(Source: Business Wire)
Allis-Chalmers Energy Inc. (NYSE:ALY) reported a net loss attributed to
common stockholders for the third quarter of 2009 of $10.3 million, or
$0.14 per diluted share, after preferred stock dividend, compared to net
income of $12.3 million, or $0.35 per diluted share in the third quarter
of 2008. Revenues for the third quarter of 2009 decreased 32.7% to
$120.0 million compared to $178.3 million for the third quarter of 2008.
Results for the third quarter of 2009 include $1.1 million of severance
payments and a $500,000 addition to the allowance for bad debts.
Allis-Chalmers reported a net loss attributed to common stockholders for
the first nine months of 2009 of $13.0 million, or $0.27 per diluted
share, after preferred stock dividend, compared to net income of $30.9
million, or $0.87 per diluted share for the first nine months of 2008.
Revenues for the first nine months of 2009 decreased 23.6% to $377.6
million compared to $494.6 million for the first nine months of 2008.
Results for the first nine months of 2009 include a pre-tax gain of
$26.4 million on debt extinguishment associated with the repurchase of
$74.8 million of senior notes in June 2009 and non-routine and
restructuring charges totaling $12.5 million. These charges include a
$4.1 million addition to the allowance for bad debts, $3.2 million in
restructuring charges consisting of severance payments and the closing
of certain yard locations, a $3.2 million non-cash loss on an asset
disposition and inventory writedowns and $2.0 million of customer
credits.
The decrease in revenues and net income in the third quarter and the
first nine months of 2009, as compared to the third quarter and the
first nine months of 2008, was due primarily to the drop in the U.S. rig
count, equipment utilization and pricing.
Adjusted EBITDA was $20.6 million for the third quarter of 2009,
compared to $48.3 million for the third quarter of 2008. For the first
nine months of 2009 Adjusted EBITDA was $67.8 million compared to $136.9
million for the first nine months of 2008. Adjusted EBITDA does not
include the $26.4 million pre-tax gain on debt extinguishment in the
second quarter of 2009 and certain non-routine and restructuring
charges. EBITDA and Adjusted EBITDA are non-GAAP financial measures that
are not necessarily comparable from one company to another. Additional
information and a reconciliation of GAAP net income to EBITDA and
Adjusted EBITDA are provided later in this release.
Weighted average shares of common stock outstanding on a diluted basis
increased to 70.9 million for the third quarter of 2009 compared to 35.6
million for the third quarter of 2008. For the nine month period ended
September 30, 2009, weighted average shares of common stock outstanding
on a diluted basis were 47.8 million compared to 35.5 million for the
first nine months of 2008.
Micki Hidayatallah, Allis-Chalmers' Chairman and Chief Executive Officer
stated, "Our revenues and operating results improved modestly in the
third quarter compared to the second quarter of 2009. Total revenues
increased in the quarter by $7.5 million, or 6.7%, compared to the
second quarter of 2009. Revenues for our Oilfield Services segment also
increased sequentially by $2.4 million, or 8.2%, compared to the second
quarter of this year. While the domestic pricing environment remains
very competitive, we have seen a slight increase in utilization in our
Oilfield Services segment and are realizing the benefits from our cost
reduction measures. With the stabilization of the U.S. rig count and the
financial markets we have begun to see the benefits of our strategy to:
(1) redeploy assets and resources to the areas with the highest
utilization rates and greatest growth potential such as the Haynesville,
Marcellus and Eagle Ford shales; (2) increase market share and diversify
our customer base through our new account management system and our
emphasis on high technology products and services; and (3) reduce our
workforce and close or scale back certain satellite locations. As
opportunities arise, we are also redeploying idle Rental and Oilfield
Services assets to Brazil, Columbia, Mexico and the Middle East."
Mr. Hidayatallah continued, "Our Drilling and Completion segment with
operations in Argentina, Brazil and Bolivia has shown an improvement in
day rates and revenues. Revenues for this segment increased in the
quarter by $8.5 million, or 12.5%, compared to the second quarter of
2009. While we were successful during the quarter in increasing prices,
it has been difficult to recoup rapidly increasing wages and other costs
in their entirety in Argentina. In October, we relocated two drilling
rigs from Argentina to Brazil where our operations have performed above
expectations. In December, we expect to mobilize a 3000hp drilling rig
from Argentina to begin a contract in Bolivia. In an effort to reduce
our costs and redeploy equipment elsewhere from Argentina we have
reduced our workforce by approximately 100 people and incurred severance
costs of $1.4 million over the past nine months."
Segment Results for Third Quarter 2009
Oilfield Services. Revenues for our Oilfield Services segment
were $31.9 million for the three months ended September 30, 2009; a
decrease of 56.5% compared to $73.4 million in revenues for the three
months ended September 30, 2008. Income from operations decreased
$18.0 million and resulted in a loss from operations of $4.2 million
in the third quarter of 2009 compared to income from operations of
$13.8 million in the third quarter of 2008. Our Oilfield Services
segment revenues and operating income for the third quarter of 2009
decreased compared to the third quarter of 2008 due to weak market
conditions that resulted in reduced demand for our services and a
significant deterioration in the pricing for our services.
Depreciation and amortization expense for the Oilfield Services
segment increased by $2.0 million or 32.4% in the third quarter of
2009 compared to the third quarter of the previous year, due to
capital expenditures completed during 2008, including six coiled
tubing units delivered in the last half of 2008. We have not realized
the benefits of these capital expenditures due to decreased
utilization and pricing of our equipment as a result of the decline in
U.S. drilling activity.
Drilling and Completion. Revenues for the quarter ended
September 30, 2009 for the Drilling and Completion segment were $76.3
million compared to $77.8 million in revenues for the quarter ended
September 30, 2008. Income from operations decreased to $5.5 million
in the third quarter of 2009 compared to $11.3 million in the third
quarter of 2008. This reduction was due to: (1) reduced rig
utilization and rig rates in Argentina; (2) increased labor and other
costs in Argentina; (3) an increase of $1.8 million, or 47.4%, in
depreciation and amortization; and (4) $1.1 million of severance costs
during the three months ended September 30, 2009 related to workforce
reductions in Argentina as a result of lower activity. The increase in
depreciation and amortization expense was the result of the addition
of new rigs in Argentina and the acquisition of BCH in Brazil. Our
Drilling and Completion segment revenues for the third quarter of 2009
included $11.0 million of revenue generated from the acquisition of
BCH at the end of 2008.
Rental Services. Revenues for the quarter ended September 30,
2009 for the Rental Services segment were $11.8 million, a decrease
from $27.1 million in revenues for the quarter ended September 30,
2008. Income from operations decreased to a $1.2 million operating
loss in the third quarter of 2009 compared to $8.5 million operating
income in the third quarter of 2008. Our Rental Services segment
revenues and operating income for the third quarter of 2009 decreased
compared to the prior year primarily due to the decrease in
utilization of our rental equipment and a more competitive pricing
environment due to a decrease in drilling activity in the U.S. In
addition, depreciation and amortization expense for our Rental
Services segment increased $582,000, or 8.7%, in the third quarter of
2009 compared to the third quarter of 2008 due to capital expenditures
made during 2008.
Conference Call
Allis-Chalmers has scheduled a conference call to be held on Tuesday,
November 3, 2009 at 10:00 am Eastern time, 9:00 am Central time. The
call will be web cast live on the Internet through the Investor
Relations page on the Allis-Chalmers' website. To participate by
telephone, call (888) 771-4350 domestically or (847) 585-4343
internationally ten minutes prior to the start time. The confirmation
number is 25702911. Participants may pre-register for the call at the
following link and will be issued a new phone number and a PIN number to
use when dialing into the live call which will provide quick access to
the conference by bypassing the operator upon connection.
http://web.meetme.net/r.aspx?p=1&a=70542570291157
A telephonic replay will be available through November 10, 2009 and may
be accessed by calling (888) 843-8996 domestically or (630) 652-3044
internationally, and using the passcode 6022024. The call will be
available for replay through Allis-Chalmers' website.
About Allis-Chalmers
Allis-Chalmers Energy Inc. is a Houston-based multi-faceted oilfield
services company. Allis-Chalmers provides services and equipment to oil
and natural gas exploration and production companies, domestically
primarily in Texas, Louisiana, New Mexico, Oklahoma, Arkansas, offshore
in the Gulf of Mexico, and internationally, primarily in Argentina,
Brazil and Mexico. Allis-Chalmers provides directional drilling
services, casing and tubing services, underbalanced drilling, production
and workover services with coiled tubing units, rental of drill pipe and
blow-out prevention equipment, and international drilling and workover
services. For more information, visit our website at http://www.alchenergy.com
or request future press releases via email at http://www.b2i.us/irpass.asp?BzID=1233&to=ea&s=0.
Forward-Looking Statements
This press release contains forward-looking statements (within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934) regarding Allis-Chalmers' business,
financial condition, results of operations and prospects. Words such as
expects, anticipates, intends, plans, believes, seeks, estimates and
similar expressions or variations of such words are intended to identify
forward-looking statements, but are not the exclusive means of
identifying forward-looking statements in this press release.
Although forward-looking statements in this press release reflect the
good faith judgment of our management, such statements can only be based
on facts and factors that our management currently knows. Consequently,
forward-looking statements are inherently subject to risks and
uncertainties, and actual results and outcomes may differ materially
from the results and outcomes discussed in the forward-looking
statements. Factors that could cause or contribute to such differences
in results and outcomes include, but are not limited to, demand for oil
and natural gas drilling services in the areas and markets in which
Allis-Chalmers operates, competition, obsolescence of products and
services, the ability to obtain financing to support operations,
environmental and other casualty risks, and the effect of government
regulation.
Further information about the risks and uncertainties that may affect
our business are set forth in our most recent filings on Form 10-K
(including without limitation in the "Risk Factors" section) and in our
other SEC filings and publicly available documents. We urge readers not
to place undue reliance on these forward-looking statements, which speak
only as of the date of this press release. Allis-Chalmers undertakes no
obligation to revise or update any forward-looking statements in order
to reflect any event or circumstance that may arise after the date of
this press release.
Use of EBITDA and Adjusted EBITDA &
Regulation G Reconciliation
This press release contains references to EBITDA, a non-GAAP financial
measure that complies with federal securities regulations when it is
defined as net income (the most directly comparable GAAP financial
measure) before interest, taxes, depreciation and amortization.
Allis-Chalmers defines EBITDA accordingly for the purposes of this press
release. We also utilize Adjusted EBITDA as a supplemental financial
measurement in the evaluation of our business. We have defined Adjusted
EBITDA for the purposes of this press release to mean EBITDA plus stock
compensation expense. However, EBITDA and Adjusted EBITDA, as used and
defined by Allis-Chalmers, may not be comparable to similarly titled
measures employed by other companies and is not a measure of performance
calculated in accordance with GAAP. Neither EBITDA nor Adjusted EBITDA
should be considered in isolation or as a substitute for operating
income, net income or loss, cash flows provided by operating, investing
and financing activities, or other Income or cash flow statement data
prepared in accordance with GAAP. However, we believe EBITDA and
Adjusted EBITDA are useful to an investor in evaluating our operating
performance because these measures:
are widely used by investors in the energy industry to measure a
company's operating performance without regard to the items excluded
from EBITDA, which can vary substantially from company to company
depending upon accounting methods and book value of assets, capital
structure and the method by which assets were acquired, among other
factors;
help investors to more meaningfully evaluate and compare the results
of our operations from period to period by removing the effect of our
capital structure and asset base from our operating results; and
are used by our management for various purposes, including as a
measure of operating performance, in presentations to our board of
directors, as a basis for strategic planning and forecasting, as a
component for setting incentive compensation, and to assess compliance
in financial ratios.
There are significant limitations to using EBITDA and Adjusted EBITDA as
a measure of performance, including the inability to analyze the effect
of recurring and non-recurring items that are excluded from EBITDA and
materially affect net income or loss, results of operations, and the
lack of compatibility of the results of operations of different
companies. Reconciliations of these financial measures to net income,
the most directly comparable GAAP financial measure, are provided in the
table below.
Reconciliation of EBITDA and Adjusted EBITDA to GAAP Net Income ($ in millions)
For the ThreeMonths EndedSeptember 30, For the NineMonths EndedSeptember 30,
2009 2008 2009 2008
Net income (9.7 ) 12.3 (12.3 ) 30.9
Depreciation and amortization 20.9 16.7 61.8 48.5
Interest expense, net 10.7 10.7 37.4 32.1
Income taxes (4.1 ) 6.1 (6.8 ) 17.9
EBITDA $ 17.8 $ 45.8 $ 80.1 $ 129.4
Stock compensation expense (non-cash) 1.2 1.8 3.6 6.2
Non-cash asset gains and losses (1) - (0.2 ) (23.2 ) (0.2 )
Increase to allowance for bad debts 0.5 0.9 4.1 1.5
Severance and restructure expenses 1.1 - 3.2 -
Adjusted EBITDA $ 20.6 $ 48.3 $ 67.8 $ 136.9
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(1) Includes gain on debt extinguishment of $26.4 million net of $3.2
million loss on asset disposition and inventory writedown in the first
six months of 2009.
ALLIS-CHALMERS ENERGY INCCONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS(in thousands, except per share amounts)(unaudited)
For the Three Months EndedSeptember 30, For the Nine Months EndedSeptember 30,
2009 2008 2009 2008
Revenues $ 120,016 $ 178,265 $ 377,624 $ 494,582
Operating cost and expenses
Direct costs 90,763 116,921 281,136 319,761
Depreciation and amortization 20,893 16,628 61,819 48,542
Selling, general and administrative expense 11,430 15,849 40,595 46,162
Loss (gain) on asset dispositions - (166 ) 1,916 (166 )
Total operating costs and expenses 123,086 149,232 385,466 414,299
Income (loss) from operations (3,070 ) 29,033 (7,842 ) 80,283
Other income (expense)
Interest expense (10,764 ) (12,166 ) (37,492 ) (36,243 )
Interest income 39 1,457 53 4,147
Gain on debt extinguishment - - 26,365 -
Other 37 115 (231 ) 591
Total other income (expense) (10,688 ) (10,594 ) (11,305 ) (31,505 )
Net income (loss) before income taxes (13,758 ) 18,439 (19,147 ) 48,778
Income benefit (expense) 4,108 (6,127 ) 6,802 (17,858 )
Net income (loss) (9,650 ) 12,312 (12,345 ) 30,920
Preferred stock dividend (630 ) - (665 ) -
Net income (loss) attributed to common stockholders $ (10,280 ) $ 12,312 $ (13,010 ) $ 30,920
Net income (loss) per common share:
Basic $ (0.14 ) $ 0.35 $ (0.27 ) $ 0.88
Diluted $ (0.14 ) $ 0.35 $ (0.27 ) $ 0.87
Weighted average shares outstanding:
Basic 70,945 35,156 47,834 35,004
Diluted 70,945 35,551 47,834 35,455
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ALLIS-CHALMERS ENERGY INC.CONSOLIDATED CONDENSED BALANCE SHEETS(in thousands)
September 30,2009 December 31,2008
(unaudited)
ASSETS
Cash and cash equivalents $ 41,635 $ 6,866
Trade receivables, net 94,335 157,871
Inventories 35,197 39,087
Deferred income tax asset 4,839 6,176
Prepaid expenses and other 15,137 15,238
Total current assets 191,143 225,238
Property and equipment, net 756,211 760,990
Goodwill 41,982 43,273
Other intangible assets, net 33,813 37,371
Debt issuance costs, net 10,071 12,664
Deferred income tax asset 16,284 3,993
Other assets 26,965 31,522
Total assets $ 1,076,469 $ 1,115,051
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt $ 16,710 $ 14,617
Trade accounts payable 33,392 62,078
Accrued salaries, benefits and payroll taxes 21,420 20,192
Accrued interest 6,144 18,623
Accrued expenses 16,264 26,642
Total current liabilities 93,930 142,152
Deferred income tax liability 8,113 8,253
Long-term debt, net of current maturities 478,739 579,044
Other long-term liabilities 1,357 2,193
Total liabilities 582,139 731,642
Commitments and Contingencies
Stockholders' Equity
Preferred stock 34,183 -
Common stock 714 357
Capital in excess of par value 424,024 334,633
Retained earnings 35,409 48,419
Total stockholders' equity 494,330 383,409
Total liabilities and stockholders' equity $ 1,076,469 $ 1,115,051
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ALLIS-CHALMERS ENERGY INC.SEGMENT INFORMATION(Unaudited)
For the Three Months EndedSeptember 30, For the Nine Months EndedSeptember 30,
2009 2008 2009 2008
Revenue
Oilfield Services $ 31,904 $ 73,390 $ 105,827 $ 209,946
Drilling and Completion 76,299 77,761 223,237 210,640
Rental Services 11,813 27,114 48,560 73,996
$ 120,016 $ 178,265 $ 377,624 $ 494,582
Operating income (loss)
Oilfield Services $ (4,211 ) $ 13,831 $ (15,701 ) $ 40,218
Drilling and Completion 5,508 11,337 14,420 29,596
Rental Services (1,218 ) 8,545 3,318 24,033
General corporate (3,149 ) (4,680 ) (9,879 ) (13,564 )
$ (3,070 ) $ 29,033 $ (7,842 ) $ 80,283
Depreciation and amortization
Oilfield Services $ 8,077 $ 6,101 $ 22,825 $ 17,692
Drilling and Completion 5,462 3,706 16,182 10,283
Rental Services 7,281 6,699 22,580 20,163
General corporate 73 122 232 404
$ 20,893 $ 16,628 $ 61,819 $ 48,542
Capital expenditures
Oilfield Services $ 1,348 $ 11,782 $ 9,408 $ 35,599
Drilling and Completion 7,067 25,782 50,775 65,476
Rental Services 851 5,594 7,042 16,700
General corporate 7 14 41 60
$ 9,273 $ 43,172 $ 67,266 $ 117,835
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