Oil States International, Inc. (OIS) Bundle
Understanding Oil States International, Inc. (OIS) Revenue Streams
Understanding Oil States International, Inc.’s Revenue Streams
Oil States International, Inc. generates revenue through three primary segments: Offshore Manufactured Products, Completion and Production Services, and Downhole Technologies. Below is a detailed breakdown of these revenue sources.
Breakdown of Primary Revenue Sources
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Change (%) |
|---|---|---|---|
| Offshore Manufactured Products | $102,234 | $96,070 | 6% |
| Completion and Production Services | $40,099 | $59,831 | -33% |
| Downhole Technologies | $32,015 | $38,388 | -17% |
| Total Revenue | $174,348 | $194,289 | -10% |
Year-over-Year Revenue Growth Rate
In the first nine months of 2024, total revenues decreased by $46.0 million, or 8%, compared to the same period in 2023. The revenue breakdown is as follows:
| Segment | 9M 2024 Revenue (in thousands) | 9M 2023 Revenue (in thousands) | Change (%) |
|---|---|---|---|
| Offshore Manufactured Products | $290,647 | $255,222 | 14% |
| Completion and Production Services | $133,812 | $191,425 | -30% |
| Downhole Technologies | $103,534 | $127,370 | -19% |
| Total Revenue | $527,993 | $574,017 | -8% |
Contribution of Different Business Segments to Overall Revenue
In Q3 2024, the contributions to overall revenue were:
- Offshore Manufactured Products: 59%
- Completion and Production Services: 23%
- Downhole Technologies: 18%
Analysis of Significant Changes in Revenue Streams
The most notable changes in revenue streams include:
- Completion and Production Services: Revenues declined by 33% in Q3 2024 due to lower U.S. land-based customer activity levels, particularly in natural gas basins.
- Downhole Technologies: Revenues decreased by 19% year-over-year, primarily driven by reduced U.S. customer demand.
- Offshore Manufactured Products: This segment saw a revenue increase of 6% in Q3 2024, attributed to heightened demand for military products and international project-driven services.
Overall, the company has faced challenges in its U.S. land-based operations, leading to a strategic exit from underperforming locations, while international operations have shown resilience.
A Deep Dive into Oil States International, Inc. (OIS) Profitability
A Deep Dive into Oil States International, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, gross profit was reported at $42.5 million, resulting in a gross profit margin of 8.06%. In comparison, for the same period in 2023, gross profit was $46.2 million, translating to a gross profit margin of 8.05%.
Operating Profit Margin: The operating loss for the first nine months of 2024 was $20.2 million, leading to an operating margin of (3.83%). This is a significant decline from the operating income of $15.3 million and an operating margin of 2.67% for the same period in 2023.
Net Profit Margin: The net loss for the nine months ended September 30, 2024, was $26.4 million, resulting in a net profit margin of (5.01%). This contrasts sharply with a net income of $6.9 million and a net profit margin of 1.20% for the same period in 2023.
Trends in Profitability Over Time
Profitability metrics indicate a downward trend over the past year. The following table summarizes key profitability metrics from the last two fiscal years:
| Metric | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Gross Profit | $42.5 million | $46.2 million |
| Operating Income (Loss) | ($20.2 million) | $15.3 million |
| Net Income (Loss) | ($26.4 million) | $6.9 million |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average for gross profit margins in the oil and gas services sector is approximately 15%. The following table compares the company's profitability ratios with the industry averages:
| Ratio | Company | Industry Average |
|---|---|---|
| Gross Profit Margin | 8.06% | 15% |
| Operating Profit Margin | (3.83%) | 5% |
| Net Profit Margin | (5.01%) | 3% |
Analysis of Operational Efficiency
Operational efficiency has been impacted by rising costs and decreased revenues. The company's total cost of revenues (exclusive of depreciation and amortization) decreased by 9% year-over-year to $132.3 million for the third quarter of 2024. This decline is attributed to lower U.S. land-based activity levels.
Gross Margin Trends: In Q3 2024, the gross margin was reported at 24.4%, down from 30.2% in Q3 2023. This reflects challenges in maintaining pricing power amid competitive pressures and rising operational costs.
Overall, the company's ability to manage costs effectively remains crucial for improving profitability metrics moving forward.
Debt vs. Equity: How Oil States International, Inc. (OIS) Finances Its Growth
Debt vs. Equity: How Oil States International, Inc. Finances Its Growth
As of September 30, 2024, the company reported total debt of $126.5 million, consisting of $123.5 million in 2026 Notes and $3.0 million in other debt. There were no borrowings outstanding under the Asset-Based Lending (ABL) Facility at this time.
The debt-to-equity ratio stands at approximately 0.18, calculated using total debt of $126.5 million against total stockholders' equity of $698.4 million as of September 30, 2024.
Recent Debt Issuances and Credit Ratings
In March 2021, the company issued $135 million in 4.75% convertible senior notes due in 2026. As of September 30, 2024, the carrying value of these notes was $123.5 million, and the company recorded $10.8 million in cash for the purchase of outstanding notes. The company maintains a credit rating indicative of its financial health, although specific rating details were not disclosed in the latest filings.
Debt Financing and Equity Funding Balance
The company primarily funds its operations and growth through cash flow from operations, supplemented by available cash, internally generated funds, and borrowing capacity under its ABL Facility, which had an available draw of $76.4 million as of September 30, 2024. The management emphasizes maintaining a balance between debt financing and equity funding, ensuring liquidity to meet operational and capital expenditure needs.
| Debt Type | Principal Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| 2026 Notes | $123.5 million | 4.75% | April 1, 2026 |
| Other Debt | $3.0 million | N/A | N/A |
In the first nine months of 2024, the net cash used in financing activities totaled $20.2 million, which included the repurchase of $5.1 million of common stock and the purchase of $11.5 million principal amount of the 2026 Notes.
Assessing Oil States International, Inc. (OIS) Liquidity
Assessing Oil States International, Inc. (OIS) Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 3.40, calculated by dividing total current assets of $478.9 million by total current liabilities of $140.8 million.
Quick Ratio: The quick ratio, which excludes inventory, stands at 1.38, with quick assets (current assets minus inventories) of $257.8 million and current liabilities of $140.8 million.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is calculated at $338.1 million, showing a decrease from $330.7 million at the end of 2023. This reflects a slight increase in current liabilities from $140.8 million in 2024 compared to $157.3 million at the end of 2023.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities totaled $27.7 million, a decrease from $52.4 million in the same period of 2023.
Investing Cash Flow: Net cash used in investing activities was $8.3 million for the nine months ended September 30, 2024, down from $19.1 million used in the prior year.
Financing Cash Flow: Cash used in financing activities was $20.2 million in the first nine months of 2024, compared to $22.7 million in 2023.
| Cash Flow Component | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $27.7 | $52.4 |
| Investing Cash Flow | ($8.3) | ($19.1) |
| Financing Cash Flow | ($20.2) | ($22.7) |
Potential Liquidity Concerns or Strengths
The company has $46.0 million in cash and cash equivalents as of September 30, 2024, compared to $47.1 million at the end of 2023. Additionally, there are no borrowings outstanding under the ABL Facility, providing significant liquidity flexibility.
However, the total debt outstanding includes $123.5 million in 2026 Notes and $3.0 million in other debt. The interest expense for the first nine months of 2024 was $5.5 million, approximately 6% of the average principal balance.
Overall, while liquidity appears strong, ongoing operational losses and a decline in cash flow from operations raise concerns about the sustainability of this liquidity in the long term.
Is Oil States International, Inc. (OIS) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the price-to-earnings (P/E) ratio for the company stands at -5.57, reflecting a negative earnings per share of $-0.42 for the first nine months of 2024.
The price-to-book (P/B) ratio is calculated at 2.4, with book value per share reported at $1.98.
The enterprise value-to-EBITDA (EV/EBITDA) ratio is noted at -11.8, indicating negative EBITDA due to significant losses.
Over the last 12 months, the stock price has shown a downward trend. The stock price was approximately $1.29 on September 30, 2024, compared to $1.78 one year earlier, reflecting a decline of 27.5%.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, leading to a dividend yield of 0%. The payout ratio is also 0%, consistent with the absence of dividend payments.
Analyst Consensus on Stock Valuation
Analyst consensus for the stock is predominantly a "Hold" rating, with a few analysts suggesting a "Sell" due to the current financial challenges.
| Valuation Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | -5.57 |
| Price-to-Book (P/B) Ratio | 2.4 |
| Enterprise Value-to-EBITDA (EV/EBITDA) | -11.8 |
| Current Stock Price | $1.29 |
| Stock Price 1 Year Ago | $1.78 |
| Stock Price Decline (%) | 27.5% |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Oil States International, Inc. (OIS)
Key Risks Facing Oil States International, Inc.
Oil States International, Inc. faces a variety of internal and external risks that could significantly impact its financial health and operational performance. The following outlines key risk factors identified in recent earnings reports and filings.
Industry Competition
In a highly competitive market, the company has experienced challenges due to lower U.S. customer investment levels, particularly in natural gas basins. Revenues for the Completion and Production Services segment decreased by $57.6 million, or 30%, in the first nine months of 2024 compared to the same period in 2023, primarily driven by these competitive pressures.
Regulatory Changes
Recent SEC rules concerning climate-related disclosures could impose increased compliance costs and litigation risks. These regulations are set to take effect for fiscal years starting December 31, 2026, and could affect access to capital.
Market Conditions
The company reported a net loss of $26.4 million for the nine months ended September 30, 2024, compared to a net income of $6.9 million for the same period in 2023. This shift reflects the impact of declining U.S. land-based investments and competitive market conditions.
Operational Risks
Operational challenges have been highlighted by significant asset impairment charges totaling $21.1 million related to the Completion and Production Services segment, as well as $10.0 million in goodwill impairment in the Downhole Technologies segment.
Financial Risks
The company has reported a total debt of $125.3 million as of September 30, 2024, with interest expense totaling $6.0 million for the first nine months of 2024, representing approximately 7% of total debt. The ongoing management of this debt, especially in a volatile market, poses a significant risk to financial stability.
Mitigation Strategies
To address these risks, management has implemented cost control measures and is focusing on restructuring certain U.S. land-based operations, which includes exiting underperforming service offerings. The company also expects to invest approximately $30 million in capital expenditures during 2024.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Increased competition leading to reduced revenues and market share. | Completion and Production Services revenue decreased by $57.6 million (30%) in 2024. |
| Regulatory Changes | New SEC climate-related disclosure rules may increase compliance costs. | Uncertain financial impact due to potential litigation risks. |
| Market Conditions | Declining investments in U.S. land-based operations. | Net loss of $26.4 million for the first nine months of 2024. |
| Operational Risks | Asset impairments due to strategic exits from underperforming areas. | Impairment charges totaling $21.1 million in 2024. |
| Financial Risks | High levels of debt and associated interest expenses. | Total debt of $125.3 million with interest expense of $6.0 million. |
Future Growth Prospects for Oil States International, Inc. (OIS)
Future Growth Prospects for Oil States International, Inc.
Analysis of Key Growth Drivers
The primary growth drivers for Oil States International, Inc. include:
- Product Innovations: The company has focused on enhancing its product offerings, particularly in offshore and international project-driven products, which saw an increase in demand, contributing to a 14% revenue rise in the Offshore Manufactured Products segment for the first nine months of 2024 compared to the same period in 2023.
- Market Expansions: The company has strategically relocated its Asian manufacturing and service operations from Singapore to Batam, Indonesia, aiming to enhance operational efficiencies and reduce costs.
- Acquisitions: Ongoing assessments of potential acquisitions that align with their growth strategy, particularly in the areas of offshore services, could further drive revenue growth.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, analysts project a modest recovery in revenues driven by increased international project activity. The company reported total revenues of $527.99 million for the nine months ended September 30, 2024, down 8% from the prior year.
Future projections estimate that revenues could rebound as offshore investments increase, with expectations of reaching approximately $700 million by the end of 2025, contingent on market conditions and operational improvements.
Strategic Initiatives and Partnerships
Recent strategic initiatives include:
- Cost Reductions: Implemented measures to reduce costs across the organization, which included the consolidation and exit of underperforming locations, leading to a decrease in corporate expenses by 22% in Q3 2024.
- Partnerships: Collaborations with major oil and gas companies to enhance service offerings and increase participation in high-value projects.
Competitive Advantages
Oil States International benefits from several competitive advantages:
- Diverse Product Portfolio: The company operates through three key segments: Offshore Manufactured Products, Completion and Production Services, and Downhole Technologies, providing resilience against market fluctuations.
- Strong Backlog: The Offshore Manufactured Products segment reported a backlog of $313 million as of September 30, 2024, indicating strong demand for upcoming projects.
- Geographic Reach: The company’s expansion into international markets provides access to new revenue streams, with offshore and international revenues increasing to $113.86 million for Q3 2024.
| Segment | Revenue (9M 2024) | Revenue Change (YoY) | Operating Income (Loss) (9M 2024) | Backlog (as of Sept 30, 2024) |
|---|---|---|---|---|
| Offshore Manufactured Products | $290.65 million | +14% | $44.27 million | $313 million |
| Completion and Production Services | $133.81 million | -30% | ($19.22 million) | N/A |
| Downhole Technologies | $103.53 million | -17% | ($16.87 million) | N/A |
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Article updated on 8 Nov 2024
Resources:
- Oil States International, Inc. (OIS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Oil States International, Inc. (OIS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Oil States International, Inc. (OIS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.