A $482M Backlog, Its Highest Since 2014. 46% of It Is Military. The Cash Has Not Followed Yet.

Oil States International makes offshore and subsea equipment, naval military products, and perforating systems in Houston and around the world, with 2,172 employees at the end of 2025. Its offshore backlog reached $482M at September 30, 2026, the highest since December 2014 and up 55% in seven quarters, and 46% of it is military work that converts to revenue over several years. Third-quarter revenue rose 3% to $169.8M and net income was $3.1M. The orders are in hand; whether they turn into earnings and cash on the schedule management describes is the test.

Analysis

Oil States International is a Houston company that has traded on the New York Stock Exchange since 2001. It reports three segments. Offshore Manufactured Products builds deepwater and subsea equipment, including FlexJoint technology, connector systems, high-pressure riser systems, compact valves, and subsea pipeline products, along with valves and sound and vibration dampening products for naval military applications. Downhole Technologies makes perforating systems, frac plugs, toe valves, and setting tools, a business built largely on the 2018 acquisition of GEODynamics for about $615M. Completion and Production Services provides pressure control equipment and extended reach tools as a service. The company spun off its accommodations business as Civeo in 2014. It had 2,172 full-time employees at the end of 2025, 63% of them in the offshore segment, and no customer accounted for 10% of revenue.

The third quarter of 2026 is why the desk is writing now. Revenue for the quarter ended September 30 was $169.8M, up 3% from $165.2M, and net income was $3.1M, or $0.05 per diluted share, against $1.9M, or $0.03. Adjusted EBITDA was $20.1M, down 3%. Both revenue and adjusted EBITDA came in above the July guidance of $157M to $167M and $18M to $20M. The offshore segment booked $135M of orders, a book-to-bill ratio of 1.3x, and its backlog reached $482M, the highest since December 2014. On October 29 the board approved a new $50M share repurchase authorization. The company is also in its first months under a new chief executive.

The Human Translation: Oil States builds heavy equipment that connects oil platforms to the seabed, parts for naval vessels, and the explosive charges that open oil wells for production. It has more orders waiting to be built than at any time since 2014, and almost half of them are long military contracts that pay out over four to five years. Profit is thin for now because of one-time costs, including the leadership transition, and expensive raw materials. Management's case is that the orders become steady profit and cash over the next two years.

The backlog is the clearest change in the business. Offshore backlog was $311M at the end of 2024, then $357M, $363M, $399M, and $435M through 2025. It slipped to $430M in March 2026, when bookings fell to 0.9 times revenue and management cited Middle East uncertainty, contract award delays, and project deferrals. It then rose to $451M in June and $482M in September, up 21% in a year. Year-to-date bookings reached $333M, and management said nearly 90% of them were offshore energy products, with Brazil, Guyana, and Asia named as drivers. On the October 30 call, chief executive Lloyd Hajdik said the company has not cut prices on capital equipment.

The composition of that backlog sets its pace. Military programs were about 46% of it at September 30, roughly $220M on the desk's arithmetic, down from 48% at the July call. Management said the military share comes largely from awards booked in the third and fourth quarters of 2025, multiyear block orders that convert over four to five years, and that the latest awards begin producing meaningful revenue in 2027. The result is a slower conversion rate. Management now expects 50% to 55% of the backlog to become revenue within twelve months, against a historical 65% to 70%. A larger backlog does not mean a proportionally larger next year.

The offshore segment carried the quarter. Revenue was $104.4M, up 13% from the second quarter and down 4% from a year earlier. Adjusted segment EBITDA was $18.8M, an 18% margin, against $22.3M and 20.5% a year earlier. Management has guided to a margin of roughly 20% for the segment and reiterated that target on the call. It also pointed to managed pressure drilling equipment, a product line it has modeled at about $35M to $40M of revenue, with another rental project booked in the quarter and a sale order expected in the fourth quarter. The segment's mix shapes its margin, and the military awards begin converting in larger amounts in 2027.

Downhole Technologies is growing but not yet earning much. Revenue was $42.2M, up 45% from $29.0M a year earlier and the highest since the first quarter of 2023. Adjusted segment EBITDA was $3.6M, an 8% margin, against a loss of $0.7M a year earlier and 11% in the second quarter. Management attributed the squeeze to limited availability of explosive powder, higher costs for tungsten and copper used in shaped charges, and product mix, and noted that the second quarter had included a one-time tariff refund. It expects the raw material pressure to persist through the fourth quarter and to ease in early 2027. The segment absorbed $112.7M of the company's $121.1M of impairments in 2025, including all of the $20.8M recorded on inventory.

Completion and Production Services is smaller by design. Revenue was $23.2M, down 16% from a year earlier and 5% from the second quarter, which management attributed to lower U.S. land activity. Adjusted segment EBITDA was $6.1M, a 26% margin, the highest in the company. The segment exited U.S. land service locations and offerings during 2025, and in the first quarter of 2026 the company decided to exit one more U.S. land service line, recording a $1.4M impairment on equipment moved to assets held for sale. Management said it has concentrated the segment on proprietary extended reach tools, the Gulf of America, and selected international markets, and Hajdik said he expects U.S. land spending to rise modestly in 2027.

The geography explains the strategy. Offshore and international revenue was $121.8M in the quarter, 72% of the total, and U.S. land revenue was $48.0M, up from $41.8M a year earlier as Downhole sales grew even while the service segment shrank. Hajdik described a constructive multiyear offshore and international investment cycle in the release and said on the call that disruption in the Middle East strengthens the case for offshore investment. The same conflict is the reason management gave for the first quarter's weak bookings. The company sells into the decisions oil producers make about long projects, not into the oil price itself, and those decisions can be delayed as easily as accelerated.

The gap between reported and adjusted earnings comes from charges and taxes. The quarter included $5.5M of charges: $3.3M of executive transition costs, including accelerated vesting of the former chief executive's stock awards, and $2.2M for facility consolidation and exits. Corporate operating loss widened to $14.1M from $9.1M a year earlier. Pre-tax income was $5.3M, and the $2.1M tax expense was an effective rate of about 41%, which the company attributes to valuation allowances, discrete items, and non-deductible expenses. Adjusted net income, before charges, was $8.5M, or $0.15 per share, against $4.7M, or $0.08. The adjusted figure is closer to the operating trend; the reported figure is what shareholders kept.

The annual record shows a company that shrank its land exposure at a cost. Revenue was $782.3M in 2023 with net income of $12.9M and adjusted EBITDA of $87.8M. In 2024 revenue fell to $692.6M and the company lost $11.3M after $24.6M of impairments. In 2025 revenue was $669.0M and the net loss was $109.4M, or $1.86 per share, after $121.1M of impairments, $100.3M on long-lived assets and $20.8M on inventory, along with $11.6M of facility exit and other charges. Operating cash flow in 2025 was $105.1M. The offshore share of revenue rose to 64% in 2025 from 57% in 2024, and the service share fell to 17% from 24%.

The 2026 outlook has come down twice. In February, management guided full-year revenue to $680M to $700M and adjusted EBITDA to $90M to $95M. In July, after the first quarter's delays, it lowered the ranges to $640M to $660M and $77M to $83M, noting that some revenue had moved into 2027 because of delayed awards. Nine-month revenue was $471.8M, down 3.8%, and nine-month adjusted EBITDA was $55.8M, down 8%. Fourth-quarter guidance is revenue of $172M to $184M and adjusted EBITDA of $20M to $23M. On the desk's arithmetic, that implies full-year revenue of about $644M to $656M and adjusted EBITDA of about $76M to $79M, against $83.4M for the four quarters of 2025. Formal 2027 guidance is due in mid-February.

Cash is where the year has disappointed most. Operating cash flow was negative $2.8M for the first nine months, against positive $55.0M a year earlier, because the company invested $38M in inventory to support the backlog and rising perforating demand. Capital spending fell to $10.4M from $28.2M. The company's free cash flow measure, which includes $13.1M of asset sale proceeds, was negative $0.1M. Fourth-quarter guidance is $15M to $25M of free cash flow as working capital is released. On the desk's arithmetic, the year would finish at about $15M to $25M, against the $35M to $40M guided in July. Management called the shortfall a matter of timing.

The balance sheet was rebuilt in 2026 with less cash and a small net cash position. At the end of 2025 the company held $69.9M of cash against $55.0M of debt, most of it 4.75% convertible notes due in April. In January it replaced its asset-based facility with a $125M cash flow credit agreement, a $75M revolver and a $50M multi-draw term loan. On April 1 it retired the remaining $52.7M of notes with $25.5M of cash, $25.0M of revolver borrowings, and 529,428 new shares, recording a $3.6M loss. In July it borrowed $20.0M under the term loan to repay the revolver, and the remaining term commitments lapsed. At September 30, cash was $22.9M, debt was $20.0M, and $58.0M remained available.

Capital returns have continued through the transition. The company repurchased $14.2M of stock in 2024 and $16.6M in 2025, 3.3 million shares or 5% of those outstanding at the end of 2024. It bought 1,053,670 shares for $9.1M in the first nine months of 2026 under a $50M program that expired on October 24, leaving 59.8 million shares outstanding on October 23. The new $50M authorization runs through October 2028. It is more than twice the cash on hand, so its pace depends on the fourth-quarter release of working capital and on the $14.4M of assets held for sale. Hajdik also said management is being somewhat more aggressive than in the past in reviewing acquisitions.

Leadership changed with continuity. Cindy Taylor, who spent more than 25 years at the company and 19 as chief executive, announced her retirement in March. Lloyd Hajdik, chief financial officer since December 2013 and earlier chief accounting officer at Helix Energy Solutions, became president and chief executive on May 1 and joined the board. Matthew Autenrieth, who joined in 2007, became chief financial officer. Taylor's transition agreement kept her as a senior advisor through November 1, with accelerated vesting of her 2024 and 2025 stock awards, and the company has recognized $5.0M of transition costs this year. The new team inherited the backlog and the restructuring.

The restructuring is longer than first described. In February, Taylor said the U.S. land restructuring was essentially complete. Since then the company has decided on another service line exit and recorded $6.3M of facility consolidation, exit and other charges in the first nine months, offset by a $4.1M gain on the sale of a facility. Asset sales brought in $12.2M from held-for-sale assets and $0.9M from other equipment, and $14.4M of assets remained held for sale at September 30, down from $17.4M at the end of 2025. Management has said the remaining proceeds are likely to arrive in 2027. Each closure lowers the cost base and adds a charge in the period it happens.

The risks the filings name are concrete. The offshore business depends on customers' timing for long projects, and the first quarter showed how quickly awards can slip. Military orders are steady but slow to convert, and their share of the mix affects segment margins. Downhole depends on explosive powder, tungsten, and copper, and the 10-K says U.S. tariffs substantially increased the cost of steel and other metal components imported from China in 2025. The credit agreement requires net leverage of no more than 2.5 times, with some exceptions, and interest coverage of at least 3.0 times; the company was in compliance at September 30. A large acquisition would test those limits.

The scenario map has three branches. In the first, the fourth quarter lands inside guidance, working capital releases the cash management expects, and 2027 guidance in February shows revenue growing with the offshore and international cycle as the military awards begin to convert; the backlog then becomes the earnings base it appears to be. In the second, conversion is slower than the 50% to 55% management expects, raw material costs stay high into 2027, and earnings remain near the 2026 level even as the backlog grows. In the third, offshore awards slip again on geopolitics or customer budgets, bookings fall below revenue, and the backlog shrinks while the new buyback competes with working capital for cash.

The checkpoint set, stated fully. First, fourth-quarter revenue and adjusted EBITDA against the $172M to $184M and $20M to $23M guidance. Second, fourth-quarter free cash flow against the $15M to $25M range, and whether inventory starts to come down. Third, offshore book-to-bill and the backlog against $482M, along with the military share against 46%. Fourth, Downhole margins as explosive powder and metal costs ease or do not. Fifth, the 2027 guidance in mid-February, especially how much of the backlog management expects to convert. Sixth, the use of the $50M authorization against cash, debt, and the $58M of available credit. Seventh, any further facility exits or acquisitions under the new leadership.

The Human Translation

Oil States builds equipment that connects oil platforms to the seabed, parts for naval vessels, and the charges that open oil wells for production. It has more orders waiting than at any time since 2014, and almost half are long military contracts that pay out over four to five years. Profit is thin for now because of one-time costs, a leadership change, and expensive raw materials, and cash went into inventory. Management's case is that the orders become steady profit and cash over the next two years.

Bottom Line

Watch whether the fourth quarter lands inside the $172M to $184M revenue and $20M to $23M adjusted EBITDA guidance, and whether it produces the $15M to $25M of free cash flow management expects as inventory is released. Then watch the February guidance for 2027 and how much of the $482M backlog converts. Downhole margins show whether raw material costs are easing.

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