Superior Energy Services Inc. Earnings Call Nuggets: CapEx Guidance, Labor
On Friday, Superior Energy Services Inc (NYSE:SPN) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.
James West – Barclays Capital Management: Dave, on your new CapEx guidance, I’m understanding you’re taking out some of the lower or eliminating some of the projects that might been turned. Is there a geographic shift in CapEx as well? I guess, what I’m really trying to get at with this is, are you getting less optimistic about North America than were say three months ago?
David Dunlap – President and CEO: I mean, I think, I wouldn’t say that we’re significantly less optimistic than we were three months ago, but off the $100 million that we’ve reduced from the overall capital spend, the bulk of that is coming from the U.S., but the things, James, that we looked that weren’t contributing for 2012 and we have a number of items in there that are related to CapEx that are non-revenue producing and as what we have tried to do is just try and high side, high grade some of the investments overall, so that we get a bit more efficient with our overall capital spend and it’s an ongoing theme in the Company to try and high grade our overall investments.
James West – Barclays Capital Management: There is nothing like slowing down coiled tubing or drill piping in North America?
David Dunlap – President and CEO: Coiled tubing has not slowed down. We’re still aren’t backing, are taking the orders that we’ve put in place and fact is that we’re probably allocating a little bit more money toward drill pipe than what the original budget would have let us believe.
James West – Barclays Capital Management: Fair enough and then just a follow-up for me on the Gulf of Mexico, we obviously have a large number of deepwater rigs running today. We’re going to be probably above pre-Macondo levels perhaps by the end of this year. Has your market share on drill pipe shifted at all or do you still dominate the drill pipe business and then are you seeing the benefits also of the businesses you acquired from Baker, the sand control business?
David Dunlap – President and CEO: I wouldn’t characterize at all as drill pipe on those deepwater rigs. We had a very high share of rental equipment on the 33 rigs that we’re drilling pre-Macondo and by all measures our market share is holding to be about the same as the rig resurface. It’s not all drill pipe, its bottom hole assemblies and stabilizers and it’s in some cases its surface related rentals, but our share seems to be holding strong there. On the completion side of the business, we expect as the market continues to return to pre-Macondo levels that we’ll have a market share in that business that’s consistent with what that product line experienced in the past prior to acquiring?
James Rollyson – Raymond James: Great quarter. I’ll make sure and send some cupcakes your way. One of your competitors noted issues on the labor front, availability, turnover, etcetera, on the coil tubing side of the business, just I guess because things have been so strong and everyone has been adding equipment, kind of curious to how you guys are managing through that given the market strength and capacity adds, and just kind of how you have been seeing that going on?
David Dunlap – President and CEO: Labor has been the big problem in being able to grow out the coil tubing business. What we have done is we’ve taken an approach to capital additions in coil tubing that were within the compounds of what we felt comfortable with from a labor standpoint. We could have added a lot more coil tubing units last year, we could probably add more coil tubing units than what we budgeted this year, but our constraint by what we see is, our ability to add the quality labor that we want to have. To this point we have been able to add the labor and we have got people in the pipeline that are being trained for units that are coming out and seem to be holding pretty good from that front, but the challenge is not – you had knew that challenge has been there for at least the last six quarters for us and I just think we managed it fine.
James Rollyson – Raymond James: Just kind of one follow-up related to pressure pumping. You mentioned your position is from a contracted standpoint and being a smaller piece of your business, remind us for one, what percent of the business that will end up being in terms of revenues this year? Number two, where you stand on percentage of your fleet that’s contracted this year and into next?
David Dunlap – President and CEO: It’s about 24% of our overall U.S. revenue and it’s about 60% contracted. Our first contracts expire beginning in the summer of 2013, so we’re pretty well set on contracts through 2012.