Superior Energy Services Inc (NYSE:SPN) Q2 2019 Earnings Conference Call Transcript

Jul 24, 2019 • 09:00 am ET

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Superior Energy Services Inc (NYSE:SPN) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, and welcome to the Superior Energy Services Second Quarter Earnings Conference Call. [Operator Instructions].

I would not like to turn the conference over to Mr. Paul Vincent, Vice President, Treasurer and Investor Relations. Please go ahead, sir.

Executive
Paul Vincent

Good morning, and thank you for joining Superior Energy's Second Quarter 2019 Conference Call. With me today are Superior's President and CEO Dave Dunlap; our CFO, Westy Ballard; and our CAO, Jamie Spexarth.

During this conference call, management may make forward-looking statements regarding future expectations about the company's business, management's plans for future operations or similar matters. The company's actual results could differ materially due to several important factors, including those described in the company's filings with the Securities and Exchange Commission.

Management will refer to non-GAAP financial measures during this call in accordance with Regulation G. The company provides a reconciliation of these measures on its website.

With that, I'll turn the call over to Dave Dunlap.

Executive
David Dunlap

Thank you, Paul, and good morning to everyone listening to our call today. We'll begin with a brief review of our second quarter activity. Westy will discuss segment results, and I'll offer thoughts on our outlook before turning the call over for Q&A.

For the second quarter of 2019, Superior Energy generated revenue of $436 million, adjusted EBITDA of $69 million and an adjusted net loss from operations of $46 million or $0.29 per share. Our cash balance increased in excess of $82 million sequentially, primarily due to divestiture of our U.S. land drilling rig business. This all cash transaction resulted in the receipt of $74 million at closing, as well as roughly $4.5 million in net working capital collected early in the third quarter. During the first quarter of 2019, these rigs generated 11.5% EBITDA margin on approximately $33 million of revenue. This attractively valued divestiture immediately improves our balance sheet, and also demonstrates that transactions can be consummated despite a very challenging market.

We also generated free cash flow during the quarter as we maintained a disciplined approach to capital spending, and benefited from the diversity of our geographic and product mix. Our expectations are to generate free cash flow between $20 million and $30 million in the second half of 2019. We now expect capital expenditures for the year to be approximately $160 million, lower than our original expectation of $170 million. We recognize that our current capital structure contains too much long-term debt. As a result of the aforementioned developments, which have significantly increased our cash balances. Be assured that we will continue to proactively rationalize operating cost, maintain disciplined capital allocation and seek further divestitures of non core assets. All of these behaviors are cash positive.

And in conjunction with routinely evaluating refinancing opportunities, greatly enhance our ability to address our first long-term debt maturity, which occurs more than two years from now. Operationally, U.S. land markets continue to experience varying degrees of fragmentation and oversupply on the service side, as well as continually evolving customer behavior. More specifically,