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Tesco Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 6, 2012 04:27PM
Tesco Corp. (TESO) filed Quarterly Report for the period ended 2012-06-30. Tesco Corporation (usa) has a market cap of $465.7 million; its shares were traded at around $10.23 with a P/E ratio of 12.6 and P/S ratio of 0.9. Tesco Corporation (usa) had an annual average earning growth of 18.5% over the past 10 years.
Highlight of Business Operations:Top Drive operating income — The increase in Top Drive operating income for the three and six months ended June 30, 2012 as compared to the same period in 2011 is due to higher revenue from Top Drive sales, and after-market sales and services discussed above. This increase for the six months ended June 30, 2012, was significantly offset due to an increase in warranty expense of $4.4 million specifically associated with the gearbox housing issue for our new ESI model.
The increase in Tubular Services revenue for the three and six months ended June 30, 2012 compared to the same periods in 2011 is due to increased demand for tubular services. A significant amount of current U.S. drilling activity is in shale formations that require directional and horizontal drilling techniques, which we believe are good applications for our proprietary service offerings. In addition, increased domestic and international demand for our tubular services, both proprietary and conventional, has resulted in new jobs at more favorable pricing terms. For the three and six months ended June 30, 2012, revenue related to our MCLRS proprietary tubular services increased $3.5 million and $4.3 million, respectively, compared to the same periods in 2011, due to the market conditions in the first half of 2011 resulting from the Deepwater Horizon explosion, the temporary Gulf of Mexico drilling moratorium and the resulting negative impact on the deepwater drilling permitting process. Tubular Services revenue for the three and six months ended June 30, 2012 included $0.5 million and $2.2 million, respectively, of revenue for CDS equipment sales while no CDS equipment sales were made during the same periods in 2011.
CASING DRILLING™ operating income for the three and six months ended June 30, 2012 includes approximately $13.3 million gain from the sale. For a detailed discussion of this matter, see Part I, Item 1—"Financial Statements", Note 3—Sale of CASING DRILLING™ in this Quarterly Report on Form 10-Q. Absent the gain, CASING DRILLING™ operating loss decreased for the three and six months ended June 30, 2012 compared to the same period in 2011 due primarily to increased revenue, the focus on cost management and related job activity.
We are an Alberta, Canada corporation. We conduct business and are taxed on profits earned in a number of jurisdictions around the world. Our income tax rate is based on the laws and rates in effect in the countries in which our operations are conducted or in which we are considered a resident for income tax purposes. Our effective tax rate, which is income tax expense as a percentage of pre-tax earnings, increased for the three months ended June 30, 2012 and decreased for the six months ended June 30, 2012 compared to the same periods in 2011 due to the fluctuating mix of pre-tax earnings in the various tax jurisdictions in which we operate around the world.
Investing Activities – Net cash provided by investing activities was $11.8 million during the six months ended June 30, 2012 compared to $19.3 million used during the same period of 2011. On June 4, 2012, we completed the sale of substantially all of the assets of the CASING DRILLING™ segment to the Schlumberger Group, which provided $38.0 million of cash proceeds, net of transactions costs. During the six months ended June 30, 2012 and 2011, we used $35.0 million and $19.5 million of cash, respectively, for capital expenditures, and sales of operating assets provided $8.9 million and $1.6 million of cash, respectively. Our capital expenditures increased by $14.6 million, or 75%, during the six months ended June 30, 2012 as compared to the same period of 2011 to meet projected demand for our products and services.
Stocks Discussed: TESO,