31/2010
		(Unaudited)				(Audited)
ASSETS
Current assets:
Cash and cash equivalents		$	71,082			$	50,727
Accounts receivable, net of allowance for doubtful accounts of $21,123 and $22,618 at March 31, 2011 and December 31, 2010, respectively			375,228				452,450
Prepaid expenses			31,974				25,828
Inventory and other current assets			234,891				235,047
Total current assets			713,175				764,052
Property, plant and equipment, net of accumulated depreciation and depletion of $821,024 and $771,602 at March 31, 2011 and December 31, 2010, respectively			1,361,412				1,313,150
Goodwill			589,967				588,000
Notes receivable			70,135				69,026
Equity-method investments			59,350				59,322
Intangible and other long-term assets, net of accumulated amortization of $24,120 and $22,065 at March 31, 2011 and December 31, 2010, respectively			121,208				113,983
Total assets		$	2,915,247			$	2,907,533
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	105,753			$	110,276
Accrued expenses			150,015				162,044
Income taxes payable			—				2,475
Deferred income taxes			23,158				29,353
Current portion of decommissioning liabilities			17,063				16,929
Current maturities of long-term debt			810				184,810
Total current liabilities			296,799				505,887
Deferred income taxes			228,107				223,936
Decommissioning liabilities			102,321				100,787
Long-term debt, net			851,822				681,635
Other long-term liabilities			118,073				114,737
Stockholders’ equity:
Preferred stock of $.01 par value. Authorized, 5,000,000 shares; none issued			—				—
Common stock of $.001 par value. Authorized, 125,000,000 shares; issued and outstanding 79,482,018 shares at March 31, 2011 and 78,951,053 shares at December 31, 2010			79				79
Additional paid in capital			429,494				415,278
Accumulated other comprehensive loss, net			(17,845	)			(25,700	)
Retained earnings			906,397				890,894
Total stockholders’ equity			1,318,125				1,280,551
Total liabilities and stockholders’ equity		$	2,915,247			$	2,907,533

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2011 and 2010
(in thousands, except per share data)
(unaudited)

		2011				2010
Revenues		$	413,981			$	364,511
Costs and expenses:
Cost of services (exclusive of items shown separately below)			233,845				199,052
Depreciation, depletion, amortization and accretion			59,363				51,048
General and administrative expenses			86,879				70,724
Gain on sale of businesses			2,674				—
Income from operations			36,568				43,687
Other income (expense):
Interest expense, net			(12,372	)			(14,038	)
Earnings from equity-method investments, net			27				3,985
Income before income taxes			24,223				33,634
Income taxes			8,720				12,108
Net income		$	15,503			$	21,526
Basic earnings per share		$	0.20			$	0.27
Diluted earnings per share		$	0.19			$	0.27
Weighted average common shares used in computing earnings per share:
Basic			79,021				78,534
Incremental common shares from stock-based compensation			1,738				819
Diluted			80,759				79,353

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2011 and 2010
(in thousands)
(unaudited)

		2011				2010
Cash flows from operating activities:
Net income		$	15,503			$	21,526
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion			59,363				51,048
Deferred income taxes			(2,305	)			3,495
Stock-based and performance share unit compensation expense, net			3,686				4,760
Retirement and deferred compensation plans expense, net			123				150
Earnings / losses from equity-method investments, net of cash received			(27	)			2,035
Amortization of debt acquisition costs and note discount			6,255				5,849
Gain on sale of businesses			(2,674	)			—
Other, net			(1,482	)			(212	)
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Receivables			78,834				(26,665	)
Inventory and other current assets			(3,015	)			22,601
Accounts payable			(2,305	)			(8,108	)
Accrued expenses			(13,145	)			(4,098	)
Income taxes			(2,558	)			14,522
Other, net			1,692				462
Net cash provided by operating activities			137,945				87,365
Cash flows from investing activities:
Payments for capital expenditures			(108,579	)			(76,559	)
Acquisitions of businesses, net of cash acquired			—				(206,772	)
Cash proceeds from sale of businesses			5,762				—
Other, net			(1,974	)			(1,938	)
Net cash used in investing activities			(104,791	)			(285,269	)
Cash flows from financing activities:
Net borrowings from (payments on) revolving credit facility			(19,000	)			46,200
Proceeds from exercise of stock options			6,147				108
Tax benefit from exercise of stock options			5,078				70
Proceeds from issuance of stock through employee benefit plans			634				599
Other			(6,551	)			(545	)
Net cash provided by (used in) financing activities			(13,692	)			46,432
Effect of exchange rate changes on cash			893				(1,085	)
Net increase (decrease) in cash and cash equivalents			20,355				(152,557	)
Cash and cash equivalents at beginning of period			50,727				206,505
Cash and cash equivalents at end of period		$	71,082			$	53,948

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Three Months Ended March 31, 2011

(1) Basis of Presentation

Certain information and footnote disclosures normally in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission; however, management believes the disclosures which are made are adequate to make the information presented not misleading. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Superior Energy Services, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010 and Management’s Discussion and Analysis of Financial Condition and Results of Operations herein.

The financial information of Superior Energy Services, Inc. and subsidiaries (the Company) for the three months ended March 31, 2011 and 2010 has not been audited. However, in the opinion of management, all adjustments necessary to present fairly the results of operations for the periods presented have been included therein. The results of operations for the first three months of the year are not necessarily indicative of the results of operations that might be expected for the entire year. Certain previously reported amounts have been reclassified to conform to the 2011 presentation.

(2) Acquisitions

In August 2010, the Company acquired certain assets (operating as Superior Completion Services) from subsidiaries of Baker Hughes Incorporated (Baker Hughes) for approximately $54.3 million. The assets purchased were used in Baker Hughes’ Gulf of Mexico stimulation and sand control business.

In January 2010, the Company acquired 100% of the equity interest of Hallin Marine Subsea International Plc (Hallin) for approximately $162.3 million. Additionally, the Company repaid approximately $55.5 million of Hallin’s debt. Hallin is an international provider of integrated subsea services and engineering solutions, focused on installing, maintaining and extending the life of subsea wells. Hallin operates in international offshore oil and gas markets with offices and facilities located in Singapore, Indonesia, Australia, Scotland and the United States.

In January 2010, Wild Well Control, Inc. (Wild Well), a wholly-owned subsidiary of the Company, acquired 100% ownership of Shell Offshore, Inc.’s Gulf of Mexico Bullwinkle platform and its related assets, including 29 wells, and assumed the decommissioning obligation for such assets. Immediately after Wild Well acquired these assets, it conveyed an undivided 49% interest in these assets and the related well plugging and abandonment obligations to Dynamic Offshore Resources, LLC (DOR), a wholly-owned subsidiary of Dynamic Offshore Holding, LP (DOH), which operates these assets. Additionally, DOR will pay Wild Well to extinguish its 49% portion of the well plugging and abandonment obligation (see note 3).

The Company has no off-balance sheet financing arrangements other than potential additional consideration that may be payable as a result of the future operating performance of certain acquired businesses. At March 31, 2011, the maximum additional consideration payable was approximately $4.0 million and will be determined and payable through 2012. Since these acquisitions occurred before the Company adopted the revised authoritative guidance for business combinations, these amounts are not classified as liabilities and are not reflected in the Company’s condensed consolidated financial statements until the amounts are fixed and determinable. When these amounts are determined, they will be capitalized as part of the purchase price of the related acquisition.

(3) Long-Term Contracts

In 2010, Wild Well acquired 100% ownership of Shell Offshore, Inc.’s Gulf of Mexico Bullwinkle platform and its related assets, and assumed the related decommissioning obligations. In connection with the subsequent conveyance to DOR of an undivided 49% interest in these assets and the related well plugging and abandonment obligation, DOR will pay Wild Well to extinguish its portion of the well plugging and abandonment obligation, limited to the fair value of the obligation at the time of acquisition. As part of the asset purchase agreement with Shell Offshore, Inc., Wild Well was required to obtain a $50.0 million performance bond, as well as fund $50.0 million into an escrow account. This escrow account will be funded $3.0 million monthly through May 2011, with a final payment of $2.0 million in June 2011. DOR will fund a portion of this amount as part of its payment obligation for the well plugging and abandonment. Included in intangible and other long-term assets, net is escrowed cash of $42.0 million and $33.0 million at March 31, 2011 and December 31, 2010, respectively. Included in other long-term liabilities is deferred revenue of $20.7 million and $16.2 million at March 31, 2011 and December 31, 2010, respectively (see note 2).

In connection with the sale of 75% of its interest in SPN Resources, LLC (SPN Resources) in 2008, the Company retained preferential rights on certain service work and entered into a turnkey contract to perform well abandonment and decommissioning work associated with oil and gas properties owned and operated by SPN Resources. This contract covers only decommissioning work for properties owned and operated by SPN Resources at the date of closing. The turnkey contract consists of numerous, separate billable jobs estimated to be performed through 2022. In March 2011, the Company contributed its equity interest in SPN Resources and DBH, LLC (DBH) in exchange for a 10% limited partnership interest in DOH (see note 6) and modified the terms of this turnkey contract.

In December 2007, Wild Well entered into contractual arrangements pursuant to which it decommissioned seven downed oil and gas platforms and related well facilities located offshore in the Gulf of Mexico for a fixed sum of $750 million, which is payable in installments upon the completion of specified portions of work. The contract contains certain covenants primarily related to Wild Well’s performance of the work. As of March 31, 2011, all work was complete, pending certain regulatory approvals. The revenue related to the contract for decommissioning these downed platforms and well facilities was recorded on the percentage-of-completion method utilizing costs incurred as a percentage of total estimated costs. At March 31, 2011 and December 31, 2010, there were $144.5 million of costs and estimated earnings in excess of billings related to this contract included in other current assets.

(4) Stock-Based Compensation and Retirement Plans

The Company maintains various stock incentive plans that provide long-term incentives to the Company’s key employees, including officers, directors, consultants and advisors (Eligible Participants). Under the incentive plans, the Company may grant incentive stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-based awards or any combination thereof to Eligible Participants.

Stock Options

The Company has issued non-qualified stock options under its stock incentive plans. The options generally vest in equal installments over three years and expire in ten years. Non-vested options are generally forfeited upon termination of employment. The Company’s compensation expense related to stock options for the three months ended March 31, 2011 and 2010 was approximately $0.8 million and $0.6 million, respectively, which is reflected in general and administrative expenses.

Restricted Stock

The Company has issued shares of restricted stock under its stock incentive plans. Shares of restricted stock generally vest in equal annual installments over three years. Non-vested shares are generally forfeited upon the termination of employment. Holders of shares of restricted stock are entitled to all rights of a stockholder of the Company with respect to the restricted stock, including the right to vote the shares and receive any dividends or other distributions. The Company’s compensation expense related to restricted stock for the three months ended March 31, 2011 and 2010 was approximately $1.4 million and $1.5 million, respectively, which is reflected in general and administrative expenses.

Restricted Stock Units

The Company has issued restricted stock units (RSUs) to its non-employee directors under its stock incentive plans. Annually, each non-employee director is issued a number of RSUs having an aggregate dollar value determined by the Company’s Board of Directors. An RSU represents the right to receive from the Company, within 30 days of the date the director ceases to serve on the Board, one share of the Company’s common stock. The Company’s expense related to RSUs for the three months ended March 31, 2011 and 2010 was approximately $0.3 million and $0.4 million, respectively, which is reflected in general and administrative expenses.

Performance Share Units

The Company has issued performance share units (PSUs) to its employees as part of the Company’s long-term incentive program. There is a three year performance period associated with each PSU grant. The two performance measures applicable to all participants are the Company’s return on invested capital and total stockholder return relative to those of the Company’s pre-defined “peer group.” If the participant has met specified continued service requirements, the PSUs will settle in cash or a combination of cash and up to 50% of equivalent value in the Company’s common stock, at the discretion of the compensation committee. The Company’s compensation expense related to all outstanding PSUs for the three months ended March 31, 2011 and 2010 was approximately $1.1 million and $2.1 million, respectively, which is reflected in general and administrative expenses. The Company has recorded a current liability of approximately $6.2 million and $6.0 million at March 31, 2011 and December 31, 2010, respectively, for outstanding PSUs, which is reflected in accrued expenses. Additionally, the Company has recorded a long-term liability of approximately $5.0 million and $7.0 million at March 31, 2011 and December 31, 2010, respectively, for outstanding PSUs, which is reflected in other long-term liabilities. On March 31, 2011, the Company issued approximately 67,300 shares of its common stock and on April 4, 2011, the Company paid approximately $2.8 million in cash to settle PSUs for the three year performance period ended December 31, 2010.

Employee Stock Purchase Plans

The Company has employee stock purchase plans under which an aggregate of 1,250,000 shares of common stock were reserved for issuance. Under these stock purchase plans, eligible employees can purchase shares of the Company’s common stock at a discount. The Company received approximately $0.6 million related to shares issued under these plans for each three month period ended March 31, 2011 and 2010. For each three month period ended March 31, 2011 and 2010, the Company recorded compensation expense of approximately $0.1 million which is reflected in general and administrative expenses. Additionally, the Company issued approximately 20,000 shares and 33,000 shares in the three month periods ended March 31, 2011 and 2010, respectively, related to these stock purchase plans.

Deferred Compensation Plans

The Company has a non-qualified deferred compensation plan which allows certain highly compensated employees to defer up to 75% of their base salary, up to 100% of their bonus, and up to 100% of the cash portion of their PSU compensation to the plan. The Company also has a non-qualified deferred compensation plan for its non-employee directors which allows each director to defer up to 100% of their cash compensation paid by the Company to the plan. Additionally, participating directors may defer up to 100% of the shares of common stock they are entitled to receive in connection with the payout of RSUs. Under each plan, payments are made to participants based on their annual enrollment elections and plan balance. Participants earn a return on their deferred compensation that is based on hypothetical investments in certain mutual funds. Changes in market value of these hypothetical participant investments are reflected as an adjustment to the deferred compensation liability of the Company with an offset to compensation expense (see note 15).

Supplemental Executive Retirement Plan

The Company has a supplemental executive retirement plan (SERP). The SERP provides retirement benefits to the Company’s executive officers and certain other designated key employees. The SERP is an unfunded, non-qualified defined contribution retirement plan, and all contributions under the plan are unfunded credits to a notional account maintained for each participant. Under the SERP, the Company will generally make annual contributions to a retirement account based on age and years of service. The Company may also make discretionary contributions to a participant’s account. The Company recorded compensation expense of approximately $0.4 million and $0.2 million in general and administrative expenses for the three month periods ended March 31, 2011 and 2010, respectively.

(5) Inventory and Other Current Assets

Inventory and other current assets includes approximately $69.3 million and $70.0 million of inventory at March 31, 2011 and December 31, 2010, respectively. Our inventory balance at March 31, 2011 consisted of approximately $31.2 million of finished goods, $1.9 million of work-in-process, $2.1 million of raw materials and $34.1 million of supplies and consumables. Our inventory balance at December 31, 2010 consisted of approximately $31.4 million of finished goods, $1.4 million of work-in-process, $2.2 million of raw materials and $35.0 million of supplies and consumables. Inventories are stated at the lower of cost or market. Cost is determined on an average cost basis for finished goods and work-in-process. Supplies and consumables consist principally of products used in our services provided to customers.

Additionally, inventory and other current assets include approximately $147.7 million and $146.9 million of costs incurred and estimated earnings in excess of billings on uncompleted contracts at March 31, 2011 and December 31, 2010, respectively. The Company follows the percentage-of-completion method of accounting for applicable contracts. Accordingly, income is recognized in the ratio that costs incurred bears to estimated total costs. Adjustments to cost estimates are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined.

(6) Equity-Method Investments

Investments in entities that are not controlled by the Company, but where the Company has the ability to exercise influence over the operations, are accounted for using the equity-method. The Company’s share of the income or losses of these entities is reflected as earnings from equity-method investments on its condensed consolidated statements of operations.

In March 2011, the Company contributed all of its equity interests in SPN Resources and DBH to DOH, the majority owner of both SPN Resources and DBH, in exchange for a 10% limited partnership interest in DOH. Following these contributions, DOH owns all the equity interests of SPN Resources and continues to own a majority of the equity interest of DBH. Prior to these contributions, the Company accounted for its equity interests in SPN Resources and DBH as separate equity-method investments. The Company’s equity interest in DOH is accounted for as an equity-method investment with a balance of approximately $57.4 million at March 31, 2011. The Company recorded a loss from its equity-method investment in DOH of approximately $1.1 million for the month ended March 31, 2011. The Company, where possible and at competitive rates, provides its products and services to

assist DOH in producing and developing its oil and gas properties. The Company had a receivable from DOH of approximately $8.9 million at March 31, 2011. The Company also recorded revenue from DOH of approximately $2.2 million for the month ended March 31, 2011. Additionally, the Company has a receivable from DOR of approximately $5.8 million as of March 31, 2011 related to its share of oil and natural gas commodity sales and production handling arrangement fees.

The Company’s equity-method investment balance in SPN Resources was approximately $43.6 million at December 31, 2010. The Company recorded earnings from its equity-method investment in SPN Resources of approximately $0.2 million for the two months ended February 28, 2011 and approximately $0.8 million for the three months ended March 31, 2010. Additionally, the Company received approximately $6.0 million of cash distributions from its equity-method investment in SPN Resources for the three month period ended March 31, 2010. The Company, where possible and at competitive rates, provides its products and services to assist SPN Resources in producing and developing its oil and gas properties. The Company had a receivable from SPN Resources of approximately $3.2 million at December 31, 2010. The Company also recorded revenue from SPN Resources of approximately $0.3 million for the two months ended February 28, 2011 and approximately $2.7 million for the three months ended March 31, 2010.

The Company’s equity-method investment balance in DBH was approximately $13.8 million at December 31, 2010. During the two months ended February 28, 2011, the Company recorded earnings from its equity-method investment in DBH of approximately $0.9 million. During the three months ended March 31, 2010, the Company recorded earnings from its equity-method investment in DBH of approximately $3.2 million. The Company, where possible and at competitive rates, provides its products and services to assist DBH in producing and developing its oil and gas properties. The Company had a receivable from DBH of approximately $1.4 million at December 31, 2010. The Company also recorded revenue of approximately $0.9 million for the two months ended February 28, 2011 and approximately $0.9 million from DBH for the three months ended March 31, 2010.

(7) Debt

The Company has a $400 million revolving credit facility, with the right, at the Company’s option and subject to certain conditions, to increase the borrowing capacity of the facility to $550 million. Any amounts outstanding under the revolving credit facility are due on July 20, 2014. At March 31, 2011, the Company had $156.0 million outstanding under the revolving credit facility with a weighted average interest rate of 3.6% per annum. The Company also had approximately $8.3 million of letters of credit outstanding, which reduce the Company’s borrowing availability under this credit facility. Amounts borrowed under the credit facility bear interest at LIBOR plus margins that depend on the Company’s leverage ratio. Indebtedness under the credit facility is secured by substantially all of the Company’s assets, including the pledge of the stock of the Company’s principal domestic subsidiaries. The credit facility contains customary events of default and requires that the Company satisfy various financial covenants. It also limits the Company’s ability to pay dividends or make other distributions, make acquisitions, make changes to the Company’s capital structure, create liens or incur additional indebtedness. At March 31, 2011, the Company was in compliance with all such covenants.

At March 31, 2011, the Company had outstanding $13.4 million in U.S. Government guaranteed long-term financing under Title XI of the Merchant Marine Act of 1936, which is administered by the Maritime Administration, for two 245-foot class liftboats. The debt bears interest at 6.45% per annum and is payable in equal semi-annual installments of $405,000 on June 3^rd and December 3^rd of each year through the maturity date of June 3, 2027. The Company’s obligations are secured by mortgages on the two liftboats. In accordance with the agreement, the Company is required to comply with certain covenants and restrictions, including the maintenance of minimum net worth, working capital and debt-to-equity requirements. At March 31, 2011, the Company was in compliance with all such covenants.

The Company also has outstanding $300 million of 6 7/8% unsecured senior notes due 2014. The indenture governing the senior notes requires semi-annual interest payments on June 1^st and December 1^st of each year through the maturity date of June 1, 2014. The indenture contains certain covenants that, among other things, limit the Company from incurring additional debt, repurchasing capital stock, paying dividends or making other distributions, incurring liens, selling assets or entering into certain mergers or acquisitions. At March 31, 2011, the Company was in compliance with all such covenants.

In March 2010, the Company entered into an interest rate swap agreement for a notional amount of $150 million, whereby the Company is entitled to receive semi-annual interest payments at a fixed rate of 6 7/8% per annum and is obligated to make quarterly interest payments at a variable rate. The variable interest rate, which is adjusted every 90 days, is based on LIBOR plus a fixed margin (see note 16).

The Company has outstanding $400 million of 1.50% unsecured senior exchangeable notes due 2026. Effective January 1, 2009, the Company retrospectively adopted authoritative guidance related to debt with conversion and other options, which requires the proceeds from the issuance of the 1.50% unsecured senior exchangeable notes to be allocated between a liability (issued at a discount) and an equity component. The resulting debt discount is amortized over the period the exchangeable debt is expected to be outstanding as additional non-cash interest expense. The Company used an effective interest rate of 6.89% and will amortize this debt discount through December 12, 2011. The Company has recorded an unamortized discount of $14.6 million and $19.7 million at March 31, 2011 and December 31, 2010, respectively, related to these exchangeable notes. The exchangeable notes bear interest at a rate of 1.50% per annum and decrease to 1.25% per annum on December 15, 2011. Interest on the exchangeable notes is payable semi-annually on December 15^th and June 15^th of each year through the maturity date of December 15, 2026. The exchangeable notes do not contain any restrictive financial covenants.

Under certain circumstances, holders may exchange the notes for shares of the Company’s common stock. The initial exchange rate is 21.9414 shares of common stock per $1,000 principal amount of notes. This is equal to an initial exchange price of $45.58 per share. The exchange price represents a 35% premium over the closing share price at date of issuance. The notes may be exchanged under the following circumstances:

	•		during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock is greater than or equal to 135% of the applicable exchange price of the notes for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter;
	•		prior to December 15, 2011, during the five business-day period after any ten consecutive trading-day period (the “measurement period”) in which the trading price of $1,000 principal amount of notes for each trading day in the measurement period was less than 95% of the product of the last reported sale price of the Company’s common stock and the exchange rate on such trading day;
	•		if the notes have been called for redemption;
	•		upon the occurrence of specified corporate transactions; or
	•		at any time beginning on September 15, 2026, and ending at the close of business on the second business day immediately preceding the maturity date of December 15, 2026.

Holders of the senior exchangeable notes may also require the Company to purchase all or a portion of their notes on December 15, 2011, December 15, 2016 and December 15, 2021 subject to certain administrative formalities. Conversely, on or after December 15, 2011 the Company may redeem at any time all or part of the notes. In each case, the purchase price payable will be equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest with all amounts payable in cash.

In connection with the exchangeable note transaction, the Company simultaneously entered into agreements with affiliates of the initial purchasers to purchase call options and sell warrants on its common stock. The Company may exercise the call options it purchased at any time to acquire approximately 8.8 million shares of its common stock at a strike price of $45.58 per share. The owners of the warrants may exercise the warrants to purchase from the Company approximately 8.8 million shares of the Company’s common stock at a price of $59.42 per share, subject to certain anti-dilution and other customary adjustments. The warrants may be settled in cash, in common stock or in a combination of cash and common stock, at the Company’s option. Lehman Brothers OTC Derivatives, Inc. (LBOTC) is the counterparty to 50% of the Company’s call option and warrant transactions. In October 2008, LBOTC filed for bankruptcy protection. The Company continues to carefully monitor the developments affecting LBOTC. Although the Company may not retain the benefit of the call option due to LBOTC’s bankruptcy, the Company does not expect that there will be a material impact, if any, on the financial statements or results of operations. The call option and warrant transactions described above do not affect the terms of the outstanding exchangeable notes.

Subsequent Event

In April 2011, the Company issued $500 million of 6 3/8% unsecured senior notes due 2019. The indenture governing the senior notes requires semi-annual interest payments on May 1^st and November 1^st of each year through the maturity date of May 1, 2019. The indenture contains certain covenants that, among other things, limit the Company from incurring additional debt, repurchasing capital stock, paying dividends or making other distributions, incurring liens, selling assets or entering into certain mergers or acquisitions. Costs associated with the issuance of these notes are estimated to be approximately $10.0 million and will be capitalized and amortized over the term of the notes.

The Company has the ability to redeem its $400 million 1.50% unsecured senior exchangeable notes on or after December 15, 2011 for 100% of the principal amount plus any accrued and unpaid interest. As such, the Company intends to use a portion of the net proceeds of this recent offering to redeem all of the outstanding senior exchangeable notes. The remaining net proceeds are available for general corporate purposes. In the interim, the Company used a portion of the proceeds to pay down all of its outstanding borrowings under its revolving credit facility.

As the holders of the Company’s 1.50% senior exchangeable notes have the ability to require the Company to purchase all of the notes on December 15, 2011, the entire amount of these notes would be deemed to be a current liability at December 31, 2010. However, in accordance with accounting guidance related to classification of short-term debt that is to be refinanced, the Company utilized the amount available to it under its revolving credit facility as of December 31, 2010 of approximately $216.0 million to classify this portion as long-term under the assumption that the revolving credit facility could be used to refinance that portion of the debt. Following completion of the $500 million note offering in April 2011, the Company has classified all $400 million of the senior exchangeable notes as long-term debt at March 31, 2011.

(8) Earnings per Share

Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share except that the denominator is increased to include the number of additional common shares that could have been outstanding assuming the exercise of stock options and restricted stock units and the potential shares that would have a dilutive effect on earnings per share.

Stock options of approximately 180,000 and 810,000 shares were excluded in the computation of diluted earnings per share for the three months ended March 31, 2011 and 2010, respectively, as the effect would have been anti-dilutive.

In connection with the Company’s outstanding 1.50% unsecured senior exchangeable notes, there could be a dilutive effect on earnings per share if the price of the Company’s stock exceeds the initial exchange price of $45.58 per share for a specified period of time. In the event the Company’s common stock exceeds $45.58 per share for a specified period of time, the first $1.00 the price exceeds $45.58 would cause a dilutive effect of approximately 188,400 shares. The impact on the calculation of earnings per share varies depending on when during the quarter the $45.58 per share price is reached.

(9) Other Comprehensive Loss

The following table reconciles the change in accumulated other comprehensive loss for the three months ended March 31, 2011 and 2010 (in thousands):

		2011				2010
Accumulated other comprehensive loss, December 31, 2010 and 2009, respectively		$	(25,700	)		$	(18,996	)
Other comprehensive income (loss):
Foreign currency translation adjustment			7,855				(9,699	)
Accumulated other comprehensive loss, March 31, 2011 and 2010, respectively		$	(17,845	)		$	(28,695	)

(10) Decommissioning Liabilities

In connection with the acquisition of the Bullwinkle platform and its related assets, the Company records estimated future decommissioning liabilities in accordance with the authoritative guidance related to asset retirement obligations (decommissioning liabilities), which requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred, with a corresponding increase in the carrying amount of the related long-lived asset. Subsequent to initial measurement, the decommissioning liability is required to be accreted each period to present value. The Company’s decommissioning liabilities associated with the Bullwinkle platform and its related assets consist of costs related to the plugging of wells, the removal of the related facilities and equipment, and site restoration.

Whenever practical, the Company utilizes its own equipment and labor services to perform well abandonment and decommissioning work. When the Company performs these services, all recorded intercompany revenues and related costs of services are eliminated in the consolidated financial statements. The recorded decommissioning liability associated with a specific property is fully extinguished when the property is abandoned. The recorded liability is first reduced by all cash expenses incurred to abandon and decommission the property. If the recorded liability exceeds (or is less than) the Company’s total costs, then the difference is reported as income (or loss) within revenue during the period in which the work is performed. The Company reviews the adequacy of its decommissioning liabilities whenever indicators suggest that the estimated cash flows needed to satisfy the liability have changed materially. The timing and amounts of these expenditures are estimates, and changes to these estimates may result in additional (or decreased) liabilities recorded, which in turn would increase (or decrease) the carrying values of the related assets. The Company reviews its estimates for the timing of these expenditures on a quarterly basis.

The following table summarizes the activity for the Company’s decommissioning liabilities for the three month periods ended March 31, 2011 and 2010 (in thousands):

		2011				2010
Decommissioning liabilities, December 31, 2010 and 2009, respectively		$	117,716			$	—
Liabilities acquired and incurred			—				126,559
Accretion			1,668				1,306
Total decommissioning liabilities, March 31, 2011 and 2010, respectively			119,384				127,865
Less: current portion of decommissioning liabilities at March 31, 2011 and 2010, respectively			17,063				18,633
Long-term decommissioning liabilities, March 31, 2011 and 2010, respectively		$	102,321			$	109,232

(11) Notes Receivable

Notes receivable consists of a commitment from the seller of certain assets to pay the Company upon the decommissioning of the Bullwinkle platform. These notes are recorded at present value, and the related discount is amortized to interest income based on the expected timing of the platform’s removal.

(12) Gain on Sale of Businesses

During the first quarter of 2011, the Company sold three liftboats from its 145-155-foot class for approximately $5.8 million. As a result of the sale of these liftboats, the Company recorded a pre-tax gain of approximately $2.7 million for the three month period ended March 31, 2011.

(13) Segment Information

Business Segments

The Company has three reportable segments: subsea and well enhancement, drilling products and services, and marine. The subsea and well enhancement segment provides production-related services used to enhance, extend and maintain oil and gas production, which include integrated subsea services and engineering solutions, mechanical wireline, hydraulic workover and snubbing, well control, coiled tubing, electric line, pumping and stimulation and well bore evaluation services; well plug and abandonment services; stimulation and sand control equipment and services; and other oilfield services used to support drilling and production operations. The subsea and well enhancement segment also includes production handling arrangements, as well as the production and sale of oil and gas. The drilling products and services segment rents and sells stabilizers, drill pipe, tubulars and specialized equipment for use with onshore and offshore oil and gas well drilling, completion, production and workover activities. It also provides on-site accommodations and bolting and machining services. The marine segment operates liftboats for production service activities, as well as oil and gas production facility maintenance, construction operations and platform removals.

Summarized financial information for the Company’s segments for the three months ended March 31, 2011 and 2010 is shown in the following tables (in thousands):

Three Months Ended March 31, 2011

		Subsea and				Drilling
		Well				Products and												Consolidated
		Enhancement				Services				Marine				Unallocated				Total
Revenues		$	262,045			$	128,270			$	23,666			$	—			$	413,981
Cost of services (exclusive of items shown separately below)			170,668				46,697				16,480				—				233,845
Depreciation, depletion, amortization and accretion			25,741				30,560				3,062				—				59,363
General and administrative expenses			54,657				29,309				2,913				—				86,879
Gain on sale of businesses			—				—				2,674				—				2,674
Income from operations			10,979				21,704				3,885				—				36,568
Interest income (expense), net			1,109				—				—				(13,481	)			(12,372	)
Earnings from equity-method investments, net			—				—				—				27				27
Income (loss) before income taxes		$	12,088			$	21,704			$	3,885			$	(13,454	)		$	24,223

Three Months Ended March 31, 2010

		Subsea and				Drilling
		Well				Products and												Consolidated
		Enhancement				Services				Marine				Unallocated				Total
Revenues		$	232,766			$	114,277			$	17,468			$	—			$	364,511
Cost of services (exclusive of items shown separately below)			142,869				40,095				16,088				—				199,052
Depreciation, depletion, amortization and accretion			20,422				28,236				2,390				—				51,048
General and administrative expenses			45,778				21,999				2,947				—				70,724
Income (loss) from operations			23,697				23,947				(3,957	)			—				43,687
Interest income (expense), net			835				—				—				(14,873	)			(14,038	)
Earnings from equity-method investments, net			—				—				—				3,985				3,985
Income (loss) before income taxes		$	24,532			$	23,947			$	(3,957	)		$	(10,888	)		$	33,634

Identifiable Assets

		Subsea and				Drilling
		Well				Products and												Consolidated
		Enhancement				Services				Marine				Unallocated				Total
March 31, 2011		$	1,777,931			$	820,964			$	238,317			$	78,035			$	2,915,247
December 31, 2010		$	1,769,813			$	802,785			$	255,883			$	79,052			$	2,907,533

Geographic Segments

The Company attributes revenue to various countries based on the location where services are performed or the destination of the drilling products or equipment sold or leased. Long-lived assets consist primarily of property, plant and equipment and are attributed to various countries based on the physical location of the asset at the end of a period. The Company’s information by geographic area is as follows (in thousands):

		Three Months Ended March 31,
Revenues:		2011				2010
United States		$	310,203			$	255,325
Other Countries			103,778				109,186
Total		$	413,981			$	364,511

		March 31,				December 31,
Long-Lived Assets:		2011				2010
United States		$	903,976			$	881,416
Other Countries			457,436				431,734
Total, net		$	1,361,412			$	1,313,150

(14) Guarantee

As part of SPN Resources’ acquisition of its oil and gas properties while a wholly-owned subsidiary of the Company, the Company guaranteed SPN Resources’ performance of its decommissioning liabilities. These guarantees remain in place. In accordance with authoritative guidance related to guarantees, the Company has assigned an estimated value of $2.6 million at March 31, 2011 and December 31, 2010 related to decommissioning performance guarantees, which is reflected in other long-term liabilities. The Company believes that the likelihood of being required to perform these guarantees is remote. In the unlikely event that SPN Resources defaults on the decommissioning liabilities, the total maximum potential obligation under these guarantees is estimated to be approximately $110.2 million, net of the contractual right to receive payments from third parties, which is approximately $24.6 million as of March 31, 2011. The total maximum potential obligation will decrease over time as the underlying obligations are fulfilled by SPN Resources.

(15) Fair Value Measurements

The Company follows the authoritative guidance for fair value measurements relating to financial and nonfinancial assets and liabilities, including presentation of required disclosures herein. This guidance establishes a fair value framework requiring the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets and liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

	Level 1:		Unadjusted quoted prices in active markets for identical assets and liabilities.
	Level 2:		Observable inputs other than those included in Level 1 such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical assets or liabilities in inactive markets; or model-derived valuations or other inputs that can be corroborated by observable market data.
	Level 3:		Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The following tables provide a summary of the financial assets and liabilities measured at fair value on a recurring basis at March 31, 2011 and December 31, 2010 (in thousands):

		March 31,				Fair Value Measurements at Reporting Date Using
		2011				Level 1				Level 2				Level 3
Intangible and other long-term assets
Non-qualified deferred compensation assets		$	11,143			$	812			$	10,331				—
Interest rate swap		$	535				—			$	535				—
Accounts Payable
Non-qualified deferred compensation liabilities		$	1,524				—			$	1,524				—
Other long-term liabilities
Non-qualified deferred compensation liabilities		$	16,186				—			$	16,186				—

		December 31,
		2010				Level 1				Level 2				Level 3
Intangible and other long-term assets
Non-qualified deferred compensation assets		$	10,820			$	812			$	10,008				—
Interest rate swap		$	161				—			$	161				—
Accounts Payable
Non-qualified deferred compensation liabilities		$	2,953			$	1,429			$	1,524				—
Other long-term liabilities
Non-qualified deferred compensation liabilities		$	14,236				—			$	14,236				—

The Company’s non-qualified deferred compensation plans allow officers, certain highly compensated employees and non-employee directors to defer receipt of a portion of their compensation and contribute such amounts to one or more hypothetical investment funds (see note 4). The Company entered into separate trust agreements, subject to general creditors, to segregate assets of each plan and reports the accounts of the trusts in its condensed consolidated financial statements. These investments are reported at fair value based on unadjusted quoted prices in active markets for identifiable assets and observable inputs for similar assets and liabilities, which represent Levels 1 and 2, respectively, in the fair value hierarchy. The realized and unrealized holding gains and losses related to non-qualified deferred compensation assets are recorded in interest expense, net. The realized and unrealized holding gains and losses related to non-qualified deferred compensation liabilities are recorded in general and administrative expenses.

In March 2010, the Company entered into an interest rate swap agreement for a notional amount of $150 million, whereby the Company is entitled to receive semi-annual interest payments at a fixed rate of 6 7/8% per annum and is obligated to make quarterly interest payments at a floating rate, which is adjusted every 90 days, based on LIBOR plus a fixed margin. The Company entered into the interest rate swap agreement in an effort to achieve a more balanced debt portfolio by targeting an overall desired position of fixed and floating interest rates. The swap agreement, scheduled to terminate on June 1, 2014, is designated as a fair value hedge of a portion of the 6 7/8% unsecured senior notes, as the derivative has been tested to be highly effective in offsetting changes in the fair value of the underlying note. As this derivative is classified as a fair value hedge, the changes in the fair value of the derivative are offset against the changes in the fair value of the underlying note in interest expense, net (see note 16).

The fair value of the Company’s cash equivalents, accounts receivable and current maturities of long-term debt approximates their carrying amounts. The fair value of the Company’s long-term debt was approximately $897.8 million and $902.5 million at March 31, 2011 and December 31, 2010, respectively. The fair value of these debt instruments is determined by reference to the market value of the instrument as quoted in an over-the-counter market.

(16) Derivative Financial Instruments

The Company manages its debt portfolio by targeting an overall desired position of fixed and floating rates and may employ interest rate swaps from time to time to achieve its goal. The Company does not use derivative financial instruments for trading or speculative purposes.

In March 2010, the Company entered into an interest rate swap agreement for a notional amount of $150 million related to its fixed rate debt maturing in 2014 to floating rate debt. This transaction was designated as a fair value hedge since the swap hedges against the change in fair value of fixed rate debt resulting from changes in interest rates. The Company’s derivative agreement includes a credit risk-related contingent feature whereby the counterparty is allowed to terminate the transaction following the occurance of a default on certain of the Company’s indebtedness. The Company recorded a derivative asset of $0.5 million and $0.2 million within intangible and other long-term assets in the condensed consolidated balance sheets as of March 31, 2011 and December 31, 2010, respectively (see note 7). The change in fair value of the interest rate swap is included in the adjustments to reconcile net income to net cash provided by operating activities in the condensed consolidated statements of cash flows.

The location and effect of the derivative instrument on the condensed consolidated statements of operations for the three month periods ended March 31, 2011 and 2010, presented on a pre-tax basis, is as follows (in thousands):

		Location of
		(gain) loss				Amount of (gain) loss recognized
		recognized				2011				2010
Interest rate swap		Interest expense, net				$	516			$	1,115
Hedged item — debt		Interest expense, net					(891	)			(492	)
						$	(375	)		$	623

For the three months ended March 31, 2011 and 2010, approximately $0.4 million of interest income and $0.6 million of interest expense, respectively, was related to the ineffectiveness associated with this fair value hedge.

Hedge ineffectiveness represents the difference between the changes in fair value of the derivative instruments and the changes in fair value of the fixed rate debt attributable to changes in the benchmark interest rate.

(17) Income Taxes

The Company follows authoritative guidance surrounding accounting for uncertainty in income taxes. It is the Company’s policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense. The Company had approximately $24.8 million of unrecorded tax benefits at March 31, 2011 and December 31, 2010, all of which would impact the Company’s effective tax rate if recognized.

In addition to its U.S. federal tax return, the Company files income tax returns in various state and foreign jurisdictions. The number of years that are open under the statute of limitations and subject to audit varies depending on the tax jurisdiction. The Company remains subject to U.S. federal tax examinations for years after 2006.

(18) Commitments and Contingencies

Due to the nature of the Company’s business, the Company is involved, from time to time, in routine litigation or subject to disputes or claims regarding our business activities. Legal costs related to these matters are expensed as incurred. In management’s opinion, none of the pending litigation, disputes or claims is expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

(19) Subsequent Events

In accordance with authoritative guidance, the Company has evaluated and disclosed all material subsequent events that occurred after the balance sheet date, but before financial statements were issued (see notes 7 and 20).

(20) Financial Information Related to Guarantor Subsidiaries

In April 2011, SESI, L.L.C. (Issuer), a wholly-owned subsidiary of Superior Energy Services, Inc. (Parent), issued $500 million of 6 3/8% unsecured senior notes due 2019. The Parent, along with substantially all of its domestic subsidiaries, fully and unconditionally guaranteed the senior notes, and such guarantees are joint and several. All of the guarantor subsidiaries are wholly-owned subsidiaries of the Issuer. Domestic income taxes are paid by the Parent through a consolidated tax return and are accounted for by the Parent. The following tables present the condensed consolidating balance sheets as of March 31, 2011 and December 31, 2010 and the condensed consolidating statements of operations and cash flows for the three months ended March 31, 2011 and 2010.

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Balance Sheets
March 31, 2011
(in thousands)

														Non-
										Guarantor				Guarantor
		Parent				Issuer				Subsidiaries				Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	16,845			$	1,911			$	52,326			$	—			$	71,082
Accounts receivable, net			—				3,458				311,554				93,812				(33,596	)			375,228
Income taxes receivable			—				—				—				2,062				(2,062	)			—
Prepaid expenses			64				5,217				11,764				14,929				—				31,974
Inventory and other current assets			—				1,695				223,017				10,179				—				234,891
Intercompany interest receivable			—				22,090				—				—				(22,090	)			—
Total current assets			64				49,305				548,246				173,308				(57,748	)			713,175
Property, plant and equipment, net			—				3,060				979,885				378,467				—				1,361,412
Goodwill, net			—				—				447,404				142,563				—				589,967
Notes receivable			—				—				70,135				—				—				70,135
Intercompany notes receivable			—				478,311				—				—				(478,311	)			—
Investments in subsidiaries			124,271				593,768				—				—				(718,039	)			—
Equity-method investments			—				57,738				—				1,612				—				59,350
Intangible and other long-term assets, net			—				22,084				69,889				29,235				—				121,208
Total assets		$	124,335			$	1,204,266			$	2,115,559			$	725,185			$	(1,254,098	)		$	2,915,247
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	—			$	3,342			$	74,479			$	63,169			$	(35,237	)		$	105,753
Accrued expenses			165				37,185				81,896				30,769				—				150,015
Income taxes payable			2,062				—				—				—				(2,062	)			—
Deferred income taxes			23,158				—				—				—				—				23,158
Current portion of decommissioning liabilities			—				—				17,063				—				—				17,063
Current maturities of long-term debt			—				—				—				810				—				810
Intercompany interest payable			—				—				—				22,090				(22,090	)			—
Total current liabilities			25,385				40,527				173,438				116,838				(59,389	)			296,799
Deferred income taxes			215,257				—				—				12,850				—				228,107
Decommissioning liabilities			—				—				102,321				—				—				102,321
Long-term debt, net			—				839,276				—				12,546				—				851,822
Intercompany notes payable			—				—				—				478,311				(478,311	)			—
Intercompany payables/(receivables)			(102,592	)			862,976				(101,177	)			(125,324	)			(533,883	)			—
Other long-term liabilities			8,260				37,595				23,536				48,682				—				118,073
Stockholders’ equity:
Preferred stock of $.01 par value			—				—				—				—				—				—
Common stock of $.001 par value			79				—				—				176				(176	)			79
Additional paid in capital			429,494				124,271				—				58,068				(182,339	)			429,494
Accumulated other comprehensive income (loss), net			—				—				—				(17,845	)			—				(17,845	)
Retained earnings (accumulated deficit)			(451,548	)			(700,379	)			1,917,441				140,883				—				906,397
Total stockholders’ equity			(21,975	)			(576,108	)			1,917,441				181,282				(182,515	)			1,318,125
Total liabilities and stockholders’ equity		$	124,335			$	1,204,266			$	2,115,559			$	725,185			$	(1,254,098	)		$	2,915,247

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Balance Sheets
December 31, 2010
(in thousands)

														Non-
										Guarantor				Guarantor
		Parent				Issuer				Subsidiaries				Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	—			$	5,493			$	45,234			$	—			$	50,727
Accounts receivable, net			—				415				382,935				99,010				(29,910	)			452,450
Income tax receivable			—				—				—				2,024				(2,024	)			—
Prepaid expenses			18				4,128				8,948				12,734				—				25,828
Inventory and other current assets			—				1,678				222,822				10,547				—				235,047
Intercompany interest receivable			—				15,883				—				—				(15,883	)			—
Total current assets			18				22,104				620,198				169,549				(47,817	)			764,052
Property, plant and equipment, net			—				3,189				957,561				352,400				—				1,313,150
Goodwill, net			—				—				447,467				140,533				—				588,000
Notes receivable			—				—				69,026				—				—				69,026
Intercompany notes receivable			—				456,280				—				—				(456,280	)			—
Investments in subsidiaries			124,271				602,461				4,347				4,347				(735,426	)			—
Equity-method investments			—				43,947				—				15,375				—				59,322
Intangible and other long-term assets, net			—				22,455				61,722				29,806				—				113,983
Total assets		$	124,289			$	1,150,436			$	2,160,321			$	712,010			$	(1,239,523	)		$	2,907,533
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	—			$	6,654			$	71,790			$	64,636			$	(32,804	)		$	110,276
Accrued expenses			153				42,821				91,451				27,619				—				162,044
Income taxes payable			4,499				—				—				—				(2,024	)			2,475
Deferred income taxes			29,353				—				—				—				—				29,353
Current portion of decommissioning liabilities			—				—				16,929				—				—				16,929
Current maturities of long-term debt			—				184,000				—				810				—				184,810
Intercompany interest payable			—				—				—				15,883				(15,883	)			—
Total current liabilities			34,005				233,475				180,170				108,948				(50,711	)			505,887
Deferred income taxes			211,173				—				—				12,763				—				223,936
Decommissioning liabilities			—				—				100,787				—				—				100,787
Long-term debt, net			—				669,089				—				12,546				—				681,635
Intercompany notes payable			—				—				—				456,280				(456,280	)			—
Intercompany payables/(receivables)			(100,882	)			760,164				(1,407	)			(125,246	)			(532,629	)			—
Other long-term liabilities			8,260				37,537				19,427				49,513				—				114,737
Stockholders’ equity:
Preferred stock of $.01 par value			—				—				4,347				4,347				(8,694	)			—
Common stock of $.001 par value			79				—				—				176				(176	)			79
Additional paid in capital			415,278				124,271				—				66,762				(191,033	)			415,278
Accumulated other comprehensive loss, net			—				—				—				(25,700	)			—				(25,700	)
Retained earnings (accumulated deficit)			(443,624	)			(674,100	)			1,856,997				151,621				—				890,894
Total stockholders’ equity (deficit)			(28,267	)			(549,829	)			1,861,344				197,206				(199,903	)			1,280,551
Total liabilities and stockholders’ equity		$	124,289			$	1,150,436			$	2,160,321			$	712,010			$	(1,239,523	)		$	2,907,533

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations
Three Months Ended March 31, 2011
(in thousands)

														Non-
										Guarantor				Guarantor
		Parent				Issuer				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenues		$	—			$	—			$	351,640			$	78,118			$	(15,777	)		$	413,981
Costs and expenses:
Cost of services (exclusive of items shown separately below)			—				—				194,086				55,472				(15,713	)			233,845
Depreciation, depletion, amortization and accretion			—				128				48,691				10,544				—				59,363
General and administrative expenses			325				18,918				52,169				15,531				(64	)			86,879
Gain on sale of business			—				—				2,674				—				—				2,674
Income (loss) from operations			(325	)			(19,046	)			59,368				(3,429	)			—				36,568
Other income (expense):
Interest expense, net			—				(12,561	)			1,076				(887	)			—				(12,372	)
Intercompany interest expense, net			—				6,206				—				(6,206	)			—				—
Earnings (losses) from equity-method investments, net			—				(878	)			—				905				—				27
Income (loss) before income taxes			(325	)			(26,279	)			60,444				(9,617	)			—				24,223
Income taxes			7,599				—				—				1,121				—				8,720
Net income (loss)		$	(7,924	)		$	(26,279	)		$	60,444			$	(10,738	)		$	—			$	15,503

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations
Three Months Ended March 31, 2010
(in thousands)

														Non-
										Guarantor				Guarantor
		Parent				Issuer				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenues		$	—			$	—			$	308,489			$	67,767			$	(11,745	)		$	364,511
Costs and expenses:
Cost of services (exclusive of items shown separately below)			—				—				170,446				40,351				(11,745	)			199,052
Depreciation, depletion, amortization and accretion			—				129				42,719				8,200				—				51,048
General and administrative expenses			89				17,197				43,461				9,977				—				70,724
Income (loss) from operations			(89	)			(17,326	)			51,863				9,239				—				43,687
Other income (expense):
Interest income (expense), net			—				(14,022	)			698				(714	)			—				(14,038	)
Intercompany interest expense, net			—				2,147				—				(2,147	)			—				—
Earnings from equity-method investments, net			—				833				—				3,152				—				3,985
Income (loss) before income taxes			(89	)			(28,368	)			52,561				9,530				—				33,634
Income taxes			8,379				—				—				3,729				—				12,108
Net income (loss)		$	(8,468	)		$	(28,368	)		$	52,561			$	5,801			$	—			$	21,526