e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2007
or
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o |
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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. 0-20310
SUPERIOR ENERGY SERVICES, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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75-2379388 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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1105 Peters Road |
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Harvey, Louisiana
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70058 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (504) 362-4321
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer þ Accelerated filer o Non-accelerated o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The number of shares of the registrants common stock outstanding on May 1, 2007 was 80,698,695.
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q for
the Quarterly Period Ended March 31, 2007
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 2007 and December 31, 2006
(in thousands, except share data)
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3/31/07 |
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12/31/06 |
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(Unaudited) |
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(Audited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
31,986 |
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$ |
38,970 |
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Accounts receivable, net |
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327,899 |
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303,800 |
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Income taxes receivable |
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2,630 |
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Current portion of notes receivable |
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15,149 |
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14,824 |
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Prepaid insurance and other |
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49,712 |
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59,563 |
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Total current assets |
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424,746 |
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419,787 |
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Property, plant and equipment, net |
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885,330 |
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804,228 |
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Goodwill, net |
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462,231 |
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444,687 |
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Notes receivable |
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16,101 |
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16,137 |
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Equity-method investments |
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59,582 |
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64,603 |
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Intangible and other long-term assets, net |
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126,754 |
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125,036 |
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Total assets |
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$ |
1,974,744 |
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$ |
1,874,478 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
74,012 |
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$ |
65,451 |
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Accrued expenses |
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130,480 |
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141,684 |
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Income taxes payable |
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23,476 |
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Current portion of decommissioning liabilities |
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36,316 |
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35,150 |
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Current maturities of long-term debt |
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810 |
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810 |
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Total current liabilities |
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265,094 |
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243,095 |
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Deferred income taxes |
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121,586 |
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112,011 |
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Decommissioning liabilities |
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86,600 |
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87,046 |
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Long-term debt |
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711,613 |
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711,505 |
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Other long-term liabilities |
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13,519 |
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10,133 |
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Stockholders equity: |
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Preferred stock of $.01 par value. Authorized, 5,000,000 shares; none
issued |
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Common stock of $.001 par value. Authorized, 125,000,000 shares; issued
and outstanding, 80,671,745 shares at March 31, 2007, and 80,617,337
shares at December 31, 2006 |
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81 |
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81 |
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Additional paid in capital |
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413,441 |
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411,374 |
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Accumulated other comprehensive income, net |
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9,846 |
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10,288 |
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Retained earnings |
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352,964 |
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288,945 |
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Total stockholders equity |
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776,332 |
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710,688 |
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Total liabilities and stockholders equity |
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$ |
1,974,744 |
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$ |
1,874,478 |
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See accompanying notes to consolidated financial statements.
3
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2007 and 2006
(in thousands, except per share data)
(unaudited)
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2007 |
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2006 |
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Oilfield service and rental revenues |
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$ |
325,895 |
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$ |
206,998 |
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Oil and gas revenues |
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37,029 |
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15,471 |
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Total revenues |
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362,924 |
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222,469 |
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Cost of oilfield services and rentals |
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142,429 |
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93,255 |
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Cost of oil and gas sales |
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18,058 |
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14,205 |
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Total cost of services, rentals and sales |
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160,487 |
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107,460 |
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Depreciation, depletion, amortization and accretion |
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38,844 |
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22,915 |
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General and administrative expenses |
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50,859 |
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37,651 |
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Income from operations |
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112,734 |
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54,443 |
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Other income (expense): |
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Interest expense, net |
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(8,278 |
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(4,844 |
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Interest income |
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579 |
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663 |
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Losses from equity-method investments, net |
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(5,006 |
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Income before income taxes |
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100,029 |
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50,262 |
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Income taxes |
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36,010 |
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18,094 |
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Net income |
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$ |
64,019 |
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$ |
32,168 |
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Basic earnings per share |
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$ |
0.79 |
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$ |
0.40 |
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Diluted earnings per share |
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$ |
0.78 |
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$ |
0.40 |
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Weighted average common shares used
in computing earnings per share: |
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Basic |
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80,632 |
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79,639 |
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Incremental common shares from stock options |
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1,487 |
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1,329 |
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Incremental common shares from restricted
stock units |
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37 |
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20 |
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Diluted |
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82,156 |
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80,988 |
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See accompanying notes to consolidated financial statements.
4
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2007 and 2006
(in thousands)
(unaudited)
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2007 |
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2006 |
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Cash flows from operating activities: |
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Net income |
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$ |
64,019 |
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$ |
32,168 |
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Adjustments to reconcile net income to net cash provided
by operating activities: |
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Depreciation, depletion, amortization and accretion |
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38,844 |
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22,915 |
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Deferred income taxes |
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5,545 |
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1,034 |
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Stock-based and performance share unit compensation expense |
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3,557 |
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1,155 |
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Losses from equity-method investments, net |
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5,006 |
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Amortization of debt acquisition costs and note discount |
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881 |
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235 |
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Changes in operating assets and liabilities, net of acquisitions
and dispositions: |
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Receivables |
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(20,946 |
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(20,032 |
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Other, net |
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4,663 |
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(13,052 |
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Accounts payable |
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4,007 |
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(3,687 |
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Accrued expenses |
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(15,190 |
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6,720 |
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Decommissioning liabilities |
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(478 |
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(2,255 |
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Income taxes |
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25,564 |
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15,136 |
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Net cash provided by operating activities |
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115,472 |
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40,337 |
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Cash flows from investing activities: |
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Payments for capital expenditures |
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(83,121 |
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(44,489 |
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Acquisitions of businesses, net of cash acquired |
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(49,758 |
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Cash proceeds from sale of subsidary, net of cash sold |
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18,343 |
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Other |
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9,585 |
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(1,695 |
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Net cash used in investing activities |
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(123,294 |
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(27,841 |
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Cash flows from financing activities: |
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Payment of debt acquisition costs |
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(209 |
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Proceeds from exercise of stock options |
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670 |
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1,467 |
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Tax benefit from exercise of stock options |
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390 |
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Net cash provided by financing activities |
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851 |
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1,467 |
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Effect of exchange rate changes on cash |
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(13 |
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154 |
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Net increase (decrease) in cash |
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(6,984 |
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14,117 |
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Cash and cash equivalents at beginning of period |
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38,970 |
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54,457 |
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Cash and cash equivalents at end of period |
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$ |
31,986 |
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$ |
68,574 |
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See accompanying notes to consolidated financial statements.
5
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Three Months Ended March 31, 2007 and 2006
(1) Basis of Presentation
Certain information and footnote disclosures normally in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or omitted pursuant to
the rules and regulations of the Securities and Exchange Commission; however, management believes
the disclosures which are made are adequate to make the information presented not misleading.
These financial statements and footnotes 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, 2006 and Managements Discussion and Analysis of
Financial Condition and Results of Operations.
The financial information of Superior Energy Services, Inc. and subsidiaries (the Company) for the
three months ended March 31, 2007 and 2006 has not been audited. However, in the opinion of
management, all adjustments (which include only normal recurring adjustments) necessary to present
fairly the results of operations for the periods presented have been included therein. The results
of operations for the first three months of the year are not necessarily indicative of the results
of operations that might be expected for the entire year. Certain previously reported amounts have
been reclassified to conform to the 2007 presentation.
(2) Stock-Based and Long-Term Compensation
The Company maintains various stock incentive plans that provide long-term incentives to the
Companys key employees, including officers and directors, consultants and advisers (Eligible
Participants). Under the incentive plans, the Company may grant incentive stock options,
non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights,
other stock-based awards or any combination thereof to Eligible Participants.
Stock Options
The Company has issued non-qualified stock options under its stock incentive plans. The options
generally vest in equal installments over three years and expire in ten years. Non-vested options
are generally forfeited upon termination of employment. The Companys compensation expense related
to stock options for the three months ended March 31, 2007 and 2006 was approximately $0.4 million
and $0.2 million, respectively, which is reflected in general and administrative expenses.
Restricted Stock
The Company has issued shares of restricted stock under its stock incentive plans. Shares of
restricted stock generally vest in equal annual installments over three years. Non-vested shares
are generally forfeited upon the termination of employment. Holders of the shares of restricted
stock are entitled to all rights of a shareholder of the Company with respect to the restricted
stock, including the right to vote the shares and receive all dividends and other distributions
declared thereon. The Companys compensation expense related to shares of restricted stock
outstanding for the three months ended March 31, 2007 and 2006 was approximately $0.6 million and
$0.1 million, respectively, which is reflected in general and administrative expenses.
Restricted Stock Units
The Directors Restricted Stock Units Plan provides that each non-employee director is issued a
number of restricted stock units having an aggregate value in a dollar amount determined by the
Companys Board of Directors. A restricted stock unit represents the right to receive from the
Company, within 30 days of the date the participant ceases to serve on the Board, one share of the
Companys common stock. The Companys expense related to restricted stock units for the three
months ended March 31, 2007 and 2006 was approximately $0.3 million, which is reflected in general
and administrative expenses.
6
Performance Share Units
The Company has issued performance share units (PSUs) to its employees as part of the Companys
long-term incentive program. There is a three-year performance period associated with each PSU grant
date. The two performance measures applicable to all participants are the Companys return on
invested capital and total shareholder return relative to those of the Companys pre-defined peer
group. The PSUs provide for settlement in cash or up to 50% in equivalent value in Company common
stock, if the participant has met specified continued service requirements. The Companys
compensation expense related to all outstanding PSUs for the three months ended March 31, 2007 and
2006 was approximately $2.2 million and $0.5 million, respectively, which is reflected in general
and administrative expenses. The Company has recorded a liability of
approximately $6.7 million and $4.5 million at
March 31, 2007 and December 31, 2006, respectively, for all outstanding PSUs which is reflected in accrued expenses.
(3) 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 that would have a dilutive effect on earnings per share and the
conversion of restricted stock units into common stock using the treasury stock method.
In connection with the $400 million senior exchangeable notes, there could be a dilutive effect on
earnings per share if the price of the Companys stock exceeds the initial exchange price of $45.58
per share. In the event the Companys common stock exceeds the initial exchange price of $45.58
per share, for the first $1.00 the price exceeds $45.58, the dilutive effect would be as much as
188,400 shares. The impact on the calculation of earnings per share would depend on when during
the quarter the $45.58 per share price is reached. (See note 8).
(4) Acquisitions and Dispositions
In January 2007, the Company acquired Duffy & McGovern Accommodation Services Limited (Duffy &
McGovern) for approximately $47.4 million in cash consideration. Duffy & McGovern is a provider of
offshore accommodation rentals operating in most deep water oil and gas territories with major
operations in Europe, Africa, the Americas and South East Asia. The Company acquired Duffy &
McGovern to further expand its rental tools segment internationally. The acquisition has been
accounted for as a purchase, and the results of Duffy & McGovern have been included from the
acquisition date. The pro forma effect of the operations of the acquisition when included as of
the beginning of the periods presented was not material to the Condensed Consolidated Statements of
Operations of the Company.
In December 2006, the Company acquired Warrior Energy Services Corporation (Warrior) for a total
purchase price of approximately $374.1 million. The total consideration was comprised of cash
payments of approximately $237.8 million (including acquisition costs and repayment of Warriors
debt) and equity consideration of approximately $136.3 million. The acquisition has been accounted
for as a purchase, and the results of operations of Warrior have been included from the acquisition
date. The allocation of the purchase price and the valuation of assets and liabilities will be
subject to refinement as the Company gathers additional information with respect to income taxes,
outstanding litigation and other items.
In July 2006, Coldren Resources LP (Coldren Resources) completed the acquisition from Noble Energy,
Inc. (Noble) of substantially all of Nobles offshore Gulf of Mexico shallow water oil and gas
properties. SPN Resources, LLC (SPN Resources), a wholly-owned subsidiary of the Company, acquired
a 40% interest in Coldren Resources for an initial cash investment of approximately $57.8 million.
The Companys investment in Coldren Resources is accounted for under the equity-method of
accounting.
In April 2006, SPN Resources acquired additional oil and gas properties through the acquisition of
five offshore Gulf of Mexico leases. Under the terms of the transaction, the Company acquired the
properties and assumed the
related decommissioning liabilities. The Company paid cash in the amount of $46.6 million and
7
preliminarily recorded decommissioning liabilities of approximately $3.7 million and oil and gas
producing assets of approximately $50.3 million.
The Company made other business acquisitions, which were not significant on an individual basis,
requiring cash consideration of $2.6 million in 2007 and $9.8 million in 2006. The Company also
sold its environmental subsidiary in the first quarter of 2006 for approximately $18.7 million
in cash.
Several of the Companys prior business acquisitions require future payments if specific conditions
are met. As of March 31, 2007, the maximum additional contingent consideration payable was
approximately $0.4 million, and will be determined and payable through 2008. In the quarter ended
March 31, 2007, the Company capitalized and paid additional consideration of approximately $0.6
million as a result of prior acquisitions.
Subsequent Event
In April 2007, the Company acquired Advanced Oilwell Services, Inc. (AOS) for approximately $24.1
million in cash consideration. Additional consideration, if any, will be based upon the average
earnings before interest, income taxes, depreciation and amortization expense of the business over
a three-year period, and will not exceed $6.0 million. The acquisition will be accounted for as a
purchase. AOS is a provider of cementing and pressure pumping services primarily operating in the
East Texas region.
In April 2007, the Company acquired two additional businesses for an aggregate $9.2 million in cash
consideration in order to geographically expand as well as enhance the products and services
offered by its well intervention and rental tools segments. Additional consideration, if any, will be
based upon the sales volume to one of the business primary customers, and will not exceed $1.0
million. These acquisitions will be accounted for as purchases. Also in April 2007, the Company
completed the sale of the assets of its field management division for approximately $2.3 million
(inclusive of a $0.5 million note receivable).
(5) Segment Information
Business Segments
The Company has four reportable segments: well intervention, rental tools, marine, and oil and gas.
The well intervention segment provides: production related services used to enhance, extend and
maintain oil and gas production, which include mechanical wireline, hydraulic workover and
snubbing, well control, coiled tubing, electric line, pumping and stimulation and well bore
evaluation services; well plug and abandonment services, and other oilfield services used to
support drilling and production operations. The rental tools segment rents and sells stabilizers,
drill pipe, tubulars and specialized equipment for use with onshore and offshore oil and gas well
drilling, completion, production and workover activities. It also provides onsite accommodations
and bolting and machining services. The marine segment operates liftboats for production service
activities, as well as oil and gas production facility maintenance, construction operations and
platform removals. The oil and gas segment acquires mature oil and gas properties and produces and
sells any remaining economic oil and gas reserves. Oil and gas eliminations represent products and
services provided to the oil and gas segment by the Companys three other segments.
Summarized financial information concerning the Companys segments for the three months ended March
31, 2007 and 2006 is shown in the following tables (in thousands):
8
Three Months Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil & Gas |
|
|
|
|
Well |
|
Rental |
|
|
|
|
|
|
|
|
|
Eliminations |
|
Consolidated |
|
|
Intervention |
|
Tools |
|
Marine |
|
Oil & Gas |
|
& Unallocated |
|
Total |
|
|
|
Revenues |
|
$ |
174,548 |
|
|
$ |
118,563 |
|
|
$ |
35,866 |
|
|
$ |
37,029 |
|
|
$ |
(3,082 |
) |
|
$ |
362,924 |
|
Cost of services, rentals and sales |
|
|
93,992 |
|
|
|
37,031 |
|
|
|
14,489 |
|
|
|
18,057 |
|
|
|
(3,082 |
) |
|
|
160,487 |
|
Depreciation, depletion,
amortization and accretion |
|
|
10,038 |
|
|
|
15,570 |
|
|
|
2,188 |
|
|
|
11,048 |
|
|
|
|
|
|
|
38,844 |
|
General and
administrative expenses |
|
|
24,582 |
|
|
|
20,757 |
|
|
|
2,728 |
|
|
|
2,792 |
|
|
|
|
|
|
|
50,859 |
|
Income from operations |
|
|
45,936 |
|
|
|
45,205 |
|
|
|
16,461 |
|
|
|
5,132 |
|
|
|
|
|
|
|
112,734 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,278 |
) |
|
|
(8,278 |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
291 |
|
|
|
288 |
|
|
|
579 |
|
Losses from equity method
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,006 |
) |
|
|
|
|
|
|
(5,006 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
45,936 |
|
|
$ |
45,205 |
|
|
$ |
16,461 |
|
|
$ |
417 |
|
|
$ |
(7,990 |
) |
|
$ |
100,029 |
|
|
|
|
Three Months Ended March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil & Gas |
|
|
|
|
Well |
|
Rental |
|
|
|
|
|
|
|
|
|
Eliminations |
|
Consolidated |
|
|
Intervention |
|
Tools |
|
Marine |
|
Oil & Gas |
|
& Unallocated |
|
Total |
|
|
|
Revenues |
|
$ |
102,073 |
|
|
$ |
77,774 |
|
|
$ |
30,207 |
|
|
$ |
15,471 |
|
|
$ |
(3,056 |
) |
|
$ |
222,469 |
|
Cost of services, rentals and sales |
|
|
60,000 |
|
|
|
24,298 |
|
|
|
12,013 |
|
|
|
14,205 |
|
|
|
(3,056 |
) |
|
|
107,460 |
|
Depreciation, depletion,
amortization and accretion |
|
|
4,535 |
|
|
|
11,713 |
|
|
|
2,152 |
|
|
|
4,515 |
|
|
|
|
|
|
|
22,915 |
|
General and
administrative expenses |
|
|
17,868 |
|
|
|
15,266 |
|
|
|
2,898 |
|
|
|
1,619 |
|
|
|
|
|
|
|
37,651 |
|
Income (loss) from operations |
|
|
19,670 |
|
|
|
26,497 |
|
|
|
13,144 |
|
|
|
(4,868 |
) |
|
|
|
|
|
|
54,443 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,844 |
) |
|
|
(4,844 |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300 |
|
|
|
363 |
|
|
|
663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
$ |
19,670 |
|
|
$ |
26,497 |
|
|
$ |
13,144 |
|
|
$ |
(4,568 |
) |
|
$ |
(4,481 |
) |
|
$ |
50,262 |
|
|
|
|
Identifiable Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Well |
|
Rental |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
Intervention |
|
Tools |
|
Marine |
|
Oil & Gas |
|
Unallocated |
|
Total |
|
|
|
March 31, 2007 |
|
$ |
828,854 |
|
|
$ |
611,248 |
|
|
$ |
186,158 |
|
|
$ |
319,042 |
|
|
$ |
29,442 |
|
|
$ |
1,974,744 |
|
|
|
|
December 31, 2006 |
|
$ |
807,358 |
|
|
$ |
533,928 |
|
|
$ |
187,597 |
|
|
$ |
318,297 |
|
|
$ |
27,298 |
|
|
$ |
1,874,478 |
|
|
|
|
Geographic Segments
The Company attributes revenue to countries based on the location where services are performed or
the destination of the sale of products. Long-lived assets consist primarily of property, plant
and equipment and are attributed to the United States or other countries based on the physical
location of the asset at the end of a period. The Companys information by geographic area is as
follows (amounts in thousands):
9
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2007 |
|
|
2006 |
|
United States |
|
$ |
294,021 |
|
|
$ |
189,005 |
|
Other Countries |
|
|
68,903 |
|
|
|
33,464 |
|
|
|
|
|
|
|
|
Total |
|
$ |
362,924 |
|
|
$ |
222,469 |
|
|
|
|
|
|
|
|
Long-Lived Assets:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
United States |
|
$ |
747,295 |
|
|
$ |
715,899 |
|
Other Countries |
|
|
138,035 |
|
|
|
88,329 |
|
|
|
|
|
|
|
|
Total |
|
$ |
885,330 |
|
|
$ |
804,228 |
|
|
|
|
|
|
|
|
(6) Construction Contract
In July 2006, the Company contracted to construct a derrick barge that will be sold to a third
party for approximately $53.7 million. The contract to construct the derrick barge to the customers
specifications is recorded on the percentage-of-completion method utilizing engineering estimates
and construction progress. This methodology requires the Company to make estimates regarding the
progress against the project schedule and estimated completion date, both of which impact the
amount of revenue and gross margin the Company recognizes in each reporting period. Contract costs
primarily include sub-contract and program management costs. Provisions for unanticipated losses,
if any, will be recorded in full when such losses become evident. Included in accrued expenses at
March 31, 2007 and December 31, 2006 is approximately $14.5 million and $12.3 million,
respectively, of billings in excess of costs and estimated earnings related to this contract.
(7) |
|
Equity-Method Investments |
Investments in entities that are not controlled by the Company, but where the Company has the
ability to exercise influence over the operations are accounted for using the equity-method. The
Companys share of the income or losses of these entities is
reflected as earnings or losses from equity-method
investments on its Condensed Consolidated Statements of Operations.
In May 2006, SPN Resources acquired a 40% interest in Coldren Resources. The Companys total cash
contribution for its equity-method investment in Coldren Resources was approximately $57.8 million.
The Company has not made additional contributions since its initial investment. The Companys
equity-method investment balance in Coldren Resources is approximately $58.6 million at March 31,
2007 and $63.6 million at December 31, 2006, and its losses from the equity-method investments in
Coldren Resources is approximately $5.0 million for the three months ended March 31, 2007.
The Company provides operating and administrative support services to Coldren Resources and
receives reimbursement for general and administrative and direct expenses incurred on behalf of
Coldren Resources. The Company also, where possible and at competitive rates, provides its
products and services to assist Coldren Resources in producing and developing its oil and gas
properties. As such, the Company has a receivable from Coldren Resources of approximately $2.7
million at March 31, 2007 and $3.0 million at December 31, 2006. The Company offset its general
and administrative expenses by approximately $1.3 million for the reimbursements due from Coldren
Resources for the three months ended March 31, 2007. The Company also recorded revenue of
approximately $1.8 million from Coldren Resources for the three months ended March 31, 2007. The
Company reduces its revenue and its investment in Coldren Resources for its 40% ownership when
products and services are provided to and capitalized by Coldren Resources. The Company records
these amounts in revenue as Coldren Resources records the related depreciation and depletion
expenses. The Company recorded a net reduction to revenue and its investment in Coldren Resources
of approximately $15,000 for the three months ended March 31, 2007.
10
Summarized balance sheet and statement of operations information for Coldren Resources is presented
below (amounts in thousands):
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Current assets |
|
$ |
183,397 |
|
|
$ |
176,860 |
|
Property, plant and equipment, net |
|
|
495,694 |
|
|
|
522,941 |
|
Other assets |
|
|
14,083 |
|
|
|
23,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
693,174 |
|
|
$ |
722,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
23,188 |
|
|
$ |
27,922 |
|
Decommissioning and other long-term
liabilities |
|
|
92,565 |
|
|
|
89,610 |
|
Long-term debt |
|
|
432,804 |
|
|
|
432,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
548,557 |
|
|
|
550,229 |
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net |
|
|
(1,706 |
) |
|
|
13,861 |
|
Partners capital |
|
|
146,323 |
|
|
|
158,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital |
|
|
144,617 |
|
|
|
172,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital |
|
$ |
693,174 |
|
|
$ |
722,936 |
|
|
|
|
|
|
|
|
Income Statement
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended |
|
|
|
March 31, |
|
|
|
2007 |
|
Revenues |
|
$ |
54,591 |
|
Lease operating expenses |
|
|
(14,060 |
) |
Depreciation, depletion, amortization
and accretion |
|
|
(30,211 |
) |
General and administrative expenses |
|
|
(4,439 |
) |
Interest expense |
|
|
(11,388 |
) |
Interest income |
|
|
1,262 |
|
Loss on derivatives |
|
|
(8,278 |
) |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(12,523 |
) |
|
|
|
|
Also included in equity-method investments at March 31, 2007 and 2006 is approximately $1 million
investment for a 50% ownership in a company that owns an airplane. Earnings from the equity-method
investment in this company were not material for the three months ended March 31, 2007 or 2006.
The Company recorded approximately $55,000 and $70,000 in expense to lease the airplane (exclusive
of operating costs) from this company for the three months ended March 31, 2007 and 2006,
respectively.
(8) Debt
The Company has a $250 million bank revolving credit facility. Any amounts outstanding under the
revolving credit facility are due on June 14, 2011. At March 31, 2007, the Company had no amounts
outstanding under the revolving credit facility, but it had approximately $60.7 million of letters
of credit outstanding, which reduce the Companys borrowing availability under this credit
facility. Amounts borrowed under the credit facility bear interest at a LIBOR rate plus margins
that depend on the Companys leverage ratio. Indebtedness under the credit facility is secured by
substantially all of the Companys assets, including the pledge of the stock of the Companys
principal subsidiaries. The credit facility contains customary events of default and requires that
the Company
11
satisfy various financial covenants. It also limits the Companys ability to pay
dividends or make other distributions, make acquisitions, make changes to the Companys capital
structure, create liens, incur additional indebtedness or assume additional decommissioning
liabilities. At March 31, 2007, the Company was in compliance with all such covenants.
The Company has $16.6 million outstanding at March 31, 2007, in U. S. Government guaranteed
long-term financing under Title XI of the Merchant Marine Act of 1936, which is administered by the
Maritime Administration (MARAD), for two 245-foot class liftboats. The debt bears interest at
6.45% per annum and is payable in equal semi-annual installments of $405,000, on every June
3rd and December 3rd through the maturity date of June 3, 2027. The
Companys obligations are secured by mortgages on the two liftboats. In accordance with this
agreement, the Company is required to comply with certain covenants and restrictions, including the
maintenance of minimum net worth and debt-to-equity requirements. At March 31, 2007, the Company
was in
compliance with all such covenants. This long-term financing ranks equally with the bank credit
facility as both are secured by different collateral.
The Company has $300 million of 6 7/8% unsecured senior notes due 2014. The indenture governing the
senior notes requires semi-annual interest payments on every June 1st and December
1st through the maturity date of June 1, 2014. The indenture contains certain covenants
that, among other things, restrict the Company from incurring additional debt, repurchasing capital
stock, paying dividends or making other distributions, incurring liens, selling assets or entering
into certain mergers or acquisitions. At March 31, 2007, the Company was in compliance with all
such covenants.
The Company also has $400 million of 1.50% unsecured senior exchangeable notes due 2026. The
exchangeable notes bear interest at a rate of 1.50% per annum and decrease to 1.25% per annum on
December 15, 2011. Interest on the exchangeable notes is payable semi-annually on December
15th and June 15th of each year, beginning June 15, 2007. The exchangeable
notes do not contain any restrictive financial covenants.
Under certain circumstances, holders may exchange the notes for shares of the Companys common
stock. The initial exchange rate is 21.9414 shares of common stock per $1,000 principal amount of
notes. This is equal to an initial exchange price of $45.58 per share. The exchange price
represents a 35% premium over the closing share price at the date of issuance. The notes may be
exchanged under the following circumstances:
|
|
|
during any fiscal quarter (and only during such fiscal quarter) commencing after March
31, 2007, if the last reported sale price of the Companys common stock is greater than or
equal to 135% of the applicable exchange price of the notes for at least 20 trading days in
the period of 30 consecutive trading days ending on the last trading day of the preceding
fiscal quarter; |
|
|
|
|
prior to December 15, 2011, during the five business-day period after any ten
consecutive trading-day period (the measurement period) in which the trading price of
$1,000 principal amount of notes for each trading day in the measurement period was less
than 95% of the product of the last reported sale price of the Companys common stock and
the exchange rate on such trading day; |
|
|
|
|
if the notes have been called for redemption; |
|
|
|
|
upon the occurrence of specified corporate transactions; or |
|
|
|
|
at any time beginning on September 15, 2026, and ending at the close of business on the
second business day immediately preceding the maturity date of December 15, 2026. |
In connection with the exchangeable note transaction, the Company simultaneously entered into
agreements with affiliates of the initial purchasers to purchase call options and sell warrants on
its common stock. The Company may exercise the call options it purchased at any time to acquire
approximately 8.8 million shares of its common stock at a strike price of $45.58 per share. The
owners of the warrants may exercise the warrants to purchase from the Company approximately 8.8
million shares of the Companys common stock at a price of $59.42 per share, subject to certain
anti-dilution and other customary adjustments. The warrants may be settled in cash, in shares or
in a combination of cash and shares, at the Companys option.
(9) Hedging Activities
12
The Company entered into hedging transactions in 2004 that expired on August 31, 2006 to secure a
range of commodity prices for a portion of its future oil production and to reduce its exposure to
oil price fluctuations. The Company does not enter into derivative transactions for trading
purposes. The Company used financially-settled crude oil swaps and zero-cost collars that provided
floor and ceiling prices with varying upside price participation. The Companys swaps and
zero-cost collars were designated and accounted for as cash flow hedges. For the three months
ended March 31, 2006, hedging settlement payments reduced oil revenues by approximately $3.8
million, and no gains or loses were recorded due to hedge ineffectiveness. There were no
outstanding contracts as of March 31, 2007.
(10) Decommissioning Liabilities
The Company records estimated future decommissioning liabilities related to its oil and gas
producing properties pursuant to the provisions of Statement of Financial Accounting Standards No.
143 (FAS No. 143), Accounting for Asset Retirement Obligations. FAS No. 143 requires entities to
record the fair value of a liability for an asset retirement obligation (decommissioning
liabilities) in the period in which it is incurred with a corresponding increase in the carrying
amount of the related long-lived asset. Subsequent to initial measurement, the decommissioning
liability is required to be accreted each period to present value. The Companys decommissioning
liabilities consist of costs related to the plugging of wells, the removal of the related
facilities and equipment, and site restoration.
The Company estimates the cost that would be incurred if it contracted an unaffiliated third party
to plug and abandon wells, abandon the pipelines, decommission and remove the platforms and
pipelines and restore the sites of its oil and gas properties, and uses that estimate to record its
proportionate share of the decommissioning liability. In estimating the decommissioning liability,
the Company performs detailed estimating procedures, analysis and engineering studies. Whenever
practical, the Company utilizes its own equipment and labor services to perform well abandonment
and decommissioning work. When the Company performs these services, all recorded intercompany
revenues and related costs of services are eliminated in the consolidated financial statements.
The recorded decommissioning liability associated with a specific property is fully extinguished
when the property is abandoned. The recorded liability is first reduced by all cash expenses
incurred to abandon and decommission the property. If the recorded liability exceeds (or is less
than) the Companys total costs, then the difference is reported as income (or loss) within revenue
during the period in which the work is performed. The Company reviews the adequacy of its
decommissioning liabilities whenever indicators suggest that the estimated cash flows needed to
satisfy the liability have changed materially. The timing and amounts of these expenditures are
estimates, and changes to these estimates may result in additional (or decreased) liabilities
recorded, which in turn would increase (or decrease) the carrying values of the related oil and gas
properties. The Company revised its estimates for the timing of these expenditures during the
three months ended March 31, 2006, which caused a reduction in the decommissioning liability of
approximately $5.1 million. The following table summarizes the activity for the Companys
decommissioning liabilities for the three months ended March 31, 2007 and 2006 (amounts in
thousands):
13
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2007 |
|
|
2006 |
|
Total decommissioning liabilities at December 31,
2006 and 2005, respectively |
|
$ |
122,196 |
|
|
$ |
121,909 |
|
Liabilities settled |
|
|
(478 |
) |
|
|
(2,255 |
) |
Accretion |
|
|
991 |
|
|
|
1,178 |
|
Revision in estimated liabilities |
|
|
207 |
|
|
|
(5,063 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total decommissioning liabilities at March 31,
2007 and 2006, respectively |
|
|
122,916 |
|
|
|
115,769 |
|
Current portion of decommissioning liabilities at March 31,
2007 and 2006, respectively |
|
|
36,316 |
|
|
|
13,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion of decommissioning liabilities at March
31,
2007 and 2006, respectively |
|
$ |
86,600 |
|
|
$ |
102,020 |
|
|
|
|
|
|
|
|
Notes receivable consist primarily of contractual obligations of sellers of oil and gas properties
to reimburse the Company a specified amount following the abandonment of acquired properties. The
Company invoices the seller specified amounts following the performance of decommissioning
operations (abandonment and structure removal) in accordance with the applicable agreements with
the seller. These receivables are recorded at present value, and the related discounts are
amortized to interest income, based on the expected timing of the decommissioning.
(12) Prepaid Insurance and Other
Prepaid insurance and other includes approximately $12.7 million and $13.6 million in insurance
receivables at March 31, 2007 and December 31, 2006, respectively. The balances are primarily due
to property and casualty insurance claims caused by the impact of Hurricanes Katrina and Rita on
oil and gas properties, as well as buildings and equipment. The insurance deductibles on
Hurricanes Katrina and Rita of approximately $1 million were expensed during 2005. All amounts not
expected to be reimbursed by insurance are expensed as incurred.
(13) Other Comprehensive Income
The following tables reconcile the change in accumulated other comprehensive income (loss) for the
three months ended March 31, 2007 and 2006 (amounts in thousands):
14
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2007 |
|
|
2006 |
|
Accumulated other comprehensive income (loss), December 31,
2006 and 2005, respectively |
|
$ |
10,288 |
|
|
$ |
(4,916 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
Hedging activities: |
|
|
|
|
|
|
|
|
Adjustment for settled contracts, net of tax of $1,323 in 2006 |
|
|
|
|
|
|
2,253 |
|
Changes in fair value of outstanding hedging positions,
net of tax of ($704) in 2006 |
|
|
|
|
|
|
(1,198 |
) |
Foreign currency translation adjustment |
|
|
(442 |
) |
|
|
508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) |
|
|
(442 |
) |
|
|
1,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), March 31,
2007 and 2006, respectively |
|
$ |
9,846 |
|
|
$ |
(3,353 |
) |
|
|
|
|
|
|
|
(14) Income Taxes
In July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109. FIN 48
requires that the Company recognize in its financial statements the impact of a tax position, if
that position is more likely than not of being sustained on audit, based on the technical merits of
the position.
The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the
implementation, the Company recognized no material adjustment to the liability for unrecognized
income tax benefits that existed as of
December 31, 2006. At the date of adoption, the Company had approximately $6.2 million of
unrecognized tax benefits in other long-term liabilities, all of which would impact the Companys
effective tax rate if recognized.
It is the Companys policy to recognize interest and applicable penalties related to uncertain tax
positions in income tax expense. As of the date of adoption, the Company had accrued approximately
$1.1 million of interest and applicable penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal and various state and foreign
jurisdictions. The number of years that are open under the statue of limitations and subject to
audit varies depending on the tax jurisdiction. The Company remains subject to U.S. federal tax
examinations for years after 2002.
As of March 31, 2007 there have been no material changes to the liability for uncertain tax
positions.
(15) Commitments and Contingencies
From time to time, the Company is involved in litigation and other disputes arising out of
operations in the normal course of business. In managements opinion, the Company is not involved
in any litigation or disputes, the outcome of which would have a material effect on the financial
position, results of operations or liquidity of the Company.
(16) Financial Information Related to Guarantor Subsidiaries
SESI, L.L.C. (Issuer), a wholly-owned subsidiary of Superior Energy Services, Inc. (Parent), has
issued and outstanding $300 million of 6 7/8% senior notes due 2014 and $400 million of 1.5% senior
exchangeable notes due 2026. The Parent, along with substantially all of its domestic
subsidiaries, fully and unconditionally guaranteed the senior notes and the senior exchangeable
notes and such guarantees are joint and several. All of the guarantor subsidiaries are
wholly-owned subsidiaries of the Issuer. Domestic income taxes are paid by the Parent through a
consolidated tax return and are accounted for by the Parent. The following tables present the
Condensed Consolidating
15
Balance Sheets as of March 31, 2007 and December 31, 2006 and the Condensed
Consolidating Statements of Operations and Cash Flows for the three months ended March 31, 2007 and
2006.
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheets
March 31, 2007
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
566 |
|
|
$ |
10,620 |
|
|
$ |
20,800 |
|
|
$ |
|
|
|
$ |
31,986 |
|
Accounts receivable, net |
|
|
|
|
|
|
3,190 |
|
|
|
294,415 |
|
|
|
44,579 |
|
|
|
(14,285 |
) |
|
|
327,899 |
|
Current portion of notes receivable |
|
|
|
|
|
|
|
|
|
|
15,149 |
|
|
|
|
|
|
|
|
|
|
|
15,149 |
|
Prepaid insurance and other |
|
|
63 |
|
|
|
3,801 |
|
|
|
41,730 |
|
|
|
4,118 |
|
|
|
|
|
|
|
49,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
63 |
|
|
|
7,557 |
|
|
|
361,914 |
|
|
|
69,497 |
|
|
|
(14,285 |
) |
|
|
424,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
2,476 |
|
|
|
782,757 |
|
|
|
100,097 |
|
|
|
|
|
|
|
885,330 |
|
Goodwill, net |
|
|
|
|
|
|
|
|
|
|
419,987 |
|
|
|
42,244 |
|
|
|
|
|
|
|
462,231 |
|
Notes receivable |
|
|
|
|
|
|
|
|
|
|
16,101 |
|
|
|
|
|
|
|
|
|
|
|
16,101 |
|
Equity-method investments |
|
|
124,271 |
|
|
|
532,432 |
|
|
|
58,604 |
|
|
|
|
|
|
|
(655,725 |
) |
|
|
59,582 |
|
Intangible and other long-term assets, net |
|
|
|
|
|
|
26,069 |
|
|
|
99,862 |
|
|
|
823 |
|
|
|
|
|
|
|
126,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
124,334 |
|
|
$ |
568,534 |
|
|
$ |
1,739,225 |
|
|
$ |
212,661 |
|
|
$ |
(670,010 |
) |
|
$ |
1,974,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
1,841 |
|
|
$ |
61,599 |
|
|
$ |
24,857 |
|
|
$ |
(14,285 |
) |
|
$ |
74,012 |
|
Accrued expenses |
|
|
579 |
|
|
|
32,069 |
|
|
|
89,320 |
|
|
|
8,512 |
|
|
|
|
|
|
|
130,480 |
|
Income taxes payable |
|
|
18,359 |
|
|
|
|
|
|
|
|
|
|
|
5,117 |
|
|
|
|
|
|
|
23,476 |
|
Current portion of decommissioning liabilities |
|
|
|
|
|
|
|
|
|
|
36,316 |
|
|
|
|
|
|
|
|
|
|
|
36,316 |
|
Current maturities of long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
810 |
|
|
|
|
|
|
|
810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
18,938 |
|
|
|
33,910 |
|
|
|
187,235 |
|
|
|
39,296 |
|
|
|
(14,285 |
) |
|
|
265,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
114,000 |
|
|
|
|
|
|
|
|
|
|
|
7,586 |
|
|
|
|
|
|
|
121,586 |
|
Decommissioning liabilities |
|
|
|
|
|
|
|
|
|
|
86,600 |
|
|
|
|
|
|
|
|
|
|
|
86,600 |
|
Long-term debt |
|
|
|
|
|
|
695,827 |
|
|
|
|
|
|
|
15,786 |
|
|
|
|
|
|
|
711,613 |
|
Intercompany payables/(receivables) |
|
|
(225,230 |
) |
|
|
(57,163 |
) |
|
|
745,415 |
|
|
|
38,026 |
|
|
|
(501,048 |
) |
|
|
|
|
Other long-term liabilities |
|
|
6,197 |
|
|
|
6,911 |
|
|
|
|
|
|
|
411 |
|
|
|
|
|
|
|
13,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock of $.01 par value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock of $.001 par value |
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
101 |
|
|
|
(101 |
) |
|
|
81 |
|
Additional paid in capital |
|
|
413,441 |
|
|
|
127,173 |
|
|
|
|
|
|
|
27,403 |
|
|
|
(154,576 |
) |
|
|
413,441 |
|
Accumulated other comprehensive
income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,846 |
|
|
|
|
|
|
|
9,846 |
|
Retained earnings (deficit) |
|
|
(203,093 |
) |
|
|
(238,124 |
) |
|
|
719,975 |
|
|
|
74,206 |
|
|
|
|
|
|
|
352,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
210,429 |
|
|
|
(110,951 |
) |
|
|
719,975 |
|
|
|
111,556 |
|
|
|
(154,677 |
) |
|
|
776,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
124,334 |
|
|
$ |
568,534 |
|
|
$ |
1,739,225 |
|
|
$ |
212,661 |
|
|
$ |
(670,010 |
) |
|
$ |
1,974,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheets
December 31, 2006
(in thousands)
(audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
1,608 |
|
|
$ |
14,775 |
|
|
$ |
22,587 |
|
|
$ |
|
|
|
$ |
38,970 |
|
Accounts receivable, net |
|
|
|
|
|
|
3,764 |
|
|
|
275,477 |
|
|
|
39,390 |
|
|
|
(14,831 |
) |
|
|
303,800 |
|
Income taxes receivable |
|
|
7,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,612 |
) |
|
|
2,630 |
|
Current portion of notes receivable |
|
|
|
|
|
|
|
|
|
|
14,824 |
|
|
|
|
|
|
|
|
|
|
|
14,824 |
|
Prepaid insurance and other |
|
|
|
|
|
|
16,582 |
|
|
|
40,456 |
|
|
|
2,525 |
|
|
|
|
|
|
|
59,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
7,242 |
|
|
|
21,954 |
|
|
|
345,532 |
|
|
|
64,502 |
|
|
|
(19,443 |
) |
|
|
419,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
2,622 |
|
|
|
738,446 |
|
|
|
63,160 |
|
|
|
|
|
|
|
804,228 |
|
Goodwill, net |
|
|
|
|
|
|
|
|
|
|
417,979 |
|
|
|
26,708 |
|
|
|
|
|
|
|
444,687 |
|
Notes receivable |
|
|
|
|
|
|
|
|
|
|
16,137 |
|
|
|
|
|
|
|
|
|
|
|
16,137 |
|
Equity-method investments |
|
|
124,271 |
|
|
|
510,163 |
|
|
|
63,627 |
|
|
|
|
|
|
|
(633,458 |
) |
|
|
64,603 |
|
Intangible and other long-term assets, net |
|
|
|
|
|
|
23,823 |
|
|
|
101,097 |
|
|
|
116 |
|
|
|
|
|
|
|
125,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
131,513 |
|
|
$ |
558,562 |
|
|
$ |
1,682,818 |
|
|
$ |
154,486 |
|
|
$ |
(652,901 |
) |
|
$ |
1,874,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
1,045 |
|
|
$ |
58,528 |
|
|
$ |
20,709 |
|
|
$ |
(14,831 |
) |
|
$ |
65,451 |
|
Accrued expenses |
|
|
505 |
|
|
|
27,671 |
|
|
|
104,866 |
|
|
|
8,642 |
|
|
|
|
|
|
|
141,684 |
|
Income taxes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,612 |
|
|
|
(4,612 |
) |
|
|
|
|
Current portion of decommissioning liabilities |
|
|
|
|
|
|
|
|
|
|
35,150 |
|
|
|
|
|
|
|
|
|
|
|
35,150 |
|
Current maturities of long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
810 |
|
|
|
|
|
|
|
810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
505 |
|
|
|
28,716 |
|
|
|
198,544 |
|
|
|
34,773 |
|
|
|
(19,443 |
) |
|
|
243,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
108,649 |
|
|
|
|
|
|
|
|
|
|
|
3,362 |
|
|
|
|
|
|
|
112,011 |
|
Decommissioning liabilities |
|
|
|
|
|
|
|
|
|
|
87,046 |
|
|
|
|
|
|
|
|
|
|
|
87,046 |
|
Long-term debt |
|
|
|
|
|
|
695,719 |
|
|
|
|
|
|
|
15,786 |
|
|
|
|
|
|
|
711,505 |
|
Intercompany payables/(receivables) |
|
|
(224,208 |
) |
|
|
(79,487 |
) |
|
|
782,022 |
|
|
|
23,507 |
|
|
|
(501,834 |
) |
|
|
|
|
Other long-term liabilities |
|
|
6,197 |
|
|
|
3,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock of $.01 par value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock of $.001 par value |
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
101 |
|
|
|
(101 |
) |
|
|
81 |
|
Additional paid in capital |
|
|
411,374 |
|
|
|
127,173 |
|
|
|
|
|
|
|
4,350 |
|
|
|
(131,523 |
) |
|
|
411,374 |
|
Accumulated other comprehensive
income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,288 |
|
|
|
|
|
|
|
10,288 |
|
Retained earnings (deficit) |
|
|
(171,085 |
) |
|
|
(217,495 |
) |
|
|
615,206 |
|
|
|
62,319 |
|
|
|
|
|
|
|
288,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
240,370 |
|
|
|
(90,322 |
) |
|
|
615,206 |
|
|
|
77,058 |
|
|
|
(131,624 |
) |
|
|
710,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
131,513 |
|
|
$ |
558,562 |
|
|
$ |
1,682,818 |
|
|
$ |
154,486 |
|
|
$ |
(652,901 |
) |
|
$ |
1,874,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
Three Months Ended March 31, 2007
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Oilfield service and rental revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
289,971 |
|
|
$ |
43,471 |
|
|
$ |
(7,547 |
) |
|
$ |
325,895 |
|
Oil and gas revenues |
|
|
|
|
|
|
|
|
|
|
37,029 |
|
|
|
|
|
|
|
|
|
|
|
37,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
327,000 |
|
|
|
43,471 |
|
|
|
(7,547 |
) |
|
|
362,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of oilfield services and rentals |
|
|
|
|
|
|
|
|
|
|
130,523 |
|
|
|
19,453 |
|
|
|
(7,547 |
) |
|
|
142,429 |
|
Cost of oil and gas sales |
|
|
|
|
|
|
|
|
|
|
18,058 |
|
|
|
|
|
|
|
|
|
|
|
18,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of services, rentals and sales |
|
|
|
|
|
|
|
|
|
|
148,581 |
|
|
|
19,453 |
|
|
|
(7,547 |
) |
|
|
160,487 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, amortization and
accretion |
|
|
|
|
|
|
145 |
|
|
|
35,099 |
|
|
|
3,600 |
|
|
|
|
|
|
|
38,844 |
|
General and administrative expenses |
|
|
133 |
|
|
|
12,676 |
|
|
|
33,783 |
|
|
|
4,267 |
|
|
|
|
|
|
|
50,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(133 |
) |
|
|
(12,821 |
) |
|
|
109,537 |
|
|
|
16,151 |
|
|
|
|
|
|
|
112,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
|
(7,814 |
) |
|
|
(195 |
) |
|
|
(269 |
) |
|
|
|
|
|
|
(8,278 |
) |
Interest income |
|
|
|
|
|
|
3 |
|
|
|
436 |
|
|
|
140 |
|
|
|
|
|
|
|
579 |
|
Earnings (losses) from equity-method
investments, net |
|
|
|
|
|
|
3 |
|
|
|
(5,009 |
) |
|
|
|
|
|
|
|
|
|
|
(5,006 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(133 |
) |
|
|
(20,629 |
) |
|
|
104,769 |
|
|
|
16,022 |
|
|
|
|
|
|
|
100,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
31,875 |
|
|
|
|
|
|
|
|
|
|
|
4,135 |
|
|
|
|
|
|
|
36,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(32,008 |
) |
|
$ |
(20,629 |
) |
|
$ |
104,769 |
|
|
$ |
11,887 |
|
|
$ |
|
|
|
$ |
64,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Operations
Three Months Ended March 31, 2006
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Oilfield service and rental revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
190,221 |
|
|
$ |
21,773 |
|
|
$ |
(4,996 |
) |
|
$ |
206,998 |
|
Oil and gas revenues |
|
|
|
|
|
|
|
|
|
|
15,471 |
|
|
|
|
|
|
|
|
|
|
|
15,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
205,692 |
|
|
|
21,773 |
|
|
|
(4,996 |
) |
|
|
222,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of oilfield services and rentals |
|
|
|
|
|
|
|
|
|
|
86,664 |
|
|
|
11,587 |
|
|
|
(4,996 |
) |
|
|
93,255 |
|
Cost of oil and gas sales |
|
|
|
|
|
|
|
|
|
|
14,205 |
|
|
|
|
|
|
|
|
|
|
|
14,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of services, rentals and sales |
|
|
|
|
|
|
|
|
|
|
100,869 |
|
|
|
11,587 |
|
|
|
(4,996 |
) |
|
|
107,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, amortization and
accretion |
|
|
|
|
|
|
|
|
|
|
20,773 |
|
|
|
2,142 |
|
|
|
|
|
|
|
22,915 |
|
General and administrative expenses |
|
|
106 |
|
|
|
7,358 |
|
|
|
27,159 |
|
|
|
3,028 |
|
|
|
|
|
|
|
37,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(106 |
) |
|
|
(7,358 |
) |
|
|
56,891 |
|
|
|
5,016 |
|
|
|
|
|
|
|
54,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
|
(4,548 |
) |
|
|
(10 |
) |
|
|
(286 |
) |
|
|
|
|
|
|
(4,844 |
) |
Interest income |
|
|
|
|
|
|
185 |
|
|
|
412 |
|
|
|
66 |
|
|
|
|
|
|
|
663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(106 |
) |
|
|
(11,721 |
) |
|
|
57,293 |
|
|
|
4,796 |
|
|
|
|
|
|
|
50,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
16,760 |
|
|
|
|
|
|
|
|
|
|
|
1,334 |
|
|
|
|
|
|
|
18,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(16,866 |
) |
|
$ |
(11,721 |
) |
|
$ |
57,293 |
|
|
$ |
3,462 |
|
|
$ |
|
|
|
$ |
32,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 2007
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Consolidated |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(32,008 |
) |
|
$ |
(20,629 |
) |
|
$ |
104,769 |
|
|
$ |
11,887 |
|
|
$ |
64,019 |
|
Adjustments to reconcile net income to net cash
provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, amortization and accretion |
|
|
|
|
|
|
145 |
|
|
|
35,099 |
|
|
|
3,600 |
|
|
|
38,844 |
|
Deferred income taxes |
|
|
5,350 |
|
|
|
|
|
|
|
|
|
|
|
195 |
|
|
|
5,545 |
|
Stock-based and performance share unit compensation
expense |
|
|
|
|
|
|
3,557 |
|
|
|
|
|
|
|
|
|
|
|
3,557 |
|
(Earnings) losses from equity-method investments |
|
|
|
|
|
|
(3 |
) |
|
|
5,009 |
|
|
|
|
|
|
|
5,006 |
|
Amortization of debt acquisition costs and note
discount |
|
|
|
|
|
|
881 |
|
|
|
|
|
|
|
|
|
|
|
881 |
|
Changes in operating assets and liabilities, net
of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
(413 |
) |
|
|
(19,180 |
) |
|
|
(1,353 |
) |
|
|
(20,946 |
) |
Other, net |
|
|
(63 |
) |
|
|
4,348 |
|
|
|
1,314 |
|
|
|
(936 |
) |
|
|
4,663 |
|
Accounts payable |
|
|
|
|
|
|
796 |
|
|
|
2,522 |
|
|
|
689 |
|
|
|
4,007 |
|
Accrued expenses |
|
|
74 |
|
|
|
1,850 |
|
|
|
(16,366 |
) |
|
|
(748 |
) |
|
|
(15,190 |
) |
Decommissioning liabilities |
|
|
|
|
|
|
|
|
|
|
(478 |
) |
|
|
|
|
|
|
(478 |
) |
Income taxes |
|
|
25,385 |
|
|
|
|
|
|
|
|
|
|
|
179 |
|
|
|
25,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
(1,262 |
) |
|
|
(9,468 |
) |
|
|
112,689 |
|
|
|
13,513 |
|
|
|
115,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for capital expenditures |
|
|
|
|
|
|
|
|
|
|
(78,602 |
) |
|
|
(4,519 |
) |
|
|
(83,121 |
) |
Acquisitions of businesses, net of cash acquired |
|
|
|
|
|
|
(49,758 |
) |
|
|
|
|
|
|
|
|
|
|
(49,758 |
) |
Other |
|
|
|
|
|
|
9,585 |
|
|
|
|
|
|
|
|
|
|
|
9,585 |
|
Intercompany receivables/payables |
|
|
202 |
|
|
|
48,808 |
|
|
|
(38,242 |
) |
|
|
(10,768 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
202 |
|
|
|
8,635 |
|
|
|
(116,844 |
) |
|
|
(15,287 |
) |
|
|
(123,294 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of debt acquisition costs |
|
|
|
|
|
|
(209 |
) |
|
|
|
|
|
|
|
|
|
|
(209 |
) |
Proceeds from exercise of stock options |
|
|
670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
670 |
|
Tax benefit from exercise of stock options |
|
|
390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
1,060 |
|
|
|
(209 |
) |
|
|
|
|
|
|
|
|
|
|
851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
|
|
|
|
|
(1,042 |
) |
|
|
(4,155 |
) |
|
|
(1,787 |
) |
|
|
(6,984 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
1,608 |
|
|
|
14,775 |
|
|
|
22,587 |
|
|
|
38,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
566 |
|
|
$ |
10,620 |
|
|
$ |
20,800 |
|
|
$ |
31,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 2006
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Guarantor |
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Consolidated |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(16,866 |
) |
|
$ |
(11,721 |
) |
|
$ |
57,293 |
|
|
$ |
3,462 |
|
|
$ |
32,168 |
|
Adjustments to reconcile net income to net cash
provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, amortization and accretion |
|
|
|
|
|
|
|
|
|
|
20,773 |
|
|
|
2,142 |
|
|
|
22,915 |
|
Deferred income taxes |
|
|
1,172 |
|
|
|
|
|
|
|
|
|
|
|
(138 |
) |
|
|
1,034 |
|
Stock-based and performance share unit compensation
expense |
|
|
|
|
|
|
1,155 |
|
|
|
|
|
|
|
|
|
|
|
1,155 |
|
Amortization of debt acquisition costs |
|
|
|
|
|
|
235 |
|
|
|
|
|
|
|
|
|
|
|
235 |
|
Changes in operating assets and liabilities, net
of disposition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
627 |
|
|
|
(16,609 |
) |
|
|
(4,050 |
) |
|
|
(20,032 |
) |
Other, net |
|
|
(50 |
) |
|
|
(1,652 |
) |
|
|
(11,524 |
) |
|
|
174 |
|
|
|
(13,052 |
) |
Accounts payable |
|
|
|
|
|
|
(175 |
) |
|
|
(939 |
) |
|
|
(2,573 |
) |
|
|
(3,687 |
) |
Accrued expenses |
|
|
58 |
|
|
|
3,357 |
|
|
|
3,923 |
|
|
|
(618 |
) |
|
|
6,720 |
|
Decommissioning liabilities |
|
|
|
|
|
|
|
|
|
|
(2,255 |
) |
|
|
|
|
|
|
(2,255 |
) |
Income taxes |
|
|
15,092 |
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
15,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
(594 |
) |
|
|
(8,174 |
) |
|
|
50,662 |
|
|
|
(1,557 |
) |
|
|
40,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for capital expenditures |
|
|
|
|
|
|
|
|
|
|
(43,131 |
) |
|
|
(1,358 |
) |
|
|
(44,489 |
) |
Cash proceeds from sale of subsidary, net of cash sold |
|
|
|
|
|
|
18,343 |
|
|
|
|
|
|
|
|
|
|
|
18,343 |
|
Other |
|
|
|
|
|
|
(1,695 |
) |
|
|
|
|
|
|
|
|
|
|
(1,695 |
) |
Intercompany receivables/payables |
|
|
(873 |
) |
|
|
(203 |
) |
|
|
(901 |
) |
|
|
1,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
(873 |
) |
|
|
16,445 |
|
|
|
(44,032 |
) |
|
|
619 |
|
|
|
(27,841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
1,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
1,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154 |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
|
|
|
|
8,271 |
|
|
|
6,630 |
|
|
|
(784 |
) |
|
|
14,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
21,414 |
|
|
|
19,421 |
|
|
|
13,622 |
|
|
|
54,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
29,685 |
|
|
$ |
26,051 |
|
|
$ |
12,838 |
|
|
$ |
68,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
(17) Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board issued its Statement of Financial
Accounting Standards No. 157 (FAS No. 157), Fair Value Measurements. FAS No. 157 establishes a
framework for measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. FAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements. FAS No. 157 indicates, among other
things, a fair value measurement assumes that the transaction to sell an asset or transfer a
liability occurs in the principal market for the asset or liability or, in the absence of a
principal market, the most advantageous market for the asset or liability. FAS No. 157 is effective
for financial statements issued for fiscal years beginning after November 15, 2007. The Company is
currently evaluating the impact of FAS No. 157 on the Companys financial statements.
In September 2006, the Financial Accounting Standards Board issued its Statement of Financial
Accounting Standards No. 158 (FAS No. 158), Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans an Amendment of FASB Statements No. 87, 88, 106, and 132(R). FAS No.
158 requires recognition of the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability on the balance sheet
and the recognition of changes in the funded status in the year in which the changes occur though
comprehensive income. FAS No. 158 also requires an employer to measure the funded status of a plan
as of the end of the fiscal year. FAS No. 158 is effective for fiscal years ending after December
15, 2006, except for the measurement date provisions which are effective for fiscal years ending
after December 15, 2008. The adoption of FAS No. 158 has not had an impact on our results of
operations or our financial position.
In February 2007, the Financial Accounting Standards Board issued its Statement of Financial
Accounting Standards No. 159 (FAS No. 159), The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115 which is effective for
fiscal years beginning after November 15, 2007. This statement permits an entity to choose to
measure many financial instruments and certain other items at fair value at specified election
dates. Subsequent unrealized gains and losses on items for which the fair value option has been
elected will be reported in earnings. The Company is currently evaluating the impact of FAS No. 159
on its financial statements.
22
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
Forward-Looking Statements
The following managements discussion and analysis of financial condition and results of operations
contains forward-looking statements which involve risks and uncertainties. All statements other
than statements of historical fact included in this section regarding our financial position and
liquidity, strategic alternatives, future capital needs, 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 its perception of historical trends, current conditions, expected future
developments and other factors it believes are appropriate under the circumstances. Such
forward-looking statements are subject to uncertainties that could cause our actual results to
differ materially from such statements. Such uncertainties include but are not limited to: the
volatility and cyclicality of the oil and gas industry, including oil and gas prices and the level
of offshore exploration, production and development activity; changes in competitive factors
affecting our operations; risks associated with the acquisition of mature oil and gas properties,
including estimates of recoverable reserves, future oil and gas prices and potential environmental
and plugging and abandonment liabilities; the risk associated with our non-United States
operations, which expose us to additional political, economic and other uncertainties; risks of
adverse weather conditions in the Gulf of Mexico; risks of our growth strategy, including the risks
of rapid growth and the risks inherent in acquiring businesses and mature oil and gas properties;
our dependence on key personnel; our ability to employ and retain skilled workers; our dependence
on significant customers; operating hazards, including the significant possibility of accidents
resulting in personal injury, property damage or environmental damage; the volatility and risk
associated with oil and gas prices; the effect on our performance of regulatory programs and
environmental matters and risks associated with international expansion, including political and
economic uncertainties. These and other uncertainties related to our business are described in
detail in our Annual Report on Form 10-K for the year ended December 31, 2006. 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. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date hereof. We undertake
no obligation to update any of our forward-looking statements for any reason.
Executive Summary
During the first quarter of 2007, we achieved our highest quarterly levels for revenue, income from
operations, net income and diluted earnings per share. Revenue was $362.9 million, income from
operations was $112.7 million and net income was $64.0 million, or $0.78 diluted earnings per
share. These results were achieved primarily due to a full quarter contribution from our
acquisition of Warrior, which closed on December 12, 2006, and continued geographic expansion,
particularly in the rental tools segment.
The greatest impact from the Warrior transaction was in the well intervention segment, which
recorded revenue of $174.5 million and income from operations of $45.9 million, a 31% and 60%
increase, respectively, over the fourth quarter of 2006. As a result of our acquisition of Warrior,
we saw significant increases in revenues from domestic land markets in coiled tubing, electric line
and snubbing services. In addition to the contribution from our acquisition of Warrior, we
benefited from increased well control activity in certain international market areas. Activity for
many of our core production-related services remained essentially unchanged to slightly lower,
particularly in the Gulf of Mexico, due to similar seasonal factors experienced in the most recent
quarter.
In our rental tools segment, revenue was $118.6 million, a 9% increase as compared to the fourth
quarter of 2006, and income from operations was $45.2 million, an 8% increase over the fourth
quarter of 2006. Rentals increased for drill pipe, stabilizers, drill collars, specialty tubulars
and accessories. Geographically, demand increased domestically in Texas and internationally in the
North Sea, Norway and West Africa market areas.
In our marine segment, revenue was $35.9 million and income from operations was $16.5 million.
These results were down slightly from the fourth quarter of 2006 primarily due to lower
utilization. Utilization in the first quarter was 74% as compared to 80% in the fourth quarter of
2006. Idle days increased significantly in the first quarter primarily due to poor weather in the
Gulf of Mexico early in the quarter.
23
Revenues and income from operations from our oil and gas segment were $37.0 million and $5.1,
respectively, in the first quarter. This represents a 8.3% decrease in revenue and a significant
decrease in income from operations as compared to the fourth quarter of 2006. Higher realized
commodity prices were partially offset by lower oil and gas production as compared to the most
recent quarter. Oil and gas production was approximately 711,000, or 7,900 barrels of oil
equivalent (boe) per day as compared to fourth quarter 2006 oil and gas production of approximately
772,000, or 8,400 boe per day. Production was lower in the first quarter of 2007 due to weather,
mechanical repair downtime and a shut-in third party pipeline.
We experienced losses from our equity-method investment in Coldren Resources as it was negatively
impacted by $3.3 million in unrealized losses from Coldren Resources oil and gas derivative
positions as compared to $0.7 million in unrealized gains during the fourth quarter of 2006.
Comparison of the Results of Operations for the Three Months Ended March 31, 2007 and 2006
For the three months ended March 31, 2007, our revenues were $362.9 million, resulting in net
income of $64 million, or $0.78 diluted earnings per share. For the three months ended March 31,
2006, revenues were $222.5 million and net income was $32.2 million, or $0.40 diluted earnings per
share. Revenue and gross margin were higher in the well intervention, rental tools and marine
segments as a result of increased production-related projects and drilling activity worldwide,
recent acquisitions and continued expansion of our rental tool business. Revenues in our oil and
gas segment were higher due to significantly higher production as the first quarter of 2006
production was impacted by shut-in production due to Hurricanes Katrina and Rita.
The following table compares our operating results for the three months ended March 31, 2007 and
2006. Gross margin is calculated by subtracting cost of services from revenue for each of our
four business segments. Oil and gas eliminations represent products and services provided to the
oil and gas segment by our three other segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
Gross Margin |
|
|
|
2007 |
|
|
2006 |
|
|
Change |
|
|
2007 |
|
|
% |
|
|
2006 |
|
|
% |
|
|
Change |
|
|
|
|
|
|
Well Intervention |
|
$ |
174,548 |
|
|
$ |
102,073 |
|
|
$ |
72,475 |
|
|
$ |
80,556 |
|
|
|
46 |
% |
|
$ |
42,073 |
|
|
|
41 |
% |
|
$ |
38,483 |
|
Rental Tools |
|
|
118,563 |
|
|
|
77,774 |
|
|
|
40,789 |
|
|
|
81,532 |
|
|
|
69 |
% |
|
|
53,476 |
|
|
|
69 |
% |
|
|
28,056 |
|
Marine |
|
|
35,866 |
|
|
|
30,207 |
|
|
|
5,659 |
|
|
|
21,377 |
|
|
|
60 |
% |
|
|
18,194 |
|
|
|
60 |
% |
|
|
3,183 |
|
Oil and Gas |
|
|
37,029 |
|
|
|
15,471 |
|
|
|
21,558 |
|
|
|
18,972 |
|
|
|
51 |
% |
|
|
1,266 |
|
|
|
8 |
% |
|
|
17,706 |
|
Less: Oil and Gas
Elim |
|
|
(3,082 |
) |
|
|
(3,056 |
) |
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
362,924 |
|
|
$ |
222,469 |
|
|
$ |
140,455 |
|
|
$ |
202,437 |
|
|
|
56 |
% |
|
$ |
115,009 |
|
|
|
52 |
% |
|
$ |
87,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following discussion analyzes our results on a segment basis.
Well Intervention Segment
Revenue for our well intervention segment was $174.5 million for the three months ended March 31,
2007, as compared to $102.1 million for the same period in 2006. This segments gross margin
percentage increased to 46% for the three months ended March 31, 2007 from 41% for the same period
of 2006. We experienced higher revenue for most of our production-related services, especially our
well control, coiled tubing, pumping and stimulation, mechanical wireline, hydraulic workover
services, and engineering and project management services as production-related activity improved
significantly. We also benefited from the December 2006 acquisition of Warrior, which increased
domestic land revenue in coiled tubing, electric line and snubbing. Revenue increased
for our plug and abandonment services as many customers continued plugging severely damaged wells
and temporarily or permanently plugging other wells to lower their insurance exposure and risk of
damage from any future hurricanes. Gross margin improved due to higher increases in demand for our
services, as well as the contribution from Warrior.
Rental Tools Segment
24
Revenue for our rental tools segment for the three months ended March 31, 2007 was $118.6 million,
a 52% increase over the same period in 2006. The gross margin percentage remained constant at 69%
for the three months ended March 31, 2007 and 2006. We experienced significant increases in
revenue from our stabilizers, on-site accommodations, drill pipe and accessories, specialty
tubulars and drill collars. The increases are a result of recent acquisitions, expansion of
rental products through capital expenditures, and increased activity worldwide. Our international
revenue for the rental tools segment has increased significantly to approximately $37.0 million
for the quarter ended March 31, 2007 over the same period of 2006. Our largest improvements were
in the North Sea, South America and West Africa market areas.
Marine Segment
Our marine segment revenue for the three months ended March 31, 2007 increased 19% over the same
period in 2006 to $35.9 million. The gross margin percentage for the three months ended March 31,
2007 remained constant at 60% for the same period in 2006. We experienced higher pricing for our
liftboats in the three months ended March 31, 2007 than the same period of 2006 due to demand for
liftboats in the Gulf of Mexico throughout 2006. The fleets average dayrate increased over 33% to
approximately $19,100 in the first quarter of 2007 from $14,300 in the first quarter of 2006. The
fleets average utilization decreased to approximately 74% for the first quarter of 2007 from 85%
in the same period in 2006 due to poor weather conditions in the Gulf of Mexico.
Oil and Gas Segment
Oil and gas revenues were $37.0 million in the three months ended March 31, 2007, as compared to
$15.5 million in the same period of 2006. In the first quarter of 2007, production was
approximately 711,000 boe, as compared to approximately 358,600 boe in the first quarter of 2006.
Much of our production was shut-in during the first quarter of 2006 due to ongoing repairs to third
party pipelines and SPN Resources facilities that sustained hurricane damage. The gross margin
percentage increased significantly to 51% for the three months ended March 31, 2007 from 8% for the
same period of 2006.
Depreciation, Depletion, Amortization and Accretion
Depreciation, depletion, amortization and accretion increased to $38.8 million in the three months
ended March 31, 2007 from $22.9 million in the same period in 2006. The increase results from the
depreciation associated with our 2007 and 2006 capital expenditures as well as our acquisition of
Warrior. The increase also results from additional depletion related to significantly higher
production in the first quarter of 2007 as compared to the first quarter of 2006.
General and Administrative Expenses
General and administrative expenses increased to $50.9 million for the three months ended March 31,
2007 from $37.7 million for the same period in 2006. This increase was primarily related to our
acquisition of Warrior, increased bonus and compensation expenses due to our improved performance,
and increased expenses related to our geographic expansion, other acquisitions and our growth.
General and administrative expenses decreased to 14% of revenue for the three months ended March
31, 2007 from 17% for the same period in 2006.
Liquidity and Capital Resources
In the three months ended March 31, 2007, we generated net cash from operating activities of $115.5
million as compared to $40.3 million in the same period of 2006. Our primary liquidity needs are
for working capital, capital
expenditures, debt service and acquisitions. Our primary sources of liquidity are cash flows from
operations and borrowings under our revolving credit facility. We had cash and cash equivalents of
$32.0 million at March 31, 2007 compared to $39.0 million at December 31, 2006.
We made $83.1 million of capital expenditures during the three months ended March 31, 2007, of
which approximately $26.0 million was used to expand and maintain our rental tool equipment
inventory. We also made $17.9 million of capital expenditures in our oil and gas segment and $37.6
million of capital expenditures to expand and maintain the asset base of our well intervention and
marine segments, including $2.0 million related to
25
modification of the derrick barge presently
under charter and $2.1 million of progress payments related to the construction of another derrick
barge. In addition, we made $1.6 million of capital expenditures on construction and improvements
to our facilities.
During the three months ending March 31, 2007, we acquired Duffy & McGovern Accommodation Services
Limited (Duffy & McGovern) for approximately $47.4 million in cash consideration. Duffy & McGovern
is a provider of offshore accommodation rentals operating in most deep water oil and gas
territories with major operations in Europe, Africa, the Americas and South East Asia.
In July 2006, we contracted to construct a derrick barge that will be sold to a third party for
approximately $53.7 million. We expect to take delivery of the derrick barge and sell it to the
third party during the first quarter of 2008. We receive monthly payments from the purchaser in
accordance with the terms of the sales contract. In turn, we issue letters of credit to the
purchaser in equal amounts to guarantee our performance of the contract. We have entered into
fixed-price contracts to construct this derrick barge and its 880-ton offshore mast crane. Our
payment obligation for the construction of the barge is secured by letters of credit that are
posted upon performance milestones and are payable upon the barges delivery and our acceptance.
The contract for the crane requires periodic progress payments with final payment due upon
completion of the contract. Revenue and costs associated with the sale contract are accounted for
on the percentage-of-completion method utilizing engineering estimates and construction progress.
This methodology requires us to make estimates regarding our progress against the project schedule
and estimated completion date, both of which impact the amount of revenue and gross margin we
recognize in each reporting period. Contract costs mainly include sub-contract and program
management costs. Provisions for any anticipated losses will be recorded in full when such losses
become evident.
Also in July 2006, we contracted to construct another derrick barge to support our decommissioning
and construction operations. We expect to take delivery of this barge in the second quarter of
2008. We have entered into fixed-price contracts to construct this derrick barge and its 880-ton
offshore mast crane. Our payment obligation for the construction of the barge is secured by
letters of credit that are posted upon performance milestones and are payable upon the barges
delivery and our acceptance. The contract for the crane requires periodic progress payments with
final payment due upon completion of the contract. We currently intend to utilize this
construction barge to support our removal projects in the Gulf of Mexico market area for both third
party customers and our subsidiary, SPN Resources.
We currently believe that we will make approximately $265 to $275 million of capital expenditures,
excluding acquisitions and targeted asset purchases, during the remaining nine months of 2007 to
expand our rental tool asset base and perform workovers and drilling operations on SPN Resources
oil and gas properties. We believe that our current working capital, cash generated from our
operations and availability under our revolving credit facility will provide sufficient funds for
our identified capital projects.
We have a $250 million bank revolving credit facility. Any amounts outstanding under the revolving
credit facility are due on June 14, 2011. At March 31, 2007, we had no amounts outstanding under
the bank credit facility, but we had approximately $60.7 million of letters of credit outstanding,
which reduce our borrowing capacity under this credit facility. Borrowings under the credit
facility bear interest at a LIBOR rate plus margins that depend on our leverage ratio. As of May
4, 2007, we had $25.7 million outstanding on this facility, and the weighted interest rate was
8.25%. Indebtedness under the credit facility is secured by substantially all of our assets,
including the pledge of the stock of our principal subsidiaries. The credit facility contains
customary events of default and requires that we satisfy various financial covenants. It also
limits our ability to pay dividends or make other
distributions, make acquisitions, create liens, incur additional indebtedness or assume additional
decommissioning liabilities.
26
We have $16.6 million outstanding at March 31, 2007 in U. S. Government guaranteed long-term
financing under Title XI of the Merchant Marine Act of 1936, which is administered by the Maritime
Administration (MARAD), for two 245-foot class liftboats. This debt bears an interest rate of
6.45% per annum and is payable in equal semi-annual installments of $405,000 on every June
3rd and December 3rd through the maturity date of June 3, 2027. Our
obligations are secured by mortgages on the two liftboats. This MARAD financing also requires that
we comply with certain covenants and restrictions, including the maintenance of minimum net worth
and debt-to-equity requirements.
We have $300 million of 6 7/8% unsecured senior notes due 2014. The indenture governing the senior
notes requires semi-annual interest payments, on every June 1st and December
1st through the maturity date of June 1, 2014. The indenture contains certain covenants
that, among other things, restrict us from incurring additional debt, repurchasing capital stock,
paying dividends or making other distributions, incurring liens, selling assets or entering into
certain mergers or acquisitions.
We also have $400 million of 1.50% senior exchangeable notes due 2026. The exchangeable notes bear
interest at a rate of 1.50% per annum and decrease to 1.25% per annum on December 15, 2011.
Interest on the exchangeable notes is payable semi-annually in arrears on December 15th
and June 15th of each year, beginning June 15, 2007. The exchangeable notes do not
contain any restrictive financial covenants.
Under certain circumstances, holders may exchange the notes for shares of our common stock. The
initial exchange rate is 21.9414 shares of common stock per $1,000 principal amount of notes. This
is equal to an initial exchange price of $45.58 per share. The exchange price represents a 35%
premium over the closing share price at the date of issuance. The notes may be exchanged under the
following circumstances:
|
|
|
during any fiscal quarter (and only during such fiscal quarter) commencing after March
31, 2007, if the last reported sale price of our common stock is greater than or equal to
135% of the applicable exchange price of the notes for at least 20 trading days in the
period of 30 consecutive trading days ending on the last trading day of the preceding
fiscal quarter; |
|
|
|
|
prior to December 15, 2011, during the five business-day period after any ten
consecutive trading-day period (the measurement period) in which the trading price of
$1,000 principal amount of notes for each trading day in the measurement period was less
than 95% of the product of the last reported sale price of our common stock and the
exchange rate on such trading day; |
|
|
|
|
if the notes have been called for redemption; |
|
|
|
|
upon the occurrence of specified corporate transactions; or |
|
|
|
|
at any time beginning on September 15, 2026, and ending at the close of business on the
second business day immediately preceding the maturity date of December 15, 2026. |
In connection with the issuance of the exchangeable notes, we entered into agreements with
affiliates of the initial purchasers to purchase call options and sell warrants on our common
stock. We may exercise the call options we purchased at any time to acquire approximately 8.8
million shares of our common stock at a strike price of $45.58 per share. The owners of the
warrants may exercise the warrants to purchase from us approximately 8.8 million shares of our
common stock at a price of $59.42 per share, subject to certain anti-dilution and other customary
adjustments. The warrants may be settled in cash, in shares or in a combination of cash and
shares, at our option. These transactions may potentially reduce the dilution of our common stock
from the exchange of the notes by increasing the effective exchange price to $59.42 per share.
The following table summarizes our contractual cash obligations and commercial commitments at March
31, 2007 (amounts in thousands) for our long-term debt (including estimated interest payments),
decommissioning liabilities, operating leases and contractual obligations. The decommissioning
liability amounts do not give any effect to our contractual right to receive amounts from third
parties, which is approximately $31.2 million, when decommissioning operations are performed. The
vessel construction liability amounts do not give any effect to our
contractual right to receive payments from a third-party customer, which is approximately $31.4
million. We do not have any other material obligations or commitments.
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
|
|
|
|
|
|
|
|
|
|
Description |
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
2012 |
|
Thereafter |
|
Long-term debt, including
estimated interest payments |
|
$ |
28,492 |
|
|
$ |
28,440 |
|
|
$ |
28,388 |
|
|
$ |
28,336 |
|
|
$ |
27,783 |
|
|
$ |
27,231 |
|
|
$ |
818,347 |
|
Decommissioning liabilities |
|
|
32,463 |
|
|
|
5,717 |
|
|
|
2,395 |
|
|
|
10,363 |
|
|
|
29,700 |
|
|
|
6,353 |
|
|
|
35,925 |
|
Operating leases |
|
|
4,882 |
|
|
|
5,945 |
|
|
|
3,926 |
|
|
|
2,100 |
|
|
|
1,087 |
|
|
|
324 |
|
|
|
12,789 |
|
Vessel construction |
|
|
20,258 |
|
|
|
47,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
86,095 |
|
|
$ |
87,158 |
|
|
$ |
34,709 |
|
|
$ |
40,799 |
|
|
$ |
58,570 |
|
|
$ |
33,908 |
|
|
$ |
867,061 |
|
|
|
|
We have no off-balance sheet arrangements other than our potential additional consideration that
may be payable as a result of the future operating performances of one acquisition. At March 31,
2007, the maximum additional consideration payable for this acquisition was approximately $0.4
million. We do not have any other financing arrangements that are not required under generally
accepted accounting principles to be reflected in our financial statements.
We intend to continue implementing our growth strategy of increasing our scope of services through
both internal growth and strategic acquisitions. We expect to continue to make the capital
expenditures required to implement our growth strategy in amounts consistent with the amount of
cash generated from operating activities, the availability of additional financing and our credit
facility. Depending on the size of any future acquisitions, we may require additional equity or
debt financing in excess of our current working capital and amounts available under our revolving
credit facility.
New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board issued its Statement of Financial
Accounting Standards No. 157 (FAS No. 157), Fair Value Measurements. FAS No. 157 establishes a
framework for measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. FAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements. FAS No. 157 indicates, among other
things, a fair value measurement assumes that the transaction to sell an asset or transfer a
liability occurs in the principal market for the asset or liability or, in the absence of a
principal market, the most advantageous market for the asset or liability. FAS No. 157 is effective
for financial statements issued for fiscal years beginning after November 15, 2007. We are
currently evaluating the impact that FAS No. 157 will have on our results of operations and
financial position.
In September 2006, the Financial Accounting Standards Board issued its Statement of Financial
Accounting Standards No. 158 (FAS No. 158), Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans an Amendment of FASB Statements No. 87, 88, 106, and 132(R). FAS No.
158 requires recognition of the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability on the balance sheet
and the recognition of changes in the funded status in the year in which the changes occur though
comprehensive income. FAS No. 158 also requires an employer to measure the funded status of a plan
as of the end of the fiscal year. FAS No. 158 is effective for fiscal years ending after December
15,
2006, except for the measurement date provisions which are effective for fiscal years ending after
December 15, 2008. The adoption of FAS No. 158 has not had an impact on our results of operations
or our financial position.
In February 2007, the Financial Accounting Standards Board issued its Statement of Financial
Accounting Standards No. 159 (FAS No. 159), The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115 which is effective for
fiscal years beginning after November 15, 2007. This statement permits an entity to choose to
measure many financial instruments and certain other items at fair value at specified election
dates. Subsequent unrealized gains and losses on items for which the fair value option has been
elected will be reported in earnings. We are currently evaluating the impact that FAS No. 159 will
have on our results of operations and financial position.
28
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency Exchange Rates
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 our operations in the United Kingdom, is the U.S. dollar, but a portion of
the revenues from our foreign operations is paid in foreign currencies. The effects of foreign
currency fluctuations are partly mitigated because local expenses of such foreign 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. Any gains or losses
associated with such fluctuations have not been material.
We do not hold any foreign currency exchange forward contracts and/or currency options. We have
not made use of derivative financial instruments to manage risks associated with existing or
anticipated transactions. We do not hold derivatives for trading purposes or use derivatives with
complex features. Assets and liabilities of our subsidiaries in the United Kingdom are translated
at current exchange rates, while income and expense are translated at average rates for the period.
Translation gains and losses are reported as the foreign currency translation component of
accumulated other comprehensive income in stockholders equity.
Interest Rate Risk
At March 31, 2007, none of our long-term debt outstanding had variable interest rates, and we had
no interest rate risks at that time.
Equity Price Risk
We have $400 million of 1.50% senior exchangeable notes due 2026. The notes are, subject to the
occurence of specified conditions, exchangeable for our common stock initially at an exchange price
of $45.58 per share, which would result in an aggregate of approximately 8.8 million shares of
common stock being issued upon exchange. We may redeem for cash all or any part of the notes on or
after December 15, 2011 for 100% of the principal amount redeemed. The holders may require us to
repurchase for cash all or any portion of the notes on December 15, 2011, December 15, 2016 and
December 15, 2021 for 100% of the principal amount of notes to be purchased plus any accrued and
unpaid interest. The notes do not contain any restrictive financial covenants.
Each $1,000 of principal amount of the notes is initially exchangeable into 21.9414 shares of our
common stock, subject to adjustment upon the occurrence of specified events. Holders of the notes
may exchange their notes prior to maturity only if: (1) the price of our common stock reaches
$45.58 during certain periods of time specified in the notes; (2) specified corporate transactions
occur; (3) the notes have been called for redemption; or (4) the trading price of the notes falls
below a certain threshold. In addition, in the event of a fundamental change in our corporate
ownership or structure, the holders may require us to repurchase all or any portion of the notes
for 100% of the principal amount.
We also have agreements with affiliates of the initial purchasers to purchase call options and sell
warrants of our common stock. We may exercise the call options at any time to acquire
approximately 8.8 million shares of our common stock at a strike price of $45.58 per share. The
owners of the warrants may exercise their warrants to purchase from us approximately 8.8 million
shares of our common stock at a price of $59.42 per share, subject to
certain anti-dilution and other customary adjustments. The warrants may be settled in cash, in
shares or in a combination of cash and shares, at our option.
For additional discussion of the notes, see Managements Discussion and Analysis of Financial
Condition and Results of OperationsLiquidity and Capital Resources in Part I, Item 2 above.
Commodity Price Risk
Our revenues, profitability and future rate of growth partially depends upon the market prices of
oil and natural gas. Lower prices may also reduce the amount of oil and gas that can economically
be produced.
29
We use derivative commodity instruments to manage commodity price risks associated with future oil
production. Our hedging contracts for a portion of our oil production expired on August 31, 2006,
and there are no outstanding contracts as of March 31, 2007 or as of the date of this Form 10-Q.
Item 4. Controls and Procedures
As of the end of the period covered by this quarterly report on Form 10-Q, our chief financial
officer and chief executive officer have concluded, based on their evaluation, that our disclosure
controls and procedures (as defined in rule 13a-15(e) promulgated under the Securities Exchange Act
of 1934, as amended) 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 recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms.
There were no material changes to our system of internal controls over financial reporting or in
other factors that have materially affected or are reasonably likely to materially affect those
internal controls subsequent to the date of the most recent evaluation by our chief financial
officer and chief executive officer.
30
PART II. OTHER INFORMATION
Item 6. Exhibits
(a) The following exhibits are filed with this Form 10-Q:
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3.1
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Certificate of Incorporation of the Company (incorporated herein by reference to the
Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 1996). |
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3.2
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Certificate of Amendment to the Companys Certificate of Incorporation (incorporated
herein by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999). |
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3.3
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Amended and Restated Bylaws of the Company (incorporated herein by reference to
Exhibit 3.1 to the Companys Form 8-K filed on November 15, 2004). |
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31.1
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Officers certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2
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Officers certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1
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Officers certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2
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Officers certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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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.
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SUPERIOR ENERGY SERVICES, INC. |
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Date: May 9, 2007
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By:
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/s/ Robert S. Taylor |
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Robert S. Taylor |
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Executive Vice President, Treasurer and |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
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32
EXHIBIT INDEX
(a) The following exhibits are filed with this Form 10-Q:
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3.1
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Certificate of Incorporation of the Company (incorporated herein by reference to the
Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 1996). |
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3.2
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Certificate of Amendment to the Companys Certificate of Incorporation (incorporated
herein by reference to the Companys Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999). |
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3.3
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Amended and Restated Bylaws of the Company (incorporated herein by reference to
Exhibit 3.1 to the Companys Form 8-K filed on November 15, 2004). |
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31.1
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Officers certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2
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Officers certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1
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Officers certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2
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Officers certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |