Q4 2024 Oil States International Inc Earnings Call
Prevent any background noise. After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time sensitive breasts are followed by the number one on your telephone keypad. If you would like to withdraw your question first star one again. Thank you Ms. Ellen Pennington you may begin your conference.
Mark: Thank you Mark good morning, and welcome to oil States' fourth quarter 2024 earnings conference call. Our call today will be led by our President and CEO, Cindy Taylor and Lloyd <unk> oil States' executive Vice President and Chief Financial Officer before we begin we would like to caution listeners regarding forward looking statements.
Mark: To the extent that our remarks today contain information other than historical information. Please note that we're relying on the safe Harbor protections afforded by federal law No. One should assume that these forward looking statements remain valid later in the quarter or beyond any such remarks should be weighed in the context of the many factors that affect our business, including those.
Mark: As disclosed in our 2023 Form 10-K, along with other recent SEC filings. This call is being webcast and can be accessed at oil States' website. A replay of the conference call will be available two hours. After the completion of this call and will continue to be available for 12 months I will now turn the call over to.
Mark: Cindy.
Cindy Taylor: Thank you Alan and good morning, and thank you for joining our conference call today, where we will discuss our fourth quarter 2024 results and provide our thoughts on market trends. In addition to discussing our company's specific outlook through.
Cindy Taylor: Through the fourth quarter, we continued to build momentum towards achieving our strategic objectives supported by strong demand in offshore and international sectors, while overcoming some headwinds in U S domestic land based activities.
Risks disclosed in our 2023 Form 10-K, along with other recent SEC filings. This call is being webcast and can be accessed at oil States' website. A replay of the conference call will be available two hours. After the completion of this call and will continue to be available for 12 months I will now turn the call.
Cindy Taylor: With continued expansion of our international and offshore product offerings, along with the strategic optimization of our U S land driven businesses, our international and offshore revenues by destination grew to 72% of our consolidated revenues for the quarter, while U S land driven.
Cindy: Over to Cindy.
Cindy: Thank you Alan and good morning, and thank you for joining our conference call today, where we will discuss our fourth quarter 2024 results and provide our thoughts on market trends. In addition to discussing our company's specific outlook.
Cindy Taylor: Revenues represented 28% as.
Cindy Taylor: As we have discussed in prior quarters, we have strategically streamlined our operations in the United States through the exit of underperforming locations and business lines. Our focus on business mix optimization continued during the fourth quarter along these lines, we completed the sale of a previously.
Cindy: During the fourth quarter, we continued to build momentum towards achieving our strategic objectives supported by strong demand in offshore and international sectors, while overcoming some headwinds in U S. Domestic land based activities with continued expansion of our international and offshore product offerings.
Cindy Taylor: <unk> idled facility, netting cash proceeds of $24 $8 million, resulting in a pretax gain.
Cindy: Along with the strategic optimization of our U S land driven businesses, our international and offshore revenues by destination grew to 72% of our consolidated revenues for the quarter, while U S land driven revenues represented 28%.
Cindy Taylor: $15 3 million or offshore and international operations grew sequentially in terms of revenue and bookings during the fourth quarter. However improvements in these regions were offset by our U S land driven operations due to a declining frac spread count triggered by typical fourth quarter sees.
Cindy: As we have discussed in prior quarters, we have strategically streamlined our operations in the United States through the exit of underperforming locations and business lines are focused on business mix optimization continued during the fourth quarter.
Cindy Taylor: Analogy.
Cindy Taylor: Our completion and production work in the Gulf of America has rebounded to higher activity levels early in 2025 from a slower second half of 2024, following adverse third quarter weather events, we remain dedicated to growing our operations.
Cindy: These lines, we completed the sale of a previously idled facility, netting cash proceeds of $24.8 million, resulting in a pretax gain of $15 3 million.
Cindy Taylor: Strategically investing in our most profitable business areas supported by advanced technologies. We will also continue to focus on the return of cash to our shareholders. During the quarter, we generated cash flows from operations totaling $18 million and repurchased $9 million of our common stock.
Cindy: Our offshore and international operations grew sequentially in terms of revenue and bookings during the fourth quarter. However improvements in these regions were offset by our U S land driven operations due to a declining frac spread count triggered by typical fourth quarter seasonality.
Cindy Taylor: During 2025, we expect to generate strong free cash flow, allowing for further shareholder returns.
Cindy: Our completion and production work in the Gulf of America has rebounded to higher activity levels early in 2025 for my slower second half of 2024, following adverse third quarter weather events.
Cindy Taylor: Lloyd will now review, our operating results along with our financial position in more detail.
Lloyd: Thanks, Cindy good morning, everyone. During the fourth quarter, we generated revenues of $165 million.
Cindy: We remain dedicated to growing our operations and strategically investing in our most profitable business areas supported by advanced technologies. We will also continue to focus on the return of cash to our shareholders. During the quarter, we generated cash flows from operations totaling $18 million and.
Cindy Taylor: Adjusted consolidated EBITDA of $19 million.
Cindy Taylor: Our adjusted net income totaled $5 $5 million or <unk> <unk> per share after excluding a gain of $15 3 million associated with the sale of a previously idle facility and $3 $1 million of restructuring charges incurred in connection with certain U S land based operations and facility closures.
Cindy: Repurchased $9 million of our common stock during 2025, we expect to generate strong free cash flow, allowing for further shareholder returns Lloyd will now review, our operating results along with our financial position in more detail.
Cindy Taylor: Our offshore manufactured products segment grew 5% sequentially.
Cindy Taylor: Generating revenues of $107 million and adjusted segment EBITDA of $25 million up 6% sequentially in the fourth quarter.
Lloyd: Thanks, Andy and good morning, everyone. During the fourth quarter, we generated revenues of $165 million.
Cindy Taylor: Adjusted segment EBITDA margin was 23% in the fourth quarter comparable to the third quarter.
Lloyd: Adjusted consolidated EBITDA of $19 million.
Lloyd: Our adjusted net income totaled $5 $5 million or nine cents per share after excluding a gain of $15 3 million associated with the sale of a previously idled facility and $3 $1 million of restructuring charges incurred in connection with certain U S land based operations and facility closures.
Cindy Taylor: In our completion and production services segment, we generated revenues of $30 million and adjusted segment EBITDA of $3 $5 million in the fourth quarter.
Cindy Taylor: Adjusted segment EBITDA excluded operating lease asset impairment charges of $1 2 million and facility closure and other charges totaling $1 9 million.
Lloyd: Our offshore manufactured products segment grew 5% sequentially.
Cindy Taylor: Excluding these charges adjusted segment EBITDA was 12% in the fourth quarter compared to 13% in the third quarter.
Generating revenues of $107 million and adjusted segment EBITDA of $25 million up 6% sequentially in the fourth quarter.
Cindy Taylor: Excluding the revenue impact of exited operations in both the third and fourth quarters.
Lloyd: Adjusted segment EBITDA margin was 23% in the fourth quarter comparable to the third quarter.
Cindy Taylor: <unk> and production services segment revenues declined $1 6 million or 5% sequentially.
Lloyd: In our completion and production services segment, we generated revenues of $30 million and adjusted segment EBITDA of $3 $5 million in the fourth quarter.
Cindy Taylor: In our downhole technologies segment, we reported revenues of $27 million and breakeven adjusted segment EBITDA for the fourth quarter.
Lloyd: Adjusted segment, EBITDA excluded operating lease asset impairment charges of $1.2 million and facility closure and other charges totaling $1 $9 million.
Cindy Taylor: Despite some large planned collections from customers moving into early January oil states generated $18 million in cash flows from operations during the quarter.
Lloyd: Excluding these charges adjusted segment EBITDA was 12% in the fourth quarter compared to 13% in the third quarter.
Cindy Taylor: We invested $14 million in Capex, a portion of which was customer funded.
Lloyd: Excluding the revenue impact of exited operations in both the third and fourth quarters completion and production services segment revenues declined $1 6 million or 5% sequentially.
Which was more than offset by the $25 billion in net proceeds received during the fourth quarter.
Idled facility sale.
Cindy Taylor: Cindy mentioned cash was used to buy back $9 million of our common stock.
Sony: Sony will offer some market outlook and concluding comments.
Lloyd: In our downhole technologies segment.
Lloyd: We reported revenues of $27 million and breakeven adjusted segment EBITDA for the fourth quarter.
Strong long term prospects for oil natural gas and LNG, coupled with growing global power demand are expected to drive ongoing capital investments in offshore and international projects led by developments in Latin America, The United States Asia, and Africa recently announced.
Lloyd: Despite some large planned collections from customers moving into early January.
Lloyd: Oil states generated $18 million in cash flows from operations during the quarter.
Lloyd: We invested $14 million in Capex, a portion of which was customer funded.
Sony: <unk>, which has resulted in production orders with major subsea Oems and associated industry backlog bills should continue to translate into increased demand for our products driving higher bidding activity bookings and ultimately revenue growth.
Which was more than offset by the $25 billion in net proceeds received during the fourth quarter from this idled facility sale.
Lloyd: And he mentioned cash was used to buy back $9 million of our common stock.
Lloyd: Cindy will offer some market outlook and concluding comments.
Sony: We are successfully marketing our managed pressure drilling system, which received further market acceptance with key customer approval to operate in South America. During the fourth quarter. We are also seeing positive market momentum across our conductor connector products and our flagship flex joint deeper.
Cindy: Strong long term prospects for oil natural gas and LNG, coupled with growing global power demand are expected to drive ongoing capital investments in offshore and international projects led by developments in Latin America, The United States Asia, and Africa recently announced F. I days, which have result.
Sony: Water riser connector products.
Sony: In the shallow water environment project opportunities for fixed platform foundations, subsea pipeline and associated repair systems as well as topside equipment. Our emerging these opportunities compare combined with the low capital intensity of our global manufacturing operations.
Cindy: Sid in production orders with major subsea Oems and associated industry backlog builds should continue to translate into increased demand for our products driving higher bidding activity bookings and ultimately revenue growth. We are successfully marketing our managed pressure drilling.
Sony: This positions us for strong future growth and shareholder returns.
Cindy: Systems, which received further market acceptance with key customer approval to operate in South America. During the fourth quarter. We are also seeing positive market momentum across our conductor connector products and our flagship flex joint deepwater riser connector products.
Sony: While domestic market conditions and activity levels are expected to remain relatively flat throughout 2025, we expect profitability to improve within our completion and production services and downhole technologies segments, given our restructuring initiatives undertaken in two.
Cindy: In the shallow water environment project opportunities for fixed platform foundations, subsea pipeline and associated repair systems as well as topside equipment are emerging these opportunities compare combined with the low capital intensity of our global manufacturing operations.
Sony: 1024, coupled with what is expected to be a more friendly energy friendly regulatory environment.
Sony: Domestic revenue opportunities from new technology introductions, including our open architecture Perforating systems.
Cindy: Because it positions us for strong future growth and shareholder returns.
Sony: In digital technologies for wireline service providers should support market share gains in.
Cindy: While domestic market conditions and activity levels are expected to remain relatively flat throughout 2025, we expect profitability to improve within our completion and production services and downhole technologies segments, given our restructuring initiatives undertaken in two.
Sony: Internationally, our initiatives to secure contracts with our customers for the supply of perforating products is gaining traction with recent awards in Latin America, and the eastern Hemisphere that are scheduled to commence in 2025.
Cindy: 1024, coupled with what is expected to be a more friendly energy friendly regulatory environment.
Sony: Given a solid offshore and international outlook combined with the potential for incremental margin improvement across our U S land driven businesses. We expect 2025 full year revenues to range between 700 $735 million.
Cindy: Domestic revenue opportunities from new technology introductions, including our open architect or perforating systems.
Cindy: And digital technologies for wireline service providers should support market share gains internationally, our initiatives to secure contracts with our customers for the supply of perforating products is gaining traction with recent awards in Latin America, and the eastern Hemisphere that are scheduled to.
Sony: Full year EBITDA to range between 88 and $93 million, our first quarter guidance calls for revenues in a range of $160 million to $170 million and EBITDA of 17, and a half to $18 5 million cash.
Cindy: Commenced in 2025.
Sony: Cash flows from operations are expected to remain strong in 2025, and a range of 65 to 75 million with Capex of approximately $25 million planned providing opportunities for ongoing share repurchases during the year.
Cindy: Given a solid offshore and international outlook combined with the potential for incremental margin improvement across our U S land driven businesses. We expect 2025 full year revenues to range between 700 and $735 million and full.
Sony: I would remind listeners that we generally see lower cash flows in the first quarter of each year driven by the timing of funding short and long term incentive payments.
Cindy: Your EBITDA to range between 88 and $93 million, our first quarter guidance calls for revenues in a range of $160 million to $170 million and EBITDA of 17, and a half to 18 and a half million dollars.
Sony: Our capital allocation priorities remain very focused we are committed to investing in organic growth opportunities prioritizing growth Capex and funding organic research and development, which will provide for sustained competitive advantages our strategic priority center on driving long term.
Cindy: Cash flows from operations are expected to remain strong in 2025, and a range of $65 million to $75 million with Capex of approximately 25 million plant providing opportunities for ongoing share repurchases during the year.
Sony: <unk> ability and growth by optimizing our global operations capitalizing on the strength of offshore and international markets and focusing on our core competencies and technology differentiators by leveraging our expanded portfolio of technologies and specialized services, we aim to.
Cindy: I would remind listeners that we generally see lower cash flows in the first quarter of each year driven by the timing of funding short and long term incentive payments.
Sony: Deliver superior value to our customers and generate strong returns for our stockholders.
Cindy: Our capital allocation priorities remain very focused we are committed to investing in organic growth opportunities prioritizing growth Capex and funding organic research and development, which will provide for sustained competitive advantages our strategic priorities center on driving long term prop.
Speaker Change: That completes our prepared comments Mark would you open up the call for questions and answers at this time please.
Speaker Change: Absolutely at this time I would like to remind everyone in order to ask a question with the press star followed by the number one on your telephone keypad.
Cindy: Portability and growth by optimizing our global operations capitalizing on the strength of offshore and international markets and focusing on our core competencies and technology differentiators by leveraging our expanded portfolio of technologies and specialized services, we aim to deliver.
Speaker Change: Phosphate just a moment to compile the Q&A roster.
Speaker Change: Okay.
Speaker Change: And your first question comes from the line of Stephen King Carroll with Stifel. Your line is now open.
Speaker Change: Thanks, Good morning, everybody.
Speaker Change: Thanks, David.
Speaker Change: I think two things.
Cindy: Liver superior value to our customers and generate strong returns for our stockholders.
Speaker Change: Sure.
Speaker Change: Kind of a little Kid.
Speaker Change: Free cash flow it looks like $40 million to $50 million in 2025. What are you are you focused on buybacks over over debt reduction at this point, but how do you think about the allocation of that free cash.
Cindy: That completes our prepared comments Mark would you open up the call for questions and answers at this time please add.
Speaker Change: Absolutely at this time I would like to remind everyone in order to ask the questions and depressed star followed by the number one on your telephone keypad.
Speaker Change: We feel very comfortable with our debt levels. I think you saw we executed in Q4 with share repurchases.
Cindy: Phosphate just a moment to compile the Q&A roster.
Speaker Change: We do have our debt maturing in April but at the end of the year. We noted we had roughly $60 million of net debt and Lloyd's comments, we had some very large receivables due late in December that we're actually collected on January 9th that thing and so I think the point of that is.
Speaker Change: And your first question comes from the line of Stephen King Garo, which Stifel.
Cindy: Line is now open.
Thanks, Good morning, everybody.
Cindy: Steven.
Cindy: I think two things from me.
Cindy: Sure.
Cindy: Kind of allude to free cash flow it looks like $40 million to $50 million next in 2025. What are you are you focused on buybacks over over debt reduction at this point of how do you. How do you think about the allocation of that free cash.
As we were roughly net debt $45 million in January and so we're really not concerned with the level of debt that we have at this point and I think it is prudent to focus on shareholder returns.
Cindy: We feel very comfortable with our debt levels. I think you saw we executed in Q4 with share repurchases. Yes, we do have our debt maturing in April but at the end of the year. We noted we had roughly $60 million of net debt in Lloyd's comments, we had some very large receivables due.
Speaker Change: Great. Thanks.
Speaker Change: One of the things that kind of keeps surfacing in conversations or is it sort of lack of.
Speaker Change: Offshore production capacity sort of delayed rig activity.
Speaker Change: When we think about <unk> growth can.
Speaker Change: Can you give us a SaaS or remind us sort of the revenue opportunity you have on the <unk> side I think one of the big players are sort of suggesting seven combined per year that are in the order in the next couple of years can you just kind of frame your opportunity.
Cindy: Late in December that we're actually collected on January 9th that thing and so I think the point of that is we were roughly net debt $45 million in January and so we're really not concerned with the level of debt that we have at this point and I think it is prudent to focus on share.
Speaker Change: Well I can I mean were embedded in our guidance on now you need to work through the numbers, but there is revenue growth and our offshore manufactured products business and Thats really grounded on one existing backlog.
Cindy: Holder returns.
Cindy: Great. Thanks.
Cindy: One of the things that kind of keeps sharp shooting in conversations or is it sort of lack of off.
Speaker Change: Indicating growth in certain regions are bidding and quoting activity, particularly in.
Cindy: Offshore production capacity sort of delayed rig activity.
Cindy: When we think about <unk> growth can you give us a SaaS or remind us sort of the revenue opportunity you have on the <unk> side I think one of the big players instead of suggestions seven combined per year loaded in the order in the next couple of years can you just kind of frame your opportunity.
Speaker Change: South America, Brazil, Guyana et cetera.
Speaker Change: Give us the indication that the revenue growth appear solid coupled with new technology introductions, and so I tend to get a bit more granular when we gave our guidance and it's really predicated on existing bidding and quoting activity.
Cindy: Well I can I mean, where are you now in <unk>.
Cindy: Got it in our guidance and now you need to walk through the numbers, but there is revenue growth and our offshore manufactured products business and that's really grounded on one existing backlog.
Speaker Change: We have coming in and you know as well Stephen we actually try to schedule that as best we can it is never exact in terms of receiving the orders on a quarter by quarter basis.
Speaker Change: Maybe we are a little bit different everybody tends to focus on white space for a drill ours or any kind of new reactivation of rigs coming out of the market and we're a little more production infrastructure oriented I accept and realize that for analysts that follow it it's a little harder because you don't ever.
Catering growth in certain regions are bidding and quoting activity, particularly in.
Cindy: South America, Ie, Brazil, Guyana et cetera.
Cindy: Give us the indication that the revenue growth appear solid coupled with new technology introductions, and so I tend to get a bit more granular when we give our guidance and it's really predicated on existing bidding and quoting activity.
Speaker Change: Let's say the backend on the deployment of the production infrastructure.
And I think you are asking me in a given F PSL opportunity, how big could that be in it very I hate to tell you. It varies greatly depending on how that field is designed AIE were really largely driven by the number of import lines export lines on a facility some time.
Cindy: That we have coming in and you know as well Stephen we actually try to schedule that as best we can it is never exact in terms of receiving the orders on a quarter by quarter basis.
Speaker Change: I think maybe we are a little bit different everybody tends to focus on white space for drillers or any kind of new reactivation, our rigs coming out of the market and where we're a little more production infrastructure oriented and I accept and realize that for analysts that follow it it's a little harder because you don't.
Speaker Change: <unk> they will face those over a period of time, sometimes youll do a larger build out so that were giving you a range just on the large key connectors is probably anywhere from $15 million to $25 million order of magnitude and so they're important to us without question.
Speaker Change: Ever see the backend on the deployment of the production infrastructure and I think you're asking may in a given F. P. S O opportunity, how big could that be in it very I hate to tell you. It varies greatly depending on how that field is designed I, we're really largely <unk>.
Speaker Change: And it's also some of our leading technology I hope that answers your questions I know, it's kind of hard to model, but I think important for this call. We are planning for revenue growth in this environment and I know that the macro suggest kind of a flattish international activity, but new product development are.
And by the number of import lines export lines on a facility, sometimes they will face those over a period of time, sometimes you'll do a larger build out so that were giving you a range just on the large the key connectors is probably anywhere from $15 million to $25 million order of magnitude and so there.
Speaker Change: But Tom facility and kind of existing backlog and bidding and quoting activity gives us a level of confidence to guide to higher revenues.
Speaker Change: Yes.
Speaker Change: Color and if I could just ask one more quick one.
Okay.
Speaker Change: Without asking you sort of specifics, you've clearly talked about streamlining opportunities and focusing on more value added product lines.
Speaker Change: Important to us without question intolerant and it's also some of our leading technology I hope that answers your questions I know, it's kind of hard to model, but I think important for this call. We are planning for revenue growth in this environment and I know that the macro suggest kind of a flattish.
Speaker Change: The revenue guidance you gave if you just kind of use that as a framework or even 2024.
<unk> of that you think falls in that category of sort of stuff that's kind of.
Speaker Change: We could if we found the way.
Speaker Change: Yes.
Speaker Change: International activity, but new product development, our new baton facility and kind of existing backlog and bidding and quoting activity give us a level of confidence to guide to higher revenues.
Speaker Change: Reward is it 10% or greater.
Speaker Change: I'm not sure I understand what Youre asking Steve So first of all we do.
Speaker Change: <unk> put in the press release that the revenue impact from the exited operations in 2024 was $41 million.
Speaker Change: No.
Speaker Change: That's great color and if I could just ask one more quick one unnoticed.
Speaker Change: What kind of effect that as our starting point.
Speaker Change: For 2020.
Speaker Change: Without asking you sort of specifics, you've clearly talked about streamlining opportunities and focusing on more value added product lines of the revenue guidance. You gave if you just kind of use that as a framework or even 2024.
Speaker Change: The point of what Lloyd is say in your model, maybe modeling different revenue mix because of these exited businesses, but fundamentally the mix and the margin profile has improved and it is more exposed to offshore and international and more differentiated technology than it was before.
Speaker Change: What percentage of that do you think falls in that category of sort of stopped its cargo.
Speaker Change: So if we can if we found a way to get divested the reward is it 10% or is it greater.
Speaker Change: Sure.
Speaker Change: We're answering your specific question yes.
Speaker Change: I'm not sure I understand what you're asking Stephen.
Speaker Change: So does that helps that helps thank you, but we did put all of that information on the exited information and it'll be in the 10-K to help you model it.
Speaker Change: First off we did put in the press release that the revenue impact from the exited operations in 2024 was $41 million. So that's kind of a starting point.
Speaker Change: It's in the press release too and that's that's just specific to the completion of production services segment.
Speaker Change: 2020.
Speaker Change: Yes, no that is helpful.
Speaker Change: I think the point of what Lloyd is say in your mouth, maybe modeling different revenue mix because of these exited businesses, but fundamentally the mix and the margin profile has improved and it is more exposed to offshore and international and more differentiated technology than it was.
Speaker Change: Probably asked the question poorly, but I think my question was of the remainder of the business.
Speaker Change: What's left.
Speaker Change: Currently.
Speaker Change: What percentage of that kind of revenue base, just kind of would you sort of think about it is sort of lower margin stuff that would.
Speaker Change: Candidate.
Speaker Change: Before.
Speaker Change: For answering your specific question.
Speaker Change: Yeah.
Speaker Change: All of this a long time.
Speaker Change: That helps us that helps that helps thank you, but we did put all of that information on the exited information and it'll be in the 10-K to help you model. It's in the press release to that.
Speaker Change: The key initiatives are oftentimes around.
Speaker Change: Kind of our downhole technologies business I mean, you look at the overall results are relatively breakeven, but it was a very weak market in November December with the holidays and shutdown of completion activity, but a huge focus of us has been and will be in this year, improving the margin profile for the downhole technology.
Speaker Change: Specific to the completion of production services segment.
Speaker Change: Yes no.
Speaker Change: That is helpful.
Speaker Change: Probably asked the question poorly, but I think my question was of the remainder of the business and sort of what's left.
Speaker Change: <unk> segment and the international expansion efforts are already beginning to pay off in the sense that new contract opportunities internationally and then we are rolling out new technology domestically and we're seeing early indications of market share gains there as well great.
Speaker Change: Currently how what percentage of that kind of revenue base, just kind of what you should think about as sort of a lower margin or stuff that would.
Speaker Change: Okay.
Speaker Change: Well on the Eve of followed US a long time.
Speaker Change: The key initiatives are oftentimes around.
Great that's great color. Thank you.
Speaker Change: Kind of our downhole technologies business I mean, you look at the overall results are relatively breakeven, but it was a very weak market in November December with the holidays and shutdown of completion activity, but a huge focus of us has been and will be in this year, improving the margin profile for the downhole.
Speaker Change: Thank you Steven.
Speaker Change: And your next question comes from the line of Chip.
Speaker Change: Jim Rollyson with Raymond James Please go ahead.
Speaker Change: Hey, good morning, everyone.
Speaker Change: Maybe taking stevens questions.
Speaker Change: Further just.
Speaker Change: So you talked about the revenue side of that the.
Speaker Change: <unk> segment and the international expansion efforts are already beginning to pay off in the sense of new contract opportunities internationally, and then we rolling out new technology domestically and we're seeing early indications of market share gains there as well.
Speaker Change: The other part you put in the press release on completion and production services.
Speaker Change: Was the kind of 20 million type of or.
Speaker Change: Just under $20 million of operating losses of stuff that you got rid of.
Speaker Change: And your full year to date number was low $20 million operating wassail.
Speaker Change: Great that's great color. Thank you.
Speaker Change: Just kind of trying to bridge the gap here on as we think about 25.
Steven: Thank you Steven.
Speaker Change: And your next question comes from the line of Chi.
Speaker Change: And what the margin profile in that business segment. How are you thinking about that when you look at what you've done to get rid of the kind of bad mix of stuff that got re you got rid of the new tech and international rollout opportunities and the margins embedded there like how do we think about.
Speaker Change: Jim Rollyson with Raymond James Please go ahead.
Hey, good morning, everyone.
Speaker Change: Taking stevens questions a step further.
Speaker Change: So he thought he talked about the revenue side of that you know.
Speaker Change: The other part you put in the press release on completion and production services.
Maybe for the full year or however, you want to talk about it like the margin profile and completion production for 45, given what happened in 'twenty four.
Speaker Change: Was the kind of 20 million type of or just or.
Speaker Change: Just under $20 million of operating losses of stuff that you got rid of.
Speaker Change: I'm looking to Lloyd to kind of tell me what it was for 2024, but I think it was mid teens range I'm sure you have that in front of you and we are trying to move those margins more into the 19% to 20% range.
Speaker Change: And your full year to date number was low $20 million of operating wassail.
Speaker Change: Just kind of trying to bridge the gap here on as we think about 25.
Speaker Change: And what the margin profile in that business segment. How are you thinking about that when you look at what you've done to get rid of the kind of bad mix of stuff that got re you got rid of the new Tech and international rollout opportunity from a margin embedded there like how do we think about.
Speaker Change: In.
Speaker Change: 2025.
Speaker Change: So very substantial EBITDA, our EBITDA margin improvement and even last year a lot of those were impairment charges that werent necessarily cash cost somewhere.
Speaker Change: Maybe for the full year or however, you want to talk about it like the margin profile and completion production for 45, given what happened in 'twenty four yeah.
Speaker Change: But as we go forward. This is a much cleaner year, we envision that today I E. We've gotten through a lot of this work in all of our employees on the phone should know that this is largely behind us and it'll pay off and I should also mention and completion and production services, we have a mix of business.
Lloyd: I'm looking to Lloyd to kind of tell me what it was for 2024, but I think it was mid teens range I'm sure you have that in front of you and we are trying to move those margin more into the 19% to 20% range in two.
Speaker Change: As part of which is in our national weighted to the Middle East part of which is Gulf of Mexico, and I meant our Gulf of America as it is now called.
Speaker Change: 2025.
Speaker Change: So very substantial EBITDA. These are EBITDA margins improvement and even last year a lot of those were impairment charges, they werent necessarily cashcall somewhere.
Speaker Change: So that mix shift to again, a little more and our national offshore mix of business, which generally has a little higher margin and more resilient, albeit the Gulf of America rig count low it's beneficial work at good margins and so that mix helps us.
Speaker Change: But as we go forward. This is a much cleaner year, we envision that today I E. We've gotten through a lot of this work.
Speaker Change: Now our employees on the phone should know that this is largely behind us and it'll pay off and I should also mention and completion and production services, we have a mix of business as part of which is in our national weighted to the middle East part of which is Gulf of Mexico, and I met our Gulf of America as it is now.
Speaker Change: As we go forward and.
Speaker Change: Then again the drag has been just the cost structure and some of the low to no margin contributing businesses that are no longer in our portfolio.
Speaker Change: Got it that's very helpful. Cindy appreciate that.
Speaker Change: <unk>.
Speaker Change: Following up on that one of the things.
So that mix shifts to again, a little more in our national offshore mix of business, which generally has a little higher margin and more resilient, albeit you know the Gulf of America rig counts low it's beneficial work at good margins and so that mix helped.
Kind of heard over the course over the last I don't know three or four quarters.
Speaker Change: From other manufacturers of various products is kind of the theme.
Speaker Change: That backlog has kind of been gradually rolling from lower margin work that was priced back coming out of COVID-19 to gradually higher priced backlog as pricing has gotten better because the market got stronger.
Seth: Seth as we go forward and.
Seth: Then again the drag has been just the cost structure and some of the low to no margin contributing businesses that are no longer in our portfolio.
Speaker Change: Maybe just a little bit of commentary around you talked about bidding opportunities in the general thesis seems to be.
Speaker Change: <unk> revenues will grow year over year, but maybe talk about the kind of margin profile there.
Seth: Got it that's very helpful. Cindy appreciate that.
Speaker Change: We really didn't have the adverse mark we didn't take a lot of loss leaders if you will during.
Seth: Following up on that one of the things.
Seth: Kind of heard over the course of the last I don't know three or four quarters from other manufacturers of various products as kind of the theme that backlog has kind of been gradually rolling from lower margin work that was priced back coming out of COVID-19 to gradually higher priced backlog is price.
Speaker Change: The down market and so ours tend to be mix oriented and if you go back for the last five years, our offshore manufactured products business has been very solid in terms of growth.
Speaker Change: And margin profile over the years and cash flow generation I mean, it's a great business and what we're looking for really is increased market share topline growth at incrementals come through very well, but we.
Seth: It's gotten better because the market got stronger may.
Maybe just a little bit of commentary around you know you talked about bidding opportunities in the general thesis seems to be your O. M. P revenues will grow year over year, but maybe talk about the kind of margin profile there.
Speaker Change: I can't say that the margin profile is really that different in totality.
You know, we really didn't have the adverse mark we didn't take a lot of loss leaders. If you will during <unk>.
Speaker Change: Higher revenues helped with absorption and Incrementals.
Seth: The down market and so ours tend to be mix oriented and if you go back for the last five years, our offshore manufactured products business has been very solid in terms of growth.
Speaker Change: Got it got it and then one last follow up is just kind of circling back to the $40 $50 million of free cash flow.
Speaker Change: Steven asked the question about debt repayment and that makes sense, especially given where your your converts are trading.
Seth: And margin profile over the years and cash flow generation I mean, it's a great business and what we're looking for really is increased market share topline grows the incrementals come through.
Speaker Change: How do you think about deploying that free cash flow between buying back stock and just kind of building more cash given kind of where you are now and presumably where you are as of January with the extra collections.
Seth: Very well, but.
Speaker Change: We favor share repurchases no shareholder pays us to sit on cash and we've got plenty of balance sheet.
Seth: I can't say that the margin profile is really that different in totality.
Seth: Higher revenues helped with absorption and Incrementals.
Speaker Change: Working capital does support repayment of the debt I'm very fond with our debt level, but I don't think you sit for a year and not returned cash to shareholders.
Seth: Got it got it and then one last follow up is just kind of circling back to the $40 million to $50 million of free cash flow.
Speaker Change: Awesome. Thanks for all the color I appreciate it guys. Thanks.
Seth: Steven asked the question about debt repayment and that that makes sense, especially given where your your converts are trading.
Thanks, Jim Thanks, Jim.
Speaker Change: Again, if you would like to ask a question simply press star followed by the number one on your telephone keypad.
Seth: How do you think about deploying that free cash flow between buying back stock and just kind of building more cash given kind of where you are now and presumably where you are as of January with the extra collections.
Speaker Change: And our next question comes from the line of Blake Mclean with Daniel Energy Partners. Please go ahead.
Hey, good morning, all.
Speaker Change: Hi, Blake.
Seth: We favor share repurchases no no shareholder pays us to sit on cash and we've got plenty of balance sheet.
Speaker Change: I was hoping maybe on the international.
And offshore opportunities that you could just maybe maybe provide a bit more color on the various markets.
Seth: Working capital to support repayment of the debt I'm very fine with our debt level, but I don't think you sit for a year and not returned cash to shareholders.
Speaker Change: And how they differentiate and what those what those outlooks look like from an activity perspective from an oral safe technology adoption perspective, maybe just a little more color on the specific markets.
Seth: Awesome. Thanks for all the color I appreciate it guys. Thanks.
Seth: Thanks, Jim Thanks, Jim.
Well I mean I hit on some of it already but some of our most differentiated technology is the connection technology, we put into production facilities, specifically <unk> and others and that has been and will continue to be driven by areas like.
Again, if you would like to ask a question simply press star followed by the number one on your telephone keypad.
Seth: And our next question comes from the line of Blake Mclean with Daniel Energy Partners. Please go ahead.
Blake McLean: Hey, good morning, all.
Seth: Blake.
Seth: I was hoping maybe on the international.
Speaker Change: Brazil, Guyana and on a margin basis or an army as an example.
Seth: And offshore opportunities that you could just maybe maybe provide a bit more color on the various markets.
Speaker Change: Where we have active bidding and quoting activity that aligns very well with the industry dynamics I E. Petrobras is the largest deepwater driller and producer in the world. So one would think that we would have significant exposure there and we do and have for years and a growing presence I E.
Seth: And how they differentiate what those what those outlooks look like from an activity perspective from an oral safe technology adoption perspective, and maybe just a little more color on specific markets well.
Seth: Well I mean, I'd add hit on some of it already but some of our most differentiated technology is the connection technology, we put into production facilities, specifically S. P. S o's and others and that has been and will continue to be driven by areas like Brazil.
Speaker Change: Spanning into other product lines into the region, even including perforating products as an example.
Speaker Change: We probably have had static or shrinking market share in southeast Asia.
Seth: Brazil, Guyana and on a margin basis, Suriname me as an example.
Speaker Change: Cause of a higher cost base of manufacturing that was the specific objective.
Seth: Where we have active bidding and quoting activity that aligns very well with the industry dynamics I E. Petrobras is the largest deepwater driller and producer in the world. So one would think that we would have significant exposure there and we do and have for years and I and a growing presence I E.
Speaker Change: In building this new facility in Baton and with that we do expect to take on incremental market share we've had very active.
Speaker Change: Bids and quotes of consequence around our large OD conductor casing connectors in that region, and we have the potential longer term opportunity to move more manufacturing into that region.
Seth: Spanning into other product lines into the region, even including perforating products as an example.
Speaker Change: Our quote unquote transitional.
Seth: We probably have had static or shrinking market share in south East Asia because of a higher cost base of manufacturing that was the specific objective.
Energy activities are not that big as a percentage, but we do have some exposure obviously to fixed foundation wind we talked about that in our conference call notes were doing some around Ccs in geothermal and we have longer term potential for.
In building this new facility in Baton and with that we do expect to take on incremental market share we've had very active there.
Speaker Change: Offshore when not in the United States, but really in the European region.
Seth: Bids and quotes of consequence around our large OD conductor casing connectors in that region, and we have the potential longer term opportunity to move more manufacturing into that region.
Speaker Change: But we're not counting on much growth there, it's more our traditional products, coupled with new technology introductions, including the managed pressure drilling system.
Seth: You know our quote unquote transitional.
Speaker Change: Got it.
Seth: Energy activities are not that big as a percentage, but we do have some exposure obviously to fixed foundation when we talked about that in our conference call notes were doing some around Ccs in geothermal and we have longer term potential bar.
Speaker Change: That's helpful. Thank you.
Speaker Change: I guess, just I guess my last one.
Speaker Change: Maybe on U S land, you talked about sort of flattish activity. Although you guys will have improving profitability, but how do you think about the trajectory of activity here.
Speaker Change: Going forward through the rest of this year, you know hope springs that turn on on the dry gas basins I guess bake in any any color you could provide on how you're thinking about that I think youre looking at or customer conversations.
Seth: Offshore when not in the United States, but really in the European region.
Seth: But we're not counting on much growth there, it's more traditional products, coupled with new technology introductions, including the managed pressure drilling systems.
Speaker Change: Yeah, I mean, we've seen a lift in activity as early as January and taken on incremental Frac fleets.
We are very selective with our product offering on land is generally frac in isolation and extended reach technology for the most part and we're very region specific and customer specific in doing so so we have got to think about how it would run an efficient operation.
Seth: Got it.
Seth: That's helpful. Thank you.
Seth: I guess, just I guess my last one.
Seth: Maybe on U S land, you talked about sort of flattish activity. Although you guys will have improving profitability, but how do you think about the trajectory of activity here.
Seth: Going forward through the rest of this year, you know hope springs that turn on on the dry gas basins, I guess, but any any color you would provide on how youre thinking about that I think youre looking at or customer conversations.
Speaker Change: And gain market share with the in the regions and with the customers that give us continuous work, we're not trying to be all things to all people in this and again, we've augmented our operations with new technology introductions in that space, specifically the accuracy gate valves that are.
Speaker Change: Yeah, I mean ours, we've seen a lift in activity as early as January and taken on incremental Frac fleets.
Speaker Change: We are very selective with our product offering on land is generally frac in isolation and extended reach technology for the most part and we're very region specific and customer specific in doing so so we have got to think about how it run an efficient operation.
Speaker Change: Used in fracking isolation and more recently, we are introducing our automation equipment into that market, just think about us being more high end and very selective in terms of capital allocation.
Speaker Change: To that business.
Speaker Change: For example, we did show a little higher Capex in this segment in Q4, but this was stuff we already had in inventory, we're moving it into the manufacturer of the valves supporting the new Frac fleets setup, we have gained in January.
Speaker Change: And gain market share with the in the regions and with the customers that give us continuous work, we're not trying to be all things to all people in this and again, we've augmented our operations with new technology introductions in that space, specifically the active seat gate valves that are.
Speaker Change: But very selective in terms of that capital allocation.
Speaker Change: Okay.
Speaker Change: Got it. Thank you all very much for your time.
Speaker Change: Used in Frac and isolation and more recently, we're introducing our automation equipment into that market, just think about us being more high end and very selective in terms of capital allocation.
Speaker Change: Thanks Blake.
Speaker Change: Alright, no further question at this time I'll turn the call back over to you Mr. Taylor.
Speaker Change: Okay. Thank you Mark I just want to thank all of you for joining the call today and for your continued interest and support and oil States. We now we have some conferences coming up and we hope to catch up with even more fully.
Speaker Change: That business.
As an example, we did show a little higher Capex in this segment in Q4, but this was stuff we already had in inventory, we're moving it into the manufacturer of the vowels supporting the new Frac flake setup, we have gained in January.
Speaker Change: In the coming weeks and months have a great earning season and hope to see some of you soon take care.
Speaker Change: But very selective in terms of that capital allocation.
Speaker Change: That concludes today's conference call you may now disconnect.
Speaker Change: Okay.
Got it Sidney Thank you all very much for your time.
Speaker Change: Thanks, Blake Thanks Blake.
Speaker Change: There are no further question at this time I'll turn the call back over to you Mr. Taylor.
Speaker Change: Okay. Thank you Mark I just want to thank all of you for joining the call today and for your continued interest and support and the oil states. We now we have some conferences coming up and we hope to catch up with you more fully in.
Speaker Change: In the coming weeks and months have a great earning season and hope to see some of you soon take care.
Speaker Change: That concludes today's conference call you may now disconnect.
Speaker Change: [music].