BJ Services Reports Third Fiscal Quarter Earnings of $0.48 per Diluted Share



    HOUSTON, July 22 /CNW/ -- BJ Services Company (NYSE:   BJS; CBOE; PCX)
today reported net income of $141.8 million, or $0.48 per diluted share, for
the third quarter of fiscal 2008, which ended June 30, 2008.  These results
represent a 12% increase from the $0.43 per diluted share reported in the
previous quarter and a 16% decrease compared to the $0.57 per diluted share
reported in the third quarter of fiscal 2007.
    Revenue in the third quarter of fiscal 2008 was a record $1.33 billion, a
4% increase from the $1.28 billion reported in the previous quarter and a 15%
increase from the $1.15 billion reported in the prior year's June quarter.
Operating income for the quarter was $206.9 million, an 11% increase compared
to $186.5 million for the previous quarter and a 20% decrease compared to
$257.8 million reported in the third quarter of fiscal 2007.  Operating income
as a percentage of revenue was 15.6% in the third quarter of fiscal 2008,
compared to 14.5% in the previous quarter and 22.4% in the comparable quarter
of the prior year.  The lower operating margin compared to the prior year is
primarily attributable to lower pricing in our U.S. Pressure Pumping
operations.
    Commenting on the results, Chairman and CEO Bill Stewart said, "We are
greatly encouraged by our operating results for the quarter.  The significant
milestone of achieving price and margin stabilization in U.S. Pressure Pumping
operations appears to have occurred during the quarter. Improved margins in
our International Pressure Pumping operations were also achieved and we expect
these two events to be positive turning points for the Company in today's
market environment.
    "In North America, U.S. drilling activity exceeded expectations, while
Canada activity was hindered by the seasonal spring break-up period.
Importantly, as stated above, prices in the U.S. for our services appear to be
stabilizing.  The U.S./Mexico Pressure Pumping, International Pressure Pumping
and Oilfield Services segments all experienced sequentially improved revenues
and operating margins for the quarter.
    "Looking at our fourth fiscal quarter, we expect drilling activity in the
U.S. to be up 3%-4% compared to the third fiscal quarter.  In Canada, the
spring break-up period is over, and we expect meaningful positive contribution
sequentially from our operations there.  We anticipate modest sequential
revenue and margin improvement from our International Pressure Pumping and
Oilfield Services operations.  Based on these assumptions, we are currently
projecting diluted earnings for the fourth fiscal quarter to be in the range
of $0.54 to $0.57 per share."
    Debt decreased $14.7 million during the quarter to $601.2 million and
cash and cash equivalents increased $38.9 million to $82.5 million during the
quarter.  Uses of cash during the quarter included capital expenditures of
$106.5 million, payment of $14.7 million in dividends and $53.4 million for
the May 2008 purchase of Innicor Subsurface Technologies Inc., an important
complement to the Company's completion tool product line.  Innicor is a
Calgary-based designer, manufacturer and provider of tools and equipment used
in the completion and production phases of oil and gas well development in
Canada and select international markets.



    
                CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                  UNAUDITED
                   (in thousands except per share amounts)
    

    
                                             Three Months Ended
                                         June 30                    March 31
                                   2008            2007               2008
    Revenue                     $1,328,228      $1,152,518         $1,283,202
    Operating
    Expenses:
      Cost of sales and
       services                  1,032,375         812,701          1,004,107
      Research and engineering      18,563          17,146             18,913
      Marketing                     29,400          27,450             31,764
      General and administrative    40,401          35,630             41,652
      Loss on long-lived assets        631           1,764                238
        Total operating
         expenses                1,121,370         894,691          1,096,674
    Operating income               206,858         257,827            186,528
    Interest expense                (6,596)         (8,994)            (6,949)
    Interest income                    554             581                356
    Other income/(expense), net     (3,189)         (1,806)             1,053
    Income before income taxes     197,627         247,608            180,988
    Income taxes                    55,844          79,318             53,685
    Net income                    $141,783        $168,290           $127,303
    

    
    Earnings Per
    Share:
      Basic                          $0.48           $0.57              $0.43
      Diluted                        $0.48           $0.57              $0.43
    


    
    Weighted Average Shares
    Outstanding:
      Basic                        293,892         293,142            293,245
      Diluted                      296,357         296,407            295,285
    


    
    Supplemental Data:
      Depreciation
       and amortization            $67,532         $55,581            $64,900
      Capital expenditures         106,502         186,315            149,989
      Debt                         601,219         707,052            615,892
    



    
                                          Nine Months Ended June 30
                                         2008                  2007
    Revenue                           $3,896,495            $3,523,096
    Operating Expenses:
      Cost of sales and services       2,986,932             2,421,997
      Research and engineering            54,674                49,004
      Marketing                           89,996                79,338
      General and administrative         118,683               106,471
      Loss on long-lived assets              243                 1,946
        Total operating expenses       3,250,528             2,658,756
    Operating income                     645,967               864,340
    Interest expense                     (21,407)              (26,261)
    Interest income                        1,384                 1,405
    Other expense, net                    (4,847)               (5,679)
    Income before income taxes           621,097               833,805
    Income taxes                         179,827               269,515
    Net income                          $441,270              $564,290
    

    
    Earnings Per Share:
      Basic                                $1.50                 $1.93
      Diluted                              $1.49                 $1.90
    


    
    Weighted Average
    Shares Outstanding:
      Basic                              293,253               293,137
      Diluted                            295,586               296,383
    

    
    Supplemental Data:
      Depreciation and
       amortization                     $195,198              $151,105
      Capital expenditures               418,288               542,498
    



    
                             Operating Highlights
    

    Following are the results of operations for the three months ended June
30, 2008, June 30, 2007 and March 31, 2008 and for the nine months ended June
30, 2008 and 2007:

    
                                Three Months Ended       Nine Months Ended
                               June 30       March 31         June 30
                           2008      2007      2008       2008       2007
    

    
    U.S./Mexico
     Pressure Pumping
      Revenue            $706,689  $646,719  $643,044  $2,012,284 $1,920,901
      Operating Income    146,821   215,449   126,516     455,359    688,346
      Operating Income
       Margins                21%       33%       20%         23%        36%
    

    
    Canada Pressure
     Pumping
      Revenue             $48,636   $35,169  $138,790    $308,772   $268,709
      Operating Income
       (Loss)             (16,595)  (21,610)   14,481      14,878     10,607
      Operating Income
       Margins               -34%      -61%       10%          5%         4%
    

    
    International
     Pressure Pumping
      Revenue            $316,922  $277,314  $292,120    $897,554   $779,741
      Operating Income     45,235    42,623    34,714     115,874    112,066
      Operating Income
       Margins                14%       15%       12%         13%        14%
    

    
    Oilfield Services
     Group
      Revenue            $255,981  $193,316  $209,248    $677,885   $553,745
      Operating Income     49,669    41,800    37,769     127,471    111,172
      Operating Income
       Margins                19%       22%       18%         19%        20%
    

    
    Corporate
      Operating Loss     $(18,272) $(20,455) $(26,952)   $(67,615)  $(57,851)
    June Quarter Review
    
    U.S./Mexico Pressure Pumping Services third quarter 2008 revenue of
$706.7 million was 10% higher than the March 2008 quarter (sequential) with
average active drilling rigs for the same period increasing 5%.  Increased
activity in the Rocky Mountains, the Northeast, East Texas and the Gulf of
Mexico was the primary source of the revenue improvement.  Compared to the
June 2007 quarter (year over year), revenue increased 9% on a 6% increase in
average active drilling rigs. Increased activity in the Rocky Mountains,
Mid-Continent and East Texas primarily accounts for the increased revenue. 
Operating income margin for U.S./Mexico increased to 21% from 20% in the
previous quarter and decreased from 33% in the same quarter last year.  The
lower operating income margin compared to the same quarter of last year was
due to lower pricing and increased material, maintenance and fuel costs.
    Canada Pressure Pumping Services third quarter 2008 revenue of $48.6
million was 65% lower sequentially as the region experienced its annual spring
break-up period with average drilling rig activity down 67%. Year over year
revenue increased 38% with average drilling rig activity increasing 22%.  The
operating loss during the third quarter was less severe compared to the prior
year quarter due to the improved revenue in addition to cost reduction
initiatives.
    International Pressure Pumping Services third quarter 2008 revenue of
$316.9 million increased 8% sequentially with average active drilling rig
levels increasing 4% for the same period.  Revenue compared to the same
quarter last year increased 14% with average active drilling rigs up 8%.
Percentage changes in revenue by region compared to the second quarter of
fiscal 2008 and the third quarter of fiscal 2007 are as follows:



    
    Region                                    Sequential        Year Over Year
    Europe(1)                                     25%                  -8%
    Middle East(1)                                 3%                  21%
    Asia Pacific                                  26%                   5%
    Russia                                        -3%                   9%
    Latin America(1)                               2%                  30%
      Total                                        8%                  14%
    
    (1) During the quarter ended March 31, 2008, we revised the internal
management reporting structure of our pressure pumping operations in Africa,
whose results of operations were previously reported in our Europe/Africa
operating segment.  Our North Africa results, including Algeria and Libya, are
now included in our Middle East operating segment, while our  West Africa
results south of Nigeria, including Angola and Gabon, are now included in our
Latin America operating segment.  Nigeria and coastal areas north of there
remain as part of our Europe operating segment.  Prior period results have
been revised to conform with the current presentation.
    All of our International Pressure Pumping operating segments except
Russia showed sequential revenue improvement benefiting from increased
activity levels.  Average active drilling rigs in Europe and Asia Pacific
increased 7% and 11%, respectively, from the prior quarter while our revenue
in Europe and Asia Pacific increased 25% and 26%, respectively.  Middle East
and Latin America revenue improvement sequentially was in line with average
drilling rig activity in those regions.
    Year over year revenue improved 30% in Latin America and 21% in the
Middle East, with average active drilling rigs increasing 3% and 4%,
respectively. The Latin America increase was primarily the result of increased
stimulation activity in Brazil, Venezuela and Argentina, while the Middle East
increase was primarily the result of new service contracts in North Africa and
Kazakhstan.  Asia Pacific revenue improved 5% on an 11% increase in average
active drilling rigs.  In Europe, revenue declined 8% while drilling activity
in the region increased 21%, largely as a result of the transfer of a
stimulation vessel from the North Sea to India.  Russian revenue improved 9%
year over year, primarily as a result of increased stimulation activity.
    Operating income margin for International Pressure Pumping was 14% for
the third quarter of fiscal 2008, a sequential increase from 12% in the
previous quarter and a decrease from 15% reported in the prior year June
quarter.
    Oilfield Services Group third quarter 2008 revenue of $256.0 million
increased 22% sequentially and increased 32% year over year.  Percentage
changes in revenue by division compared to the second quarter of fiscal 2008
and the third quarter of fiscal 2007 are as follows:



    
    Division                                   Sequential    Year Over Year
    Tubular Services                               16%             18%
    Process & Pipeline Services                    24%             45%
    Chemical Services                              19%             46%
    Completion Tools                                1%              5%
    Completion Fluids                              60%             31%
      Total                                        22%             32%
    
    All of our operating segments made positive contributions to the Oilfield
Services Group's increase in revenue from the prior quarter.  A 24% seasonal
increase in Process & Pipeline Services and a 60% increase in Completion
Fluids, primarily in the Gulf of Mexico, were the biggest contributors.
Completion Tools revenue increased slightly from the previous quarter, while
Tubular Services and Chemical Services revenue increased 16% and 19%,
respectively.
    Year over year, revenue improved 45% and 46%, respectively, for our
Process & Pipeline Services and Chemical Services group, primarily as a result
of increased activity levels.  Completion Fluids and Tubular Services also
improved markedly year over year, due to increased activity.
    The Oilfield Services Group operating income margin for the quarter was
19%, up from 18% in the previous quarter and down from 22% in the prior year's
third quarter.
    
    Consolidated Geographic Highlights
    
    The following table reflects the percentage change in consolidated
revenue by geographic area for the June 2008 quarter compared to the March
2008 quarter and the June 2007 quarter.  The information presented is based on
our combined service and product line offering by geographic region.



    
    Region                                  Sequential          Year Over Year
    U.S.                                        12%                   11%
    Canada                                     -53%                   47%
      Total                                      1%                   13%
    Latin America                               -2%                   21%
    Europe/Africa                               21%                   -2%
    Russia                                      -1%                   10%
    Middle East                                  6%                   29%
    Asia Pacific                                 8%                   12%
      Total                                      4%                   15%
    Non-GAAP Financial Measures
    
    A non-GAAP financial measure is a numerical measure of a registrant's
historical or future financial performance, financial position or cash flows
that 1) excludes amounts, or is subject to adjustments that have the effect of
excluding amounts, that are included in the most directly comparable measure
calculated and presented in accordance with GAAP in the statement of income,
balance sheet, or statement of cash flows, or 2) includes amounts, or is
subject to adjustments that have the effect of including amounts, that are
excluded from the most directly comparable measure so calculated and
presented.
    Any unexpected disclosures of non-GAAP financial measures discussed on
the conference call mentioned below will be posted on our website as soon
thereafter as practicable.
    
    Conference Call
    
    The Company will hold a conference call following this earnings release.
The call will take place at 10:00 a.m. Central Time.
    To participate in the conference call, please call 913-312-1462 ten
minutes prior to the conference call start time and give the conference code
number 1634930.  If you are unable to participate, the conference call will be
available for playback three hours after conclusion of the conference call.
The playback number is 719-457-0820 and the replay entry code is 1634930.
Playback will be available for five days.
    The conference call will also be available via real-time webcast at
http://www.bjservices.com.  Playback of the webcast will be available
following the conference call.
    This news release contains forward-looking statements that anticipate
future performance such as the Company's prospects, expected revenue, and
expenses and profits.  These forward-looking statements are based on
assumptions that may prove to be inaccurate, and they are subject to risks and
uncertainties that may cause actual results to differ materially from expected
results.  These risk factors include, without limitation, general global
business and economic conditions, drilling activity and rig count, pricing
volatility for oil and gas, reduction in demand for our services and products,
risks from operating hazards such as fire, explosion and oil spills,
unexpected litigation for which insurance and customer agreements do not
provide complete protection, potential adverse results from our SEC and DOJ
investigations, changes in exchange rates and declines in the U.S. dollar, and
risks associated with our international operations, including potential
instability and hostilities.  This list of risk factors is not intended to be
comprehensive.  More extensive information concerning risk factors may be
found in our public filings with the Securities and Exchange Commission.
    BJ Services Company is a leading provider of pressure pumping, well
completion, production enhancement and pipeline services to the petroleum
industry.




For further information:

For further information: Jeff Smith of BJ Services Company,
+1-713-462-4239 Web Site: http://www.bjservices.com

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