Trading Symbol: "TESOF" on NASDAQ "TEO" on TSX CALGARY, Nov. 6
/PRNewswire-FirstCall/ -- Tesco Corporation ("TESCO" or the
"Company") today reported record high net income for the quarterly
period ended September 30, 2006 of US$9.3 million, or US$0.25 per
diluted share, compared to net income of US$1.6 million, or US$0.04
per diluted share, for the third quarter of 2005 and net income of
US$3.1 million, or US$0.08 per diluted share, for the second
quarter of 2006. Revenue, also the strongest in the Company's
history, was US$101.5 million for the quarterly period ended
September 30, 2006 compared to revenue of US$51.3 million for the
comparable period in 2005 and US$87.2 million in the second quarter
of 2006. Both of the Company's business segments reported strong
year-over-year and sequential quarterly gains in revenue and
operating income. Top Drive segment revenue of US$58.5 million for
the third quarter of 2006 increased 73% over the comparable prior
year period and was 23% higher than the second quarter of 2006. The
strong revenue gain compared to the third quarter of 2005 was
driven by the sale of 26 Top Drive units during the quarter
compared with 12 sold in the prior year quarter. All of the Top
Drives sold in the third quarter of 2006 were new units. In the
second quarter of 2006, the Company sold 16 new Top Drive units and
two used units. During the third quarter of 2006, the Company
received 15 new Top Drive orders resulting in a backlog of 80 units
at September 30, 2006 compared with a backlog of 91 units and 62
units at June 30, 2006 and December 31, 2005, respectively. Top
Drive rental revenue was up 31% compared with the same period in
2005 due to both improved day rates and rental days. Operating
income in the third quarter of 2006 for the Top Drive segment was
US$17.8 million, up over 80% from the comparable prior year period
and 9% higher than operating income for the second quarter of 2006.
Casing Services revenue in the third quarter of 2006 was a record
US$43.0 million, almost two and a half times higher than the
comparable quarter in 2005 and 8% higher than the second quarter of
2006. The revenue growth was the result of two Casing Services
acquisitions in November 2005 and increased activity in both
conventional and proprietary casing running services, primarily in
North America. Operating income for the Casing Services segment
totaled US$9.4 million in the third quarter of 2006, more than
double the third quarter of 2005 and 39% higher than the prior
quarter. The increase in Casing Services operating income in the
third quarter of 2006 compared to the previous quarter resulted
from increased activity in both conventional and proprietary casing
running services. Total company cost of sales and service for the
third quarter of 2006 increased to US$75.0 million from US$38.5
million in the third quarter of 2005 primarily due to the
acquisitions associated with the Casing Services segment and
significantly increased activity levels. Selling, general and
administrative expenses were $9.4 million, an increase of US$3.3
million year-over-year and US$1.4 million higher than the second
quarter of 2006. The year-over-year increase was due to an expanded
sales force resulting from the Casing Services acquisitions in
November 2005, increased legal expenses and higher expenses related
to compliance with Section 404 of the Sarbanes Oxley Act. The
increase in sellings, general and administrative expenses from the
second quarter of 2006 was due to increased legal expenses and the
impact of the second quarter 2006 collection of previously written
off receivables. Other expense includes net interest expense,
change in the value of share purchase warrants, foreign exchange
gains/losses and other income and expense. For the third quarter of
2006, other expense decreased to US$0.9 million from US$1.9 million
in the third quarter of 2005, principally due to lower foreign
exchange losses. Balance Sheet At September 30, 2006, cash and cash
equivalents totaled US$14.1 million, down US$21.3 million from
$35.4 million at December 31, 2005. This decrease in cash was
primarily the result of higher inventory levels required to
manufacture orders in the Company's current backlog, which stood at
80 Top Drive units at September 30, 2006. Total debt at the end of
the third quarter of 2006 was US$44.6 million, up US$3.3 million
from $41.3 million at the end of 2005. TESCO had net debt (total
debt less cash and cash equivalents) of US$30.5 million at
September 30, 2006 compared to net debt of US$5.9 million at
year-end 2005. Capital expenditures totaled US$11.8 million during
the third quarter of 2006 for a total of US$35.0 million for the
nine month period ended September 30, 2006. TESCO's capital
expenditure plan for full year 2006 is estimated to be
approximately US$41.0 million, of which the largest component is
rental tools targeted for its Casing Services segment. Financial
Reporting During the third quarter of 2006, TESCO determined that
it no longer qualified for foreign private issuer status related to
periodic reporting of its financial results with the U.S.
Securities and Exchange Commission (SEC). As a result, TESCO will
be required to prepare and file a Form 10-K annual report beginning
with the year ended December 31, 2006 and will file quarterly Form
10-Q's for future quarterly results thereafter. In addition, at
December 31, 2006 TESCO will begin reporting results in accordance
with US GAAP. Although the Company will become a U.S. registrant
with the SEC, it will continue to be a Canadian corporation.
Commentary Julio Quintana, TESCO's President and Chief Executive
Officer, commented, "Our record high net earnings and revenue this
quarter represent outstanding performances in both of our business
segments. We met our objective established earlier this year of
delivering 25 Top Drive units per quarter and have substantially
increased our aftermarket business with room for further growth. We
have utilized the casing running acquisitions we completed last
year as a springboard for our tubular services business to become
one of the leading providers in the industry. Recently completed
CASING DRILLING(R) projects, together with a number of projects
currently planned or in process, have proven our proprietary
technology adds great value in highly difficult drilling
environments, including those situations utilizing rotary steerable
technology." Quintana continued, "We will continue to maintain a
tight focus on further growing our Top Drive business while
developing technologies to assure the continued success of our
Casing Services businesses. We are very pleased with the results
this quarter, and believe we will continue to successfully grow our
Company through wider acceptance of our products and services and a
continued internal focus of controlling costs." Conference Call The
Company will conduct a conference call to discuss its results for
the third quarter of 2006 today at 11:00 a.m. CST. Individuals who
wish to participate in the conference call should dial US/Canada
(866) 433-0163 or International (706) 679-3976 approximately five
to ten minutes prior to the scheduled start of the call. The
conference ID for this call is 9773355. The conference call will
also be webcast live and available for replay at the Company's web
site, http://www.tescocorp.com/. Listeners may access the call
through the "Conference Calls" link in the Investor Relations
section of the site. The conference call and all questions and
answers will be recorded and made available until November 20,
2006. To listen to the recording, call (800) 642-1687 or (706)
645-9291 and enter conference ID 9773355. Tesco Corporation is a
global leader in the design, manufacture and service of technology
based solutions for the upstream energy industry. The Corporation's
mandate is to change the way people drill wells by delivering safer
and more efficient solutions that add real value by reducing the
costs of drilling for and producing oil and gas. FORWARD-LOOKING
STATEMENTS This presentation contains statements that may
constitute "forward-looking statements" within the meaning of the
US Private Securities Litigation Reform Act of 1995. These
statements include, among others, statements regarding expectations
of future revenues, activities, capital expenditures and earnings
and technical results. These statements are based on current
expectations that involve a number of risks and uncertainties,
which could cause actual results to differ from those anticipated.
These risks include, but are not limited to: the background risks
of the drilling services industry (e.g. operational risks;
potential delays or changes in plans with respect to customers'
exploration or development projects or capital expenditures; the
uncertainty of estimates and projections relating to levels of
rental activities; uncertainty of estimates and projections of
costs and expenses; risks in conducting foreign operations (e.g.
political and fiscal instability) and exchange rate fluctuations);
uncertainty and risks in technical results and performance of
technology; and other uncertainties. TESCO CORPORATION CONSOLIDATED
STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) (Thousands
of U.S. Dollars, except per share information) For the Three Months
For the Nine Months Ended September 30, Ended September 30,
----------------------- ----------------------- 2006 2005 2006 2005
----------- ----------- ----------- ----------- REVENUE $ 101,451 $
51,302 $ 272,209 $ 137,161 EXPENSES Cost of Sales and Services
74,967 38,468 200,416 99,683 Research and Engineering 1,406 1,846
3,831 3,901 Selling, General and Administrative 9,370 6,121 24,438
18,071 ----------- ----------- ----------- ----------- 85,743
46,435 228,685 121,655 ----------- ----------- -----------
----------- Operating income 15,708 4,867 43,524 15,506 Other
expense 933 1,912 7,603 1,017 ----------- ----------- -----------
----------- Income from operations before restructuring and other
exceptional items 14,775 2,955 35,921 14,489 -----------
----------- ----------- ----------- (Gain) on restructuring and
other exceptional items - 62 - (550) ----------- -----------
----------- ----------- Income before income taxes 14,775 2,893
35,921 15,039 ----------- ----------- ----------- -----------
Income taxes Current 6,647 201 16,139 4,335 Future (1,128) 1,135
(840) 1,816 ----------- ----------- ----------- ----------- 5,519
1,336 15,299 6,151 ----------- ----------- ----------- -----------
Net income 9,256 1,557 20,622 8,888 Retained earnings, beginning of
period 57,052 44,785 45,686 37,454 ----------- -----------
----------- ----------- Retained earnings, end of period $ 66,308 $
46,342 $ 66,308 $ 46,342 ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings per share: Basic $ 0.26 $ 0.04 $0.58 $0.25 Diluted $ 0.25
$ 0.04 $0.56 $0.25 Weighted average number of shares: Basic
35,948,779 35,190,246 35,797,903 35,131,480 Diluted 36,618,152
35,680,117 36,609,274 35,451,931 TESCO CORPORATION CONSOLIDATED
BALANCE SHEETS (Unaudited) (Thousands of U.S. Dollars) September
30, December 31, 2006 2005 -------------- ------------- ASSETS
CURRENT ASSETS Cash and cash equivalents $ 14,140 $ 35,396 Accounts
receivable - trade 82,869 56,433 - prepaid and other 9,997 12,808
Income taxes recoverable 1,998 1,607 Inventories 86,348 40,064
Future income taxes 6,385 5,287 ---------- ---------- Total Current
Assets 201,737 151,595 Property, plant and equipment, net 127,754
109,732 Investments 865 2,132 Goodwill 17,213 16,885 Future income
taxes 5,890 9,539 Intangible and other assets 13,347 15,460
---------- ---------- Total Assets $ 366,806 $ 305,343 ----------
---------- ---------- ---------- LIABILITIES & SHAREHOLDERS'
EQUITY CURRENT LIABILITIES Current portion of long term debt and
capital lease $ 7,796 $ 425 Accounts payable 37,909 22,961 Accrued
liabilities 44,093 29,655 ---------- ---------- Total Current
Liabilities 89,798 53,041 Capital Lease Long term debt and capital
lease 36,835 40,853 Future income taxes 1,345 4,736 ----------
---------- Total Liabilities 127,978 98,630 ---------- ----------
Contingencies SHAREHOLDERS' EQUITY Share capital 123,192 115,195
Contributed surplus 8,645 6,501 Cumulative translation account
40,683 39,331 Retained earnings 66,308 45,686 ---------- ----------
Total Shareholders' Equity 238,828 206,713 ---------- ----------
Total Liabilities & Shareholders' Equity $ 366,806 $ 305,343
---------- ---------- ---------- ---------- SEGMENT INFORMATION:
The Corporation operates in two segments: Top Drives and Casing
Services. Financial information relating to these segments is as
follows: For the Three Months Ended September 30, 2006
-------------------------------------------- Corporate Casing and
Top Drive Services Unallocated Total
-------------------------------------------- Revenues $ 58,481 $
42,970 $ - $101,451 Depreciation and Amortization 2,450 3,427 696
6,573 Operating Income 17,839 9,352 (11,483) 15,708
-------------------------------------------- Other expense 933
Restructuring (gain) and other exceptional items - ----------
Income before income taxes $ 14,775 ---------- ---------- For the
Three Months Ended September 30, 2005
-------------------------------------------- Corporate Casing and
Top Drive Services Unallocated Total
-------------------------------------------- Revenues $ 33,724 $
17,578 $ - $ 51,302 Depreciation and Amortization 1,679 2,194 387
4,260 Operating Income 9,557 3,469 (8,159) 4,867
-------------------------------------------- Other expense 1,912
Restructuring (gain) and other exceptional items 62 ----------
Income before income taxes $ 2,893 ---------- ---------- For the
Nine Months Ended September 30, 2006
-------------------------------------------- Corporate Casing and
Top Drive Services Unallocated Total
-------------------------------------------- Revenues $152,443
$119,766 $ - $272,209 Depreciation and Amortization 6,134 9,387
2,007 17,528 Operating Income 47,928 24,912 (29,316) 43,524
-------------------------------------------- Other expense 7,603
Restructuring (gain) and other exceptional items - ----------
Income before income taxes $ 35,921 ---------- ---------- For the
Nine Months Ended September 30, 2005
-------------------------------------------- Corporate Casing and
Top Drive Services Unallocated Total
-------------------------------------------- Revenues $ 91,590 $
45,571 $ - $137,161 Depreciation and Amortization 4,932 5,896 1,052
11,880 Operating Income 26,050 10,243 (20,787) 15,506
-------------------------------------------- Other expense 1,017
Restructuring (gain) and other exceptional items (550) ----------
Income before income taxes $ 15,039 ---------- ---------- OTHER
EXPENSE: Items comprising other (income) expense are: For the Three
Months For the Nine Months Ended September 30, Ended September 30,
--------------------- --------------------- 2006 2005 2006 2005
---------------------------------------------------
--------------------- Interest income $ (240) $ (142) $ (1,101) $
(339) Interest expense(1) 915 115 3,119 491 Withholding tax claim -
- 2,589 - Decrease (increase) in fair market value of share
purchase warrants 180 - 1,263 - Foreign exchange loss (gain) 3
1,916 1,174 777 Other 75 23 559 88
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--------------------- Total $ 933 $ 1,912 $ 7,603 $ 1,017
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---------------------
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--------------------- (1) Includes an interest expense accrual of
$1.2 million related to a claim for withholding tax on payments
made in 2000 to 2004. DATASOURCE: Tesco Corporation CONTACT: Mike
Kearney at (713) 849-5900, Tesco Corporation
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