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Slow Drilling Takes Hit on Superior Energy Services' Q2 Financials

Share Print Bookmark    |    Monday,July 25,2016

Superior Energy Services, Inc. announced a net loss from continuing operations for the second quarter of 2016 of $468.6 million, or $3.09 per share, on revenue of $356.3 million.  This compares to a net loss from continuing operations for the first quarter of 2016 of $84.5 million, or $0.56 per share, on revenue of $413.1 million and a net loss from continuing operations for the second quarter of 2015 of $775.1 million, or $5.15 per share, on revenue of $710.8 million.

The Company reported a pre-tax expense of $460.3 million in reduction in value of assets, primarily related to an impairment of goodwill in its Production Services and Onshore Completion and Workover Services segments.  The Company also recorded a pre-tax charge of $7.4 million for restructuring costs.  The resulting adjusted net loss from continuing operations for the second quarter of 2016 was $80.4 million, or $0.53 per share.  This compares to an adjusted net loss from continuing operations of $74.4 million, or $0.49 per share for the first quarter of 2016, and an adjusted net loss from continuing operations of $47.4 million, or $0.31 per share for the second quarter of 2015.

David Dunlap, President and CEO, said: "Oil and gas drilling and completion activity slowed during the second quarter and as a result Superior Energy's second quarter operational and financial results declined as well. In U.S. land markets, pricing and utilization continued to move lower, although at a slower pace than prior quarters.  We even observed a slight increase in activity, as measured by the U.S. rig count, as the end of the quarter approached, which was a welcome signal from the market.  While it remains difficult to tell if the prolonged industry downturn has reached bottom, we are encouraged that several of our domestic customers who possess high quality shale acreage positions will increase spending by the fourth quarter of this year.

"We believe we have taken major strides towards optimizing our cost structure and have ensured that we have significant operating capacity to meet any increase in market demand.  Our focus in the coming quarters is to maximize our opportunities to expand revenues and margins as drilling and completion activity grows." 

Second Quarter 2016 Geographic Breakdown

U.S. land revenue was $157.1 million in the second quarter of 2016, a 17% decrease as compared with revenue of $190.1 million in the first quarter of 2016 and a 59% decrease compared to revenue of $378.8 million in the second quarter of 2015.  Gulf of Mexico revenue was $104.3 million, a sequential decrease of 8% from first quarter 2016 revenue of $113.4 million, and a 36% decrease from revenue of $162.5 million in the second quarter of 2015.  International revenue decreased 13% to $94.9 million as compared with $109.6 million in the first quarter of 2016 and decreased 44% as compared to revenue of $169.5 million in the second quarter of 2015.

Drilling Products and Services Segment

The Drilling Products and Services segment revenue in the second quarter of 2016 was $80.7 million, a 17% decrease from first quarter 2016 revenue of $96.6 million and a 45% decrease from second quarter 2015 revenue of $146.3 million.

U.S. land revenue decreased 41% sequentially to $11.7 million, Gulf of Mexico revenue decreased 15% sequentially to $38.9 million and international revenue decreased 3% sequentially to $30.1 million.  All product lines in this segment experienced a combination of lower levels of utilization and pricing pressure. 

Onshore Completion and Workover Services Segment

The Onshore Completion and Workover Services segment revenue in the second quarter of 2016 was $115.9 million, a 13% decrease from first quarter 2016 revenue of $132.5 million and a 49% decrease from second quarter 2015 revenue of $226.5 million.  Activity declines in this segment occurred primarily in the fluid management and horizontal well fracturing service lines while well service rig activity increased slightly.

Production Services Segment

The Production Services segment revenue in the second quarter of 2016 was $80.5 million, a 17% decrease from first quarter 2016 revenue of $96.7 million and a 61% decrease from second quarter 2015 revenue of $208.7 million.

U.S. land revenue decreased 26% sequentially to $20.4 million due to lower levels of activity across all product lines and a continued emphasis on minimizing operations that are challenged to achieve cash breakeven levels.  Gulf of Mexico revenue decreased 5% sequentially to $15.6 million due to decreased hydraulic workover and snubbing, electric line and slickline activity which was offset slightly by increased coiled tubing activity.  International revenue decreased 16% sequentially to $44.5 million primarily due to a decrease in hydraulic workover and snubbing activity, partially offset by increased revenues from coiled tubing services in Argentinaand India, higher levels of electric line and slickline activity in Argentina and higher stimulation revenues inBrazil.  

Technical Solutions Segment

The Technical Solutions segment revenue in the second quarter of 2016 was $79.2 million, a 9% decrease from first quarter 2016 revenue of $87.3 million and a 39% decrease from second quarter 2015 revenue of $129.3 million.

U.S. land revenue decreased 11% sequentially to $9.1 million.  Gulf of Mexico revenue decreased 3% sequentially to $49.8 million due to decreased completion tools revenue which was almost entirely offset by increased plug and abandonment activity both on the shelf and deep water.  International revenue decreased 21% sequentially to $20.3 million primarily as a result of lower levels of well control activity.