10-Q
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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 March 31, 2023

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

Commission Company Name: SUPERIOR ENERGY SERVICES, INC.

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC.

 

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

 

 

 

Delaware

 

87-4613576

 

 

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

 

 

 

1001 Louisiana Street, Suite 2900

Houston, TX

(Address of principal executive offices)

 

77002

(Zip Code)

 

 

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol

Name of each exchange on which registered

 None

N/A

None

 

 

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

 

Large Accelerated filer ☐

 

Accelerated filer ☐

Non-accelerated filer      ☒

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No

The number of shares of the registrant’s Class A common stock outstanding on April 28, 2023 was 19,998,695.

The number of shares of the registrant’s Class B common stock outstanding on April 28, 2023 was 152,030.

1

 


 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

Page

 

Information Regarding Forward-Looking Statements

3

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

Unaudited Condensed Consolidated Balance Sheets

4

 

Unaudited Condensed Consolidated Statements of Operations

5

 

Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity

6

 

Unaudited Condensed Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

Item 4.

Controls and Procedures

20

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

21

Item 1A.

Risk Factors

21

Item 6.

Exhibits

21

 

 

 

SIGNATURES

 

22

 

 

 

2

 


 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (the “Form 10-Q”) and other documents filed by us with the Securities and Exchange Commission (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. All statements, other than statements of historical fact, included in this Form 10-Q 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 their 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 risks and uncertainties include, but are not limited to:

 

risks and uncertainties regarding the continuing effects of residual bankruptcy proceedings on us and our various constituents; attendant risks associated with restrictions on our ability to pursue our business strategies;
the difficulty to predict our long-term liquidity requirements and the adequacy of our capital resources;
restrictive covenants in the Credit Facility (as defined below) could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions and engage in other business activities that may be in our best interests;
the conditions in the oil and gas industry;
U.S. and global market and economic conditions, including impacts relating to inflation and supply chain disruptions;
the effects of public health threats, pandemics and epidemics, and the adverse impact thereof on our growth, operating costs, supply chain, labor availability, logistical capabilities, customer demand and industry demand generally, margins, utilization, cash position, taxes, the price of our securities, and our ability to access capital markets;
the ability of the members of Organization of Petroleum Exporting Countries (“OPEC+”) to agree on and to maintain crude oil price and production controls;
operating hazards, including the significant possibility of accidents resulting in personal injury or death, or property damage for which we may have limited or no insurance coverage or indemnification rights;
the possibility of not being fully indemnified against losses incurred due to catastrophic events;
claims, litigation or other proceedings that require cash payments or could impair financial condition;
credit risk associated with our customer base;
the effect of regulatory programs and environmental matters on our operations or prospects;
the impact that unfavorable or unusual weather conditions could have on our operations;
the potential inability to retain key employees and skilled workers;
political, legal, economic and other uncertainties associated with our international operations could materially restrict our operations or expose us to additional risks;
potential changes in tax laws, adverse positions taken by tax authorities or tax audits impacting our operating results;
changes in competitive and technological factors affecting our operations;
risks associated with the uncertainty of macroeconomic and business conditions worldwide;
risks to our operations from potential cyber-attacks;
counterparty risks associated with reliance on key suppliers;
challenges with estimating our potential liabilities related to our oil and natural gas property;
risks associated with potential changes of Bureau of Ocean Energy Management (“BOEM”) security and bonding requirements for offshore platforms;
the likelihood that the interests of our significant stockholders may conflict with the interests of our other stockholders;
the risks associated with owning our Class A Common Stock, par value $0.01 per share (the “Class A Common Stock”), for which there is no public market; and
the likelihood that our stockholders agreement may prevent certain transactions that could otherwise be beneficial to our stockholders.

 

These risks and other uncertainties related to our business are described in detail in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”). We undertake no obligation to update any of our forward-looking statements in the Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

 

3

 


 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

March 31, 2023

 

 

December 31, 2022

 

 ASSETS

 

 

 

 

 

 

 Current assets:

 

 

 

 

 

 

 Cash and cash equivalents

 

$

324,128

 

 

$

258,999

 

 Accounts receivable, net

 

 

228,283

 

 

 

249,808

 

 Income taxes receivable

 

 

7,540

 

 

 

6,665

 

 Prepaid expenses

 

 

20,183

 

 

 

17,299

 

 Inventory

 

 

72,324

 

 

 

65,587

 

 Other current assets

 

 

5,886

 

 

 

6,276

 

 Assets held for sale

 

 

4,421

 

 

 

11,978

 

 Total current assets

 

 

662,765

 

 

 

616,612

 

 Property, plant and equipment, net

 

 

294,094

 

 

 

282,376

 

 Note receivable

 

 

70,643

 

 

 

69,679

 

 Restricted cash

 

 

80,599

 

 

 

80,108

 

 Deferred tax assets

 

 

81,652

 

 

 

97,492

 

 Other assets, net

 

 

43,050

 

 

 

44,745

 

 Total assets

 

$

1,232,803

 

 

$

1,191,012

 

 

 

 

 

 

 

 

 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 Current liabilities:

 

 

 

 

 

 

 Accounts payable

 

$

46,209

 

 

$

31,570

 

 Accrued expenses

 

 

110,602

 

 

 

116,575

 

 Income taxes payable

 

 

15,198

 

 

 

11,682

 

 Decommissioning liability

 

 

19,361

 

 

 

9,770

 

 Liabilities held for sale

 

 

3,516

 

 

 

3,349

 

 Total current liabilities

 

 

194,886

 

 

 

172,946

 

 Decommissioning liability

 

 

143,278

 

 

 

150,901

 

 Deferred tax liabilities

 

 

3,181

 

 

 

3,388

 

 Other liabilities

 

 

78,425

 

 

 

80,893

 

 Total liabilities

 

 

419,770

 

 

 

408,128

 

 

 

 

 

 

 

 

 Stockholders’ equity:

 

 

 

 

 

 

 Class A common stock $0.01 par value; 50,000 shares authorized;
    
19,999 shares issued and outstanding at March 31, 2023 and
    December 31, 2022

 

 

200

 

 

 

200

 

 Class B common stock $0.01 par value; 2,000 shares authorized;
    
156 shares issued and 152 shares outstanding at March 31, 2023 and
   
84 shares issued and 80 shares outstanding at December 31, 2022

 

 

2

 

 

 

1

 

 Class A Additional paid-in capital

 

 

902,486

 

 

 

902,486

 

 Class B Additional paid-in capital

 

 

5,831

 

 

 

5,896

 

 Accumulated deficit

 

 

(95,486

)

 

 

(125,699

)

 Total stockholders’ equity

 

 

813,033

 

 

 

782,884

 

 Total liabilities and stockholders’ equity

 

$

1,232,803

 

 

$

1,191,012

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

 

 

 

 

4

 


 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 

(unaudited)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

 Revenues:

 

 

 

 

 

 

 Services

 

$

93,290

 

 

$

91,439

 

 Rentals

 

 

85,610

 

 

 

67,162

 

 Product sales

 

 

41,237

 

 

 

39,329

 

 Total revenues

 

 

220,137

 

 

 

197,930

 

 Cost of revenues:

 

 

 

 

 

 

 Services

 

 

65,079

 

 

 

62,216

 

 Rentals

 

 

29,048

 

 

 

24,613

 

 Product sales

 

 

23,594

 

 

 

25,551

 

 Total cost of revenues (exclusive of depreciation, depletion, amortization and accretion)

 

 

117,721

 

 

 

112,380

 

 Depreciation, depletion, amortization and accretion:

 

 

 

 

 

 

 Services

 

 

7,295

 

 

 

13,666

 

 Rentals

 

 

6,694

 

 

 

10,037

 

 Product sales

 

 

6,150

 

 

 

10,382

 

 Total depreciation, depletion, amortization and accretion

 

 

20,139

 

 

 

34,085

 

 General and administrative expenses

 

 

30,990

 

 

 

32,018

 

 Restructuring expenses

 

 

1,983

 

 

 

1,555

 

 Other (gains) and losses, net

 

 

(1,398

)

 

 

1,147

 

 Income from operations

 

 

50,702

 

 

 

16,745

 

 Other income (expense):

 

 

 

 

 

 

 Interest income, net

 

 

5,439

 

 

 

1,179

 

 Other income (expense)

 

 

(2,152

)

 

 

13,947

 

 Income from continuing operations before income taxes

 

 

53,989

 

 

 

31,871

 

 Income tax expense

 

 

(24,065

)

 

 

(7,884

)

 Net income from continuing operations

 

 

29,924

 

 

 

23,987

 

 Income from discontinued operations, net of income tax

 

 

289

 

 

 

1,739

 

 Net income

 

$

30,213

 

 

$

25,726

 

 

 

 

 

 

 

 

 Income per share - basic:

 

 

 

 

 

 

 Net income from continuing operations

 

$

1.49

 

 

$

1.20

 

 Income from discontinued operations, net of income tax

 

 

0.01

 

 

 

0.09

 

 Net income

 

$

1.50

 

 

$

1.29

 

 

 

 

 

 

 

 

 Income per share - diluted:

 

 

 

 

 

 

 Net income from continuing operations

 

$

1.49

 

 

$

1.20

 

 Income from discontinued operations, net of income tax

 

 

0.01

 

 

 

0.08

 

 Net income

 

$

1.50

 

 

$

1.28

 

 

 

 

 

 

 

 

 Weighted-average shares outstanding

 

 

 

 

 

 

 Basic

 

 

20,107

 

 

 

19,999

 

 Diluted

 

 

20,131

 

 

 

20,056

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

 

 

5

 


 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders' Equity

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Common Stock

 

 

paid-in

 

 

 

 

 

 

 

 

 

Class A

 

 

Class B

 

 

capital

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Class A

 

 

Class B

 

 

deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Balances, December 31, 2021

 

 

19,999

 

 

$

200

 

 

 

76

 

 

$

1

 

 

$

902,486

 

 

$

1,224

 

 

$

(162,178

)

 

$

741,733

 

 Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

286,465

 

 

 

286,465

 

 Cash dividends ($12.45 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(249,986

)

 

 

(249,986

)

 Stock-based compensation expense, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,807

 

 

 

-

 

 

 

4,807

 

 Restricted stock units vested

 

 

-

 

 

 

-

 

 

 

10

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 Share withheld and retired

 

 

-

 

 

 

-

 

 

 

(2

)

 

 

-

 

 

 

-

 

 

 

(135

)

 

 

-

 

 

 

(135

)

 Shares placed in treasury

 

 

-

 

 

 

-

 

 

 

(4

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 Balances, December 31, 2022

 

 

19,999

 

 

 

200

 

 

 

80

 

 

 

1

 

 

 

902,486

 

 

 

5,896

 

 

 

(125,699

)

 

 

782,884

 

 Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

30,213

 

 

 

30,213

 

 Restricted stock units vested

 

 

-

 

 

 

-

 

 

 

91

 

 

 

1

 

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

-

 

 Shares withheld and retired

 

 

-

 

 

 

-

 

 

 

(19

)

 

 

-

 

 

 

-

 

 

 

(1,116

)

 

 

-

 

 

 

(1,116

)

 Stock-based compensation expense, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,052

 

 

 

-

 

 

 

1,052

 

 Balances, March 31, 2023

 

 

19,999

 

 

$

200

 

 

 

152

 

 

$

2

 

 

$

902,486

 

 

$

5,831

 

 

$

(95,486

)

 

$

813,033

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

 

6

 


 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

2023

 

 

 

2022

 

 Cash flows from operating activities:

 

 

 

 

 

 

 

 Net income

 

$

30,213

 

 

 

$

25,726

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 Depreciation, depletion, amortization and accretion

 

 

20,139

 

 

 

 

34,085

 

 Deferred income taxes

 

 

15,677

 

 

 

 

(2,769

)

 Stock based compensation expense

 

 

1,052

 

 

 

 

585

 

 Bad debt

 

 

732

 

 

 

 

(1,203

)

 Gain on sale of equity securities

 

 

-

 

 

 

 

(1,761

)

 Unrealized gain on investment in equity securities

 

 

-

 

 

 

 

(6,474

)

 Other gains, net

 

 

(2,225

)

 

 

 

(5,755

)

 Other reconciling items, net

 

 

(837

)

 

 

 

126

 

 Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 Accounts receivable

 

 

20,793

 

 

 

 

(13,359

)

 Prepaid expenses

 

 

(2,884

)

 

 

 

(176

)

 Inventory and other current assets

 

 

(7,292

)

 

 

 

1,562

 

 Accounts payable

 

 

1,963

 

 

 

 

3,888

 

 Accrued expenses

 

 

(8,045

)

 

 

 

(3,673

)

 Income taxes

 

 

2,641

 

 

 

 

4,239

 

 Other, net

 

 

1,326

 

 

 

 

49

 

 Net cash from operating activities

 

 

73,253

 

 

 

 

35,090

 

 Cash flows from investing activities:

 

 

 

 

 

 

 

 Payments for capital expenditures

 

 

(18,086

)

 

 

 

(11,297

)

 Proceeds from sales of assets

 

 

11,569

 

 

 

 

13,379

 

 Proceeds from sales of equity securities

 

 

-

 

 

 

 

7,365

 

 Net cash from investing activities

 

 

(6,517

)

 

 

 

9,447

 

 Cash flows from financing activities:

 

 

 

 

 

 

 

  Tax withholdings for vested restricted stock units

 

 

(1,116

)

 

-

 

 

-

 

 Net cash from financing activities

 

 

(1,116

)

 

 

 

-

 

 Net change in cash, cash equivalents, and restricted cash

 

 

65,620

 

 

 

 

44,537

 

 Cash, cash equivalents, and restricted cash at beginning of period

 

 

339,107

 

 

 

 

394,535

 

 Cash, cash equivalents, and restricted cash at end of period

 

$

404,727

 

 

 

$

439,072

 

 

See accompanying notes to unaudited condensed consolidated financial statements

 

7

 


 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(unless noted otherwise, amounts in thousands, except share data)

 

(1) Basis of Presentation

 

Certain information and footnote disclosures normally included 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 (the “SEC”); however, management believes the disclosures are adequate such that the information presented is not misleading.

 

As used herein, the “Company,” “we,” “us” and similar terms refer to Superior Energy Services, Inc. and its consolidated subsidiaries, unless otherwise specifically stated.

 

These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting primarily of normal recurring adjustments, necessary for a fair statement of our financial position as of March 31, 2023, and our results of operations and cash flows for the three months ended March 31, 2023 and 2022. The balance sheet as of December 31, 2022, was derived from our audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements.

 

(2) Revenue

 

Disaggregation of Revenue

 

The following table presents our revenues by segment disaggregated by geography:

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

U.S. land

 

 

 

 

 

 

Rentals

 

$

45,133

 

 

$

33,962

 

Well Services

 

 

6,355

 

 

 

4,548

 

Total U.S. land

 

 

51,488

 

 

 

38,510

 

 

 

 

 

 

 

 

U.S. offshore

 

 

 

 

 

 

Rentals

 

 

35,670

 

 

 

32,753

 

Well Services

 

 

16,321

 

 

 

28,321

 

Total U.S. offshore

 

 

51,991