spn-20160930 10Q Q3_Taxonomy2016

 

Table Of Contents

 

   

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549







FORM 10-Q





(Mark One)

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





For the quarterly period ended September 30, 2016



or



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



For the Transition Period from          to



Commission File No. 001-34037







SUPERIOR ENERGY SERVICES, INC.



(Exact name of registrant as specified in its charter)











 

 



 

 



 

 

Delaware

 

75-2379388

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)



 

 



 

 



 

 



 

 



 

 

1001 Louisiana Street, Suite 2900

 

77002

Houston, TX

 

(Zip Code)

(Address of principal executive offices)

 

 



Registrant’s telephone number, including area code: (713)  654-2200



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    No



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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No



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  

 

Accelerated filer                           

Non-accelerated filer    

(do not check if smaller reporting company)

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   No  



The number of shares of the registrant’s common stock outstanding on October 24, 2016 was 151,741,328.



 

 

 


 

 

Table Of Contents

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q for

the Quarterly Period Ended September 30, 2016



TABLE OF CONTENTS





 

 



 

 



 

Page

PART I.

FINANCIAL INFORMATION

 



 

 

Item 1.

Condensed Consolidated Financial Statements and Notes

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations 

17 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

23 

Item 4.

Controls and Procedures

24 



 

 

PART II.

OTHER INFORMATION

 



 

 

Item 1A.

Risk Factors

25 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25 

Item 6.

Exhibits

26 





2

 


 

 

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PART I.  FINANCIAL INFORMATION



Item 1. Financial Statements



 

 

 

 

 

 



 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

September 30, 2016 and December 31, 2015

(in thousands, except share data)

(unaudited)



 

9/30/2016

 

12/31/2015

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

278,155 

 

$

564,017 

Accounts receivable, net of allowance for doubtful accounts of $30,592 and

 

 

 

 

 

 

$28,242 at September 30, 2016 and December 31, 2015, respectively

 

 

271,323 

 

 

428,514 

Prepaid expenses

 

 

37,477 

 

 

42,298 

Inventory and other current assets

 

 

151,084 

 

 

165,062 

Assets held for sale

 

 

62,247 

 

 

95,234 

Total current assets

 

 

800,286 

 

 

1,295,125 

Property, plant and equipment, net of accumulated depreciation and depletion of
$2,395,301 and $2,278,856 at September 30, 2016 and December 31, 2015, respectively

 

 

1,753,713 

 

 

2,123,291 

Goodwill

 

 

806,087 

 

 

1,140,101 

Notes receivable

 

 

55,782 

 

 

52,382 

Intangible and other long-term assets, net of accumulated amortization of $67,036
and $83,520 at September 30, 2016 and December 31, 2015, respectively

 

 

227,952 

 

 

303,345 

Total assets

 

$

3,643,820 

 

$

4,914,244 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

81,641 

 

$

114,475 

Accrued expenses

 

 

242,376 

 

 

271,246 

Income taxes payable

 

 

2,919 

 

 

9,185 

Current maturities of long-term debt

 

 

 -

 

 

29,957 

Current portion of decommissioning liabilities

 

 

22,770 

 

 

19,052 

Liabilities held for sale

 

 

3,080 

 

 

4,661 

Total current liabilities

 

 

352,786 

 

 

448,576 

Deferred income taxes

 

 

200,664 

 

 

383,069 

Decommissioning liabilities

 

 

99,485 

 

 

98,890 

Long-term debt, net

 

 

1,283,581 

 

 

1,588,263 

Other long-term liabilities

 

 

193,571 

 

 

184,634 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock of $0.01 par value.  Authorized - 5,000,000 shares; none issued

 

 

 -

 

 

 -

Common stock of $0.001 par value

 

 

 

 

 

 

Authorized-250,000,000, Issued and Outstanding-151,719,236 at September 30, 2016
Authorized-250,000,000, Issued and Outstanding-150,861,500 at December 31, 2015

 

 

152 

 

 

151 

Additional paid in capital

 

 

2,682,188 

 

 

2,664,517 

Accumulated other comprehensive loss, net

 

 

(72,310)

 

 

(45,694)

Retained deficit

 

 

(1,096,297)

 

 

(408,162)

Total stockholders’ equity

 

 

1,513,733 

 

 

2,210,812 

Total liabilities and stockholders’ equity

 

$

3,643,820 

 

$

4,914,244 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

 

 

 

 

 

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

Three and Nine Months Ended September 30, 2016 and 2015

(in thousands, except per share data)

(unaudited)



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months

 

Nine Months



 

2016

 

2015

 

2016

 

2015

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Services

 

$

266,093 

 

$

464,545 

 

$

873,985 

 

$

1,684,968 

Rentals

 

 

60,132 

 

 

136,851 

 

 

221,644 

 

 

544,447 

Total revenues

 

 

326,225 

 

 

601,396 

 

 

1,095,629 

 

 

2,229,415 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (exclusive of depreciation, depletion, amortization and accretion)

 

 

223,766 

 

 

355,373 

 

 

703,061 

 

 

1,224,931 

Cost of rentals (exclusive of depreciation, depletion, amortization and accretion )

 

 

34,402 

 

 

65,112 

 

 

99,081 

 

 

243,333 

Depreciation, depletion, amortization and accretion - services

 

 

100,579 

 

 

113,362 

 

 

312,713 

 

 

353,202 

Depreciation, depletion, amortization and accretion - rentals

 

 

22,729 

 

 

33,395 

 

 

79,304 

 

 

114,127 

General and administrative expenses

 

 

86,743 

 

 

123,189 

 

 

270,467 

 

 

403,812 

Reduction in value of assets

 

 

 -

 

 

755,632 

 

 

462,461 

 

 

1,563,269 

Loss from operations

 

 

(141,994)

 

 

(844,667)

 

 

(831,458)

 

 

(1,673,259)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(21,771)

 

 

(22,622)

 

 

(68,325)

 

 

(71,213)

Other income (expense):

 

 

3,667 

 

 

(3,123)

 

 

22,103 

 

 

(10,620)

Loss from continuing operations before income taxes

 

 

(160,098)

 

 

(870,412)

 

 

(877,680)

 

 

(1,755,092)

Income taxes

 

 

(46,185)

 

 

(53,825)

 

 

(210,599)

 

 

(161,876)

Net loss from continuing operations

 

 

(113,913)

 

 

(816,587)

 

 

(667,081)

 

 

(1,593,216)

Loss from discontinued operations, net of income tax

 

 

(4,085)

 

 

(4,610)

 

 

(8,577)

 

 

(24,107)

Net loss

 

$

(117,998)

 

$

(821,197)

 

$

(675,658)

 

$

(1,617,323)

Loss per share information:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.75)

 

$

(5.42)

 

$

(4.40)

 

$

(10.60)

Discontinued operations

 

 

(0.03)

 

 

(0.03)

 

 

(0.06)

 

 

(0.16)

Basic and diluted loss per share

 

$

(0.78)

 

$

(5.45)

 

$

(4.46)

 

$

(10.76)

Cash dividends declared per share

 

$

 -

 

$

0.08 

 

$

0.08 

 

$

0.24 

Weighted average common shares used in computing
loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

151,707 

 

 

150,742 

 

 

151,337 

 

 

150,372 



 

 

 

 

 

 

 

 

 

 

 

 















































 

 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

Three and Nine Months Ended September 30, 2016 and 2015

(in thousands)

(unaudited)



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months

 

Nine Months



 

2016

 

2015

 

2016

 

2015

Net loss

 

$

(117,998)

 

$

(821,197)

 

$

(675,658)

 

$

(1,617,323)

Change in cumulative translation adjustment, net of tax

 

 

(4,693)

 

 

(7,483)

 

 

(26,616)

 

 

(7,928)

Comprehensive loss

 

$

(122,691)

 

$

(828,680)

 

$

(702,274)

 

$

(1,625,251)



 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

























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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2016 and 2015

(in thousands)

(unaudited)



 

2016

 

2015

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(675,658)

 

$

(1,617,323)

Adjustments to reconcile net loss to net cash provided by operating
  activities:

 

 

 

 

 

 

Depreciation, depletion, amortization and accretion

 

 

392,017 

 

 

467,329 

Deferred income taxes

 

 

(186,232)

 

 

(195,308)

Reduction in value of assets

 

 

462,461 

 

 

1,563,269 

Stock based compensation expense

 

 

34,167 

 

 

34,721 

Other reconciling items, net

 

 

(10,392)

 

 

18,348 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

155,717 

 

 

438,698 

Inventory and other current assets

 

 

(5,028)

 

 

10,924 

Accounts payable

 

 

(8,692)

 

 

(105,683)

Accrued expenses

 

 

(41,617)

 

 

(74,741)

Income taxes

 

 

(4,515)

 

 

(30,254)

Other, net

 

 

34,447 

 

 

55,507 

Net cash provided by operating activities

 

 

146,675 

 

 

565,487 

Cash flows from investing activities:

 

 

 

 

 

 

Payments for capital expenditures

 

 

(74,071)

 

 

(318,908)

Purchase of leased vessels

 

 

 -

 

 

(46,442)

Other

 

 

6,238 

 

 

(1,425)

         Net cash used in investing activities

 

 

(67,833)

 

 

(366,775)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from revolving line of credit

 

 

325,123 

 

 

7,475 

Payments on revolving line of credit

 

 

(325,123)

 

 

(7,475)

Principal payments on long-term debt

 

 

(337,576)

 

 

(15,775)

Proceeds from issuance of long-term debt

 

 

 -

 

 

10,357 

Payment of debt issuance costs

 

 

(2,675)

 

 

 -

Cash dividends

 

 

(12,111)

 

 

(36,081)

Payment to extinguish capital lease obligation

 

 

 -

 

 

(20,933)

Proceeds from exercise of stock options

 

 

 -

 

 

8,800 

Other

 

 

(5,410)

 

 

(3,760)

         Net cash used in financing activities

 

 

(357,772)

 

 

(57,392)

         Effect of exchange rate changes on cash

 

 

(6,932)

 

 

(692)

         Net increase (decrease) in cash and cash equivalents

 

 

(285,862)

 

 

140,628 

Cash and cash equivalents at beginning of period

 

 

564,017 

 

 

393,046 

Cash and cash equivalents at end of period

 

$

278,155 

 

$

533,674 



 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

































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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2016

(1)Basis of Presentation



Certain information and footnote disclosures normally in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC); however, management believes the disclosures that 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, 2015, 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 and nine months ended September 30, 2016 and 2015 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.  Certain previously reported amounts have been reclassified to conform to the 2016 presentation.  The results of operations for the first nine months of the year are not necessarily indicative of the results of operations that might be expected for the entire year. 



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 its 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.



The Company evaluates events that occur after the balance sheet date but before the financial statements are issued for potential recognition or disclosure.  Based on the evaluation, the Company determined that there were no material subsequent events for recognition or disclosure other than those disclosed herein.





(2)  Reduction in Value of Assets and Other Charges



For the three and nine months ended September 30, 2016 and 2015, the Company recorded $0, $462.5 million, $755.6 million and $1,563.3 million in expense related to the reduction in value of assets, respectively.  The components of the reduction in value of assets are as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended September 30,



 

2016

 

2015

 Reduction in value of goodwill

 

$

 -

 

$

740,000 

 Reduction in value of long-lived assets

 

 

 -

 

 

15,632 

   Total reduction in value of assets

 

$

 -

 

$

755,632 







 

 

 

 

 

 



 

Nine Months Ended September 30,



 

2016

 

2015

 Reduction in value of goodwill

 

$

330,500 

 

$

1,315,389 

 Reduction in value of long-lived assets

 

 

105,859 

 

 

165,888 

 Retirements of long-lived assets

 

 

26,102 

 

 

42,545 

 Reduction in value of assets related to sale of a business

 

 

 -

 

 

39,447 

   Total reduction in value of assets

 

$

462,461 

 

$

1,563,269 



Reduction in Value of Goodwill



Goodwill is tested for impairment annually as of October 1st or on an interim basis if events or circumstances indicate that the fair value of the asset has decreased below its carrying value.  Due to the prolonged downturn in the oil and gas industry and the impact it has had on the Company’s activity levels, the Company’s goodwill impairment evaluation as of June 30, 2016, indicated that the carrying values of the Onshore Completion and Workover Services and Production Services segments exceeded their fair values so that goodwill was potentially impaired.  The Company then performed the second step of the goodwill impairment test, which involved calculating the implied fair value of the segments’ goodwill by allocating the fair values of the Onshore Completion and Workover Services and Production Services segments to all of their assets and liabilities (other than goodwill) and comparing them to the carrying amounts of the goodwill.  To estimate the fair value of the reporting unit (which is consistent with the reported business segment), the Company used a weighting of the discounted cash flow method and the public company guideline method of determining fair value of the reporting unit. The Company weighted the discounted cash flow method 80% and the public company guideline method 20% due to differences between the Company’s reporting unit and peer companies’ size, profitability and diversity of operations. 

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During the second quarter of 2016, the Company recorded a $330.5 million reduction in value of goodwill relating to its Onshore Completion and Workover Services and Production Services segments.  The Company determined that the implied fair value of its goodwill for the Onshore Completion and Workover Services segment was less than its carrying value and recorded a $140.0 million impairment of the Onshore Completion and Workover Services segment’s goodwill.  In addition, the Company determined that the implied fair value of its goodwill for the Production Services segment was less than its carrying value and recorded a $190.5 million impairment of the Production Services segment’s goodwill.  The reduction in values of goodwill in the Onshore Completion and Workover Services and Production Services segments was primarily driven by further deterioration of market conditions during the period and the Company’s forecast did not indicate a timely recovery sufficient to support the carrying values of the goodwill.



During the three and nine months ended September 30, 2015, the Company recorded $740.0 million and $1,315.4 million in expense related to the reduction in value of goodwill, respectively.  During the three months ended June 30, 2015, the Company recorded a $575.4 million reduction in the value of goodwill relating to its Production Services segment.  The Company determined that the implied fair value of its goodwill for the Production Services segment was less than its carrying value and recorded a $575.4 million impairment of the Production Services segment’s goodwill.  The reduction in the value of goodwill in the Production Services segment was primarily driven by the decline in demand for coiled tubing services and the Company’s forecast did not indicate a timely recovery sufficient to support the carrying value of the goodwill.



During the three months ended September 30, 2015, the Company recorded a $740.0 million reduction in the value of goodwill relating to its Onshore Completion and Workover Services segment.  The Company determined that the implied fair value of its goodwill for the Onshore Completion and Workover Services segment was less than its carrying value and recorded a $740.0 million impairment of the segment’s goodwill.  The reduction in the value of goodwill in the Onshore Completion and Workover Services segment was primarily driven by deterioration of market conditions during the period and the Company’s forecast did not indicate a timely recovery sufficient to support the carrying value of the goodwill.



At September 30, 2016 and December 31, 2015, the Company’s accumulated reduction in value of goodwill was $1,748.2 million and $1,417.7 million, respectively.



Reduction in Value of Long-Lived Assets



Long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of such assets to their fair value calculated, in part, by the estimated undiscounted future cash flows expected to be generated by the assets.  Cash flow estimates are based upon, among other things, historical results adjusted to reflect the best estimate of future market rates, utilization levels, and operating performance.  Estimates of cash flows may differ from actual cash flows due to, among other things, changes in economic conditions or changes in an asset’s operating performance.  The Company’s assets are grouped by line of business or division for the impairment testing, which represent the lowest level of identifiable cash flows.  If the asset grouping’s fair value is less than the carrying amount of those items, impairment losses are recorded in the amount by which the carrying amount of such assets exceeds the fair value.  The estimate of fair value represents the Company’s best estimate based on industry trends and reference to market transactions and is subject to variability. 



During the three and nine months ended September 30, 2016, the Company recorded $0 and $105.9 million, respectively, in connection with the reduction in value of its long-lived assets.  The reduction in value of assets was comprised of $2.9 million related to equipment and $45.9 million related to intangibles in the fluid management business in the Onshore Completion and Workover Services segment and $12.4 million related to equipment and $21.0 million related to intangibles, primarily relating to the cementing business in the Production Services segment.  In addition, the Company recorded $23.7 million related to the reduction in carrying values of certain accommodation units included in the Drilling Products and Services segment.  The reduction in value of assets recorded during the second quarter of 2016 was primarily driven by the decline in demand for these services.



During the three and nine months ended September 30, 2015, the Company recorded $15.6 million and $166.0 million in connection with the reduction in value of its long-lived assets.  The reduction in value of assets was comprised of $78.5 million related to equipment and $58.8 million related to intangibles in the coiled tubing and pressure control tools businesses in the Production Services segment and $12.9 million related to mechanical drilling rigs included in the Onshore Completion and Workover Services segment.  In addition, the Company recorded $15.8 million related to reduction in carrying values of certain international accommodation units included in the Drilling Products and Services segment.



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Retirements of Long-Lived Assets



During the second quarter of 2016, the Company recorded $23.9 million in the Drilling Products and Services segment for retirement and abandonment of excess and inoperable and/or functionally obsolete long-lived assets that would require a significant cost to refurbish. 



During the second quarter of 2015, the Company recorded $42.5 million for retirement and abandonment of inoperable and/or functionally obsolete long-lived assets that would require a significant cost to refurbish.  The total amount recorded includes $27.3 million for the Onshore Completion and Workover Services segment and $15.2 million for the Production Services segment.   



Reduction in Value of Assets Related to Sale of Coiled Tubing Business in Mexico



During the second quarter of 2015, the Company sold its Mexico based coiled tubing business and related assets.  The Company received proceeds in the form of cash and a note receivable.  The Company recorded a full valuation allowance on the note receivable in the amount of $16.8 million because its collectability was not reasonably assured.  In connection with the sale, the Company recorded a $39.4 million reduction in value of assets, primarily related to property, plant and equipment and intangible assets.



Other Charges



During the three and nine months ended September 30, 2016, the Company recorded a $2.3 million and $22.8 million expense, respectively, primarily for severance and facility closures. At September 30, 2016, the accrued lease termination liability balances were $6.0 million and $9.0 million, included in accrued expenses and other long-term liabilities, respectively, on the consolidated balance sheet. At December 31, 2015, the accrued lease termination liability balances were $7.2 million and $11.1 million, included in accrued expenses and other long-term liabilities, respectively, on the consolidated balance sheet.     



(3)Inventory



Inventories are stated at the lower of cost or market.  Cost is determined using the first-in, first-out or weighted-average cost methods for finished goods and work-in-process.  Supplies and consumables consist principally of products used in our services provided to customers. The components of the inventory balances are as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

September 30, 2016

 

December 31, 2015

Finished goods

 

$

67,749 

 

$

71,951 

Raw materials

 

 

16,745 

 

 

23,418 

Work-in-process

 

 

4,194 

 

 

18,203 

Supplies and consumables

 

 

35,224 

 

 

35,189 

Total

 

$

123,912 

 

$

148,761 



 

 

 

 

 

 













(4) Notes Receivable



Notes receivable consist of a commitment from the seller of an oil and gas property acquired by the Company related to costs associated with the abandonment of the acquired property.  Pursuant to an agreement with the seller, the Company will invoice the seller an agreed upon amount at the completion of certain decommissioning activities.  The gross amount of this obligation totals $115.0 million and is recorded at present value using an effective interest rate of 6.58%.  The related discount is amortized to interest income based on the expected timing of completion of the decommissioning activities.  The Company recorded interest income related to notes receivable of $2.7 million and $1.3 million for the nine months ended September 30, 2016 and 2015, respectively.  





(5)Decommissioning Liabilities



The Company’s decommissioning liabilities associated with an oil and gas property and its related assets consist of costs related to the plugging of wells, the removal of the related platform and equipment, and site restoration.  The Company reviews the adequacy of its decommissioning liabilities whenever indicators suggest that the estimated cash flows needed to satisfy the liabilities have changed materially.  The Company had decommissioning liabilities of $122.3 million and $117.9 million at September  30, 2016 and December 31, 2015, respectively.



8

 


 

 

Table Of Contents

 

(6)Debt



The Company’s outstanding debt is as follows (in thousands):





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

September 30, 2016

 

December 31, 2015



 

Long-term

 

Current

 

Long-term

 

Current

Senior Notes due May 2019

 

$

500,000 

 

$

 -

 

$

500,000 

 

$

 -

Senior Notes due December 2021

 

 

800,000 

 

 

 -

 

 

800,000 

 

 

 -

Term loan

 

 

 -

 

 

 -

 

 

305,000 

 

 

20,000 

Other

 

 

 -

 

 

 -

 

 

3,089 

 

 

9,957 

Total debt, gross

 

 

1,300,000 

 

 

 -

 

 

1,608,089 

 

 

29,957 

Unamortized debt issuance costs

 

 

(16,419)

 

 

 -

 

 

(19,826)

 

 

 -

Total debt, net

 

$

1,283,581 

 

$

 -

 

$

1,588,263 

 

$

29,957 



Credit Facility



At December 31, 2015, the Company had a bank credit facility, comprised of a $600.0 million revolving credit facility and a $325.0 million term loan.  In February 2016, the Company amended and extended its credit facility, resulting in a $470.3 million revolving credit facility that matures in 2019 and no longer has a term loan component.  In July 2016, the Company amended the credit facility and repaid the outstanding balance of $250.0 million.  The amended agreement, among other things, reduces the size of the facility to $400.0 million, suspends the maximum leverage ratio covenant until the fourth quarter of 2017 and replaces it with a senior secured debt to earnings before interest, taxes, depreciation and amortization ratio covenant during this period and modifies the restricted payment covenant to eliminate our ability to pay dividends and make equity repurchases until September 2017.



Senior Unsecured Notes



The Company has outstanding $500 million of 6 3/8% unsecured senior notes due 2019.  The indenture governing the 6 3/8% senior notes requires semi-annual interest payments on May 1 and November 1 of each year through the maturity date of May 1, 2019. 



The Company also has outstanding $800 million of 7 1/8% unsecured senior notes due 2021.  The indenture governing the 7 1/8% senior notes requires semi-annual interest payments on June 15 and December 15 of each year through the maturity date of December 15, 2021. 



(7Derivative Financial Instruments



From time to time, the Company may employ interest rate swaps in an attempt to achieve a more balanced debt portfolio between fixed and variable interest.  The Company does not use derivative financial instruments for trading or speculative purposes.



The Company has three interest rate swap agreements related to its fixed rate debt maturing in 2021 for notional amounts of $100 million each, whereby the Company is entitled to receive semi-annual interest payments at a fixed rate of 7 1/8% per annum and is obligated to make semi-annual interest payments at floating rates, which are adjusted every 90 days, based on LIBOR plus a fixed margin. The swap agreements, scheduled to terminate on December 15, 2021, are designated as fair value hedges of a portion of the Company’s 7 1/8% senior notes, as the derivatives have been tested to be highly effective in offsetting changes in the fair value of the underlying notes.  As these derivatives are classified as fair value hedges, the changes in the fair value of the derivatives are offset against the changes in the fair value of the underlying note in interest expense, net.  The Company recorded a derivative asset relating to these swaps of $10.9 million and $6.9 million within intangible and other long term assets in the consolidated balance sheets at September 30, 2016 and December 31, 2015, respectively



9

 


 

 

Table Of Contents

 

The location and effect of the derivative instruments on the condensed consolidated statement of operations, presented on a pre-tax basis, are as follows (in thousands):





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

 

 

 

Three Months Ended September 30,

Effect of derivative instrument

 

Location of (gain) loss recognized

 

 

2016

 

 

2015

Interest rate swap

 

Interest expense, net

 

 

$

1,791 

 

 

$

(5,452)

Hedged item - debt

 

Interest expense, net

 

 

 

(1,805)

 

 

 

3,134 



 

 

 

 

$

(14)

 

 

$

(2,318)



 

 

 

 

 

 

 

 

 

 









 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 



 

 

 

 

Nine Months Ended September 30,

Effect of derivative instrument

 

Location of (gain) loss  recognized

 

 

2016

 

 

2015

Interest rate swap

 

Interest expense, net

 

 

$

(4,329)

 

 

$

(5,643)

Hedged item - debt

 

Interest expense, net

 

 

 

365 

 

 

 

2,648 



 

 

 

 

$

(3,964)

 

 

$

(2,995)



 

 

 

 

 

 

 

 

 

 





For the nine months ended September 30, 2016 and 2015,  approximately $4.0 million and $3.0 million of interest income, respectively, was related to the ineffectiveness associated with these fair value hedges.  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. 



(8Fair Value Measurements



Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Inputs used in determining fair value are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable.  The three input levels of the fair value hierarchy are 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.



10

 


 

 

Table Of Contents

 

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



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Fair Value Measurements at Reporting Date Using



 

September 30, 2016

 

Level 1

 

Level 2

 

Level 3

Intangible and other long-term assets, net

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation assets

 

$

12,370 

 

$

367 

 

$

12,003 

 

 

 -

Interest rate swaps

 

$

10,869 

 

 

 -

 

$

10,869 

 

 

 -

Accounts payable

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

1,589 

 

 

 -

 

$

1,589 

 

 

 -

Other long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

18,591 

 

 

 -

 

$

18,591 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 



 

December 31, 2015

 

Level 1

 

Level 2

 

Level 3

Intangible and other long-term assets, net

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation assets

 

$

11,548 

 

$

368 

 

$

11,180 

 

 

 -

Interest rate swaps

 

$

6,905 

 

 

 -

 

$

6,905 

 

 

 -

Accounts payable

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

721 

 

 

 -

 

$

721 

 

 

 -

Other long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

17,367 

 

 

 -

 

$

17,367 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

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.  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 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 $1,282.0 million and $1,508.0 million as of September 30, 2016 and December 31, 2015, respectively.  The fair value of these debt instruments is determined by reference to the market value of the instruments as quoted in over-the-counter markets, which are Level 1 inputs.



The following table reflects the fair value measurements used in testing the impairments of long-lived assets and goodwill (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended September 30, 2016



 

Impairment

 

Fair Value

Goodwill

 

$

330,500 

 

$

668,864 

Property, plant and equipment, net

 

$

38,977 

 

$

284,457 

Intangible assets

 

$

66,882 

 

$

 -



Fair value is measured as of the impairment date using Level 3 inputs.  See note 2 for discussion of reduction in value of assets and other charges.



(9)  Segment Information



Business Segments



The Drilling Products and Services segment rents and sells bottom hole assemblies, premium 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 machining services.  The Onshore Completion and Workover Services segment provides pressure pumping services used to complete and stimulate production in new oil and gas wells, fluid handling services and well servicing rigs that provide a variety of well completion, workover and maintenance services.  The Production Services segment provides intervention services such as coiled tubing, cased hole and mechanical wireline, hydraulic workover and snubbing, production testing and optimization, and remedial pumping services.  The Technical Solutions segment provides services typically requiring specialized engineering, manufacturing or project planning, including well containment systems, stimulation and sand control services and well plug and abandonment services. It also includes production handling arrangements and the production and sale of oil and gas. 

11

 


 

 

Table Of Contents

 

 

The Company evaluates the performance of its reportable segments based on income or loss from operations.  The segment measure is calculated as follows: segment revenues less segment operating expenses, depreciation, depletion, amortization and accretion expense, reduction in value of assets and allocated general and administrative expenses.  General and administrative expenses are allocated to the segments based primarily on specific identification and, to the extent that such identification is not practical, other methods that the Company believes to be a reasonable reflection of the utilization of services provided.  The Company believes this segment measure is useful in evaluating the performance of its reportable segments because it highlights operating trends and aids analytical comparisons.



Summarized financial information for the Company’s segments is as follows (in thousands): 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

 

 

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Unallocated

 

Total

Revenues

 

$

63,570 

 

$

125,022 

 

$

73,540 

 

$

64,093 

 

$

 -

 

$

326,225 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

30,137 

 

 

124,747 

 

 

62,818 

 

 

40,466 

 

 

 -

 

 

258,168 

Depreciation, depletion, amortization and accretion

 

 

39,612 

 

 

51,346 

 

 

21,469 

 

 

10,881 

 

 

 -

 

 

123,308 

General and administrative expenses

 

 

23,168 

 

 

23,124 

 

 

16,975 

 

 

23,476 

 

 

 -

 

 

86,743 

Loss from operations

 

 

(29,347)

 

 

(74,195)

 

 

(27,722)

 

 

(10,730)

 

 

 -

 

 

(141,994)

Interest income (expense), net

 

 

 -

 

 

 -

 

 

(17)

 

 

870 

 

 

(22,624)

 

 

(21,771)

Other income

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

3,667 

 

 

3,667 

Loss from continuing operations before income taxes

 

$

(29,347)

 

$

(74,195)

 

$

(27,739)

 

$

(9,860)

 

$

(18,957)

 

$

(160,098)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

 

 

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Unallocated

 

Total

Revenues

 

$

128,489 

 

$

202,912 

 

$

163,937 

 

$

106,058 

 

$

 -

 

$

601,396 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

43,827 

 

 

174,429 

 

 

130,021 

 

 

72,208 

 

 

 -

 

 

420,485 

Depreciation, depletion, amortization and accretion

 

 

48,366 

 

 

53,836 

 

 

29,954 

 

 

14,601 

 

 

 -

 

 

146,757 

General and administrative expenses

 

 

29,299 

 

 

30,044 

 

 

34,395 

 

 

29,451 

 

 

 -

 

 

123,189 

Reduction in value of assets

 

 

 -

 

 

740,000 

 

 

15,632 

 

 

 -

 

 

 -

 

 

755,632 

Income (loss) from operations

 

 

6,997 

 

 

(795,397)

 

 

(46,065)

 

 

(10,202)

 

 

 -

 

 

(844,667)

Interest income (expense), net

 

 

 -

 

 

 -

 

 

(845)

 

 

430 

 

 

(22,207)

 

 

(22,622)

Other expense

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(3,123)

 

 

(3,123)

Income (loss) from continuing operations
   before income taxes

 

$

6,997 

 

$

(795,397)

 

$

(46,910)

 

$

(9,772)

 

$

(25,330)

 

$

(870,412)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





12

 


 

 

Table Of Contents

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

 

 

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Unallocated

 

Total

Revenues

 

$

240,773 

 

$

373,387 

 

$

250,829 

 

$

230,640 

 

$

 -

 

$

1,095,629 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

102,308 

 

 

363,447 

 

 

201,002 

 

 

135,385 

 

 

 -

 

 

802,142 

Depreciation, depletion, amortization and accretion

 

 

130,749 

 

 

158,885 

 

 

68,041 

 

 

34,342 

 

 

 -

 

 

392,017 

General and administrative expenses

 

 

76,974 

 

 

68,250 

 

 

55,643 

 

 

69,600 

 

 

 -

 

 

270,467 

Reduction in value of assets

 

 

47,659 

 

 

188,741 

 

 

226,061 

 

 

 -

 

 

 -

 

 

462,461 

Loss from operations

 

 

(116,917)

 

 

(405,936)

 

 

(299,918)

 

 

(8,687)

 

 

 -

 

 

(831,458)

Interest expense, net

 

 

 -

 

 

 -

 

 

(1,330)

 

 

2,669 

 

 

(69,664)

 

 

(68,325)

Other expense

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

22,103 

 

 

22,103 

Loss from continuing operations
   before income taxes

 

$

(116,917)

 

$

(405,936)

 

$

(301,248)

 

$

(6,018)

 

$

(47,561)

 

$

(877,680)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

 

 

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Unallocated

 

Total

Revenues

 

$

471,501 

 

$

780,455 

 

$

623,985 

 

$

353,474 

 

$

 -

 

$

2,229,415 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

153,350 

 

 

610,876 

 

 

477,752 

 

 

226,286 

 

 

 -

 

 

1,468,264 

Depreciation, depletion, amortization and accretion

 

 

146,541 

 

 

169,106 

 

 

105,463 

 

 

46,219 

 

 

 -

 

 

467,329 

General and administrative expenses

 

 

98,292 

 

 

101,093 

 

 

113,500 

 

 

90,927 

 

 

 -

 

 

403,812 

Reduction in value of assets

 

 

15,797 

 

 

780,263 

 

 

767,209 

 

 

 -

 

 

 -

 

 

1,563,269 

Income (loss) from operations

 

 

57,521 

 

 

(880,883)

 

 

(839,939)

 

 

(9,958)

 

 

 -

 

 

(1,673,259)

Interest expense, net

 

 

 -

 

 

 -

 

 

(979)

 

 

1,271 

 

 

(71,505)

 

 

(71,213)

Other expense

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(10,620)

 

 

(10,620)

Income (loss) from continuing operations
   before income taxes

 

$

57,521 

 

$

(880,883)

 

$

(840,918)

 

$

(8,687)

 

$

(82,125)

 

$

(1,755,092)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Identifiable Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

 

 

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Unallocated

 

Total

September 30, 2016

 

$

934,094 

 

$

1,556,485 

 

$

563,915 

 

$

589,326 

 

$

 -

 

$

3,643,820 

December 31, 2015

 

$

1,223,191 

 

$

1,929,185 

 

$

967,719 

 

$

794,149 

 

$

 -

 

$

4,914,244 



Geographic Segments



The Company attributes revenue to various countries based on the location of where services are performed or the destination of the drilling products or equipment sold or rented.  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 revenue attributed to the U.S. and to other countries and the value of its long-lived assets by those locations are as follows (in thousands):













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Revenues

 

 

 



 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,



 

2016

 

2015

 

2016

 

2015

United States

 

$

243,586 

 

$

470,154 

 

$

808,546 

 

$

1,771,934 

Other Countries

 

 

82,639 

 

 

131,242 

 

 

287,083 

 

 

457,481 

Total

 

$

326,225 

 

$

601,396 

 

$

1,095,629 

 

$

2,229,415 



 

 

 

 

 

 

 

 

 

 

 

 

Long-Lived Assets

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

September 30, 2016

 

December 31, 2015

United States

 

 

 

 

 

 

 

$

1,410,751 

 

$

1,799,418 

Other Countries

 

 

 

 

 

 

 

 

342,962 

 

 

323,873 

Total, net

 

 

 

 

 

 

 

$

1,753,713 

 

$

2,123,291 



 

 

 

 

 

 

 

 

 

 

 

 























(10)Stock-Based Compensation 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 stock 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.  The Company’s total compensation expense related to these plans was approximately $32.4 million and $34.0 million for the nine months ended September 30, 2016 and 2015, respectively, which is reflected in general and administrative expenses.



(11)  Income Taxes



The Company had $29.7 million of unrecorded tax benefits at September 30, 2016 and December 31, 2015, all of which would impact the Company’s effective tax rate if recognized.  It is the Company’s policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.



(12) 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 the conversion of restricted stock units.



For the three and nine months ended September 30, 2016 and 2015, the Company incurred a loss from continuing operations; therefore the impact of any incremental shares would be anti-dilutive.



(13) Discontinued Operations



During the first quarter of 2016, the Company’s management determined that the conventional decommissioning business no longer met the held for sale criteria.  Accordingly, property, plant and equipment related to the conventional decommissioning business was reclassified back to continuing operations.



At September 30, 2016, the assets of the subsea construction business were being actively marketed and the Company’s management is committed to selling the remaining assets, which were classified as held for sale. 



14

 


 

 

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The following table summarizes the components of loss from discontinued operations, net of tax (in thousands):



 

 

 

 

 

 



 

Three Months Ended September 30,



 

2016

 

2015

Revenues

 

$

 -

 

$

588 



 

 

 

 

 

 

Loss from discontinued operations, net of tax benefit of $0 and
$275, respectively

 

 

(4,085)

 

 

(4,610)



















 

 

 

 

 

 



 

Nine Months Ended September 30,



 

2016

 

2015

Revenues

 

$

 -

 

$

18,694 



 

 

 

 

 

 

Loss from discontinued operations, net of tax benefit of $0 and
$1,991, respectively

 

 

(8,577)

 

 

(24,107)



For the three and nine months ended September 30, 2015, loss from discontinued operations included $0.5 million and $1.6 million, respectively, of loss related to the conventional decommissioning business.



The following summarizes the assets and liabilities related to the businesses reported as discontinued operations (in thousands):



 

 

 

 

 

 



 

 

 

 

 

 



 

September 30, 2016

 

December 31, 2015

Current assets

 

$

2,247 

 

$

2,600 

Property, plant and equipment, net

 

 

60,000 

 

 

92,634 

Total assets

 

$

62,247 

 

$

95,234 

Current liabilities

 

$

3,080 

 

$

4,661 



At December 31, 2015, assets held for sale also included $26.6 million of property, plant and equipment related to the conventional decommissioning business. 



(14Related Party Disclosures





The Company’s President and Chief Executive Officer serves as an independent director of the board of Linn Energy, LLC (Linn), an independent oil and gas development company.  The Company recorded revenues from Linn and its subsidiaries of $4.0 million and $6.0 million for the nine months ended September 30, 2016 and 2015, respectively.  The Company had trade receivables from Linn and its subsidiaries of $0.5 million and $2.0 million as of September 30, 2016 and December 31, 2015, respectively.



(15)  Recently Issued Accounting Guidance



In March, 2016, the Financial Accounting Standards Board (FASB) issued accounting standards update (ASU) 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which relates to the accounting for employee share-based payments.  The guidance in this update addresses several aspects of the accounting for share-based payments, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows.  The new standard is effective for the Company beginning on January 1, 2017.  The Company is evaluating the effect that ASU 2016-09 will have on its consolidated financial statements and related disclosures.

   

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize the assets and liabilities arising from leases on the balance sheet. The new standard is effective for the Company beginning on January 1, 2019 and should be applied using a modified retrospective approach. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.



In July 2015, the FASB issued ASU No. 2015-11, Inventory – Simplifying the Measurement of Inventory, which applies to inventory measured using first-in, first-out or average cost. The guidance in this update states that inventory within its scope shall be measured at the lower of cost or net realizable value, and when the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings. The new standard is effective for the Company beginning on January 1, 2017 and should be applied on a prospective basis. The Company is evaluating the effect that ASU 2015-11 will have on its consolidated financial statements and related disclosures.



In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which will replace most existing revenue recognition guidance in GAAP.  The guidance in this update requires an entity to recognize the amount of revenue that it expects to be

15

 


 

 

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entitled for the transfer of promised goods or services to customers. The new standard is effective for the Company on January 1, 2018. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the accounting guidance on its ongoing financial reporting.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations



Forward-Looking Statements



This Quarterly Report on Form 10-Q and other documents filed by us with the SEC contain, and future oral or written statements or press releases by us and our management may contain, 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 included in this Quarterly Report on Form 10-Q or such other materials regarding our financial position, financial performance, liquidity, strategic alternatives, market outlook, future capital needs, capital allocation plans, business strategies and other plans and objectives of our management for future operations and activities are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and prevailing circumstances on the date such statements are made. Such forward-looking statements, and the assumptions on which they are based, are inherently speculative and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from such statements. Such uncertainties include, but are not limited to: the cyclicality and volatility of the oil and gas industry, including changes in prevailing oil and gas prices or expectations about future prices; operating hazards, including the significant possibility of accidents resulting in personal injury or death, property damage or environmental damage for which we may have limited or no insurance coverage or indemnification rights; the effect of regulatory programs (including regarding worker health and safety laws) and environmental matters on our operations or prospects, including the risk that future changes in the regulation of hydraulic fracturing could reduce or eliminate demand for our pressure pumping services, or that future changes in climate change legislation could result in increased operating costs or reduced commodity demand globally; counter-party risks associated with reliance on key suppliers; risks associated with the uncertainty of macroeconomic and business conditions worldwide; changes in competitive and technological factors affecting our operations; credit risk associated with our customer base; the potential inability to retain key employees and skilled workers; challenges with estimating our oil and natural gas reserves and potential liabilities related to our properties; risks inherent in acquiring businesses; risks associated with cyber-attacks; risks associated with business growth during an industry recovery outpacing the capabilities of our infrastructure and workforce; political, legal, economic and other risks and uncertainties associated with our international operations; potential changes in tax laws, adverse positions taken by tax authorities or tax audits impacting our operating results; risks associated with our outstanding debt obligations and the potential effect of limiting our future growth and operations; our continued access to credit markets on favorable terms; and the impact that unfavorable or unusual weather conditions could have on our operations. These risks and other uncertainties related to our business are described in detail in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Investors are cautioned that many of the assumptions on which our forward-looking statements are based are likely to change after such statements are made, including for example the market prices of oil and gas and regulations affecting oil and gas operations, which we cannot control or anticipate. Further, we may make changes to our business strategies and plans (including our capital spending and capital allocation plans) at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise, any of which could or will affect our results. For all these reasons, actual events and results may differ materially from those anticipated, estimated, projected or implied by us in our forward-looking statements. We undertake no obligation to update any of our forward-looking statements for any reason and,  notwithstanding any changes in our assumptions, changes in our business plans, our actual experience, or other changes. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.



Executive Summary



General



We provide a wide variety of services and products to the energy industry.  We serve major, national and independent oil and natural gas exploration and production companies around the world throughout the various phases of a well’s economic life cycle.  We report our results in four segments: Drilling Products and Services; Onshore Completion and Workover Services; Production Services; and Technical Solutions. 



Industry Trends



The oil and gas industry is both highly cyclical and seasonal.  The level of spending by oil and gas companies is highly influenced by current and expected demand and future prices of oil and natural gas. Changes in spending result in an increased or decreased demand for our services and products. Rig count is an indicator of the level of spending by oil and gas companies. Our financial performance is significantly affected by the rig count in the U.S. land and offshore market area as well as oil and natural gas prices and worldwide rig activity, which are summarized in the tables below.





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Three Months Ended September 30,

 

Nine Months Ended September 30,



 

2016

 

2015

 


% Change

 

2016

 

2015

 


% Change

Worldwide Rig Count (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

 

461

 

 

833

 

-45%

 

 

459

 

 

1,021

 

-55%

Offshore

 

 

18

 

 

32

 

-44%

 

 

23

 

 

38

 

-39%

International (2)

 

 

936

 

 

1,132

 

-17%

 

 

965

 

 

1,187

 

-19%

Commodity Prices (average)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude Oil (West Texas Intermediate)

 

$

44.85 

 

$

46.49 

 

-4%

 

$

41.35 

 

$

50.94 

 

-19%

Natural Gas (Henry Hub)

 

$

2.88 

 

$

2.76 

 

4% 

 

$

2.34 

 

$

2.80 

 

-16%



(1) Estimate of drilling activity as measured by average active drilling rigs based on Baker Hughes Incorporated rig count information.

(2) Excludes Canadian Rig Count.



Outlook



Lower oil prices throughout the first nine months of 2016 have led to the reduction in drilling and completion activity by our customers.  The reduction in our customers’ capital expenditure budgets and spending plans has had a direct impact on our revenues both through lower activity levels as well as pressure on pricing.  The ultimate impact on us of the current downturn will depend upon its length and several other factors, many of which are beyond our control.  We will continue refining our business and adjusting our cost structure to respond to market conditions.  Additionally, we believe our businesses have competitive advantages to respond quickly when the market ultimately recovers.



Sequential results by segment for the three months ended September 30, 2016 and June 30, 2016



For the three months ended September 30, 2016, revenue was $326.2 million and net loss from continuing operations was $113.9 million, or  a $0.75 loss per share.  Net loss was $118.0 million, or $0.78 loss per share.    



Third quarter 2016 revenue in our Drilling Products and Services segment decreased 21% sequentially to $63.6 million, as compared to $80.7 million in the second quarter of 2016.  U.S. land revenue increased 30% sequentially to $15.2 million due to the increase in drilling activity during the quarter.  This increase was offset by a decrease in revenue from Gulf of Mexico and international market areas.  Gulf of Mexico revenue decreased 32% sequentially to $26.5 million and international revenue decreased 27% sequentially to $21.9 million due to the decrease in drilling activity in those markets



Third quarter 2016 revenue in our Onshore Completion and Workover Services segment increased 8% sequentially to $125.0 million, as compared to $115.9 million in the second quarter of 2016.  All of this segment’s revenue is derived from the U.S. land market area.  On a sequential basis, the revenue increase was driven primarily by higher well fracturing utilization as completion activity increased during the quarter. 

 

Third quarter 2016 revenue in our Production Services segment decreased 9% sequentially to $73.6 million, as compared to $80.5 million in the second quarter of 2016. U.S. land revenue decreased 6% sequentially to $19.3 million primarily due to lower levels of coiled tubing activity.  International revenue decreased 10% sequentially to $40.1 million and Gulf of Mexico revenue decreased 9% sequentially to $14.2 million, primarily as a result of decreased hydraulic workover and snubbing operations.

   

Third quarter 2016 revenue in our Technical Solutions segment decreased 19% sequentially to $64.0 million, as compared to $79.2 million in the second quarter of 2016.  U.S. land revenue increased 17% sequentially to $10.7 million primarily due to increased well control activity.  Gulf of Mexico revenue decreased 34% sequentially to $32.7 million due to the decreased completion tools revenue and lower subsea intervention activity.  International revenue remained unchanged at $20.6 million. 



Comparison of the Results of Operations for the Three Months Ended September 30, 2016 and 2015 



For the three months ended September 30, 2016, our revenue was $326.2 million, a decrease of $275.2 million or 46%, as compared to the same period of 2015.  The decline is largely attributable to a 29% decline in the worldwide rig count which has led to widespread pricing pressure.  The net loss from continuing operations was $113.9 million, or a $0.75 loss per share.  Net loss was $118.0 million, or a $0.78 loss per share.  This compares to a net loss from continuing operations for the three months ended September 30, 2015 of $816.6 million, or a $5.42 loss per share.  Net loss was $821.2 million, or a $5.45 loss per share.  Included in the results for the three months ended September 30, 2015 was a pre-tax charge for $755.6 million related to the reduction in value of assets.    



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The following table compares our operating results for the three months ended September 30, 2016 and 2015 (in thousands, except percentages).  Cost of services and rentals excludes depreciation, depletion, amortization and accretion for each of our business segments







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

Revenue

 

 

 

Cost of Services and Rentals



 

 

 

2016

 

2015

 

Change

 

 

 

2016

 

%

 

2015

 

%

 

Change

Drilling Products and     

  Services

 

 

 

$

63,570 

 

$

128,489 

 

$

(64,919)

 

-51%

 

$

30,137 

 

47% 

 

$

43,827 

 

34% 

 

$

(13,690)

Onshore Completion and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 -

 

 

 

 

 

Workover Services

 

 

 

 

125,022 

 

 

202,912 

 

 

(77,890)

 

-38%

 

 

124,747 

 

100% 

 

 

174,429 

 

86% 

 

 

(49,682)

Production Services

 

 

 

 

73,540 

 

 

163,937 

 

 

(90,397)

 

-55%

 

 

62,818 

 

85% 

 

 

130,021 

 

79% 

 

 

(67,203)

Technical Solutions

 

 

 

 

64,093 

 

 

106,058 

 

 

(41,965)

 

-40%

 

 

40,466 

 

63% 

 

 

72,208 

 

68% 

 

 

(31,742)

Total

 

 

 

$

326,225 

 

$

601,396 

 

$

(275,171)

 

-46%

 

$

258,168 

 

79% 

 

$

420,485 

 

70% 

 

$

(162,317)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



The following provides a discussion of our results on a segment basis:



Drilling Products and Services Segment



Revenue from our Drilling Products and Services segment decreased 51% to $63.6 million for the three months ended September 30, 2016, as compared to $128.5 million for the same period in 2015The decline in revenue in this segment is due to the low rig count, lower pricing and customer budget constraints. Cost of services and rentals as a percentage of revenue increased to 47% of segment revenue for the three months ended September 30, 2016, as compared to 34% for the same period in 2015, primarily due to a decrease in revenue.  Revenue from our Gulf of Mexico market area decreased 52%, revenue generated from our U.S. land market area decreased 54% and revenue from our international market area decreased 45%.    The decline in revenue in these market areas is primarily attributable to decreases in revenues from rentals of premium drill pipe, bottom hole assemblies and accommodation units, as demand for these rental products decreased along with the worldwide rig count. 



Onshore Completion and Workover Services Segment



Revenue from our Onshore Completion and Workover Services segment decreased 38% to $125.0 million for the three months ended September 30, 2016, as compared to $202.9 million for the same period in 2015.   All of this segment’s revenue is derived from the U.S. land market area, in which rig count was down 45%.  Cost of services and rentals as a percentage of revenues increased to 100% of segment revenue from 86% in the third quarter of 2015 primarily due to a  significant decrease in revenue.  The decrease in revenue is primarily due to a decline in activity and pricing for our services, primarily in our pressure pumping and fluid management businesses.  These services were impacted negatively by reduced customer spending and activity as well as continued pricing pressure in North America during the quarter.  During the three months ended September 30, 2015, we recorded $740.0 million in reduction in value of assets.  



Production Services Segment



Revenue from our Production Services segment for the three months ended September 30, 2016 decreased by 55% to $73.6 million, as compared to $163.9 million for the same period in 2015The decline in revenue in this segment is due to low rig count, lower pricing and customer budget constraints.    Cost of services and rentals as a percentage of revenue increased to 85% of segment revenue from 79% in the third quarter of 2015, primarily as a result of the decrease in revenueRevenue derived from the Gulf of Mexico market area increased 15% primarily due to increased activity in hydraulic workover and snubbing and well services.  Revenue from the U.S. land market area decreased 78% and revenue from international market areas decreased 39%, primarily due to decreased activity in hydraulic workover and snubbing operationsDuring the three months ended September 30, 2015, we recorded $15.6 million in reduction in value of assets.  

 

Technical Solutions Segment



Revenue from our Technical Solutions segment decreased 40% to $64.0 million for the three months ended September 30, 2016, as compared to $106.1 million for the same period in 2015.  The decline in revenue in this segment is due to low rig count, lower pricing and customer budget constraints. Cost of services and rentals as a percentage of revenue decreased to 63% of segment revenue from 68% in the third quarter of 2015Revenue derived from the Gulf of Mexico market area decreased 49%, primarily due to a decrease in demand for well control services and completion tools and products.  In addition, the decrease in revenue was also attributable to the discontinuation of our marine technical services business due to the termination of the contract with its customer.  Revenue from the U.S. land market area decreased 33% and revenue from the international market area decreased 21%, primarily due to a decrease in demand for completion tools and products.

19

 


 

 

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Depreciation, Depletion, Amortization and Accretion



Depreciation, depletion, amortization and accretion decreased to $123.3 million during the three months ended September 30, 2016 from $146.8 million during the same period in 2015. Depreciation and amortization expense decreased for our Drilling Products and Services segment by $8.8 million, or 18%; for our Onshore Completion and Workover Services segment by $2.5 million, or 5%; for our Production Services segment by $8.5 million, or 28% and for our Technical Solutions segment by $3.7 million, or 25%.  The decrease in depreciation, depletion, amortization and accretion is primarily due to lower asset values as a result of the impairments recorded during the second half of 2015 as well as reduced capital expenditures.



General and Administrative Expenses



General and administrative expenses were $86.7 million for the three months ended September 30, 2016 as compared to $123.2 million for the same period in 2015.  The decrease is primarily attributable to significant cost reduction initiatives that resulted in lower levels of employee and infrastructure-related expenses.



Reduction in Value of Assets



The reduction in value of assets recorded during the three months ended September 30, 2015 included $740.0 million related to the Onshore Completion and Workover Services segment goodwill impairment and $15.6 million related to the write-off of intangibles within the Production Services segment. 



Other Income/Expense



Other income/expense for the three months ended September 30, 2016 was $3.7 million income as compared to $3.1 million expense for the same period in 2015. The increase in other income is primarily attributable to foreign currency translations.



Income Taxes



Our effective tax rate for the three months ended September 30, 2016 was 29% compared to a 6% effective tax rate for the same period in 2015.  The difference in the effective tax rate from the statutory rate is primarily due to the reduction in value of goodwill which is non-deductible for income tax purposes.



Discontinued Operations



Loss from discontinued operations, net of tax, was $4.1 million for the three months ended September 30, 2016 as compared to $4.6 million for the same period in 2015.    



Comparison of the Results of Operations for the Nine Months Ended September 30, 2016 and 2015



For the nine months ended September 30, 2016, our revenue was $1,095.6 million, a decrease of $1,133.8 million or 51%, as compared to the same period of 2015.  The decline is largely attributable to a 36% decline in the worldwide rig count which has led to widespread pricing pressure.  Net loss from continuing operations was $667.1 million, or a $4.40 loss per share.  Net loss was $675.7 million, or a $4.46 loss per share.  Included in the results for the nine months ended September 30, 2016 were pre-tax charges of $462.5 million related to the reduction in value of assets and $22.8 million for severance and facility closures.  For the nine months ended September 30, 2015, revenue was $2,229.4 million and net loss from continuing operations was $1,593.2 million, or a $10.60 loss per share.  Net loss was $1,617.3 million, or a $10.76 loss per share.  Included in the results for the nine months ended September 30, 2015 was a pre-tax charge for $1,563.3 million related to the reduction in value of assets.    



The following table compares our operating results for the nine months ended September 30, 2016 and 2015 (in thousands, except percentages).  Cost of services and rentals excludes depreciation, depletion, amortization and accretion for each of our business segments













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Revenue

 

 

 

Cost of Services and Rentals



 

2016

 

2015

 

Change

 

%

 

2016

 

%

 

2015

 

%

 

Change

Drilling Products and

 Services

 

$

240,773 

 

$

471,501 

 

$

(230,728)

 

-49%

 

$

102,308 

 

42% 

 

$

153,350 

 

33% 

 

$

(51,042)

Onshore Completion and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workover Services

 

 

373,387 

 

 

780,455 

 

 

(407,068)

 

-52%

 

 

363,447 

 

97% 

 

 

610,876 

 

78% 

 

 

(247,429)

Production Services

 

 

250,829 

 

 

623,985 

 

 

(373,156)

 

-60%

 

 

201,002 

 

80% 

 

 

477,752 

 

77% 

 

 

(276,750)

Technical Solutions

 

 

230,640 

 

 

353,474 

 

 

(122,834)

 

-35%

 

 

135,385 

 

59% 

 

 

226,286 

 

64% 

 

 

(90,901)

Total

 

$

1,095,629 

 

$

2,229,415 

 

$

(1,133,786)

 

-51%

 

$

802,142 

 

73% 

 

$

1,468,264 

 

66% 

 

$

(666,122)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



The following provides a discussion of our results on a segment basis:



Drilling Products and Services Segment



Revenue from our Drilling Products and Services segment decreased 49%  to $240.8 million for the nine months ended September 30, 2016, as compared to $471.5 million for the same period in 2015.  The decline in revenue in this segment is due to low rig count, lower pricing and customer budget constraints.  Cost of services and rentals as a percentage of revenue increased to 42% of segment revenue for the nine months ended September 30, 2016, as compared to 33% for the same period in 2015, primarily due to a decrease in revenue.  Revenue from our Gulf of Mexico market area decreased 45%, revenue generated from our U.S. land market area decreased 65% and revenue from our international market area decreased 39%.  The decline in revenue in these market areas is primarily attributable to decreases in revenues from rentals of premium drill pipe, bottom hole assemblies and accommodation units, as demand for these rental products decreased along with the worldwide rig count.  In addition, during the nine months ended September 30, 2016, we recorded $47.7 million in reduction in value of assets as compared to $15.8 million recorded for the same period in 2015.      



Onshore Completion and Workover Services Segment



Revenue from our Onshore Completion and Workover Services segment decreased 52% to $373.4 million for the nine months ended September 30, 2016, as compared to $780.5 million for the same period in 2015.  All of this segment’s revenue is derived from the U.S. land market area, in which rig count was down 55%.  Cost of services and rentals as a percentage of revenues increased to 97% of segment revenue from 78% in the same period in 2015, primarily due to  a significant decrease in revenue.  The decrease in revenue is primarily due to  a decline in activity and pricing for our services, primarily in our pressure pumping and fluid management businesses.  These services were impacted negatively by reduced customer spending and activity as well as continued pricing pressure in North America during the nine months ended September 30, 2016.  In addition, during the nine months ended September 30, 2016, we recorded $188.7 million in reduction in value of assets as compared to $780.2 million recorded for the same period in 2015.      



Production Services Segment



Revenue from our Production Services segment for the nine months ended September 30, 2016 decreased by 60% to $250.8 million, as compared to $624.0 million for the same period in 2015.  The decline in revenue in this segment is due to low rig count, lower pricing and customer budget constraints. Cost of services and rentals as a percentage of revenue increased to 80% of segment revenue from 77% in the same period in 2015, primarily as a result of a decrease in revenueRevenue derived from the Gulf of Mexico market area decreased 23%, primarily due to a  decrease in electric line activity.  Revenue from the U.S. land market area decreased 80%, primarily due to decreased activity in coiled tubing, electric line and slickline services.  Revenue from international market areas decreased 41%, primarily due to decreased activity from hydraulic workover and snubbing, electric line and coiled tubing services. In addition, during the nine months ended September 30, 2016, we recorded $226.1 million in reduction in value of assets as compared to $767.3 million recorded for the same period in 2015.  

   

Technical Solutions Segment



Revenue from our Technical Solutions segment decreased 35% to $230.6 million for the nine months ended September 30, 2016, as compared to $353.5 million for the same period in 2015.  The decline in revenue in this segment is due to low rig count, lower pricing and customer budget constraints. Cost of services and rentals as a percentage of revenue decreased to 59% of segment revenue from 64% in the same period in 2015Revenue derived from the Gulf of Mexico market area decreased 38%, primarily due to a decrease in demand for well control services and completion tools and products.  In addition, the decrease in revenue was also attributable to the discontinuation of our marine technical services business due to the termination of the contract with its customer.  Revenue from the U.S. land market area decreased 39% and revenue from the international market area decreased 24%, primarily due to a decrease in demand for completion tools and products.



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Depreciation, Depletion, Amortization and Accretion



Depreciation, depletion, amortization and accretion decreased to $392.0 million during the nine months ended September 30, 2016 from $467.3 million during the same period in 2015. Depreciation and amortization expense decreased for our Drilling Products and Services segment by $15.8 million, or 11%; for our Onshore Completion and Workover Services segment by $10.2 million, or 6%; for our Production Services segment by $37.4 million, or 35%, and for our Technical Solutions segment by $11.9 million, or 26%.  The decrease in depreciation, depletion, amortization and accretion is primarily due to lower asset values as a result of the impairments recorded during the second half of 2015 as well as reduced capital expenditures.



General and Administrative Expenses



General and administrative expenses were $270.5 million for the nine months ended September 30, 2016 as compared to $403.8 million for the same period in 2015.  The decrease is primarily attributable to significant cost reduction initiatives that resulted in lower levels of employee and infrastructure-related expenses.



Reduction in Value of Assets



Reduction in value of assets for the nine months ended September 30, 2016 was $462.5 million as compared to $1,563.3 million for the same period in 2015. The reduction in value of assets recorded during the nine months ended September 30, 2016 included $190.5 million related to the Production Services segment goodwill impairment and $140.0 million related to the Onshore Completion and Workover Services segment goodwill impairment. In addition, the reduction in value of assets expense included $132.0 million related to reduction in value and retirements of long-lived assets within the Drilling Products and Services, Onshore Completion and Workover Services and Production Services segments.  The reduction in value of assets recorded during the nine months ended September 30, 2015 included $740.0 million related to the Onshore Completion and Workover Services segment goodwill impairment, $575.4 million related to the Production Services segment goodwill impairment and $247.9 million related to reduction in value and retirements of long-lived assets within the Production Services, Onshore Completion and Workover Services and Drilling Products and Services segments.



Other Income/Expense



Other income/expense for the nine months ended September 30, 2016 was $22.1 million income as compared to a $10.6 million loss for the same period in 2015. The increase in other income is primarily attributable to foreign currency translations. 



Income Taxes



Our effective tax rate for the nine months ended September 30, 2016 was 24% compared to a 9% effective tax rate for the same period in 2015.  The difference in the effective tax rate from the statutory rate is primarily due to the reduction in value of goodwill which is non-deductible for income tax purposes.



Discontinued Operations



Loss from discontinued operations, net of tax, was $8.6 million for the nine months ended September 30, 2016 as compared to $24.1 million for the same period in 2015.  Loss from discontinued operations for the nine months ended September 30, 2015 included a $15.5 million reduction in value of the marine vessels.  

  

Liquidity and Capital Resources



In the nine months ended September 30, 2016, we generated net cash from operating activities of $146.7 million, as compared to $565.5 million in the same period of 2015.  Our primary liquidity needs are for working capital and capital expenditures.  Our primary sources of liquidity are cash flows from operations and available borrowings under our credit facility.  We had cash and cash equivalents of $278.2 million at September 30, 2016, compared to $564.0 million at December 31, 2015In July 2016 we made a $250.0 million payment on our revolving credit facility and currently have no outstanding debt balances under the revolving credit facility.    At September 30, 2016, approximately $58.3 million of our cash balance was held outside the United States.  Cash balances held in foreign jurisdictions could be repatriated to the United States, however, they would be subject to federal income taxes, less applicable foreign tax credits.  We have not provided U.S. income tax expense on earnings of our foreign subsidiaries because we expect to reinvest the undistributed earnings indefinitely.    



We spent $74.1 million of cash on capital expenditures during the nine months ended September 30, 2016Approximately $37.4 million was used to expand and maintain our Drilling Products and Services segment’s equipment inventory, and approximately $15.8 million, $17.3 million and $3.6 million was spent to maintain the asset bases of our Onshore Completion and Workover Services, Production Services and Technical Solutions segments, respectively.    



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During the nine months ended September 30, 2016, we generated $72.6 million of free cash flow.  We define free cash flow as operating cash flows less capital expenditures. Cash flows from operations included a $36.0 million income tax refund received during the second quarter of 2016.



During the first quarter of 2016, we paid $12.1 million of dividends to stockholders.  We have since announced that the Company has eliminated the quarterly dividend program.



At September 30, 2016, we had $35.4 million of letters of credit outstanding under our revolving credit facility.  In July 2016, we amended the credit facility and repaid the outstanding balance of $250.0 million with cash on hand.  The amended agreement, among other things, reduces the size of the facility to $400.0 million, suspends the maximum leverage ratio covenant until the fourth quarter of 2017 and replaces it with a senior secured debt to earnings before interest, taxes, depreciation and amortization ratio covenant during this period and modifies the restricted payment covenant to eliminate our ability to pay dividends and make equity repurchases until September 2017.  At October 24, 2016, we had $35.7 million of letters of credit outstanding under the credit facility.   Borrowings under the credit facility bear interest at LIBOR plus margins that depend on our credit rating.  Indebtedness under the credit facility is secured by substantially all of our assets, including the pledge of the stock of our principal domestic subsidiaries. The credit facility contains customary events of default and requires that we satisfy various financial covenants.  The credit facility also limits our ability to pay dividends or make distributions, make acquisitions, create liens or incur additional indebtedness. At September 30, 2016, we were in compliance with all such covenants.



We have outstanding $500 million of 6 3/8% unsecured senior notes due 2019. The indenture governing the 6 3/8% senior notes requires semi-annual interest payments on May 1 and November 1 of each year through the maturity date of May 1, 2019.  The indenture contains customary events of default and requires that we satisfy various covenants. At September 30, 2016, we were in compliance with all such covenants.



We also have outstanding $800 million of 7 1/8% unsecured senior notes due 2021.  The indenture governing the 7 1/8% senior notes requires semi-annual interest payments on June 15 and December 15 of each year through the maturity date of December 15, 2021.  The indenture contains customary events of default and requires that we satisfy various covenants. At September 30, 2016, we were in compliance with all such covenants.



Hedging Activities



We have three interest rate swap agreements for notional amounts of $100 million each related to our 7 1/8% senior notes maturing in December 2021, whereby we are entitled to receive semi-annual interest payments at a fixed rate of 7 1/8% per annum and are obligated to make semi-annual interest payments at variable rates.  The variable interest rates, which are adjusted every 90 days, are based on LIBOR plus a fixed margin and are scheduled to terminate on December 15, 2021.



Recently Issued Accounting Guidance



See Part I, Item 1, “Financial Statements – Note 15 – Recently Issued Accounting Guidance.”



Off-Balance Sheet Arrangements



At September 30, 2016, we had no off-balance sheet arrangements.



Item 3.  Quantitative and Qualitative Disclosures about Market Risk



We are exposed to market risks associated with foreign currency fluctuations and changes in interest rates.  A discussion of our market risk exposure in financial instruments follows.



Foreign Currency Exchange Rates Risk



Because we operate in a number of countries throughout the world, we conduct a portion of our business in currencies other than the U.S. dollar.  The functional currency for our international operations, other than certain operations in the United Kingdom and Europe, is the U.S. dollar, but a portion of the revenues from our international operations is paid in foreign currencies.  The effects of foreign currency fluctuations are partly mitigated because local expenses of such international operations are also generally denominated in the same currency.  We continually monitor the currency exchange risks associated with all contracts not denominated in the U.S. dollar. 



Assets and liabilities of certain subsidiaries in the United Kingdom and Europe are translated at end of period exchange rates, while income and expenses are translated at average rates for the period.  Translation gains and losses are reported as the foreign currency translation component of accumulated other comprehensive loss in stockholders’ equity. 



23

 


 

 

Table Of Contents

 

We do not hold derivatives for trading purposes or use derivatives with complex features. When we believe prudent, we enter into forward foreign exchange contracts to hedge the impact of foreign currency fluctuations. We do not enter into forward foreign exchange contracts for trading or speculative purposes.  At September 30, 2016, we had no outstanding foreign currency forward contracts.



Interest Rate Risk



At September 30, 2016, our debt was comprised of the following (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

Fixed
Rate Debt

 

Variable
Rate Debt

6 3/8 % Senior Notes due 2019

 

$

500,000 

 

$

 -

7 1/8% Senior Notes due 2021

 

 

500,000 

 

 

300,000 

Total Debt

 

$

1,000,000 

 

$

300,000 



 

 

 

 

 

 



Variable debt of $300 million represents the portion of the $800 million aggregate principal amount of our 7 1/8% senior notes subject to the fixed-to-variable interest rate swap agreements. Based on the amount of this debt outstanding as of September 30, 2016, a 10% increase in the variable interest rate would have increased our interest expense for the nine months ended September 30, 2016 by approximately $1.2 million, while a 10% decrease would have decreased our interest expense by approximately $1.2 million. 



Commodity Price Risk



Our revenues, profitability and future rate of growth significantly depend upon the market prices of oil and natural gas.  Lower prices may also reduce the amount of oil and natural gas that can economically be produced. 



For additional discussion, see Part 1, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”



Item 4.  Controls and Procedures



a.

Evaluation of disclosure controls and procedures.    As of the end of the period covered by this quarterly report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation, that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective for ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.



b.

Changes in internal control.  There has been no change in our internal control over financial reporting that occurred during the three months ended September 30, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Table Of Contents

 

PART II.  OTHER INFORMATION



Item 1ARisk Factors



For information regarding certain risks relating to our operations, any of which could negatively affect our business, financial condition, operating results or prospects, see Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2015.



Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds



Issuer Purchases of Equity Securities



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Period

 

(a)
Total Number
of Shares
Purchased (1)

 

(b)
Average Price Paid per Share

 

(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)

 

(d)
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan or Programs (2)

July 1 - 31, 2016

 

 -

 

$

 -

 

 -

 

$

500,000,000 

August 1 - 31, 2016

 

9,933 

 

$

16.78 

 

 -

 

$

500,000,000 

September 1 - 30, 2016

 

814 

 

$

16.83 

 

 -

 

$

500,000,000 

Total

 

10,747 

 

$

16.79 

 

 -

 

$

500,000,000 



 

 

 

 

 

 

 

 

 

 



(1)

Through our stock incentive plans, 10,747 shares were delivered to us by our employees to satisfy their tax withholding requirements upon vesting of restricted stock and restricted stock units.

(2)

On December 11, 2014, we announced that our Board of Directors authorized a share repurchase program of up to $500 million of our common stock, which will expire on December 31, 2016.  At September 30, 2016, $500 million remained authorized under the stock repurchase program.



25

 


 

 

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Item 6.   Exhibits



(a)

The following exhibits are filed with this Form 10-Q:



 



 



 



 

Exhibit No.

Description

3.1

Restated Certificate of Incorporation of Superior Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Quarterly Report on Form 10-Q filed August 7, 2013 (File No. 001-34037)).

3.2

Amended and Restated Bylaws of Superior Energy Services, Inc. (as amended through March 7, 2012) (incorporated herein by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed March 12, 2012 (File No. 001-34037))



 

10.1*

Second Amendment to Fourth Amended and Restated Credit Agreement and Security Agreement, dated October 25, 2016, among SESI, L.L.C., Superior Energy Services, Inc., JPMorgan Chase Bank N.A. and the lenders party thereto.

31.1*

Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 

31.2*

Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

32.2*

Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document



    *Filed herein

26

 


 

 

Table Of Contents

 

SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



SUPERIOR ENERGY SERVICES, INC.





 

 

 

Date: 

October 26, 2016

By:

/s/ Robert S. Taylor



 

 

Robert S. Taylor



 

 

Executive Vice President, Treasurer and



 

 

Chief Financial Officer



 

 

(Principal Financial and Accounting Officer)



 

 

 



27

 


Exhibit 101

Execution Version

 



SECOND AMENDMENT

TO

FOURTH AMENDED AND RESTATED
CREDIT AGREEMENT AND SECURITY AGREEMENT

Dated as of October 25, 2016

among

SESI, L.L.C.,
as the Borrower,

SUPERIOR ENERGY SERVICES, INC.,
as Parent,

JPMORGAN CHASE BANK, N.A.
as Administrative Agent

and

the Lenders Party Hereto





 

 


 

 

SECOND AMENDMENT TO FOURTH AMENDED AND RESTATED
CREDIT AGREEMENT AND SECURITY AGREEMENT

THIS SECOND AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT AND SECURITY AGREEMENT (this “Amendment”) dated as of October 25, 2016 is among SESI, L.L.C., a limited liability company duly formed and existing under the laws of the State of Delaware (the “Borrower”), Superior Energy Services, Inc., a corporation duly formed and existing under the laws of the State of Delaware (the “Parent”), each of the other Loan Parties party hereto (together with the Borrower and the Parent, the “Obligors”), each of the undersigned Lenders and JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”) and as an Issuing Lender.



R E C I T A L S



A.       The Borrower, the Parent, the Administrative Agent and the Lenders are parties to that certain Fourth Amended and Restated Credit Agreement dated as of February 22, 2016 (as amended by the First Amendment to the Fourth Amended and Restated Credit Agreement, dated as of July 13, 2016, the “Credit Agreement”), pursuant to which the Lenders have made certain credit available to and on behalf of the Borrower.

B.       The Borrower has requested and the Administrative Agent, Issuing Lenders and Lenders constituting the Required Lenders have agreed to waive certain provisions and to make certain changes to the Credit Agreement as set forth herein.

C.       NOW, THEREFORE, to induce the Administrative Agent, Issuing Lenders and the Lenders party hereto to enter into this Amendment  and in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.       Defined Terms.  Each capitalized term used herein but not otherwise defined herein has the meaning given such term in the Credit Agreement, as amended by this Amendment.  Unless otherwise indicated, all article, exhibit, section and schedule references in this Amendment refer to articles, exhibits, sections and schedules of the Credit Agreement. 

Section 2.       Amendments to Credit Agreement.

2.1.       Global Amendment. All references in the Credit Agreement to “U.S. dollars” and “U.S. dollar equivalent” are hereby replaced with “U.S. Dollars” and “U.S. Dollar Equivalent,” respectively.

2.2.       Amendments to Section 1.1.

(a)       The following definitions are hereby added where alphabetically appropriate:

Agreed Currency” is defined in Section 2.20.  

Alternate Currency” means, (a) with respect to any Letter of Credit issued by JPMorgan Chase Bank, N.A., Australian Dollars, Bahts, Dirhams, Euros, Indian Rupees, Kuwaiti Dinars, New Zealand Dollars, Norwegian Kroners, Pounds, Reais, Ringgits, Rupiah, Saudi Riyals and Singapore Dollars, (b) with respect to any Letter of Credit issued by Bank of America, N.A., Australian Dollars, Bahts, Dirhams, Euros, Indian Rupees, Kuwaiti Dinars, New

 


 

Zealand Dollars, Norwegian Kroners, Pounds, Ringgits, Rupiah, Saudi Riyals and Singapore Dollars, and (c) with respect to any Letter of Credit issuing by any Issuing Lender, any other currency (other than U.S. Dollars) that has been designated by the Administrative Agent as an Alternate Currency at the request of the Borrower and with the consent of the applicable Issuing Lender.

Alternate Currency Overnight Rate” means, with respect to a currency other than U.S. Dollars, the rate per annum determined by the Administrative Agent to represent its cost of overnight or short-term funds in such currency (which determination shall be conclusive absent manifest error) plus the Applicable Margin then in effect with respect to Eurodollar Loans.

Australian Dollars” means the lawful currency of the Commonwealth of Australia.

Bahts” means the lawful currency of the Kingdom of Thailand.

Calculation Date” means, with respect to any Letter of Credit denominated in an Alternate Currency, each of the following: (a) each date of an amendment of any such Letter of Credit having the effect of increasing the amount thereof (solely with respect to the increased amount) and (b) each date of any payment by the Issuing Lender of any Letter of Credit denominated in an Alternate Currency. The Administrative Agent will notify the Borrower of the applicable amounts recalculated on each Calculation Date.

Dirhams” means the lawful currency of the United Arab Emirates.

Euros” means the single currency of participating member states of the European Monetary Union introduced in accordance with the provisions of Article 109(1)4 of the Treaty of Rome of March 25, 1957 (as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992 and came into force on November 1, 1993) as amended from time to time) and as referred to in legislative measures of the European Union for the introduction of, changeover to or operating of the euro in one or more member states.

Foreign Letters of Credit” means the letters of the credit listed on Schedule 5, which in each case were issued in an Alternate Currency by an Issuing Lender to the Borrower prior to date the Second Amendment became effective.

Indian Rupees” means the lawful currency of India.

Kuwaiti Dinars” means the lawful currency of the State of Kuwait.

Local Time” means, with respect to (a) fundings, continuations, payments and prepayments of Letters of Credit for the account of the Borrower in U.S. Dollars or Canadian dollars, New York City time, and (b) fundings, continuations, payments and prepayments of Letters of Credit for the account of the Borrower in Alternate Currencies (other than Canadian dollars), the local time zone of the country where the applicable Alternate Currency is the lawful

2

 


 

currency, provided that if such country has multiple time zones in the mainland area, than a local time zone of that country as selected by the Issuing Bank.

New Zealand Dollars” means the lawful currency of New Zealand.

Norwegian Kroners” means the lawful currency of the Kingdom of Norway.

Other Currency” is defined in Section 2.20.

Pounds” means the lawful currency of the United Kingdom.

Reais” means the lawful currency of Brazil.

Ringgits” means the lawful currency of Malaysia.

Rupiah” means the lawful currency of the Republic of Indonesia.

Saudi Riyals” means the lawful currency of the Kingdom of Saudi Arabia.

Second Amendment” means that certain Second Amendment  to the Fourth Amended and Restated Credit Agreement, dated as of October 25, 2016 among the Loan Parties, the Administrative Agent, and the Lenders party thereto.

Singapore Dollars” means the lawful currency of the Republic of Singapore.

Spot Exchange Rate” means, on any day with respect to any Alternate Currency, the spot rate at which U.S. Dollars are offered on such day by the applicable Issuing Bank, in the market where its foreign currency exchange operations are then being conducted for such foreign currency, at approximately 11:00 A.M. Local Time, for delivery two Business Days later; provided, if at the time of any such determination, for any reason no such spot rate is being quoted, the applicable Issuing Bank may use reasonable methods it deems appropriate to determine such rate.

U.S. Dollars” and “$” means dollars in lawful currency of the United States.

U.S. Dollar Equivalent” means on any date, with respect to any amount denominated in any Alternate Currency, the equivalent in U.S. Dollars that may be purchased with such currency at the Spot Exchange Rate (determined as of the most recent Calculation Date) with respect to such currency at such date.

(b)       The following defined terms are hereby amended and restated to read as follows:

Issuing Lender” means, as the context may require, (a) each of the Administrative Agent and any other Lender approved by the Administrative Agent and the Borrower that has agreed in its sole discretion to act as an “Issuing Lender” hereunder, in each case in its capacity as issuer of any Letter of Credit,

3

 


 

and (b) with respect to each Existing Letter of Credit or Foreign Letter of Credit, the Lender that issued such Existing Letter of Credit or Foreign Letter of Credit, as applicable.  An Issuing Lender may, in its discretion, arrange for one or more Letters of Credit to be issued by affiliates of such Issuing Lender.  Each reference herein to the “Issuing Lender” shall be deemed to be a reference to the relevant Issuing Lender.

L/C Obligations” means at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit that have not then been reimbursed pursuant to Section 2.2.5 (in each case based on the U.S. Dollar Equivalent thereof with respect to Letters of Credit denominated in an Alternate Currency).

2.3.       Amendment to Section 2.2.1(a).  Section 2.2.1(a) is hereby amended and restated as follows:

(a)       Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Lenders set forth in Section 2.2.4(a), agrees to issue Letters of Credit for the account of the Borrower or any of its Subsidiaries on any Business Day during the Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed $100,000,000, (ii) the L/C Exposure of any Issuing Lender would exceed such Issuing Lender’s L/C Commitment, (iii) the Extensions of Credit of any Lender would exceed such Lender’s Commitment, (iv) 105% of the U.S. Dollar Equivalent of the L/C Obligations attributable to Letters of Credit denominated in Alternate Currencies would exceed the lesser of (x) $25,000,000 and (y) the Available Commitments or (v) the aggregate amount of the Available Commitments would be less than zero.  The parties hereto agree that the Existing Letters of Credit and Foreign Letters of Credit will automatically, without any further action on the part of any Person, be deemed to be Letters of Credit hereunder issued hereunder, in the case of Existing Letters of Credit, on the Closing Date and in the case of Foreign Letters of Credit, on the date issued by the Issuing Bank (after giving effect to the Second Amendment), for the account of the Borrower.  Without limiting the foregoing (i) each such Existing Letter of Credit and Foreign Letter of Credit shall be included in the calculation of the L/C Exposure, (ii) all liabilities of the Borrower and the other Loan Parties with respect to such Existing Letters of Credit and Foreign Letters of Credit shall constitute Obligations and (iii) each Lender shall have reimbursement obligations with respect to such Existing Letters of Credit and Foreign Letters of Credit as provided in Section 2.2.4.

2.4.       Amendment to Section 2.2.1(b).  Section 2.1.5(b) is hereby amended by amending and restating clause (i) thereof as follows:

(i) be denominated in U.S. Dollars or, if agreed by the Issuing Lender, any Alternate Currency and

4

 


 

2.5.       Amendment to Section 2.2.2.  Section 2.2.2 is hereby amended by adding the language after the last sentence thereof:

Following receipt of such notice and prior to the issuance of a requested Letter of Credit, the Administrative Agent shall calculate the U.S. Dollar Equivalent of such Letter of Credit if it is to be denominated in an Alternate Currency and shall notify the Borrower and the Issuing Lender of the aggregate amount of the Extensions of Credit after giving effect to (i) the issuance of such Letter of Credit, (ii) the issuance or expiration of any other Letter of Credit that is to be issued or will expire prior to the requested date of issuance of such Letter of Credit and (iii) the borrowing or repayment of any Loans that (based upon notices delivered to the Administrative Agent by the Borrower) are to be borrowed or repaid prior to the requested date of issuance of such Letter of Credit. A Letter of Credit shall be issued only if (and upon issuance of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the L/C Obligations shall not exceed $100,000,000, (ii) 105% of the U.S. Dollar Equivalent of the L/C Obligations applicable to Letters of Credit denominated in Alternate Currencies shall not exceed the lesser of (x) $25,000,000 and (y) the Available Commitment and (iii) the aggregate amount of the Extensions of Credit shall not exceed the Aggregate Commitment.



2.6.       Amendment to Section 2.2.3.  Section 2.2.3 is hereby amended and restated in its entirety as follows:

(a)       The Borrower agrees to pay the Issuing Lender a fronting fee in U.S. Dollars in an amount agreed between the Borrower and the Issuing Lender (but not less than 0.125% per annum on the U.S. Dollar Equivalent of the face amount of the Letter of Credit), payable quarterly in arrears on the last day of each calendar quarter, for the term of the Letter of Credit, together with the Issuing Lender’s customary letter of credit issuance and processing fees.  The fronting fee and customary letter of credit issuance and processing fees shall be retained by the Issuing Lender, which fee shall not be shared with the other Lenders.



(b)       In addition, the Borrower agrees to pay the Administrative Agent a fee in U.S. Dollars equal to the Applicable Letter of Credit Fee Rate (on a per annum basis) shown on the Pricing Schedule times the U.S. Dollar Equivalent of the aggregate face amount of all outstanding Letters of Credit (as reduced from time to time), payable quarterly in arrears on the last day of each calendar quarter, for the term of the Letter of Credit and shall be shared by the Issuing Lender and the other Lenders on the basis of each Lender’s Pro Rata Share.



2.7.       Amendment to Section 2.2.4(a).  Section 2.2.4(a) is hereby amended and restated as follows:

(a)       The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions set forth below, for such L/C Participant’s own account and risk an

5

 


 

undivided interest equal to such L/C Participant’s Pro Rata Share in the Issuing Lender’s obligations and rights under and in respect of each Letter of Credit and the amount of each draft paid by the Issuing Lender thereunder.  Each L/C Participant agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement (or in the event that any reimbursement received by the Issuing Lender shall be required to be returned by it at any time), such L/C Participant shall pay in U.S. Dollars to the Issuing Lender upon demand at the Issuing Lender’s address for notices specified herein an amount equal to such L/C Participant’s Pro Rata Share of the U.S. Dollar Equivalent of the amount that is not so reimbursed (or is so returned).  Each L/C Participant’s obligation to pay such amount shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such L/C Participant may have against the Issuing Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Article IV, (iii) any adverse change in the condition (financial or otherwise) of the Borrower, (iv) any breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other L/C Participant or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.



2.8.       Amendment to Section 2.2.5.  Section 2.2.5 is hereby amended and restated as follows:

2.2.5       Reimbursement Obligation of the Borrower.  If any draft is paid under any Letter of Credit, the Borrower shall reimburse the Issuing Lender for the amount of (a) the draft so paid in the currency in which such Letter of Credit was issued and (b) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment, not later than 12:00 Noon, New York City time, on (i) the Business Day that the Borrower receives notice of such draft, if such notice is received on such day prior to 10:00 a.m., New York City time if such Letter of Credit is denominated in U.S. Dollars or Canadian dollars, or (ii) if clause (i) above does not apply, the Business Day immediately following the day that the Borrower receives such notice.  Each such payment shall be made to the Issuing Lender at its address for notices referred to herein in the currency in which such draft is payable (except that, in the case of any Letter of Credit denominated in any currency other than Dollars, upon notice by the Issuing Lender to the Borrower, such payment shall be made in U.S. Dollars from and after the date on which the amount of such payment shall have been converted into Dollars at the Spot Exchange Rate on such date of conversion, which date of conversion shall be selected by the Issuing Lender and may be any Business Day after the date on which such payment is due) and in immediately available funds.  Interest shall be payable on any such amounts from the date on which the relevant draft is paid until payment in full at (x) until the Business Day next succeeding the date of the relevant notice, the Floating Rate and (y) thereafter, the rate set forth in Section 2.10; provided, that if any such amount is denominated in a currency other than U.S. Dollars for any period, such interest shall be payable for such period at the Alternate Currency Overnight Rate. If, as a result of fluctuations in the exchange rate between the U.S. Dollar and any Alternate Currency, the amount of the L/C Obligations exceeds 105% of the L/C

6

 


 

Commitment, then the Borrower shall deposit within three Business Days of demand by the Administrative Agent as cash collateral, an amount in U.S. Dollars equal to such excess. The obligation to deposit amounts shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the under the terms of a Letter of Credit. If (1) the Borrower was required to provide an amount of cash collateral hereunder as a result of the L/C Obligations exceeding the L/C Commitment due to fluctuations in the exchange rate between the U.S. Dollar and any applicable Alternate Currency (2) the L/C Obligations no longer exceed the L/C Commitment and (3) the Borrower is not otherwise required to post cash collateral in respect of the Letters of Credit hereunder which has not been posted, then the amount of such excess shall be returned to such Borrower within five Business Days upon request of the Borrower.

2.9.       Amendment to Article 2. Article 2 is hereby amended by adding the following as the new Section 2.20:

2.20        Currency Indemnity. The Borrower shall, and shall cause the other Loan Parties to, make payment relative to any Obligation (including with respect to Letters of Credit) in the currency in which such Obligation was effected (the “Agreed Currency”).  If any payment is received on account of any Obligation in any currency other than the Agreed Currency (the “Other Currency”) (whether voluntarily or pursuant to an order or judgment or the enforcement thereof or the realization of any collateral under the Collateral Documents or the liquidation of a Loan Party or otherwise), such payment shall constitute a discharge of the liability of the Loan Parties hereunder and under the other Loan Documents in respect of such obligation only to the extent of the amount of the Agreed Currency which the relevant Lender or Agent, as the case may be, is able to purchase with the amount of the Other Currency received by it on the Business Day next following such receipt in accordance with its normal banking procedures in the relevant jurisdiction and applicable law after deducting any costs of exchange.  To the fullest extent permitted by applicable law, if the amount of the Other Currency received is insufficient to satisfy the obligation in the Agreed Currency in full, then the Borrower shall on demand indemnify the Issuing Lenders, Lenders and the Administrative Agent from and against any loss or cost arising out of or in connection with such deficiency; provided that if the amount of the Agreed Currency so purchased is greater than the amount of the Agreed Currency due in respect of such liability immediately prior to such judgment or order, voluntary prepayment, realization of collateral, liquidation of a Loan Party or otherwise, then the Agents or the Lenders, as the case may be, agree to return the amount of any excess to the Borrower (or to any other Person who may be entitled thereto under applicable law).  To the fullest extent permitted by applicable law, the foregoing indemnity and agreement by each party shall constitute an obligation separate and independent from all other obligations contained in this Agreement and shall give rise to a separate and independent cause of action.



2.10.       Amendment to Schedules. Schedule 5 attached hereto is hereby added as a new schedule.

7

 


 

Section 3.       Conditions Precedent.  This Amendment  shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.12 of the Credit Agreement) (such date, the “Amendment Effective Date”):

3.1.       Execution and Delivery.  The Administrative Agent shall have received from the Obligors, each Issuing Lender and the Lenders constituting the Required Lenders, counterparts (in such number as may be requested by the Administrative Agent) of this Amendment signed on behalf of such Person.

3.2.       Payment of Expenses.  To the extent invoiced at least one Business Day prior to the Amendment Effective Date, the Administrative Agent and the Lenders shall have received reimbursement or payment of all documented fees and out-of-pocket expenses required to be reimbursed or paid by the Borrower under the Credit Agreement.

3.3.       No Default or Event of Default.   No Default or Event of Default shall have occurred and be continuing as of the date hereof, after giving effect to the terms of this Amendment.

The Administrative Agent is hereby authorized and directed to declare this Amendment to be effective when it has received documents confirming or certifying, to the satisfaction of the Administrative Agent, compliance with the conditions set forth in this Section 4 or the waiver of such conditions as permitted hereby. Such declaration shall be final, conclusive and binding upon all parties to the Credit Agreement for all purposes.

Section 4.       Miscellaneous.

4.1.       Confirmation.  The provisions of the Credit Agreement, as amended by this Amendment, shall remain in full force and effect following the effectiveness of this Amendment.

4.2.       Ratification and Affirmation; Representations and Warranties.  Each Obligor hereby (a) acknowledges the terms of this Amendment; (b) ratifies and affirms its obligations under, and acknowledges, renews and extends its continued liability under, each Loan Document to which it is a party and agrees that each Loan Document to which it is a party remains in full force and effect, except as expressly amended hereby, notwithstanding the amendments contained herein; and (c) represents and warrants to the Lenders that as of the date hereof, after giving effect to the terms of this Amendment:  (i) all of the representations and warranties contained in each Loan Document to which it is a party are true and correct in all material respects, except to the extent any such representations and warranties are stated to relate solely to an earlier date, in which case, such representations and warranties shall have been true and correct in all material respects on and as of such earlier date (provided that such materiality qualifier shall not be applicable to any representation or warranty that is already qualified or modified by materiality in the Credit Agreement) and (ii) no Default or Event of Default has occurred and is continuing.

4.3.       No Waiver; Loan Document.  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.  On and after the Amendment Effective Date, this Amendment shall for all purposes constitute a Loan Document.

4.4.       Counterparts.  This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument.  Delivery of this Amendment by facsimile or electronic

8

 


 

transmission in portable document format (.pdf) shall be effective as delivery of a manually executed counterpart hereof.

4.5.       NO ORAL AGREEMENT.  THIS AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.  AS OF THE DATE OF THIS AMENDMENT, THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

4.6.       GOVERNING LAW.  THIS AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

[SIGNATURES BEGIN NEXT PAGE]



 

9

 


 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.



 

BORROWER:

SESI, L.L.C.



 



 



By:       /s/ Robert S. Taylor          



Name:  Robert S. Taylor



Title:    Executive Vice President, Chief Financial Officer
             and Treasurer



 

PARENT:

SUPERIOR ENERGY SERVICES, INC.



 



 



By:       /s/ Robert S. Taylor          



Name:  Robert S. Taylor



Title:    Executive Vice President, Chief Financial Officer
             and Treasurer

 

SUBSIDIARY GUARANTORS:

1105 PETERS ROAD, L.L.C.



ALLIANCE ENERGY SERVICE CO. LLC



COMPLETE ENERGY SERVICES, INC.



H.B. RENTALS, L.C.



INTEGRATED PRODUCTION SERVICES, INC.



STABIL DRILL SPECIALTIES, L.L.C.



SUB-SURFACE TOOLS, L.L.C.



SUPERIOR ENERGY SERVICES-NORTH AMERICA
SERVICES, INC.



TEXAS CES, INC.



WARRIOR ENERGY SERVICES CORPORATION



WILD WELL CONTROL, INC.



WORKSTRINGS INTERNATIONAL, L.L.C.



 



By:       /s/ Robert S. Taylor          



Name:  Robert S. Taylor



Title:    Vice President and Treasurer



 



MONUMENT WELL SERVICE CO.



PUMPCO ENERGY SERVICES, INC.



 



By:       /s/ Robert S. Taylor          



Name:  Robert S. Taylor



Title:    Vice President, Treasurer and Assistant Secretary



 



SUPERIOR ENERGY SERVICES, L.L.C.



 



By:       /s/ Robert S. Taylor          



Name:  Robert S. Taylor



Title:    Executive Vice President, Chief Financial Officer
             and Treasurer

Signature Page to Second Amendment to
Fourth Amended and Restated Credit Agreement

 


 



 

ADMINISTRATIVE AGENT, ISSUING
LENDER AND LENDER:

JPMORGAN CHASE BANK, N.A.



 



 



By:       /s/ Darren Vanek         



Name:  Darren Vanek



Title:    Authorized Signatory























Signature Page to Second Amendment to
Fourth Amended and Restated Credit Agreement

 


 



 

ISSUING LENDER AND LENDER:

Bank of America, N.A.



 



 



By:       /s/ Tyler Ellis           



Name:  Tyler Ellis



Title:    Director























Signature Page to Second Amendment to
Fourth Amended and Restated Credit Agreement

 


 



 

LENDER:

WELLS FARGO BANK, N.A.



 





 



By:       /s/ Benjamin Kerr          



Name:  Benjamin Kerr



Title:    Portfolio Manager























Signature Page to Second Amendment to
Fourth Amended and Restated Credit Agreement

 


 



 

LENDER:

CAPITAL ONE, NATIONAL ASSOCIATION



 





 



By:       /s/ Mark Brewster          



Name:  Mark Brewster



Title:    Vice President























Signature Page to Second Amendment to
Fourth Amended and Restated Credit Agreement

 


 



 

LENDER:

WHITNEY BANK



 





 



By:       /s/ Hollie L. Ericksen          



Name:  Hollie L. Ericksen



Title:    Senior Vice President























Signature Page to Second Amendment to
Fourth Amended and Restated Credit Agreement

 


 



 

LENDER:

ROYAL BANK OF CANADA



 





 



By:       /s/ Matthias Wong          



Name:  Matthias Wong



Title:    Authorized Signatory

























Signature Page to Second Amendment to
Fourth Amended and Restated Credit Agreement

 


 



 

LENDER:

THE BANK OF NOVA SCOTIA



 





 



By:       /s/ John Frazell         



Name:  John Frazell



Title:    Director

























Signature Page to Second Amendment to
Fourth Amended and Restated Credit Agreement

 


 



 

LENDER:

CITIBANK, N.A.



 





 



By:       /s/ Peter Baumann          



Name:  Peter Baumann



Title:    Managing Director























 

Signature Page to Second Amendment to
Fourth Amended and Restated Credit Agreement

 


 

SCHEDULE 5

each issued by JPMorgan Chase Bank, N.A., as an Issuing Bank





 

 

 

Currency

Outstanding Amount in U.S.
Dollar Equivalent as of the
Second Amendment
Effective Date

Expiration/Maturity
Date

Beneficiary

Norwegian Krone

$372,721.74

November 22, 2017

Nordea Bank Finland PLC

Qatar Rial

$68,519.48

March 30, 2017

Qatar National Bank

Indian Rupee

$44,024.17

May 01, 2017

IDBI Bank Ltd.

Indian Rupee

$81,650.06

March 30, 2017

IDBI Bank Ltd.

Indian Rupee

$56,414.88

May 01, 2017

IDBI Bank Ltd.

Kuwaiti Dinar

$7,922.89

October 10, 2018

National Bank of Kuwait

Indian Rupee

$25,187.90

March 30, 2017

IDBI Bank Ltd.

Indian Rupee

$30,461.33

December 30, 2016

IDBI Bank Ltd.

Kuwaiti Dinar

$2,000.76

November 02, 2016

National Bank of Kuwait

Indian Rupee

$9,149.94

January 30, 2017

IDBI Bank Ltd.

Indian Rupee

$12,782.86

March 02, 2017

IDBI Bank Ltd.

Indian Rupee

$26,283.28

January 30, 2019

IDBI Bank Ltd.

Indian Rupee

$161,822.92

January 31, 2017

IDBI Bank Ltd.

Indian Rupee

$73,756.05

October 30, 2017

IDBI Bank Ltd.

Indian Rupee

$265,510.95

March 30, 2018

IDBI Bank Ltd.

Indian Rupee

$41,618.68

January 23, 2017

IDBI Bank Ltd.

Indian Rupee

$45,847.43

September 29, 2016

IDBI Bank Ltd.

Indian Rupee

$14,611.05

March 03, 2017

IDBI Bank Ltd.



Total U.S. Dollar Equivalent: $1,340,286.37



Schedule 5 - 1

 


Exhibit 311

EXHIBIT 31.1



CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED



I, David D. Dunlap,  President and Chief Executive Officer of Superior Energy Services, Inc., certify that:



1.I have reviewed this quarterly report on Form 10-Q of Superior Energy Services, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.





 

 

 

Date:    October 26, 2016

 

 

 



 

 

/s/ David. D. Dunlap



 

 

David D. Dunlap



 

 

President and Chief Executive Officer



 

 

Superior Energy Services, Inc.




Exhibit 312

EXHIBIT 31.2



CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED



I, Robert S. Taylor, Executive Vice President, Treasurer and Chief Financial Officer of Superior Energy Services, Inc., certify that:



1.I have reviewed this quarterly report on Form 10-Q of Superior Energy Services, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



 

 

 

Date:   October 26, 2016

 

 

 



 

 

/s/ Robert S. Taylor



 

 

Robert S. Taylor



 

 

Executive Vice President, Treasurer and Chief Financial Officer



 

 

Superior Energy Services, Inc.




Exhibit 321

EXHIBIT 32.1



CERTIFICATION PURSUANT TO

SECTION 1350 OF TITLE 18 OF THE U.S. CODE



I, David D. Dunlap,  President and Chief Executive Officer of Superior Energy Services, Inc. (the “Company”), certify, pursuant to Section 1350 of Title 18 of the U.S. Code, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that:



1.the quarterly report on Form 10-Q of the Company for the quarter ended September 30, 2016 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Report or as a separate disclosure document.





 

 

 

Date:    October 26, 2016

 

 

 



 

 

/s/ David D. Dunlap



 

 

David D. Dunlap



 

 

President and Chief Executive Officer



 

 

Superior Energy Services, Inc.



A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.




Exhibit 322

EXHIBIT 32.2



CERTIFICATION PURSUANT TO

SECTION 1350 OF TITLE 18 OF THE U.S. CODE



I, Robert S. Taylor, Executive Vice President, Treasurer and Chief Financial Officer of Superior Energy Services, Inc. (the “Company”), certify, pursuant to Section 1350 of Title 18 of the U.S. Code, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that:



1.the quarterly report on Form 10-Q of the Company for the quarter ended September  30, 2016 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Report or as a separate disclosure document.





 

 

 

Date:    October 26, 2016

 

 

 



 

 

/s/ Robert S. Taylor



 

 

Robert S. Taylor



 

 

Executive Vice President, Treasurer and Chief Financial Officer



 

 

Superior Energy Services, Inc.



A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.