Pioneer Energy Services Reports First Quarter 2019 Results

May 2, 2019

SAN ANTONIO, May 2, 2019 /PRNewswire/ -- Pioneer Energy Services (NYSE: PES) today reported financial and operating results for the quarter ended March 31, 2019. First quarter highlights include:

  • Domestic drilling fleet was fully contracted and generated an average margin per day of $10,944.
  • Production services revenues increased 6% sequentially, primarily driven by the coiled tubing revenue increase of 16%.
  • Deployed our newest 1,500 horsepower, super-spec, new-build drilling rig, which began operations in West Texas on a three-year term contract.

Consolidated Financial Results

Revenues for the first quarter of 2019 were $146.6 million, up 4% from revenues of $141.5 million in the fourth quarter of 2018 ("the prior quarter"). Net loss for the first quarter of 2019 was $15.1 million, or $0.19 per share, compared with net loss of $14.5 million, or $0.19 per share, in the prior quarter. Adjusted net loss(1) for the first quarter was $10.5 million, and adjusted EPS(2) was a loss of $0.13 per share. These results compare to an adjusted net loss of $13.6 million, and an adjusted EPS loss of $0.17 per share in the prior quarter. First quarter adjusted EBITDA(3) was $19.9 million, down from $20.8 million in the prior quarter.

The increase in revenues from the prior quarter was primarily due to an increase across all of our production services segments as operators resumed operations after temporarily slowing activity in the prior quarter as a result of lower commodity prices. Adjusted EBITDA decreased sequentially, primarily driven by the change in fair value of our phantom stock awards, for which we recognized an expense of $0.8 million in the first quarter, while we recognized a benefit of $2.8 million in the prior quarter. The impact of the phantom stock expense was partially offset by improvement in both the coiled tubing and domestic drilling segments as well as $1.1 million of gains from the sale of certain assets, primarily spare coiled tubing equipment.

Operating Results

Production Services Business

Revenue from our production services business was $86.9 million in the first quarter, up 6% from the prior quarter. Gross margin as a percentage of revenue from our production services business was 20% in the first quarter, up from 19% in the prior quarter. Both revenue and margin were positively impacted in all businesses as operators increased completion-related operations after a brief pause in activity in the prior quarter given instability in commodity prices.

The increase in production services revenues from the prior quarter was attributable to improvements in all business segments, led by coiled tubing which benefited from the addition of a large diameter unit delivered late in the prior quarter. Wireline's completion-related activity stabilized over the prior quarter and well servicing gradually expanded its activity levels in both remedial and completion-related activity.

Well servicing average revenue per hour was $558 in the first quarter, down from $571 in the prior quarter, while rig utilization was 54%, up from 50% in the prior quarter. Coiled tubing revenue days totaled 351 in the first quarter, as compared to 346 in the prior quarter. The number of wireline jobs completed in the first quarter decreased by 3% sequentially.

Drilling Services Business

Revenue from our drilling services business was $59.7 million in the first quarter, reflecting a 1% increase from the prior quarter. Average margin per day was $10,349, down from $10,872 in the prior quarter.

Our domestic drilling fleet was fully contracted during the current quarter and the prior quarter with average revenues per day of $26,767 in the first quarter, up from $25,794 in the prior quarter. Domestic drilling average margin per day was $10,944 in the first quarter, up from $10,252 in the prior quarter due to the full impact of rate increases effective during the prior quarter as well as a benefit of $0.3 million, or approximately $235 per day, from recognition of the early termination of a domestic drilling contract due to a customer's budget realignment, which had 34 days remaining on its term. After contract termination, the drilling rig mobilized from South Texas and resumed operations for a new client in West Texas.

International drilling rig utilization was 81% for the first quarter, up from 71% in the prior quarter. Average revenues per day were $37,316, down from $41,230 in the prior quarter, while average margin per day for the first quarter was $8,894, down from $12,590 in the prior quarter. The decrease in revenue per day and margin per day was primarily due to the benefit of revenue items negotiated during the prior quarter and reversal of demobilization revenue in the first quarter as a contract that was previously expected to terminate was extended.

Currently, 16 of our 17 domestic drilling rigs are earning revenues, 13 of which are under term contracts, and seven of our eight rigs in Colombia are earning revenue under daywork contracts.

Comments from our President and CEO 

"As oil prices have steadily improved in 2019 and customers have resumed activity, we are seeing stable demand for our drilling and production services," said Wm. Stacy Locke, President and Chief Executive Officer.  "We remain focused on achieving cash flow neutrality in 2019 as our capital spending program was more heavily weighted towards the first quarter, and our reduced spending program for the remainder of 2019 is primarily for routine capital expenditures. Also, we experienced a longer collection cycle in the first quarter, but we expect to improve our working capital position as we move forward through 2019.

"In late March, we deployed our newest 1,500 horsepower, super-spec, new-build drilling rig, which began operations in West Texas on a three-year term contract. We believe our premium rigs are the best designed moving rigs in the market, helping customers continue to improve efficiency. By focusing on safety and performance with superior equipment, we have been able to generate industry-leading margins and have successfully extended the contract terms on several of our rigs. Our drilling services both domestically and in Colombia are benefiting from stable dayrates, extended contract coverage and solid customer demand. Internationally, the market outlook is currently strong, and we are having success extending contract coverage as our customers continue to have robust drilling programs through 2019.

"Our production services business is experiencing healthy activity levels, although weather conditions in the Rockies negatively impacted our wireline business in February, and wildlife restrictions will impact activity in the Rockies in April and May. Customer demand for large diameter coiled tubing equipment contributed to a 16% increase in that segment's revenue in the first quarter as we benefited from the deployment of a large diameter unit at the end of the prior quarter. With commodity prices continuing to firm up, we expect improved activity levels for all business lines as we move through 2019."

Second Quarter 2019 Guidance

In the second quarter of 2019, revenue from our production services business segments is expected to be up 1% to 4% as compared to the first quarter of 2019. Margin from our production services business is estimated to be 19% to 22% of revenue. Domestic drilling services rig utilization is expected to be 93% to 95% as one rig will be idle during the second quarter as it prepares to move to a new client in July, and generate average margins per day of approximately $9,700 to $10,200. International drilling services rig utilization is estimated to average 83% to 86%, and generate average margins per day of approximately $8,500 to $9,500.

We expect general and administrative expense to be approximately $20.0 million to $21.0 million in the second quarter of 2019, which as it relates to phantom stock compensation expense, is based on the closing price of our common stock of $1.77 per share at March 31, 2019.

Liquidity

Working capital at March 31, 2019 was $103.7 million, down from $110.3 million at December 31, 2018. Cash and cash equivalents, including restricted cash, were $27.9 million, down from $54.6 million at year-end 2018. During the three months ended March 31, 2019, we used $16.8 million of cash for the purchase of property and equipment, and our cash used in operations was $10.8 million.

Capital Expenditures

Cash capital expenditures during the three months ended March 31, 2019 were $16.8 million, including capitalized interest. We estimate total cash capital expenditures for 2019 to be approximately $55 million to $60 million, which includes approximately $7 million for final payments on the construction of the new-build drilling rig that began operations in the first quarter, and previous commitments on high-pressure pump packages for coiled tubing completion operations.

Conference Call

Pioneer Energy Services' management team will hold a conference call today at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss these results. To participate, dial (412) 902-0003 approximately 10 minutes prior to the call and ask for the Pioneer Energy Services conference call. A telephone replay will be available after the call until May 9th. To access the replay, dial (201) 612-7415 and enter the pass code 13689876.

The conference call will also be webcast on the Internet and accessible from Pioneer Energy Services' web site at www.pioneeres.com. To listen to the live call, visit our web site at least 10 minutes early to register and download any necessary audio software. For more information, please contact Donna Washburn at Dennard Lascar Investor Relations at (713) 529-6600 or e-mail dwashburn@dennardlascar.com.

About Pioneer

Pioneer Energy Services provides well servicing, wireline, and coiled tubing services to producers in the U.S. Gulf Coast, Mid-Continent and Rocky Mountain regions through its three production services business segments. Pioneer also provides contract land drilling services to oil and gas operators in Texas, the Mid-Continent and Appalachian regions and internationally in Colombia through its two drilling services business segments.

Cautionary Statement Regarding Forward-Looking Statements,
Non-GAAP Financial Measures and Reconciliations

Statements we make in this news release that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements made in good faith that are subject to risks, uncertainties and assumptions. Our actual results, performance or achievements, or industry results, could differ materially from those we express in the following discussion as a result of a variety of factors, including general economic and business conditions and industry trends, levels and volatility of oil and gas prices, the continued demand for drilling services or production services in the geographic areas where we operate, decisions about exploration and development projects to be made by oil and gas exploration and production companies, the highly competitive nature of our business, technological advancements and trends in our industry and improvements in our competitors' equipment, the loss of one or more of our major clients or a decrease in their demand for our services, future compliance with covenants under debt agreements, including our senior secured term loan, our senior secured revolving asset-based credit facility, and our senior notes, operating hazards inherent in our operations, the supply of marketable drilling rigs, well servicing rigs, coiled tubing units and wireline units within the industry, the continued availability of new components for drilling rigs, well servicing rigs, coiled tubing units and wireline units, the continued availability of qualified personnel, the success or failure of our acquisition strategy, the occurrence of cybersecurity incidents, the political, economic, regulatory and other uncertainties encountered by our operations, and changes in, or our failure or inability to comply with, governmental regulations, including those relating to the environment. We have discussed many of these factors in more detail in our Annual Report on Form 10-K for the year ended December 31, 2018, including under the headings "Special Note Regarding Forward-Looking Statements" in the Introductory Note to Part I and "Risk Factors" in Item 1A. These factors are not necessarily all the important factors that could affect us. Other unpredictable or unknown factors could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. All forward-looking statements speak only as of the date on which they are made and we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. We advise our shareholders that they should (1) recognize that important factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.

This news release contains non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each such measure to its most directly comparable U.S. Generally Accepted Accounting Principles (GAAP) financial measure, together with an explanation of why management believes that these non-GAAP financial measures provide useful information to investors, is provided in the following tables.

_________________________________



(1)

Adjusted net loss represents net loss as reported adjusted to exclude impairments and the related tax benefit and valuation allowance adjustments on deferred tax assets. We believe that adjusted net loss is a useful measure to facilitate period-to-period comparisons of our core operating performance and to evaluate our long-term financial performance against that of our peers, although it is not a measure of financial performance under GAAP. Adjusted net loss may not be comparable to other similarly titled measures reported by other companies. A reconciliation of net loss as reported to adjusted net loss is included in the tables to this news release.



(2)

Adjusted (diluted) EPS represents adjusted net loss divided by the weighted-average number of shares outstanding during the period, including the effect of dilutive securities, if any. We believe that adjusted (diluted) EPS is a useful measure to facilitate period-to-period comparisons of our core operating performance and to evaluate our long-term financial performance against that of our peers, although it is not a measure of financial performance under GAAP. Adjusted (diluted) EPS may not be comparable to other similarly titled measures reported by other companies. A reconciliation of diluted EPS as reported to adjusted (diluted) EPS is included in the tables to this news release.



(3)

Adjusted EBITDA represents income (loss) before interest expense, income tax (expense) benefit, depreciation and amortization, impairment, and any loss on extinguishment of debt. Adjusted EBITDA is a non-GAAP measure that our management uses to facilitate period-to-period comparisons of our core operating performance and to evaluate our long-term financial performance against that of our peers. We believe that this measure is useful to investors and analysts in allowing for greater transparency of our core operating performance and makes it easier to compare our results with those of other companies within our industry. Adjusted EBITDA should not be considered (a) in isolation of, or as a substitute for, net income (loss), (b) as an indication of cash flows from operating activities or (c) as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. Adjusted EBITDA may not be comparable to other similarly titled measures reported by other companies.  A reconciliation of net loss as reported to adjusted EBITDA is included in the tables to this news release.

 

Contacts:

Dan Petro, CFA, Vice President, Treasury and


Investor Relations


Pioneer Energy Services Corp.


(210) 828-7689




Lisa Elliott / pes@dennardlascar.com


Dennard Lascar Investor Relations / (713) 529-6600

 - Financial Statements and Operating Information Follow -

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)



Three months ended


March 31,


December 31,


2019


2018


2018









Revenues

$

146,568



$

144,478



$

141,505








Costs and expenses:






Operating costs

108,585



102,766



103,989


Depreciation

22,653



23,747



23,019


General and administrative

19,758



19,194



16,051


Bad debt expense (recovery), net

62



(52)



582


Impairment

1,046





1,815


Gain on dispositions of property and equipment, net

(1,075)



(335)



(199)


Total costs and expenses

151,029



145,320



145,257


Loss from operations

(4,461)



(842)



(3,752)








Other income (expense):






Interest expense, net of interest capitalized

(9,885)



(9,513)



(9,816)


Other income (expense), net

684



504



(308)


Total other expense, net

(9,201)



(9,009)



(10,124)








Loss before income taxes

(13,662)



(9,851)



(13,876)


Income tax expense

(1,453)



(1,288)



(611)


Net loss

$

(15,115)



$

(11,139)



$

(14,487)








Loss per common share:






Basic

$

(0.19)



$

(0.14)



$

(0.19)


Diluted

$

(0.19)



$

(0.14)



$

(0.19)








Weighted-average number of shares outstanding:






Basic

78,311



77,606



78,136


Diluted

78,311



77,606



78,136


 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)



March 31,
2019


December 31,
2018


(unaudited)


(audited)

ASSETS




Current assets:




Cash and cash equivalents

$

26,855



$

53,566


Restricted cash

998



998


Receivables, net of allowance for doubtful accounts

148,085



130,881


Inventory

20,229



18,898


Assets held for sale

4,794



3,582


Prepaid expenses and other current assets

7,307



7,109


Total current assets

208,268



215,034






Net property and equipment

517,767



524,858


Operating lease assets

9,423




Other noncurrent assets

1,633



1,658


Total assets

$

737,091



$

741,550






LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

38,163



$

34,134


Deferred revenues

1,659



1,722


Accrued expenses

64,754



68,912


Total current liabilities

104,576



104,768






Long-term debt, less unamortized discount and debt issuance costs

465,315



464,552


Noncurrent operating lease liabilities

6,929




Deferred income taxes

4,844



3,688


Other noncurrent liabilities

4,460



3,484


Total liabilities

586,124



576,492


Total shareholders' equity

150,967



165,058


Total liabilities and shareholders' equity

$

737,091



$

741,550


 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)



Three months ended


March 31,


2019


2018





Cash flows from operating activities:




Net loss

$

(15,115)



$

(11,139)


Adjustments to reconcile net loss to net cash provided by (used in) operating activities:




Depreciation

22,653



23,747


Allowance for doubtful accounts, net of recoveries

62



(52)


Gain on dispositions of property and equipment, net

(1,075)



(335)


Stock-based compensation expense

867



1,259


Phantom stock compensation expense

848



430


Amortization of debt issuance costs and discount

763



707


Impairment

1,046




Deferred income taxes

1,156



911


Change in other noncurrent assets

699



(463)


Change in other noncurrent liabilities

(20)



1,414


Changes in current assets and liabilities

(22,674)



(11,421)


Net cash provided by (used in) operating activities

(10,790)



5,058






Cash flows from investing activities:




Purchases of property and equipment

(16,844)



(11,657)


Proceeds from sale of property and equipment

1,043



1,283


Proceeds from insurance recoveries



523


Net cash used in investing activities

(15,801)



(9,851)






Cash flows from financing activities:




Debt issuance costs



(33)


Purchase of treasury stock

(120)



(96)


Net cash used in financing activities

(120)



(129)






Net decrease in cash, cash equivalents and restricted cash

(26,711)



(4,922)


Beginning cash, cash equivalents and restricted cash

54,564



75,648


Ending cash, cash equivalents and restricted cash

$

27,853



$

70,726


 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Operating Results by Segment

(in thousands)

(unaudited)



Three months ended


March 31,


December 31,


2019


2018


2018

Revenues:






Domestic drilling

$

38,009



$

35,926



$

37,530


International drilling

21,643



17,611



21,646


Drilling services

59,652



53,537



59,176


Well servicing

26,254



21,114



25,155


Wireline services

45,874



56,601



44,466


Coiled tubing services

14,788



13,226



12,708


Production services

86,916



90,941



82,329


Consolidated revenues

$

146,568



$

144,478



$

141,505








Operating costs:






Domestic drilling

$

22,469



$

20,898



$

22,613


International drilling

16,485



12,961



15,036


Drilling services

38,954



33,859



37,649


Well servicing

18,896



15,570



18,111


Wireline services

39,347



42,486



37,295


Coiled tubing services

11,388



10,851



10,934


Production services

69,631



68,907



66,340


Consolidated operating costs

$

108,585



$

102,766



$

103,989








Gross margin:






Domestic drilling

$

15,540



$

15,028



$

14,917


International drilling

5,158



4,650



6,610


Drilling services

20,698



19,678



21,527


Well servicing

7,358



5,544



7,044


Wireline services

6,527



14,115



7,171


Coiled tubing services

3,400



2,375



1,774


Production services

17,285



22,034



15,989


Consolidated gross margin

$

37,983



$

41,712



$

37,516








Consolidated:






Net loss

$

(15,115)



$

(11,139)



$

(14,487)


Adjusted EBITDA (1)

$

19,922



$

23,409



$

20,774



(1)    Adjusted EBITDA represents income (loss) before interest expense, income tax (expense) benefit, depreciation and amortization, impairment, and any loss on extinguishment of debt. Adjusted EBITDA is a non-GAAP measure that our management uses to facilitate period-to-period comparisons of our core operating performance and to evaluate our long-term financial performance against that of our peers. We believe that this measure is useful to investors and analysts in allowing for greater transparency of our core operating performance and makes it easier to compare our results with those of other companies within our industry. Adjusted EBITDA should not be considered (a) in isolation of, or as a substitute for, net income (loss), (b) as an indication of cash flows from operating activities or (c) as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. Adjusted EBITDA may not be comparable to other similarly titled measures reported by other companies.  A reconciliation of net loss as reported to adjusted EBITDA is included in the table on page 13.

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Operating Statistics

(unaudited)



Three months ended


March 31,


December 31,


2019


2018


2018







Domestic drilling:






Average number of drilling rigs

16



16



16


Utilization rate

97

%


100

%


99

%

Revenue days

1,420



1,440



1,455








Average revenues per day

$

26,767



$

24,949



$

25,794


Average operating costs per day

15,823



14,513



15,542


Average margin per day

$

10,944



$

10,436



$

10,252








International drilling:






Average number of drilling rigs

8



8



8


Utilization rate

81

%


76

%


71

%

Revenue days

580



550



525








Average revenues per day

$

37,316



$

32,020



$

41,230


Average operating costs per day

28,422



23,565



28,640


Average margin per day

$

8,894



$

8,455



$

12,590








Drilling services business:






Average number of drilling rigs

24



24



24


Utilization rate

92

%


92

%


90

%

Revenue days

2,000



1,990



1,980








Average revenues per day

$

29,826



$

26,903



$

29,887


Average operating costs per day

19,477



17,015



19,015


Average margin per day

$

10,349



$

9,888



$

10,872








Well servicing:






Average number of rigs

125



125



125


Utilization rate

54

%


47

%


50

%

Rig hours

47,064



40,774



44,051


Average revenue per hour

$

558



$

518



$

571








Wireline services:






Average number of units

105



110



105


Number of jobs

2,342



2,830



2,407


Average revenue per job

$

19,588



$

20,000



$

18,474








Coiled tubing services:






Average number of units

9



14



8


Revenue days

351



414



346


Average revenue per day

$

42,131



$

31,947



$

36,728


 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Reconciliation of Net Loss to Adjusted EBITDA

and Consolidated Gross Margin

(in thousands)

(unaudited)



Three months ended


March 31,


December 31,


2019


2018


2018







Net loss as reported

$

(15,115)



$

(11,139)



$

(14,487)








Depreciation and amortization

22,653



23,747



23,019


Impairment

1,046





1,815


Interest expense

9,885



9,513



9,816


Income tax expense

1,453



1,288



611


Adjusted EBITDA(1)

19,922



23,409



20,774








General and administrative

19,758



19,194



16,051


Bad debt expense (recovery), net

62



(52)



582


Gain on dispositions of property and equipment, net

(1,075)



(335)



(199)


Other expense (income)

(684)



(504)



308


Consolidated gross margin

$

37,983



$

41,712



$

37,516


 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Reconciliation of Net Income (Loss) as Reported to Adjusted Net Income (Loss)

and Diluted EPS as Reported to Adjusted (Diluted) EPS

(in thousands, except per share data)

(unaudited)



Three months ended


March 31,


December 31,


2019


2018


2018







Net loss as reported

$

(15,115)



$

(11,139)



$

(14,487)


Impairment

1,046





1,815


Tax benefit related to adjustments

(242)





(426)


Valuation allowance adjustments on deferred tax assets

3,846



4,190



(2,236)


 Effect of change in tax rates





1,692


Adjusted net loss(2)

$

(10,465)



$

(6,949)



$

(13,642)








Basic weighted average number of shares outstanding, as reported

78,311



77,606



78,136


Effect of dilutive securities






Diluted weighted average number of shares outstanding, as adjusted

78,311



77,606



78,136








Adjusted (diluted) EPS(3)

$

(0.13)



$

(0.09)



$

(0.17)








Diluted EPS as reported

$

(0.19)



$

(0.14)



$

(0.19)



(2)    Adjusted net loss represents net loss as reported adjusted to exclude impairments and the related tax benefit and valuation allowance adjustments on deferred tax assets. We believe that adjusted net loss is a useful measure to facilitate period-to-period comparisons of our core operating performance and to evaluate our long-term financial performance against that of our peers, although it is not a measure of financial performance under GAAP. Adjusted net loss may not be comparable to other similarly titled measures reported by other companies. A reconciliation of net loss as reported to adjusted net loss is included in the table above.


(3)    Adjusted (diluted) EPS represents adjusted net loss divided by the weighted-average number of shares outstanding during the period, including the effect of dilutive securities, if any. We believe that adjusted (diluted) EPS is a useful measure to facilitate period-to-period comparisons of our core operating performance and to evaluate our long-term financial performance against that of our peers, although it is not a measure of financial performance under GAAP. Adjusted (diluted) EPS may not be comparable to other similarly titled measures reported by other companies. A reconciliation of diluted EPS as reported to adjusted (diluted) EPS is included in the table above.

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Equipment Information

As of May 2, 2019



Multi-well, Pad-capable

Drilling Services Business Segments:

AC rigs


SCR rigs


Total

Domestic drilling

17





17


International drilling



8



8







25








Production Services Business Segments:

550 HP


600 HP


Total

Well servicing rigs, by horsepower (HP) rating

113



12



125













Total

Wireline services units


95


Coiled tubing services units


9


 

SOURCE Pioneer Energy Services


Email Alerts/RSS Feeds