10-Q 1 spn-20180630x10q.htm 10-Q spn-20180630 10Q Q2_Taxonomy2018

      

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





 

 



 

 



FORM 10-Q

 



 

 



(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended June 30, 2018



or



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. 001-34037



 

 



 

 



SUPERIOR ENERGY SERVICES, INC.



(Exact name of registrant as specified in its charter)



 

 



 

 







 

 

 

 



Delaware

 

75-2379388

 



(State or other jurisdiction of

 

(I.R.S. Employer

 



incorporation or organization)

 

Identification No.)

 



 

 

 

 



1001 Louisiana Street, Suite 2900

 

77002

 



Houston, TX

 

(Zip Code)

 



(Address of principal executive offices)

 

 

 



Registrant’s telephone number, including area code: (713) 654-2200



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   No



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.





 

 

Large accelerated filer   

 

Accelerated filer                            

Non-accelerated filer     

(Do not check if a smaller reporting company)

Smaller reporting company           



 

Emerging growth company           



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No  



The number of shares of the registrant’s common stock outstanding on July 20, 2018 was 154,525,627.



 

 

 


 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q for

the Quarterly Period Ended June 30, 2018



TABLE OF CONTENTS





 

 



 

 



 

Page

PART I.

FINANCIAL INFORMATION

 



 

 

Item 1.

Condensed Consolidated Financial Statements and Notes

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations 

23 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

28 

Item 4.

Controls and Procedures

29 



 

 

PART II.

OTHER INFORMATION

 



 

 

Item 1

Legal Proceedings

30 

Item 1A.

Risk Factors

30 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30 

Item 6.

Exhibits

30 

 



2

 


 

   PART I.  FINANCIAL INFORMATION



Item 1. Financial Statements





 

 

 

 

 



 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

June 30, 2018 and December 31, 2017

(in thousands, except share data)

(unaudited)



6/30/2018

 

12/31/2017

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

118,512 

 

$

172,000 

Accounts receivable, net of allowance for doubtful accounts of $19,534 and

 

 

 

 

 

$29,037 at June 30, 2018 and December 31, 2017, respectively

 

441,983 

 

 

398,056 

Income taxes receivable

 

 -

 

 

959 

Prepaid expenses

 

43,188 

 

 

42,128 

Inventory and other current assets

 

158,765 

 

 

134,032 

Assets held for sale

 

 -

 

 

13,644 

Total current assets

 

762,448 

 

 

760,819 

Property, plant and equipment, net of accumulated depreciation and depletion of
$2,848,297 and $2,736,620 at June 30, 2018 and December 31, 2017, respectively

 

1,240,703 

 

 

1,316,944 

Goodwill

 

806,813 

 

 

807,860 

Notes receivable

 

62,041 

 

 

60,149 

Restricted cash

 

11,631 

 

 

20,483 

Intangible and other long-term assets, net of accumulated amortization of $89,561
and $83,359 at June 30, 2018 and December 31, 2017, respectively

 

137,349 

 

 

143,970 

Total assets

$

3,020,985 

 

$

3,110,225 



 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

162,125 

 

$

119,716 

Accrued expenses

 

201,665 

 

 

221,757 

Current portion of decommissioning liabilities

 

24,156 

 

 

27,261 

Liabilities held for sale

 

 -

 

 

6,463 

Total current liabilities

 

387,946 

 

 

375,197 



 

 

 

 

 

Deferred income taxes

 

41,758 

 

 

61,058 

Decommissioning liabilities

 

103,088 

 

 

103,136 

Long-term debt, net

 

1,281,145 

 

 

1,279,771 

Other long-term liabilities

 

154,333 

 

 

158,634 



 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock of $0.01 par value.  Authorized - 5,000,000 shares; none issued

 

 -

 

 

 -

Common stock of $0.001 par value

 

 

 

 

 

Authorized - 250,000,000, Issued and Outstanding - 154,525,627 at June 30, 2018
Authorized - 250,000,000, Issued and Outstanding - 153,263,097 at December 31, 2017

 

155 

 

 

153 

Additional paid in capital

 

2,722,224 

 

 

2,713,161 

Accumulated other comprehensive loss, net

 

(70,092)

 

 

(67,427)

Retained deficit

 

(1,599,572)

 

 

(1,513,458)

Total stockholders’ equity

 

1,052,715 

 

 

1,132,429 

Total liabilities and stockholders’ equity

$

3,020,985 

 

$

3,110,225 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

 

 

 

 



3

 


 













 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

Three and Six Months Ended June 30, 2018 and 2017

(in thousands, except per share data)

(unaudited)



Three Months

 

Six Months



2018

 

2017

 

2018

 

2017

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Services

$

446,812 

 

$

404,131 

 

$

846,580 

 

$

738,581 

Rentals

 

88,736 

 

 

65,937 

 

 

171,286 

 

 

132,423 

Total revenues

 

535,548 

 

 

470,068 

 

 

1,017,866 

 

 

871,004 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of services (exclusive of depreciation, depletion, amortization and accretion)

 

333,126 

 

 

322,795 

 

 

644,265 

 

 

619,229 

Cost of rentals (exclusive of depreciation, depletion, amortization and accretion)

 

36,684 

 

 

29,007 

 

 

69,005 

 

 

54,559 

Depreciation, depletion, amortization and accretion - services

 

81,740 

 

 

92,953 

 

 

169,487 

 

 

188,283 

Depreciation, depletion, amortization and accretion - rentals

 

16,233 

 

 

15,166 

 

 

34,205 

 

 

34,117 

General and administrative expenses

 

69,896 

 

 

76,708 

 

 

145,716 

 

 

152,201 

Loss from operations

 

(2,131)

 

 

(66,561)

 

 

(44,812)

 

 

(177,385)



 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(24,894)

 

 

(23,333)

 

 

(49,781)

 

 

(47,583)

Other income (expense)

 

(2,382)

 

 

(2,156)

 

 

(4,117)

 

 

(1,507)

Loss from continuing operations before income taxes

 

(29,407)

 

 

(92,050)

 

 

(98,710)

 

 

(226,475)

Income taxes

 

(3,970)

 

 

(30,011)

 

 

(13,325)

 

 

(74,775)

Net loss from continuing operations

 

(25,437)

 

 

(62,039)

 

 

(85,385)

 

 

(151,700)

Loss from discontinued operations, net of income tax

 

(953)

 

 

(1,767)

 

 

(729)

 

 

(3,765)

Net loss

$

(26,390)

 

$

(63,806)

 

$

(86,114)

 

$

(155,465)



 

 

 

 

 

 

 

 

 

 

 

Loss per share information:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

$

(0.16)

 

$

(0.41)

 

$

(0.56)

 

$

(1.00)

Loss from discontinued operations

 

(0.01)

 

 

(0.01)

 

 

 -

 

 

(0.02)

Net loss

$

(0.17)

 

$

(0.42)

 

$

(0.56)

 

$

(1.02)



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares used in computing loss per share:

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

154,278 

 

 

152,857 

 

 

153,728 

 

 

152,317 

 









 

 

 

 

 

 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

Three and Six Months Ended June 30, 2018 and 2017

(in thousands)

(unaudited)



Three Months

 

Six Months



2018

 

2017

 

2018

 

2017

Net loss

$

(26,390)

 

$

(63,806)

 

$

(86,114)

 

$

(155,465)

Change in cumulative translation adjustment, net of tax

 

(7,053)

 

 

6,022 

 

 

(2,665)

 

 

7,746 

Comprehensive loss

$

(33,443)

 

$

(57,784)

 

$

(88,779)

 

$

(147,719)



 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

4

 


 





 

 

 

 

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2018 and 2017

(in thousands)

(unaudited)





 

2018

 

2017

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(86,114)

 

$

(155,465)

Adjustments to reconcile net loss to net cash provided by operating
  activities:

 

 

 

   

 

 

Depreciation, depletion, amortization and accretion

 

 

203,692 

 

 

222,400 

Deferred income taxes

 

 

(19,300)

 

 

(61,322)

Stock based compensation expense

 

 

16,552 

 

 

20,027 

Other reconciling items, net

 

 

(2,595)

 

 

(1,603)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(44,415)

 

 

(89,324)

Inventory and other current assets

 

 

(24,854)

 

 

(10,192)

Accounts payable

 

 

32,852 

 

 

26,499 

Accrued expenses

 

 

(35,729)

 

 

(11,202)

Income taxes

 

 

1,255 

 

 

98,561 

Other, net

 

 

(1,929)

 

 

(21,232)

Net cash provided by operating activities

 

 

39,415 

 

 

17,147 



 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Payments for capital expenditures

 

 

(119,841)

 

 

(56,649)

Proceeds from sales of assets

 

 

23,297 

 

 

4,090 

Net cash used in investing activities

 

 

(96,544)

 

 

(52,559)



 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Tax withholdings for vested restricted stock units

 

 

(5,183)

 

 

(8,298)

Other

 

 

1,283 

 

 

1,324 

Net cash used in financing activities

 

 

(3,900)

 

 

(6,974)

Effect of exchange rate changes on cash

 

 

(1,311)

 

 

2,093 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(62,340)

 

 

(40,293)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

192,483 

 

   

246,092 

Cash, cash equivalents, and restricted cash at end of period

 

$

130,143 

 

$

205,799 



 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

5

 


 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Six Months Ended June 30, 2018

(1)Basis of Presentation



Certain information and footnote disclosures normally in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC); however, management believes the disclosures that are made are adequate to make the information presented not misleading.  These financial statements and notes 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, 2017, and Management’s Discussion and Analysis of Financial Condition and Results of Operations herein.



The financial information of Superior Energy Services, Inc. and its subsidiaries (the Company) for the three and six months ended June 30, 2018 and 2017 has not been audited.  However, in the opinion of management, all adjustments necessary to present fairly the results of operations for the periods presented have been included therein.  Certain previously reported amounts have been reclassified to conform to the 2018 presentation.  The results of operations for the first six months of the year are not necessarily indicative of the results of operations that might be expected for the entire year. 



Due to the nature of the Company’s business, the Company is involved, from time to time, in routine litigation or subject to disputes or claims regarding its business activities. Legal costs related to these matters are expensed as incurred.  In management’s opinion, none of the pending litigation, disputes or claims is expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.



The Company evaluates events that occur after the balance sheet date but before the financial statements are issued for potential recognition or disclosure.  Based on the evaluation, the Company determined that there were no material subsequent events for recognition or disclosure.

 

(2)Revenue



Adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers



Effective January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  The Company adopted this ASU using the modified retrospective adoption method.  There was no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.



Revenue Recognition



Revenues are recognized when performance obligations are satisfied in accordance with contractual terms, in an amount that reflects the consideration the Company expects to be entitled to in exchange for services rendered or rentals provided.  Taxes collected from customers and remitted to governmental authorities and revenues are reported on a net basis in the Company’s financial statements.



Performance Obligations



A performance obligation arises under contracts with customers to render services or provide rentals, and is the unit of account under Topic 606.  The Company accounts for services rendered and rentals provided separately if they are distinct and the service or rental is separately identifiable from other items provided to a customer and if a customer can benefit from the services rendered or rentals provided on its own or with other resources that are readily available to the customer.  A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.  A contract’s standalone selling prices are determined based on the prices that the Company charges for its services rendered and rentals provided.  The majority of the Company’s performance obligations are satisfied over time, which is generally represented by a period of 30 days or less.  The Company’s payment terms vary by the type of products or services offered.  The term between invoicing and when the payment is due is typically 30 days.



Services revenue primarily represents amounts charged to customers for the completion of services rendered, including labor, products and supplies necessary to perform the service.  Rates for these services vary depending on the type of services provided and can be based on a per job, per hour or per day basis.



Rentals revenue is, primarily priced on a per day, per man hour or similar basis and consists of fees charged to customers for use of the Company’s rental equipment over the term of the rental period, which is generally less than twelve months.



The Company expenses sales commissions when incurred because the amortization period would have been one year or less.



6

 


 

Disaggregation of revenue



The following table presents the Company’s revenues by segment disaggregated by geography (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



Three Months Ended June 30,

 

Six Months Ended June 30,

 



 

2018

 

 

2017

 

 

2018

 

 

2017

 

U.S. land

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

43,394 

 

$

27,770 

 

$

84,111 

 

$

48,932 

 

    Onshore Completion and Workover Services

 

276,242 

 

 

249,079 

 

 

507,731 

 

 

454,058 

 

    Production Services

 

47,944 

 

 

33,062 

 

 

100,401 

 

 

56,497 

 

    Technical Solutions

 

7,858 

 

 

7,921 

 

 

14,691 

 

 

17,006 

 

Total U.S. land

$

375,438 

 

$

317,832 

 

$

706,934 

 

$

576,493 

 



 

 

 

 

 

 

 

 

 

 

 

 

Gulf of Mexico

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

23,261 

 

$

22,266 

 

$

44,250 

 

$

45,751 

 

    Onshore Completion and Workover Services

 

 -

 

 

 -

 

 

 -

 

 

 -

 

    Production Services

 

13,634 

 

 

19,937 

 

 

31,134 

 

 

37,683 

 

    Technical Solutions

 

35,333 

 

 

42,030 

 

 

72,895 

 

 

75,747 

 

Total Gulf of Mexico

$

72,228 

 

$

84,233 

 

$

148,279 

 

$

159,181 

 



 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

27,378 

 

$

18,791 

 

$

50,874 

 

$

42,575 

 

    Onshore Completion and Workover Services

 

 -

 

 

 -

 

 

 -

 

 

 -

 

    Production Services

 

40,426 

 

 

35,607 

 

 

71,186 

 

 

63,031 

 

    Technical Solutions

 

20,078 

 

 

13,605 

 

 

40,593 

 

 

29,724 

 

Total International

$

87,882 

 

$

68,003 

 

$

162,653 

 

$

135,330 

 

Total Revenues

$

535,548 

 

$

470,068 

 

$

1,017,866 

 

$

871,004 

 



 

 

 

 

 

 

 

 

 

 

 

 





The following table presents the Company’s revenues by segment disaggregated by type (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



Three Months Ended June 30,

 

Six Months Ended June 30,

 



 

2018

 

 

2017

 

 

2018

 

 

2017

 

Services

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

27,461 

 

$

19,629 

 

$

51,466 

 

$

36,500 

 

    Onshore Completion and Workover Services

 

266,071 

 

 

240,461 

 

 

487,418 

 

 

439,907 

 

    Production Services

 

93,678 

 

 

82,575 

 

 

188,292 

 

 

145,857 

 

    Technical Solutions

 

59,602 

 

 

61,466 

 

 

119,404 

 

 

116,317 

 

Total services

$

446,812 

 

$

404,131 

 

$

846,580 

 

$

738,581 

 



 

 

 

 

 

 

 

 

 

 

 

 

Rentals

 

 

 

 

 

 

 

 

 

 

 

 

    Drilling Products and Services

$

66,572 

 

$

49,198 

 

$

127,769 

 

$

100,758 

 

    Onshore Completion and Workover Services

 

10,171 

 

 

8,618 

 

 

20,313 

 

 

14,151 

 

    Production Services

 

8,326 

 

 

6,031 

 

 

14,429 

 

 

11,354 

 

    Technical Solutions

 

3,667 

 

 

2,090 

 

 

8,775 

 

 

6,160 

 

Total rentals

$

88,736 

 

$

65,937 

 

$

171,286 

 

$

132,423 

 

Total Revenues

$

535,548 

 

$

470,068 

 

$

1,017,866 

 

$

871,004 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

7

 


 

(3)Inventory



Inventories are stated at the lower of cost or net realizable value.  The Company applies net realizable value and obsolescence to the gross value of the inventory.  Cost is determined using the first-in, first-out or weighted-average cost methods for finished goods and work-in-process.  Supplies and consumables primarily consist of products used in our services provided to customers.  The components of the inventory balances are as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

June 30, 2018

 

December 31, 2017

Finished goods

 

$

72,884 

 

$

61,764 

Raw materials

 

 

14,955 

 

 

13,727 

Work-in-process

 

 

10,051 

 

 

6,174 

Supplies and consumables

 

 

26,309 

 

 

24,923 

Total

 

$

124,199 

 

$

106,588 



 

 

 

 

 

 

 

(4)Notes Receivable



Notes receivable consist of a commitment from the seller of an oil and gas property acquired by the Company related to costs associated with the abandonment of the acquired property.  Pursuant to an agreement with the seller, the Company will invoice the seller an agreed upon amount at the completion of certain decommissioning activities.  The gross amount of this obligation totals $115.0 million and is recorded at present value using an effective interest rate of 6.58%.  The related discount is amortized to interest income based on the expected timing of completion of the decommissioning activities.  The Company recorded interest income related to notes receivable of $1.9  million and $1.7 million for the six months ended June 30, 2018 and 2017, respectively.

 



(5)Decommissioning Liabilities



The Company’s decommissioning liabilities associated with an oil and gas property and its related assets consist of costs related to the plugging of wells, the removal of the related platform and equipment, and site restoration.  The Company reviews the adequacy of its decommissioning liabilities whenever indicators suggest that the estimated cash flows needed to satisfy the liabilities have changed materially.  The Company had decommissioning liabilities of $127.2 million and $130.4 million at June 30, 2018 and December 31, 2017, respectively.

 

(6)Debt



The Company’s outstanding debt is as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

June 30, 2018

 

December 31, 2017



 

Long-term

 

Long-term

Senior unsecured notes due September 2024

 

$

500,000 

 

$

500,000 

Senior unsecured notes due December 2021

 

 

800,000 

 

 

800,000 

Total debt, gross

 

 

1,300,000 

 

 

1,300,000 

Unamortized debt issuance costs

 

 

(18,855)

 

 

(20,229)

Total debt, net

 

$

1,281,145 

 

$

1,279,771 



Credit Facility



The Company has a $300 million asset-based revolving credit facility which matures in October 2022.  The borrowing base under the credit facility is calculated based on a formula referencing the borrower’s and the subsidiary guarantors’ eligible accounts receivable, eligible inventory and eligible premium rental drill pipe less reserves.  Availability under the credit facility is the lesser of (i) the commitments, (ii) the borrowing base and (iii) the highest principal amount permitted to be secured under the indenture governing the 7 1/8% senior unsecured notes due 2021.  At June 30, 2018, the borrowing base was $263.0 million and the Company had $37.9  million of letters of credit outstanding that reduced its borrowing availability under the revolving credit facility.  The credit agreement contains various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, merger, consolidations, dispositions of assets and other provisions customary in similar types of agreements.

   

8

 


 

Senior Unsecured Notes



The Company has outstanding $500 million of 7 3/4% senior unsecured notes due September 2024.  The indenture governing the 7 3/4% senior unsecured notes due 2024 requires semi-annual interest payments on March 15th and September 15th of each year, beginning on March 15, 2018, through the maturity date of September 15, 2024.



The Company also has outstanding $800 million of 7 1/8% senior unsecured notes due December 2021.  The indenture governing the 7 1/8% senior unsecured notes due 2021 requires semi-annual interest payments on June 15th and December 15th of each year through the maturity date of December 15, 2021. 

 

(7)  Fair Value Measurements



Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Inputs used in determining fair value are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable.  The three input levels of the fair value hierarchy are as follows.  



Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.



Level 2: Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical assets or liabilities in inactive markets; or model-derived valuations or other inputs that can be corroborated by observable market data.



Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.



The following tables provide a summary of the financial assets and liabilities measured at fair value on a recurring basis (in thousands):



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 



 

Fair Value at June 30, 2018



 

Level 1

 

Level 2

 

Level 3

 

Total

Intangible and other long-term assets, net

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation assets

 

$

373 

 

$

13,904 

 

$

 -

 

$

14,277 

Accounts payable

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

 -

 

$

1,163 

 

$

 -

 

$

1,163 

Other long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

 -

 

$

21,081 

 

$

 -

 

$

21,081 



 

 

 

 

 

 

 

 

 

 

 

 



 

Fair Value at December 31, 2017



 

Level 1

 

Level 2

 

Level 3

 

Total

Intangible and other long-term assets, net

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation assets

 

$

370 

 

$

13,817 

 

$

 -

 

$

14,187 

Accounts payable

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

 -

 

$

1,253 

 

$

 -

 

$

1,253 

Other long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified deferred compensation liabilities

 

$

 -

 

$

21,085 

 

$

 -

 

$

21,085 



 

 

 

 

 

 

 

 

 

 

 

 

The Company’s non-qualified deferred compensation plans allow officers, certain highly compensated employees and non-employee directors to defer receipt of a portion of their compensation and contribute such amounts to one or more hypothetical investment funds.  These investments are reported at fair value based on unadjusted quoted prices in active markets for identifiable assets and observable inputs for similar assets and liabilities, which represent Levels 1 and 2, respectively, in the fair value hierarchy. 



The fair value of the Company’s cash equivalents and accounts receivable approximates their carrying amounts.  The fair value of the Company’s long-term debt was approximately $1,321.0  million and $1,347.0 million as of June 30, 2018 and December 31, 2017, respectively.  The fair value of these debt instruments is determined by reference to the market value of the instruments as quoted in over-the-counter markets, which are Level 1 inputs.

 

9

 


 

(8)  Segment Information



Business Segments



The Drilling Products and Services segment rents and sells premium drill pipe, bottom hole assemblies, tubulars and specialized equipment for use with onshore and offshore oil and gas well drilling, completion, production and workover activities.  It also provides on-site accommodations and machining services.  The Onshore Completion and Workover Services segment provides pressure pumping services used to complete and stimulate production in new oil and gas wells, fluid handling services and well servicing rigs that provide a variety of well completion, workover and maintenance services.  The Production Services segment provides intervention services such as coiled tubing, cased hole and mechanical wireline, hydraulic workover and snubbing, production testing and optimization, and remedial pumping services.  The Technical Solutions segment provides services typically requiring specialized engineering, manufacturing or project planning, including well control services, stimulation and sand control services and well plug and abandonment services. It also includes production and sale of oil and gas. 



The Company evaluates the performance of its reportable segments based on income or loss from operations excluding allocated corporate expenses.  The segment measure is calculated as follows: segment revenues less segment operating expenses, depreciation, depletion, amortization and accretion expense and reduction in value of assets.  The Company uses this segment measure to evaluate its reportable segments because it is the measure that is most consistent with how the Company organizes and manages its business operations.  Corporate and other costs primarily include expenses related to support functions, salaries and benefits for corporate employees and stock-based compensation expense.



Summarized financial information for the Company’s segments is as follows (in thousands): 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

Corporate and

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Other

 

Total

Revenues

 

$

94,033 

 

$

276,242 

 

$

102,004 

 

$

63,269 

 

$

 -

 

$

535,548 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

36,599 

 

 

210,206 

 

 

85,129 

 

 

37,876 

 

 

 -

 

 

369,810 

Depreciation, depletion, amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  and accretion

 

 

28,590 

 

 

47,423 

 

 

14,303 

 

 

6,273 

 

 

1,384 

 

 

97,973 

General and administrative expenses

 

 

13,843 

 

 

11,102 

 

 

9,696 

 

 

13,323 

 

 

21,932 

 

 

69,896 

Income (loss) from operations

 

 

15,001 

 

 

7,511 

 

 

(7,124)

 

 

5,797 

 

 

(23,316)

 

 

(2,131)

Interest income (expense), net

 

 

 -

 

 

 -

 

 

 -

 

 

971 

 

 

(25,865)

 

 

(24,894)

Other expense

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(2,382)

 

 

(2,382)

Income (loss) from continuing operations 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  before income taxes

 

$

15,001 

 

$

7,511 

 

$

(7,124)

 

$

6,768 

 

$

(51,563)

 

$

(29,407)



10

 


 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

Corporate and

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Other

 

Total

Revenues

 

$

68,827 

 

$

249,079 

 

$

88,606 

 

$

63,556 

 

$

 -

 

$

470,068 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

33,002 

 

 

207,021 

 

 

71,377 

 

 

40,402 

 

 

 -

 

 

351,802 

Depreciation, depletion, amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  and accretion

 

 

33,619 

 

 

44,621 

 

 

20,193 

 

 

8,255 

 

 

1,431 

 

 

108,119 

General and administrative expenses

 

 

12,739 

 

 

11,804 

 

 

11,886 

 

 

13,828 

 

 

26,451 

 

 

76,708 

Income (loss) from operations

 

 

(10,533)

 

 

(14,367)

 

 

(14,850)

 

 

1,071 

 

 

(27,882)

 

 

(66,561)

Interest income (expense), net

 

 

 -

 

 

 -

 

 

 -

 

 

911 

 

 

(24,244)

 

 

(23,333)

Other expense

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(2,156)

 

 

(2,156)

Income (loss) from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  before income taxes

 

$

(10,533)

 

$

(14,367)

 

$

(14,850)

 

$

1,982 

 

$

(54,282)

 

$

(92,050)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

Onshore

 

 

 

 

 

 

 

 

 

 

 

 



 

Drilling

 

Completion

 

 

 

 

 

 

 

 

 

 

 



 

Products and

 

and Workover

 

Production

 

Technical

 

Corporate and

 

Consolidated



 

Services

 

Services

 

Services

 

Solutions

 

Other

 

Total

Revenues

 

$

179,235 

 

$

507,731 

 

$

202,721 

 

$

128,179 

 

$

 -

 

$

1,017,866 

Cost of services and rentals (exclusive of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

depreciation, depletion, amortization and accretion)

 

 

71,669 

 

 

390,857 

 

 

171,065 

 

 

79,679 

 

 

 -

 

 

713,270