Superior Energy preps for market rebound, CEO touts $1 billion liquidity and cash conservation

By Lisa Kerner

Charlotte, N.C., Dec. 2 – Superior Energy Services, Inc. president and chief executive officer Dave Dunlap is not certain the industry downturn has reached the bottom yet.

However, he wants Superior to have its operations in order so it can be a “first responder” when the market does rebound.

“With the lack of visibility we have on the overall market, our objectives have been clear: we want to conserve cash, we want to maintain liquidity and we want to continue to be patient through this cycle,” Dunlap said during a presentation on Wednesday at the Cowen & Co. 5th Annual Ultimate Energy Conference in New York.

Dunlap touted his company’s $1 billion of liquidity, including $500 million of cash, as well as an affirmation of its investment-grade rating by Moody’s. Superior also has a $600 million undrawn revolving credit facility.

The cash is a valuable asset, one that Dunlap wants to hang onto right now.

He urged patience when it comes to investing in M&A. Superior is going to pay valuations that “make sense” for the company and its investors, and currently there are no deals that meet Superior’s requirements, he said.

While Superior has a history of divesting assets, Dunlap is not in a hurry to sell off anything. Given the current state of the balance sheet, Dunlap said Superior is not “desperate” for cash and won’t give its assets away.

The company sold $147 million of non-core assets in 2014 and had $120 million of assets held for sale at Sept. 30.

“We’ve been very effective and efficient with capital deployment,” said Dunlap, noting that excess cash is earmarked for the balance sheet first and then for shareholder returns.

In 2012 and 2013, Superior used cash to repay debt, to the chagrin of some investors who preferred share repurchases, Dunlap said. Today he is pleased with the decision.

Superior has long-term debt totaling $1.6 billion that matures between 2017 and 2021.

Dunlap said Superior has also effectively cut costs in the downturn. Headcount is down 35% from December, resulting in a savings of $350 million. Capital expenditures have been reduced 35% from 2014 levels, and product line restructuring savings will be between $45 million and $50 million.

Returning value to shareholders

In 2013, the company began an “aggressive” share repurchase program and initiated a dividend, according to the CEO.

The company purchased $300 million of stock in 2014 and is authorized to purchase an additional $500 million. There are no immediate plans for share buybacks.

Superior paid $50 million of dividends in 2014 and maintained the dividend in 2015.

Based in Houston, Superior Energy Services provides oilfield services and equipment.

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