Tesco Corp. (TESO, Financial) filed Annual Report for the period ended 2011-12-31.
Tesco Corp has a market cap of $602.5 million; its shares were traded at around $14.79 with a P/E ratio of 21.9 and P/S ratio of 1.6.
Top Drive rental services revenue — The increase in revenue from 2010 to 2011 and 2009 to 2010 was due to the increase in rental operating days during the respective periods resulting from a 16% growth in the average worldwide rig count year-over-year. Our rental fleet has increased by 8 units during 2010 and by 7 units in 2011 to meet the demand of our customers for rental services. In addition, the increase in top drive rental revenues is due to improved average daily rates from 2010 to 2011.
Our CASING DRILLING operating loss slightly increased from 2010 to 2011 despite revenues increasing due to significant customer delays in the first half of 2011, which caused increased staffing and other costs while waiting for the scheduled jobs to commence. Our operating income improved by $1.3 million in the second half of 2011 as compared to the first half of 2011. Our CASING DRILLING operating loss decreased from 2009 to 2010 despite revenues decreasing due to non-recurring charges recorded in 2009. Specifically, we performed an analysis of our inventory parts to determine excess or slow moving items based on our operating activities and projected future demand for all business segments in 2009 and recorded a charge of $7.0 million to reflect the net realizable value of our CASING DRILLING inventory. Our operating results in 2009 were also negatively impacted by an impairment charge of $1.8 million for assets held for sale, a loss on sale of operating assets located in Latin America of $0.5 million, and severance costs of $0.2 million as a result of cost restructuring measures.
We routinely assess whether impairment indicators of our long-lived assets are present based on triggering events that include continued declines in the market or not achieving our internal projections in future years. Although we have seen increased demand for CASING DRILLING in 2011 and expect improved operating results in 2012, we have experienced losses in the CASING DRILLING segment over the past few years and expect losses to continue in the near term. We therefore conducted a test of recoverability as set forth in current accounting guidance for long-lived assets and determined that our CASING DRILLING long-lived assets are not impaired as of December 31, 2011. Our analysis includes significant growth and profitability assumptions beginning in 2013. If the expected market conditions do not occur at the level expected or within the timeframe projected, we may determine in the future that our CASING DRILLING long-lived assets are impaired. As of December 31, 2011, our CASING DRILLING long-lived assets and inventory had a net book value of approximately $11.7 million and $6.7 million, respectively. If, in the future, we determine that an impairment of our CASING DRILLING long-lived assets has occurred, the amount of such impairment expense could be material to our results of operations, but we expect that it would not materially impact our cash flows or overall viability.
Investing Activities – Net cash used for investing activities was $57.6 million during 2011 compared to $25.8 million in 2010. During 2011 and 2010, we used $47.4 million and $37.1 million of cash, respectively, for capital expenditures, and sales from operating assets provided $6.9 million and $10.4 million of cash, respectively. Our capital expenditures increased by $10.3 million or 28% in 2011 as compared to 2010 to meet projected demand for our products and services. Additionally, we used $16.0 million of cash to acquire Premiere, net of cash acquired, during 2011.
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Tesco Corp has a market cap of $602.5 million; its shares were traded at around $14.79 with a P/E ratio of 21.9 and P/S ratio of 1.6.
Highlight of Business Operations:
Our top drive sales backlog at December 31, 2011 was 74 units with a total potential revenue value of $91.1 million, compared to 25 units with a total potential revenue value of $33.0 million at December 31, 2010. This increase reflects a higher order rate as a result of the strengthened economic and industry conditions in 2011. Sales activity has improved in 2011 compared to 2010, and our backlog has surpassed pre-recession levels.Top Drive rental services revenue — The increase in revenue from 2010 to 2011 and 2009 to 2010 was due to the increase in rental operating days during the respective periods resulting from a 16% growth in the average worldwide rig count year-over-year. Our rental fleet has increased by 8 units during 2010 and by 7 units in 2011 to meet the demand of our customers for rental services. In addition, the increase in top drive rental revenues is due to improved average daily rates from 2010 to 2011.
Our CASING DRILLING operating loss slightly increased from 2010 to 2011 despite revenues increasing due to significant customer delays in the first half of 2011, which caused increased staffing and other costs while waiting for the scheduled jobs to commence. Our operating income improved by $1.3 million in the second half of 2011 as compared to the first half of 2011. Our CASING DRILLING operating loss decreased from 2009 to 2010 despite revenues decreasing due to non-recurring charges recorded in 2009. Specifically, we performed an analysis of our inventory parts to determine excess or slow moving items based on our operating activities and projected future demand for all business segments in 2009 and recorded a charge of $7.0 million to reflect the net realizable value of our CASING DRILLING inventory. Our operating results in 2009 were also negatively impacted by an impairment charge of $1.8 million for assets held for sale, a loss on sale of operating assets located in Latin America of $0.5 million, and severance costs of $0.2 million as a result of cost restructuring measures.
We routinely assess whether impairment indicators of our long-lived assets are present based on triggering events that include continued declines in the market or not achieving our internal projections in future years. Although we have seen increased demand for CASING DRILLING in 2011 and expect improved operating results in 2012, we have experienced losses in the CASING DRILLING segment over the past few years and expect losses to continue in the near term. We therefore conducted a test of recoverability as set forth in current accounting guidance for long-lived assets and determined that our CASING DRILLING long-lived assets are not impaired as of December 31, 2011. Our analysis includes significant growth and profitability assumptions beginning in 2013. If the expected market conditions do not occur at the level expected or within the timeframe projected, we may determine in the future that our CASING DRILLING long-lived assets are impaired. As of December 31, 2011, our CASING DRILLING long-lived assets and inventory had a net book value of approximately $11.7 million and $6.7 million, respectively. If, in the future, we determine that an impairment of our CASING DRILLING long-lived assets has occurred, the amount of such impairment expense could be material to our results of operations, but we expect that it would not materially impact our cash flows or overall viability.
Investing Activities – Net cash used for investing activities was $57.6 million during 2011 compared to $25.8 million in 2010. During 2011 and 2010, we used $47.4 million and $37.1 million of cash, respectively, for capital expenditures, and sales from operating assets provided $6.9 million and $10.4 million of cash, respectively. Our capital expenditures increased by $10.3 million or 28% in 2011 as compared to 2010 to meet projected demand for our products and services. Additionally, we used $16.0 million of cash to acquire Premiere, net of cash acquired, during 2011.
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