Oil States International, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This filing reports annual results; it does not provide a clear standalone fourth-quarter income statement. Oil States supplies engineered products and services to energy, industrial and military markets through Offshore/Manufactured Products, Well Site Services and Downhole Technologies.
Financial performance
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $737.7 million | $573.2 million |
| Operating income (loss) | $2.9 million | $(64.8) million |
| Net loss | $(9.5) million | $(64.0) million |
| Net loss per diluted share | $(0.15) | $(1.06) |
| Cash from operating activities | $32.9 million | $7.2 million |
| Capital expenditures | $20.3 million | $17.5 million |
| Cash and cash equivalents at year-end | $42.0 million | $52.9 million |
| Total debt at year-end | $152.9 million | $178.8 million |
Revenue increased 29% year over year, with products and services each up approximately 29%. Calculated gross profit before depreciation and amortization was $159.2 million, or 21.6% of revenue, versus $102.8 million, or 17.9%, in 2021. Operating margin was approximately 0.4%, compared with negative 11.3% in 2021. Oil States remained loss-making after interest and taxes. The 2022 tax provision was $5.5 million despite a pretax loss of $4.1 million, reflecting nondeductible expenses and discrete tax items.
Operating cash flow improved, but higher activity required $34.7 million of net working-capital investment, primarily in receivables and inventory. The company reported no ABL borrowings and $92.1 million available under the facility at year-end, net of letters of credit. The remaining $17.3 million principal of the 1.50% 2023 Notes was repaid on February 15, 2023; $135.0 million principal of 4.75% convertible notes due 2026 remained outstanding at year-end.
Material changes and segment results
- Offshore/Manufactured Products: Revenue rose 28% to $381.7 million; operating income was $45.3 million, including a $6.1 million litigation-settlement gain. Backlog reached $308 million, up from $260 million; 2022 bookings were $435 million and book-to-bill was 1.1x.
- Well Site Services: Revenue increased 35% to $231.2 million and operating income was $4.9 million, versus a $34.5 million operating loss in 2021. The company exited underperforming service lines in January 2022 that had generated about $20 million of 2021 revenue; management said the exit improved segment margins.
- Downhole Technologies: Revenue increased 21% to $124.8 million, while the segment recorded a $6.7 million operating loss, an improvement from a $13.5 million loss in 2021.
- Consolidated operating results benefited from higher customer activity and the absence of prior-year impairments and restructuring charges. 2022 also included the $6.1 million litigation gain. Inflation and higher material, transportation and labor costs partly offset revenue growth.
Outlook, liquidity, and risks
Management expected activity to improve further in 2023, citing customer cash flows and potential growth in capital budgets. It expected approximately $25 million of 2023 capital expenditures, to be funded with cash, internally generated funds and, if needed, ABL borrowings. These are expectations, not formal earnings guidance. Offshore/Manufactured Products expected to recognize approximately 63% of year-end backlog as 2023 revenue; backlog may be delayed or canceled.
Key risks include oil and gas price and activity volatility; customer spending restraint; inflation, labor shortages and supply-chain disruption; geopolitical impacts, including the Russia-Ukraine conflict; changing environmental, climate and energy-transition rules; severe weather; and project execution, customer credit, foreign-exchange, cybersecurity and litigation risks. Environmental compliance or regulation could raise costs or reduce customer activity. The company reported no material remaining balance-sheet exposure to Russia at year-end.
Notable transactions and capital actions: Oil States acquired E-Flow for $8.1 million net of cash acquired; settled disputes with the GEODynamics seller for $10.0 million cash and approximately 1.9 million shares; and settled separate litigation for $6.9 million cash proceeds, recognizing a $6.1 million gain. On February 16, 2023, the board authorized up to $25 million of share repurchases through February 2025. The company had not paid cash dividends since its 2001 IPO, and the ABL facility restricts dividends.
Most important facts for investors to verify
- Whether operating improvement translates into sustained positive net income and cash generation, especially after working-capital needs and cost inflation.
- Conversion of the $308 million offshore backlog into revenue and profit, including customer cancellations, schedules and project margins.
- Liquidity and debt-service capacity following repayment of the 2023 Notes, with $135 million principal of 2026 Notes still outstanding.
- Whether management’s 2023 activity outlook and approximately $25 million capital-spending plan are borne out by customer budgets and market conditions.
- Potential financial impact of regulatory, environmental, climate-transition, supply-chain and litigation exposures; the filing does not quantify a clear aggregate future cost.