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Superior Energy Services (SPN)
Q3 2011 Earnings Call
October 27, 2011 11:00 am ET
Robert S. Taylor - Chief Financial Officer, Executive Vice President and Treasurer
David D. Dunlap - Chief Executive Officer, President and Director
Greg A. Rosenstein - Vice President of Investor Relations, Secretary and Member of Administrative Committee
Joe Hill - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division
James C. West - Barclays Capital, Research Division
Geoff Kieburtz - Weeden & Co., LP, Research Division
Robin E. Shoemaker - Citigroup Inc, Research Division
Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division
Stephen D. Gengaro - Sterne Agee & Leach Inc., Research Division
J. Marshall Adkins - Raymond James & Associates, Inc., Research Division
William Sanchez - Howard Weil Incorporated, Research Division
Travis Z. Bartlett - Simmons & Company International, Research Division
Previous Statements by SPN
» Superior Energy Services' CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Superior Energy Services' CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Superior Energy Services' CEO Discusses Q4 2010 Results - Earnings Call Transcript
Greg A. Rosenstein
All right, good morning, and thank you for joining today's conference call. Joining me today are Superior's CEO, David Dunlap; and CFO, Robert Taylor. Let me remind everyone that during this conference call, management may make forward-looking statements regarding future expectations about the company's business management plans for future operations or similar matters, and the company's actual results could differ materially due to several important factors, including those described in the company filings with the Securities and Exchange Commission.
During this call, management will refer to EBITDA, which is a non-GAAP financial measure. And in accordance with Regulation G, the company provides a reconciliation between net income and these items on the website.
I will now turn the call over to David Dunlap.
David D. Dunlap
Thank you, Greg, and good morning to everyone. Last night, we reported quarterly -- record quarterly revenue of $565 million, EBITDA of $177 million and net income of just under $60 million or $0.73 per diluted share.
Our performance was in line with our expectations, thanks to the continued strength of the U.S. land markets, the gradual improvement of the Gulf of Mexico and the steady growth we are achieving internationally. Without question, growth in the U.S. land market is the major factor driving our third quarter performance as revenue increased almost 16% through a quarterly record of $229 million. The record results reflect high utilization for new capacity added during the year, as we have invested about $170 million of CapEx in the U.S. during the first 9 months of 2011.
The market continues to show an appetite for absorbing new capacity for virtually all of our intervention services and drilling products.
Our U.S. land results would have been even stronger if not for weather interruptions in Pennsylvania during September.
Deepwater Gulf of Mexico activity continued to slowly migrate upward as a few more rigs were drilling during the quarter, which benefited our completion services and premium drill type -- pipe businesses.
In fact, completion services had its best quarter since we acquired the business in August of last year.
By our estimate, there were 13 incremental rigs drilling in the deepwater of Gulf of Mexico at the end of the quarter. This is out of a total floater count of 20 according to recent ODS-Petrodata rig report.
Our annual guidance calls for 15 incremental rigs drilling in the deepwater by the end of the year. So far in October, 2 additional rigs have been put to work, so our guidance appears to be on track.
Activity in the shallow water Gulf of Mexico also improved. But much like in Pennsylvania, tropical weather disrupted activity for about a week in September.
International revenue increased to a record of $143 million due mostly to a 12% increase in Drilling Products and Services.
We continued to experience increased demand for premium drill pipe in Latin America, especially in Brazil. In addition, snubbing and hydraulic workover activity increased in Peru and Trinidad.
Hallin Marine's results were down slightly as compared with second quarter due to costs incurred with transitioning the Ullswater from West Africa to Singapore for a project that starts in the Asia-Pacific market during the fourth quarter. We could have left the Ullswater in West Africa, but the backlog of work in Southeast Asia has grown to the point where it made more economic sense to bring the vessel to Asia.
Utilization at Hallin remained strong and has increased since the end of the third quarter as the vessel schedule is solid for the remainder of the year. Hallin's revenue was slightly higher than in Q2 despite the downtime and higher costs.
We had strong incremental margins in Drilling Products and Services due to higher revenue and favorable business mix and in the Marine Segment as a result of lower maintenance and repair expenses.
Margins in the Subsea and Well Enhancement Segment were lower relative to the second quarter due to the weather-related downtime I mentioned earlier and the vessel transition costs at Hallin Marine. Both of those issues are transitory and confined to the quarter.
Robert will walk you now through some of the financial detail, and then I'll discuss our guidance and outlook. And with that, I'll turn the call over to our CFO, Robert Taylor.
Robert S. Taylor
Thank you, David. As we go through each segment, I will make comparisons to the second quarter of 2011.