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2016-05-12 20:00:00

TESCO NET LOSS $56.8 MLN

TESCO NET LOSS $56.8 MLN

Tesco Corporation Reports First Quarter 2016 Results: 

  • Revenues declined to $35.5 million as a result of challenging market conditions
  • Cash increased $2.4 million during the quarter, ending at $53.9 million with no debt
  • Adjusted EBITDA was $(7.8) million, or (22)% of revenue
  • Reported diluted EPS was a loss of $1.45 and adjusted EPS was a loss of $0.46, after $0.99 in charges
  • Restructuring programs since Q4 2014 expected to yield $60 million of annualized savings

  

HOUSTON, May 10, 2016 /PRNewswire/ -- Tesco Corporation ("TESCO" or the "Company") (NASDAQ: TESO) today reported first quarter 2016 financial and operating results.

First Quarter Operating Results

Fernando Assing, Tesco's Chief Executive Officer, commented, "We continue to maintain the position that the market will remain lower for longer and cash generation is our number one priority. We were pleased that our overall cash levels increased during the first quarter despite the drop in revenue and profitability."

"We implemented additional global restructuring actions in the first quarter that are expected to produce annualized savings of approximately $10-15 million. As the bottom of the market forms and restructuring opportunities are exhausted, we will be shifting our focus to adding revenue back to our platform by more aggressively marketing our automated product offerings and services as well as rig control technologies. We must continue to adapt our business and commercial models to create a more sustainable and competitive company."

Tesco reported revenue of $35.5 million for the first quarter ended March 31, 2016, down from $52.2 million, or (32)%, in the fourth quarter of 2015, and down from $91.7 million, or (61)%, for the first quarter of 2015.The sequential decline in revenue was primarily from lower activity in North America and lower rental and tubular services activity in Latin America.

Tesco reported a net loss of $(56.8) million, or $(1.45) per diluted share, for the first quarter ended March 31, 2016. Our adjusted net loss for the quarter was $(17.9) million, or $(0.46) per diluted share, excluding special items, consisting primarily of several charges related to asset impairments, additional inventory reserves, and restructuring costs. This compares to a net loss of $(78.1) million, or $(2.00) per diluted share, in the fourth quarter of 2015, and a net loss of $(8.3) million, or $(0.21) per diluted share, for the first quarter of 2015. Adjusted net loss in the fourth quarter of 2015 was $(13.4) million, or $(0.33) per diluted share, and in the first quarter of 2015 was $(3.3) million, or $(0.08) per diluted share.

Adjusted EBITDA was $(7.8) million for the first quarter ended March 31, 2016 compared to adjusted EBITDA of $(2.0) million in the fourth quarter of 2015. Sequential adjusted EBITDA decrementals were approximately 35% on nearly 32% revenue decline. While the benefits of restructuring in the fourth quarter reduced the decremental rate in the first quarter, these benefits could not offset the rapid decline in activity experienced in the first quarter. Additional restructuring was implemented in the first quarter. Adjusted operating loss during the first quarter was $(17.2) million which excludes the impact of $37.6 million of charges. Cash and cash equivalents as of March 31, 2016 increased sequentially by approximately $2.4 million to $53.9 million, with free cash flow of over $2 million before approximately $3.7 million of restructuring payments. Accounts receivable declined by over $15 million through focused collection efforts. Excluding the additional reserve, inventory declined by approximately $1 million in the first quarter, a downward trend we expect to continue. In addition, cash was consumed for capital expenditures of $0.8 million offset by $1.1 million of proceeds from the sale of used equipment and $1.6 million in research and engineering investments.

Tesco ended the quarter with $53.9 million of cash and no borrowings on its credit facility, other than supporting $4.4 million of letters of credit. During the first quarter, we worked with our bank group on options to replace our existing credit facility. We received an extension of the current credit facility compliance waiver through the second quarter filing period. We do have a commitment for an ABL facility that should accommodate letters of credit and limited borrowing capacity not subject to EBITDA covenants. We are still negotiating and expect to finalize it in the second quarter.

Products Segment

We have renamed our previously named Top Drive segment to Products to reflect our broader offerings. There were no changes to the underlying product line reporting within the segment.

Revenue from the Products segment for Q1 2016 was $16.6 million, an $8.9 million, or 34.9%, decrease from Q4 2015 and a $33.4 million, or 66.8%, decrease from Q1 2015.

Product sales for Q1 2016 included 6 top drive units (3 new and 3 used), compared to 17 units (6 new and 11 used) sold in Q4 2015 and 14 units (14 new and 0 used) sold in Q1 2015.

The rental top drive fleet was 121 at the end of the first quarter with a utilization of 14%, down from 124 units at the end of the fourth quarter of 2015.

Operating loss before adjustments in the Products segment for Q1 2016 was $(39.2) million, a $22.5 million, or 135%, decrease from Q4 2015 and a $43.8 million decrease from Q1 2015. Our Products operating margin before adjustments was (237)% in Q1 2016, a decrease from 65% and 9% in Q4 2015 and Q1 2015, respectively. First quarter operating loss and operating margin after adjustments were $4.0 million and (24)%, respectively, with sequential decremental margins of 49%. This decline in profitability is primarily related to the impact of reduced global top drive sales and lower Latin American rental activity.

At March 31, 2016, backlog of top drives was 10 units, with a total potential value of $9.5 million, compared to 8 units at December 31, 2015, with a potential value of $7.2 million. This compares to a backlog of 24 units at March 31, 2015, with a potential value of $23.1 million. In addition, the Company expects to ship its first offshore catwalk and an offshore pipe handling package with a combined value of $3.5 million in the second quarter which are not included in this reported top drive backlog. Today, our top drive backlog stands at 12 units with a potential value of $11.7 million.

Tubular Services Segment

Revenue from the Tubular Services segment for Q1 2016 was $18.9 million, a $7.8 million, or 29.2%, decrease from Q4 2015 and a $22.8 million, or 54.7%, decrease from Q1 2015.

Operating income before adjustments in the Tubular Services segment for Q1 2016 was $(6.0) million, a $35.8 million increase from Q4 2015 and an $8.0 million decrease from Q1 2015. Our Tubular Services operating margin was (32)% for Q1 2016, down from (157)% and 5% in Q4 2015 and Q1 2015, respectively. First quarter operating loss and operating margin after adjustments were $5.6 million and (30)%, respectively. The sequential adjusted decremental margin was 19% and stems from lower revenues in Argentina and the U.S.

Other Segments and Expenses

Research and engineering costs for Q1 2016 were $1.6 million, compared to $2.2 million in Q4 2015 and $2.9 million in Q1 2015. We continue to invest in the development, commercialization, and enhancement of our proprietary technologies relating to our Products and Tubular Services segments.

Corporate and other costs for Q1 2016 were $8.0 million, a $1.4 million, or 21.2%, increase from Q4 2015 and a $1.3 million, or 14.0%, decrease from Q1 2015. Excluding restructuring costs and other special items, adjusted costs would have been $5.9 million.

Net foreign exchange losses for Q1 2016 were $1.2 million, compared to $8.6 million in Q4 2015 and $3.2 million in Q1 2015. The largest foreign exchange losses were from Argentina.

Our effective tax rate for Q1 2016 was a 1% expense compared to a 2% expense in Q4 2015 and a 6% benefit in Q1 2015.

Total capital expenditures were $0.8 million in Q1 2016, primarily for tubular services equipment, a $2.2 million, or 73%, decrease from Q4 2015 and a $6.5 million, or 89%, decrease from Q1 2015.

Outlook

The global markets will continue to be challenging in the second quarter as the first quarter rig count declines will be compounded with the additional rig count declines expected in that quarter.

Products revenue is expected to increase sequentially between 15% and 20% as we ship 3-5 top drives in addition to the offshore catwalk and the offshore pipe handling package. Product rentals and AMSS results are expected to continue to trend down as those follow the rig counts. Products adjusted operating profit is expected to increase over the first quarter primarily due to the effect of the non-recurring new products shipping activity within the quarter.

Tubular Services revenue is expected to be down sequentially between 25% and 30%. This decline is being driven primarily by lower land drilling activity in the US along with some market share decline due to not bidding in some cases where pricing is below breakeven EBITDA. We will not be performing work temporarily on two contracted rigs in the Gulf of Mexico due to drilling schedules. In addition, we do not have work scheduled in the North Sea as all activity under our multi-platform contract has been indefinitely postponed. However, decremental margins are expected to be similar to the first quarter as we see the benefits of prior restructuring and cost controls.

Corporate and R&E expenses are expected to decrease slightly in the second quarter. Depreciation expense should decrease to approximately $7.5 million per quarter after adjusting for the impairment charge in the first quarter.

These factors should cause adjusted EBITDA to be flat to slightly down over first quarter levels. Cash is expected to be slightly down sequentially as inventory reduction during the second quarter driven by the higher Product sales partially offsets EBITDA losses. Capital spending is expected to remain in the $1-$2 million range per quarter.

"Despite the difficult market, we continue to implement the strategy we outlined in 2014" Assing said. "Technology is a key differentiator for Tesco, and we are committed to investing in the development of products and services that we believe can improve both market share and margins while reducing the drilling and completion costs of our customers. Consistent with this, we are gaining tubular services market share in our targeted offshore markets, particularly in the Gulf of Mexico and are encouraged by greater acceptance of technology adoption in key land markets due to the cost reductions it can bring, as evidenced by recent contract awards in Saudi Arabia."

"Our investments in technology initiatives continue to progress and we plan to accelerate the deployment of optimized offerings that more radically reduce the cost structure for our clients. We completed several field trials of our Automated Rig Control platform and are pleased by the initial results. We continue to test the Pipe Drive System ("PDS"), the Differential Speed Disengager ("DSD") and a new Multi-Plug launcher system that significantly increases the capability of our Side Entry Cement Swivel and will allow the CDS to be more competitive and address more applications."

"While our short-term priority remains cash generation and improving profitability, positioning is also important. We will continue to implement our strategy and fund our technology as market conditions dictate. We are reducing our cost structure, eliminating smaller operations, adapting our business models and developing third-party market channels. All of these measures will transform Tesco in to a leaner, more efficient company that will generate greater operating leverage in the recovery," he concluded.

TESCO CORPORATION

Condensed Consolidated Statements of Income

(in millions, except per share information)

 
 

Three Months Ended 
March 31,

 

2016

2015

 

(Unaudited)

Revenue

$

35.5

$

91.7

Operating expenses

   

Cost of sales and services

46.9

83.3

Selling, general and administrative

6.3

11.1

Long-lived asset impairments

35.5

Research and engineering

1.6

2.9

 

90.3

97.3

Operating loss

(54.8)

(5.6)

Interest expense, net

0.4

0.2

Other expense, net

1.1

3.0

Loss before income taxes

(56.3)

(8.8)

Income tax provision (benefit)

0.5

(0.5)

Net loss

$

(56.8)

$

(8.3)

Loss per share:

   

Basic

$

(1.45)

$

(0.21)

Diluted

$

(1.45)

$

(0.21)

Dividends per share:

   

Basic

$

$

0.05

Weighted average number of shares:

   

Basic

39.3

39.0

Diluted

39.3

39.0

 

In Millions of USD (except for per share items)3 months ending 2016-03-313 months ending 2015-12-313 months ending 2015-09-303 months ending 2015-06-303 months ending 2015-03-31
Revenue 35.45 52.22 61.40 74.45 91.67
Total Revenue 35.45 52.22 61.40 74.45 91.67
Cost of Revenue, Total 46.86 70.93 65.67 76.74 83.30
Gross Profit -11.41 -18.71 -4.28 -2.29 8.38
Selling/General/Admin. Expenses, Total 5.97 11.62 8.84 8.84 10.58
Research & Development 1.57 2.21 2.08 2.06 2.85
Depreciation/Amortization 0.29 0.39 0.52 0.53 0.58
Unusual Expense (Income) 35.51 34.40 - - -
Total Operating Expense 90.21 119.55 77.12 88.17 97.31
Operating Income -54.76 -67.33 -15.72 -13.72 -5.64
Other, Net -0.01 0.18 -0.12 0.14 0.21
Income Before Tax -56.32 -76.31 -18.00 -15.32 -8.78
Income After Tax -56.84 -78.11 -19.90 -27.49 -8.25
Net Income Before Extra. Items -56.84 -78.11 -19.90 -27.49 -8.25
Net Income -56.84 -78.11 -19.90 -27.49 -8.25
Income Available to Common Excl. Extra Items -56.84 -78.11 -19.90 -27.49 -8.25
Income Available to Common Incl. Extra Items -56.84 -78.11 -19.90 -27.49 -8.25
Diluted Weighted Average Shares 39.26 39.08 39.01 38.98 38.96
Diluted EPS Excluding Extraordinary Items -1.45 -2.00 -0.51 -0.71 -0.21
Dividends per Share - Common Stock Primary Issue 0.00 0.05 0.05 0.05 0.05
Diluted Normalized EPS -0.86 -1.43 -0.51 -0.71 -0.21

 

tescocorp.com

-----

Earlier: 

TESCO NET LOSS $133.8 MLN 

TESCO CORPORATION DOWN 57% 

TESCO CORP LOSS $35.7 MLN 

ISSUES FOR TESCO CORPORATION 

TESCO NAMED THE NEW BOSS 

TESCO: BELOW EXPECTATIONS AGAIN 

TESCO ANNOUNCES $100 M 

TESCO CORPORATION: SALES & DOWN 

TESCO OVERWEIGHT 

TESCO: CEO SELLS - 2 

TESCO: CEO SELLS 

TESCO CORPORATION: DIE ANOTHER DAY 

TESCO DON'T PAY AND LOSE 

TESCO REWIEW STRATEGIC PLAN 

TESCO CORPORATION ANNOUNCES Q-4 2013 

TESCO SOLD. WHO WANTS TO BUY?

 



 

Tags: TESCO, CORPORATION, OIL, GAS, DRILLING

Chronicle:

TESCO NET LOSS $56.8 MLN
2017, December, 15, 12:50:00

LUKOIL'S PLAN: $50

LUKOIL - The plan is based on the conservative $50 per barrel oil price scenario. Sustainable hydrocarbon production growth is planned in the Upstream business segment along with the growth in the share of high-margin projects in the overall production. In the Downstream business segment, the focus is on the improvement of operating efficiency and selective investment projects targeted at the enhancement of product slate.

TESCO NET LOSS $56.8 MLN
2017, December, 15, 12:45:00

BP INVESTS TO SOLAR

BP - BP will acquire on completion a 43% equity share in Lightsource for a total consideration of $200 million, paid over three years. The great majority of this investment will fund Lightsource’s worldwide growth pipeline. The company will be renamed Lightsource BP and BP will have two seats on the board of directors.

TESCO NET LOSS $56.8 MLN
2017, December, 13, 12:40:00

OIL PRICE: ABOVE $64 YET

REUTERS - Brent crude was up 69 cents, or 1.1 percent, at $64.03 a barrel by 0743 GMT. It had settled down $1.35, or 2.1 percent, on Tuesday on a wave of profit-taking after news of a key North Sea pipeline shutdown helped send the global benchmark above $65 for the first time since mid-2015. U.S. West Texas Intermediate crude was up 45 cents, or 0.8 percent, at $57.59 a barrel.

TESCO NET LOSS $56.8 MLN
2017, December, 13, 12:35:00

RUSSIAN-TURKISH NUCLEAR

ROSATOM - On December 10, 2017, the construction start ceremony took place at the Akkuyu NPP site under a limited construction licence issued by the Turkish Atomic Energy Agency (TAEK). Director General of the ROSATOM Alexey Likhachev, and First Deputy Minister of Energy and Mineral Resources of the Turkish Republic, Fatih Donmez, took part in the ceremony.

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