W-H Energy Services, Inc. (NYSE:WHQ) announced second quarter net
income of $45.8 million or $1.45 per share (excluding approximately
$5.1 million or $0.16 per share of transaction costs related to the
proposed acquisition of the Company by Smith International, Inc.)
as compared to the $39.1 million or $1.25 per share reported for
the same period in the prior year. In the preceding quarter, the
Company reported net income of $37.1 million or $1.18 per share.
Revenues for the second quarter of $346.9 million were 25 percent
higher than the second quarter of 2007 and were 15 percent higher
than the preceding quarter. Domestic revenues increased 26 percent
as compared to the second quarter of last year and were 17 percent
higher than the preceding quarter. International revenues also
increased 13 percent as compared to the second quarter of last year
and were 1 percent higher than the preceding quarter. The Company
spent approximately $62.0 million in capital expenditures during
the second quarter, resulting in a year-to-date capital spend of
approximately $120.1 million. QUARTERLY SEGMENT RESULTS Drilling
Revenues in the drilling segment were $223.0 million in the second
quarter, 25 percent higher than the comparable period in the prior
year and 15 percent higher than the preceding quarter. Sequential
increases in revenue from the Company�s drilling lines of business
were 38 percent in rental tools, 17 percent in drilling fluids, and
10 percent in measurement/logging-while-drilling, directional
drilling and motors. Operating income from the drilling segment of
$43.2 million was 5 percent higher than the comparable period in
the prior year and 15 percent higher than the preceding quarter.
Completion and workover Second quarter revenues in the completion
and workover segment were $124.0 million, 26 percent higher than
the comparable period in the prior year and 16 percent higher than
the preceding quarter. Sequential increases in revenue from the
Company�s completion and workover lines of business were 23 percent
in completion fluids, 18 percent in rental tools, 17 percent in
cased-hole wireline, and 12 percent in coiled tubing. Operating
income from the completion and workover segment of $34.8 million
recorded in the second quarter was 34 percent higher than the
comparable period in the prior year and 23 percent higher than the
preceding quarter. W-H Energy is a diversified oilfield service
company that provides products and services used in connection with
the drilling and completion of oil and natural gas wells and the
production of oil and natural gas. The Company has operations in
North America and select areas internationally. Statements in this
press release that are not strictly historical are
"forward-looking" statements as defined in the Private Securities
Litigation Reform Act of 1995. Actual results may differ materially
from those projected in the forward-looking statements due to,
among other things, the current and expected future prices of crude
oil and natural gas, the level of exploration, development and
production activity of, and the corresponding capital spending by,
our customers, risks associated with events that result in personal
injuries, loss of life, damage to or destruction of property,
equipment or the environment and suspension of operations,
unavailability of or costs associated with insurance, competition
in our industry, difficulty in continuing to develop, produce and
commercialize technologically advanced products and services, loss
of use of certain technologies and weather conditions in offshore
markets. These and other risks are more fully described in W-H
Energy Services, Inc.'s Annual Report filed on Form 10-K with the
Securities and Exchange Commission. The Company disclaims any
obligation to update the statements in this press release. Smith
International, Inc. ("Smith") filed a registration statement on
Form S-4 and a tender offer statement on Schedule�TO with the SEC
on June�24, 2008, as amended, and W-H filed a
solicitation/recommendation statement on Schedule�14D-9 on June�24,
2008, as amended, in connection with Smith's pending exchange offer
to acquire all the outstanding shares of W-H common stock. These
documents contain important information about the exchange offer
that should be read carefully before any decision is made with
respect to the exchange offer. These materials will be made
available to the shareholders of W-H at no expense to them.
Investors and security holders may obtain the documents free of
charge at the SEC�s web site, www.sec.gov. In addition, such
materials (and all other documents filed with the SEC) may be
obtained free of charge at www.smith.com or www.whes.com. You may
also read and copy any reports, statements and other information
filed by Smith or W-H with the SEC at the SEC public reference room
at 100 F Street N.E., Room�1580, Washington, D.C. 20549. Please
call the SEC at (800)�732-0330 or visit the SEC�s website for
further information on its public reference room. Copies of the
exchange offer materials may also be obtained at no charge from
MacKenzie Partners, Inc., the information agent for the exchange
offer, toll-free at 1-800-322-2885. W-H ENERGY SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except per share amounts) � � � � � � Three Months Ended June 30,
Six Months Ended June 30, 2008 2007 2008 2007 � Revenues $ 346,937
$ 277,752 $ 647,905 $ 550,639 � Costs and Expenses: Cost of
revenues 191,276 145,386 355,314 292,805 Selling, general and
administrative 50,874 44,964 97,044 88,244 Transaction related
costs (1) 5,350 - 5,350 - Research and development 6,849 5,485
12,943 10,201 Depreciation and amortization � 24,671 � � 19,162 � �
47,988 � � 36,714 � Total costs and expenses 279,020 214,997
518,639 427,964 � Operating income 67,917 62,755 129,266 122,675 �
Other expenses: Interest expense, net 2,770 1,896 5,178 3,889 Other
income, net � (4 ) � (70 ) � (12 ) � (41 ) Income before income
taxes 65,151 60,929 124,100 118,827 � Provision for income taxes �
24,405 � � 21,855 � � 46,294 � � 43,929 � Net income $ 40,746 � $
39,074 � $ 77,806 � $ 74,898 � � � � Earnings per common share:
Basic $ 1.33 $ 1.29 $ 2.54 $ 2.48 Diluted $ 1.29 $ 1.25 $ 2.48 $
2.42 � � � Weighted average shares outstanding: Basic 30,670 30,315
30,622 30,196 Diluted 31,480 31,140 31,389 31,008 � � (1)
Transaction related costs for the three and six months ended June
30, 2008 includes costs related to the proposed acquisition of the
Company by Smith International, Inc. For more information, see the
reconciliation of non-GAAP measures presented elsewhere in this
press release. W-H ENERGY SERVICES, INC. UNAUDITED CONSOLIDATED
CONDENSED BALANCE SHEETS (in thousands) � � � � June 30, 2008
December 31, 2007 � Assets: Cash and cash equivalents $ 30,943 $
23,076 Accounts receivable, net 281,437 252,313 Inventory 119,232
102,584 Other current assets � 31,056 � 28,880 Total current assets
462,668 406,853 � Property and equipment, net 516,302 448,913 Other
assets � 199,603 � 151,264 Total assets $ 1,178,573 $ 1,007,030 � �
Liabilities and Shareholders' Equity: Accounts payable and accrued
liabilities $ 127,685 $ 116,815 Total current liabilities 127,685
116,815 � Long-term debt (1) 225,149 150,000 Other liabilities �
84,502 � 84,687 Total liabilities 437,336 351,502 � Shareholders'
equity � 741,237 � 655,528 Total liabilities and shareholders'
equity $ 1,178,573 $ 1,007,030 � � (1) As of June 30, 2008, there
was approximately $139.4 million available under the Company's
revolving credit facility. W-H ENERGY SERVICES, INC. UNAUDITED
SEGMENTED AND SELECTED FINANCIAL DATA (in thousands) � � � � � � �
� For the Three Months Ended: June 30, 2008 March 31, 2008 December
31, 2007 September 30, 2007 June 30, 2007 SEGMENTED INFORMATION:
Revenue: Drilling $ 222,984 $ 194,253 $ 192,555 $ 187,456 $ 179,141
Completion and workover � 123,953 � � 106,715 � � 100,821 � �
95,536 � � 98,611 � Total revenue $ 346,937 � $ 300,968 � $ 293,376
� $ 282,992 � $ 277,752 � � Depreciation and amortization: Drilling
$ 14,899 $ 14,063 $ 13,737 $ 12,542 $ 11,600 Completion and
workover 9,709 9,190 8,352 7,825 7,493 Corporate � 63 � � 64 � � 66
� � 50 � � 69 � Total depreciation and amortization $ 24,671 � $
23,317 � $ 22,155 � $ 20,417 � $ 19,162 � � Operating income:
Drilling $ 43,242 $ 37,593 $ 39,272 $ 40,114 $ 41,307 Completion
and workover 34,842 28,447 26,318 21,726 26,032 Corporate (1) �
(10,167 ) � (4,691 ) � (4,999 ) � (5,147 ) � (4,584 ) Total
operating income $ 67,917 � $ 61,349 � $ 60,591 � $ 56,693 � $
62,755 � � � � (1) Corporate operating expense for the three months
ended June 30, 2008 includes costs of approximately $5.4 million
related to the proposed acquisition of the Company by Smith
International, Inc. For more information, see the reconciliation of
non-GAAP measures presented elsewhere in this press release. W-H
ENERGY SERVICES, INC. UNAUDITED RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES (1) (in thousands, except per share amounts) � �
� � � � � Three Months Ended June 30, Six Months Ended June 30,
2008 2007 2008 2007 � Net income (as reported) $ 40,746 $ 39,074 $
77,806 $ 74,898 � Transaction related costs 5,350 - 5,350 - Less:
Tax impact of transaction related costs � (281 ) � - � � (281 ) � -
� Transaction related costs, net of tax 5,069 - 5,069 - � � � � Net
income before transaction related costs $ 45,815 � $ 39,074 � $
82,875 � $ 74,898 � � � � � Per diluted common share information:
Net income (as reported) $ 1.29 $ 1.25 $ 2.48 $ 2.42 Transaction
related costs, net of tax � 0.16 � � - � � 0.16 � � - � Net income
before transaction related costs $ 1.45 � $ 1.25 � $ 2.64 � $ 2.42
� � � � � Corporate segment operating expense (as reported) $
(10,167 ) $ (4,584 ) $ (14,858 ) $ (9,498 ) � Transaction related
costs � 5,350 � � - � � 5,350 � � - � � Corporate segment operating
expense before transaction related costs $ (4,817 ) $ (4,584 ) $
(9,508 ) $ (9,498 ) � � � (1) Management believes that the non-GAAP
financial measures included within this press release are used by
financial analysts and investors to provide comparative financial
information regarding the continuing operations of the Company,
particularly with regard to transaction costs that have been
incurred as a result of the proposed acquisition of the Company by
Smith International, Inc. These measures should not be considered
as an alternative to net income or any other measure of operating
performance calculated in accordance with generally accepted
accounting principles.
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