Oil States International ((OIS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Oil States International’s recent earnings call painted a picture of robust performance in offshore and international markets, bolstered by a strong order backlog and increased cash flow. The company’s strategic focus on high-margin projects and technological advancements has paid off, though challenges in the US land market, such as reduced activity and tariff impacts, have negatively affected certain segments.
Offshore and International Revenue Growth
During the third quarter, Oil States International saw a significant shift in its revenue mix, with 75% of consolidated revenues coming from offshore and international projects. This marks an increase both sequentially and year-over-year, highlighting the company’s successful pivot towards these markets.
Strong Order Backlog
The company reported a substantial increase in its order backlog, reaching $399 million, the highest level since June 2015. This was supported by robust bookings of $145 million, representing a 29% increase quarter-over-quarter.
Increased Cash Flow from Operations
Oil States International experienced a notable rise in cash flow from operations, which grew to $31 million, a 105% sequential increase. The company also generated $23 million in free cash flow, underscoring its strong financial performance.
Financial Position and Shareholder Returns
The company maintained a solid financial position, repurchasing $4 million of common stock and $6 million of convertible senior notes. With no borrowings under the credit facility, Oil States International remains financially robust.
Safety Awards and Technological Advancements
Oil States International received two prestigious safety awards, including the president’s gold award for health, safety, and environment incident rate improvement, reflecting its commitment to safety and innovation.
US Land Activity Decline
The company faced challenges in the US land market, with a significant decline in completion activity. The average US frac spread count was down 11% sequentially, primarily due to weaker crude oil prices and OPEC+ actions.
Downhole Technologies Segment Struggles
The Downhole Technologies segment reported an adjusted segment EBITDA loss of $1 million, impacted by higher costs from tariffs and lower international activity levels.
Impact of Tariffs
Tariff increases significantly affected the Downhole Technologies segment, with rates rising from 25% to as high as 98%, impacting gun steel costs and contributing to financial losses.
Completion and Production Services Revenue Decline
The Completion and Production Services segment saw a 61% sequential decline in revenues, driven by reduced US land-based activity.
Forward-Looking Guidance
Looking ahead, Oil States International anticipates a sequential revenue increase of 8% to 13% in the fourth quarter, with adjusted EBITDA expected to range from $21 million to $22 million. The company projects a strong free cash flow outlook, with cash flows from operations expected to exceed $100 million annually.
In summary, Oil States International’s earnings call highlighted a strong performance in offshore and international markets, supported by a robust order backlog and increased cash flow. Despite challenges in the US land market, the company remains optimistic about future growth, with positive revenue projections and a focus on high-margin projects and technological advancements.