Global Hunter Securities Comments On Oil States International Following Expansion Plans

Yesterday, Oil States International OIS announced its Board of Directors approved the construction of Henday Lodge, located adjacent to its Wapasu Creek lodge in the oil sands region of northern Alberta, Canada. The facility will have initial capacity of 1,264 rooms by the end of 3Q11 and be OIS's fifth lodge in the Canadian oil sands. The company has already secured a 24-month contract for 1,000 rooms, giving it >90% contracted occupancy for the lodge's 1,100 rentable rooms. Capex for the facility was already built into its $535MM 2011 capex guidance. Assuming 80% annual occupancy, and revenues per room in line with Wapasu, Global Hunter estimates the lodge will add ~$15-$20MM in annual EBITDA and 20-25c in EPS accretion in 2012. As Global Hunter had already modeled the capex guidance, its depreciation estimate remains unchanged but earnings and cash flows improve with the incremental revenues. Global Hunter thinks investors will continue to be attracted to the company's impressive growth strategy, which it expects to result in 30-35% EPS growth over the next two years. Accounting for the accretion for the Henday Lodge, as well as making a few minor tweaks to other assumptions, Global Hunter is increasing its price target to $86, from $82 and has an accumulate rating on OIS. OIS is trading higher at $75.75