On the one hand, MRC Global's (MRC +0.00%) financial results took a step back during the fourth quarter after revenue declined and its adjusted net loss widened. However, the company expected as much due to seasonality. Meanwhile, there were some encouraging trends elsewhere in its business, which has it expecting sales and earnings to start growing again this year.
MRC Global results: The raw numbers
|
Metric |
Q4 2016 |
Q4 2015 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$719 million |
$967 billion |
(26%) |
|
Net income |
($24.0 million) |
($399 million) |
N/A |
|
Earnings per share |
($0.25) |
($3.92) |
N/A |
Data source: MRC Global.
What happened with MRC Global this quarter?
MRC Global continues to see some slight improvements.
- MRC Global's revenue slumped 26% year over year due to weakness across all segments and sectors. Furthermore, sales were down 9% versus last quarter due to seasonal weakness in sales to midstream customers. However, it wasn't all bad news as sales in the upstream segment increased 8% versus the third quarter thanks to improving well completion activity across U.S. shale plays.
- While the company's net loss appears to have vastly improved versus last year, that's because it recorded a significant impairment charge in the fourth quarter or 2015. If we adjust for the difference in one-time items in both quarters, the company would have still reported a loss of $0.18 per share during 2016's fourth quarter versus a profit of $0.12 per share in the fourth quarter of 2015. Also, the company's loss in the fourth quarter deepened from the third quarter's adjusted loss of $0.06 per share.
- Despite the accounting loss, the company did generate $23 million of cash from operations last quarter and $253 million for the full year. As a result, it ended the quarter with $109 million of cash and just $305 million of net debt, which is down by $1 billion over the past two years. The company also repurchased $7 million of stock during the quarter and has now bought back $107 million under its $125 million share repurchase plan.
Image source: Getty Images.
What management had to say
CEO Andrew Lane commented on the quarter and the company's recent progress by saying:
As expected, fourth quarter revenue was down 9% sequentially due to seasonality primarily driven by U.S. midstream. However, we are encouraged as sequential revenue for our U.S. upstream business increased 8%, as well completion activity is increasing. While the last two years have been challenging in the oil and gas markets, we are in a strong position to capitalize on the improving market conditions. Over the past two years, since the downturn began, we executed our strategic objectives. We have gained valuable market share, generated $943 million in cash from operations, reduced debt by $1 billion, reduced operating costs by 27% and returned $107 million to shareholders. These actions have allowed us to strengthen our position as the leading PVF distributor and now we are ready to return our focus to growing with our customers again.
MRC Global's focus during the oil market downturn was to shore up its position so it could thrive when market conditions improved. That's just what the company has done by shedding debt and costs so that it has the flexibility to expand now that its customers are spending again.
Looking forward
There has been a noticeable rise in industry budgets this year, which is starting to flow down to distributors. For example, fellow energy sector distributor NOW Inc. (DNOW 0.81%) noted that the recent rise in the North American rig count is starting to translate into more sales. In fact, NOW CEO Robert Workman pointed out that the company recently won new supply chain service awards, which has it "encouraged about 2017." MRC Global's CEO, likewise, "expect[s] 2017 results to be improved over 2016 and we are looking forward to returning to sales and earnings growth across each of our segments and sectors."
