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What happened
Shares of Superior Energy Services (SPN +0.00%) are down 14% as of 11 a.m. EDT after the company announced earnings results that were well below analyst expectations. Net loss for the quarter came in at $0.75 per share compared to consensus analyst estimates that projected Superior's third quarter at a loss of $0.58 per share. On a GAAP basis, net income was up from a net loss of $5.42 from this time last year.
So what
One of the things that isn't reflected in Superior's numbers is that this quarter was worse than in prior quarters. In both the prior quarter and the same one last year, Superior took some large writedown charges that impacted the bottom line without affecting the cash flow situation or its continuing operations. If we back out these charges, last quarter and the year-over-year quarter had net losses of $0.53 and $0.46 per share, respectively. This goes to show that the company is still seeing a deterioration of its bottom line.
According to CEO David Dunlap, some of the increase in drilling activity we have seen in the U.S. hasn't yet hit the company's bottom line. Certain business segments started to see some modest upticks like its U.S. land-based well completion, drilling products, and technical solutions. For every gain in U.S. land-based services, though, it saw even larger declines in the Gulf of Mexico and its international business.
Now what
The end result for Superior didn't meet analyst expectations, but many of the reasons it struggled are not that surprising. Drilling activity, especially outside the Lower 48, is sill declining and may continue to do so for some time until we see a stronger uptick in prices. Unfortunately for Superior, its U.S. land-based business isn't large enough to offset the declines in its other businesses.
Anyone invested in this company over the long term shouldn't view today's earnings results or stock-price reaction as a reason to alter ones investment thesis. This is just further evidence that the recovery in the oil market is taking much longer than expected and investors need to be extremely patient with their investments.
