MRC Global Inc. Bounces Back Big-Time

By MarketsFool.com

The long-awaited recovery in the oil and gas market finally appears to be taking hold. Those improving market conditions are having a noticeable impact on MRC Global's (NYSE: MRC) financial results, which bounced back sharply in the first quarter versus prior periods.

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MRC Global results: The raw numbers

Data source: MRC Global.

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What happened with MRC Global this quarter?

MRC Global enjoyed a bounce-back quarter:

  • MRC Global's revenue jumped 10% versus the year-ago quarter and was 20% above the seasonally weaker fourth quarter.
  • Sales to midstream customers drove growth during the quarter, rising 33% year over year to $371 million. Sales to transmission and gathering customers led the way, up 48% year over year.
  • Upstream revenue was also up versus the year-ago quarter, increasing 6% to $245 million. Driving the rebound was improvement in sales to customers in North America, mainly due to the rebound in shale drilling.
  • The lone laggard was downstream sales, which fell 10% to $246 million, primarily due to the conclusion of a large petrochemical project. Sequentially, however, revenue increased 8% thanks to higher turnaround activities in the refining sector.
  • While the company only broke even during the quarter, it's worth noting that underlying earnings as measured by adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) were $36 million, up from $19 million in the year-ago quarter. Meanwhile, the company generated $22 million in cash flow from operations during the quarter.
  • MRC Global used that cash flow to repurchase $18 million of stock during the quarter, exhausting its $125 million share-repurchase authorization. That buyback program has had a meaningful impact on the share count, which is down 5.6% over the past year, setting the company up for stronger earnings-per-share growth as market conditions improve.

What management had to say

CEO Andrew Lane commented on the quarter by saying:

MRC Global enjoyed its best quarter for sales in more than a year thanks to the beginning stages of a recovery in the oil and gas market. Because drillers in the U.S. and Canada are operating more rigs, they're driving demand not only for pipes, valves, and fittings to support new wells but also for more gathering and transmission systems within the midstream segment, to move this production to market centers.

Looking forward

While market conditions are clearly on the upswing, there's still plenty of uncertainty in the oil market. Crude prices, which had been above $50 a barrel since late last year, have dipped below that critical level in recent weeks due to rapidly rising shale output. Weaker shale producers might need to cut back on spending if prices don't improve, which could slow down MRC Global's rebound.

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Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends MRC Global. The Motley Fool has a disclosure policy.