Superior Energy Services (SPN)
Q1 2012 Earnings Call
April 27, 2012 11:00 am ET
Greg A. Rosenstein - Executive Vice President of Investor Relations & Corporate Development and Member of Administrative Committee
David D. Dunlap - Chief Executive Officer, President and Director
Robert S. Taylor - Chief Financial Officer, Executive Vice President and Treasurer
James C. West - Barclays Capital, Research Division
James M. Rollyson - Raymond James & Associates, Inc., Research Division
Robin E. Shoemaker - Citigroup Inc, Research Division
Joe Hill - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division
Joseph D. Gibney - Capital One Southcoast, Inc., Research Division
William Cornelius Conroy - Pritchard Capital Partners, LLC, Research Division
Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division
Previous Statements by SPN
» Superior Energy Services' CEO Discusses Q4 2011 Results - Earnings Call Transcript
» Superior Energy Services, Inc. Presents at Citi's 8th Annual Small/Mid Cap Conference, Nov-16-2011 08:45 AM
» Superior Energy Services' CEO Discusses Q3 2011 Results - Earnings Call Transcript
Good day ladies and gentlemen, thank you for standing by. Welcome to the Superior Energy Services First Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, April 27, 2012. I would now like to turn the conference over to Mr. Greg Rosenstein with Superior Energy Services. Please go ahead, sir.
Greg A. Rosenstein
Hi. Good morning, and thank you for joining today's conference call. Joining me today are Superior's President and CEO, David Dunlap; and Chief Financial Officer, Robert Taylor.
Let me remind everyone that during this conference call, management may make forward-looking statements regarding future expectations about the company's business management plans for future operations or similar matters. The company's actual results could differ materially due to several important factors, including those described in the company's filings with the Securities and Exchange Commission.
During this call, management will refer to EBITDA, and also adjusted net income from continuing operations, both of which are non-GAAP financial measures. In accordance with Regulation G, the company does provide a reconciliation between net income and EBITDA on its website and net income and adjusted net income from continuing operations in the earnings release. And with that, I'll now turn the call over to David Dunlap.
David D. Dunlap
Thank you, Greg, and good morning, everyone. Robert Taylor reminded me yesterday that my 2-year anniversary with the company is coming up this weekend and I'm [indiscernible] today that there were no cupcakes by the coffee machine this morning or special gifts on my desk today. Instead, what the company has given me is a fantastic quarter to report to you this morning. We reported quarterly revenue last night of $967 million, EBITDA of $244 million and adjusted net income from continuing operations of $90 million or $0.71 per diluted share. Our Drilling Products and Services segment experienced tremendous growth in both the U.S. land market and Gulf of Mexico markets, with our revenue increasing 15% over the fourth quarter in each of those markets.
In the Gulf of Mexico, premium drill pipe bottomhole assemblies and other rentals continue to benefit from the ongoing increase in deepwater drilling. In addition, shallow water drilling is also on the upswing, which resulted in higher demand for both drilling and completions work. Shallow water activity was better than expected for our intervention and abandonment services. While we did experience some seasonality in Q1, the pace of work was greater than forecasted. We think this bodes well as we move into the traditional season for intervention and decommissioning work during the spring and summer months.
In the U.S. land markets, the legacy Superior products and services grew 7%, highlighted by 15% growth in our drilling products and services. Our downhole drilling tools are located in the sweet spot of today's horizontal drilling markets with exposure in Oklahoma, the Eagle Ford, Permian and Bakken. These markets account for about 60% of the horizontal rig count in the U.S. Not coincidentally, the horizontal rig count in those markets has increased by about 15% since the end of 2011. The other big driver for us in Q1 was the post-merger results turned in by Complete, which contributed better results than our prior expectations.
To understand the balance and diversity in our new U.S. revenue mix, we estimated and compared our first quarter EBITDA margin in the U.S. land market to the fourth quarter and assumed that Complete was in that calculation for both periods. The analysis indicates that our U.S. EBITDA margin would've been flat as compared with the fourth quarter. Slightly lower pressure pumping margins were offset by higher margins in many of our other U.S. land-oriented businesses. The revenue and margin balance in our diverse product line portfolio is working as designed to minimize the impact to total U.S. margins from pricing fluctuations in any one particular product line. After Robert walks you through some of the financial details of the quarter, I will discuss our guidance and outlook and some of the unique features of our business model that give us a level of comfort with the guidance. And with that, I'll now turn the call over to Robert Taylor.
Robert S. Taylor
Thank you, Dave. As we go through each segment, I will make comparisons to the fourth quarter of 2011. As you know, we have 2 significant content differences in the first quarter of 2012. Results from the legacy Complete were included beginning on February 8. Complete contributed to about $398 million in revenue and about $84 million in operating income for the 58% of the quarter for which they were with us. All their results are included in the Subsea and Well Enhancement segment. The operating income from Complete is not burdened with corporate overhead for the transaction expenses.