CPX Complete Production Services Complete Production Services Common Stock

Complete Production Services, Inc. (NYSE:CPX) today reported fourth quarter revenue of $626.8 million, an increase of 12% over the third quarter of 2011, and fourth quarter Adjusted EBITDA (as defined below) of $183.9 million, an increase of $34.9 million, or 23%, over the third quarter of 2011 resulting in Adjusted EBITDA margins of 29.3%. Fourth quarter 2011 operating income was $134.7 million, up 32% versus the third quarter of 2011, and fourth quarter net income from continuing operations was $78.0 million, or $0.98 per diluted share, an increase of $22.9 million or $0.29 per diluted share over the prior quarter. Results for the fourth quarter of 2011 include approximately $3.3 million of pre-tax transactional expense associated with the pending merger with Superior Energy Services, Inc. and exclude the results of the rig logistics business which was divested on November 30, 2011.

Revenue for the Completion and Production Services segment during the fourth quarter of 2011 was $603.9 million, an increase of 13% over the prior quarter. Adjusted EBITDA for the segment was $191.2 million in the fourth quarter of 2011, an increase of $37.0 million, or 24%, versus the third quarter of 2011. The improved performance was primarily attributed to new asset deployments including a 49,500 horsepower pressure pumping spread in the Marcellus, under a long-term take or pay contract, contributions from the previously-announced acquisition of a Permian Basin focused pressure pumping and acidizing service company, and a recovery from previously reported items which adversely impacted the third quarter of 2011.

Drilling Services segment revenue was $22.9 million during the fourth quarter of 2011, versus $21.7 million in the third quarter of 2011. Adjusted EBITDA increased by $1.3 million over the third quarter of 2011 to $7.5 million, primarily due to a new drilling rig that was deployed under a term contract during the fourth quarter of 2011.

In comparison to the fourth quarter of 2010, revenue increased $190.0 million, Adjusted EBITDA increased $71.1 million, operating income increased $66.4 million, and net income from continuing operations increased by $43.9 million, or $0.55 per diluted share during the fourth quarter of 2011.

For the full year 2011, revenue was $2.2 billion, a 51% increase from full year 2010, and Adjusted EBITDA was $590.2 million, up $242.6 million over the prior year. In 2011, operating income was $398.4 million and net income from continuing operations was $217.1 million, or $2.74 per diluted share.

“Our results for the quarter, adjusted for the divestiture of our rig logistics business and merger related expenses, exceeded the guidance we communicated during our third quarter conference call,” commented Joe Winkler, Chairman and Chief Executive Officer.

“We are pleased with our results and the accomplishments achieved in 2011, which included:

• Assisting our customers in transitioning their focus to the development of oil- and liquid-rich plays by leveraging our:
  • New platform in the Permian Basin,
  • Expanded market positions in the Bakken, Niobrara, Granite Wash and Eagle Ford basins.
• Divesting non-strategic businesses including our rig logistics operations and our Southeast Asian products business.
• Investing over $420 million into strategic services and geographic markets, including:
  • Over 150,000 horsepower of pressure pumping capacity, approximately 80% of which is under long-term take-or-pay agreements,
  • Six large diameter, extended reach coiled tubing units.
• Completing $116.8 million in acquisitions.
• Strengthening our balance sheet by reducing net debt $84.5 million to $446.4 million, and finishing the year with a leverage ratio (net debt to trailing twelve month EBITDA) of 0.76x.”

“We are very proud of what our people have accomplished since the company was established, and we believe our business is very well positioned to continue benefiting from trends in North America which are driving completions of service-intensive, multi-stage, long lateral wells. We look forward to completing the merger with Superior Energy Services, Inc. within the next few weeks and contributing to the growth of the combined company,” concluded Mr. Winkler.

Complete Production Services, Inc. is a leading oilfield service provider focused on the completion and production phases of oil and gas wells. The company has established a significant presence in unconventional oil and gas plays in North America that it believes have the highest potential for long-term growth.

The foregoing 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. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risk and uncertainties. These forward-looking statements include statements regarding future market conditions and trends, the anticipated closing of the company’s merger with Superior Energy Services, Inc. and the company’s future growth. Such statements are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the oilfield service industry, the uncertainty of near-term and long-term activity levels, general economic conditions in the United States and globally, and other risks described in the company’s most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and recent Current Reports on Form 8-K. The company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release.

Management evaluates the performance of Complete’s operating segments using non-GAAP financial measures, including Adjusted EBITDA. Adjusted EBITDA is calculated as net income from continuing operations before net interest expense, taxes, depreciation, amortization, impairment charges and non-controlling interest. Adjusted EBITDA is not a substitute for GAAP measures of earnings and cash flow. Adjusted EBITDA is used in this press release because our management considers this measure to be an important supplemental measure of performance and believes it is used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Reconciliations of Adjusted EBITDA to income from continuing operations are included in the tables at the end of this press release.

         

Complete Production Services, Inc.

Consolidated Statements of Operations

For the Quarters Ended December 31, 2011 and 2010 and September 30, 2011

And the Twelve Months Ended December 31, 2011 and 2010

(unaudited, in thousands, except share and per share data)

  Quarter Ended Twelve Months Ended December 31, September 30, December 31, 2011 2010 2011 2011 2010 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenue 626,788 436,758 557,304 2,153,317 1,424,053   Cost of services 385,189 277,697 356,310 1,358,611 910,629 General and administrative expense 57,682 46,227 51,988 204,555 165,905 Depreciation and amortization   49,254     44,565     47,262     191,792     175,322   492,125 368,489 455,560 1,754,958 1,251,856

Income from continuing operations before interest and taxes

134,663 68,269 101,744 398,359 172,197   Interest expense 12,594 13,952 12,917 53,303 57,605 Interest income   (181 )   (74 )   (180 )   (588 )   (322 ) Income from continuing operations before taxes 122,250 54,391 89,007 345,644 114,914   Tax provision   44,267     20,321     33,931     128,580     44,694     Income from continuing operations $ 77,983 $ 34,070 $ 55,076 $ 217,064 $ 70,220   Discontinued operations, net of tax $ 40,057   $ 4,149   $ 4,110   $ 53,601   $ 13,938     Net income $ 118,040   $ 38,219   $ 59,186   $ 270,665   $ 84,158     Earnings per Share: Continuing operations $ 1.00 $ 0.45 $ 0.71 $ 2.79 $ 0.92 Discontinued operations $ 0.51   $ 0.05   $ 0.05   $ 0.69   $ 0.19   Basic earnings per share: $ 1.51   $ 0.50   $ 0.76   $ 3.48   $ 1.11     Continuing operations $ 0.98 $ 0.43 $ 0.69 $ 2.74 $ 0.90 Discontinued operations $ 0.50   $ 0.06   $ 0.05   $ 0.68   $ 0.18   Diluted earnings per share: $ 1.48   $ 0.49   $ 0.74   $ 3.42   $ 1.08     Weighted average shares outstanding: Basic 78,022 76,318 78,004 77,690 76,048 Diluted 79,575 78,545 79,445 79,208 77,684      

Complete Production Services, Inc.

Condensed Consolidated Balance Sheets

As of December 31, 2011 and 2010

(in thousands)

  December 31, December 31, 2011 2010 (unaudited) (unaudited) Assets: Cash $ 203,588 $ 119,135 Other current assets 549,086 401,289 Property, plant and equipment, net 1,178,455 915,770 Goodwill 277,501 244,138 Restricted cash((1)) 17,000 17,000 Other long-term assets 57,716 24,162 Assets of discontinued operations   -     85,910   Total assets   2,283,346     1,807,404     Liabilities and stockholders' equity: Current liabilities 237,650 135,356 Long-term debt 650,000 650,000 Long-term deferred tax liabilities 289,427 181,473 Other long-term liabilities 3,511 5,916 Liabilities of discontinued operations   -     28,825   Total liabilities 1,180,588 1,001,570   Common stock 780 764 Treasury stock (7,750 ) (1,765 ) Additional paid-in capital 692,204 657,993 Retained earnings 396,830 126,165 Cumulative translation adjustment   20,694     22,677   Total stockholders' equity 1,102,758 805,834   Total liabilities and stockholders' equity $ 2,283,346   $ 1,807,404     (1)

Represents funds placed in escrow as a compensating balance for certain potential long-term insurance claim liabilities, effectively cash collateralizing and replacing a letter of credit.

       

Complete Production Services, Inc.

Consolidated Segment Information

For the Quarters Ended December 31, 2011 and 2010, and September 30, 2011

And Twelve Months Ended December 31, 2011 and 2010

(in thousands, except percentages)

  Quarter Ended December 31, September 30, 2011 2010 2011 (unaudited) (unaudited) (unaudited) Revenue: Completion and production services $ 603,903 $ 416,592 $ 535,625

Drilling services (2)(3)

  22,885     20,166     21,679   Total revenues $ 626,788   $ 436,758   $ 557,304    

Adjusted EBITDA: (1)

Completion and production services $ 191,208 $ 119,217 $ 154,249

Drilling services (2)(3)

7,453 4,811 6,127 Corporate and other   (14,744 )   (11,194 )   (11,370 ) Total $ 183,917   $ 112,834   $ 149,006     Adjusted EBITDA as a % of Revenue: Completion and production services 31.7 % 28.6 % 28.8 %

Drilling services (2)(3)

32.6 % 23.9 % 28.3 % Total 29.3 % 25.8 % 26.7 %     Twelve Months Ended December 31, December 31, 2011 2010 (unaudited) (unaudited) Revenue: Completion and production services $ 2,068,496 $ 1,354,797

Drilling services (2)(3)

  84,821     69,256   Total $ 2,153,317   $ 1,424,053    

Adjusted EBITDA: (1)

Completion and production services $ 611,901 $ 369,826

Drilling services (2)(3)

25,264 16,781 Corporate and other   (47,014 )   (39,088 ) Total $ 590,151   $ 347,519     Adjusted EBITDA as a % of Revenue: Completion and production services 29.6 % 27.3 %

Drilling services (2)(3)

29.8 % 24.2 % Total 27.4 % 24.4 %   (1)

Adjusted EBITDA is a non-GAAP measure used by management, as defined in the last paragraph of this press release.

  (2)

Our Products segment historically consisted of our fabrication and repair shop in north Texas and our Southeast Asian business. We sold our Southeast Asian business in July 2011 and recorded these results as discontinued operations. The remaining Products segment has been combined into the Drilling Services segment for all periods presented.

  (3)

Our Drilling services segment historically primarily consisted of contract drilling and rig logistics businesses. On November 30, 2011, we completed the divestiture of our rig logistics operation and recorded these results as discontinued operations. For the eleven months ended November 30, 2011, our rig logistics business had revenue of $119.0 million and Adjusted EBITDA of $28.1 million.

         

Complete Production Services, Inc.

Reconciliation of Adjusted EBITDA to Income from Continuing Operations

For the Quarters Ended December 31, 2011 and 2010, and September 30, 2011

And the Twelve Months Ended December 31, 2011 and 2010

(unaudited, in thousands)

  Completion & Production Drilling Corporate & Services Services Other Total Quarter Ended December 31, 2011:

Adjusted EBITDA (1)

$ 191,208 $ 7,453 $ (14,744 ) $ 183,917 Depreciation & amortization   45,023   3,658   573     49,254   Operating income (loss) $ 146,185 $ 3,795 $ (15,317 ) $ 134,663 Interest expense 12,594 Interest income (181 ) Income taxes   44,267   Income from continuing operations $ 77,983       Quarter Ended December 31, 2010:

Adjusted EBITDA (1)

$ 119,217 $ 4,811 $ (11,194 ) $ 112,834 Depreciation & amortization   40,469   3,578   518     44,565   Operating income (loss) $ 78,748 $ 1,233 $ (11,712 ) $ 68,269 Interest expense 13,952 Interest income (74 ) Income taxes   20,321   Income from continuing operations $ 34,070       Quarter Ended September 30, 2011:

Adjusted EBITDA (1)

$ 154,249 $ 6,127 $ (11,370 ) $ 149,006 Depreciation & amortization   43,147   3,539   576     47,262   Operating income (loss) $ 111,102 $ 2,588 $ (11,946 ) $ 101,744 Interest expense 12,917 Interest income (180 ) Income taxes   33,931   Income from continuing operations $ 55,076       Twelve Months Ended December 31, 2011:

Adjusted EBITDA (1)

$ 611,901 $ 25,264 $ (47,014 ) $ 590,151 Depreciation & amortization   175,011   14,427   2,354     191,792   Operating income (loss) $ 436,890 $ 10,837 $ (49,368 ) $ 398,359 Interest expense 53,303 Interest income (588 ) Income taxes   128,580   Income from continuing operations $ 217,064       Twelve Months Ended December 31, 2010:

Adjusted EBITDA (1)

$ 369,826 $ 16,781 $ (39,088 ) $ 347,519 Depreciation & amortization   159,110   14,190   2,022     175,322   Operating income (loss) $ 210,716 $ 2,591 $ (41,110 ) $ 172,197 Interest expense 57,605 Interest income (322 ) Income taxes   44,694   Income from continuing operations $ 70,220    

(1) Adjusted EBITDA is a non-GAAP measure used by management, as defined in the last paragraph of this press release.