Superior Energy Services, Inc. Q4 2007 Earnings Call Transcript

Superior Energy Services, Inc. (SPN)

Q4 FY07 Earnings Call

February 27, 2008, 11:00 AM ET

Executives

Greg Rosenstein - VP of IR

Terence E. Hall - Chairman and CEO

Analysts

JamesWest - Lehman Brothers

James Rollyson - Raymond James

Joseph D. Gibney - CapitalOne Southcoast

William Sanchez - Howard Weil

Robin Shoemaker - Bear Stearns

Byron Pope - PickeringEnergy Partners

Thomas Escott - Pritchard Capital Partners

Joe Agular - Johnson Rice

Matthew McGeary - Sentinel Asset Management

Presentation

Operator

Good morning ladies and gentlemen. Thank you for standing by. Welcome to the Superior Energy's Fourth Quarter Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. [Operator Instructions] This conference is being recorded today, Wednesday, February 27, 2008.

I would now like to turn the conference over to our host Mr. Greg Rosenstein. Please go ahead sir.

Greg Rosenstein - Vice President of Investor Relations

All right, good morning and thank you everyone for joining today's call. Joining me today are Chairman and CEO, Terry Hall; President and COO, Ken Blanchard, and Chief Financial Officer, Robert Taylor.

Before I turn it over to Terry, let me remind everyone that during the call, management may make forward-looking statements regarding future expectations about the company's business, management's plans for future operations or similar matters. The company's actual results could differ materially due to several important factors, including those described in the company's filings with the Securities and Exchange Commission. During the call, management may refer to EBITDA, which is a non-GAAP financial measure and in accordance with Regulation G, the company provides reconciliation between net income and EBITDA on its website.

And with that, I'll now turn the call over to Terry Hall.

Terence E. Hall - Chairman and Chief Executive Officer

Good morning everyone. Got a little infection of flu or something. So if I lose my voice, please forgive me. Don't take that as some weakness as part of our business. It's a very personal matter.

To recap the fourth quarter, revenue was $413 million, EBITDA was $170 million, net income $72 million, or $0.88 diluted earnings per share. But compared to the third quarter revenue grew 4%, operating income when adjusted for the $7.5 million gain in the third quarter, we made on the sale of a small non-core business. The operating income actually grew 30%. Incremental operating margin on our revenue growth was lower than we normally generate due to nothing more than business mix with some higher operating expenses.

In terms of business mix, we saw lower revenues from higher margin well control work which I told you on the last quarters call is likely to occur. In addition, rental tool segment had a sharp increase in revenue from the accommodations business as a result of the increased activity in the Rockies. This is primarily due to a large scale camp project which we manufactured and sold accommodations to our customers.

The sale of accommodations carries a lower margin in rentals so it had the impact of lowering overall rental tools margins against this business mix cost. On the expense side G&A was 60% higher than the third quarter primarily due to a incentive comp for the insurance expense. We had a record year financial accomplished many of our non-financial goals including the fourth consecutive year of topping our entire peer group in terms of safety performance.

In addition, we had increment of $2 million in G&A as a result of three acquisitions made early in the fourth quarter. We mentioned those acquisitions to you on the last call.

Looking at fourth quarter business conditions in our geographic markets, the Gulf of Mexico was stronger as we rebounded from the poor third quarter, which resulted an increase in Gulf of Mexico revenue for all of our segments. Activity in domestic landmarks has decreased primarily due to an increase in rentals and stabilized accommodations. Well intervention activity in landmark this is weaker due to poor weather in certain market especially West Texas and the mid-continent.

International activity was lower as a result of decreased revenue from the derrick barge construction and chartered contracts all of which you were aware of. Work on the construction of the derrick barge where our customer to DB3 that we are selling is nearing completion. Also the charter of our derrick barge work in Malaysia is ending. We are re positioning the barge at the Gulf of Mexico to begin work on the decommissioning project we announced in January.

International revenues from the remainder of our business increased over the third quarter. Rental tools revenue international is especially strong particularly in the North Sea. We benefited from revenue in Columbia from a small acquisition we made early in the fourth quarter.

Oil and gas segment revenue and operating income increased from the strength of higher commodity prices to lower lease operating expenses. I'll now review these highlights on the segment basis and make comparisons to the third quarter.

In the Well Intervention segment revenues were $190 million and income from operations was $37 million. Both revenue and operating income decreased in the third quarter. Three key factors impacting the quarter 60% of revenue decreased was due to lower derrick barge revenue as the international construction and charter contract begin to run down.

Our subsidiary revolver controlled for revenue decreased to well control work due to some of the hurricane recovery work especially in December. As you know we announced the signing of that contract we are working for BP and others they shutdown all their work and the work is not going to start up until the end of March.

So we also told you that was going to happen. Revenue decreased in some of our production related services including coiled tubing, plug and abandonment engineering services. Most of the decreases was due to seasonal factors of poor weather in certain markets. Whereas the coiled tubing activities decreased in the mid-continent and the West Texas market due to poor weather and ice storms in December.

25% of our coiled tubing units are located in these markets, but when the weather has allowed us to work this equipment, we have done very well and we continue do well with it so, so far this is a weather related story and don't read any thing else into it.

The rental tool segment, revenue of $137 million income operations is $46.4 million. The 60% revenues growth at the third quarter was due to the accommodation project in the Rockies. Increased drill pipe rentals in Gulf and North Sea, and increased rentals for stabilizing the Mexico and the U.K. Gulf of Mexico market, in particular was strong, just sort pick up in deep water drilling programs following significant downtime that we experienced in the third quarter.

Despite the lower margins, the operating income increased 6% over third quarter when excluding the $7.5 million gain from third quarter sales and non-core rental goods.

In the marine segment, revenue was 30.5 million income from operations $8.2 million, both increasing over the third quarter. Utilization was 70% as compared to 62% in the third quarter reflecting improved weather during October and November. Our day rates fell by about 2%, the largest decreases occurring in the smaller lift boats. Again that's what we predict.

Eight new builds were added to the market in '07 and another 6 are expected to be added in '08. Most of the new builds were in the 175 to 255 class and owned and operated by liftboat companies that do not have the advantage of putting their own services on the deck of these boats.

As a result, while we can't control pricing these vessels, our utilization would still be higher than most of our competitors, that's always been the case in the past.

As is the case of with other liftboat providers harsh weather and seasonality impact the ability to work in December through January. We expect that to increase in March as weather improves and local programs resume.

First 60 days of the first quarter our fleet utilization suffered, it's currently anywhere from 92% on the big boats to as low as 38% on the smallest boats. Daily revenue is about $230,000. Last week we added a 175-foot class liftboats to our fleet giving us 7 liftboats in 160 to 170 class, a 28 total liftboats in our rental fleet. The new liftboats currently working.

In oil and gas and segment; revenue increased by 8% over the third quarter to $55.8 million, income from operations increased 84% to 24.9%. Fourth quarter production are approximately 821,000 barrels of oil equivalents or 8,900 boe per day down from 899,000 boe or 9,800 boe per day in the third quarter.

Average loss price of 67.16 as compared to 59.39 in the third quarter. Clearly production was not where we had projected it. This was due to some shut-ins during the period the most notable were two wells that are largest deals past 60 for equipment upgrades. The wells are back on line.

Looking at Beryl Oil and Gas production of barrels is approximately 11,700 per day as compared to 11.30 per day in the third quarter. So the two non-cash charges that impacted barrels results, first barrels negatively impacted by $2.1 million charge net to superior related to reduction of value of oil and gas reserves. Second Beryl recorded $300,000 charge net to superior for the early extinguishment of debt.

CapEx during the fourth quarter it been $84.7 million and this 85% of this was expansion related. We expect CapEx in the first quarter to be about $100 million to $110 million. Within G&A increased to $9.2 million over third quarter primarily related to increased comp insurance expense and acquisition. We expect first quarter G&A to be in the range of $62 million to $64 million.

DD&A increased primarily as a result of increased liftboat utilization as well as our CapEx, our capital expenditures for the year. We believe DD&A of $50 million to $52 million is a good run rate for the first quarter.

At the end of the quarter, we had approximately $716 million in debt. Debt breakdown as follows, convertible notes $400 million, senior notes $300 million, myriad $1600, so the debt is 716. Debt to EBITDA at the end of the quarter was $1.11 million debt to total cap is 42%.

If you read yesterday's press release, you are aware that we entered into a purchase agreement to sell 75% of our interest in SPN resources to a product company, Dynamic Resources LLC and its affiliated companies for a $165 million in cash.

This had no effect on our interest in Beryl, doesn't include anything from Beryl. We expect the sale to close in the first quarter. We retained preferential rights in the service work. In addition, we will perform the well abandonment and decommissioning work on properties owned and operated at the closing. The turnkey work is intended to cover routine end of life plug in and abandonment decommissioning work as long as SPN Resources owns the properties. Once the properties are ready for decommission, we would have a large discretionary one day as to when we can perform the work.

For those who have followed our company for some time we recall energy, oil and gas those of most of our core businesses were based solely in the Gulf of Mexico. SPN Resources used the company well intervention expertise to increase reserves. Our services were typically deployed during off-peak periods resulting in additional efficiencies as out of fixed cost services were put to work on an incremental cost basis.

In turn the production enhancement work from SPN resources provides less additional opportunities to further demonstrate our competency in enhancing, maintaining, and extending production. That's what it's always about. We were just trying to show people how we could really build up reserves by bringing certain efficiencies to the table into plans and techniques that we felt we could deliver. We clearly proved the point given the amount of money we made in this business.

We started it 03. We really considered it to be a great strategy something that we would utilize to drive utilization of assets until we got more diversified. So clearly we have gotten a lot more diversified now so it's a nub thing that's going to drive in the sales of business. A lot of people are telling over year are confused now they have made our story little bit confusing and is blending on multiple and doing all sorts of things. I don't know if it was true or not. I guess we are going to find as we see how you react that we are getting out of that business for the most part. Although we have retained from exposure we have retained exposure to the outside. Sales clearly averaged on lots value and SPN Resources monetized the successful execution of the strategy and put us in the position to deploy that cash in the markets into which we want to expand.

Obviously your question is what we are going to do with the cash? I am not going to tell you exactly today but I will tell you we've got several opportunities we are looking you should expect to something is happening in the very near term. We are going to deploy this cash in ways that this fairly saw diversification. So get ready its coming.

We can also use this cash to repurchase additional shares if we so choose. The bottom line is. We will deploy this cash into accretive manner in very short order. Some accounting items you need to be aware of as a result of the sale. Our 25% interest in SPN will be accounted for the use of the equity metric and our portion of SPN pre-tax income will be recorded as earnings from equity method investment which is the same line item we will record our portion at Beryl's income.

In the first quarter of 08 we have consolidated two months of SPN Resources as we have done up until now and about one month of earnings from equity method investments accounting a bit clearly depended on the closing date. The after tax cash proceeds are expected to be $130 million in the book gains subject to adjustment for closing should be in the range of $55 million to $60 million. We also expect to record additional G&A expenses approximately $4.5 million as a result of the sale.

Earnings in the first quarter in terms of our outlook and, what I hope you will understand just saying this quarter is going to be one of the transition for us. You may not like some of what you hear, but just hear me out to the end. First the sale of SPN Resources will result in lower EPS of about $0.03 as compared to the fourth quarter. This assumes with consolidated SPN Resources for the first two months of the quarter and then account 25% of the income in March.

Second we will substantially complete three big projects in the first quarter. The accommodation project in Milwaukee, the derrick barge construction contract in China, and the derrick barge charter in Malaysia combined the completion of these projects we reduce earnings with fourth quarter by about a nickel.

In March, we would mobilize our derrick barge in the Gulf of Mexico preparation to go to the decommissioning project with broad well control. So there is the potential for an opportunity cost for that barge during the month of March. I don't think that's significant.

Third based on the slow start from the year turned in by liftboat due to seasonality we got horrible weather. We expect the marine segment to be weaker than the fourth quarter by as much as $0.03 or $0.04. Finally, our tax rate will return to 36%. Based on these factors, we expect our first quarter earnings from operations to be in the range of $0.75 to $0.80.

In summary the reason for this range are largely transitory and include the reduced combination from SPN Resources substantial completion of three large projects in the first quarter and we could look both activity in the change in tax rates. This guidance does not include the gain expected from the sale of SPN Resource of $55 million to $60 million or the $4.5 million of additional G&A expenses relating to the transaction.

The inclusion of these one line item with earnings per share in the range of $1.06 to $1.21 in the first quarter. Looking beyond the first quarter, looking at the year as a whole we think expectations are reasonable. Once you make some adjustments of the sale of SPN Resource as most of you have taken it down about $0.30.

So just we are very confident that at the end of the year excluding the gain on SPN we'll still further number that starts with the 4. There is a lot of very positive things that are working in our favor. The seasonality, of the Gulf of Mexico has differed much of the work in the middle of the year in other words we think, there is a lot of work to be done and we expect to liftboats to rebound fairly dramatically in the month of March throughout the rest of the year.

The rental tool segments, should continue to grow in all of our markets. Gulf of Mexico land international as drilling activity remains robust. We enter 08 with much broader asset based to address the domestic landmarks. In 07 we give our core use did not consist the full spread because the way delivered toward the nitrogen bonds. At the end of 08 with most of our units convert the coal spread aligned was to capture more revenues per job.

The decommissioning project is progressing on schedule we should see an activity pick up and fairly dramatic beginning in April. Much of the engineering work is complete, our paper work is complete, necessary approvals are in place. Finally we'll take delivery of our new derrick barge and DB3 in late September or early October. We are already receiving enquires for seven international market. Depending on the project lines and scope of work we expect that derrick barge to generate available charter at least 60% higher than what we would and would just completed charter with our first derrick barge.

That implies a rate of $75,000 and $80,000 a day quite frankly I expect it go for more than that. There is a tremendous amount of interest in this barge. I think we already know where it's going. We think our 08 CapEx would be in the range of $350 million to $370 million more than 40% of our amount going to be limited to a segment.

In summary we see a lot of opportunities, the year is off to a slow start. First quarter is clearly going to be choppy and we really expect to remain at the year to be quite, quite strong. So that's really all that I have and I'm sure you have got a lot of questions. So we are ready for them.

Question And Answer

Operator

Thank you sir, we will now begin the question-and-answer session [Operator Instructions]. Our first question comes from the line of James West with Lehman Brothers. Please go ahead

Terence E. Hall - Chairman and Chief Executive Officer

Good morning James

JamesWest - Lehman Brothers

Good morning Terry. A lot of detail on the conference call so far a very good color. Are there any additional product lines that you would be looking to divest in the near term or your happy with your the business mix that you have now with SPN Resources having gone away?

Terence E. Hall - Chairman and Chief Executive Officer

No, we're not looking divest anything right now I mean if anything, we are acquiring, we are expanding the product line not reducing it and selling SPN and monetizing debt would just allow us to further that expansion strategy.

JamesWest - Lehman Brothers

Okay then and 2008 capital budget how much of your I guess you said 350 or so million is maintenance CapEx and how much would you call growth CapEx then on top of that given the key hires you've made recently in the Middle East, how much of that growth CapEx would be budgeted for that regional growth?

Terence E. Hall - Chairman and Chief Executive Officer

The maintenance CapEx is somewhere in the area of $80 million to $100 million for the year and the amount that we budgeted... we certainly got 40% to 50% of our budget, CapEx budget internationally. And exactly which market is going to go through. We are lining up equipment and we are waiting to see which way it can go. We are not sure whether it's going to mid. We loan out the equipment, we've got the sales force on the ground, we see a lot of opportunities we'll be buying equipment and getting ready to go in whichever market it may induct them.

JamesWest - Lehman Brothers

Okay, and understood one last allow up from me, did you guys reactive in the market buying back stock during the quarter?

Terence E. Hall - Chairman and Chief Executive Officer

We bought 1 million shares.

JamesWest - Lehman Brothers

Okay, great thanks Terry.

Terence E. Hall - Chairman and Chief Executive Officer

Thank you James.

Operator

Thank you. Our next question comes from the line of Jim Rollyson with Raymond James. Please go ahead.

James Rollyson - Raymond James

Good morning Terry.

Terence E. Hall - Chairman and Chief Executive Officer

Good morning.

James Rollyson - Raymond James

Just one... kind of going back to the sales of SPN Resources, it sounds like you are pretty much still going to get more or less the same amount of work you are getting from it on the service side before, is that fair?

Terence E. Hall - Chairman and Chief Executive Officer

I think that's accurate, we operated SPN Resources, we operated primarily just to work on old properties, we did not aggressively try to develop those properties to with the drove bid at all. There's a lot of opportunity there and these guys are the people who are coming in. They are looking for the expression upside, that I think everybody knows in those property. So, that's why we kept an interest in it. The type of work they will do will probably be a little different to the type of work we would do because again our objectives were totally different. But the key work that we would like to do on there, the routine productions related services, we'll still continue to do all that. So in that sense it's a win, win for us. In the other sense it's an opportunity for us without taking much exposure to benefit from what we think would be some very successful joint operations on those properties.

James Rollyson - Raymond James

Got you then, for a follow up, are you more inclined to take the proceeds and try to expand your business lines or just add to what you have already got going. You mentioned share repurchase is one of the ideas, if you kind of leaning one way or the other, sounds like you got a lot of opportunity to expand as opposed to repurchase shares?

Terence E. Hall - Chairman and Chief Executive Officer

James I don't think I am going to have any problems deploying this cash pretty quick with assets.

James Rollyson - Raymond James

Very good, hope you feel better.

Terence E. Hall - Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Joe Gibney with CapitalOne Southcoast. Please go ahead.

Joseph D. Gibney - CapitalOne Southcoast

Good morning everybody.

Terence E. Hall - Chairman and Chief Executive Officer

Hi.

Joseph D. Gibney - CapitalOne Southcoast

I just had a quick question on the core to be said obviously the weather here in the mid-continent West Texas in the quarter. Just curious how you have two units spread outside of those regions?

Terence E. Hall - Chairman and Chief Executive Officer

Not bad. We kept things going pretty busy, we have been busy in Mississippi. And any where's it did not have a lot of weather issues, we have done quite well. Our coal team spreads at work, at utilization rate with Natural model. So that's why I'd say I didn't want it by the rating thing in 2000 is just weather related. I mean the weather has been horrible. I don't know if you have traveled out that way, but ice storms, snow storms, frozen ground pretty well shuts down operations everywhere you see. That's really it. There is a good demand. We have got new equipment. We have got the best people. The quality is there. The service is there. We have taken market shares, so it's been bad... it's been a bad quarter weather wise, but every time the weather improves we see the business is improving. So we feel good about that. We are feeling good about North American land in general.

Joseph D. Gibney - CapitalOne Southcoast

I appreciate it. I appreciate the color on the quarter here on 1Q downtick on the seasonality is that you actually walk through here on the marine side and some of the moving parts here with the derrick barge, I didn't hear you talk too much on rental tools. Just kind of curious about your outlook here in the first quarter on the rental tool side given probably continue deep water drilling demand overall. But I just wanted to get your sense on the relative markets as we look to proceed seasonally. I appreciate it?

Terence E. Hall - Chairman and Chief Executive Officer

I think the renal tool market will be better in the first quarter than it was in the fourth quarter. We looked to that market, but it won't be going down. We continue to grow in that business. We have just got some things happen in the first quarter that are that we will use the term transition and never can perfectly time it. You can't shut down large projects and have another start the next day, but when you get committed on long term projects you do have some issues and there will be transition period and all these things we've told during this call we been telling you these things are going to happen last couple of calls. People who have really paid attention shouldn't be surprised but we've got... we feel good and assuming we don't really do much of anything with the cash we've got we're still telling you we are pretty comfortable about when this company starts with the full 08.

Joseph D. Gibney - CapitalOne Southcoast

Good deal, I appreciate guys, thanks.

Operator

Thank you, our next question comes form the line of Bill Sanchez with Howard Weil. Please go ahead.

Terence E. Hall - Chairman and Chief Executive Officer

Good morning Bill.Hi Bill.

Operator

William Sanchez your line is open. Please ask your question.

Operator

Bill Sanchez, your line is open. Please ask your question.

William Sanchez - Howard Weil

Yes, good morning Terry.

Terence E. Hall - Chairman and Chief Executive Officer

Goodmorning Bill.

William Sanchez - Howard Weil

Just a follow up on earlier question here on the sale of SPN Resources, clearly you guys are going to have the ability to generate work. With the well intervention and rental tool side of the business, I'm just curious from a time perspective, do you get any kind of revenue pick up as a result of work this year on SPN Resources as now this will be in the hands of the third party or is that really nothing anticipated this year in terms of an equivalent pickup on the revenue side?

Terence E. Hall - Chairman and Chief Executive Officer

I don't anticipate anything at all. I think we'll continue to do about much work as we have been doing on those properties. I think these people will be when they really get the hands around then I think they are going to go ahead and exploit these properties and also they're going to be acquiring other properties and be very happy about the prospects of having 25% interest. So we can participate in that upside while monetizing the profits that we built in that business and how we can deploy those things elsewhere and again eliminate all this quick confusion that I have heard about for so long about us the oil and gas business.

William Sanchez - Howard Weil

Sorry, to work that's going to originate now from this sales as you contract these turnkey services, that's now going to be at some point whether its '08 or '09 that's going to come through 100% on your in the well intervention and I guess in the rental tool segment right on a consolidated basis for you.

Terence E. Hall - Chairman and Chief Executive Officer

Absolutely.

William Sanchez - Howard Weil

Okay.

Terence E. Hall - Chairman and Chief Executive Officer

Now this is going to be much P&L activity this year for SPN Resources I mean these guys are going to be... they not looking to plug and abandon a lot of properties, they are looking to expand, they have got a far more aggressive budget, than we were ever comfortable of putting out. So I think there will be a lot of work to do in the properties but I don't expect a lot of it to be close.

William Sanchez - Howard Weil

Sure, okay is the full year depreciation expectation of SPN kind of that in that $70 million or so range and G&A at about $10 million just looking at the historically quarterly numbers?

Terence E. Hall - Chairman and Chief Executive Officer

Yes.

William Sanchez - Howard Weil

Okay I guess last question for you Terry. You talked in the past about potentially international liftboat expansion, just your thoughts there in terms of the potential new builds certainly got the proceeds here from the sale. Can you just kind of update us on your thoughts of international liftboat market?

Terence E. Hall - Chairman and Chief Executive Officer

I fully expect that we'll be involved in sending some liftboats overseas this year and probably also involved in building some additional boats that will go in these things on the specific project that we are working on right now. So that's going to play out over the next 18 months or. So I mean the market seems to do everything on 90 days, it's not going to happen in 90 days, but we feel pretty strongly that some boats are getting ready to go overseas.

William Sanchez - Howard Weil

Thanks Terry.

Terence E. Hall - Chairman and Chief Executive Officer

Thank you.

Operator

Thank you our next question comes from the line of Robin Shoemaker with Bear Stearns. Please go ahead

Robin Shoemaker - Bear Stearns

Good morning Terry.

Terence E. Hall - Chairman and Chief Executive Officer

Hey Rob

Robin Shoemaker - Bear Stearns

Wanted to on your on your comp, ask you about the on your conference call after the announcement of your big decommissioning project. Someone asked if you thought there would be more of these very large dollar like your award of $750 million for seven platform decommissioning projects, if you though there will be more and you thought there would, what I just wanted, having turned people's attention with this announcement and subsequently in the time that's elapsed since then. If you've had some conservation that need to believe there are in fact more possibilities of that size?

Terence E. Hall - Chairman and Chief Executive Officer

I don't think there's possibilities to jobs of that size but I think there's several possibilities to jobs that's half that size, significant, very significant projects. Yes, we are talking to people. We were talking to people then. These talks you know continue to go on so I expected at least some of the large significant projects and they are not be 750 but may be 300 to 400 million or they may be more than 750. But, there'll some more projects.

Robin Shoemaker - Bear Stearns

Okay, you used to expect I think you said $200 million of revenue from that project in 08, are you on kind of schedule to achieve that?

Terence E. Hall - Chairman and Chief Executive Officer

Yes.

Robin Shoemaker - Bear Stearns

Okay, one other thing on the derrick barge three and I guess multiple opportunities for that work. Are you considering or do you perhaps have an option to build a fourth derrick barge and would that be some thing you would look at as possible and further investments?

Terence E. Hall - Chairman and Chief Executive Officer

No, we haven't looked at doing that. We have looked at building another barge that will be a special purpose barge for doing service work internationally, but it would not be a derrick barge. It would be more of a real platform for providing multitude of production or joint related services. We will have a look at that. But it would not be, really have a much smaller crane and probably very significant quarters, but smaller crane.

Robin Shoemaker - Bear Stearns

Okay. I guess that's all I need. Thanks.

Terence E. Hall - Chairman and Chief Executive Officer

Thank you Ron.

Operator

Thank you. Our next question comes from the line of Byron Pope with Tudor Pickering Holding Company. Please go ahead.

Byron Pope - PickeringEnergy Partners

Good morning guys.

Terence E. Hall - Chairman and Chief Executive Officer

Good morning Byron.

Byron Pope - PickeringEnergy Partners

In the press release you guys have provided the percentage of your revenues that came from domestic land in international markets. Terry, could you guys break out just the split just Gulf versus onshore versus international for rental tools and well interventions for Q4?

Terence E. Hall - Chairman and Chief Executive Officer

No I can't tell you there right this second. If you call back Byron we'll get back to you.

Byron Pope - PickeringEnergy Partners

Okay.

Terence E. Hall - Chairman and Chief Executive Officer

And then just rental all these forms of that has been going to be a slow down small if I try to reiterate right now the vehicles [ph] I rather will give your wrong number.

Byron Pope - PickeringEnergy Partners

Fair enough.

Terence E. Hall - Chairman and Chief Executive Officer

Pat will give it to you.

Byron Pope - PickeringEnergy Partners

Okay. And then just the second question, you mentioned that absent the weather issues coal to be in wire line activity continues to be holding there pretty nicely. So is it fair to think that pricing is holding flat both of those areas, so you guys both offshore and onshore?

Terence E. Hall - Chairman and Chief Executive Officer

Well it's always... it's been all over the place. But it hasn't been any real significant deterioration of prices. A lot of fighting going on from market share I just think that we've got a little bit of an advantage in most of those markets, one because of the quality and service we deliver, and second we've got, the new equipment fleet paired up with really the best employees that are out there. So we've been able to hold our own and we are doing well mainly because of they are taking market share. The market just going trying to sideways. But I see the market actually improving right now.

Byron Pope - PickeringEnergy Partners

Okay.

Terence E. Hall - Chairman and Chief Executive Officer

We feel pretty good about the Gulf of Mexico clearly, it's been real sloppy and slow ever since Thanks Giving. In this time we're sort of coming back. So again, the things, lot of the things we have seen and I expect to improve and, I don't, there hasn't been any real significant price deterioration at all.

Byron Pope - PickeringEnergy Partners

Okay. And then on the rental tool side I know that stabilize your business has generally been a pretty good leading indicator. Are you guys seeing anything in that business that makes you think we are seeing, we are seeing the operators will get a little more active with drill bit here?

Terence E. Hall - Chairman and Chief Executive Officer

Everything that we state of drill looks like their business is moving along pretty nicely. Now it looks like is trying to grow right now. So using that as our ground hold it is telling us that business is about to get better.

Byron Pope - PickeringEnergy Partners

Okay thanks guys

Terence E. Hall - Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Thomas Escott with Pritchard Capital Partners. Please go ahead.

Thomas Escott - Pritchard Capital Partners

Good morning fellows. A lot of the things I have thought about have been covered but one thing you mentioned tax rate you know obviously had little, fourth quarter thing and then you have said 36% for this year. With more and more of your business now evolving to overseas, can we expect that tax rate to work lower here over the next year to two?

Terence E. Hall - Chairman and Chief Executive Officer

That might happen that I wouldn't, it would not be that significant Tom. I don't, let's just be conservative to you. We are not modeling for that to happen actually, it could come down as much as a point it maybe. But it's not going to be some dramatic change.

Thomas Escott - Pritchard Capital Partners

Is that going down 23% or anything like that.

Terence E. Hall - Chairman and Chief Executive Officer

No, sir.

Thomas Escott - Pritchard Capital Partners

And then...

Terence E. Hall - Chairman and Chief Executive Officer

That modeling there if it goes to 23% is going to be a lot better years than any of you guys think.

Thomas Escott - Pritchard Capital Partners

And then the other thing I know you'd already talked about all the transition issues for the first quarter clearly and lot of moving parts there, but, on the plus side there. Can we model in for the first quarter an increase for full, of a full quarter contribution from those acquisitions made at late 07 and full quarter contribution from this big Gulf of Mexico well abandonment project. Are those two things going to be added to here to this period also?

Terence E. Hall - Chairman and Chief Executive Officer

No, the first well, the first quarter has got almost nothing in it. We are not even getting on that big well abandonment project till the end of the quarter. So there is nothing in there for that. And the little acquisitions we made are so small, until we begin to really build out their product line to get a quick term which we are doing everyday. We'll be fine and they are working fine but they are not big, big numbers. Well abandonment project those are big numbers and naturally not getting started to the end of the quarter. I want to play down the significant well acquisitions that we've made, that's again they are not big enough to have a lot of impact yes we will have the benefit of them to all first quarter and certainly we will have the benefit of as we go forward through the year and we expect both of them to grow fairly dramatically as we go through this year.

Thomas Escott - Pritchard Capital Partners

All right. So well abandonment contributions really loaded or to margin beyond that?

Terence E. Hall - Chairman and Chief Executive Officer

It always was Tom. And let me make that clear let me apologize we tried to, but, we've got at this transition period and the project got shut down in November. We are going to all pull it all at time as we go through all the paper work get the deal done, get all the transfers approved by the MMS and do a lot of engineering. It's a lot of things that has to happen before the job starts. So we always said that the job has started at best late in the first quarter and we are right on schedule to do that.

Thomas Escott - Pritchard Capital Partners

Okay. Thank you.

Terence E. Hall - Chairman and Chief Executive Officer

Thank you, Tom.

Operator

Thank you. Our next question comes from the line of Joe Agular with Johnson Rice and Company. Please go ahead.

Joe Agular - Johnson Rice

Thank you. Terry, I wanted to just focus a little on the international growth opportunities and have you comment may be I think last month, you announced a new appointment for international sales?

Terence E. Hall - Chairman and Chief Executive Officer

Right.

Joe Agular - Johnson Rice

If you could may be give us a little bit of more background on what's going on there?

Terence E. Hall - Chairman and Chief Executive Officer

Joe, I think that just shows you our commitment to these markets, we had a very high power individuals expert in those markets for many, many years. We need to develop the market to work on M&A in those markets as well as sales. So its more than sales, its really playing a large role in our international expansion but we... that's the first time we have ever brought in anybody to push out the background to live the stays in that market year around. The past we kind of approached to domestic guys going over and coming back. But, this is a significant departure from us and I think it represents a significant commitment from us to go into those markets, so we got a lot going on over there, but we just don't have anything we can quit right now. So, we wouldn't do something like that, we wouldn't bring someone on board like that, unless we were very committed itself, very good about our opportunities.

Joe Agular - Johnson Rice

It sounds interesting, and just to may be return to some of your comments regarding the full year 08 and your confidence in achieving a number, I guess you said over $4. I assume I am asking you I guess that does not include anything from may be redeploying some capital that you are going to receive from the SPN Resources sale?

Terence E. Hall - Chairman and Chief Executive Officer

No, the only thing that we... I think when we look at we assume that we might put the money in bank to draw interest but...

Joe Agular - Johnson Rice

No, but I mean, I guess what I am saying is, if you make an acquisition or if you add some equipments some place, that would be agreed but that's not...

Terence E. Hall - Chairman and Chief Executive Officer

At all and let me make very clear, we fully expect to deploy fair amount of this cash pretty quickly.

Joe Agular - Johnson Rice

I understand, thank you Terry.

Terence E. Hall - Chairman and Chief Executive Officer

Thank you Joe.

Operator

Thank you, ladies and gentlemen, [Operator Instructions]. Our next question comes from the line of Matt McGeary with Sentinel Asset Management. Please go ahead.

Matthew McGeary - Sentinel Asset Management

Hi, on the SPN Resources sale, how much of that was... you guys really marketing that versus being opportunistic with someone approaching you. Doest that make sense?

Terence E. Hall - Chairman and Chief Executive Officer

We got a lot of people approaches about it in the past and we've always said that it was sort of a great strategy one day we would get out of there. So I think it was opportunistic on our part as well as the part of the people wanting to get in because what we ended up with was some properties with some potential that really for us to exploit them would require us to get outside of what we said the business model was. So I think it's opportunistic on both sides for them as well as for us that allowed us to monetize and really the results of our efforts there for so long but it was time for us to either again to really start exploiting the properties with the drill bit or to do what we have done. So we retained the service work which is something we wanted to do and now we can benefit with about 25% interest in what I think there will do with the drill bit as they grow that business.

Matthew McGeary - Sentinel Asset Management

Okay great. Do you have any visibility at all on required boat maintenance coming up that can still [indiscernible] quarters.

Terence E. Hall - Chairman and Chief Executive Officer

We've got a chart on that and that's still complicated but I don't think we are expecting anything out of the ordinary, anything that was in the other year.

Matthew McGeary - Sentinel Asset Management

Okay. Do you know what your average cost was in 1 million shares repurchased this quarter? Any chance?

Terence E. Hall - Chairman and Chief Executive Officer

33 AV.

Matthew McGeary - Sentinel Asset Management

Okay, and just lastly, could you talk about sort of your comfort level on debt to cap, kind of where you think as you are sitting here and some capital coming in and you know again looking to grow the business and where you feel comfortable thinking that too as necessary?

Terence E. Hall - Chairman and Chief Executive Officer

Well, I'm certainly not uncomfortable taking it up a little bit. We are not afraid of that, we demonstrated that in past. And just in terms turns on the opportunity, the reality is on the right deal we can step out and it wouldn't bother me a bit to take on little more debt for the right opportunity. It's hard to comeback, you know that clearly allowed us the international stuff is impacted by the weakening dollar. It's not a great time to be out there and while the dominations try to body things so. But, if we get the right opportunity, we would have no fear at all about taking a little more debt.

Matthew McGeary - Sentinel Asset Management

Okay, great. Thanks guys.

Operator

: Thank you there are no further questions in the queue and I turn back over to management for any closing remarks.

Terence E. Hall - Chairman and Chief Executive Officer

Thank you very much for your attendance. And again if any of you have any follow up questions or something, feel free to call. Thank you.

Operator

: Thank you. Ladies and gentlemen that does conclude today's Superior Energy's fourth quarter conference call. Thank you for your participation and for using ACT teleconferencing. You may now disconnect.

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