spn-20180630 10Q Q2_Taxonomy2018

 

Table Of Contents

 

      

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





 

 



 

 



FORM 10-Q

 



 

 



(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended June 30, 2018



or



TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the Transition Period from          to



Commission File No. 001-34037



 

 



 

 



SUPERIOR ENERGY SERVICES, INC.



(Exact name of registrant as specified in its charter)



 

 



 

 







 

 

 

 



Delaware

 

75-2379388

 



(State or other jurisdiction of

 

(I.R.S. Employer

 



incorporation or organization)

 

Identification No.)

 



 

 

 

 



1001 Louisiana Street, Suite 2900

 

77002

 



Houston, TX

 

(Zip Code)

 



(Address of principal executive offices)

 

 

 



Registrant’s telephone number, including area code: (713) 654-2200



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.





 

 

Large accelerated filer   

 

Accelerated filer                            

Non-accelerated filer     

(Do not check if a smaller reporting company)

Smaller reporting company           



 

Emerging growth company           



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No  



The number of shares of the registrant’s common stock outstanding on July 20, 2018 was 154,525,627.



 

 

 


 

 

Table Of Contents

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q for

the Quarterly Period Ended June 30, 2018



TABLE OF CONTENTS





 

 



 

 



 

Page

PART I.

FINANCIAL INFORMATION

 



 

 

Item 1.

Condensed Consolidated Financial Statements and Notes

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations 

23 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

28 

Item 4.

Controls and Procedures

29 



 

 

PART II.

OTHER INFORMATION

 



 

 

Item 1

Legal Proceedings

30 

Item 1A.

Risk Factors

30 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30 

Item 6.

Exhibits

30 

 



2

 


 

 

Table Of Contents

 

   PART I.  FINANCIAL INFORMATION



Item 1. Financial Statements





 

 

 

 

 



 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

June 30, 2018 and December 31, 2017

(in thousands, except share data)

(unaudited)



6/30/2018

 

12/31/2017

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

118,512 

 

$

172,000 

Accounts receivable, net of allowance for doubtful accounts of $19,534 and

 

 

 

 

 

$29,037 at June 30, 2018 and December 31, 2017, respectively

 

441,983 

 

 

398,056 

Income taxes receivable

 

 -

 

 

959 

Prepaid expenses

 

43,188 

 

 

42,128 

Inventory and other current assets

 

158,765 

 

 

134,032 

Assets held for sale

 

 -

 

 

13,644 

Total current assets

 

762,448 

 

 

760,819 

Property, plant and equipment, net of accumulated depreciation and depletion of
$2,848,297 and $2,736,620 at June 30, 2018 and December 31, 2017, respectively

 

1,240,703 

 

 

1,316,944 

Goodwill

 

806,813 

 

 

807,860 

Notes receivable

 

62,041 

 

 

60,149 

Restricted cash

 

11,631 

 

 

20,483 

Intangible and other long-term assets, net of accumulated amortization of $89,561
and $83,359 at June 30, 2018 and December 31, 2017, respectively

 

137,349 

 

 

143,970 

Total assets

$

3,020,985 

 

$

3,110,225 



 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

162,125 

 

$

119,716 

Accrued expenses

 

201,665 

 

 

221,757 

Current portion of decommissioning liabilities

 

24,156 

 

 

27,261 

Liabilities held for sale

 

 -

 

 

6,463 

Total current liabilities

 

387,946 

 

 

375,197 



 

 

 

 

 

Deferred income taxes

 

41,758 

 

 

61,058 

Decommissioning liabilities

 

103,088 

 

 

103,136 

Long-term debt, net

 

1,281,145 

 

 

1,279,771 

Other long-term liabilities

 

154,333 

 

 

158,634 



 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock of $0.01 par value.  Authorized - 5,000,000 shares; none issued

 

 -

 

 

 -

Common stock of $0.001 par value

 

 

 

 

 

Authorized - 250,000,000, Issued and Outstanding - 154,525,627 at June 30, 2018
Authorized - 250,000,000, Issued and Outstanding - 153,263,097 at December 31, 2017

 

155 

 

 

153 

Additional paid in capital

 

2,722,224 

 

 

2,713,161 

Accumulated other comprehensive loss, net

 

(70,092)

 

 

(67,427)

Retained deficit

 

(1,599,572)

 

 

(1,513,458)

Total stockholders’ equity

 

1,052,715 

 

 

1,132,429 

Total liabilities and stockholders’ equity

$

3,020,985 

 

$

3,110,225 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

 

 

 

 



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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

Three and Six Months Ended June 30, 2018 and 2017

(in thousands, except per share data)

(unaudited)



Three Months

 

Six Months



2018

 

2017

 

2018

 

2017

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Services

$

446,812 

 

$

404,131 

 

$

846,580 

 

$

738,581 

Rentals

 

88,736 

 

 

65,937 

 

 

171,286 

 

 

132,423 

Total revenues

 

535,548 

 

 

470,068 

 

 

1,017,866 

 

 

871,004 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of services (exclusive of depreciation, depletion, amortization and accretion)

 

333,126 

 

 

322,795 

 

 

644,265 

 

 

619,229 

Cost of rentals (exclusive of depreciation, depletion, amortization and accretion)

 

36,684 

 

 

29,007 

 

 

69,005 

 

 

54,559 

Depreciation, depletion, amortization and accretion - services

 

81,740 

 

 

92,953 

 

 

169,487 

 

 

188,283 

Depreciation, depletion, amortization and accretion - rentals

 

16,233 

 

 

15,166 

 

 

34,205 

 

 

34,117 

General and administrative expenses

 

69,896 

 

 

76,708 

 

 

145,716 

 

 

152,201 

Loss from operations

 

(2,131)

 

 

(66,561)

 

 

(44,812)

 

 

(177,385)



 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(24,894)

 

 

(23,333)

 

 

(49,781)

 

 

(47,583)

Other income (expense)

 

(2,382)

 

 

(2,156)

 

 

(4,117)

 

 

(1,507)

Loss from continuing operations before income taxes

 

(29,407)

 

 

(92,050)

 

 

(98,710)

 

 

(226,475)

Income taxes

 

(3,970)

 

 

(30,011)

 

 

(13,325)

 

 

(74,775)

Net loss from continuing operations

 

(25,437)

 

 

(62,039)

 

 

(85,385)

 

 

(151,700)

Loss from discontinued operations, net of income tax

 

(953)

 

 

(1,767)

 

 

(729)

 

 

(3,765)

Net loss

$

(26,390)

 

$

(63,806)

 

$

(86,114)

 

$

(155,465)



 

 

 

 

 

 

 

 

 

 

 

Loss per share information:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

$

(0.16)

 

$

(0.41)

 

$

(0.56)

 

$

(1.00)

Loss from discontinued operations

 

(0.01)

 

 

(0.01)

 

 

 -

 

 

(0.02)

Net loss

$

(0.17)

 

$

(0.42)

 

$

(0.56)

 

$

(1.02)



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares used in computing loss per share:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

154,278 

 

 

152,857 

 

 

153,728 

 

 

152,317 

 









 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

Three and Six Months Ended June 30, 2018 and 2017

(in thousands)

(unaudited)



Three Months

 

Six Months



2018

 

2017

 

2018

 

2017

Net loss

$

(26,390)

 

$

(63,806)

 

$

(86,114)

 

$

(155,465)

Change in cumulative translation adjustment, net of tax

 

(7,053)

 

 

6,022 

 

 

(2,665)

 

 

7,746 

Comprehensive loss

$

(33,443)

 

$

(57,784)

 

$

(88,779)

 

$

(147,719)



 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2018 and 2017

(in thousands)

(unaudited)





 

2018

 

2017

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(86,114)

 

$

(155,465)

Adjustments to reconcile net loss to net cash provided by operating
  activities:

 

 

 

   

 

 

Depreciation, depletion, amortization and accretion

 

 

203,692 

 

 

222,400 

Deferred income taxes

 

 

(19,300)

 

 

(61,322)

Stock based compensation expense

 

 

16,552 

 

 

20,027 

Other reconciling items, net

 

 

(2,595)

 

 

(1,603)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(44,415)

 

 

(89,324)

Inventory and other current assets

 

 

(24,854)

 

 

(10,192)

Accounts payable

 

 

32,852 

 

 

26,499 

Accrued expenses

 

 

(35,729)

 

 

(11,202)

Income taxes

 

 

1,255 

 

 

98,561 

Other, net

 

 

(1,929)

 

 

(21,232)

Net cash provided by operating activities

 

 

39,415 

 

 

17,147 



 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Payments for capital expenditures

 

 

(119,841)

 

 

(56,649)

Proceeds from sales of assets

 

 

23,297 

 

 

4,090 

Net cash used in investing activities

 

 

(96,544)

 

 

(52,559)



 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Tax withholdings for vested restricted stock units

 

 

(5,183)

 

 

(8,298)

Other

 

 

1,283 

 

 

1,324 

Net cash used in financing activities

 

 

(3,900)

 

 

(6,974)

Effect of exchange rate changes on cash

 

 

(1,311)

 

 

2,093 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(62,340)

 

 

(40,293)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

192,483 

 

   

246,092 

Cash, cash equivalents, and restricted cash at end of period

 

$

130,143 

 

$

205,799 



 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Six Months Ended June 30, 2018

(1)Basis of Presentation



Certain information and footnote disclosures normally in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC); however, management believes the disclosures that are made are adequate to make the information presented not misleading.  These financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Superior Energy Services, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017, and Management’s Discussion and Analysis of Financial Condition and Results of Operations herein.



The financial information of Superior Energy Services, Inc. and its subsidiaries (the Company) for the three and six months ended June 30, 2018 and 2017 has not been audited.  However, in the opinion of management, all adjustments necessary to present fairly the results of operations for the periods presented have been included therein.  Certain previously reported amounts have been reclassified to conform to the 2018 presentation.  The results of operations for the first six months of the year are not necessarily indicative of the results of operations that might be expected for the entire year. 



Due to the nature of the Company’s business, the Company is involved, from time to time, in routine litigation or subject to disputes or claims regarding its business activities. Legal costs related to these matters are expensed as incurred.  In management’s opinion, none of the pending litigation, disputes or claims is expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.



The Company evaluates events that occur after the balance sheet date but before the financial statements are issued for potential recognition or disclosure.  Based on the evaluation, the Company determined that there were no material subsequent events for recognition or disclosure.

 

(2)Revenue



Adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers



Effective January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  The Company adopted this ASU using the modified retrospective adoption method.  There was no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.



Revenue Recognition



Revenues are recognized when performance obligations are satisfied in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled to in exchange for services rendered or rentals provided.  Taxes collected from customers and remitted to governmental authorities and revenues are reported on a net basis in the Company’s financial statements.



Performance Obligations



A performance obligation arises under contracts with customers to render services or provide rentals, and is the unit of account under Topic 606.  The Company accounts for services rendered and rentals provided separately if they are distinct and the service or rental is separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered or rentals provided on its own or with other resources that are readily available to the customer.  A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.  A contract’s standalone selling prices are determined based on the prices that the Company charges for its services rendered and rentals provided.  The majority of the Company’s performance obligations are satisfied over time, which is generally represented by a period of 30 days or less.  The Company’s payment terms vary by the type of products or services offered.  The term between invoicing and when the payment is due is typically 30 days.



Services revenue primarily represents amounts charged to customers for the completion of services rendered, including labor, products and supplies necessary to perform the service.  Rates for these services vary depending on the type of services provided and can be based on a per job, per hour or per day basis.



Rentals revenue is, primarily priced on a per day, per man hour or similar basis and consists of fees charged to customers for use of the Company’s rental equipment over the term of the rental period, which is generally less than twelve months.



The Company expenses sales commissions when incurred because the amortization period would have been one year or less.



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Disaggregation of revenue



The following table presents the Company’s revenues by segment disaggregated by geography (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



Three Months Ended June 30,

 

Six Months Ended June 30,

 



 

2018

 

 

2017

 

 

2018

 

 

2017

 

U.S. land

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

43,394 

 

$

27,770 

 

$

84,111 

 

$

48,932 

 

    Onshore Completion and Workover Services

 

276,242 

 

 

249,079 

 

 

507,731 

 

 

454,058 

 

    Production Services

 

47,944 

 

 

33,062 

 

 

100,401 

 

 

56,497 

 

    Technical Solutions

 

7,858 

 

 

7,921 

 

 

14,691 

 

 

17,006 

 

Total U.S. land

$

375,438 

 

$

317,832 

 

$

706,934 

 

$

576,493 

 



 

 

 

 

 

 

 

 

 

 

 

 

Gulf of Mexico

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

23,261 

 

$

22,266 

 

$

44,250 

 

$

45,751 

 

    Onshore Completion and Workover Services

 

 -

 

 

 -

 

 

 -

 

 

 -

 

    Production Services

 

13,634 

 

 

19,937 

 

 

31,134 

 

 

37,683 

 

    Technical Solutions

 

35,333 

 

 

42,030 

 

 

72,895 

 

 

75,747 

 

Total Gulf of Mexico

$

72,228 

 

$

84,233 

 

$

148,279 

 

$

159,181 

 



 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

27,378 

 

$

18,791 

 

$

50,874 

 

$

42,575 

 

    Onshore Completion and Workover Services

 

 -

 

 

 -

 

 

 -

 

 

 -

 

    Production Services

 

40,426 

 

 

35,607 

 

 

71,186 

 

 

63,031 

 

    Technical Solutions

 

20,078 

 

 

13,605 

 

 

40,593 

 

 

29,724 

 

Total International

$

87,882 

 

$

68,003 

 

$

162,653 

 

$

135,330 

 

Total Revenues

$

535,548 

 

$

470,068 

 

$

1,017,866 

 

$

871,004 

 



 

 

 

 

 

 

 

 

 

 

 

 





The following table presents the Company’s revenues by segment disaggregated by type (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



Three Months Ended June 30,

 

Six Months Ended June 30,

 



 

2018

 

 

2017

 

 

2018

 

 

2017

 

Services

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

27,461 

 

$

19,629 

 

$

51,466 

 

$

36,500 

 

    Onshore Completion and Workover Services

 

266,071 

 

 

240,461 

 

 

487,418 

 

 

439,907 

 

    Production Services

 

93,678 

 

 

82,575 

 

 

188,292 

 

 

145,857 

 

    Technical Solutions

 

59,602 

 

 

61,466 

 

 

119,404 

 

 

116,317 

 

Total services

$

446,812 

 

$

404,131 

 

$

846,580 

 

$

738,581 

 



 

 

 

 

 

 

 

 

 

 

 

 

Rentals

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

66,572 

 

$

49,198 

 

$

127,769 

 

$

100,758 

 

    Onshore Completion and Workover Services

 

10,171 

 

 

8,618 

 

 

20,313 

 

 

14,151 

 

    Production Services

 

8,326 

 

 

6,031 

 

 

14,429 

 

 

11,354 

 

    Technical Solutions

 

3,667 

 

 

2,090 

 

 

8,775 

 

 

6,160 

 

Total rentals

$

88,736 

 

$

65,937 

 

$

171,286 

 

$

132,423 

 

Total Revenues

$

535,548 

 

$

470,068 

 

$

1,017,866 

 

$

871,004 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

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(3)Inventory



Inventories are stated at the lower of cost or net realizable value.  The Company applies net realizable value and obsolescence to the gross value of the inventory.  Cost is determined using the first-in, first-out or weighted-average cost methods for finished goods and work-in-process.  Supplies and consumables primarily consist of products used in our services provided to customers.  The components of the inventory balances are as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

June 30, 2018

 

December 31, 2017

Finished goods

 

$

72,884 

 

$

61,764 

Raw materials

 

 

14,955 

 

 

13,727 

Work-in-process

 

 

10,051 

 

 

6,174 

Supplies and consumables

 

 

26,309 

 

 

24,923 

Total

 

$

124,199 

 

$

106,588 



 

 

 

 

 

 

 

(4)Notes Receivable



Notes receivable consist of a commitment from the seller of an oil and gas property acquired by the Company related to costs associated with the abandonment of the acquired property.  Pursuant to an agreement with the seller, the Company will invoice the seller an agreed upon amount at the completion of certain decommissioning activities.  The gross amount of this obligation totals $115.0 million and is recorded at present value using an effective interest rate of 6.58%.  The related discount is amortized to interest income based on the expected timing of completion of the decommissioning activities.  The Company recorded interest income related to notes receivable of $1.9  million and $1.7 million for the six months ended June 30, 2018 and 2017, respectively.

 



(5)Decommissioning Liabilities



The Company’s decommissioning liabilities associated with an oil and gas property and its related assets consist of costs related to the plugging of wells, the removal of the related platform and equipment, and site restoration.  The Company reviews the adequacy of its decommissioning liabilities whenever indicators suggest that the estimated cash flows needed to satisfy the liabilities have changed materially.  The Company had decommissioning liabilities of $127.2 million and $130.4 million at June 30, 2018 and December 31, 2017, respectively.

 

(6)Debt



The Company’s outstanding debt is as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

June 30, 2018

 

December 31, 2017



 

Long-term

 

Long-term

Senior unsecured notes due September 2024

 

$

500,000 

 

$

500,000 

Senior unsecured notes due December 2021

 

 

800,000 

 

 

800,000 

Total debt, gross

 

 

1,300,000 

 

 

1,300,000 

Unamortized debt issuance costs

 

 

(18,855)

 

 

(20,229)

Total debt, net

 

$

1,281,145 

 

$

1,279,771 



Credit Facility



The Company has a $300 million asset-based revolving credit facility which matures in October 2022.  The borrowing base under the credit facility is calculated based on a formula referencing the borrower’s and the subsidiary guarantors’ eligible accounts receivable, eligible inventory and eligible premium rental drill pipe less reserves.  Availability under the credit facility is the lesser of (i) the commitments, (ii) the borrowing base and (iii) the highest principal amount permitted to be secured under the indenture governing the 7 1/8% senior unsecured notes due 2021.  At June 30, 2018, the borrowing base was $263.0 million and the Company had $37.9  million of letters of credit outstanding that reduced its borrowing availability under the revolving credit facility.  The credit agreement contains various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, merger, consolidations, dispositions of assets and other provisions customary in similar types of agreements.

   

8

 


 

 

Table Of Contents

 

Senior Unsecured Notes



The Company has outstanding $500 million of 7 3/4% senior unsecured notes due September 2024.  The indenture governing the 7 3/4% senior unsecured notes due 2024 requires semi-annual interest payments on March 15th and September 15th of each year, beginning on March 15, 2018, through the maturity date of September 15, 2024.



The Company also has outstanding $800 million of 7 1/8% senior unsecured notes due December 2021.  The indenture governing the 7 1/8% senior unsecured notes due 2021 requires semi-annual interest payments on June 15th and December 15th of each year through the maturity date of December 15, 2021. 

 

(7)  Fair Value Measurements



Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Inputs used in determining fair value are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable.  The three input levels of the fair value hierarchy are as follows.  



Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.



Level 2: Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical assets or liabilities in inactive markets; or model-derived valuations or other inputs that can be corroborated by observable market data.



Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.



The following tables provide a summary of the financial assets and liabilities measured at fair value on a recurring basis (in thousands):



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 



 

Fair Value at June 30, 2018



 

Level 1

 

Level 2

 

Level 3

 

Total

Intangible and other long-term assets, net

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation assets

 

$

373 

 

$

13,904 

 

$

 -

 

$

14,277 

Accounts payable

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

 -

 

$

1,163 

 

$

 -

 

$

1,163 

Other long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

 -

 

$

21,081 

 

$

 -

 

$

21,081 



 

 

 

 

 

 

 

 

 

 

 

 



 

Fair Value at December 31, 2017



 

Level 1

 

Level 2

 

Level 3

 

Total

Intangible and other long-term assets, net

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation assets

 

$

370 

 

$

13,817 

 

$

 -

 

$

14,187 

Accounts payable

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

 -

 

$

1,253 

 

$

 -

 

$

1,253 

Other long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

 -

 

$

21,085 

 

$

 -

 

$

21,085 



 

 

 

 

 

 

 

 

 

 

 

 

The Company’s non-qualified deferred compensation plans allow officers, certain highly compensated employees and non-employee directors to defer receipt of a portion of their compensation and contribute such amounts to one or more hypothetical investment funds.  These investments are reported at fair value based on unadjusted quoted prices in active markets for identifiable assets and observable inputs for similar assets and liabilities, which represent Levels 1 and 2, respectively, in the fair value hierarchy. 



The fair value of the Company’s cash equivalents and accounts receivable approximates their carrying amounts.  The fair value of the Company’s long-term debt was approximately $1,321.0  million and $1,347.0 million as of June 30, 2018 and December 31, 2017, respectively.  The fair value of these debt instruments is determined by reference to the market value of the instruments as quoted in over-the-counter markets, which are Level 1 inputs.

 

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Table Of Contents

 

(8)  Segment Information



Business Segments



The Drilling Products and Services segment rents and sells premium drill pipe, bottom hole assemblies, tubulars and specialized equipment for use with onshore and offshore oil and gas well drilling, completion, production and workover activities.  It also provides on-site accommodations and machining services.  The Onshore Completion and Workover Services segment provides pressure pumping services used to complete and stimulate production in new oil and gas wells, fluid handling services and well servicing rigs that provide a variety of well completion, workover and maintenance services.  The Production Services segment provides intervention services such as coiled tubing, cased hole and mechanical wireline, hydraulic workover and snubbing, production testing and optimization, and remedial pumping services.  The Technical Solutions segment provides services typically requiring specialized engineering, manufacturing or project planning, including well control services, stimulation and sand control services and well plug and abandonment services. It also includes production and sale of oil and gas. 



The Company evaluates the performance of its reportable segments based on income or loss from operations excluding allocated corporate expenses.  The segment measure is calculated as follows: segment revenues less segment operating expenses, depreciation, depletion, amortization and accretion expense and reduction in value of assets.  The Company uses this segment measure to evaluate its reportable segments because it is the measure that is most consistent with how the Company organizes and manages its business operations.  Corporate and other costs primarily include expenses related to support functions, salaries and benefits for corporate employees and stock-based compensation expense.



Summarized financial information for the Company’s segments is as follows (in thousands): 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

Corporate and

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Other

 

Total

Revenues

 

$

94,033 

 

$

276,242 

 

$

102,004 

 

$

63,269 

 

$

 -

 

$

535,548 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

36,599 

 

 

210,206 

 

 

85,129 

 

 

37,876 

 

 

 -

 

 

369,810 

Depreciation, depletion, amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  and accretion

 

 

28,590 

 

 

47,423 

 

 

14,303 

 

 

6,273 

 

 

1,384 

 

 

97,973 

General and administrative expenses

 

 

13,843 

 

 

11,102 

 

 

9,696 

 

 

13,323 

 

 

21,932 

 

 

69,896 

Income (loss) from operations

 

 

15,001 

 

 

7,511 

 

 

(7,124)

 

 

5,797 

 

 

(23,316)

 

 

(2,131)

Interest income (expense), net

 

 

 -

 

 

 -

 

 

 -

 

 

971 

 

 

(25,865)

 

 

(24,894)

Other expense

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(2,382)

 

 

(2,382)

Income (loss) from continuing operations 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  before income taxes

 

$

15,001 

 

$

7,511 

 

$

(7,124)

 

$

6,768 

 

$

(51,563)

 

$

(29,407)



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Three Months Ended June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

Corporate and

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Other

 

Total

Revenues

 

$

68,827 

 

$

249,079 

 

$

88,606 

 

$

63,556 

 

$

 -

 

$

470,068 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

33,002 

 

 

207,021 

 

 

71,377 

 

 

40,402 

 

 

 -

 

 

351,802 

Depreciation, depletion, amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  and accretion

 

 

33,619 

 

 

44,621 

 

 

20,193 

 

 

8,255 

 

 

1,431 

 

 

108,119 

General and administrative expenses

 

 

12,739 

 

 

11,804 

 

 

11,886 

 

 

13,828 

 

 

26,451 

 

 

76,708 

Income (loss) from operations

 

 

(10,533)

 

 

(14,367)

 

 

(14,850)

 

 

1,071 

 

 

(27,882)

 

 

(66,561)

Interest income (expense), net

 

 

 -

 

 

 -

 

 

 -

 

 

911 

 

 

(24,244)

 

 

(23,333)

Other expense

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(2,156)

 

 

(2,156)

Income (loss) from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  before income taxes

 

$

(10,533)

 

$

(14,367)

 

$

(14,850)

 

$

1,982 

 

$

(54,282)

 

$

(92,050)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

Corporate and

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Other

 

Total

Revenues

 

$

179,235 

 

$

507,731 

 

$

202,721 

 

$

128,179 

 

$

 -

 

$

1,017,866 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

71,669 

 

 

390,857 

 

 

171,065 

 

 

79,679 

 

 

 -

 

 

713,270 

Depreciation, depletion, amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  and accretion

 

 

58,231 

 

 

95,078 

 

 

33,583 

 

 

14,003 

 

 

2,797 

 

 

203,692 

General and administrative expenses

 

 

26,367 

 

 

24,328 

 

 

19,289 

 

 

27,383 

 

 

48,349 

 

 

145,716 

Income/(loss) from operations

 

 

22,968 

 

 

(2,532)

 

 

(21,216)

 

 

7,114 

 

 

(51,146)

 

 

(44,812)

Interest income (expense), net

 

 

 -

 

 

 -

 

 

 -

 

 

1,927 

 

 

(51,708)

 

 

(49,781)

Other expense

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(4,117)

 

 

(4,117)

Income/(loss) from continuing operations 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  before income taxes

 

$

22,968 

 

$

(2,532)

 

$

(21,216)

 

$

9,041 

 

$

(106,971)

 

$

(98,710)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



11

 


 

 

Table Of Contents

 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

Corporate and

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Other

 

Total

Revenues

 

$

137,258 

 

$

454,058 

 

$

157,211 

 

$

122,477 

 

$

 -

 

$

871,004 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

62,060 

 

 

400,710 

 

 

132,157 

 

 

78,861 

 

 

 -

 

 

673,788 

Depreciation, depletion, amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    and accretion

 

 

68,348 

 

 

93,768 

 

 

40,782 

 

 

16,631 

 

 

2,871 

 

 

222,400 

General and administrative expenses

 

 

25,705 

 

 

23,075 

 

 

23,167 

 

 

27,396 

 

 

52,858 

 

 

152,201 

Loss from operations

 

 

(18,855)

 

 

(63,495)

 

 

(38,895)

 

 

(411)

 

 

(55,729)

 

 

(177,385)

Interest income (expense), net

 

 

 -

 

 

 -

 

 

 -

 

 

1,701 

 

 

(49,284)

 

 

(47,583)

Other income

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(1,507)

 

 

(1,507)

Income (loss) from continuing operations 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  before income taxes

 

$

(18,855)

 

$

(63,495)

 

$

(38,895)

 

$

1,290 

 

$

(106,520)

 

$

(226,475)













 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Identifiable Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

Corporate and

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Other

 

Total

June 30, 2018

 

$

578,083 

 

$

1,553,343 

 

$

491,859 

 

$

345,196 

 

$

52,504 

 

$

3,020,985 

December 31, 2017

 

$

662,968 

 

$

1,501,214 

 

$

512,256 

 

$

377,549 

 

$

56,238 

 

$

3,110,225 



Geographic Segments



The Company attributes revenue to various countries based on the location of where services are performed or the destination of the drilling products or equipment sold or rented.  Long-lived assets consist primarily of property, plant and equipment and are attributed to various countries based on the physical location of the asset at the end of a period.  The Company’s revenue attributed to the U.S. and to other countries and the value of its long-lived assets by those locations are as follows (in thousands):





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended June 30,

 

Six Months Ended June 30,



 

2018

 

2017

 

2018

 

2017

United States

 

$

447,666 

 

$

402,065 

 

$

855,213 

 

$

735,674 

Other countries

 

 

87,882 

 

 

68,003 

 

 

162,653 

 

 

135,330 

Total

 

$

535,548 

 

$

470,068 

 

$

1,017,866 

 

$

871,004 



 

 

 

 

 

 

 

 

 

 

 

 

Long-Lived Assets

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

June 30, 2018

 

December 31, 2017

 

 

 

 

United States

 

$

1,001,738 

 

$

1,064,823 

 

 

 

 

 

 

Other countries

 

 

238,965 

 

 

252,121 

 

 

 

 

 

 

Total

 

$

1,240,703 

 

$

1,316,944 

 

 

 

 

 

 

 

12

 


 

 

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(9)Stock-Based Compensation Plans



The Company maintains various stock incentive plans that provide long-term incentives to the Company’s key employees, including officers, directors, consultants and advisors (Eligible Participants).  Under the stock incentive plans, the Company may grant incentive stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-based awards or any combination thereof to Eligible Participants.  The Company’s total compensation expense related to these plans was approximately $16.3 million and $19.7 million for the six months ended June 30, 2018 and 2017, respectively, which is reflected in general and administrative expenses.



(10)  Income Taxes



The Company had $30.7 million of unrecorded tax benefits as of June 30, 2018 and December 31, 2017, all of which would impact the Company’s effective tax rate if recognized.  It is the Company’s policy to recognize interest and applicable penalties, if any, related to uncertain tax positions in income tax expense.  The Company continues to evaluate the impact of the Tax Cuts and Jobs Act of 2017 and no revisions were recorded during the six months ended June 30, 2018.



(11) Earnings per Share



Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted earnings per share is computed in the same manner as basic earnings per share except that the denominator is increased to include the number of additional common shares that could have been outstanding assuming the exercise of stock options and the conversion of restricted stock units.



For the three and six months ended June 30, 2018 and 2017, the Company incurred a loss from continuing operations; therefore the impact of any incremental shares would be anti-dilutive.

 

(12)  Supplemental Guarantor Information



SESI, L.L.C. (the Issuer), a 100% owned subsidiary of Superior Energy Services, Inc. (Parent), has $500 million of 7 3/4% senior unsecured notes due 2024. The Parent, along with certain of its 100% owned domestic subsidiaries, fully and unconditionally guaranteed such senior unsecured notes, and such guarantees are joint and several.



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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

June 30, 2018

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 -

 

$

68,807 

 

$

1,243 

 

$

48,462 

 

$

 -

 

$

118,512 

Accounts receivable, net

 

 

 -

 

 

(924)

 

 

372,274 

 

 

70,633 

 

 

 -

 

 

441,983 

Intercompany accounts receivable

 

 

 -

 

 

8,920 

 

 

68,283 

 

 

5,533 

 

 

(82,736)

 

 

 -

Other current assets

 

 

 -

 

 

12,190 

 

 

153,887 

 

 

35,876 

 

 

 -

 

 

201,953 

Total current assets

 

 

 -

 

 

88,993 

 

 

595,687 

 

 

160,504 

 

 

(82,736)

 

 

762,448 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

 -

 

 

10,609 

 

 

1,035,229 

 

 

194,865 

 

 

 -

 

 

1,240,703 

Goodwill

 

 

 -

 

 

 -

 

 

657,099 

 

 

149,714 

 

 

 -

 

 

806,813 

Notes receivable

 

 

 -

 

 

 -

 

 

62,041 

 

 

 -

 

 

 -

 

 

62,041 

Long-term intercompany accounts receivable

 

 

2,230,531 

 

 

 -

 

 

2,058,093 

 

 

180,246 

 

 

(4,468,870)

 

 

 -

Equity investments of consolidated subsidiaries

 

 

(1,177,514)

 

 

4,461,755 

 

 

6,223 

 

 

 -

 

 

(3,290,464)

 

 

 -

Restricted cash

 

 

 -

 

 

 -

 

 

11,586 

 

 

45 

 

 

 -

 

 

11,631 

Intangible and other long-term assets, net

 

 

 -

 

 

21,217 

 

 

108,503 

 

 

7,629 

 

 

 -

 

 

137,349 

Total assets

 

$

1,053,017 

 

$

4,582,574 

 

$

4,534,461 

 

$

693,003 

 

$

(7,842,070)

 

$

3,020,985 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 -

 

$

12,184 

 

$

128,478 

 

$

21,463 

 

$

 -

 

$

162,125 

Accrued expenses

 

 

302 

 

 

103,998 

 

 

74,908 

 

 

22,457 

 

 

 -

 

 

201,665 

Intercompany accounts payable

 

 

 -

 

 

724 

 

 

8,250 

 

 

73,762 

 

 

(82,736)

 

 

 -

Current portion of decommissioning liabilities

 

 

 -

 

 

 -

 

 

20,670 

 

 

3,486 

 

 

 -

 

 

24,156 

       Total current liabilities

 

 

302 

 

 

116,906 

 

 

232,306 

 

 

121,168 

 

 

(82,736)

 

 

387,946 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

 -

 

 

(156,705)

 

 

194,992 

 

 

3,471 

 

 

 -

 

 

41,758 

Decommissioning liabilities

 

 

 -

 

 

 -

 

 

103,088 

 

 

 -

 

 

 -

 

 

103,088 

Long-term debt, net

 

 

 -

 

 

1,281,145 

 

 

 -

 

 

 -

 

 

 -

 

 

1,281,145 

Long-term intercompany accounts payable

 

 

 -

 

 

4,468,870 

 

 

 -

 

 

 -

 

 

(4,468,870)

 

 

 -

Other long-term liabilities

 

 

 -

 

 

49,872 

 

 

78,276 

 

 

26,185 

 

 

 -

 

 

154,333 

Total stockholders' equity (deficit)

 

 

1,052,715 

 

 

(1,177,514)

 

 

3,925,799 

 

 

542,179 

 

 

(3,290,464)

 

 

1,052,715 

Total liabilities and stockholders' equity

 

$

1,053,017 

 

$

4,582,574 

 

$

4,534,461 

 

$

693,003 

 

$

(7,842,070)

 

$

3,020,985 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



14

 


 

 

Table Of Contents

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

December 31, 2017

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 -

 

$

126,533 

 

$

440 

 

$

45,027 

 

$

 -

 

$

172,000 

Accounts receivable, net

 

 

 -

 

 

 -

 

 

332,402 

 

 

70,889 

 

 

(5,235)

 

 

398,056 

Income taxes receivable

 

 

 -

 

 

 -

 

 

(221)

 

 

1,180 

 

 

 -

 

 

959 

Intercompany accounts receivable

 

 

 -

 

 

6,460 

 

 

58,375 

 

 

5,865 

 

 

(70,700)

 

 

 -

Other current assets

 

 

 -

 

 

11,895 

 

 

129,970 

 

 

34,295 

 

 

 -

 

 

176,160 

Assets held for sale

 

 

 -

 

 

 -

 

 

 -

 

 

13,644 

 

 

 -

 

 

13,644 

Total current assets

 

 

 -

 

 

144,888 

 

 

520,966 

 

 

170,900 

 

 

(75,935)

 

 

760,819 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

 -

 

 

12,055 

 

 

1,093,446 

 

 

211,443 

 

 

 -

 

 

1,316,944 

Goodwill

 

 

 -

 

 

 -

 

 

657,099 

 

 

150,761 

 

 

 -

 

 

807,860 

Notes receivable

 

 

 -

 

 

 -

 

 

60,149 

 

 

 -

 

 

 -

 

 

60,149 

Long-term intercompany accounts receivable

 

 

2,221,697 

 

 

 -

 

 

2,032,056 

 

 

177,842 

 

 

(4,431,595)

 

 

 -

Equity investments of consolidated subsidiaries

 

 

(1,088,736)

 

 

4,481,702 

 

 

6,590 

 

 

 -

 

 

(3,399,556)

 

 

 -

Restricted cash

 

 

 -

 

 

 -

 

 

20,483 

 

 

 -

 

 

 -

 

 

20,483 

Intangible and other long-term assets, net

 

 

 -

 

 

22,118 

 

 

113,632 

 

 

8,220 

 

 

 -

 

 

143,970 

Total assets

 

$

1,132,961 

 

$

4,660,763 

 

$

4,504,421 

 

$

719,166 

 

$

(7,907,086)

 

$

3,110,225 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 -

 

$

14,339 

 

$

89,714 

 

$

20,898 

 

$

(5,235)

 

$

119,716 

Accrued expenses

 

 

532 

 

 

116,767 

 

 

80,825 

 

 

23,633 

 

 

 -

 

 

221,757 

Intercompany accounts payable

 

 

 -

 

 

724 

 

 

7,918 

 

 

62,058 

 

 

(70,700)

 

 

 -

Current portion of decommissioning liabilities

 

 

 -

 

 

 -

 

 

25,670 

 

 

1,591 

 

 

 -

 

 

27,261 

Liabilities held for sale

 

 

 -

 

 

 -

 

 

 -

 

 

6,463 

 

 

 -

 

 

6,463 

       Total current liabilities

 

 

532 

 

 

131,830 

 

 

204,127 

 

 

114,643 

 

 

(75,935)

 

 

375,197 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

 -

 

 

(147,116)

 

 

205,386 

 

 

2,788 

 

 

 -

 

 

61,058 

Decommissioning liabilities

 

 

 -

 

 

 -

 

 

101,293 

 

 

1,843 

 

 

 -

 

 

103,136 

Long-term debt, net

 

 

 -

 

 

1,279,771 

 

 

 -

 

 

 -

 

 

 -

 

 

1,279,771 

Long-term intercompany accounts payable

 

 

 -

 

 

4,431,595 

 

 

 -

 

 

 -

 

 

(4,431,595)

 

 

 -

Other long-term liabilities

 

 

 -

 

 

53,419 

 

 

79,061 

 

 

26,154 

 

 

 -

 

 

158,634 

Total stockholders' equity (deficit)

 

 

1,132,429 

 

 

(1,088,736)

 

 

3,914,554 

 

 

573,738 

 

 

(3,399,556)

 

 

1,132,429 

Total liabilities and stockholders' equity

 

$

1,132,961 

 

$

4,660,763 

 

$

4,504,421 

 

$

719,166 

 

$

(7,907,086)

 

$

3,110,225 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



15

 


 

 

Table Of Contents

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

Three Months Ended June 30, 2018

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Revenues

 

$

 -

 

$

 -

 

$

473,724 

 

$

73,289 

 

$

(11,465)

 

$

535,548 

Cost of services and rentals (exclusive of depreciation,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depletion, amortization and accretion)

 

 

 -

 

 

(2,963)

 

 

334,169 

 

 

50,069 

 

 

(11,465)

 

 

369,810 

Depreciation, depletion, amortization and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

accretion

 

 

 -

 

 

990 

 

 

85,501 

 

 

11,482 

 

 

 -

 

 

97,973 

General and administrative expenses

 

 

 -

 

 

21,098 

 

 

35,668 

 

 

13,130 

 

 

 -

 

 

69,896 

Loss from operations

 

 

 -

 

 

(19,125)

 

 

18,386 

 

 

(1,392)

 

 

 -

 

 

(2,131)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 -

 

 

(25,884)

 

 

980 

 

 

10 

 

 

 -

 

 

(24,894)

Other income (expense)

 

 

 -

 

 

(186)

 

 

264 

 

 

(2,460)

 

 

 -

 

 

(2,382)

Equity in losses of consolidated subsidiaries

 

 

(26,390)

 

 

11,361 

 

 

(200)

 

 

 -

 

 

15,229 

 

 

 -

Loss from continuing operations before income taxes

 

 

(26,390)

 

 

(33,834)

 

 

19,430 

 

 

(3,842)

 

 

15,229 

 

 

(29,407)

Income taxes

 

 

 -

 

 

(7,444)

 

 

3,001 

 

 

473 

 

 

 -

 

 

(3,970)

Net loss from continuing operations

 

 

(26,390)

 

 

(26,390)

 

 

16,429 

 

 

(4,315)

 

 

15,229 

 

 

(25,437)

Loss from discontinued operations, net of income tax

 

 

 -

 

 

 -

 

 

 -

 

 

(953)

 

 

 -

 

 

(953)

Net loss

 

$

(26,390)

 

$

(26,390)

 

$

16,429 

 

$

(5,268)

 

$

15,229 

 

$

(26,390)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Consolidating Statements of Comprehensive Loss

Three Months Ended June 30, 2018

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Net loss

 

$

(26,390)

 

$

(26,390)

 

$

16,429 

 

$

(5,268)

 

$

15,229 

 

$

(26,390)

Change in cumulative translation adjustment, net of tax

 

 

(7,053)

 

 

(7,053)

 

 

 -

 

 

(7,053)

 

 

14,106 

 

 

(7,053)

Comprehensive loss

 

$

(33,443)

 

$

(33,443)

 

$

16,429 

 

$

(12,321)

 

$

29,335 

 

$

(33,443)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



16

 


 

 

Table Of Contents

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

Three Months Ended June 30, 2017

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Revenues

 

$

 -

 

$

 -

 

$

416,328 

 

$

56,311 

 

$

(2,571)

 

$

470,068 

Cost of services and rentals (exclusive of depreciation,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depletion, amortization and accretion)

 

 

 -

 

 

1,500 

 

 

311,009 

 

 

41,864 

 

 

(2,571)

 

 

351,802 

Depreciation, depletion, amortization and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

accretion

 

 

 -

 

 

1,035 

 

 

94,031 

 

 

13,053 

 

 

 -

 

 

108,119 

General and administrative expenses

 

 

 -

 

 

25,948 

 

 

37,732 

 

 

13,028 

 

 

 -

 

 

76,708 

Loss from operations

 

 

 -

 

 

(28,483)

 

 

(26,444)

 

 

(11,634)

 

 

 -

 

 

(66,561)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 -

 

 

(24,370)

 

 

957 

 

 

80 

 

 

 -

 

 

(23,333)

Other income (expense)

 

 

 -

 

 

(311)

 

 

206 

 

 

(2,051)

 

 

 -

 

 

(2,156)

Equity in losses of consolidated subsidiaries

 

 

(63,806)

 

 

(24,545)

 

 

(148)

 

 

 -

 

 

88,499 

 

 

 -

Loss from continuing operations before income taxes

 

 

(63,806)

 

 

(77,709)

 

 

(25,429)

 

 

(13,605)

 

 

88,499 

 

 

(92,050)

Income taxes

 

 

 -

 

 

(13,903)

 

 

(15,278)

 

 

(830)

 

 

 -

 

 

(30,011)

Net income (loss) from continuing operations

 

 

(63,806)

 

 

(63,806)

 

 

(10,151)

 

 

(12,775)

 

 

88,499 

 

 

(62,039)

Loss from discontinued operations, net of income tax

 

 

 -

 

 

 -

 

 

 -

 

 

(1,767)

 

 

 -

 

 

(1,767)

Net loss

 

$

(63,806)

 

$

(63,806)

 

$

(10,151)

 

$

(14,542)

 

$

88,499 

 

$

(63,806)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Consolidating Statements of Comprehensive Loss

Three Months Ended June 30, 2017

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Net loss

 

$

(63,806)

 

$

(63,806)

 

$

(10,151)

 

$

(14,542)

 

$

88,499 

 

$

(63,806)

Change in cumulative translation adjustment, net of tax

 

 

6,022 

 

 

6,022 

 

 

 -

 

 

6,022 

 

 

(12,044)

 

 

6,022 

Comprehensive loss

 

$

(57,784)

 

$

(57,784)

 

$

(10,151)

 

$

(8,520)

 

$

76,455 

 

$

(57,784)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



17

 


 

 

Table Of Contents

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

Six Months Ended June 30, 2018

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Revenues

 

$

 -

 

$

 -

 

$

908,858 

 

$

126,548 

 

$

(17,540)

 

$

1,017,866 

Cost of services and rentals (exclusive of depreciation,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depletion, amortization and accretion)

 

 

 -

 

 

(5,589)

 

 

645,233 

 

 

91,166 

 

 

(17,540)

 

 

713,270 

Depreciation, depletion, amortization and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

accretion

 

 

 -

 

 

2,009 

 

 

178,215 

 

 

23,468 

 

 

 -

 

 

203,692 

General and administrative expenses

 

 

 -

 

 

46,762 

 

 

74,357 

 

 

24,597 

 

 

 -

 

 

145,716 

Loss from operations

 

 

 -

 

 

(43,182)

 

 

11,053 

 

 

(12,683)

 

 

 -

 

 

(44,812)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 -

 

 

(51,754)

 

 

1,947 

 

 

26 

 

 

 -

 

 

(49,781)

Other income (expense)

 

 

 -

 

 

(252)

 

 

538 

 

 

(4,403)

 

 

 -

 

 

(4,117)

Equity in losses of consolidated subsidiaries

 

 

(86,114)

 

 

(6,109)

 

 

(368)

 

 

 -

 

 

92,591 

 

 

 -

Loss from continuing operations before income taxes

 

 

(86,114)

 

 

(101,297)

 

 

13,170 

 

 

(17,060)

 

 

92,591 

 

 

(98,710)

Income taxes

 

 

 -

 

 

(15,183)

 

 

1,925 

 

 

(67)

 

 

 -

 

 

(13,325)

Net loss from continuing operations

 

 

(86,114)

 

 

(86,114)

 

 

11,245 

 

 

(16,993)

 

 

92,591 

 

 

(85,385)

Loss from discontinued operations, net of income tax

 

 

 -

 

 

 -

 

 

 -

 

 

(729)

 

 

 -

 

 

(729)

Net loss

 

$

(86,114)

 

$

(86,114)

 

$

11,245 

 

$

(17,722)

 

$

92,591 

 

$

(86,114)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Consolidating Statements of Comprehensive Loss

Six Months Ended June 30, 2018

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Net loss

 

$

(86,114)

 

$

(86,114)

 

$

11,245 

 

$

(17,722)

 

$

92,591 

 

$

(86,114)

Change in cumulative translation adjustment, net of tax

 

 

(2,665)

 

 

(2,665)

 

 

 -

 

 

(2,665)

 

 

5,330 

 

 

(2,665)

Comprehensive loss

 

$

(88,779)

 

$

(88,779)

 

$

11,245 

 

$

(20,387)

 

$

97,921 

 

$

(88,779)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 


 

 

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

Six Months Ended June 30, 2017

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Revenues

 

$

 -

 

$

 -

 

$

770,188 

 

$

108,499 

 

$

(7,683)

 

$

871,004 

Cost of services and rentals (exclusive of depreciation,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depletion, amortization and accretion)

 

 

 -

 

 

2,260 

 

 

595,969 

 

 

83,242 

 

 

(7,683)

 

 

673,788 

Depreciation, depletion, amortization and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

accretion

 

 

 -

 

 

2,081 

 

 

194,599 

 

 

25,720 

 

 

 -

 

 

222,400 

General and administrative expenses

 

 

 -

 

 

51,883 

 

 

74,876 

 

 

25,442 

 

 

 -

 

 

152,201 

Loss from operations

 

 

 -

 

 

(56,224)

 

 

(95,256)

 

 

(25,905)

 

 

 -

 

 

(177,385)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 -

 

 

(49,611)

 

 

1,759 

 

 

269 

 

 

 -

 

 

(47,583)

Other income (expense)

 

 

 -

 

 

(722)

 

 

447 

 

 

(1,232)

 

 

 -

 

 

(1,507)

Equity in losses of consolidated subsidiaries

 

 

(155,465)

 

 

(79,107)

 

 

(208)

 

 

 -

 

 

234,780 

 

 

 -

Loss from continuing operations before income taxes

 

 

(155,465)

 

 

(185,664)

 

 

(93,258)

 

 

(26,868)

 

 

234,780 

 

 

(226,475)

Income taxes

 

 

 -

 

 

(30,199)

 

 

(44,246)

 

 

(330)

 

 

 -

 

 

(74,775)

Net income (loss) from continuing operations

 

 

(155,465)

 

 

(155,465)

 

 

(49,012)

 

 

(26,538)

 

 

234,780 

 

 

(151,700)

Loss from discontinued operations, net of income tax

 

 

 -

 

 

 -

 

 

 -

 

 

(3,765)

 

 

 -

 

 

(3,765)

Net loss

 

$

(155,465)

 

$

(155,465)

 

$

(49,012)

 

$

(30,303)

 

$

234,780 

 

$

(155,465)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Consolidating Statements of Comprehensive Loss

Six Months Ended June 30, 2017

(in thousands)

(unaudited)



 

Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Net loss

 

$

(155,465)

 

$

(155,465)

 

$

(49,012)

 

$

(30,303)

 

$

234,780 

 

$

(155,465)

Change in cumulative translation adjustment, net of tax

 

 

7,746 

 

 

7,746 

 

 

 -

 

 

7,746 

 

 

(15,492)

 

 

7,746 

Comprehensive loss

 

$

(147,719)

 

$

(147,719)

 

$

(49,012)

 

$

(22,557)

 

$

219,288 

 

$

(147,719)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

Six Months Ended June 30, 2018

(in thousands)

(unaudited)



Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

12,342 

 

$

(91,600)

 

$

131,729 

 

$

(1,787)

 

$

(11,269)

 

$

39,415 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments for capital expenditures

 

 -

 

 

(549)

 

 

(114,360)

 

 

(4,932)

 

 

 -

 

 

(119,841)

Proceeds from sales of assets

 

 -

 

 

 -

 

 

10,150 

 

 

13,147 

 

 

 -

 

 

23,297 

Net cash used in investing activities

 

 -

 

 

(549)

 

 

(104,210)

 

 

8,215 

 

 

 -

 

 

(96,544)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intercompany dividends

 

 -

 

 

 -

 

 

 -

 

 

(11,269)

 

 

11,269 

 

 

 -

Changes in notes with affiliated companies, net

 

(8,834)

 

 

34,815 

 

 

(35,613)

 

 

9,632 

 

 

 -

 

 

 -

Other

 

(3,508)

 

 

(392)

 

 

 -

 

 

 -

 

 

 -

 

 

(3,900)

Net cash provided by (used in) financing activities

 

(12,342)

 

 

34,423 

 

 

(35,613)

 

 

(1,637)

 

 

11,269 

 

 

(3,900)

Effect of exchange rate changes on cash

 

 -

 

 

 -

 

 

 -

 

 

(1,311)

 

 

 -

 

 

(1,311)

Net decrease in cash, cash equivalents, and restricted cash

 

 -

 

 

(57,726)

 

 

(8,094)

 

 

3,480 

 

 

 -

 

 

(62,340)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 -

 

 

126,533 

 

 

20,923 

 

 

45,027 

 

 

 -

 

 

192,483 

Cash, cash equivalents, and restricted cash at end of period

$

 -

 

$

68,807 

 

$

12,829 

 

$

48,507 

 

$

 -

 

$

130,143 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



20

 


 

 

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

Six Months Ended June 30, 2017

(in thousands)

(unaudited)



Parent

 

Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

 

Consolidated

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

13,572 

 

$

11,674 

 

$

(520)

 

$

(7,579)

 

 

$

17,147 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments for capital expenditures

 

 -

 

 

(461)

 

 

(45,506)

 

 

(10,682)

 

 

 

(56,649)

Other

 

 -

 

 

 -

 

 

4,090 

 

 

 -

 

 

 

4,090 

Net cash used in investing activities

 

 -

 

 

(461)

 

 

(41,416)

 

 

(10,682)

 

 

 

(52,559)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in notes with affiliated companies, net

 

(6,822)

 

 

(7,812)

 

 

11,026 

 

 

3,608 

 

 

 

 -

Other

 

(6,750)

 

 

(224)

 

 

 -

 

 

 -

 

 

 

(6,974)

Net cash used in financing activities

 

(13,572)

 

 

(8,036)

 

 

11,026 

 

 

3,608 

 

 

 

(6,974)

Effect of exchange rate changes on cash

 

 -

 

 

 -

 

 

 -

 

 

2,093 

 

 

 

2,093 

Net decrease in cash, cash equivalents, and restricted cash

 

 -

 

 

3,177 

 

 

(30,910)

 

 

(12,560)

 

 

 

(40,293)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 -

 

 

127,445 

 

 

51,789 

 

 

66,858 

 

 

 

246,092 

Cash, cash equivalents, and restricted cash at end of period

$

 -

 

$

130,622 

 

$

20,879 

 

$

54,298 

 

 

$

205,799 











(13)  Discontinued Operations



During the six months ended June 30, 2018, the remaining marine vessels and equipment of the Company’s former subsea construction business were disposed of, resulting in $0.8 million loss on sale.    Loss from discontinued operations for the three and six months ended June 30, 2018 was $1.0 million and $0.7 million, respectively.  Loss from discontinued operations for the three and six months ended June 30, 2017 was $1.8 million and $3.8 million, respectively.





(14)  New Accounting Pronouncements



Standards adopted

   

In May 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.  The guidance in this ASU applies to all entities that change the terms or conditions of a share-based payment award.  The amendments provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation – Stock Compensation, to the modification of the terms and conditions of a share-based payment award.  The amendments in ASU 2017-09 include guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718.  The Company adopted the accounting guidance as of January 1, 2018.  The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements. 



In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.  The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business.  The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  The amendments provide a more robust framework to use in determining when a set of assets and activities is a business.  The Company adopted the accounting guidance as of January 1, 2018.  The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements. 

   

In November 2016, the FASB issued ASU 2016-18, Statements of Cash Flows (Topic 230): Restricted Cash.  The guidance in this ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts

21

 


 

 

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shown on the statement of cash flows.  The Company adopted the accounting guidance as of January 1, 2018 and applied it retrospectively to the periods presented in the Company’s condensed consolidated statements of cash flows.  For the six months ended June 30, 2017, net cash used in investing activities was adjusted to exclude the change in restricted cash related to cash held in escrow for the future decommissioning obligations associated with an oil and gas property.  The adjustment resulted in a $30.6 million decrease in net cash used in investing activities for the six months ended June 30, 2018.



In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.  The guidance in this ASU requires entities to recognize at the transaction date the income tax consequences of intercompany asset transfers other than inventory.  The Company adopted the accounting guidance as of January 1, 2018.  The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements.

   

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which replaced most existing revenue recognition guidance in GAAP.  The guidance in this ASU requires an entity to recognize the amount of revenue that it expects to be entitled for the transfer of promised goods or services to customers.  The Company adopted the accounting guidance as of January 1, 2018.  The Company adopted this ASU using the modified retrospective adoption method.  There was no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.



Standards not yet adopted



In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize the assets and liabilities arising from leases on the balance sheet.  This new ASU will require the lessee to recognize a lease liability equal to the present value of the lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for all leases longer than 12 months.  For leases with a term of 12 month or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities and recognize the lease expense for such leases generally on a straight-line basis over the lease term.  Under the new guidance, the Company will revise its leasing policies to require most of the leases, where the Company is the lessee, to be recognized on the balance sheet as a lease and lease liability.  Further, the Company will separate leases from other contracts where the Company is either the lessor or lessee when the rights conveyed under the contracts indicate there is a lease.  The Company is evaluating the effect ASU 2016-02 will have on its condensed consolidated financial statements.  The Company anticipates that its assets and liabilities will increase by a significant amount.   The new standard is effective for the Company beginning on January 1, 2019. 



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations



Forward-Looking Statements



This Quarterly Report on Form 10-Q and other documents filed by us with the SEC contain, and future oral or written statements or press releases by us and our management may contain, forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Generally, the words “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks” and “estimates,” variations of such words and similar expressions identify forward-looking statements, although not all forward-looking statements contain these identifying words.  All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q or such other materials regarding our financial position, financial performance, liquidity, strategic alternatives, market outlook, future capital needs, capital allocation plans, business strategies and other plans and objectives of our management for future operations and activities are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and prevailing circumstances on the date such statements are made. Such forward-looking statements, and the assumptions on which they are based, are inherently speculative and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from such statements. Such uncertainties include, but are not limited to: the cyclicality and volatility of the oil and gas industry, including changes in prevailing oil and gas prices or expectations about future prices; operating hazards, including the significant possibility of accidents resulting in personal injury or death, property damage or environmental damage for which we may have limited or no insurance coverage or indemnification rights; the effect of regulatory programs (including regarding worker health and safety laws) and environmental matters on our operations or prospects, including the risk that future changes in the regulation of hydraulic fracturing could reduce or eliminate demand for our pressure pumping and fluid management services, or that future changes in climate change legislation could result in increased operating costs or reduced commodity demand globally; counterparty risks associated with reliance on key suppliers; risks associated with the uncertainty of macroeconomic and business conditions worldwide; changes in competitive and technological factors affecting our operations; credit risk associated with our customer base; the potential inability to retain key employees and skilled workers; challenges with estimating our oil and natural gas reserves and potential liabilities related to our oil and natural gas property; risks associated with potential changes of Bureau of Ocean Energy management security and bonding requirements for offshore platforms; risks inherent in acquiring businesses; risks associated with cyber-attacks; risks associated with business growth during an industry recovery outpacing the capabilities of our infrastructure and workforce; political, legal, economic and other risks and uncertainties associated with our international operations; potential changes in tax laws, adverse positions taken by tax authorities or tax audits impacting our operating results; risks associated with our outstanding debt obligations and the potential effect of limiting our future growth and operations; our continued access to credit markets on favorable terms; the impact that unfavorable or unusual weather conditions could have on our operations; claims, litigation or other proceedings that require cash payments or could impair financial condition; not realizing the benefits of acquisitions or divestitures and volatility of the Company’s common stock. These risks and other uncertainties related to our business are described in detail in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Investors are cautioned that many of the assumptions on which our forward-looking statements are based are likely to change after such statements are made, including for example the market prices of oil and gas and regulations affecting oil and gas operations, which we cannot control or anticipate. Further, we may make changes to our business strategies and plans (including our capital spending and capital allocation plans) at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise, any of which could or will affect our results. For all these reasons, actual events and results may differ materially from those anticipated, estimated, projected or implied by us in our forward-looking statements. We undertake no obligation to update any of our forward-looking statements for any reason and, notwithstanding any changes in our assumptions, changes in our business plans, our actual experience, or other changes. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.



Executive Summary



General



We provide a wide variety of services and products to the energy industry.  We serve major, national and independent oil and natural gas exploration and production companies around the world and offer products and services with respect to the various phases of a well’s economic life cycle.  We report our operating results in four business segments: Drilling Products and Services; Onshore Completion and Workover Services; Production Services; and Technical Solutions. 



Industry Trends



The oil and gas industry is both cyclical and seasonal.  The level of spending by oil and gas companies is highly influenced by current and expected demand and future prices of oil and natural gas. Changes in spending result in an increased or decreased demand for our services and products. Rig count is an indicator of the level of spending by oil and gas companies. Our financial performance is significantly affected by the rig count in the U.S. land and offshore market areas as well as oil and natural gas prices and worldwide rig activity, which are summarized in the tables below.





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Three Months Ended June 30,

 

 

Six Months Ended June 30,



 

2018

 

2017

 

% Change

 

 

2018

 

2017

 

% Change

Worldwide Rig Count (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

 

1,021 

 

 

874 

 

17%

 

 

 

986 

 

 

798 

 

24%

Offshore

 

 

18 

 

 

21 

 

-14%

 

 

 

17 

 

 

21 

 

-19%

Total

 

 

1,039 

 

 

895 

 

16%

 

 

 

1,003 

 

 

819 

 

22%

International (2)

 

 

968 

 

 

958 

 

1%

 

 

 

969 

 

 

948 

 

2%

Worldwide Total

 

 

2,007 

 

 

1,853 

 

8%

 

 

 

1,972 

 

 

1,767 

 

12%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Prices (average)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude Oil (West Texas Intermediate)

 

$

68.07 

 

$

48.10 

 

42%

 

 

$

65.55 

 

$

49.85 

 

31%

Natural Gas (Henry Hub)

 

$

2.85 

 

$

3.08 

 

-7%

 

 

$

2.96 

 

$

3.05 

 

-3%



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



(1) Estimate of drilling activity as measured by the average active drilling rigs based on Baker Hughes, a GE company, rig count information.

(2) Excludes Canadian Rig Count.



Comparison of the Results of Operations for the Three Months Ended June 30, 2018 and March 31, 2018



For the second quarter of 2018,  our revenue was $535.5 million and the net loss from continuing operations was $25.4 million, or a $0.16 loss per share.  Net loss was $26.4 million, or a $0.17 loss per share.  This compares to net loss from continuing operations of $59.9 million, or $0.39 loss per share for the first quarter of 2018, on revenue of $482.3 million.  Net loss for the first quarter of 2018 was $59.7 million, or $0.39 loss per share.  The increase in U.S land market drilling activity largely contributed to the overall increase in our total revenues for the second quarter of 2018.   



Second quarter 2018 revenue in our Drilling Products and Services segment increased 10% sequentially to $94.0 million, as compared to $85.2 million in the first quarter of 2018.  U.S. land revenue increased 7% sequentially to $43.4 million due to the increase in drilling activity during the quarter.  International revenue increased 17% sequentially to $27.3 million due to an increase in rentals of premium drill pipe.  Gulf of Mexico revenue increased 11% sequentially to $23.3 million primarily due to an increase in rentals of premium drill pipe.

Second quarter 2018 revenue in our Onshore Completion and Workover Services segment increased 19% to 276.2 million, as compared to $231.5 million for the first quarter of 2018

Second quarter 2018 revenue in our Production Services segment increased 1% sequentially to $102.0 million, as compared to $100.8 million in the first quarter of 2018. International revenue increased 31% sequentially to $40.5 million primarily due to an increase in hydraulic workover and snubbing activities.  The increase was partially offset by decreases in revenue from U.S. land and Gulf of Mexico market areas.  U.S. land revenue decreased 9% sequentially to $47.9 million and Gulf of Mexico revenue decreased 22% sequentially to $13.6 million primarily due to a decrease in pressure control, hydraulic workover and snubbing and coiled tubing activities in those markets. 

Second quarter 2018 revenue in our Technical Solutions segment decreased 2% sequentially to $63.3 million, as compared to $64.8 million in the first quarter of 2018.  Gulf of Mexico revenue decreased 6% sequentially to $35.3 million due to a decrease in demand for completion tools and products.  International revenue decreased 2% sequentially to $20.1 million primarily due to a decrease in demand for well control services.  These decreases were offset by an increase from U.S. land revenue, which increased 16% sequentially to $7.9 million.  The increase in revenue was primarily due to an increase in demand for completion tools and products.



Comparison of the Results of Operations for the Three Months Ended June 30, 2018 and 2017 



For the three months ended June 30, 2018, our revenue was $535.5 million, an increase of $ 65.4 million or 14%, as compared to the same period in 2017.  The increase is largely attributable to a 17% increase in the U.S. land rig count.  The net loss from continuing operations was $25.4 million, or a $0.16 loss per share.  Net loss was $26.4 million, or a $0.17 loss per share.  This compares to a net loss from continuing operations for the three months ended June 30, 2017 of $62.0 million, or a $0.41 loss per share.  Net loss for the three months ended June 30, 2017 was $63.8 million, or a $0.42 loss per share.



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The following table compares our operating results for the three months ended June 30, 2018 and 2017 (in thousands, except percentages).  Cost of services and rentals excludes depreciation, depletion, amortization and accretion for each of our business segments. 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Revenue

 

 

 

Cost of Services and Rentals



2018

 

2017

 

Change

 

%

 

2018

 

%

 

2017

 

%

 

Change

Drilling Products and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Services

$

94,033 

 

$

68,827 

 

$

25,206 

 

37%

 

$

36,599 

 

39%

 

$

33,002 

 

48%

 

$

3,597 

Onshore Completion and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workover Services

 

276,242 

 

 

249,079 

 

 

27,163 

 

11%

 

 

210,206 

 

76%

 

 

207,021 

 

83%

 

 

3,185 

Production Services

 

102,004 

 

 

88,606 

 

 

13,398 

 

15%

 

 

85,129 

 

83%

 

 

71,377 

 

81%

 

 

13,752 

Technical Solutions

 

63,269 

 

 

63,556 

 

 

(287)

 

0%

 

 

37,876 

 

60%

 

 

40,402 

 

64%

 

 

(2,526)

Total

$

535,548 

 

$

470,068 

 

$

65,480 

 

14%

 

$

369,810 

 

69%

 

$

351,802 

 

75%

 

$

18,008 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





Operating Segments:



Drilling Products and Services Segment



Revenue from our Drilling Products and Services segment increased 37% to $94.0 million for the three months ended June 30, 2018, as compared to $68.8 million for the same period in 2017.  Cost of services and rentals as a percentage of revenue decreased to 39% of segment revenue for the three months ended June 30, 2018, as compared to 48% for the same period in 2017.  Revenue from the U.S. land market areas increased 56% as a result of increases in revenue from rentals of premium drill pipe, bottom hole assemblies and accommodation units, as demand for these rental products increased along with the increase in U.S. land rig count.  Revenue from the Gulf of Mexico market area increased 4% primarily due to an increase in revenue from rentals of premium drill pipe.  The revenue from the international market areas increased 46% primarily due to an increase in revenue from rentals of premium drill pipe.     



Onshore Completion and Workover Services Segment



Revenue from our Onshore Completion and Workover Services segment increased 11% to $276.2 million for the three months ended June 30, 2018, as compared to $249.1 million for the same period in 2017.  All of this segment’s revenue is derived from the U.S. land market area.  Cost of services and rentals as a percentage of revenue decreased to 76% of segment revenue for the three months ended June 30, 2018, as compared to 83% for the same period in 2017, primarily due to improved pricing and efficiencies, as well as decreased start-up and fleet reactivation costs for our pressure pumping business.  The increase in revenue is primarily attributable to increased activity in our pressure pumping and well services businesses. 



Production Services Segment



Revenue from our Production Services segment for the three months ended June 30, 2018 increased by 15% to $102.0 million, as compared to $88.6 million for the same period in 2017.  Cost of services and rentals as a percentage of revenue increased to 83% of segment revenue for the three months ended June 30, 2018, as compared to 81% for the same period in 2017.  Revenue from the U.S. land market area increased 45%, primarily due to increased activity in coiled tubing and pressure control services.  The revenue from the international market areas increased 14%, primarily due to an increase in hydraulic workover and snubbing and coiled tubing activities.  These increases were partially offset by a decrease in revenue from the Gulf of Mexico market area.  Revenue from Gulf of Mexico market area decreased 32%, primarily due to a decrease in hydraulic workover and snubbing activities, slickline services and specialty rentals.   



Technical Solutions Segment



Revenue from our Technical Solutions segment remained flat at $63.3 million for the three months ended June 30, 2018, as compared to the same period in 2017.  Cost of services and rentals as a percentage of revenue decreased to 60% of segment revenue for the three months ended June 30, 2018, as compared to 64% for the same period in 2017.  Revenue from the international market areas increased 48%, primarily due to an increase in demand for well control services.  Revenue derived from the Gulf of Mexico market area decreased 16%, primarily due to a decrease in demand for completion tools and products.  Revenue from the U.S. land market area remained unchanged. 







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Depreciation, Depletion, Amortization and Accretion



Depreciation, depletion, amortization and accretion decreased to $98.0 million during the three months ended June 30, 2018 from $108.1 million during the same period in 2017.  Depreciation and amortization expense decreased for our Drilling Products and Services segment by $5.0 million, or 15%; for our Production Services segment by $5.9 million, or 29%; and for our Technical Solutions segment by $2.0 million, or 24%.  Depreciation and amortization expense increased for our Onshore Completion and Workover Services segment by $2.8 million, or 6%.  Depreciation expense for Corporate and Other remained flat.  The decrease in depreciation, depletion, amortization and accretion is primarily due to assets becoming fully depreciated.



General and Administrative Expenses



General and administrative expenses were $69.9 million for the three months ended June 30, 2018, as compared to $76.7 million during the same period in 2017.  Despite a 14% increase in revenue, our total general and administrative expenses decreased 9%.  This demonstrates that we continue to benefit from the steps taken during the industry downturn, to reduce our cost structure and integrate product and service lines.



Income Taxes



Our effective income tax rate for the three months ended June 30, 2018 was 13% compared to a 33% effective income tax rate for the same period in 2017.  The effective tax rate for the three months ended June 30, 2018 was primarily impacted by the enactment of the Tax Cuts and Jobs Act of 2017, including a reduced U.S. corporate tax rate. 



Comparison of the Results of Operations for the Six Months Ended June 30, 2018 and 2017 



For the six months ended June 30, 2018, our revenue was $1,017.9 million, an increase of $ 146.9 million or 17%, as compared to the same period in 2017.  The increase is largely attributable to a 24% increase in the U.S. land rig count.  The net loss from continuing operations was $85.4 million, or a $0.56 loss per share.  Net loss was $86.1 million, or a $0.56 loss per share.  This compares to a net loss from continuing operations for the six months ended June 30, 2017 of $151.7 million, or a $1.00 loss per share.  Net loss for the six months ended June 30, 2017 was $155.5 million, or a $1.02 loss per share.



The following table compares our operating results for the six months ended June 30, 2018 (in thousands, except percentages).  Cost of services and rentals excludes depreciation, depletion, amortization and accretion for each of our business segments. 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

Cost of Services and Rentals



2018

 

2017

 

Change

 

%

 

2018

 

%

 

2017

 

%

 

Change



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Drilling Products and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Services

$

179,235 

 

$

137,258 

 

$

41,977 

 

31%

 

$

71,669 

 

40%

 

$

62,060 

 

45%

 

$

9,609 

Onshore Completion and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workover Services

 

507,731 

 

 

454,058 

 

 

53,673 

 

12%

 

 

390,857 

 

77%

 

 

400,710 

 

88%

 

 

(9,853)

Production Services

 

202,721 

 

 

157,211 

 

 

45,510 

 

29%

 

 

171,065 

 

84%

 

 

132,157 

 

84%

 

 

38,908 

Technical Solutions

 

128,179 

 

 

122,477 

 

 

5,702 

 

5%

 

 

79,679 

 

62%

 

 

78,861 

 

64%

 

 

818 

Total

$

1,017,866 

 

$

871,004 

 

$

146,862 

 

17%

 

$

713,270 

 

70%

 

$

673,788 

 

77%

 

$

39,482 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Operating Segments:



Drilling Products and Services Segment



Revenue from our Drilling Products and Services segment increased 31% to $179.2 million for the six months ended June 30, 2018, as compared to $137.3 million for the same period in 2017.  Cost of services and rentals as a percentage of revenue decreased to 40% of segment revenue for the six months ended June 30, 2018, as compared to 45% for the same period in 2017.  Revenue from the U.S. land market areas increased 72% as a result of increases in revenue from rentals of premium drill pipe, bottom hole assemblies and accommodation units, as demand for these rental products increased along with the increase in U.S. land rig count.    The revenue from the international market areas increased 19% primarily due to an increase in revenue from rentals of premium drill pipe.    Revenue from the Gulf of Mexico market area decreased 3% primarily due to a decrease in revenue from rentals of bottom hole assemblies. 



Onshore Completion and Workover Services Segment



Revenue from our Onshore Completion and Workover Services segment increased 12% to $507.7 million for the six months ended June 30, 2018, as compared to $454.0 million for the same period in 2017.  All of this segment’s revenue is derived from the U.S. land market

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area.  Cost of services and rentals as a percentage of revenue decreased to 77% of segment revenue for the six months ended June 30, 2018, as compared to 88% for the same period in 2017, primarily due to improved pricing and efficiencies, as well as decreased start-up and fleet reactivation costs for our pressure pumping business.  The increase in revenue is primarily attributable to increased  activity in our pressure pumping, fluid management and well services businesses.    



Production Services Segment



Revenue from our Production Services segment for the six months ended June 30, 2018 increased by 29% to $202.7 million, as compared to $157.2 million for the same period in 2017.  Cost of services and rentals as a percentage of revenue remained unchanged at 84% of segment revenue for the six months ended June 30, 2018, as compared to the same period in 2017.  Revenue from the U.S. land market area increased 78%, primarily due to increased activity in coiled tubing and pressure control services.  The revenue from the international market areas increased 13%, primarily due to an increase in hydraulic workover and snubbing and coiled tubing activities.  These increases were partially offset by a decrease in revenue from the Gulf of Mexico market area.  Revenue from Gulf of Mexico market area decreased 17%, primarily due to a decrease in slickline services, specialty rentals and coiled tubing activities.   



Technical Solutions Segment



Revenue from our Technical Solutions segment increased 5% to $128.2 million for the six months ended June 30, 2018, as compared to $122.5 million for the same period in 2017.  Cost of services and rentals as a percentage of revenue decreased to 62% of segment revenue for the six months ended June 30, 2018, as compared to 64% for the same period in 2017.  Revenue from the international market areas increased 37%, primarily due to an increase in demand for well control services.    Revenue derived from the Gulf of Mexico market area decreased 4%, primarily due to a decrease in demand for completion tools and products.  Revenue from the U.S. land market area decreased 14%, primarily due to a decrease in demand for completion tools and products.    



Depreciation, Depletion, Amortization and Accretion



Depreciation, depletion, amortization and accretion decreased to $203.7 million during the six months ended June 30, 2018 from $222.4 million during the same period in 2017.  Depreciation and amortization expense decreased for our Drilling Products and Services segment by $10.1 million, or 15%; for our Production Services segment by $7.2 million, or 18%; and for our Technical Solutions segment by $2.7 million, or 16%.  Depreciation and amortization expense increased for our Onshore Completion and Workover Services segment by $1.3 million, or 1%.  Depreciation expense for Corporate and Other remained flat.  The decrease in depreciation, depletion, amortization and accretion is primarily due to assets becoming fully depreciated.



General and Administrative Expenses



General and administrative expenses were $145.7 million for the six months ended June 30, 2018, as compared to $152.2 million during the same period in 2017.  Despite a 17% increase in revenue, our total general and administrative expenses decreased 4%.  This demonstrates that we continue to benefit from the steps taken during the industry downturn, to reduce our cost structure and integrate product and service lines.



Income Taxes



Our effective income tax rate for the six months ended June 30, 2018 was 13% compared to a 33% effective income tax rate for the same period in 2017.  The effective tax rate for the six months ended June 30, 2018 was primarily impacted by the enactment of the Tax Cuts and Jobs Act of 2017, including a reduced U.S. corporate tax rate. 

    

Liquidity and Capital Resources



For the six months ended June 30, 2018, we generated net cash from operating activities of $39.4 million, as compared to   $17.1 million for the same period in 2017.  Our primary liquidity needs during the next twelve months are for working capital and capital expenditures.  Our primary sources of liquidity are cash flows from operations and available borrowings under our credit facility.  We had cash and cash equivalents of $118.5 million at June 30, 2018, compared to $172.0 million at December 31, 2017    



We spent $119.8 million of cash on capital expenditures during the six months ended June 30, 2018.  Approximately $28.0 million was used to expand and maintain our Drilling Products and Services segment’s equipment inventory.  Approximately $77.1 million was spent on our Onshore Completion and Workover Services segment, primarily to rebuild our pressure pumping fleet.  Approximately $3.5 million and $6.9 million was spent in our Production Services and Technical Solutions segments, respectively and $4.3 million was spent in Corporate and Other.  We expect to spend up to approximately $225 million on capital expenditures during 2018.  We plan to continue adjusting our capital spending to align with market conditions and customer demand.



We have a $300 million asset-based revolving credit facility which matures in October 2022.  The borrowing base under the credit facility is calculated based on a formula referencing the borrower’s and the subsidiary guarantors’ eligible accounts receivable, eligible

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inventory and eligible premium rental drill pipe less reserves.  Availability under the credit facility is the lesser of (i) the commitments, (ii) the borrowing base and (iii) the highest principal amount permitted to be secured under the indenture governing the 7 1/8% senior unsecured notes due 2021.  At June 30, 2018, the borrowing base was $263.0  million and we had $37.9 million of letters of credit outstanding that reduced our borrowing availability under the revolving credit facility.   The credit agreement contains various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, merger, consolidations, dispositions of assets and other provisions customary in similar types of agreements.  At June 30, 2018, we were in compliance with all such covenants. 



We have outstanding $500 million of 7 3/4% senior unsecured notes due September 2024.  The indenture governing the 7 3/4% senior unsecured notes due 2024 requires semi-annual interest payments on March 15th and September 15th of each year, beginning on March 15, 2018, through the maturity date of September 15, 2024.  The indenture contains customary events of default and requires that we satisfy various covenants.  At June 30, 2018, we were in compliance with all such covenants.



We also have outstanding $800 million of 7 1/8% unsecured senior notes due December 2021.  The indenture governing the 7 1/8% senior notes due 2021 requires semi-annual interest payments on June 15th and December 15th of each year through the maturity date of December 15, 2021.  The indenture contains customary events of default and requires that we satisfy various covenants.  At June 30, 2018, we were in compliance with all such covenants.



Other Matters



Off-Balance Sheet Arrangements and Hedging Activities



At June 30, 2018, we had no off-balance sheet arrangements and no hedging contracts.



Recently Issued Accounting Guidance



See Part I, Item 1, “Financial Statements – Note 14 – New Accounting Pronouncements.”



Item 3.  Quantitative and Qualitative Disclosures about Market Risk



We are exposed to market risks associated with foreign currency fluctuations and changes in interest rates.  A discussion of our market risk exposure in financial instruments follows.



Foreign Currency Exchange Rates Risk



Because we operate in a number of countries throughout the world, we conduct a portion of our business in currencies other than the U.S. dollar.  The functional currency for our international operations, other than certain operations in the United Kingdom and Europe, is the U.S. dollar, but a portion of the revenues from our international operations is paid in foreign currencies.  The effects of foreign currency fluctuations are partly mitigated because local expenses of such international operations are also generally denominated in the same currency.  We continually monitor the currency exchange risks associated with all contracts not denominated in the U.S. dollar. 



Assets and liabilities of certain subsidiaries in the United Kingdom and Europe are translated at end of period exchange rates, while income and expenses are translated at average rates for the period.  Translation gains and losses are reported as the foreign currency translation component of accumulated other comprehensive loss in stockholders’ equity. 



We do not hold derivatives for trading purposes or use derivatives with complex features. When we believe prudent, we enter into forward foreign exchange contracts to hedge the impact of foreign currency fluctuations. We do not enter into forward foreign exchange contracts for trading or speculative purposes.  At June 30, 2018, we had no outstanding foreign currency forward contracts.



Interest Rate Risk



At June 30, 2018, we had no variable rate debt outstanding.



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Commodity Price Risk



Our revenues and profitability significantly depend upon the market prices of oil and natural gas.



For additional discussion, see Part 1, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

 

Item 4.  Controls and Procedures



(a)

Evaluation of disclosure controls and procedures.    As of the end of the period covered by this quarterly report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation, that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective for ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.



 

(b)

Changes in internal control.  There has been no change in our internal control over financial reporting that occurred during the three months ended June 30, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II.  OTHER INFORMATION



Item 1.  Legal Proceedings



From time to time, we are involved in various legal actions incidental to our business.   The outcome of these proceedings is not predictable.  However, based on current circumstances, we do not believe that the ultimate resolution of these proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on our financial position, results of operations or cash flows.



Item 1A.  Risk Factors



For information regarding certain risks relating to our operations, any of which could negatively affect our business, financial condition, operating results or prospects, see Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2017.



Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds



Issuer Purchases of Equity Securities



 

 

 

 

 



 

 

 

 

 

Period

 

(a)
Total Number
of Shares
Purchased (1)

 

(b)
Average Price Paid per Share

April 1 - 30, 2018

 

260 

 

$

11.31 

May 1 - 31, 2018

 

1,245 

 

$

11.82 

June 1 - 30, 2018

 

1,183 

 

$

10.09 

Total

 

2,688 

 

$

11.01 



 

 

 

 

 



(1)   Through our stock incentive plans, 2,688 shares were delivered to us by our employees to satisfy their tax withholding requirements upon vesting of restricted stock units.



Item 6.   Exhibits



(a)    The following exhibits are filed with this Form 10-Q:





 

Exhibit No.

Description

3.1

Restated Certificate of Incorporation of Superior Energy Services, Inc. (incorporated herein by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Quarterly Report on Form 10-Q filed August 7, 2013 (File No. 001-34037)). 

3.2

Amended and Restated Bylaws of Superior Energy Services, Inc. (as amended through March 7, 2012) (incorporated herein by reference to Exhibit 3.1 to Superior Energy Services, Inc.’s Current Report on Form 8-K filed March 12, 2012 (File No. 001-34037))

31.1*

Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 

31.2*

Officer’s certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

32.2*

Officer’s certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document



    *Filed herein

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SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



SUPERIOR ENERGY SERVICES, INC.





 

 

 



 

 

 



 

By:

/s/ Westervelt T. Ballard, Jr.



 

 

Westervelt T. Ballard, Jr.

Executive Vice President, Chief Financial Officer and Treasurer



 

 

 



 

 

 



 

By:

/s/ James W. Spexarth



 

 

James W. Spexarth



 

 

Chief Accounting Officer



 

 

 

Date:

July 25, 2018

 

 











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