Tesco Corporation (Tesco), a US-based designer, manufacturer and service provider of technology based solutions for the energy industry, has reported revenues of $534.9 million for the year-end 2008, compared with the revenues of $462.4 million in the previous year-end. It also reported a net income of $52.9 million, or $1.40 per diluted share for the year-end 2008, compared with the net income of $32.3 million, or $0.86 per diluted share, in the previous year-end.
Julio Quintana, chief executive officer of the company said that We are very pleased with our Q4 and full year 2008 results. While we expect 2009 to be a challenging economic time, we are confident that our solid financial position and focus on operating efficiencies will enable TESCO to endure an economic downturn and prepare for the future. While our Q4 2008 margins were impacted by the recent adverse market conditions, our overall financial performance remained strong; 2008 was a record year for us in terms of revenues, operating income and operating cash flows. We increased our revenues in all three of our operating segments and reduced our outstanding debt by over $31 million. We ended the year with a backlog of 65 Top Drive units. This is down from 77 units at September 30, but it represents about two quarters of production for us. We are pleased with the performance of our employees and will count on them to help us through the current economic downturn.
Revenues from the Top Drive segment for Q4 2008 were $90.0 million, down slightly from the record revenues of $90.7 million in Q3 2008, primarily due to a decrease in used Top Drive sales. Top Drive sales for Q4 2008 included a record number of new units (37 new units sold and 1 from the rental fleet). This compares to 38 units sold in Q3 2008 (32 new units sold and 6 from the rental fleet) and 29 units sold in Q4 2007 (20 new and 9 from the rental fleet).
During Q4 2008, the company has built and delivered 8 units to its rental fleet (in addition to the 37 new third party units). The rental fleet now stands at 126 units as of December 31, 2008 compared to 119 units at September 30, 2008 and 110 units at December 31, 2007.
At December 31, 2008, Top Drive backlog was 65 units, with a total value of $57 million, versus 77 units at September 30, 2008, with a total value of $72 million. This compares to a backlog of 38 units at December 31, 2007 with a total value of $39 million.
Operating days for the Top Drive rental fleet decreased to 5,808 for Q4 2008 compared to 6,014 in Q3 2008 and 5,978 in Q4 2007, primarily due to units being removed from the company’s rental fleet in preparation for sale and the timing of new rental units being activated.
The company’s Top Drive operating margins were 29% in Q4 2008 compared to 35% in Q3 2008 and 27% in Q4 2007. The margin decrease compared to Q3 2008 is a result of fewer sales of used Top Drive units (1 in Q4 2008 compared to 6 in Q3 2008) and costs incurred to prepare additional used units for sale, partially offset by increased rental margins. The increase from last year is primarily as a result of better margins in Top Drive sales and in after-market sales and service business.
Revenues from the Tubular Services segment for Q4 2008 were $43.0 million, an increase of $0.2 million from Q3 2008 primarily related to an increase in the number of proprietary jobs, but offset by a decline in conventional revenues. The company has performed a record total of 540 casing running jobs in Q4 2008 compared to 496 in Q3 2008 and 348 in Q4 2007. The company remains focused on converting the market to running casing with the company’s proprietary CDS technology. As demand for proprietary services increases, the company expects the conventional revenue base to continue to decline.
Operating Income in the company’s Tubular Services segment for Q4 2008 was $5.0 million, compared to $7.4 million in Q3 2008 and $5.2 million in Q4 2007. Q4 2008’s operating income was unfavorably impacted by pricing pressures that squeezed revenues while costs increased due to increased labor and fuel prices associated with the increase in proprietary jobs performed.
CASING DRILLING revenue in Q4 2008 was $6.4 million, compared to $6.5 million in Q3 2008, and $6.3 million in Q4 2007. The slight decrease in Q4 2008 compared to Q3 2008 was primarily due to lower revenue in North America.
Operating Loss in CASING DRILLING segment for Q4 2008 was $3.4 million, compared to $3.1 million in Q3 2008 and $2.2 million in Q4 2007. Q4 2008’s operating loss was impacted by increased costs associated with delivering CASING DRILLING(TM) services around the world and weaker than expected revenues, particularly in North America. Q4 2007 included income of $1.0 million for the cancellation of a job in the North Sea.