Oil States International reports third quarter hit from Harvey

Oct. 27 (UPI) -- As warned earlier this month, the impact of Hurricane Harvey on the southern U.S. energy sector took a toll on third quarter results, Oil States International said.

Oil States International has headquarters in Houston and operates five manufacturing facilities there. The company said Friday that one of those facilities was still out of service after heavy flooding. Work scheduled at that plant was transferred to another facility.

A report from Goldman Sachs found that flooding from Hurricane Harvey was the greatest threat to energy infrastructure in the region. As much as five feet of rain were forecast for some of the areas in the storm's path last month.

Oil States reported a net loss for the third quarter of $15 million, about 28 percent more than the same period last year.

"Our third quarter results were adversely affected by Hurricane Harvey which caused widespread damage and logistical challenges in Houston and the surrounding region where we operate five manufacturing facilities and employ about 500 individuals," President and CEO Cindy B. Taylor said in a statement.

The company warned earlier this month that spending might be impacted by the storm.

Oil States is not alone in reporting a financial impact from Harvey. Encana Corp. said last month the storm sidelined about 3,500 barrels of oil equivalent per day from the Eagle Ford and Permian basin. That's less than 1 percent of the combined oil production in the forecast from the U.S. Energy Information Administration, though that loss is from just one company.

Elsewhere, Oil States said the investor push inland toward U.S. shale basins meant lower demand for products for deepwater drilling.

"Historically low levels of deepwater spending continued to impact our offshore/manufactured products segment with limited industry award activity during the third quarter," Taylor said.

Interior Secretary Ryan Zinke said more than 75 million acres of federal waters in the Gulf of Mexico would go on the auction block for drillers in March. The secretary said the low-price market environment meant the offshore industry needed as many opportunities as possible, adding the March auction was the largest in U.S. history.

Cindy Giglio, a principal energy merger and acquisition analyst at IHS Markit, told UPI the Gulf of Mexico remains an attractive return on investment, in part because of existing infrastructure and an available workforce. The region, however, may be best suited for bigger firms because of the "long-investment timeframe, scale, and technological expertise required," she said.