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Superior Energy Services Inc. Reports Operating Results (10-Q)

November 08, 2010 | About:
10qk

10qk

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Superior Energy Services Inc. (SPN) filed Quarterly Report for the period ended 2010-09-30.

Superior Energy Services Inc. has a market cap of $2.19 billion; its shares were traded at around $27.77 with a P/E ratio of 20.88 and P/S ratio of 1.51. Superior Energy Services Inc. had an annual average earning growth of 20.1% over the past 10 years. GuruFocus rated Superior Energy Services Inc. the business predictability rank of 4-star.SPN is in the portfolios of David Nierenberg of D3 Family of Funds, David Dreman of Dreman Value Management, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

During the third quarter of 2010, revenue was $435.4 million, income from operations was $61.3 million, net income was $33.2 million and diluted earnings per share was $0.42.

For the three months ended September 30, 2010, our revenues were $435.4 million, resulting in net income of $33.2 million, or $0.42 diluted earnings per share. For the three months ended September 30, 2009, revenues were $386.5 million and net income was $24.4 million, or $0.31 earnings per share. Included in the results for the three months ended September 30, 2009 were $6.2 million of non-cash losses from equity-method investments that include $1.5 million of our share of unrealized losses associated with mark-to-market changes in the value of outstanding hedging contracts put in place by SPN Resources and $4.7 million of other non-cash charges related to SPN Resources. Revenues for the three months ended September 30, 2010 were higher in the subsea and well enhancement segment due to the current year acquisitions coupled with an increase in demand for coiled tubing services, specifically in the U.S. land market areas. Revenue also increased in the drilling products and services segment primarily due to increased rentals of stabilization equipment and accommodation units. During the three months ended September 30, 2010, revenue in our marine segment decreased due to the fact that our 265-foot class liftboats were out of service for the entire period for repairs.

Depreciation, depletion, amortization and accretion increased to $56.8 million in the three months ended September 30, 2010 from $52.7 million in the same period in 2009. Depreciation, depletion, amortization and accretion expense related to our subsea and well enhancement segment for the three months ended September 30, 2010 increased approximately $2.6 million, or 11%, from the same period in 2009. This increase is primarily due to the acquisitions of Superior Completion Services, Hallin and the Bullwinkle platform, along with 2009 and 2010 capital expenditures, which was partially offset by the decrease in depreciation and amortization expense as a result of the $212.5 million reduction in value of assets related to our domestic land market areas recorded in 2009. Depreciation and amortization expense increased within our drilling products and services segment by $2.1 million, or 8%, due to 2009 and 2010 capital expenditures. Depreciation expense related to the marine segment for the three months ended September 30, 2010 decreased slightly from the same period in 2009. This decrease in depreciation expense is due to the fact that our two completed 265-foot class liftboats were out of service for the entire period for repairs. This decrease, coupled with the fact that we sold four 145-foot leg length liftboats in November 2009, was partially offset by higher utilization.

For the nine months ended September 30, 2010, our revenues were $1,224.7 million, resulting in net income of $78.8 million, or $0.99 diluted earnings per share. Included in the results for the nine months ended September 30, 2010 were pre-tax management transition expenses of $19.0 million. For the nine months ended September 30, 2009, revenues were $1,184.7 million and net income was $12.3 million, or $0.16 diluted earnings per share. Included in the results for the nine months ended September 30, 2009 were non-cash, pre-tax charges of $92.7 million for the reduction in value of intangible assets and $36.5 million for the reduction in value of our remaining equity-method investment in BOG. Also included in the results for the nine months ended September 30, 2009 were losses of $14.0 million from our share of BOG, $8.9 million of our share of unrealized losses associated with mark-to-market changes in the value of the outstanding hedges put in place by SPN Resources and $4.7 million of other non-cash charges related to SPN Resources. Revenues for the nine months ended September 30, 2010 were higher in the subsea and well enhancement segment primarily due to the current year acquisitions of Superior Completion Services, Hallin and the Bullwinkle platform. Additionally, increases in demand for coiled tubing services and wireline services, specifically in the U.S. land market areas, contributed to the increase in revenue. Revenue increased in the drilling products and services segment primarily due to increased rentals of specialty tubulars and accommodation units. During the nine months ended September 30, 2010, revenue in our marine segment decreased due to the fact that our 265-foot class liftboats were out of service for the entire period for repairs.

Depreciation, depletion, amortization and accretion increased to $162.2 million in the nine months ended September 30, 2010 from $153.6 million in the same period in 2009. Depreciation, depletion, amortization and accretion expense related to our subsea and well enhancement segment for the nine months ended September 30, 2010 increased $3.0 million, or 5%, from the same period in 2009. Increases in depreciation, depletion, amortization and accretion related to the acquisitions of Superior Completion Services, Hallin and the Bullwinkle platform, along with 2009 and 2010 capital expenditures, were offset by the decrease in depreciation and amortization expense as a result of the $212.5 million reduction in value of assets related to our domestic land market areas recorded in 2009. Depreciation and amortization expense increased within our drilling products and services segment by $6.7 million, or 9%, due to 2009 and 2010 capital expenditures. Depreciation expense related to the marine segment for the nine months ended September 30, 2010 decreased $1.1 million, or 12%. This decrease in depreciation expense in our marine segment is attributable to lower utilization in our larger fleet coupled with the sale of four 145-foot leg length liftboats in November 2009. This decrease was partially offset due to higher utilization in our smaller fleet.

In July 2010, we amended our bank revolving credit facility to increase the borrowing capacity to $400 million from $325 million, with the right, at our option, to increase the borrowing capacity of the facility to $550 million. Any amounts outstanding under the revolving credit facility are due on July 20, 2014. At September 30, 2010, we had $193.5 million outstanding under the bank credit facility with a weighted average interest rate of 3.3% per annum. Our borrowings under the revolving credit facility increased $53.9 million during the quarter due to the acquisition of Superior Completion Services. We anticipate collecting $154.4 million late in the fourth quarter in connection with the large-scale platform decommissioning project in the Gulf of Mexico, pending certain regulatory approvals. This receipt of cash will significantly decrease the balance on our credit facility. At November 1, 2010, we had $195.4 million outstanding under the bank credit facility with a weighted average interest rate of 3.6% per annum. We also had $8.9 million of letters of credit outstanding, which reduces our borrowing capacity under this credit facility. Borrowings under the credit facility bear interest at LIBOR plus margins that depend on our leverage ratio. Indebtedness under the credit facility is secured by substantially all of our assets, including the pledge of the stock of our principal subsidiaries. The credit facility contains customary events of default and requires that we satisfy various financial covenants. It also limits our ability to pay dividends or make other distributions, make acquisitions, create liens or incur additional indebtedness.

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