Oil States International, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Although the request identifies 2023 Q4, this filing is an annual report; it does not provide a clear standalone fourth-quarter financial summary. Amounts below are in U.S. dollars unless noted.
Business context
Oil States supplies engineered products and services to energy, industrial and military customers through Offshore/Manufactured Products, Well Site Services and Downhole Technologies. Results are cyclical and sensitive to oil and gas prices, customer capital spending, U.S. drilling and completion activity, and offshore project demand.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $782.3 million | $737.7 million |
| Operating income | $23.2 million | $2.9 million |
| Net income (loss) | $12.9 million | ($9.5 million) |
| Diluted EPS | $0.20 | ($0.15) |
| Cash flow from operations | $56.6 million | $32.9 million |
| Capital expenditures | $30.7 million | $20.3 million |
| Cash and cash equivalents at year-end | $47.1 million | $42.0 million |
| Total debt at year-end | $136.1 million | $152.9 million |
- Revenue increased 6%. Products revenue rose 9% to $418.6 million; services revenue increased 3% to $363.7 million.
- Operating margin was approximately 3.0%, versus 0.4% in 2022; net margin was approximately 1.6%, versus a net loss in 2022. These percentages are calculated from reported figures.
- Operating cash flow less capital expenditures was approximately $25.9 million, compared with $12.6 million in 2022.
- At December 31, 2023, the company had no ABL borrowings, $15.2 million of letters of credit and $76.1 million available to draw under the facility. It had $135.0 million principal outstanding on 4.75% convertible notes due 2026 and $3.1 million of other debt.
- Working capital increased by $21.0 million of cash use in 2023, principally reflecting higher inventory and lower accounts payable, accrued liabilities and deferred revenue, partly offset by lower receivables.
Material changes versus FY2022
- Offshore/Manufactured Products revenue rose 16% to $441.3 million and operating income increased to $65.3 million from $45.3 million. Backlog grew to $333 million from $308 million; 2023 bookings were $472 million, a 1.1x book-to-bill ratio.
- Well Site Services revenue increased 5% to $242.6 million and operating income rose to $13.9 million from $4.9 million.
- Downhole Technologies revenue fell 21% to $98.4 million and its operating loss widened to $14.9 million from $6.7 million, reflecting weaker U.S. demand, inventory provisions and higher costs.
- U.S. year-end rig count declined 20% from December 2022; the full-year average was 686 rigs versus 723 in 2022.
- Interest expense, net, decreased to $8.2 million from $10.3 million. The company repaid the remaining $17.3 million principal of its 2023 convertible notes in February 2023.
Outlook, management commentary and notable items
- Management attributed improved results to offshore and international project growth, backlog conversion, cost controls and capital discipline; weaker U.S. well completions partially offset those gains.
- Management expects approximately $40 million of capital expenditures in 2024, including a planned new facility in Batam, Indonesia. It expects to sell facilities in Singapore and Houston in 2024 for combined proceeds of $35 million to $40 million.
- Approximately 70% of Offshore/Manufactured Products backlog at year-end is expected to be recognized as revenue during 2024. Backlog may be delayed or cancelled and is not a guarantee of revenue or profit.
- The ABL Facility maturity was extended after year-end, on February 16, 2024, from February 2025 to February 2028. Management said cash, operating cash flow and available borrowing capacity should cover liquidity needs for the next 12 months.
- The Board authorized up to $25 million of share repurchases through February 2025; $6.9 million had been repurchased in 2023. The company has not paid cash dividends since its 2001 IPO, and the credit facility restricts dividends.
- FY2023 included $2.5 million of facility consolidation charges and $0.6 million of patent-defense costs, partly offset by $4.1 million of gains on asset disposals. FY2022 included a $6.1 million litigation-settlement gain.
- Principal risks include commodity-price and activity cyclicality, customer project delays or cancellations, inflation and supply-chain costs, regulatory and climate-related changes, foreign exchange, severe weather, cybersecurity, and environmental, product-liability and litigation exposure. Management reported no material cybersecurity incident known to it as of the filing date.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The filing identifies over-time revenue recognition on project-driven contracts as a critical audit matter because estimates of remaining project costs require judgment.
Important facts for investors to verify
- Whether the $333 million offshore/manufactured backlog converts on schedule and at expected margins, including the cancellable or changeable portions.
- Whether Downhole Technologies can stabilize revenue and reduce its operating loss as U.S. completion demand and costs change.
- Whether 2024 capital spending, facility relocation and the anticipated $35–$40 million asset-sale proceeds meet management’s plans.
- The company’s ability to service or refinance the $135 million convertible notes due in 2026, and the borrowing-base availability and covenants of the amended ABL Facility.
- Whether working-capital needs, inflation, commodity prices, regulation and project execution materially alter cash generation or liquidity.