SAN ANTONIO, Texas, August 6, 2009 – Pioneer Drilling Company, Inc. (NYSE Amex : PDC) today Net loss for the second quarter was $6.3 million, or $0.13 per share, compared with net income of $618,000, or $0.01 per diluted share for the three months ended March 31, 2009 (“the prior quarter”). Net income for the three months ended June 30, 2008 (“the year-earlier quarter”) was $19.1 million, or $0.38 per diluted share.

 

Revenues for the second quarter were $69.1 million, compared with $100.8 million for the prior quarter and $152.5 million for the year-earlier quarter. EBITDA $17.9 million, compared to $27.8 million for the prior quarter and $53.4 million for the year-earlier quarter.

 

First Six Months of 2009 Results

Net loss for the six months ended June 30, 2009 was $5.6 million, or $0.11 per share, compared with net income of $31.0 million, or $0.61 per diluted share for the six months ended June 30, 2008. Revenues for the first six months of 2009 were $170.0 million, compared with $265.9 million for the prior year’s first six months. EBITDA for the first six months of 2009 was $45.7 million, compared to $89.6 million for the comparable period in 2008.

 

Operating Results

Revenues for the Drilling Services Division were $45.7 million for the second quarter, a 36% decline from the prior quarter. During the second quarter, the utilization rate for our drilling rigs averaged 35%, down from 52% in the prior quarter and 90% in the year-earlier quarter. With the lower utilization rate, the number of revenue days dropped to 2,238, a 32% decline from the prior quarter. The Drilling Services margin quarter as compared to the prior quarter.

 

Revenues for the Production Services Division declined 21% to $23.4 million for the second quarter, compared to $29.5 million in the prior quarter. Production Services margin to $8.5 million, compared to $10.8 million in the prior quarter. Margin as a percentage of revenue remained steady from the prior quarter at 36%. Currently, 60 of Pioneer’s 74 workover rigs have (2) per day decreased $541, or 7%, to $7,723 in the second(2) decreased 21%  crews assigned and are operating or being actively marketed, while the remaining 14 workover rigs are idle with no crews assigned.

 

“As we anticipated, U.S. land rig counts and production services activity may have bottomed at the end of the second quarter, and while the market seems to be stabilizing, there are limited signs of improvement,” said Wm. Stacy Locke, President and CEO of Pioneer Drilling. “Certain regions of the country are showing signs of increasing activity, in part due to improving oil prices, but we believe improvement this year will be gradual and modest.

 

“During the second quarter, we established an Appalachian drilling division to focus on operations in the Marcellus Shale. We currently have one drilling rig operating in our Appalachian division, with a second rig expected to begin operating by late August 2009. In addition, we launched wireline operations in the Marcellus Shale play.

 

“Currently, we have 26 of our 71 drilling rigs, or 37%, earning revenue under drilling contracts,” continued Mr. Locke. “Four of these drilling rigs are earning revenue through early contract termination fees while the rigs are stacked. In Colombia, all five of our drilling rigs are under contract.

 

“We continue to focus on reducing costs where possible. Our selling, general and administrative expenses were reduced 11% to $9 million in the second quarter, and operating costs were reduced in conjunction with declining revenues in both our Drilling Services and Production Services divisions. These reductions enabled us to hold margin percentages steady when compared to the prior quarter. Also, we are closely monitoring liquidity and will continue to focus our capital expenditures primarily on routine expenditures that are required to maintain safe and efficient operations and discretionary expenditures that may be required to obtain new contracts,” Locke said.

 

Pioneer’s working capital was $70.0 million at June 30, 2009, up from $67.3 million at March 31, and our cash and cash equivalents were $43.7 million at the end of the second quarter, up $13.7 million from the prior quarter. For the year, cash and cash equivalents increased $16.9 million, primarily due to cash provided by operations of $80.7 million, offset by $47.7 million of property and equipment expenditures and $16.4 million of debt payments. We have $131.0 million of borrowing availability on our senior secured revolving credit facility, with $257.5 million due at maturity in February 2013.

 

Conference Call

Pioneer’s 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 in the call, dial 480-629-9645 at least 10 minutes early and ask for the Pioneer Drilling conference call. A replay will be available approximately two hours after the call ends and will be accessible until August 13. To access the replay, dial (303) 590-3030 and enter the pass code 4106201#. The conference call will also be available on the Internet at Pioneer’s Web site at www.pioneerdrlg.com register and download any necessary audio software. An archive will be available shortly after the . To listen to the live call, visit Pioneer’s Web site at least 10 minutes early to  call. For more information, please contact Donna Washburn at DRG &E at (713) 529-6600 or e-mail dmw@drg-e.com.

 

About Pioneer

Pioneer Drilling Company provides contract land drilling services to independent and major oil and and internationally in Colombia through its Pioneer Drilling Services Division. The Company also provides workover rig, wireline and fishing and rental services to producers in the U.S. Gulf Coast, Mid-Continent, Rocky Mountain and Appalachian regions through its Pioneer Production Services Division. Its fleet consists of 71 land drilling rigs that drill at depths ranging from 6,000 to 25,000 feet, 74 workover rigs (sixty-nine 550 horsepower rigs, four 600 horsepower rigs and one 400 horsepower rig), 61 wireline units, and fishing and rental tools.

 

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 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 this news release as a result of a variety of factors, including general economic and business conditions and industry trends, risks associated with the current global economic crisis and its impact on capital markets and liquidity, the continued strength or weakness of the oil and gas production industry in the geographic areas in which we operate including the price of oil and natural gas in general, and the recent precipitous decline in prices in particular, and the impact of commodity prices and other factors upon future decisions about onshore exploration and development projects to be made by oil and gas companies and their ability to obtain necessary financing, the highly competitive nature of our business, difficulty in integrating the services of acquired companies, including the production services businesses of WEDGE, Competition, Paltec and Pettus in an efficient and effective manner, the availability, terms and deployment of capital, the availability of qualified personnel, changes in, or our failure or inability to comply with, government regulations, including those relating to the environment, the economic and business conditions of our international operations, challenges in achieving strategic objectives, and the risk that our markets do not evolve as anticipated.

 

We have discussed many of these factors in more detail in our annual report on Form 10-K for the year ended December 31, 2008. These factors are not necessarily all the important factors that could affect us. Unpredictable or unknown factors we have not discussed in this news release, or in our annual report on Form 10-K could also have material adverse effects on actual results of matters that are the subject of our forwardlooking statements. All forward-looking statements speak only as the date on which they are made and we undertake no duty to update or revise any forward-looking statements. We advise our shareholders that they should (1) be aware 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 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) We define EBITDA as earnings (loss) before interest income (expense), taxes, depreciation, amortization and impairments. Although not prescribed under GAAP, we believe the presentation of EBITDA is relevant and useful because it helps our investors understand our operating performance and makes it easier to compare our results with those of other companies that have different financing, capital or tax structures. EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity.

 

A reconciliation of net earnings (loss) to EBITDA is included in the tables to this press release. EBITDA, as we calculate it, may not be comparable to EBITDA measures reported by other companies. In addition, EBITDA does not represent funds available for discretionary use.

 

(2) Drilling Services margin represents contract drilling revenues less contract drilling operating costs. Production Services margin represents production services revenues less production services operating costs. We believe that Drilling Services margin and Production Services margin are useful measures for evaluating financial performance, although they are not measures of financial performance under GAAP. However, Drilling Services margin and Production Services margin are common measures of operating performance used by investors, financial analysts, rating agencies and Pioneer management. A reconciliation of Drilling Services margin and Production Services margin to net earnings (loss) is included in the tables to this press release. Drilling Services margin and Production Services margin as presented may not be comparable to other similarly titled measures reported by other companies.

 

March 31,

2009 2008 2009 2009 2008

 

Revenues:

Drilling services $ 45,720 $ 109,250 $ 71,366 $ 117,086 209,291

Production services 23,400 43,297 29,474 52,874 56,653

Total revenue 69,120 152,547 100,840 169,960 265,944

 

Costs and Expenses:

Drilling services 28,437 64,277 44,128 72,565 127,774

Production services 14,906 21,916 18,716 33,622 28,845

Depreciation and amortization 26,069 20,580 25,446 51,515 37,699

Selling, general and administrative 8,951 12,150 10,027 18,978 19,872

Bad debt (recovery) expense 30 (92) (334) (304) 43

Total costs and expenses 78,393 118,831 97,983 176,376 214,233

Income (loss) from operations (9,273) 33,716 2,857 (6,416) 51,711

 

Other (expense) income:

Interest expense (1,728) (4,265) (1,988) (3,716) (5,839)

Interest income 55 205 84 139 790

Other 1,140 (930) (515) 625 162

Total other (expense) income (533) (4,990) (2,419) (2,952) (4,887)

Income (loss) before income taxes (9,806) 28,726 438 (9,368) 46,824

Income tax benefit (expense) 3,547 (9,609) 180 3,727 (15,859)

Net earnings (loss) $ (6,259) $ 19,117 $ 618 $ (5,641) $ 30,965

 

Earnings (loss) per common share:

Basic $ (0.13) $ 0.38 $ 0.01 $ (0.11) $ 0.62

Diluted $ (0.13) $ 0.38 $ 0.01 $ (0.11) $ 0.61

 

Weighted average number of shares outstanding:

Basic 49,826 49,789 49,824 49,825 49,774

Diluted 49,826 50,483 49,929 49,825 50,369

 

Six months ended

June 30,

PIONEER DRILLING COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

June 30,

Three months ended

 

June 30, 2009 December 31, 2008

 

ASSETS (unaudited) (audited)

 

Current assets:

Cash and cash equivalents $ 43,700 $ 26,821

Receivables, net of allowance for doubtful accounts 73,071 99,423

Deferred income taxes 4,919 6,270

Inventory 4,649 3,874

Prepaid expenses and other current assets 4,194 8,902

Total current assets 130,533 145,290

Net property and equipment 623,975 627,562

Intangible assets, net of amortization 27,696 29,969

Other long-term assets 19,401 21,658

Total assets $ 801,605 $ 824,479

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

Current liabilities:

Accounts payable $ 12,215 $ 21,830

Current portion of long-term debt 2,081 17,298

Prepaid drilling contracts - 1,171

Accrued expenses 46,191 40,619

Total current liabilities 60,487 80,918

Long-term debt, less current portion 260,914 262,115

Other long term liabilities 6,135 6,413

Deferred taxes 62,507 60,915

Total liabilities 390,043 410,361

Total shareholders' equity 411,562 414,118

Total liabilities and shareholders' equity $ 801,605 $ 824,479

 

PIONEER DRILLING COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (in thousands)

2009 2008

 

Cash flows from operating activities:

Net earnings (loss) $ (5,641) $ 30,965

 

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

Depreciation and amortization 51,515 37,699

Allowance for doubtful accounts 96 320

(Gain) loss on dispositions of property and equipment 91 (377)

Stock-based compensation expense 3,889 1,848

Deferred income taxes 3,450 2,919

Change in other assets 907 256

Change in non-current liabilities (991) (168)

Changes in current assets and liabilities 27,397 1,964

Net cash provided by operating activities 80,713 75,426

 

Cash flows from investing activities:

Acquisition of WEDGE - (313,610)

Acquisition of Competition Wireline - (26,101)

Purchases of property and equipment (47,677) (58,936)

Purchase of auction rate securities - (16,475)

Proceeds from sale of property and equipment 261 1,851

Proceeds from insurance recoveries 36 2,301

Net cash used in investing activities (47,380) (410,970)

Cash flows from financing activities:

Debt repayments (16,418) (32,170)

Proceeds from issuance of debt - 311,500

Debt issuance costs - (3,323)

Proceeds from sale of common stock - 653

Excess tax benefit (reductions) for stock option exercises (36) 250

Net cash used in by financing activities (16,454) 276,910

Net increase (decrease) in cash and cash equivalents 16,879 (58,634)

Beginning cash and cash equivalents 26,821 76,703

Ending cash and cash equivalents $ 43,700 $ 18,069

 

PIONEER DRILLING COMPANY AND SUBSIDIARIES

June 30,

Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)

Six months ended

March 31,

2009 2008 2009 2009 2008

 

Drilling Services Division:

Revenues $ 45,720 $ 109,250 $ 71,366 $ 117,086 $ 209,291

Operating costs 28,437 64,277 44,128 72,565 127,774

Drilling services margin (1) $ 17,283 $ 44,973 $ 27,238 $ 44,521 $ 81,517

Average number of drilling rigs 70.7 66.7 70.0 70.3 66.6

Utilization rate 35% 90% 52% 44% 87%

Revenue days 2,238 5,475 3,296 5,534 10,511

Average revenues per day $ 20,429 $ 19,954 $ 21,652 $ 21,158 $ 19,912

Average operating costs per day 12,706 11,740 13,388 13,113 12,156

Drilling services margin per day (2) $ 7,723 $ 8,214 $ 8,264 $ 8,045 $ 7,756

 

Production Services Division:

Revenues $ 23,400 $ 43,297 $ 29,474 $ 52,874 $ 56,653

Operating costs 14,906 21,916 18,716 33,622 28,845

Production services margin (1) $ 8,494 $ 21,381 $ 10,758 $ 19,252 $ 27,808

 

Combined:

Revenues $ 69,120 $ 152,547 $ 100,840 $ 169,960 $ 265,944

Operating Costs 43,343 86,193 62,844 106,187 156,619

Combined margin $ 25,777 $ 66,354 $ 37,996 $ 63,773 $ 109,325

EBITDA (3) $ 17,936 $ 53,366 $ 27,788 $ 45,724 $ 89,572

 

PIONEER DRILLING COMPANY AND SUBSIDIARIES

Operating Statistics (in thousands) (unaudited)

Six months ended

June 30, June 30,

Three months ended

 

(1) Drilling services margin represents contract drilling revenues less contract drilling operating costs. Production services margin represents production services revenue less production services operating costs. Pioneer believes that Drilling services margin and Production services margin are useful measures for evaluating financial performance, although they are not measures of financial performance under generally accepted accounting principles. However, Drilling services margin and Production services margin are common measures of operating performance used by investors, financial analysts, rating agencies and Pioneer’s management. A reconciliation of Drilling services margin and Production services margin to net earnings (loss) is included in the table below. Drilling services margin and production services margin as presented may not be comparable to other similarly titled measures reported by other companies.

 

(2) Drilling services margin per revenue day represents the Drilling Services Division’s average revenue per revenue day less average operating costs per revenue day.

 

(3) We define EBITDA as earnings (loss) before interest income (expense), taxes, depreciation, amortization and impairments. Although not prescribed under GAAP, we believe the presentation of EBITDA is relevant and useful because it helps our investors understand our operating performance and makes it easier to compare our results with those of other companies that have different financing, capital or tax structures.

 

EBITDA should not be considered in isolation from or as a substitute for net earnings (loss) as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. A reconciliation of net earnings (loss) to EBITDA is included in the table below. EBITDA, as we calculate it, may not be comparable to EBITDA measures reported by other companies. In addition, EBITDA does not represent funds available for discretionary use.

 

March 31,

2009 2008 2009 2009 2008

 

Combined margin $ 25,777 $ 66,354 $ 37,996 $ 63,773 $ 109,325

General and administrative (8,951) (12,150) (10,027) (18,978) (19,872)

Bad debt expense (recoveries) (30) 92 334 304 (43)

Other income (expense) 1,140 (930) (515) 625 162

EBITDA 17,936 53,366 27,788 45,724 89,572

Depreciation and amortization (26,069) (20,580) (25,446) (51,515) (37,699)

Interest income (expense), net (1,673) (4,060) (1,904) (3,577) (5,049)

Income tax expense 3,547 (9,609) 180 3,727 (15,859)

Net earnings (loss) $ (6,259) $ 19,117 $ 618 $ (5,641) $ 30,965

 

June 30, June 30,

PIONEER DRILLING COMPANY AND SUBSIDIARIES

Reconciliation of Combined Drilling Services Margin and Production

Services Margin and EBITDA to Net Earnings (Loss)

Three months ended Six months ended (in thousands) (unaudited)

Budget Year Ending

March 31, December 31,

2009 2008 2009 2009 2008 2009

 

Capital expenditures:

 

Drilling Services Division:

Routine rigs $ 1,788 $ 3,814 $ 3,896 $ 5,684 $ 7,821 $ 13,100

Discretionary 5,455 13,704 6,063 11,518 32,718 32,100

Tubulars 1,102 3 868 1,970 1,050 5,000

New-builds and acquisitions - 1,087 - - 1,833 -

Total Drilling Services Division capital expenditures 8,345 18,608 10,827 19,172 43,422 50,200

 

Production Services Division:

Routine 1,023 835 1,713 2,736 943 5,800

Discretionary 90 - 81 171 - 2,200

New-builds and acquisitions 246 6,008 4,479 4,725 9,039 7,000

Total Production Services Division capital expenditures 1,359 6,843 6,273 7,632 9,982 15,000

Actual and budgeted capital expenditures 9,704 25,451 17,100 26,804 53,404 65,200

Budgeted capital expenditures approved in 2008 that will be incurred in 2009 8,778 - 9,638 18,416 - 19,310

$ 18,482 $ 25,451 $ 26,738 $ 45,220 $ 53,404 $ 84,510

 

June 30,

Three months ended

PIONEER DRILLING COMPANY AND SUBSIDIARIES

Capital Expenditures (in thousands)

June 30,

Six months ended (unaudited)

 

Mechanical Electric Total Rigs

 

Drilling Services Division:

 

Drilling rig horsepower ratings:

550 to 700 HP 6 - 6

750 to 900 HP 1 4 2 16

1000 HP 1 8 12 30

1200 to 2000 HP 3 16 19

Total 4 1 30 71

 

Drilling rig depth ratings:

Less than 10,000 feet 8 2 10

10,000 to 13,900 feet 3 0 7 37

14,000 to 25,000 feet 3 21 24

Total 4 1 30 71

 

Production Services Division:

 

Workover rig horsepower ratings:

400 HP 1

550 HP 69

600 HP 4

Total 74

Wireline units 61

Fishing & Rental Tools Inventory $15 Million

Drilling Rig, Workover Rig and Wireline Unit Information