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2017-03-16 18:30:00

TESCO NET LOSS $117.9 MLN

TESCO NET LOSS $117.9 MLN

TESCO CORPORATION FINANCIAL RESULTS  2013 - 2016

 

TESCO Corporation Reports Fourth Quarter 2016 Results

- Revenue grows 16% to $35.3 million showing first sequential quarterly increase in 10 quarters

- Reported U.S. GAAP diluted EPS was a loss of $(0.43) on a net loss of $20.1 million and adjusted EPS was a loss of $(0.28) on an adjusted net loss of $13.3 million, excluding $0.15 in special charges

- Adjusted EBITDA loss was $4.4 million for the fourth quarter, compared to a loss of $9.1 million for the third quarter

- Cash increases to $91.5 million at December 31, 2016 as operating cash flow improves to $3.5 million and free cash flow improves to $2.1 million

 

TESCO CORPORATION Condensed Consolidated Statements of Income (in $ millions, except per share information)

 

Three Months Ended
December 31,

Year Ended
December 31,

 

2016

2015

2016

2015

 

(Unaudited)

   

Revenue

35.3

52.2

134.7

279.7

Operating expenses

       

Cost of sales and services

43.2

70.9

178.0

296.6

Selling, general and administrative

9.5

12.0

30.2

41.9

Goodwill impairment

34.4

34.4

Long-lived asset impairments

35.5

Research and engineering

1.5

2.2

5.8

9.2

 

54.2

119.5

249.5

382.1

Operating loss

(18.9)

(67.3)

(114.8)

(102.4)

Interest expense (income), net

(0.1)

0.5

0.3

1.3

Foreign exchange loss

1.1

8.6

2.7

15.1

Other expense (income)

(0.1)

0.2

(0.3)

Loss before income taxes

(19.9)

(76.3)

(118.0)

(118.5)

Income tax provision (benefit)

0.2

1.8

(0.1)

15.3

Net loss

(20.1)

(78.1)

(117.9)

(133.8)

Loss per share:

       

Basic

(0.43)

(2.00)

(2.73)

(3.43)

Diluted

(0.43)

(2.00)

(2.73)

(3.43)

Dividends per share:

       

Basic

0.05

0.20

Weighted average number of shares (millions):

       

Basic

46.5

39.1

43.2

39.0

Diluted

46.5

39.1

43.2

39.0

 

Fourth Quarter Operating Results

Fernando Assing, TESCO's Chief Executive Officer, commented, "We are encouraged by our improved sequential financial performance as activity levels respond to higher commodity prices and rig count. However, we remain cautious as we recognize that 2017 will still present challenges in international and offshore markets as well as increasing cost escalation risks and limited pricing power in North America."

TESCO reported revenue of $35.3 million for the fourth quarter ended December 31, 2016, up from $30.4 million, or 16% in the third quarter of 2016, and down from $52.2 million, or 32% for the fourth quarter of 2015. The sequential increase in revenue was primarily from higher aftermarket part sales and increased activity in both U.S. land and offshore tubular services markets.

TESCO reported a U.S. GAAP net loss of $20.1 million, or $(0.43) per diluted share, for the fourth quarter ended December 31, 2016. Adjusted net loss for the quarter was $13.3 million, or $(0.28) per share, excluding special items, consisting primarily of several charges related to receivables and restructuring costs. This compares to a U.S. GAAP net loss of $22.1 million, or $(0.48) per diluted share in the third quarter of 2016, and a U.S. GAAP net loss of $78.1 million, or $(2.00) per diluted share, for the fourth quarter of 2015. Adjusted net loss in the third quarter of 2016 was $17.3 million, or $(0.37) per diluted share, and in the fourth quarter of 2015 was $13.4 million, or $(0.33) per diluted share.

Adjusted EBITDA loss was $4.4 million for the fourth quarter compared to adjusted EBITDA loss of $9.1 million in the third quarter of 2016, an improvement of 52%. Fourth quarter 2016 U.S. GAAP operating loss was $18.9 million and adjusted operating loss was $13.1 million, which excludes the impact of $5.8 million of pre-tax charges. This compares to the third quarter 2016 U.S. GAAP operating loss of $21.9 million and adjusted operating loss of $17.4 million, which excluded $4.5 million of pre-tax charges.

Cash and cash equivalents as of December 31, 2016 increased from the third quarter by $1.4 million to $91.5 million primarily due to $3.5 million of positive operating cash flow.

Adjusted free cash flow was $2.5 million before approximately $0.4 million of restructuring payments, compared to negative adjusted free flow of $5.7 million in the prior quarter. The sequential increase was primarily caused by lower operating losses, inventory reductions, higher collections and tax refunds.

Products Segment

Revenue for Q4 2016 was $18.8 million, a $1.8 million, or 11% increase from Q3 2016 and a $6.7 million, or 26% decrease from Q4 2015.

Product sales for Q4 2016 included 6 top drive units (4 new and 2 used) and 2 used catwalks, compared to 3 units (3 new and 0 used) sold in Q3 2016 and 17 units (6 new and 11 used) sold in Q4 2015.

There were 116 top drives in our rental fleet at the end of the fourth quarter with a utilization of 18%, down from 118 at the end of the third quarter.

U.S. GAAP operating loss before adjustments in the Products segment for Q4 2016 was $5.3 million, or 28% of sales, a $2.1 million, or 28% improvement from Q3 2016. Fourth quarter operating loss and operating margin after adjustments were $1.6 million and (9)%, respectively. This sequential increase in profitability was due primarily to an increase in aftermarket sales and a more profitable mix of product sales.

At December 31, 2016, top drive backlog was 10 units, with a total potential value of $9.3 million, compared to 9 units at September 30, 2016, with a potential value of $7.8 million. This compares to a backlog of 8 units at December 31, 2015, with a potential value of $7.2 million. Today, our top drive backlog stands at 9 units with a potential value of $8.1 million.

Tubular Services Segment

Revenue for Q4 2016 was $16.5 million, a $3.1 million, or 23% increase from Q3 2016 and a $10.2 million, or 38% decrease from Q4 2015. This sequential increase was driven primarily by higher activity in both U.S. land and offshore markets.

U.S. GAAP operating loss before adjustments in the Tubular Services segment for Q4 2016 was $6.9 million, a $1.1 million or 14% improvement from Q3 2016. Fourth quarter operating loss and operating margin after adjustments were $5.3 million and (32)%, respectively. Incremental profitability benefited from higher land accessory sales and higher offshore activity in the Gulf of Mexico.

Other Segments and Expenses

Research and engineering U.S. GAAP costs for Q4 2016 were $1.5 million, compared to $1.2 million in Q3 2016 and $2.2 million in Q4 2015. We continue to invest in the development, commercialization, and enhancement of our proprietary technologies.

Corporate and other U.S. GAAP costs for Q4 2016 were $5.2 million, flat from Q3 2016 and a $1.4 million, or 21%, decrease from Q4 2015. On an adjusted basis, the Q4 2016 costs decreased by $0.3 million and $0.9 million from Q3 2016 and Q4 2015, respectively.

Net foreign exchange losses for Q4 2016 were $1.1 million, primarily from the devaluation of the Egyptian pound, compared to $0.4 million in Q3 2016 and $8.6 million in Q4 2015. The largest foreign exchange losses in Q4 2015 were from Latin America.

The effective tax rate for Q4 2016 was a 1% benefit compared to a 2% benefit in each of Q3 2016 and Q4 2015.

Total capital expenditures were $2.6 million in Q4 2016, primarily for offshore tubular services equipment, partially offset by asset sale proceeds of $1.2 million.

Outlook

While North America rig count is expected to continue to increase during 2017, weakness in international and offshore markets is anticipated to continue. We see some opportunities to start to increase pricing in North America, however prevalent overcapacity will likely limit pricing power throughout 2017. We are also facing risks that cost escalation, which includes labor inflation and shortages, incremental logistics and equipment reactivation will exceed price increases in the short term.

In the first quarter of 2017;

Products revenue is expected to be higher sequentially from higher new top drive sales, partially offset by lower rental utilization in certain markets. Aftermarket revenue is expected to increase slightly following recent increases in quoting activity. Products adjusted operating loss is expected to be approximately flat sequentially.
Tubular Services revenue and adjusted operating loss are expected to be flat to down sequentially as increased North America land activity is offset by reduced international land activity and lower offshore activity and the impact of cost escalation.

Corporate and R&E expenses are expected to increase sequentially in the first quarter as we restore certain employee costs and benefit plans to remain competitive in a tightening labor market.
As a result, adjusted EBITDA loss is expected to be slightly higher sequentially in the first quarter. We also expect cash levels to decline due to operating losses, U.S. property taxes and restructuring payments.
For the full year of 2017, our objective is to pursue opportunities for higher new product and aftermarket sales as well as increased land and offshore tubular services activity. However, our incremental profitability will be highly dependent on securing increased pricing, managing cost escalation risks and increasing the adoption of our higher margin new products and services.

"During the fourth quarter and through this quarter, we have made continued progress on several key initiatives, including CDS™ Evolution adoption, top drive performance upgrades and ARC™ contracts. Customer interest in offerings that reduce cost and improve drilling performance continues to increase," Mr. Assing said. "In addition, we committed to additional restructuring actions starting in the fourth quarter to reduce our fixed cost structure."

"Within Products, we recently performed our first field trial of the Pipe Drive system and are making certain enhancements as we prepare for the next upcoming field trial. With ARC, we continued to increase the number of contracted installations in established markets with customer trials in new international markets ongoing. Finally, we booked several top drive performance upgrade jobs that will begin shipping in the first quarter."

"In Tubular Services, we sequentially increased the revenue from CDS Evolution in our targeted trial U.S. markets. We also performed additional field trials of our new multi-plug launcher, which is planned to go into full production in the second quarter. Global markets are increasingly understanding the value proposition of automated casing running, growing our opportunities for new and used CDS sales along with our service offering."

"As the market begins to recover, we remain highly focused on returning to a quarterly breakeven EBITDA run rate while minimizing cash usage over the next several quarters. To accomplish this, our core strategic priority continues to be to leverage our existing platform by: 1) growing CDS land Evolution adoption and gaining offshore Tubular Services market share, 2) accelerating all AMSS offerings as rigs reactivate, 3) commercializing our new pipe handling products, and 4) increasing the market share and features of our ARC platform. At the same time, we must carefully manage the ramp-up risks related to safety, quality, cost escalation and working capital management. We are prepared to take on these challenges and again thank our shareholders for their support during this very difficult market," Mr. Assing concluded.

-----

Earlier: 

TESCO NET LOSS $97.8 MLN 

TESCO NEED MONEY 

TESCO NET LOSS $56.8 MLN 

TESCO NET LOSS $133.8 MLN 

TESCO CORPORATION DOWN 57%

 



 

Tags: TESCO, TOP, DRIVE,

Chronicle:

TESCO NET LOSS $117.9 MLN
November, 15, 15:25:00

OIL PRICE: ABOVE $61 AGAIN

REUTERS - Brent crude futures LCOc1 were down 72 cents at $61.49 per barrel at 1020 GMT, having fallen by 1.5 percent on Tuesday, its largest one-day drop in a month. U.S. West Texas Intermediate (WTI) crude CLc1 was at $55.12 per barrel, down 58 cents.

TESCO NET LOSS $117.9 MLN
November, 15, 15:20:00

IEA COOLS THE MARKET

BLOOMBERG - Prices dropped during the session as the International Energy Agency said the recent recovery in oil prices, coupled with milder-than-normal winter weather, is slowing demand growth. The worsening outlook for consumption dampened some of the enthusiasm that OPEC and its allies will extend supply curbs.

TESCO NET LOSS $117.9 MLN
November, 15, 15:15:00

IEA: GLOBAL ENERGY DEMAND UP BY 30%

Global energy needs rise more slowly than in the past but still expand by 30% between today and 2040. This is the equivalent of adding another China and India to today’s global demand.

TESCO NET LOSS $117.9 MLN
November, 15, 15:10:00

RUSSIA'S OIL EXPORTS UP

Product exports have grown significantly over the past several years and are expected to continue to grow as Russian refineries add capacity to produce more high-quality products.

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