Oil States International, Inc. (NYSE:OIS) reported a net loss for the third quarter ended September 30, 2016 of $10.8 million, or $0.22 per diluted share, which included pre-tax charges of $2.0 million ($1.3 million after-tax, or $0.03 per diluted share) for severance and other downsizing charges. These results compare to reported net income for the third quarter ended September 30, 2015 of $1.7 million, or $0.03 per diluted share, which included a tax valuation allowance resulting in a higher effective tax rate ($3.2 million, or $0.06 per diluted share) and pre-tax charges of $0.7 million ($0.6 million after-tax, or $0.01 per diluted share) for severance and other downsizing charges.

During the third quarter of 2016, the Company generated revenues of $179.0 million and Adjusted Consolidated EBITDA (Note B) of $16.2 million (excluding $2.0 million for severance and other downsizing charges). These results compare to revenues of $258.9 million and Adjusted Consolidated EBITDA of $39.5 million reported in the third quarter of 2015 (excluding $0.7 million of severance and other downsizing charges).

For the first nine months of 2016, the Company reported revenues of $524.5 million and Adjusted Consolidated EBITDA of $41.9 million (excluding $4.6 million of severance and other downsizing charges). The net loss for the first nine months of 2016 totaled $35.8 million, or $0.71 per diluted share, and included $4.6 million ($3.0 million after-tax, or $0.06 per diluted share) of severance and other downsizing charges. For the first nine months of 2015, the Company reported revenues of $865.5 million and Adjusted Consolidated EBITDA of $151.6 million (excluding $4.5 million of severance and other downsizing charges). Net income for the first nine months of 2015 totaled $27.3 million, or $0.53 per diluted share, and included $10.3 million, or $0.18 per diluted share after-tax, from severance and other downsizing initiatives ($4.5 million pre-tax, $3.3 million after-tax, or $0.06 per diluted share), a higher effective tax rate driven by a $2.3 million ($0.05 per diluted share) deferred tax adjustment recorded in the first quarter of 2015 for certain non-deductible items and $3.5 million ($0.07 per diluted share) of tax valuation allowances recorded against certain of the Company’s deferred tax assets.

Oil States’ President and Chief Executive Officer, Cindy B. Taylor, stated, “The third quarter provided a number of constructive leading indicators for the energy industry. The average quarterly U.S. rig count improved 14% quarter-over-quarter, average natural gas prices increased over 30% in the third quarter and WTI crude oil prices increased following the second quarter, with WTI currently trading at $50 per barrel. Despite these positive data points, activity levels have not yet improved materially in our well site services segment which is primarily weighted to the U.S. onshore markets we serve. Our well site services revenues grew sequentially due to increases in the number of completion services jobs performed coupled with an increase in our land rig fleet utilization. However, adjusted quarterly EBITDA for the segment, while improved sequentially, was still below break-even. Our offshore products segment reported revenues above our guided range with average EBITDA margins of 22% for the third quarter. However, our book to bill ratio was 0.54x, resulting in a sequential backlog decline of 24%, ending the quarter at $203 million.”

BUSINESS SEGMENT RESULTS

Offshore Products

Offshore products generated revenues and Segment EBITDA (Note A) of $132.7 million and $29.5 million, respectively, in the third quarter of 2016 compared to revenues of $175.7 million and Segment EBITDA of $39.5 million in the third quarter of 2015. Offshore products revenues and Segment EBITDA decreased 24% and 25% year-over-year, respectively, due to lower contributions across most of the segment’s product and service lines. The lower quarterly revenues were primarily the result of reductions in production-related products, weaker demand for drilling products, lower levels of service activities and a backlog position that has trended lower since mid-2014, partially offset by improved elastomer and subsea pipeline product revenues. Segment EBITDA margins were 22.2% in the third quarter of 2016 compared to 22.5% realized in the third quarter of 2015.  Backlog declined 24% sequentially, totaling $203 million at September 30, 2016 compared to $268 million reported at June 30, 2016 and $394 million reported at September 30, 2015. There were no individual backlog awards in excess of $10 million during the third quarter.

Well Site Services

Well site services generated revenues of $46.3 million and a Segment EBITDA loss of $3.1 million in the third quarter of 2016 compared to revenues and Segment EBITDA of $83.2 million and $10.9 million, respectively, in the third quarter of 2015.  Well site services revenues and Segment EBITDA decreased 44% and 129% year-over-year, respectively, primarily due to a 49% year-over-year decrease in the number of completion services jobs performed, partially offset by a 15% year-over-year increase in revenue per completion service job primarily as a result of a shift to more long-duration jobs in international markets and longer-term project work in the U.S. Gulf of Mexico. The segment’s third quarter 2016 results continued to be negatively impacted by extreme competitive pressures and depressed activity levels in the U.S. shale basins. Lower utilization in the land drilling business, which averaged 15% in the third quarter of 2016 compared to 33% in the third quarter of 2015, also negatively impacted results. However, quarterly land drilling utilization improved sequentially for the second quarter in a row, a trend which has not occurred since the second quarter of 2014.

Income Taxes

The Company recognized an effective tax rate benefit of 35.8% in the third quarter of 2016. This compares to an effective tax rate expense of 69.9% reported in the third quarter of 2015. The higher effective tax rate in the third quarter of 2015 was primarily due to a tax valuation allowance recorded against certain of the Company’s deferred tax assets.

Financial Condition

The Company invested $5.5 million in capital expenditures during the third quarter of 2016. Capital expenditures made during the third quarter included expansionary investments for certain offshore products facilities along with maintenance capital spent on completion services equipment.

As of September 30, 2016, $63.1 million was outstanding under the Company’s revolving credit facility. Total availability under the facility as of September 30, 2016 was $217.8 million (net of standby letters of credit totaling $27.8 million).

Conference Call Information

The call is scheduled for Friday, October 28, 2016 at 11:00 am ET, and is being webcast and can be accessed from the Company’s website at www.ir.oilstatesintl.com. Participants may also join the conference call by dialing (800) 446-2782 in the United States or by dialing +1 847 413 3235 internationally and using the passcode 43614252. A replay of the conference call will be available one and a half hours after the completion of the call by dialing (888) 843-7419 in the United States or by dialing +1 630 652 3042 internationally and entering the passcode 43614252.

About Oil States

Oil States International, Inc. is an energy services company with a leading market position as a manufacturer of products for deepwater production facilities and certain drilling equipment, as well as a provider of completion services and land drilling services to the oil and gas industry.  Oil States is publicly traded on the New York Stock Exchange under the symbol “OIS”.

For more information on the Company, please visit Oil States International’s website at www.oilstatesintl.com.