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 September 30, 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 October 31, 2023 was 19,998,695.

The number of shares of the registrant’s Class B common stock outstanding on October 31, 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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

22

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 6.

Exhibits

23

 

 

 

SIGNATURES

 

24

 

 

 

2

 


 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q for the quarterly period ended September 30, 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)

 

 

 

 

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 ASSETS

 

 

 

 

 

 

 Current assets:

 

 

 

 

 

 

 Cash and cash equivalents

 

$

357,769

 

 

$

258,999

 

 Accounts receivable, net

 

 

251,395

 

 

 

249,808

 

 Income taxes receivable

 

 

6,046

 

 

 

6,665

 

 Prepaid expenses

 

 

17,167

 

 

 

17,299

 

 Inventory

 

 

87,010

 

 

 

65,587

 

 Other current assets

 

 

7,185

 

 

 

6,276

 

 Assets held for sale

 

 

753

 

 

 

11,978

 

 Total current assets

 

 

727,325

 

 

 

616,612

 

 Property, plant and equipment, net

 

 

291,144

 

 

 

282,376

 

 Note receivable

 

 

72,611

 

 

 

69,679

 

 Restricted cash

 

 

80,940

 

 

 

80,108

 

 Deferred tax assets

 

 

68,187

 

 

 

97,492

 

 Other assets, net

 

 

42,826

 

 

 

44,745

 

 Total assets

 

$

1,283,033

 

 

$

1,191,012

 

 

 

 

 

 

 

 

 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 Current liabilities:

 

 

 

 

 

 

 Accounts payable

 

 

41,760

 

 

$

31,570

 

 Accrued expenses

 

 

103,279

 

 

 

116,575

 

 Income taxes payable

 

 

15,680

 

 

 

11,682

 

 Decommissioning liability

 

 

25,334

 

 

 

9,770

 

 Liabilities held for sale

 

 

292

 

 

 

3,349

 

 Total current liabilities

 

 

186,345

 

 

 

172,946

 

 Decommissioning liability

 

 

136,233

 

 

 

150,901

 

 Other liabilities

 

 

45,231

 

 

 

84,281

 

 Total liabilities

 

 

367,809

 

 

 

408,128

 

 

 

 

 

 

 

 

 Stockholders’ equity:

 

 

 

 

 

 

 Class A common stock $0.01 par value; 50,000 shares authorized;
    
19,999 shares issued and outstanding at September 30, 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 September 30, 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

 

 

7,879

 

 

 

5,896

 

 Accumulated deficit

 

 

4,657

 

 

 

(125,699

)

 Total stockholders’ equity

 

 

915,224

 

 

 

782,884

 

 Total liabilities and stockholders’ equity

 

$

1,283,033

 

 

$

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

 

 

For the Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 Revenues:

 

 

 

 

 

 

 

 

 

 

 

 Services

$

80,956

 

 

$

99,763

 

 

$

280,376

 

 

$

291,268

 

 Rentals

 

89,348

 

 

 

80,173

 

 

 

260,319

 

 

 

224,328

 

 Product sales

 

40,081

 

 

 

42,351

 

 

 

134,300

 

 

 

129,261

 

 Total revenues

 

210,385

 

 

 

222,287

 

 

 

674,995

 

 

 

644,857

 

 Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 Services

 

57,202

 

 

 

66,205

 

 

 

181,221

 

 

 

199,903

 

 Rentals

 

29,580

 

 

 

25,816

 

 

 

88,942

 

 

 

74,664

 

 Product sales

 

23,063

 

 

 

24,060

 

 

 

78,157

 

 

 

74,862

 

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

 

109,845

 

 

 

116,081

 

 

 

348,320

 

 

 

349,429

 

 Depreciation, depletion, amortization and accretion:

 

 

 

 

 

 

 

 

 

 

 

 Services

 

6,684

 

 

 

8,266

 

 

 

21,683

 

 

 

30,224

 

 Rentals

 

7,272

 

 

 

6,749

 

 

 

20,131

 

 

 

23,278

 

 Product sales

 

6,534

 

 

 

5,493

 

 

 

19,436

 

 

 

24,437

 

 Total depreciation, depletion, amortization and accretion

 

20,490

 

 

 

20,508

 

 

 

61,250

 

 

 

77,939

 

 General and administrative expenses

 

30,089

 

 

 

31,841

 

 

 

92,256

 

 

 

94,090

 

 Restructuring expenses

 

-

 

 

 

1,223

 

 

 

1,983

 

 

 

4,441

 

 Other gains, net

 

(4,073

)

 

 

(13,397

)

 

 

(5,424

)

 

 

(30,263

)

 Income from operations

 

54,034

 

 

 

66,031

 

 

 

176,610

 

 

 

149,221

 

 Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 Interest income, net

 

6,629

 

 

 

3,373

 

 

 

18,581

 

 

 

6,011

 

 Loss on Blue Chip Swap securities

 

(12,120

)

 

 

-

 

 

 

(12,120

)

 

 

-

 

 Other expense, net

 

(4,520

)

 

 

(6,838

)

 

 

(8,508

)

 

 

(6,362

)

 Income from continuing operations before income taxes

 

44,023

 

 

 

62,566

 

 

 

174,563

 

 

 

148,870

 

 Income tax expense

 

(11,403

)

 

 

(14,058

)

 

 

(44,615

)

 

 

(32,813

)

 Net income from continuing operations

 

32,620

 

 

 

48,508

 

 

 

129,948

 

 

 

116,057

 

 Income (loss) from discontinued operations, net of income tax

 

128

 

 

 

17

 

 

 

408

 

 

 

(188

)

 Net income

$

32,748

 

 

$

48,525

 

 

$

130,356

 

 

$

115,869

 

 

 

 

 

 

 

 

 

 

 

 

 

 Income (loss) per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 Net income from continuing operations

$

1.62

 

 

$

2.42

 

 

$

6.46

 

 

$

5.80

 

 Income (loss) from discontinued operations, net of income tax

 

0.01

 

 

 

-

 

 

 

0.02

 

 

 

(0.01

)

 Net income

$

1.63

 

 

$

2.42

 

 

$

6.48

 

 

$

5.79

 

 

 

 

 

 

 

 

 

 

 

 

 

 Income (loss) per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 Net income from continuing operations

$

1.62

 

 

$

2.41

 

 

$

6.45

 

 

$

5.78

 

 Income (loss) from discontinued operations, net of income tax

 

-

 

 

 

0.01

 

 

 

0.02

 

 

 

(0.01

)

 Net income

$

1.62

 

 

$

2.42

 

 

$

6.47

 

 

$

5.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 Basic

 

20,136

 

 

 

20,024

 

 

 

20,123

 

 

 

20,016

 

 Diluted

 

20,159

 

 

 

20,090

 

 

 

20,144

 

 

 

20,074

 

 

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

 

 Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

67,395

 

 

 

67,395

 

 Stock-based compensation expense, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,024

 

 

 

-

 

 

 

1,024

 

 Balances, June 30, 2023

 

 

19,999

 

 

$

200

 

 

 

152

 

 

$

2

 

 

$

902,486

 

 

$

6,855

 

 

$

(28,091

)

 

$

881,452

 

 Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

32,748

 

 

 

32,748

 

 Stock-based compensation expense, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,024

 

 

 

-

 

 

 

1,024

 

 Balances, September 30, 2023

 

 

19,999

 

 

$

200

 

 

 

152

 

 

$

2

 

 

$

902,486

 

 

$

7,879

 

 

$

4,657

 

 

$

915,224

 

 

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 Nine Months Ended

 

 

 

September 30,

 

 

2023

 

 

2022

 

 Cash flows from operating activities:

 

 

 

 

 

 

 Net income

 

$

130,356

 

 

$

115,869

 

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

 

 

 

 

 

 

 Depreciation, depletion, amortization and accretion

 

 

61,250

 

 

 

77,939

 

 Deferred income taxes

 

 

29,589

 

 

 

7,254

 

 Stock based compensation expense

 

 

3,100

 

 

 

3,519

 

 Bad debt

 

 

(423

)

 

 

(106

)

 Gain on sale of equity securities

 

 

-

 

 

 

(3,611

)

 Unrealized gain on investment in equity securities

 

 

-

 

 

 

(908

)

 Other gains, net

 

 

(6,359

)

 

 

(37,148

)

 Loss on Blue Chip Swap securities

 

 

12,120

 

 

 

-

 

 Washington State Tax Settlement

 

 

(27,068

)

 

 

-

 

 Decommissioning costs

 

 

(6,279

)

 

 

-

 

 Other reconciling items, net

 

 

(2,550

)

 

 

2,835

 

 Changes in operating assets and liabilities:

 

 

 

 

 

 

 Accounts receivable

 

 

(3,399

)

 

 

(37,072

)

 Prepaid expenses

 

 

(511

)

 

 

(279

)

 Inventory and other current assets

 

 

(23,978

)

 

 

(8,641

)

 Accounts payable