Complete Production Services, Inc. Reports Third Quarter 2009 Results
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HOUSTON--(BUSINESS WIRE)-- Complete Production Services, Inc. (NYSE: CPX) today reported third quarter revenue of $229.9 million and an operating loss of $64.1 million, or $0.69 per diluted share. Third quarter results include pre-tax, non-cash charges of $41.0 million primarily related to fixed assets. Excluding these charges, EBITDA for the third quarter of 2009 was $27.2 million ("Modified EBITDA" as defined below) and net loss was $0.32 per diluted share.
The $41.0 million in charges resulted from an ongoing evaluation and rationalization of operations and assets due to the significant changes in market conditions which began in the fourth quarter of 2008. The contract drilling business accounted for approximately $37.6 million of the charges, of which $36.2 million related to an impairment analysis done in accordance with U.S. GAAP and $1.4 million resulted from asset disposals. The remaining $3.4 million occurred within the Completion and Production Services segment and was associated with asset disposals and inventory write-downs.
Revenue for the Completion and Production Services segment during the third quarter of 2009 was $198.0 million, an increase of $1.6 million from the prior quarter. Modified EBITDA for the segment was $34.8 million, which compares to $34.1 million in the prior quarter. Modified EBITDA margin for the segment during the third quarter was 17.6% versus 17.4% for the quarter ending June 30, 2009.
Third quarter Drilling Services segment revenue was $25.4 million, versus $24.7 million reported for the prior quarter. The segment reported a Modified EBITDA loss of $2.4 million compared to a positive contribution of $3.6 million in the second quarter of 2009. The segment was adversely impacted by a shift in mix, a decrease in utilization in the contract drilling business and an increase in bad debt expense of $3.5 million.
"Relative to the severe drop in activity earlier this year, market conditions have stabilized considerably," commented Joe Winkler, Chairman and CEO. "We anticipate that the near-term will remain challenging, but are pleased with how our dedicated people have positioned the Company for the market recovery. Year-to-date we:
-- significantly reduced our cost structure and capital expenditures;
-- reduced our debt by $197.3 million, completely paying-down our revolving
credit facility;
-- amended our undrawn credit facility to provide greater certainty that we
will have access to liquidity beyond the $76.1 million in cash we had as
of September 30, 2009; and
-- prudently protected and enhanced our core market positions."
"While we do not anticipate an improvement prior to year-end, we are seeing indications of future increases in activity. Our focus has now shifted to preparing for the recovery which we believe will be led by horizontal, multi-stage well completions in our core basins," concluded Mr. Winkler.
Complete Production Services, Inc. is a leading oilfield service provider focused on the completion and production phases of oil and gas wells. The company has established a significant presence in unconventional oil and gas plays in North America that it believes have the highest potential for long-term growth.
Complete will hold a conference call to discuss third quarter 2009 results on Tuesday, October 27, 2009 at 11:00 a.m. Eastern Time. To participate in the live conference call, dial 800-561-2601 at least ten minutes prior to the scheduled start of the call. When prompted, provide the passcode: 10516712. The conference call will be available for replay beginning at 2:00 p.m. on October 27, 2009 and will be available until November 3, 2009. To access the conference call replay, please call 888-286-8010 and use the passcode: 45251817. The call is also being webcast and can be accessed at our website at www.completeproduction.com.
The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risk and uncertainties. These forward-looking statements include statements regarding future market conditions, the Company's business objectives in the fourth quarter of 2009 and the Company's future success. Such statements are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the oilfield service industry and other risks described in the Company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release.
Management evaluates the performance of Complete's operating segments using non-GAAP financial measures, EBITDA, Adjusted EBITDA and Modified EBITDA. EBITDA is calculated as net income from continuing operations before net interest expense, taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before impairment charges and minority interest. Modified EBITDA is calculated as Adjusted EBITDA before certain other non-cash charges including fixed asset and inventory write-downs and loss on non-monetary asset exchange. EBITDA, Adjusted EBITDA and Modified EBITDA are not substitutes for GAAP measures of earnings and cash flow. EBITDA, Adjusted EBITDA and Modified EBITDA are used in this press release because our management considers these measures to be important supplemental measures of performance and believes they are used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.
In the second quarter of 2009, management discovered accounting errors at one of its operations in the Rocky Mountain region, which occurred in prior years and impacted operating results for the years ended December 31, 2006, 2007 and 2008. The Company corrected these errors as of June 30, 2009 and made the required adjustments to reported results for certain prior periods, including the three and nine-month periods ended September 30, 2008. Accordingly, the financial information in this press release for the three and nine-month periods ended September 30, 2008 has been revised from its original presentation.
Complete Production Services, Inc.
Consolidated Statements of Operations
For the Quarters and Nine Months Ended September 30, 2009 and 2008
(in thousands, except per share data)
Quarter Ended Nine Months Ended
September 30, September 30,
Revised Revised
2009 2008 2009 2008
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Services $ 223,429 $ 481,073 $ 767,496 $ 1,307,069
Products 6,484 13,237 37,496 40,689
229,913 494,310 804,992 1,347,758
Cost of services 157,708 294,958 519,694 801,908
Cost of products 4,596 8,888 28,583 27,438
General and administrative 45,204 46,498 140,115 141,952
expense
Depreciation and 50,379 47,721 153,470 130,058
amortization
Fixed asset impairment 36,158 - 36,158 -
loss
294,045 398,065 878,020 1,101,356
Income (loss) from
continuing operations (64,132 ) 96,245 (73,028 ) 246,402
before interest and taxes
Interest expense 13,987 14,052 42,344 44,252
Interest income (13 ) (85 ) (43 ) (242 )
-
Income (loss) from
continuing operations (78,106 ) 82,278 (115,329 ) 202,392
before taxes
Tax provision (benefit) (26,081 ) 29,804 (37,136 ) 71,822
Income (loss) from $ (52,025 ) $ 52,474 $ (78,193 ) $ 130,570
continuing operations
Loss from discontinued - (153 ) - (4,859 )
operations (net of tax)
Net income (loss) $ (52,025 ) $ 52,321 $ (78,193 ) $ 125,711
Basic earnings (loss) per
share:
Continuing operations $ (0.69 ) $ 0.71 $ (1.04 ) $ 1.78
Discontinued operations $ - $ (0.00 ) $ - $ (0.07 )
$ (0.69 ) $ 0.71 $ (1.04 ) $ 1.71
Diluted earnings (loss)
per share:
Continuing operations $ (0.69 ) $ 0.70 $ (1.04 ) $ 1.76
Discontinued operations $ - $ (0.00 ) $ - $ (0.07 )
$ (0.69 ) $ 0.70 $ (1.04 ) $ 1.69
Weighted average shares
outstanding:
Basic 75,200 73,935 75,045 73,225
Diluted 75,200 75,008 75,045 74,370
Complete Production Services, Inc.
Condensed Consolidated Balance Sheets
As of September 30, 2009 and December 31, 2008
(in thousands)
Revised
September 30, December 31,
2009 2008
(unaudited) (unaudited)
Assets:
Cash $ 76,143 $ 18,500
Other current assets 262,095 420,877
Property, plant and equipment, net 980,706 1,166,686
Goodwill 341,512 341,592
Other long-term assets 35,382 39,698
Total assets 1,695,838 1,987,353
Liabilities and stockholders' equity:
Current liabilities 99,907 136,440
Long-term debt 650,121 843,842
Long-term deferred tax liabilities 148,198 146,360
Total liabilities 898,226 1,126,642
Common stock 752 748
Treasury stock (328 ) (202 )
Additional paid-in capital 633,858 623,988
Retained earnings 145,482 223,675
Cumulative translation adjustment 17,848 12,502
Total stockholders' equity 797,612 860,711
Total liabilities and stockholders' equity $ 1,695,838 $ 1,987,353
Complete Production Services, Inc.
Cash Flow Data
For the Nine Months Ended September 30, 2009
(in thousands)
September 30,
2009
(unaudited)
Cash flows provided by/(used for):
Operating activities $ 270,063
Investing activities:
Capital expenditures $ (29,094 )
Other investing activities $ 20,155
Financing activities $ (203,314 )
Complete Production Services, Inc.
Consolidated Segment Information
For the Quarters Ended September 30, 2009 and 2008, and June 30, 2009
and for the Nine Months Ended September 30, 2009 and 2008
(in thousands, except percentages)
Quarter Ended
Revised
September 30, September 30, June 30,
2009 2008 2009
(unaudited) (unaudited) (unaudited)
Revenue:
Completion and production services $ 198,014 $ 418,865 $ 196,441
Drilling services 25,415 62,208 24,709
Products 6,484 13,237 17,248
Total revenues $ 229,913 $ 494,310 $ 238,398
Adjusted EBITDA: (1)
Completion and production services $ 31,396 $ 133,459 $ 31,424
Drilling services (3,757 ) 17,005 3,569
Products 1,791 3,387 2,085
Corporate and other (7,025 ) (9,885 ) (8,578 )
Total Adjusted EBITDA $ 22,405 $ 143,966 $ 28,500
Adjusted EBITDA as a % of Revenue:
Completion and production services 15.9 % 31.9 % 16.0 %
Drilling services -14.8 % 27.3 % 14.4 %
Products 27.6 % 25.6 % 12.1 %
Total 9.7 % 29.1 % 12.0 %
Nine Months Ended
Revised
September 30, September 30,
2009 2008
(unaudited) (unaudited)
Revenue:
Completion and production services $ 681,981 $ 1,134,358
Drilling services 85,515 172,711
Products 37,496 40,689
Total revenues $ 804,992 $ 1,347,758
Adjusted EBITDA: (1)
Completion and production services $ 129,044 $ 347,759
Drilling services 6,698 44,733
Products 6,427 10,209
Corporate and other (25,569 ) (26,241 )
Total Adjusted EBITDA $ 116,600 $ 376,460
Adjusted EBITDA as a % of Revenue:
Completion and production services 18.9 % 30.7 %
Drilling services 7.8 % 25.9 %
Products 17.1 % 25.1 %
Total 14.5 % 27.9 %
(1)Adjusted EBITDA is a non-GAAP measure used by management, as defined in the
last paragraph of this press release.
Footnote: The results 2008 exclude discontinued operations.
Complete Production Services, Inc.
Reconciliation of Adjusted EBITDA to the Most Comparable GAAP Measure
For the Quarters Ended September 30, 2009 and 2008 and June 30, 2009
And the Nine Months Ended September 30, 2009 and 2008
(unaudited, in thousands)
Completion
& Production Drilling Corporate &
Services Services Products Other Total
Quarter Ended
September 30,
2009:
Adjusted EBITDA $ 31,396 $ (3,757 ) $ 1,791 $ (7,025 ) $ 22,405
Depreciation & 43,744 5,466 603 566 50,379
amortization
Fixed asset - 36,158 - - 36,158
impairment loss
Operating income $ (12,348 ) $ (45,381 ) $ 1,188 $ (7,591 ) $ (64,132 )
(loss)
Quarter Ended
September 30,
2008 (Revised):
Adjusted EBITDA $ 133,459 $ 17,005 $ 3,387 $ (9,885 ) $ 143,966
Depreciation & 41,195 5,223 657 646 47,721
amortization
Operating income $ 92,264 $ 11,782 $ 2,730 $ (10,531 ) $ 96,245
(loss)
Quarter Ended
June 30, 2009:
Adjusted EBITDA $ 31,424 $ 3,569 $ 2,085 $ (8,578 ) $ 28,500
Depreciation & 44,723 5,488 624 567 51,402
amortization
Operating income $ (13,299 ) $ (1,919 ) $ 1,461 $ (9,145 ) $ (22,902 )
(loss)
Nine Months Ended
September 30,
2009:
Adjusted EBITDA $ 129,044 $ 6,698 $ 6,427 $ (25,569 ) $ 116,600
Depreciation & 133,393 16,502 1,861 1,714 153,470
amortization
Fixed asset - 36,158 - - 36,158
impairment loss
Operating income $ (4,349 ) $ (45,962 ) $ 4,566 $ (27,283 ) $ (73,028 )
(loss)
Nine Months Ended
September 30,
2008 (Revised):
Adjusted EBITDA $ 347,759 $ 44,733 $ 10,209 $ (26,241 ) $ 376,460
Depreciation & 111,972 14,527 1,762 1,797 130,058
amortization
Operating income $ 235,787 $ 30,206 $ 8,447 $ (28,038 ) $ 246,402
(loss)
Complete Production Services, Inc.
Reconciliation of Modified EBITDA to Most Comparable GAAP Measure
For the Quarters Ended September 30, 2009 and June 30, 2009
(unaudited, in thousands)
Completion
& Production Drilling Corporate &
Services Services Products Other Total
Quarter Ended
September 30,
2009:
Modified EBITDA $ 34,830 $ (2,359 ) $ 1,791 $ (7,025 ) $ 27,237
3rd Qtr. 2009
fixed asset and 3,434 1,398 - - 4,832
inventory
adjustments
Adjusted EBITDA 31,396 (3,757 ) 1,791 (7,025 ) 22,405
Depreciation and 43,744 5,466 603 566 50,379
amortization
Fixed asset - 36,158 - - 36,158
impairment charge
Operating income $ (12,348 ) $ (45,381 ) $ 1,188 $ (7,591 ) $ (64,132 )
(loss)
Quarter Ended
June 30, 2009:
Modified EBITDA $ 34,095 $ 3,569 $ 2,085 $ (8,578 ) $ 31,171
2nd Qtr. 2009
fixed asset and 2,671 - - - 2,671
inventory
adjustments
Adjusted EBITDA 31,424 3,569 2,085 (8,578 ) 28,500
Depreciation and 44,723 5,488 624 567 51,402
amortization
Operating income $ (13,299 ) $ (1,919 ) $ 1,461 $ (9,145 ) $ (22,902 )
(loss)
Complete Production Services, Inc.
Reconciliation of Earnings Per Share per GAAP Less Certain Non-cash Charges
For the Quarter Ended September 30, 2009
(unaudited, in thousands except per share amounts)
Quarter Ended
September 30,
2009
(unaudited)
Net loss from continuing operations, as reported $ (52,025 )
Add: Fixed asset impairment charge 36,158
Add: 3rd Qtr. 2009 fixed asset and inventory adjustments 4,832
Less: Tax benefit recognized from these non-cash charges (13,199 )
Adjusted net loss $ (24,234 )
Diluted weighted average shares outstanding, as reported 75,200
Diluted loss per share:
As reported $ (0.69 )
As adjusted $ (0.32 )
Source: Complete Production Services, Inc.
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