Transcript of presentation to analysts and investors

EX-10.46 3 allisex10-46.htm ALLIS EX10.46 Allis Ex10.46
 
EXHIBIT 10.46
 
ALLIS-CHALMERS ENERGY INC.
   


PRESS RELEASE 
Contact:
Victor M. Perez, CFO
   
Allis-Chalmers Energy
   
713 ###-###-####
FOR IMMEDIATE RELEASE
    
   
Lisa Elliott, Sr. VP
   
DRG&E/ 713 ###-###-####
     
ALLIS-CHALMERS ENERGY REPORTS RECORD
THIRD QUARTER 2005 RESULTS

3rd quarter revenues were up 143% to $28.9 million
3rd quarter diluted EPS grew 60% to $0.08 including debt retirement charge
3rd quarter diluted EPS grew 180% to $0.14 excluding debt retirement charge

2005 EPS guidance increased to between $0.41 and $0.47, and $0.47 and $0.53
excluding debt retirement charge

 
HOUSTON, TEXAS, November 8, 2005 - Allis-Chalmers Energy Inc. (AMEX: ALY) today announced its record results for the third quarter and nine months ended September 30, 2005.
 
Revenue for the third quarter 2005 rose 143.2% to $28.9 million compared to $11.9 million for the third quarter of 2004. Driving the company’s triple digit revenue gains were the successful integration of strategic acquisitions completed over the last twelve months, the increase in service offerings and expanded customer base resulting in increased market share, and the expanding revenue generated from the further investment in equipment and new operating locations. These results were achieved despite the significant impact of recent hurricanes and tropical storms on the Company’s Southeast Louisiana and Mexican operations, resulting in an estimated revenue loss of approximately $2.0 million.
 
Income from operations grew 184.4%, outpacing the growth in sales, to $3.5 million for third quarter 2005 from $1.2 million in last year’s third quarter due to increased market share, improved pricing and the Company’s strong customer base. Adjusted EBITDA increased 164.6% to $5.4 million for the 2005 third quarter from $2.0 million in the third quarter of 2004. As Adjusted EBITDA is a non-GAAP item, additional information and discussion regarding Adjusted EBITDA is provided later in this release.
 
Net income for the third quarter of 2005 attributed to common shares increased 149.1% to $1.3 million, or $0.08 per diluted share, compared to net income attributed to common shares of $519,000 or $0.05 per diluted share in the same quarter of 2004. The third quarter 2005 results include $1.1 million, or $0.06 per diluted share, in debt retirement expenses associated with refinancing the Company’s debt and prepaying its previous financing. Excluding these charges, earnings per share would have been $0.14, a 180% increase compared to last year’s third quarter results. Weighted average shares of common stock outstanding on a diluted basis increased 68.9% to 16.6 million shares for the three month period of 2005 from 9.8 million shares for same period last year.
 
 
Micki Hidayatallah, the Company’s Chairman and Chief Executive Officer stated, “We made significant strides to continue to grow this company and expand our market share by offering our customers more services from an expanding list of locations. I could not be more proud of our entire team led by David Wilde, our President and Chief Operating Officer. It is under his leadership and direction that we have succeeded in rapidly integrating our acquisitions and expanding our customer base. The team worked diligently to re-deploy our assets after hurricane(s) Rita (and Katrina) allowing us to continue to generate strong results.”
 
Revenue for the first nine months of 2005 rose 117.7% to $71.8 million compared to $33.0 million for the first nine months of 2004. Operating income grew at a faster pace than revenue to $8.7 million in 2005 from $3.4 million during the comparable nine months in 2004, representing a 154.2% increase. Net income for the first nine months of 2005 attributed to common shares rose 262.8% to $4.6 million, or $0.30 per diluted share, from net income of $1.3 million, or $0.18 per diluted share in the first nine months of 2004. Weighted average shares of common stock outstanding on a diluted basis increased to 15.6 million shares for the nine month period of 2005 from 7.9 million shares for same period last year.
 
Segment Results:

·    
Directional Drilling. Operating income for the directional drilling services segment increased 61.8% to $1.7 million from $1.0 in the third quarter of 2004. This significant growth is a direct result of the Company’s additional capacity and strong market presence, as well as the Company’s expansion into West Texas and Oklahoma. This segment continues to reap the benefit of its investments in its skilled operators, an expanded sales organization and down-hole motor technology.
 
·    
Casing & Tubing: Operating income for the casing and tubing services segment increased 40.8% to $1.3 million in the third quarter of 2005 from $949,000 in the comparable quarter last year. The rise was due to geographic expansion, expanded service offerings at new locations and improved market conditions; offsetting a slight downturn in revenues and operating income from the Company’s operations in Mexico, which were impacted in September by the hurricanes and tropical storms. The segment was also positively impacted for one month from the acquisition of casing and tubing assets on September 1, 2005.
 
·    
Compressed Air Drilling. Operating income attributed to compressed air drilling increased to $1.8 million in the 2005 third quarter from $130,000 in the comparable 2004 period due to investments in additional equipment and increased market share as a result of a wider geographic footprint and expanded customer base.
 
·    
Rental Tools. Operating income was $454,000 from this business segment which was recently formed through the acquisition of Safco Oilfield Products in September 2004 and of Delta Rental Service in April 2005. The segment benefited from the successful integration of Safco’s operations based in Houston, with those of Delta based in Lafayette, Louisiana, as well as by investments made in additional equipment. Sequentially, operating income in the third quarter of 2005 grew 12.1% over operating income in the second quarter of 2005.
 
·    
Production services.  During the third quarter the Company invested in this newly established segment to position itself to expand its international operations, resulting in an operating loss of $128,000 during the 2005 third quarter.
 
Outlook & Guidance:
 
The following statements are based on Allis-Chalmers’ current expectations. These statements are forward-looking and actual results may differ materially. These statements do not include the potential impact of any future capital transactions, such as business combinations, divestitures and financings, that may be completed after the date of this news release.
In addition, the Company’s guidance ranges are based on the assumption that current market conditions in the Company’s business segments will last through at least 2005. Any material change in market conditions in any of the Company’s business segments could affect its guidance.

Financial Guidance
 
 
  
Fourth Quarter
2005 Estimate
  
Revised Full Year
2005 Estimate
  
Previous Full Year
2005 Estimate
  
Revenues:
  
 
$28 mm to $32 mm
  
 
$100 mm to $104 mm
  
 
$80 mm to $95 mm
  
EBITDA:
  
 
$5.5 mm to $6.5 mm
  
 
$18.8 mm to $20.0 mm
  
 
$14.2 mm to $17.5 mm
  
Diluted EPS:
  
 
$0.11 to $0.17
  
 
$0.41 to $0.47
  
 
$0.28 to $0.45
  
Diluted EPS:
 excluding the impact
of refinance charges
    
NA
  
 
$0.47 to $0.53
    
NA
  
 
“Our results this quarter reflected the inherent strength of our operations in spite of hurricanes Katrina and Rita. We are looking forward to a strong fourth quarter and we will continue in 2006 to expand services, diversify our geographic footprint, increase market share and make acquisitions at accretive multiples,” added Mr. Hidayatallah.
 
Conference Call:
 
The Company will host a conference call to discuss its 2005 third quarter financial results and recent developments at 10:30 a.m. Eastern (9:30 a.m. Central) today, November 8, 2005. To participate in the call, please log on to www.alchenergy.com or dial ###-###-#### and ask for the Allis-Chalmers call at least 10 minutes prior to the start time. For those who cannot listen to the live call, a telephonic replay will be available through November 15, 2005, and may be accessed by calling ###-###-#### and using the pass code 11043354. A web cast archive will also be available at www.alchenergy.com shortly after the call is concluded.
 
 
About Allis-Chalmers Energy
 
Allis-Chalmers Energy Inc. provides a variety of products and services to the oil and natural gas industry. Through its subsidiaries, Allis-Chalmers is engaged in providing specialized equipment and operations to install casing and production tubing  required to drill and complete oil and gas wells,  directional and horizontal drilling services, the rental of heavy weight spiral drill pipe and related oilfield services, services to enhance production through the installation of small diameter coiled tubing and chemicals into producing oil and gas wells and air drilling services to natural gas exploration and development  operators.  
 
Forward- Looking Statements
 
This Press Release contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934) regarding Allis-Chalmers Energy’s business, financial condition, results of operations and prospects. Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Press Release.
 
Although forward-looking statements in this Press Release reflect the good faith judgment of management, such statements can only be based on facts and factors currently known to management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, demand for oil and natural gas drilling services in the areas and markets in which the Company operates, competition, obsolescence of products and services, the Company’s ability to obtain financing to support its operations, environmental and other casualty risks, and the impact of government regulation. Further information about the risks and uncertainties that may impact the Company are set forth in the Company’s most recent filings on Form 10K (including without limitation in the “Risk Factors” Section) and Form 10-Q, and in the Company’s other SEC filings and publicly available documents. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Press Release. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Press Release.
 
- Tables to Follow -



ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED INCOME STATEMENTS
(in thousands, except per share amounts)
(unaudited)
           
   
For the Three Months Ended
  
For the Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2005
  
2004
  
2005
  
2004
  
       
(Restated)
      
(Restated)
  
                   
Revenues
  
$
28,908
  
$
11,888
  
$
71,830
  
$
32,989
  
Cost of revenues
                          
Direct costs
    
19,280
    
7,633
    
47,756
    
22,395
  
Depreciation
    
1,391
    
591
   
3,397
   
1,796
  
Total cost of revenues
    
20,671
    
8,224
   
51,153
    
24,191
  
                           
Gross margin
    
8,237
    
3,664
    
20,677
    
8,798
  
General and administrative
    
4,261
    
2,227
    
10,720
    
4,781
  
Amortization
    
452
    
198
   
1,272
   
600
  
Income from operations
    
3,524
    
1,239
    
8,685
    
3,417
  
                           
Other income (expense):
                          
Interest
    
(977
)
  
(566
)
  
(2,143
)
  
(1,634
)
Debt retirement
    
(1,087
)
  
–
    
(1,087
)
  
–
  
Other
    
63
    
19
    
221
    
224
  
Total other income (expense)
    
(2,001
)
  
(547
)
  
(3,009
)
  
(1,410
)
                           
Net income before minority interest and income taxes
    
1,523
    
692
    
5,676
    
2,007
  
Minority interest in income of subsidiaries
    
–
    
(34
)
  
(488
)
  
(248
)
Provision for taxes
    
(230
)
  
(139
)
  
(559
)
  
(359
)
Net income
    
1,293
    
519
    
4,629
    
1,400
  
Preferred stock dividend
    
–
    
–
    
–
    
(124
)
Net income attributed to common shareholders
  
$
1,293
  
$
519
  
$
4,629
  
$
1,276
  
                           
                           
Net income per common share:
                          
Basic
  
$
0.09
  
$
0.06
  
$
0.33
  
$
0.21
  
Diluted
  
$
0.08
  
$
0.05
  
$
0.30
  
$
0.18
  
                           
Weighted average shares outstanding:
                          
Basic
    
14,985
    
8,298
    
14,197
    
6,168
  
Diluted
    
16,601
    
9,828
    
15,589
    
7,890
  



ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except for share amounts)
   
September 30,
  
December 31,
  
   
2005
  
2004
  
   
(unaudited)
      
Assets
          
Cash and cash equivalents
  
$
3,909
  
$
7,344
  
Trade receivables, net
    
23,777
    
12,986
  
Inventory
    
5,217
    
2,373
  
Lease receivable, current
    
–
    
180
  
Prepaid expenses and other
    
1,014
    
1,495
  
Total current assets
    
33,917
    
24,378
  
               
Property and equipment, net
   
75,516
    
37,67
  
Goodwill
    
12,042
    
11,776
  
Other intangible assets, net
   
7,264
    
5,057
  
Debt issuance costs, net
    
783
    
685
  
Lease receivable, less current portion
    
–
    
558
  
Other assets
    
40
    
59
  
Total assets
  
$
129,562
  
$
80,192
  
               
Liabilities and Stockholders' Equity
              
Current maturities of long-term debt
  
$
4,636
  
$
5,541
  
Trade accounts payable
    
8,703
    
5,694
  
Accrued salaries, benefits and payroll taxes
    
701
    
615
  
Accrued interest
    
462
    
470
  
Accrued expenses
    
4,688
    
1,852
  
Accounts payable, related parties
    
78
    
740
  
Total current liabilities
    
19,268
    
14,912
  
               
Accrued postretirement benefit obligations
    
335
    
687
  
Long-term debt, net of current maturities
    
51,491
    
24,932
  
Other long-term liabilities
    
1,092
    
129
  
Total liabilities
    
72,186
    
40,660
  
               
Commitments and contingencies
             
Minority interests
    
–
    
4,423
  
               
Stockholders' Equity
             
Preferred stock, $0.01 par value (25,000,000 shares authorized, no shares issued)
    
–
    
–
  
Common stock, $0.01 par value (100,000,000 shares authorized; 16,453,714 issued and outstanding at September 30, 2005 and 20,000,000 shares authorized and 13,611,525 issued and outstanding at December 31, 2004)
    
165
    
136
  
Capital in excess of par value
    
57,940
    
40,331
  
Accumulated deficit
    
(729
)
  
(5,358
)
Total stockholders' equity
    
57,376
    
35,109
  
Total liabilities and stockholders' equity
  
$
129,562
  
$
80,192
  


 
ALLIS-CHALMERS ENERGY INC.
SEGMENT INFORMATION
(in thousands, except per share)
 
   
For the Three Months Ended
  
For the Nine Months Ended
  
   
September 30,
  
September 30,
  
   
2005
  
2004
  
2005
  
2004
  
       
(Restated)
      
(Restated)
  
Revenues
                  
Directional drilling services
  
$
11,383
  
$
6,677
  
$
32,218
  
$
18,352
  
Casing and tubing services
    
5,103
    
2,831
    
12,596
    
7,218
  
Compressed air drilling services
    
7,637
    
2,380
    
16,684
    
7,419
  
Production services
    
3,226
    
–
    
6,833
    
–
  
Rental tools
    
1,559
    
–
    
3,499
    
–
  
   
$
28,908
  
$
11,888
  
$
71,830
  
$
32,989
  
                           
Operating Income (Loss):
                          
Directional drilling services
  
$
1,696
  
$
1,048
  
$
5,069
  
$
2,435
  
Casing and tubing services
    
1,336
    
949
    
4,015
    
2,174
  
Compressed air drilling services
    
1,802
    
130
    
3,331
    
723
  
Production services
    
(128
)
  
–
    
(130
)
  
–
  
Rental tools
    
454
    
–
    
780
    
–
  
General corporate
    
(1,636
)
  
(888
)
  
(4,380
)
  
(1,915
)
   
$
3,524
  
$
1,239
  
$
8,685
  
$
3,417
  
                           
Depreciation and Amortization:
                          
Directional drilling services
  
$
295
  
$
117
  
$
652
  
$
331
  
Casing and Tubing services
    
510
    
358
    
1,418
    
1,075
  
Compressed air drilling services
    
536
    
288
    
1,406
    
914
  
Production services
    
279
    
–
    
604
    
–
  
Rental tools
    
121
    
–
    
386
    
–
  
General corporate
    
102
    
26
    
203
    
76
  
   
$
1,843
  
$
789
  
$
4,669
  
$
2,396
  
Capital Expenditures:
                          
Directional drilling services
  
$
945
  
$
94
  
$
2,145
  
$
882
  
Casing and tubing services
    
1,373
    
32
    
3,230
    
457
  
Compressed air drilling services
    
915
    
107
    
2,841
    
771
  
Production services
    
606
    
–
    
896
    
–
  
Rental tools
    
271
    
–
    
278
    
–
  
General corporate
    
12
    
8
    
195
    
10
  
   
$
4,122
  
$
241
  
$
9,585
  
$
2,120
  


 
ALLIS-CHALMERS ENERGY INC.
REGULATION G RECONCILIATION    

Use of Adjusted EBITDA & Regulation G Reconciliation
 
This earnings release contains references to the non-GAAP financial measure of earnings (net income) before interest, taxes, depreciation, and amortization, gain on asset sales and litigation settlements, minority interest and other income and expense or Adjusted EBITDA. This term, as used and defined by Allis-Chalmers, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, the Company believes Adjusted EBITDA is useful to an investor in evaluating ALY’s operating performance because:
 
·  It is widely used by investors in the energy industry to measure a company’s operating performance without regard to the items excluded from Adjusted EBITDA, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired; and
 
·  It helps investors more meaningfully evaluate and compare the results of the Company’s operations from period to period by removing the impact of the Company’s capital structure and asset base from Allis-Chalmers’ operating results.
 
·  It is used by Allis-Chalmers’ management as a measure of operating performance, in presentations to its board of directors, as a basis for strategic planning and forecasting, as a component for setting incentive compensation and to assess compliance in financial ratios, among others.
 
There are material limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the impact of recurring and non-recurring items that are excluded from Adjusted EBITDA and materially impact results of operations, and the lack of compatibility of the results of operations of different companies.
 
Reconciliations of this financial measure to the most directly comparable GAAP financial measure are provided in the table below.
 
Reconciliation of Adjusted EBITDA to GAAP Net Income 
($ in millions)
       
   
 For the Three Months Ended
  
   
September 30,
  
September 30,
  
   
2005
  
2004
  
Consolidated Adjusted EBITDA
  
$
5.37
  
$
2.03
  
Depreciation and amortization
    
1.85
    
0.79
  
GAAP Income from operations
  
$
3.52
  
$
1.24
  
Interest expense
    
0.98
    
0.57
  
Taxes
    
0.23
    
0.14
  
Debt retirement expense
    
1.08
   
–
  
Minority Interest & other expense (income)
    
(0.06
)
  
0.01
  
Net income
 
$
1.29
  
$
0.52
  
 
 
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