Oil States International Inc (OIS) Q3 2024 Earnings Call Highlights: Strong Offshore ...

LIVE VIDEO

Powell holds a press conference after the Fed's rate decision. Watch here.

GuruFocus News

Thu, Oct 31, 2024, 1:11 AM 4 min read

Total Revenue: $174 million for the third quarter.
Adjusted Consolidated EBITDA: $22 million.
Adjusted Net Income: $2.7 million or $0.04 per share.
Offshore Manufactured Products Revenue: $102 million.
Offshore Manufactured Products Adjusted Segment EBITDA: $23 million with a margin of 23%.
Completion and Production Services Revenue: $40 million.
Completion and Production Services Adjusted Segment EBITDA: $5.4 million with a margin of 13%.
Downhole Technologies Revenue: $32 million.
Downhole Technologies Adjusted Segment EBITDA: $1 million.
Cash Flows from Operations: $29 million.
Net Debt Reduction: $20 million.
Bookings: $112 million, with a backlog of $313 million and a book-to-bill ratio of 1.1 times.
Expected Fourth Quarter Adjusted EBITDA: Between $20 million and $23 million.
Expected Free Cash Flow Generation: Approximately $20 million in the fourth quarter.
Share Repurchase Authorization: Increased to $50 million, expiring in October 2026.

Warning! GuruFocus has detected 3 Warning Sign with OIS.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Oil States International Inc (NYSE:OIS) reported strong results in its offshore manufactured products segment, with revenues totaling $102 million and adjusted segment EBITDA of $23 million.
The company achieved its largest bookings quarter of the year, with bookings totaling $112 million, up 11% sequentially, and a backlog of $313 million.
A strategic collaboration with Seadrill Limited aims to enhance safety and efficiency in offshore managed pressure drilling (MPD) operations, potentially generating $35 million to $45 million annually in associated revenue.
Oil States International Inc (NYSE:OIS) generated $29 million in cash flows from operations during the quarter, leading to a net debt reduction of $20 million.
The company expects to be net debt zero during 2025, which is anticipated to serve as a catalyst for stock price improvement.

Negative Points

Completion and Production Services segment revenues decreased 14% sequentially, impacted by weaker US market conditions and the exit of underperforming locations.
Adjusted segment EBITDA decreased at a higher rate due to weaker offshore activity in the Gulf of Mexico, partly caused by hurricanes.
The Downhole Technologies segment experienced a decrease in revenues and adjusted segment EBITDA due to weaker completion product sales.
Oil States International Inc (NYSE:OIS) reported pre-tax intangible and lease asset impairment charges of $13 million, along with facility consolidation and exit charges of $3.5 million.
Crude oil pricing declined during the quarter due to concerns about reduced oil demand in China and potential changes in OPEC-plus production cuts, affecting market conditions.

Q & A Highlights

Q: How are you thinking about the margin profile of both the Completion and Production Services and Downhole Technologies segments moving forward? A: Cynthia Taylor, President and CEO, explained that they expect material increases in EBITDA margins for Completion and Production Services due to exiting non-performing businesses. They anticipate mid-teens EBITDA margins in 2024, with potential for 23% to 25% in 2025. For Downhole Technologies, they are focusing on new EPIC technology and international penetration, expecting low double-digit EBITDA margins in 2025.

Q: How are customer conversations going, especially regarding the Offshore Manufactured Products business, given the macroeconomic backdrop? A: Cynthia Taylor noted that 65% of their revenue is offshore international, tied to production infrastructure. They expect growth in this area due to large field developments and new technologies like MPD. Despite current crude oil headlines, they anticipate mid-single-digit growth in their base business, with additional revenue from new technologies.

Q: Is there more to come in terms of strategic initiatives on different product lines, or is the bulk of it done? A: Cynthia Taylor stated that while some initiatives are ongoing, much of the operational work is complete. They are focusing on internal efficiencies, particularly around SG&A, and are concentrating on high-margin product lines like frac and isolation business and extended-reach technology.

Q: Can you provide guidance on the backlog conversion for the Offshore Manufactured Products business and how to think about margins? A: Cynthia Taylor mentioned that about 75% of the backlog typically turns in the forward 12 months, with additional revenue from service and repair work. They aim for 19% to 20% EBITDA margins annually, acknowledging variability due to product mix.

Q: What is your outlook for the Gulf of Mexico in 2025, considering the Q3 weakness? A: Cynthia Taylor indicated that the Gulf of Mexico is a high-margin contributor, with Q3 softness due to storms. They expect modestly improving activity in 2025, with strong margins from completion and intervention work.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Terms and Privacy Policy

Your Privacy Choices

Utah Privacy Notice