2006 net income increased 397% to $35.6 million, or $1.66 per diluted share
HOUSTON, March 8 /PRNewswire-FirstCall/ -- Allis-Chalmers Energy Inc. (AMEX:ALY) today announced record results for the three months and year ended December 31, 2006.
Revenues for the fourth quarter 2006 rose 240% to $114.1 million compared to $33.5 million for the fourth quarter of 2005. The increase in revenues was due to a combination of strategic acquisitions and organic growth initiatives that complemented Allis-Chalmers' existing businesses and allowed the company to integrate and cross sell its products and services into new markets. During 2006, Allis-Chalmers completed five significant acquisitions, which helped provide opportunities to expand its customer base, open new operating locations, invest in new equipment, improve capacity utilization, and increase product and service offerings. These acquisitions also provided access to additional skilled operators and enhanced Allis-Chalmers' management team.
Income from operations grew 410% to $23.1 million for fourth quarter 2006, from $4.5 million in the fourth quarter of 2005. EBITDA increased 384% to $31.4 million for the fourth quarter of 2006, from $6.5 million in the fourth quarter of 2005. EBITDA is a non-GAAP item, and additional information and discussion regarding EBITDA is provided later in this release.
Net income for the fourth quarter of 2006 attributed to common shares increased 307% to $10.4 million, or $0.40 per diluted share, compared to net income of $2.5 million, or $0.14 per diluted share, in the fourth quarter of 2005. Net income in the fourth quarter of 2006 includes approximately $820,000, or $0.02 per diluted share on an after-tax basis, in debt financing costs (both interest and amortization of fees) associated with the $300 million senior unsecured bridge loan agreement dated December 18, 2006, which was refinanced on January 29, 2007. The bridge loan was used to fund the acquisition of substantially all the assets of Oil & Gas Rental Services, Inc.
Allis-Chalmers adopted FAS 123R on January 1, 2006 and recorded a non-cash stock compensation expense (which included expense for the issuance of restricted stock) of $756,000 or $0.02 per diluted share for the fourth quarter of 2006 and of $3.4 million or $0.12 per diluted share for the full-year. Weighted average shares of common stock outstanding on a diluted basis increased 46% to 26.1 million shares for the fourth quarter of 2006 from 17.9 million shares for the fourth quarter of 2005 primarily due to equity issuances relating to the company's 2006 acquisitions. The provision for deferred taxes in the fourth quarter was accelerated due to the increase in profits and more rapid utilization of deferred tax assets, principally federal net operating loss tax carry-forwards.
Micki Hidayatallah, Allis-Chalmers' Chairman and Chief Executive Officer stated, "Over the last several years our goal has been to establish a significant presence in segments of the oilfield service sector that are growing faster than the rig count while diversifying our revenue base to mitigate cyclical risk. Our solid results for the fourth quarter and full year of 2006 are a clear demonstration of our ability to successfully execute that growth strategy. Not only have we grown our operating income from $4.2 million in 2004 and $13.2 million in 2005, to $66.7 million in 2006, but we have achieved a more balanced mix of revenue sources generated from drilling services and production services, from oil and natural gas, from onshore and offshore operations, as well as from domestic and international operations. This diversification allowed us to achieve a 21% increase in operating income for the fourth quarter of 2006 compared to the third quarter of 2006, despite an increased competitive environment in two of our business segments." "In 2006 we completed five significant acquisitions, including three that were substantially larger than any others in previous years," added Mr. Hidayatallah. "The DLS acquisition in August 2006, which expanded our operations in Latin America, has performed very well and allowed us to benefit from the strong market condition in the region. Despite being affected negatively by a ten-day labor strike in Argentina, which affected the entire oil industry there, DLS contributed $8.1 million in operating income for the fourth quarter. Also, in December 2006, we completed our largest acquisition to date of substantially all the assets of Oil & Gas Rental Services, which is already making positive contributions." Revenue for fiscal 2006 rose 192% to $307.3 million, compared to $105.3 million for fiscal 2005. Income from operations grew to $66.7 million in 2006 from $13.2 million during 2005, representing a 404% increase. Net income for 2006 rose 397% to $35.6 million, or $1.66 per diluted share, from net income of $7.2 million or $0.44 per diluted share in 2005. Weighted average shares of common stock outstanding on a diluted basis increased 32% to 21.4 million shares for 2006 from 16.2 million shares for 2005.
Segment Results: * Rental Tools. Operating income in the rental tools business segment
rose to $7.4 million during the fourth quarter of 2006 from $520,000 in
the fourth quarter of 2005, as revenue during the fourth quarter of
2006 grew to $15.2 million, compared to $1.6 million in the fourth
quarter of 2005. The increase in rental tools revenues and operating
income was due primarily to the successful integration of expanded
inventory of quality rental tools resulting from the acquisition of
Specialty Rental Tools, Inc. and enhanced marketing programs that
increased utilization of rental tool inventory. This segment also
benefited from the acquisition of substantially all the assets of Oil &
Gas Rental Services, which was completed on December 18, 2006.
* International Drilling. During the fourth quarter of 2006,
Allis-Chalmers generated operating income of $8.1 million on revenues
of $45.6 million. Results during the fourth quarter of 2006 were
affected negatively by a ten-day general strike on the oil industry in
Argentina in November 2006. Allis-Chalmers continues to make
significant progress in integrating DLS Drilling, Logistics & Services
Corporation, which was acquired on August 14, 2006 providing an entry
point into the South American drilling, workover and production
services market.
* Directional Drilling. Operating income for Allis-Chalmers' directional
drilling services business segment increased 140% to $5.6 million from
$2.3 million in the fourth quarter of 2005. Operating margin for this
segment was 27% in the fourth quarter of 2006, compared to 20% during
the fourth quarter of 2005. The directional drilling segment continues
to experience robust demand and a strong pricing environment. Allis-Chalmers has been successful in retaining its experienced
directional drillers, despite a competitive market for these highly
skilled operators. Allis-Chalmers' growth is also being driven by the
investments made in six additional measurement-while-drilling ("MWD")
kits in 2006 and new operations in West Texas and Oklahoma. An
additional six MWD units have been ordered for the first six months of
2007.
* Casing & Tubing. Operating income for Allis-Chalmers' casing and tubing
services business segment increased to $2.6 million in the fourth
quarter of 2006 from $1.0 million in the fourth quarter of 2005 due to
investments made in additional equipment and the positive contribution
from Rogers Oil Tool Services, Inc., which was acquired in April 2006. Compared to the third quarter of 2006, this segment was affected
negatively by weaker demand and increased competition as well as the
delay in certain equipment sales until the first quarter of 2007. Allis-Chalmers' operations in Mexico continued to produce solid
results, as revenue increased to $1.9 million for the fourth quarter of
2006, compared to $1.8 million in the fourth quarter of 2005.
* Compressed Air Drilling. Operating income from Allis-Chalmers'
compressed air drilling business segment was down slightly in the
fourth quarter of 2006 to $2.2 million from $2.3 million in the fourth
quarter of 2005 due to a decrease in drilling activity in the West
Texas market.
* Production Services. Operating income in Allis-Chalmers' production
services division was $1.4 million in the fourth quarter of 2006 up
from $31,000 in the fourth quarter of 2005. The improvement in
operating income was due to improved utilization of equipment and the
acquisition of Petro-Rentals, Incorporated in October 2006. During the
fourth quarter of 2006, Allis-Chalmers added two coil tubing units to
this segment and has two additional units on order, which are scheduled
to be received during the first four months of 2007.
Outlook & Guidance:
The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. These statements do not include the potential effect of any future capital transactions, such as business combinations, divestitures and financings, which may be completed after the date of this press release. In addition, Allis-Chalmers' guidance ranges are based on the assumption that current market conditions in the company's business segments will last through at least 2007. Any material change in market conditions in any of Allis-Chalmers' business segments could affect guidance. The earnings per share estimates assumes 33,050,000 average fully-diluted shares in the first quarter, and 34,400,000 for the full year, of 2007. Guidance also includes a $1.2 million one-time charge for fees associated with the refinancing of the $300 million bridge loan on January 29, 2007 and higher interest expense in the month of January 2007 while the bridge loan was outstanding.
First Quarter Full Year
2007 Estimate 2007 Estimate
Revenues: $128.0 mm to $131.0 mm $555.0 mm to $572.0 mm
EBITDA: $43.8 mm to $45.9 mm $195.0 mm to $205.9 mm
Earnings Per Share (on a
fully-diluted basis): $0.33 to $0.37 $1.70 to $1.90
Conference Call:
Allis-Chalmers will host a conference call to discuss its 2006 fourth quarter financial results and recent developments at 10:30 a.m. Eastern (9:30 a.m. Central) today, March 8, 2007. To participate in the call, please log on to http://www.alchenergy.com/ or dial (303) 275-2170 and ask for the Allis- Chalmers call at least 10 minutes prior to the start time. For those who cannot listen to the live call, a telephonic replay will be available through March 15, 2007, and may be accessed by calling (303) 590-3000 and using the pass code 11084824#. A web cast archive will also be available at http://www.alchenergy.com/ shortly after the call is concluded.
About Allis-Chalmers Allis-Chalmers Energy Inc., is a Houston based multi-faceted oilfield services company that provides services and equipment to oil and natural gas exploration and production companies throughout the United States, including Texas, Louisiana, New Mexico, Colorado, Oklahoma, Mississippi, Utah, Wyoming, the Gulf of Mexico, and internationally primarily in Argentina and Mexico. Allis-Chalmers provides directional and horizontal drilling services, rental of specialized tools for onshore and offshore drilling, completion and workover operations, casing and production tubing installation, compressed air drilling services, and workover services with capillary and coiled tubing units. In Argentina, Allis-Chalmers is a leading provider of drilling, completion, repair and related services. For more information, visit Allis-Chalmers' website at http://www.alchenergy.com/ or request future press releases via email at http://www.b2i.us/irpass.asp?BzID=1233&to=ea&s=0.
Forward-Looking Statements This press release contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Allis-Chalmers' business, financial condition, results of operations and prospects. Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this press release.
Although forward-looking statements in this press release reflect the good faith judgment of management, such statements can only be based on facts and factors currently known to management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, demand for oil and natural gas drilling services in the areas and markets in which Allis-Chalmers operates, competition, obsolescence of products and services, the ability to obtain financing to support operations, environmental and other casualty risks, and the effect of government regulation. Further information about the risks and uncertainties that may affect Allis-Chalmers are set forth in the company's most recent filings on Form 10-K (including without limitation in the "Risk Factors" section) and in its other SEC filings and publicly available documents. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Allis-Chalmers undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this press release.
Use of EBITDA & Regulation G Reconciliation This press release contains references to EBITDA, a non-GAAP financial measure that complies with federal securities regulations when it is defined as net income (the most directly comparable GAAP financial measure) before interest, taxes, depreciation and amortization. Allis-Chalmers defines EBITDA accordingly for the purposes of this press release. However, EBITDA, as used and defined by Allis-Chalmers, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, Allis-Chalmers believes EBITDA is useful to an investor in evaluating the company's operating performance because this measure: * is widely used by investors in the energy industry to measure a
company's operating performance without regard to the items excluded
from EBITDA, which can vary substantially from company to company
depending upon accounting methods and book value of assets, capital
structure and the method by which assets were acquired, among other
factors; * helps investors to more meaningfully evaluate and compare the results
of Allis-Chalmers' operations from period to period by removing the
effect of its capital structure and asset base from its operating
results; and * is used by management for various purposes, including as a measure of
operating performance, in presentations to the board of directors, as a
basis for strategic planning and forecasting, as a component for
setting incentive compensation and to assess compliance in financial
ratios, among others.
There are significant limitations to using EBITDA as a measure of performance, including the inability to analyze the effect of recurring and non-recurring items that are excluded from EBITDA and materially affect net income or loss, results of operations, and the lack of compatibility of the results of operations of different companies.
Reconciliations of this financial measure to net income, the most directly comparable GAAP financial measure, are provided in the table below.
Reconciliation of EBITDA to GAAP Net Income
($ in millions) For the Three Months
Ended
12/31/06 12/31/05 Net income 10.36 2.55
Depreciation and amortization 8.63 1.99
Interest expense, net 7.18 1.17
Income taxes 5.22 0.78
EBITDA(1) 31.39 6.49
(1) EBITDA is after a non-cash expense of $0.8 million for the fourth
quarter of 2006 for the expensing of stock options in accordance with
SFAS 123R. Forward Guidance(1)
1Q 07E 1Q 07E 2007E 2007E
Lo case Hi Case Lo case Hi Case Net income $ 10.8 $ 12.1 $ 58.3 $ 65.2
Depreciation and amortization 15.2 15.2 59.2 59.2
Interest expense, net 11.5 11.5 43.2 43.2
Income taxes 6.3 7.1 34.3 38.3
EBITDA $ 43.8 $ 45.9 $195.0 $205.9
(1) Based on 2007 Allis-Chalmers guidance range.
ALLIS-CHALMERS ENERGY INC
CONSOLIDATED CONDENSED INCOME STATEMENT
(in thousands, except per share amounts) For the Three Months For the Years
Ended December 31, Ended December 31,
2006 2005 2006 2005
(unaudited) (unaudited) (unaudited) Revenues $114,068 $33,514 $307,304 $105,344 Cost of revenues
Direct costs 71,341 22,133 181,919 69,889
Depreciation 7,655 1,477 20,261 4,874 Total cost of revenues 78,996 23,610 202,180 74,763 Gross margin 35,072 9,904 105,124 30,581 General and administrative 10,996 4,856 35,536 15,576
Amortization 978 515 2,932 1,787 Income from operations 23,098 4,533 66,656 13,218 Other income (expense)
Interest, net (7,178) (1,167) (19,263) (4,397)
Other (341) (35) (347) 186
Total other income (expense) (7,519) (1,202) (19,610) (4,211) Net income before minority
interest and income taxes 15,579 3,331 47,046 9,007 Minority interest in income of
subsidiaries - - - (488)
Provision for income taxes (5,223) (785) (11,420) (1,344) Net income $10,356 $2,546 $35,626 $7,175 Net income per common share:
Basic $0.41 $0.15 $1.73 $0.48
Diluted $0.40 $0.14 $1.66 $0.44 Weighted average shares
outstanding:
Basic 25,327 16,701 20,548 14,832
Diluted 26,097 17,929 21,410 16,238 ALLIS-CHALMERS ENERGY INC. CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands) December 31, December 31,
2006 2005
(unaudited)
ASSETS Cash and cash equivalents $39,745 $1,920
Trade receivables, net 95,766 26,964
Inventory 28,615 5,945
Prepaid expenses and other 16,636 823
Total current assets 180,762 35,652 Property and equipment, net 554,258 80,574
Goodwill 125,835 12,417
Other intangible assets, net 32,840 6,783
Debt issuance costs, net 9,633 1,298
Other assets 4,998 631 Total assets $908,326 $137,355 LIABILITIES AND STOCKHOLDERS EQUITY Current maturities of long-term debt $6,999 $5,632
Trade accounts payable 25,666 9,018
Accrued salaries, benefits and payroll taxes 10,888 1,271
Accrued interest 11,867 289
Accrued expenses 16,951 4,350
Accounts payable, related parties - 60
Total current liabilities 72,371 20,620 Accrued post retirement benefit obligations 304 335
Long-term debt, net of current maturities 561,446 54,937
Other long-term liabilities 20,272 588
Total liabilities 654,393 76,480 Commitments and Contingencies Stockholders' Equity
Common stock 282 169
Capital in excess of par value 216,208 58,889
Retained earnings 37,443 1,817
Total stockholders' equity 253,933 60,875 Total liabilities and stockholders'
equity $908,326 $137,355 ALLIS-CHALMERS ENERGY INC. SEGMENT INFORMATION For the Three Months For the Years
Ended December 31, Ended December 31,
2006 2005 2006 2005
(unaudited) (unaudited) (unaudited) Revenue
Rental tools $15,190 $1,560 $51,521 $5,059
International drilling 45,637 - 69,490 -
Directional drilling services 20,480 11,683 72,811 43,901
Casing and tubing services 13,097 8,336 50,887 20,932
Compressed air drilling
services 10,997 8,978 43,045 25,662
Production services 8,667 2,957 19,550 9,790
$114,068 $33,514 $307,304 $105,344 Operating income (loss)
Rental tools $7,412 $520 $26,293 $1,300
International drilling 8,094 - 12,233 -
Directional drilling services 5,569 2,320 17,666 7,389
Casing and tubing services 2,645 979 12,544 4,994
Compressed air drilling
services 2,193 2,281 10,810 5,612
Production services 1,400 31 2,137 (99)
General corporate (4,215) (1,598) (15,027) (5,978)
$23,098 $4,533 $66,656 $13,218 Depreciation and amortization
Rental tools $2,147 $106 $7,268 $492
International drilling 2,572 - 4,074 -
Directional drilling services 410 235 1,464 887
Casing and tubing services 1,172 588 3,908 2,006
Compressed air drilling
services 821 540 3,057 1,946
Production services 1,084 308 2,005 912
General corporate 427 215 1,417 418
$8,633 $1,992 $23,193 $6,661 Capital expenditures
Rental tools $1,722 $157 $4,538 $435
International drilling 2,680 - 5,770 -
Directional drilling services 1,339 777 5,128 2,922
Casing and tubing services 3,180 1,977 10,980 5,207
Compressed air drilling
services 1,414 4,167 7,716 7,008
Production services 3,521 618 5,253 1,514
General corporate 30 486 312 681
$13,886 $8,182 $39,697 $17,767
Contact: Victor M. Perez, CFO
Allis-Chalmers Energy
713-369-0550 Lisa Elliott, Sr. VP
DRG&E/713-529-6600
DATASOURCE: Allis-Chalmers Energy Inc.
CONTACT: Victor M. Perez, CFO, Allis-Chalmers Energy, +1-713-369-0550; or Lisa Elliott, Sr. VP, DRG&E, +1-713-529-6600, for Allis-Chalmers Energy Web site: http://www.alchenergy.com/
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