Allis-Chalmers Energy Inc. (NYSE: ALY) today reported results
for the third quarter of 2010. Revenues for the third quarter of
2010 increased 45.2% to $174.3 million compared to $120.0 million
for the third quarter of 2009, and Adjusted EBITDA increased 77% in
the third quarter of 2010 to $34.5 million compared to $19.5
million for the third quarter of 2009. Allis-Chalmers reported a
net loss attributed to common stockholders for the third quarter of
2010 of $3.2 million, or $0.04 per diluted share, after preferred
stock dividend of $637,000, compared to a net loss of $10.3
million, or $0.14 per diluted share in the third quarter of 2009,
after preferred stock dividend of $630,000.
Results for the third quarter of 2010 include $718,000 in
professional fees related to the previously announced proposed
transaction with Seawell Limited and the acquisition of American
Well Control, Inc., and a $650,000 estimated negative impact on
pre-tax operating income from a general strike in Argentina.
Revenues for the first nine months of 2010 increased 25.3% to
$473.3 million compared to $377.6 million for the first nine months
of 2009. Allis-Chalmers reported a net loss attributed to common
stockholders for the first nine months of 2010 of $19.4 million, or
$0.27 per diluted share, compared to a net loss of $13.0 million,
or $0.27 per diluted share for the first nine months of 2009.
Results for the first nine months of 2009 include a pre-tax gain of
$26.4 million on debt extinguishment associated with the repurchase
of $74.8 million of senior notes in June 2009.
The increase in revenues and net income in the third quarter and
the first nine months of 2010, as compared to the third quarter and
the first nine months of 2009, excluding the pre-tax gain on debt
extinguishment in the 2009 period, was due primarily to an
improvement in equipment utilization and pricing for our
services.
Weighted average shares of common stock outstanding on a diluted
basis were 72.2 million for the third quarter of 2010 compared to
70.9 million for the third quarter of 2009. For the nine month
period ended September 30, 2010, weighted average shares of common
stock outstanding on a diluted basis increased to 71.5 million
compared to 47.8 million for the first nine months of 2009.
EBITDA and Adjusted EBITDA are non-GAAP financial measures that
are not necessarily comparable from one company to another.
Additional information and a reconciliation of GAAP net income to
EBITDA and Adjusted EBITDA are provided later in this release.
Micki Hidayatallah, Allis-Chalmers’ Chairman and Chief Executive
Officer, stated, “Our revenues and Adjusted EBITDA have increased
sequentially in each of the past five quarters from the difficult
market conditions which existed in the first half of 2009.
Operating income increased 179.3% in the third quarter of 2010
compared to the second quarter of 2010, and our Adjusted EBITDA is
up 26.8% compared to the second quarter of 2010. Our Oilfield
Services segment revenues increased 14.0% in the third quarter of
2010 compared to the second quarter of 2010, and operating income
increased 263% in the third quarter primarily due to increased
utilization and pricing in our directional drilling and coiled
tubing business lines. We have successfully focused our efforts and
capital expenditures on enhancing our position in the strongest
U.S. onshore markets, including the Marcellus, Eagle Ford, and
Haynesville shale plays.”
Mr. Hidayatallah continued, “In spite of the U.S. Gulf of Mexico
drilling moratorium, revenues for our Rental Services segment
increased 12%, compared to the second quarter of 2010, not counting
the $6.8 million contribution from the acquisition of American Well
Control in July 2010. Allis-Chalmers continues to be proactive in
diversifying from the U.S. offshore market and responding to market
demands with strategic initiatives such as investing in equipment
that is in strong demand in the U.S. land shale plays, and
redeploying rental equipment to Egypt, Saudi Arabia and Brazil.
During the third quarter we established a facility in Pennsylvania
to serve our drill pipe rental customers in the Marcellus shale
play, and to enable American Well Control to provide full service
parts and repair services to its frac valve customers in that
market.”
Mr. Hidayatallah added, “While we had high utilization of our
rigs in Argentina and Bolivia during the third quarter of 2010,
results for our Drilling and Completion segment were impacted by
decreased utilization and pricing for our rigs in Brazil, and the
impact of a general strike in Argentina which reduced operating
income by an estimated $650,000 in the quarter. We have begun to
provide directional drilling services and the offshore rental of
drill pipe and landing strings in Brazil. We believe these
initiatives will bear fruit in 2011.”
Mr. Hidayatallah concluded, “Excluding the negative impact of
the non-recurring transaction expenses and the effect of the strike
in Argentina, the company had positive pre-tax income of $416,000
in the third quarter which we believe bodes well for our 2011
outlook.”
Segment Results for Third Quarter
2010
- Oilfield Services. Revenues for
our Oilfield Services segment were $56.7 million for the three
months ended September 30, 2010, an increase of 77.7% compared to
$31.9 million in revenues for the three months ended September 30,
2009. Income from operations increased $11.7 million and resulted
in income from operations of $7.5 million in the third quarter of
2010 compared to loss from operations of $4.2 million in the third
quarter of 2009. Our Oilfield Services segment revenues and
operating income for the third quarter of 2010 increased compared
to the third quarter of 2009 due principally to improved pricing
and utilization for our directional drilling services, tubular
services and our coiled tubing units. Our capital expenditures in
the Oilfield Services segment have emphasized new downhole
directional drilling equipment, upgrading coiled tubing units and
investing in pressure control units to serve the unconventional
natural gas drilling activity. Our Oilfield Services segment
activity is tied to the rig count in the U.S. and the Baker Hughes
average rig count for the thirteen weeks in the third quarter of
2010 was 1,626 compared to an average rig count of 977 for the
thirteen weeks in the third quarter of 2009.
- Drilling and Completion.
Revenues for the quarter ended September 30, 2010 for the Drilling
and Completion segment were $96.3 million compared to $76.3 million
in revenues for the quarter ended September 30, 2009. In spite of
improved rig utilization and pricing for our drilling rigs in
Argentina and Bolivia, income from operations decreased to $5.1
million in the third quarter of 2010 compared to $5.5 million in
the third quarter of 2009. This reduction was due to: (1) reduced
rig utilization and rig rates in Brazil; (2) an increase of $1.3
million, or 24.4%, in depreciation and amortization; and (3)
increased labor and other costs in Argentina; offset by $1.1
million of severance costs during the three months ended September
30, 2009 related to workforce reductions in Argentina as a result
of lower activity at that time. The increase in depreciation and
amortization expense was the result of the capital spending
programs over the last two years.
- Rental Services. Revenues for
the quarter ended September 30, 2010 for the Rental Services
segment were $21.3 million, an increase from $11.8 million in
revenues for the quarter ended September 30, 2009. Income from
operations increased to $3.3 million in the third quarter of 2010
compared to a $1.2 million operating loss in the third quarter of
2009. The acquisition of American Well Control provided our Rental
Services segment with $6.8 million of additional revenues and $2.4
million of additional operating income during the third quarter of
2010. Our Rental Services segment revenues and operating income for
the third quarter of 2010 also increased compared to the prior year
due to our strategy of redeploying equipment and focusing our
marketing efforts from the U.S. Gulf of Mexico to the onshore
unconventional natural gas fields in the U.S. We have concentrated
our capital expenditures in the Rental Services segment on
equipment which is in strong demand in the unconventional gas shale
plays in the U.S. and therefore has high utilization and improved
pricing.
Conference Call
Allis-Chalmers has scheduled a conference call to be held on
Thursday, November 4, 2010 at 10:00 a.m. Eastern time, 9:00 a.m.
Central time. The call will be web cast live on the Internet
through the Investor Relations page on the Allis-Chalmers’ website.
To participate by telephone, call (888) 771-4350 domestically or
(847) 585-4343 internationally ten minutes prior to the start time.
The confirmation number is 28229267. Participants may pre-register
for the call at the following link and will be issued a new phone
number and a PIN number to use when dialing into the live call
which will provide quick access to the conference by bypassing the
operator upon connection.
http://www.yourconferencecenter.com/r.aspx?p=1&a=UDjeyKuPPLMmYB
A telephonic replay will be available through November 11, 2010
and may be accessed by calling (888) 843-7419 domestically or (630)
652-3042 internationally, and using the passcode 7540224#. The call
will be available for replay through Allis-Chalmers’ website
shortly after the call is complete.
About Allis-Chalmers
Allis-Chalmers Energy Inc. is a Houston-based multi-faceted
oilfield services company. Allis-Chalmers provides services and
equipment to oil and natural gas exploration and production
companies, domestically primarily in Texas, Louisiana, Arkansas,
Pennsylvania, Oklahoma, New Mexico, offshore in the Gulf of Mexico,
and internationally, primarily in Argentina, Brazil, Mexico and
Bolivia. Allis-Chalmers provides directional drilling services,
casing and tubing services, underbalanced drilling, production and
workover services with coiled tubing units, rental of drill pipe
and blow-out prevention equipment, and international drilling and
workover services. For more information, visit our website at
http://www.alchenergy.com or request future press releases via
email at
http://www.b2i.us/irpass.asp?BzID=1233&to=ea&s=0.
Forward-Looking
Statements
This press release contains forward-looking statements (within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934) regarding
Allis-Chalmers' business, financial condition, results of
operations and prospects. Words such as expects, anticipates,
intends, plans, believes, seeks, estimates and similar expressions
or variations of such words are intended to identify
forward-looking statements, but are not the exclusive means of
identifying forward-looking statements in this press release.
Although forward-looking statements in this press release
reflect the good faith judgment of our management, such statements
can only be based on facts and factors that our management
currently knows. Consequently, forward-looking statements are
inherently subject to risks and uncertainties, and actual results
and outcomes may differ materially from the results and outcomes
discussed in the forward-looking statements. Factors that could
cause or contribute to such differences in results and outcomes
include, but are not limited to, demand for oil and natural gas
drilling services in the areas and markets in which Allis-Chalmers
operates, competition, obsolescence of products and services, the
ability to obtain financing to support operations, environmental
and other casualty risks, and the effect of government
regulation.
Further information about the risks and uncertainties that may
affect our business are set forth in our most recent filings on
Form 10-K (including without limitation in the "Risk Factors"
section) and in our other SEC filings and publicly available
documents. We urge readers not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. Allis-Chalmers undertakes no obligation to revise or
update any forward-looking statements in order to reflect any event
or circumstance that may arise after the date of this press
release.
Use of EBITDA and Adjusted EBITDA &
Regulation G Reconciliation
This press release contains references to EBITDA, a non-GAAP
financial measure that complies with federal securities regulations
when it is defined as net income (the most directly comparable GAAP
financial measure) before interest, taxes, depreciation and
amortization. Allis-Chalmers defines EBITDA accordingly for the
purposes of this press release. We also utilize Adjusted EBITDA as
a supplemental financial measurement in the evaluation of our
business. We have defined Adjusted EBITDA for the purposes of this
press release to mean EBITDA plus stock compensation expense.
However, EBITDA and Adjusted EBITDA, as used and defined by
Allis-Chalmers, may not be comparable to similarly titled measures
employed by other companies and is not a measure of performance
calculated in accordance with GAAP. Neither EBITDA nor Adjusted
EBITDA should be considered in isolation or as a substitute for
operating income, net income or loss, cash flows provided by
operating, investing and financing activities, or other Income or
cash flow statement data prepared in accordance with GAAP. However,
we believe EBITDA and Adjusted EBITDA are useful to an investor in
evaluating our operating performance because these measures:
- are widely used by investors in the
energy industry to measure a company’s operating performance
without regard to the items excluded from EBITDA, which can vary
substantially from company to company depending upon accounting
methods and book value of assets, capital structure and the method
by which assets were acquired, among other factors;
- help investors to more meaningfully
evaluate and compare the results of our operations from period to
period by removing the effect of our capital structure and asset
base from our operating results; and
- are used by our management for various
purposes, including as a measure of operating performance, in
presentations to our board of directors, as a basis for strategic
planning and forecasting, as a component for setting incentive
compensation, and to assess compliance in financial ratios.
There are significant limitations to using EBITDA and Adjusted
EBITDA as a measure of performance, including the inability to
analyze the effect of recurring and non-recurring items that are
excluded from EBITDA and materially affect net income or loss,
results of operations, and the lack of compatibility of the results
of operations of different companies. Reconciliations of these
financial measures to net income, the most directly comparable GAAP
financial measure, are provided in the table below.
Reconciliation of EBITDA and Adjusted
EBITDA to GAAP Net Income($ in millions)
For the ThreeMonths EndedSeptember 30,
For the NineMonths EndedSeptember 30,
2010 2009 2010 2009 Net loss (2.6 ) (9.7 )
(17.5 ) (12.3 ) Depreciation and amortization 22.3 20.9 65.4 61.8
Interest expense, net 11.8 10.7 33.5 37.4 Income taxes 1.6
(4.1 ) (3.6 ) (6.8 ) EBITDA $ 33.1 $
17.8 $ 77.8 $ 80.1 Stock compensation expense (non-cash) 1.4 1.2
4.4 3.6 Non-cash asset gains and losses (1) - - 1.5 (23.2 )
Increase to allowance for bad debts - 0.5
- 4.1 Adjusted EBITDA $ 34.5 $
19.5 $ 83.7 $ 64.6
(1)
Includes gain on debt extinguishment of
$26.4 million net of $3.2 million loss on asset disposition and
inventory writedown in the first nine months of 2009.
ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands,
except per share amounts) (unaudited)
For the Three Months EndedSeptember
30,
For the Nine Months EndedSeptember 30,
2010 2009 2010 2009 Revenues $ 174,288 $
120,016 $ 473,302 $ 377,624 Operating cost and expenses
Direct costs 127,622 90,763 356,060 281,136 Depreciation and
amortization 22,349 20,893 65,366 61,819 Selling, general and
administrative expense 12,772 11,430 36,949 40,595 Loss (gain) on
asset dispositions - - -
1,916 Total operating costs and expenses
162,743 123,086 458,375
385,466 Income (loss) from operations 11,545 (3,070 )
14,927 (7,842 ) Other income (expense) Interest expense
(11,881 ) (10,764 ) (33,986 ) (37,492 ) Interest income 45 39 499
53 Gain on debt extinguishment - - - 26,365 Other (661 )
37 (2,479 ) (231 ) Total other income
(expense) (12,497 ) (10,688 ) (35,966 )
(11,305 ) Net loss before income taxes (952 ) (13,758 )
(21,039 ) (19,147 ) Income tax (expense) benefit
(1,614 ) 4,108 3,563 6,802
Net loss (2,566 ) (9,650 ) (17,476 ) (12,345 )
Preferred stock dividend (637 ) (630 ) (1,911
) (665 ) Net loss attributed to common stockholders $
(3,203 ) $ (10,280 ) $ (19,387 ) $ (13,010 ) Net loss per
common share: Basic $ (0.04 ) $ (0.14 ) $ (0.27 ) $ (0.27 ) Diluted
$ (0.04 ) $ (0.14 ) $ (0.27 ) $ (0.27 ) Weighted average
shares outstanding: Basic 72,207 70,945
71,506 47,834 Diluted 72,207
70,945 71,506 47,834
ALLIS-CHALMERS ENERGY INC. CONSOLIDATED CONDENSED BALANCE
SHEETS (in thousands) September 30,
December 31, 2010 2009 (unaudited) ASSETS Cash
and cash equivalents $ 15,322 $ 41,072 Trade receivables, net
140,123 105,059 Inventories 38,993 34,528 Deferred income tax asset
2,649 3,790 Prepaid expenses and other 8,628 13,799
Total current assets 205,715 198,248 Property and equipment,
net 732,857 746,478 Goodwill 46,173 40,639 Other intangible assets,
net 35,138 32,649 Debt issuance costs, net 8,073 9,545 Deferred
income tax asset 34,736 22,047 Other assets 40,445
31,014 Total assets $ 1,103,137 $ 1,080,620
LIABILITIES AND STOCKHOLDERS' EQUITY Current maturities of
long-term debt $ 23,624 $ 17,027 Trade accounts payable 43,361
34,839 Accrued salaries, benefits and payroll taxes 25,319 22,854
Accrued interest 6,917 15,821 Accrued expenses 27,674
21,918 Total current liabilities 126,895 112,459 Deferred
income tax liability 8,087 8,166 Long-term debt, net of current
maturities 497,100 475,206 Other long-term liabilities 452
1,142 Total liabilities 632,534 596,973 Commitments
and Contingencies Stockholders' Equity Preferred stock
34,183 34,183 Common stock 734 714 Capital in excess of par value
429,146 422,823 Retained earnings 6,540 25,927 Total
stockholders' equity 470,603 483,647 Total
liabilities and stockholders' equity $ 1,103,137 $ 1,080,620
ALLIS-CHALMERS ENERGY INC. SEGMENT INFORMATION (Unaudited)
For the Three Months EndedSeptember
30,
For the Nine Months EndedSeptember 30,
2010 2009 2010 2009 Revenue Oilfield Services
$ 56,705 $ 31,904 $ 146,070 $ 105,827 Drilling and Completion
96,295 76,299 280,772 223,237 Rental Services 21,288
11,813 46,460 48,560 $
174,288 $ 120,016 $ 473,302 $ 377,624
Operating income (loss) Oilfield Services $ 7,462 $ (4,211 )
$ 7,969 $ (15,701 ) Drilling and Completion 5,125 5,508 17,640
14,420 Rental Services 3,337 (1,218 ) 1,596 3,318 General corporate
(4,379 ) (3,149 ) (12,278 ) (9,879 ) $
11,545 $ (3,070 ) $ 14,927 $ (7,842 )
Depreciation and amortization Oilfield Services $ 7,925 $ 8,077 $
23,622 $ 22,825 Drilling and Completion 6,793 5,462 19,619 16,182
Rental Services 7,565 7,281 21,929 22,580 General corporate
66 73 196 232 $
22,349 $ 20,893 $ 65,366 $ 61,819
Capital expenditures Oilfield Services $ 7,339 $ 1,348 $
18,370 $ 9,408 Drilling and Completion 8,371 7,067 20,212 50,775
Rental Services 3,840 851 11,592 7,042 General corporate 354
7 719 41 $ 19,904
$ 9,273 $ 50,893 $ 67,266
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