2011 | 2012 | ||||||
Price: | 26.62 | EPS | N/A | $4.11 | |||
Shares Out. (in M): | 155 | P/E | N/A | 6.5x | |||
Market Cap (in $M): | 4,158 | P/FCF | N/A | N/A | |||
Net Debt (in $M): | 1,777 | EBIT | 0 | 1,048 | |||
TEV (in $M): | 5,935 | TEV/EBIT | N/A | 5.7x |
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EXECUTIVE SUMMARY
Superior Energy Services, Inc. ("Superior Energy") appears to be an attractive, event-driven opportunity. The Company has signed a definitive agreement to merge with Completed Production Services, Inc. ("Complete Production")(CPX) in a cash and stock transaction. The transaction, scheduled to close by the end of 2011, is highly strategic, should be accretive to Superior Energy's earnings, and the pro forma company should benefit from trends in the oil service sector. By my calculations, the pro forma entity is trading at an undemanding valuation of 3.9x 2012E EBITDA. Placing a more appropriate 5.0x multiple on this EBITDA equates to a $38 price target, ~40% higher than the Company's current trading price.
Please note that all the figures presented above (including share count, market cap, net debt and EBIT are all pro forma for the merger).
COMPANY DESCRIPTION
INVESTMENT THESIS
FUNDAMENTAL ANALYSIS
OTHER CATALYSTS
KEY RISKS
2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||||||||
SUPERIOR ENERGY SERVICES | |||||||||||||||||||||||||||||
North American Avg. Rig Count | 2,120 | 2,111 | 2,261 | 1,312 | 1,893 | 2,308 | 2,691 | 2,772 | |||||||||||||||||||||
Growth, % | N.A. | (0.4%) | 7.1% | (42.0%) | 44.3% | 21.9% | 16.6% | 3.0% | |||||||||||||||||||||
Subsea and Well Enhancement | |||||||||||||||||||||||||||||
Revenues | $ 469.1 | $ 761.0 | $ 1,155.2 | $ 919.3 | $ 1,112.7 | $ 1,335.4 | $ 1,614.7 | $ 1,663.2 | |||||||||||||||||||||
Growth, % | N.A. | 62.2% | 51.8% | (20.4%) | 21.0% | 20.0% | 20.9% | 3.0% | |||||||||||||||||||||
Cash Cost of Services | 269.6 | 419.8 | 633.1 | 616.1 | 675.4 | 829.5 | 1,017.3 | 1,047.8 | |||||||||||||||||||||
Cash Gross Profit | 199.5 | 341.2 | 522.1 | 303.2 | 437.2 | 505.9 | 597.5 | 615.4 | |||||||||||||||||||||
Margin, % | 42.5% | 44.8% | 45.2% | 33.0% | 39.3% | 37.9% | 37.0% | 37.0% | |||||||||||||||||||||
General and Administrative Expenses | 77.8 | 118.7 | 163.6 | 149.1 | 221.6 | 237.5 | 240.0 | 240.0 | |||||||||||||||||||||
% of Revenues | 16.6% | 15.6% | 14.2% | 16.2% | 19.9% | 17.8% | 14.9% | 14.4% | |||||||||||||||||||||
EBITDA | 121.7 | 222.5 | 358.5 | 154.1 | 215.6 | 268.4 | 357.5 | 375.4 | |||||||||||||||||||||
Margin, % | 25.9% | 29.2% | 31.0% | 16.8% | 19.4% | 20.1% | 22.1% | 22.6% | |||||||||||||||||||||
Drilling Products and Services | |||||||||||||||||||||||||||||
Revenues | $ 371.2 | $ 496.3 | $ 550.9 | $ 426.9 | $ 474.7 | $ 584.6 | $ 672.8 | $ 693.0 | |||||||||||||||||||||
Growth, % | N.A. | 33.7% | 11.0% | (22.5%) | 11.2% | 23.2% | 15.1% | 3.0% | |||||||||||||||||||||
Cash Cost of Services | 115.9 | 156.7 | 178.6 | 143.8 | 176.5 | 213.9 | 242.2 | 249.5 | |||||||||||||||||||||
Cash Gross Profit | 255.3 | 339.6 | 372.4 | 283.1 | 298.3 | 370.7 | 430.6 | 443.5 | |||||||||||||||||||||
Margin, % | 68.8% | 68.4% | 67.6% | 66.3% | 62.8% | 63.4% | 64.0% | 64.0% | |||||||||||||||||||||
General and Administrative Expenses | 70.3 | 87.4 | 97.6 | 90.3 | 107.2 | 119.7 | 120.0 | 120.0 | |||||||||||||||||||||
% of Revenues | 18.9% | 17.6% | 17.7% | 21.2% | 22.6% | 20.5% | 17.8% | 17.3% | |||||||||||||||||||||
EBITDA | 185.0 | 252.1 | 274.8 | 192.8 | 191.1 | 251.0 | 310.6 | 323.5 | |||||||||||||||||||||
Margin, % | 49.8% | 50.8% | 49.9% | 45.2% | 40.2% | 42.9% | 46.2% | 46.7% | |||||||||||||||||||||
Marine | |||||||||||||||||||||||||||||
Revenues | $ 140.1 | $ 127.9 | $ 121.1 | $ 103.1 | $ 94.2 | $ 101.2 | $ 107.1 | $ 108.2 | |||||||||||||||||||||
Growth, % | N.A. | (8.7%) | (5.3%) | (14.9%) | (8.6%) | 7.4% | 5.8% | 1.0% | |||||||||||||||||||||
Cash Cost of Services | 56.2 | 60.4 | 74.8 | 64.1 | 66.8 | 73.3 | 75.0 | 75.7 | |||||||||||||||||||||
Cash Gross Profit | 83.9 | 67.5 | 46.3 | 39.0 | 27.4 | 27.9 | 32.1 | 32.5 | |||||||||||||||||||||
Margin, % | 59.9% | 52.7% | 38.2% | 37.8% | 29.1% | 27.6% | 30.0% | 30.0% | |||||||||||||||||||||
General and Administrative Expenses | 11.4 | 10.6 | 12.6 | 19.7 | 14.1 | 11.6 | 12.0 | 12.0 | |||||||||||||||||||||
% of Revenues | 8.2% | 8.3% | 10.4% | 19.1% | 14.9% | 11.4% | 11.2% | 11.1% | |||||||||||||||||||||
EBITDA | 72.5 | 56.9 | 33.7 | 19.3 | 13.4 | 16.4 | 20.1 | 20.5 | |||||||||||||||||||||
Margin, % | 51.7% | 44.5% | 27.8% | 18.7% | 14.2% | 16.2% | 18.8% | 18.9% | |||||||||||||||||||||
Consolidated | |||||||||||||||||||||||||||||
Revenues | $ 980.4 | $ 1,385.2 | $ 1,827.3 | $ 1,449.3 | $ 1,681.6 | $ 2,021.2 | $ 2,394.7 | $ 2,464.4 | |||||||||||||||||||||
Growth, % | N.A. | 41.3% | 31.9% | (20.7%) | 16.0% | 20.2% | 18.5% | 2.9% | |||||||||||||||||||||
Cash Cost of Services | 441.7 | 637.0 | 886.5 | 824.0 | 918.7 | 1,116.7 | 1,334.5 | 1,373.0 | |||||||||||||||||||||
Cash Gross Profit | 538.7 | 748.2 | 940.7 | 625.3 | 762.9 | 904.6 | 1,060.2 | 1,091.3 | |||||||||||||||||||||
Margin, % | 54.9% | 54.0% | 51.5% | 43.1% | 45.4% | 44.8% | 44.3% | 44.3% | |||||||||||||||||||||
General and Administrative Expenses | 159.5 | 216.7 | 273.8 | 259.1 | 342.9 | 368.8 | 372.0 | 372.0 | |||||||||||||||||||||
% of Revenues | 16.3% | 15.6% | 15.0% | 17.9% | 20.4% | 18.2% | 15.5% | 15.1% | |||||||||||||||||||||
EBITDA | 379.2 | 531.5 | 666.9 | 366.2 | 420.0 | 535.8 | 688.2 | 719.3 | |||||||||||||||||||||
Margin, % | 38.7% | 38.4% | 36.5% | 25.3% | 25.0% | 26.5% | 28.7% | 29.2% | |||||||||||||||||||||
Depreciation and Amortization | 111.0 | 187.8 | 175.5 | 207.1 | 220.8 | 250.7 | 256.0 | 260.0 | |||||||||||||||||||||
EBIT | 268.2 | 343.7 | 491.4 | 159.1 | 199.2 | 285.1 | 432.2 | 459.3 | |||||||||||||||||||||
Margin, % | 27.4% | 24.8% | 26.9% | 11.0% | 11.8% | 14.1% | 18.0% | 18.6% | |||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||||||||
COMPLETE PRODUCTION SERVICES | |||||||||||||||||||||||||||||
North American Avg. Rig Count | 2,120 | 2,111 | 2,261 | 1,312 | 1,893 | 2,308 | 2,691 | 2,772 | |||||||||||||||||||||
Growth, % | N.A. | (0.4%) | 7.1% | (42.0%) | 44.3% | 21.9% | 16.6% | 3.0% | |||||||||||||||||||||
Completion & Production Services | |||||||||||||||||||||||||||||
Revenues | $ 860.6 | $ 1,243.5 | $ 1,542.3 | $ 897.7 | $ 1,355.0 | $ 2,034.9 | $ 2,422.1 | $ 2,494.8 | |||||||||||||||||||||
Growth, % | N.A. | 44.5% | 24.0% | (41.8%) | 50.9% | 50.2% | 19.0% | 3.0% | |||||||||||||||||||||
Cash Operating Costs | 608.0 | 844.8 | 1,075.2 | 731.9 | 985.2 | 1,439.4 | 1,647.0 | 1,696.4 | |||||||||||||||||||||
EBITDA | 252.6 | 398.6 | 467.1 | 165.8 | 369.8 | 595.5 | 775.1 | 798.3 | |||||||||||||||||||||
Margin, % | 29.4% | 32.1% | 30.3% | 18.5% | 27.3% | 29.3% | 32.0% | 32.0% | |||||||||||||||||||||
Drilling Services | |||||||||||||||||||||||||||||
Revenues | $ 196.2 | $ 214.5 | $ 235.0 | $ 115.5 | $ 173.1 | $ 225.3 | $ 269.1 | $ 277.2 | |||||||||||||||||||||
Growth, % | N.A. | 9.3% | 9.5% | (50.9%) | 49.9% | 30.2% | 19.5% | 3.0% | |||||||||||||||||||||
Cash Operating Costs | 125.8 | 153.1 | 176.2 | 105.8 | 134.1 | 166.0 | 193.1 | 194.0 | |||||||||||||||||||||
EBITDA | 70.4 | 61.4 | 58.7 | 9.6 | 39.0 | 59.3 | 76.1 | 83.2 | |||||||||||||||||||||
Margin, % | 35.9% | 28.6% | 25.0% | 8.3% | 22.5% | 26.3% | 28.3% | 30.0% | |||||||||||||||||||||
Product Sales | |||||||||||||||||||||||||||||
Revenues | $ 69.5 | $ 79.6 | $ 89.5 | $ 52.3 | $ 39.8 | $ 46.4 | $ 49.7 | $ 50.2 | |||||||||||||||||||||
Growth, % | N.A. | 14.5% | 12.4% | (41.5%) | (24.0%) | 16.8% | 7.0% | 1.0% | |||||||||||||||||||||
Cash Operating Costs | 61.0 | 69.6 | 76.8 | 44.4 | 34.6 | 39.7 | 42.2 | 42.7 | |||||||||||||||||||||
EBITDA | 8.5 | 9.9 | 12.7 | 8.0 | 5.2 | 6.7 | 7.5 | 7.5 | |||||||||||||||||||||
Margin, % | 12.3% | 12.5% | 14.2% | 15.2% | 13.1% | 14.4% | 15.0% | 15.0% | |||||||||||||||||||||
Corporate | |||||||||||||||||||||||||||||
Intersegment Revenues | ($ 41.7) | ($ 42.1) | ($ 31.8) | ($ 9.1) | ($ 6.5) | ($ 11.5) | ($ 10.0) | ($ 10.0) | |||||||||||||||||||||
Growth, % | |||||||||||||||||||||||||||||
Cash Operating Costs | (20.8) | (14.0) | 6.5 | 25.2 | 32.6 | 30.4 | 32.0 | 32.0 | |||||||||||||||||||||
EBITDA | (20.9) | (28.1) | (38.3) | (34.3) | (39.1) | (41.9) | (42.0) | (42.0) | |||||||||||||||||||||
Margin, % | N.A. | N.A. | N.A. | N.A. | N.A. | N.A. | N.A. | N.A. | |||||||||||||||||||||
Consolidated | |||||||||||||||||||||||||||||
Revenues | $ 1,084.6 | $ 1,495.4 | $ 1,834.9 | $ 1,056.4 | $ 1,561.4 | $ 2,295.1 | $ 2,730.9 | $ 2,812.2 | |||||||||||||||||||||
Growth, % | N.A. | 37.9% | 22.7% | (42.4%) | 47.8% | 47.0% | 19.0% | 3.0% | |||||||||||||||||||||
Cash Operating Costs | 773.9 | 1,053.6 | 1,334.7 | 907.3 | 1,186.5 | 1,675.5 | 1,914.3 | 1,965.1 | |||||||||||||||||||||
EBITDA | 310.7 | 441.9 | 500.2 | 149.1 | 374.9 | 619.6 | 816.6 | 847.0 | |||||||||||||||||||||
Margin, % | 28.6% | 29.5% | 27.3% | 14.1% | 24.0% | 27.0% | 29.9% | 30.1% | |||||||||||||||||||||
Depreciation and Amortization | 75.9 | 131.4 | 181.2 | 200.7 | 181.8 | 198.6 | 200.0 | 200.0 | |||||||||||||||||||||
EBIT | 234.8 | 310.5 | 319.0 | (51.7) | 193.1 | 421.0 | 616.6 | 647.0 | |||||||||||||||||||||
Margin, % | 21.6% | 20.8% | 17.4% | (4.9%) | 12.4% | 18.3% | 22.6% | 23.0% | |||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||||||||
PRO FORMA CONSOLIDATED | |||||||||||||||||||||||||||||
Revenues | $ 980.4 | $ 1,385.2 | $ 1,827.3 | $ 1,449.3 | $ 1,681.6 | $ 2,021.2 | $ 5,125.6 | $ 5,276.5 | |||||||||||||||||||||
Growth, % | N.A. | 41.3% | 31.9% | (20.7%) | 16.0% | 20.2% | 153.6% | 2.9% | |||||||||||||||||||||
Cash Operating Costs | 601.2 | 853.7 | 1,160.3 | 1,083.1 | 1,261.6 | 1,485.4 | 3,620.8 | 3,710.1 | |||||||||||||||||||||
EBITDA | 379.2 | 531.5 | 666.9 | 366.2 | 420.0 | 535.8 | 1,504.8 | 1,566.4 | |||||||||||||||||||||
Margin, % | 38.7% | 38.4% | 36.5% | 25.3% | 25.0% | 26.5% | 29.4% | 29.7% | |||||||||||||||||||||
Depreciation and Amortization | 111.0 | 187.8 | 175.5 | 207.1 | 220.8 | 250.7 | 456.0 | 460.0 | |||||||||||||||||||||
EBIT | 268.2 | 343.7 | 491.4 | 159.1 | 199.2 | 285.1 | 1,048.8 | 1,106.4 | |||||||||||||||||||||
Margin, % | 27.4% | 24.8% | 26.9% | 11.0% | 11.8% | 14.1% | 20.5% | 21.0% | |||||||||||||||||||||
Superior Energy Services, Inc. (SPN) | |||||||||||||||||||||||||||||
Pro Forma Income Statement | |||||||||||||||||||||||||||||
($ in millions) | |||||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||||||||
Revenues | $ 980.4 | $ 1,385.2 | $ 1,827.3 | $ 1,449.3 | $ 1,681.6 | $ 2,021.2 | $ 5,125.6 | $ 5,276.5 | |||||||||||||||||||||
% Growth | N.A. | 41.3% | 31.9% | (20.7%) | 16.0% | 20.2% | 153.6% | 2.9% | |||||||||||||||||||||
Cash COGS | 601.2 | 853.7 | 1,160.3 | 1,083.1 | 1,261.6 | 1,485.4 | 3,620.8 | 3,710.1 | |||||||||||||||||||||
EBITDA | 379.2 | 531.5 | 666.9 | 366.2 | 420.0 | 535.8 | 1,504.8 | 1,566.4 | |||||||||||||||||||||
% Margin | 38.7% | 38.4% | 36.5% | 25.3% | 25.0% | 26.5% | 29.4% | 29.7% | |||||||||||||||||||||
Depreciation | 111.0 | 187.8 | 175.5 | 207.1 | 220.8 | 250.7 | 456.0 | 460.0 | |||||||||||||||||||||
Total Depreciation and Amortization | 111.0 | 187.8 | 175.5 | 207.1 | 220.8 | 250.7 | 456.0 | 460.0 | |||||||||||||||||||||
EBIT | 268.2 | 343.7 | 491.4 | 159.1 | 199.2 | 285.1 | 1,048.8 | 1,106.4 | |||||||||||||||||||||
% Margin | 27.4% | 24.8% | 26.9% | 11.0% | 11.8% | 14.1% | 20.5% | 21.0% | |||||||||||||||||||||
Total Interest Expense | 23.0 | 33.3 | 46.7 | 50.9 | 57.4 | 53.4 | 56.0 | 54.1 | |||||||||||||||||||||
Interest Income | 4.0 | 2.7 | 3.0 | 0.9 | 5.1 | 0.6 | 1.2 | 1.2 | |||||||||||||||||||||
Other Income/(Expense) | 42.7 | 119.4 | 94.6 | (269.0) | (21.8) | 14.1 | 0.0 | 0.0 | |||||||||||||||||||||
EBT | 291.8 | 432.5 | 542.4 | (159.9) | 125.1 | 246.4 | 994.0 | 1,053.5 | |||||||||||||||||||||
Taxes | 103.6 | 151.4 | 190.9 | (57.6) | 43.3 | 88.7 | 357.8 | 379.2 | |||||||||||||||||||||
Tax Rate | 35.5% | 35.0% | 35.2% | 36.0% | 34.6% | 36.0% | 36.0% | 36.0% | |||||||||||||||||||||
Net Income | $ 188.2 | $ 281.1 | $ 351.5 | ($ 102.3) | $ 81.8 | $ 157.7 | $ 636.2 | $ 674.2 | |||||||||||||||||||||
FD Shares Outstanding | 81.3 | 82.4 | 81.2 | 78.2 | 79.7 | 117.3 | 154.7 | 154.7 | |||||||||||||||||||||
FD EPS | $ 2.32 | $ 3.41 | $ 4.33 | ($ 1.31) | $ 1.03 | $ 1.34 | $ 4.11 | $ 4.36 | |||||||||||||||||||||
Growth, % | N.A. | 47.3% | 26.8% | (130.2%) | (178.4%) | 31.0% | 205.7% | 6.0% |
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