Schoeller-Bleckmann Oilfield Equipment AG: Q1 2016

- Persistently challenging market environment weighs on business results in Q1 2016
- Fundamentally sound balance sheet structure with high equity ratio
- Acquisition of Downhole Technology strengthens position in attractive Completion segment

Ternitz/Vienna, 25 May 2016. Schoeller-Bleckmann Oilfield Equipment AG (SBO), listed on the ATX market of the Vienna Stock Exchange, was hit by the further decline of global drilling activity in the first quarter of 2016 like the entire oilfield service industry. Throughout the first quarter alone, the rig count went down by another 21 % to 1,551 rigs in March 2016, bringing the decrease to almost 60 % since October 2014, in North America even to as much as almost 80 %.

Despite this extremely difficult environment, SBO generated a positive free cash-flow and maintains a fundamentally sound balance sheet structure. Due to its high liquidity, SBO is in a position to pursue targeted investments within its long-term growth strategy even in the current cycle, such as illustrated by the acquisition of Downhole Technology LLC on 1 April 2016.

"The downturn is not over yet. Oil companies are continuously cutting back on their spending for exploration and production (E&P) in 2016. However, signs are increasingly pointing to a recovery of the oil market. There are indications that the oversupply will go down in the second half of the year: As a result of the massive cuts on spending, production in North America and other non-OPEC countries has already decreased. OPEC is largely producing at maximum level. At the same time, demand is rising steadily," comments Gerald Grohmann, CEO of SBO. "Our focus is on navigating SBO safely with consistent countermeasures through the cycle. We are improving our cost base and invest specifically in our growth so as to prepare the company to fully benefit from the next upswing."

Results of Q1 2016

Reflecting the strong constraint of customers, bookings in the first quarter of 2016 shrank by 28.8 % to MEUR 40.6 (1-3/2015: MEUR 57.1). Sales went down by 56.5 % to MEUR 46.8 (1-3/2015: MEUR 107.5). In the first quarter of 2015, SBO had still profited from record bookings received in 2014. The order backlog at the end of the first quarter of 2016 was MEUR 28.3, following MEUR 34.3 as at 31 December 2015 and MEUR 91.7 as at 31 March 2015.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) was MEUR minus 4.8 (1-3/2015: MEUR 29.0). Earnings before interest and taxes (EBIT) stood at MEUR minus 16.9 (1-3/2015: MEUR 16.1). These include one-off expenses for due diligence and restructuring in the amount of MEUR 3.0. The quarterly non-cash-effective valuation of option commitments of MEUR minus 2.8 was reflected in the financial result. This concerned mainly the option for acquiring 33 % of the shares in “Resource Well Completion Technologies Inc.”, bringing the financial result to MEUR minus 3.3 (1-3/2015: MEUR minus 1.6). Profit before tax stood at MEUR minus 20.2 (1-3/2015: MEUR 14.5). Profit after tax came to MEUR minus 15.0 (1-3/2015: MEUR 10.4). Earnings per share arrived at EUR minus 0.94 (1-3/2015: EUR 0.65).

Despite the very difficult market conditions, SBO generated a positive free cash-flow in the amount of MEUR 3.8 in the first quarter of 2016 (1-3/2015: MEUR 28.6). The company has a profoundly strong balance sheet structure: SBO's equity ratio as at 31 March was 57.1 % (31 December 2015: 60.8 %), liquid funds stood at MEUR 224.9 (31 December 2015: MEUR 196.3) and the net cash position at MEUR 24.2 (31 December 2015: MEUR 26.2). Based on its sound balance sheet structure, SBO was in the position to acquire 68 % (rounded) of the shares in “Downhole Technology LLC” at a purchase price of MUSD 102.9 (or MEUR 90.4 at the relevant date) at the beginning of the second quarter of 2016.

Outlook

The downturn hitting the oilfield service industry since the fourth quarter of 2014 is not over yet. Crucial will be how long the considerable oversupply of the crude market will last. It is only a matter of time that the massive cuts on E&P spending and the decline of global drilling activity will lead to a situation where the rising demand will not be met any more. At this point, new spending will be required. Past experience in the oilfield service industry has told us one thing: The sharper and longer the downturn, the steeper the next upswing usually is.

There are some indications that the oversupply in the oil market will decrease during the second half of the year, and supply and demand will gradually move towards reaching a stable balance: Market observers expect to see a production decline in 2016 of 0.5 mb/d for North America and of 0.8 mb/d for non-OPEC countries (including North America). In the first quarter of 2016, the decline in non-OPEC countries was already stronger. At the same time, current expectations are that global demand should go up by 1.2 mb/d. Quarter-on-quarter, the rise was even 1.4 mb/d (1-3/2015 vs 1-3/2016).

With its strong cash balance and high equity ratio, SBO is prepared even for a lengthy downturn. The company will continue the measures initiated in 2014 and 2015 to combat the decline in 2016: Cost-cutting programmes will further be implemented consistently and capacities adjusted to the market situation. Site optimisation in the United States will be completed by mid-year. The strategy to develop new markets for the products of SBO in the Oilfield Equipment segment will be continued.

Following the acquisition of Canada-based "Resource Well Completion Technologies Inc." (Resource) in November 2014, SBO took over US-based "Downhole Technology LLC" (Downhole Technology) on 1 April 2016. With Resource and Downhole Technology, SBO now has become a leading provider of products in the fields of "sliding sleeve" and "plug-n-perf", the two dominating Completion technologies.

Based on targeted spending to expand the Completion segment and the consistent implementation of ongoing restructuring activities, SBO will, as technology and market leader, be well prepared to fully benefit from the next upswing.

Comparison of key figures

Schoeller-Bleckmann Oilfield Equipment AG is the global market leader in high-precision components and a leading supplier of oilfield equipment for the oilfield service industry. The business focus is on non-magnetic drillstring components and high-tech downhole tools for drilling and completing directional and horizontal wells. As of 31 March 2016, SBO has employed a workforce of 1,062 worldwide (31 March 2015: 1,534), thereof 334 in Ternitz/Austria and 378 in North America (including Mexico).

Further inquiry note:

Andreas Böcskör, Head of Investor Relations
Schoeller-Bleckmann Oilfield Equipment AG
A-2630 Ternitz, Hauptstraße 2
Phone: +43 2630/315 ext 252, fax ext 101
e-mail: a.boecskoer@sbo.co.at