10-Q
Q10000886835--12-31false0000886835spn:WhatcomCountySuperiorCourtMember2023-05-312023-05-310000886835us-gaap:CorporateAndOtherMember2023-12-310000886835spn:UnitedStatesGulfOfMexicoMember2023-01-012023-03-310000886835spn:RentalsMemberspn:ServicesMember2023-01-012023-03-310000886835spn:RentalsMember2024-01-012024-03-310000886835spn:PlatformServiceMember2023-12-310000886835spn:PlatformServiceMember2024-03-310000886835spn:WellServicesMemberus-gaap:ProductMember2024-01-012024-03-310000886835us-gaap:CommonClassBMemberus-gaap:CommonStockMember2023-01-012023-12-310000886835spn:UnitedStatesLandMember2023-01-012023-03-310000886835spn:RevenueByTypeMember2024-01-012024-03-310000886835spn:RentalsMemberspn:RentalsServicesMember2023-01-012023-03-310000886835us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonClassAMember2023-12-310000886835spn:RentalsMemberspn:ServicesMember2024-01-012024-03-310000886835spn:RevenueByGeographyMember2024-01-012024-03-310000886835us-gaap:CommonClassAMemberus-gaap:CommonStockMember2024-01-012024-03-310000886835us-gaap:RetainedEarningsMember2023-12-310000886835us-gaap:CorporateAndOtherMember2024-01-012024-03-3100008868352022-12-310000886835spn:WellServicesMemberus-gaap:ProductMember2023-01-012023-03-310000886835spn:RentalsMemberus-gaap:NonUsMember2023-01-012023-03-310000886835spn:RentalsMember2023-01-012023-03-310000886835spn:NotesReceivableSellerObligationMember2023-01-012023-03-310000886835spn:RentalsMemberspn:UnitedStatesLandMember2024-01-012024-03-310000886835us-gaap:ProductMember2023-01-012023-03-310000886835spn:RentalsServicesMember2024-01-012024-03-310000886835spn:RentalsMemberspn:UnitedStatesGulfOfMexicoMember2024-01-012024-03-310000886835us-gaap:CommonClassAMember2024-01-012024-03-310000886835spn:ManagementIncentivePlanMember2023-12-310000886835spn:UnitedStatesGulfOfMexicoMember2024-01-012024-03-3100008868352024-01-012024-03-310000886835us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonClassAMember2022-12-310000886835us-gaap:ConstructionInProgressMember2023-12-310000886835spn:WellServicesMember2023-01-012023-03-310000886835spn:WellServicesMemberspn:UnitedStatesGulfOfMexicoMember2023-01-012023-03-310000886835spn:RentalsMember2024-01-012024-03-310000886835spn:WellServicesMemberspn:ServicesMember2023-01-012023-03-310000886835us-gaap:VehiclesMember2023-12-310000886835spn:WellServicesMember2024-03-310000886835us-gaap:OilAndGasPropertiesMember2024-03-310000886835spn:RentalsMemberus-gaap:NonUsMember2024-01-012024-03-310000886835spn:ServicesMember2024-01-012024-03-310000886835spn:RentalsMember2023-01-012023-03-310000886835spn:NonQualifiedDeferredCompensationAssetsAndLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310000886835us-gaap:CommonClassAMemberus-gaap:CommonStockMember2023-12-310000886835spn:WellServicesMember2024-01-012024-03-310000886835us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310000886835spn:WellServicesMemberspn:RentalsServicesMember2024-01-012024-03-310000886835us-gaap:NonUsMember2023-01-012023-03-310000886835us-gaap:MachineryAndEquipmentMember2023-12-310000886835spn:BuildingsImprovementsAndLeaseholdImprovementsMember2023-12-310000886835us-gaap:RetainedEarningsMember2024-03-310000886835spn:ServicesMember2023-01-012023-03-310000886835spn:WellServicesMemberspn:UnitedStatesLandMember2024-01-012024-03-310000886835spn:WellServicesMemberspn:RentalsServicesMember2023-01-012023-03-3100008868352023-01-012023-03-310000886835us-gaap:ConstructionInProgressMember2024-03-310000886835us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonClassAMember2024-01-012024-03-310000886835us-gaap:VehiclesMember2024-03-310000886835us-gaap:RetainedEarningsMember2023-01-012023-12-3100008868352024-05-010000886835us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonClassAMember2023-01-012023-12-310000886835us-gaap:OilAndGasPropertiesMember2023-12-310000886835us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-12-310000886835spn:NotesReceivableSellerObligationMember2024-01-012024-03-310000886835us-gaap:FurnitureAndFixturesMember2024-03-310000886835us-gaap:RetainedEarningsMember2024-01-012024-03-310000886835spn:WellServicesMemberus-gaap:NonUsMember2024-01-012024-03-310000886835us-gaap:LandMember2023-12-310000886835spn:WellServicesMember2023-12-310000886835spn:RentalsMemberus-gaap:ProductMember2023-01-012023-03-310000886835us-gaap:CorporateAndOtherMember2024-03-310000886835us-gaap:RevolvingCreditFacilityMember2024-03-310000886835spn:WellServicesMemberspn:UnitedStatesGulfOfMexicoMember2024-01-012024-03-310000886835us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonClassBMember2023-01-012023-12-310000886835us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-12-310000886835spn:WellServicesMemberus-gaap:NonUsMember2023-01-012023-03-310000886835us-gaap:CorporateAndOtherMember2023-01-012023-03-310000886835spn:UnitedStatesLandMember2024-01-012024-03-3100008868352023-12-310000886835spn:ManagementIncentivePlanMember2024-03-310000886835spn:WellServicesMemberspn:UnitedStatesLandMember2023-01-012023-03-310000886835us-gaap:MachineryAndEquipmentMember2024-03-310000886835us-gaap:LandMember2024-03-310000886835spn:RentalsMemberspn:RentalsServicesMember2024-01-012024-03-3100008868352023-03-310000886835us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonClassAMember2024-03-310000886835spn:RentalsMember2024-03-3100008868352023-01-012023-12-310000886835spn:RentalsMember2023-12-310000886835spn:WellServicesMemberspn:ServicesMember2024-01-012024-03-310000886835us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonClassBMember2022-12-310000886835spn:RentalsMemberspn:UnitedStatesLandMember2023-01-012023-03-310000886835spn:RentalsMemberus-gaap:ProductMember2024-01-012024-03-310000886835us-gaap:RetainedEarningsMember2022-12-310000886835us-gaap:ProductMember2024-01-012024-03-310000886835us-gaap:NonUsMember2024-01-012024-03-310000886835spn:NonQualifiedDeferredCompensationAssetsAndLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-3100008868352024-03-310000886835spn:BuildingsImprovementsAndLeaseholdImprovementsMember2024-03-310000886835us-gaap:CommonClassAMemberus-gaap:CommonStockMember2024-03-310000886835spn:RentalsServicesMember2023-01-012023-03-310000886835us-gaap:FurnitureAndFixturesMember2023-12-310000886835us-gaap:CommonClassAMemberus-gaap:CommonStockMember2023-01-012023-12-310000886835spn:RentalsMemberspn:UnitedStatesGulfOfMexicoMember2023-01-012023-03-310000886835spn:JpmorganChaseBankAssetBackedSecuredRevolvingFacilityMemberspn:SeniorSecuredAssetBasedRevolvingCreditFacilityMember2023-12-31xbrli:purexbrli:sharesiso4217:USDiso4217:USDxbrli:shares

 

 

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, 2024

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

 

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 May 1, 2024 was 20,174,135

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

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

17

Item 4.

Controls and Procedures

17

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

18

Item 1A.

Risk Factors

18

Item 2

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

18

Item 6.

Exhibits

19

 

 

 

SIGNATURES

 

20

 

 

 

2

 


 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 (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 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,” “will,” “estimates,” and 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 Form 10-Q or 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 based on 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 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:

the difficulty to predict our long-term liquidity requirements and the adequacy of our capital resources;
restrictive covenants in the Credit Facility (as defined within) 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, interest rates 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 or other risks, including the significant possibility of accidents resulting in personal injury or death, or property damage or other claims or events 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;
cost and availability of insurance
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 (such as the war in Ukraine and conflict in Israel and broader geopolitical tensions in the Middle East and eastern Europe) 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 conditions worldwide (such as capital and credit markets conditions, inflation and interest rates);
risks to our operations and related infrastructure, or that of our business associates, 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, 2023 (the “Form 10-K”). We undertake no obligation to update any of our forward-looking statements in this 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, 2024

 

 

December 31, 2023

 

 ASSETS

 

 

 

 

 

 

 Current assets:

 

 

 

 

 

 

 Cash and cash equivalents

 

$

237,845

 

 

$

391,684

 

 Accounts receivable, net

 

 

243,416

 

 

 

276,868

 

 Inventory

 

 

69,095

 

 

 

74,995

 

 Income taxes receivable

 

 

10,424

 

 

 

10,542

 

 Prepaid expenses

 

 

20,562

 

 

 

18,614

 

 Other current assets

 

 

7,194

 

 

 

7,922

 

 Total current assets

 

 

588,536

 

 

 

780,625

 

 Property, plant and equipment, net

 

 

308,280

 

 

 

294,960

 

 Note receivable

 

 

70,214

 

 

 

69,005

 

 Restricted cash

 

 

57,711

 

 

 

85,444

 

 Deferred tax assets

 

 

61,130

 

 

 

67,241

 

 Other assets, net

 

 

42,304

 

 

 

43,718

 

 Total assets

 

$

1,128,175

 

 

$

1,340,993

 

 

 

 

 

 

 

 

 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 Current liabilities:

 

 

 

 

 

 

 Accounts payable

 

$

42,949

 

 

$

38,214

 

 Accrued expenses

 

 

95,431

 

 

 

103,782

 

 Income taxes payable

 

 

24,596

 

 

 

20,220

 

 Decommissioning liability

 

 

21,631

 

 

 

21,631

 

 Total current liabilities

 

 

184,607

 

 

 

183,847

 

 Decommissioning liability

 

 

150,733

 

 

 

148,652

 

 Deferred tax liabilities

 

 

4,564

 

 

 

6,138

 

 Other liabilities

 

 

40,744

 

 

 

41,445

 

 Total liabilities

 

 

380,648

 

 

 

380,082

 

 

 

 

 

 

 

 

 Stockholders’ equity:

 

 

 

 

 

 

 Common stock $0.01 par value; 52,000 shares authorized;
    
20,174 shares and 20,151 shares issued and outstanding at March 31, 2024
    and December 31, 2023, respectively

 

 

202

 

 

 

202

 

 Additional paid-in capital

 

 

910,527

 

 

 

911,388

 

 Retained (deficit) earnings

 

 

(163,202

)

 

 

49,321

 

 Total stockholders’ equity

 

 

747,527

 

 

 

960,911

 

 Total liabilities and stockholders’ equity

 

$

1,128,175

 

 

$

1,340,993

 

 

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,

 

 

 

2024

 

 

2023

 

 Revenues:

 

 

 

 

 

 

 Services

 

$

73,337

 

 

$

93,290

 

 Rentals

 

 

81,090

 

 

 

85,610

 

 Product sales

 

 

54,207

 

 

 

41,237

 

 Total revenues

 

 

208,634

 

 

 

220,137

 

 Cost of revenues:

 

 

 

 

 

 

 Services

 

 

46,489

 

 

 

65,079

 

 Rentals

 

 

31,603

 

 

 

29,048

 

 Product sales

 

 

28,547

 

 

 

23,594

 

 Total cost of revenues (exclusive of items shown separately below)

 

 

106,639

 

 

 

117,721

 

 Depreciation, depletion, amortization and accretion:

 

 

 

 

 

 

 Services

 

 

5,752

 

 

 

7,295

 

 Rentals

 

 

6,359

 

 

 

6,694

 

 Product sales

 

 

8,336

 

 

 

6,150

 

 Total depreciation, depletion, amortization and accretion

 

 

20,447

 

 

 

20,139

 

 General and administrative expenses

 

 

34,975

 

 

 

30,990

 

 Restructuring and transaction expenses

 

 

-

 

 

 

1,983

 

 Other gains, net

 

 

(1,082

)

 

 

(1,398

)

 Income from operations

 

 

47,655

 

 

 

50,702

 

 Other income (expense):

 

 

 

 

 

 

 Interest income, net

 

 

6,840

 

 

 

5,439

 

 Other expense, net

 

 

(1,813

)

 

 

(2,152

)

 Income from continuing operations before income taxes

 

 

52,682

 

 

 

53,989

 

 Income tax expense

 

 

(14,787

)

 

 

(24,065

)

 Net income from continuing operations

 

 

37,895

 

 

 

29,924

 

 Income from discontinued operations, net of tax

 

 

-

 

 

 

289

 

 Net income

 

$

37,895

 

 

$

30,213

 

 

 

 

 

 

 

 

 Income per share - basic and diluted:

 

 

 

 

 

 

 Net income from continuing operations

 

$

1.88

 

 

$

1.49

 

 Income from discontinued operations, net of tax

 

 

-

 

 

 

0.01

 

 Net income

 

$

1.88

 

 

$

1.50

 

 

 

 

 

 

 

 

 Weighted-average shares outstanding

 

 

 

 

 

 

 Basic

 

 

20,162

 

 

 

20,107

 

 Diluted

 

 

20,180

 

 

 

20,131

 

 

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, 2022

 

 

19,999

 

 

$

200

 

 

 

80

 

 

$

1

 

 

$

902,486

 

 

$

5,896

 

 

$

(125,699

)

 

$

782,884

 

 Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

175,020

 

 

 

175,020

 

 Stock-based compensation expense, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,123

 

 

 

-

 

 

 

4,123

 

 Restricted stock units vested

 

 

-

 

 

 

-

 

 

 

91

 

 

 

1

 

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

-

 

 Share withheld and retired

 

 

-

 

 

 

-

 

 

 

(19

)

 

 

-

 

 

 

-

 

 

 

(1,116

)

 

 

-

 

 

 

(1,116

)

 Shares placed in treasury

 

 

152

 

 

 

2

 

 

 

(152

)

 

 

(2

)

 

 

8,902

 

 

 

(8,902

)

 

 

-

 

 

 

-

 

 Balances, December 31, 2023

 

 

20,151

 

 

 

202

 

 

 

-

 

 

 

-

 

 

 

911,388

 

 

 

-

 

 

 

49,321

 

 

 

960,911

 

 Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

37,895

 

 

 

37,895

 

 Cash dividends ($12.38 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(250,418

)

 

 

(250,418

)

 Shares repurchased

 

 

(15

)

 

 

-

 

 

 

 

 

 

 

 

 

(961

)

 

 

 

 

 

 

 

 

(961

)

 Restricted stock units vested

 

 

53

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 Shares withheld and retired

 

 

(15

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,005

)

 

 

-

 

 

 

-

 

 

 

(1,005

)

 Stock-based compensation expense, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,105

 

 

 

-

 

 

 

-

 

 

 

1,105

 

 Balances, March 31, 2024

 

 

20,174

 

 

$

202

 

 

 

-

 

 

$

-

 

 

$

910,527

 

 

$

-

 

 

$

(163,202

)

 

$

747,527

 

 

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,

 

 

2024

 

 

2023

 

 Cash flows from operating activities:

 

 

 

 

 

 

 Net income

 

$

37,895

 

 

$

30,213

 

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

 

 

 

 

 

 

 Depreciation, depletion, amortization and accretion

 

 

20,447

 

 

 

20,139

 

 Deferred income taxes

 

 

4,538

 

 

 

15,677

 

 Stock based compensation expense

 

 

1,105

 

 

 

1,052

 

 Other gains, net

 

 

(1,083

)

 

 

(2,225

)

 Other reconciling items, net

 

 

(1,755

)

 

 

(105

)

 Changes in operating assets and liabilities

 

 

27,747

 

 

 

8,502

 

 Net cash from operating activities

 

 

88,894

 

 

 

73,253

 

 Cash flows from investing activities:

 

 

 

 

 

 

 Payments for capital expenditures

 

 

(20,698

)

 

 

(18,086

)

 Proceeds from sales of assets

 

 

2,616

 

 

 

11,569

 

 Net cash from investing activities

 

 

(18,082

)

 

 

(6,517

)

 Cash flows from financing activities:

 

 

 

 

 

 

 Distributions to shareholders

 

 

(250,417

)

 

 

-

 

 Repurchase of shares

 

 

(962

)

 

 

-

 

 Tax withholdings for vested restricted stock units

 

 

(1,005

)

 

 

(1,116

)

 Net cash from financing activities

 

 

(252,384

)

 

 

(1,116

)

 Net change in cash, cash equivalents, and restricted cash

 

 

(181,572

)

 

 

65,620

 

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

 

 

477,128

 

 

 

339,107

 

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

 

$

295,556

 

 

$

404,727

 

 

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, “we,” “us,” “our” 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 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, 2024, our results of operations and cash flows for the three months ended March 31, 2024 and 2023. The balance sheet as of December 31, 2023, was derived from our audited annual financial statements.

 

(2) Revenue and Accounts Receivable

 

Disaggregation of Revenue

 

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

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

U.S. land

 

 

 

 

 

 

Rentals

 

$

39,006

 

 

$

45,133

 

Well Services

 

 

7,466

 

 

 

6,355

 

Total U.S. land

 

 

46,472

 

 

 

51,488

 

 

 

 

 

 

 

 

U.S. offshore

 

 

 

 

 

 

Rentals

 

 

37,251

 

 

 

35,670

 

Well Services

 

 

28,872

 

 

 

16,321

 

Total U.S. offshore

 

 

66,123

 

 

 

51,991

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

Rentals

 

 

31,834

 

 

 

28,018

 

Well Services

 

 

64,205

 

 

 

88,640

 

Total International

 

 

96,039

 

 

 

116,658

 

Total Revenues

 

$

208,634

 

 

$

220,137

 

 

8

 


 

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

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Services

 

 

 

 

 

 

Rentals

 

$

20,650

 

 

$

17,145

 

Well Services

 

 

52,687

 

 

 

76,145

 

Total Services

 

 

73,337

 

 

 

93,290

 

 

 

 

 

 

 

 

Rentals

 

 

 

 

 

 

Rentals

 

 

76,073

 

 

 

82,075

 

Well Services

 

 

5,017

 

 

 

3,535

 

Total Rentals

 

 

81,090

 

 

 

85,610

 

 

 

 

 

 

 

 

Product Sales

 

 

 

 

 

 

Rentals

 

 

11,368

 

 

 

9,601

 

Well Services

 

 

42,839

 

 

 

31,636

 

Total Product Sales

 

 

54,207

 

 

 

41,237

 

Total Revenues

 

$

208,634

 

 

$

220,137

 

 

Accounts Receivable, net

 

Our allowance for credit losses as of March 31, 2024 and December 31, 2023 was approximately $6.0 million and $6.3 million, respectively.

 

(3) Inventory

 

The components of inventory are as follows:

 

 

March 31, 2024

 

 

 

December 31, 2023

 

 Finished goods

 

$

36,046

 

 

 

$

41,082

 

 Raw materials

 

 

8,489

 

 

 

 

10,379

 

 Work-in-process

 

 

8,804

 

 

 

 

8,025

 

 Supplies and consumables

 

 

15,756

 

 

 

 

15,509

 

 Total

 

$

69,095

 

 

 

$

74,995

 

 

Finished goods inventory includes component parts awaiting assembly of approximately $21.7 million and $25.0 million as of March 31, 2024 and December 31, 2023, respectively.

 

(4) Decommissioning Liability

 

The following table summarizes our net decommissioning liability:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 Wells

 

$

97,633

 

 

$

96,603

 

 Platform

 

 

74,731

 

 

 

73,680

 

 Total decommissioning liability

 

 

172,364

 

 

 

170,283

 

 Note receivable

 

 

(70,214

)

 

 

(69,005

)

 Total decommissioning liability, net of note receivable

 

$

102,150

 

 

$

101,278

 

 

Accretion expense for the three months ended March 31, 2024 and 2023 was $2.5 million and $2.3 million, respectively.

 

(5) Note Receivable

 

Our note receivable consists of a commitment from the seller of our oil and gas property for costs associated with abandonment. Pursuant to an agreement with the seller, we will invoice the seller an agreed upon amount at the completion of certain decommissioning activities. The gross amount of the seller's obligation to us is $108.4 million and is recorded at its present value, which totaled $70.2 million as of March 31, 2024.

 

9

 


 

The discount on the note receivable is currently based on an effective interest rate of 7.2% and is amortized to interest income over the expected timing of the completion of the decommissioning activities, which are expected to be completed during the second quarter of 2030. Interest is paid in kind and is compounded into the carrying amount of the note.

 

Non-cash interest income related to the note receivable for the three months ended March 31, 2024 and 2023 was $1.2 million and $1.0 million, respectively and is included in other reconciling items, net in the Condensed Consolidated Statements of Cash Flows.

 

(6) Property, Plant and Equipment, Net

 

A summary of property, plant and equipment, net is as follows:

 

 

March 31, 2024

 

 

December 31, 2023

 

 Machinery and equipment

 

$

441,839

 

 

$

422,071

 

 Buildings, improvements and leasehold improvements

 

 

66,432

 

 

 

66,746

 

 Vehicles

 

 

8,045

 

 

 

8,106

 

 Furniture and fixtures

 

 

22,857

 

 

 

22,746

 

 Construction-in-progress

 

 

15,551

 

 

 

8,195

 

 Land

 

 

26,644

 

 

 

25,654

 

 Oil and gas producing assets

 

 

29,323

 

 

 

28,984

 

 Total

 

 

610,691

 

 

 

582,502

 

 Accumulated depreciation and depletion

 

 

(302,411

)

 

 

(287,542

)

 Property, plant and equipment, net

 

$

308,280

 

 

$

294,960

 

 

A summary of depreciation and depletion expense associated with our property, plant and equipment is as follows:

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Depreciation

 

$

16,134

 

 

$

16,979

 

Depletion

 

 

1,572

 

 

 

585

 

Total depreciation and depletion

 

$

17,706

 

 

$

17,564

 

 

(7) Debt

 

In December 2023, we entered into an Amended and Restated Credit Agreement providing for up to a $140.0 million asset based secured revolving Credit Facility (the “Credit Facility”), which includes a sub-facility for financial letters of credit in an amount up to $40.0 million. The issuance of letters of credit will reduce availability under the Credit Facility dollar-for-dollar.

As of March 31, 2024, our borrowing base, as defined in the Credit Agreement, was approximately $120.9 million, and we had $36.7 million in letters of credit outstanding which reduced the borrowing availability to $84.2 million. At March 31, 2024, we had no outstanding borrowings under the Credit Facility and were in compliance with all required covenants.

 

(8) Fair Value Measurements

 

The following table provides a summary of the financial assets and liabilities measured at fair value on a recurring basis:

 

 

March 31, 2024

 

 

December 31, 2023

 

 Non-qualified deferred compensation assets and liabilities

 

 

 

 

 

 

 Other assets, net

 

$

15,592

 

 

$

17,079

 

 Accrued expenses

 

 

1,680

 

 

 

1,797

 

 Other liabilities

 

 

14,397

 

 

 

15,589

 

 

Our non-qualified deferred compensation plans 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 a Level 2 in the fair value hierarchy.

The carrying amount of cash equivalents, accounts receivable, accounts payable and accrued expenses, as reflected in the consolidated balance sheets, approximates fair value due to the short maturities.

 

10

 


 

 

(9) Other Expense, Net

 

A summary of other expense, net is as follows:

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Foreign currency losses

 

$

(1,674

)

 

$

(1,833

)

Other, net

 

 

(139

)

 

 

(319

)

 Other expense, net

 

$

(1,813

)

 

$

(2,152

)

 

Gains and losses on foreign currencies are primarily related to our operations in Argentina and Brazil.

 

(10) Segment Information

 

Summarized financial information for our segments is as follows:

 

 For the Three Months Ended March 31, 2024

 

 

 

 

Well

 

 

Corporate and

 

 

Consolidated

 

 

Rentals

 

 

Services

 

 

Other

 

 

Total

 

 Revenues

 

$

108,091

 

 

$

100,543

 

 

$

-

 

 

$

208,634

 

 Cost of revenues (exclusive of items shown separately below)

 

 

37,766

 

 

 

68,873

 

 

 

-

 

 

 

106,639

 

 Depreciation, depletion, amortization and accretion

 

 

11,810

 

 

 

8,131

 

 

 

506

 

 

 

20,447

 

 General and administrative expenses

 

 

7,192

 

 

 

11,327

 

 

 

16,456

 

 

 

34,975

 

 Restructuring expenses

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 Other (gains) and losses, net

 

 

112

 

 

 

(1,180

)

 

 

(14

)

 

 

(1,082

)

 Income (loss) from operations

 

$

51,211

 

 

$

13,392

 

 

$

(16,948

)

 

$

47,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 For the Three Months Ended March 31, 2023

 

 

 

 

Well

 

 

Corporate and

 

 

Consolidated

 

 

Rentals

 

 

Services

 

 

Other

 

 

Total

 

 Revenues

 

$

108,821

 

 

$

111,316

 

 

$

-

 

 

$

220,137

 

 Cost of revenues (exclusive of items shown separately below)

 

 

36,468

 

 

 

81,253

 

 

 

-

 

 

 

117,721

 

 Depreciation, depletion, amortization and accretion

 

 

12,168

 

 

 

7,077

 

 

 

894

 

 

 

20,139

 

 General and administrative expenses

 

 

7,202

 

 

 

11,499

 

 

 

12,289

 

 

 

30,990

 

 Restructuring expenses

 

 

-

 

 

 

-

 

 

 

1,983

 

 

 

1,983

 

 Other gains, net

 

 

(31

)

 

 

(1,367

)

 

 

-

 

 

 

(1,398

)

 Income (loss) from operations

 

$

53,014

 

 

$

12,854

 

 

$

(15,166

)

 

$

50,702

 

 

Identifiable Assets

 

 

 

 

 

Well

 

 

Corporate

 

 

Consolidated

 

 

Rentals

 

 

Services

 

 

and Other

 

 

Total

 

March 31, 2024

 

$

490,441

 

 

$

473,605

 

 

$

164,129

 

 

$

1,128,175

 

December 31, 2023

 

 

553,706

 

 

 

597,438

 

 

 

189,849

 

 

 

1,340,993

 

 

(11) Stock-Based Compensation Plans

 

We have a Management Incentive Plan (“MIP”), which provides the issuance of up to 1,999,869 shares of our Class A common stock, par value $0.01 per share (the “Class A Common Stock”) for the grant of share-based and cash-based awards.

 

As of December 31, 2023, we had 121,831 unvested awards granted under the MIP. During the three months ended March 31, 2024, 53,422 awards vested. Stock-based compensation expense totaled $1.1 million for both the three months ended March 31, 2024 and 2023. The unamortized grant date fair value of unvested awards as of March 31, 2024 was $2.9 million.

 

(12) Equity and Earnings per Share

 

Dividend

In the first quarter of 2024, we paid a special cash dividend of $12.38 per share on our outstanding Class A Common Stock totaling $250.4 million, which includes dividend equivalent payments to holders of unvested RSUs of $0.7 million.

 

Share Repurchases

 

11

 


 

In the first quarter of 2024, we purchased 14,673 shares of our Class A Common Stock totaling approximately $1.0 million from a former Board member. Upon repurchase, the repurchased shares were canceled.

Earnings per Share

 

The following table presents the reconciliation between the weighted average number of shares for basic and diluted earnings per share:

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 Weighted-average shares outstanding - basic

 

 

20,162

 

 

 

20,107

 

 Potentially dilutive stock awards and units

 

 

18

 

 

 

24

 

 Weighted-average shares outstanding - diluted

 

 

20,180

 

 

 

20,131

 

 

(13) Income Taxes

 

The effective tax rate for the three months ended March 31, 2024 and 2023 was 28.1% and 44.6%, respectively. The effective tax rate for both periods was impacted by non-deductible items and foreign tax rates that differ from the U.S. federal statutory rate of 21.0%. Additionally, the effective tax rate for the three months ended March 31, 2024 was impacted by current year foreign tax credits.

The effective tax rate for the three months ended March 31, 2023 was unfavorably impacted by the identification of an error in the tax provision for the year ended December 31, 2022 pertaining to certain net operating loss carryforwards that should have been eliminated as part of a worthless stock deduction taken in the fourth quarter of 2022. As such, we recognized an additional income tax expense of $7.6 million during the three months ended March 31, 2023 with a corresponding decrease to deferred tax assets to correct this immaterial misstatement. Management has determined that this misstatement was not material to any of its previously issued financial statements.

The Organization for Economic Co-operation and Development reached agreement on Pillar Two Model Rules (“Pillar Two”) to implement a minimum 15.0% tax rate on certain multinational companies. Participating countries are in various stages of proposing and enacting tax laws to implement the Pillar Two framework. We determined these rules did not have a material impact on our taxes for the three months ended March 31, 2024 and will continue to evaluate the impact of these proposals and legislative changes as new guidance emerges.

We had approximately $77.6 million in gross US foreign tax credit deferred tax assets with a valuation allowance of $50.0 million against them as of December 31, 2023. We continue to evaluate the realizability of our U.S. foreign tax credit carryforwards and may have additional valuation allowance releases in future periods if we achieve positive cumulative income results of appropriate character and timing that provide sufficient positive evidence to do so.

We had unrecognized tax benefits of $4.2 million as of March 31, 2024 and $4.1 million as of December 31, 2023, all of which would impact our effective tax rate if recognized. It is reasonably possible that $1.0 million of unrecognized tax benefits could be settled in the next twelve-month period due to the conclusion of tax audits or due to the expiration of statute of limitations. It is our policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.

 

(14) Contingencies

 

Due to the nature of our business, we are involved, from time to time, in various routine litigation or subject to disputes or claims or actions, including those commercial in nature, regarding our business activities in the ordinary course of business. Legal costs related to these matters are expensed as incurred. Management is of the opinion that none of the claims and actions will have a material adverse impact on our financial position, results of operations or cash flows.

 

As previously reported in the Form 10-K and Form 10-Q for the quarter ended March 31, 2023, we are currently involved in legal proceedings with the Washington State Department of Revenue in relation to a dispute arising in April 2019 pertaining to a use tax assessment from 2016 as a result of the construction of a vessel by one of our subsidiaries. The matter was appealed to the Washington State Board of Tax Appeals, which affirmed the assessment on May 22, 2023. On June 20, 2023, we appealed this decision to Whatcom County Superior Court where it is currently pending review. In order to appeal the assessment to Whatcom County Superior Court, we paid the full $27.1 million assessment on May 31, 2023.

 

(15) Supplemental Cash Flow Information

 

The table below is a reconciliation of cash, cash equivalents and restricted cash as of the beginning and the end of the periods presented:

12

 


 

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cash and cash equivalents

 

$

391,684

 

 

$

258,999

 

Restricted cash-non-current

 

 

85,444

 

 

 

80,108

 

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

 

$

477,128

 

 

$

339,107

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

237,845

 

 

$

324,128

 

Restricted cash-non-current

 

 

57,711

 

 

 

80,599

 

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

 

$

295,556

 

 

$

404,727

 

 

Accrued capital expenditures totaled $18.0 million and $13.8 million as of March 31, 2024 and 2023, respectively.

 

Additionally, during the three months ended March 31, 2023, gains recognized on the disposition of assets classified as discontinued operations totaled $0.8 million, and proceeds from these dispositions totaled $8.7 million.

 

Changes in operating accounts on cash flows from operating activities are as follows (in thousands):

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 Accounts receivable, net

 

$

33,771

 

 

$

20,793

 

 Inventory

 

 

5,900

 

 

 

(7,655

)

 Prepaid expenses and other current assets

 

 

(1,220

)

 

 

(2,521

)

 Accounts payable

 

 

(8,388

)

 

 

1,963

 

 Accrued expenses

 

 

(8,821

)

 

 

(8,045

)

 Income taxes

 

 

4,494

 

 

 

2,641

 

 Other, net

 

 

2,011

 

 

 

1,326

 

 Changes in operating assets and liabilities

 

$

27,747

 

 

$

8,502

 

 

(16) New Accounting Pronouncements

 

There were no material changes in recently issued or adopted accounting standards from those disclosed in our Form 10-K.

 

 

13

 


 

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

 

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. In addition, the following discussion and analysis and information contains forward-looking statements about our business, operations and financial performance based on our current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors, including, but not limited to, those identified below and any discussed in the sections titled “Risk Factors” and under the heading “Information Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

 

Executive Summary

 

General

 

We are a global oilfield products and services company with a portfolio of premier rental and well services brands providing customers with robust inventory, responsive delivery, engineered solutions, and expert consultative service — all aligned with enterprise-wide Shared Core Values for safe, sustainable operations and corporate citizenship; and committed to free cash flow generation and value creation.

Our portfolio of companies operates in two segments, Rentals and Well Services, to provide highly specialized solutions to the upstream oil and gas industry.

We drive true value to our business units by providing enterprise-wide support, financial discipline, capital strength, and strategic focus. Our experienced, knowledgeable leadership within those businesses has excellent latitude to execute their business strategy, determine pricing, allocate inventory, and develop new products and technology. All with a focus on safety, operational excellence, competitive positioning, and financial performance that entrenches our relationships with our customers and elevates our customers’ satisfaction.

 

Industry Trends

 

The oil and gas industry is both cyclical and seasonal. The level of spending in the energy industry is heavily influenced by the current and expected future prices of oil and natural gas. Changes in customer spending results in an increased or decreased demand for our services and products.

Our financial performance is significantly affected by rig count, which is an indicator of the level of spending by oil and gas companies. The following table summarizes rig counts in the U.S. land, U.S. offshore and International markets as well as prices of oil and natural gas.

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

2024