Pioneer Drilling Reports Third Quarter 2008 Results
Nov 6, 2008
SAN ANTONIO, Nov. 6 /PRNewswire-FirstCall/ -- Pioneer Drilling Company, Inc. (AMEX:PDC) today reported financial and operating results for the three and nine months ended September 30, 2008. As previously announced, the Company has transitioned to a December 31 fiscal year end; accordingly, the three month period ended September 30 is reported as the third quarter of 2008.
Net income for the third quarter was $24.2 million, or $0.48 per diluted share, compared with $19.1 million, or $0.38 per diluted share, for the three months ended June 30, 2008 ("the prior quarter"), and $11.8 million, or $0.23 per diluted share, for the three months ended September 30, 2007 ("the year-earlier quarter"). The third quarter of 2008 included operating results from our Production Services Division, which was formed on March 1, 2008, and the contributions from our Colombian operations, which commenced in the third quarter of 2007.
Net income in the third quarter was impacted by a charge to selling, general and administrative expenses of approximately $2.7 million, or $0.03 per diluted share, related to the Company's investigation of internal control over financial reporting completed earlier this year and payments to our former Chief Financial Officer under the Company's Key Executive Severance Plan.
Revenues for the third quarter were $174.2 million, compared with $152.5 million for the prior quarter and $106.5 million for the year-earlier quarter. EBITDA(1) for the third quarter increased 21% to $64.7 million from the prior quarter and 94% from the year-earlier quarter.
Net income for the nine months ended September 30, 2008 was $55.2 million, or $1.09 per diluted share, compared with $42.1 million, or $0.84 per diluted share, for the nine months ended September 30, 2007. Revenues for the first nine months of 2008 were $440.2 million, compared with $312.6 million for the comparable period in 2007. EBITDA for the first nine months of 2008 increased 41% to $154.3 million from the comparable period in 2007 of $109.4 million.
"Both our Drilling Services Division and our Production Services Division performed well in the third quarter," said Wm. Stacy Locke, President and CEO of Pioneer Drilling. "Revenues for the Drilling Services Division increased 14% from the prior quarter to $124.3 million due to an increase in rig utilization to 96%, compared to 90% in the prior quarter, and higher average revenues per day. More impressive was the 20% increase in Drilling Services margin(2) to $54.0 million in the third quarter, compared to $45.0 million in the prior quarter. Higher average revenues per day, combined with slightly lower costs per day, generated a per-day drilling services margin of $8,967 in the third quarter, an increase of over 9% when compared to the prior quarter.
"Colombian operations also performed very well in the third quarter," added Mr. Locke. "In August 2008, we began daywork operations with our fourth rig, a 1000 horsepower diesel electric rig. Each rig in Colombia has operated at 100% utilization and generated drilling margins in excess of comparable rigs operating in the U.S. Currently, we are rigging up on location with the fifth rig, a 1500 horsepower SCR rig, and we anticipate a mid-November spud date.
"Revenues for the Production Services Division increased 15% to $49.9 million in the third quarter, compared to $43.3 million in the prior quarter of 2008. The Company did not own this division in 2007. Production Services margins(2) increased 17% to $24.9 million, compared to $21.4 million in the prior quarter. As a percentage of revenues, the Production Services Division generated an impressive 50% margin in the third quarter, compared to a 49% margin in the second quarter.
"As we enter a potentially challenging period in our industry, our conservative approach to managing our balance sheet has prepared us well to remain financially strong," Mr. Locke continued. "Our equipment is modern and well maintained and will be highly competitive in a soft market. While we have debt, our balance sheet is strong, with $60.4 million in working capital at September 30. Even in a down cycle, we anticipate that our strong cash flow will allow us to further reduce our debt during 2009."
Pioneer 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 303-262-2055 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 November 13. To access the replay, dial (303) 590-3000 and enter the pass code 11121169#.
The conference call will also be available on the Internet at Pioneer's Web site at http://www.pioneerdrlg.com/. To listen to the live call, visit Pioneer's Web site at least 10 minutes early to register and download any necessary audio software. An archive will be available shortly after the 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 land contract drilling services to independent and major oil and gas operators in Texas, Louisiana, Oklahoma, Kansas, the Rocky Mountain region 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 and Rocky Mountain regions through its Pioneer Production Services Division. Its fleet consists of 69 land drilling rigs that drill at depths of 6,000 and 18,000 feet, 70 workover rigs (sixty-five 550 horsepower rigs, four 600 horsepower rigs and one 400 horsepower rig), 55 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 and Paltec, 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 transition report on Form 10-KT for the fiscal year ended December 31, 2007 and our quarterly reports on Form 10-Q for the quarters ended March 31, 2008 and September 30, 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, in our annual report on Form 10-K or in our quarterly reports on Form 10-Q 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 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 below.
(1) We define EBITDA as earnings before interest income (expense), taxes, depreciation and amortization. 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 income to EBITDA is included in the operating statistic table in 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 is included in the operating statistics table in 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.
Contacts: William Hibbetts, Interim CFO
Pioneer Drilling Company
(210) 828-7689
Lisa Elliott / lelliott@drg-e.com
Anne Pearson / apearson@drg-e.com
DRG&E / 713-529-6600
- Financial Statements Follow -
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months ended Nine months ended
September 30, June 30, September 30,
2008 2007 2008 2008 2007
Revenues $174,245 $106,516 $152,547 $440,189 $312,642
Costs and Expenses:
Operating Costs 95,367 65,237 86,193 251,986 186,822
Depreciation and
amortization 24,225 16,093 20,580 61,924 46,927
Selling, general and
administrative 12,840 5,252 12,150 32,712 13,792
Bad debt expense
(recovery) (260) 2,627 (92) (216) 2,627
Total operating
costs 132,172 89,209 118,831 346,406 250,168
Operating income 42,073 17,307 33,716 93,783 62,474
Other income (expense):
Interest expense (3,773) (14) (4,265) (9,612) (15)
Interest income 205 731 205 995 2,474
Other (1,551) 11 (930) (1,389) 39
Total other income
(expense) (5,119) 728 (4,990) (10,006) 2,498
Income before income
taxes 36,954 18,035 28,726 83,777 64,972
Income tax expense (12,760) (6,255) (9,609) (28,619) (22,886)
Net earnings $24,194 $11,780 $19,117 $55,158 $42,086
Earnings per common
share:
Basic $0.49 $0.24 $0.38 $1.11 $0.85
Diluted $0.48 $0.23 $0.38 $1.09 $0.84
Weighted average number
of shares
outstanding:
Basic 49,791 49,651 49,789 49,780 49,635
Diluted 50,449 50,205 50,483 50,426 50,193
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
September 30, 2008 December 31, 2007
Assets (unaudited) (audited)
Current assets:
Cash and cash equivalents $17,342 $76,703
Receivables, net 87,436 47,370
Unbilled receivables 18,676 7,861
Deferred income taxes 7,013 3,670
Inventory 4,448 1,180
Prepaid expenses and other current
assets 8,775 5,073
Total current assets 143,690 141,857
Net property and equipment 603,107 417,022
Deferred income taxes - 573
Goodwill 106,264 -
Other long-term assets 107,015 760
Total assets $960,076 $560,212
Liabilities and Equity
Current liabilities:
Accounts payable $30,906 $21,424
Current portion of long-term debt 4,452 -
Income taxes payable 4,698 -
Prepaid drilling contracts 3,447 1,933
Accrued expenses 39,777 18,693
Total current liabilities 83,280 42,050
Long-term debt, less current portion 278,199 -
Other long term liabilities 5,418 254
Deferred taxes 62,898 46,836
Total liabilities 429,795 89,140
Total shareholders' equity 530,281 471,072
Total liabilities and shareholders'
equity $960,076 $560,212
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine months ended
September 30,
2008 2007
Cash flows from operating
activities:
Net earnings $55,158 $42,086
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation and amortization 61,924 46,927
Allowance for doubtful accounts 270 2,627
Loss (gain) on dispositions of
property and equipment (512) 2,501
Stock-based compensation
expense 2,924 2,714
Deferred income taxes 10,700 10,454
Change in other assets 355 5
Change in non-current
liabilities (329) (74)
Changes in current assets and
liabilities (4,735) 8,043
Net cash provided by operating
activities 125,755 115,283
Cash flows from investing
activities:
Acquisition of WEDGE, net of
cash acquired (313,606) -
Acquisition of Competition
Wireline, net of cash acquired (26,770) -
Acquisition of Competition
Paltec (6,520) -
Purchases of property and
equipment (99,794) (126,994)
Proceeds from insurance
recoveries 2,638 -
Purchase of auction rate
securities, net (16,475) -
Proceeds from sale of property
and equipment 2,712 2,970
Net cash used in investing
activities (457,815) (124,024)
Cash flows from financing
activities:
Payments of debt (44,404) -
Proceeds from issuance of debt 319,500 -
Debt issuance costs (3,319) -
Proceeds from sale of common
stock 672 217
Excess tax benefit of stock
option exercises 250 73
Net cash provided by financing
activities 272,699 290
Net decrease in cash and cash
equivalents (59,361) (8,451)
Beginning cash and cash equivalents 76,703 74,754
Ending cash and cash equivalents $17,342 $66,303
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(in thousands)
(unaudited)
Three months ended Nine months ended
September 30, June 30, September 30,
2008 2007 2008 2008 2007
Drilling Services
Division:
Revenues $124,297 $106,516 $109,250 $333,587 $312,642
Operating costs 70,342 65,237 64,277 198,115 186,822
Drilling services
margin (1) $53,955 $41,279 $44,973 $135,472 $125,820
Average number of
drilling rigs 68.0 67.3 67.0 67.0 65.7
Utilization rate 96% 90% 90% 90% 90%
Revenue days 6,017 5,559 5,475 16,528 16,149
Average revenues per
day $20,658 $19,161 $19,954 $20,183 $19,360
Average operating
costs per day 11,691 11,735 11,740 11,987 11,569
Drilling services
margin per day
(2) $8,967 $7,426 $8,214 $8,196 $7,791
Production Services
Division:
Revenues $49,948 $- $43,297 $106,602 $-
Operating costs 25,025 - 21,916 53,871 -
Production
services margin
(1) $24,923 $- $21,381 $52,731 $-
EBITDA (3) $64,747 $33,411 $53,366 $154,318 $109,440
Reconciliation of
combined Drilling
services margin and
Production
services margin and
EBITDA to net earnings:
Drilling services
margin $53,955 $41,279 $44,973 $135,472 $125,820
Production services
margin 24,923 - 21,381 52,731 -
Combined margin 78,878 41,279 66,354 188,203 125,820
General and
administrative (12,840) (5,252) (12,150) (32,712) (13,792)
Bad debt (expense)
recovery 260 (2,627) 92 216 (2,627)
Other income
(expense) (1,551) 11 (930) (1,389) 39
EBITDA 64,747 33,411 53,366 154,318 109,440
Depreciation and
amortization (24,225) (16,093) (20,580) (61,924) (46,927)
Interest income
(expense), net (3,568) 717 (4,060) (8,617) 2,459
Income tax expense (12,760) (6,255) (9,609) (28,619) (22,886)
Net earnings $24,194 $11,780 $19,117 $55,158 $42,086
(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 GAAP. 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 is included in
the operating statistics table. Drilling services margin and
production services margin as presented may not be comparable to
other similarity 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 before interest income (expense), taxes,
depreciation and amortization. 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 income to EBITDA is included in the operating statistics
table. 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.
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Capital Expenditures
(in thousands)
Three months ended
September 30, June 30,
2008 2007 2008
Capital expenditures:
Drilling Services Division:
Routine rigs $3,736 $5,585 $3,814
Discretionary 15,211 17,311 13,704
Tubulars - 6,621 3
New-builds and acquisitions 11,531 20,941 1,087
Total Drilling Services Division
capital expenditures 30,478 50,458 18,608
Average routine rig capital
expenditures per revenue day (1) $621 $1,005 $697
Production Services Division:
Routine 2,460 - 835
Discretionary 819 - -
New-builds and acquisitions 13,614 - 6,008
Total Production Services
Division capital expenditures 16,893 - 6,843
Total capital expenditures $47,371 $50,458 $25,451
Approved
Budget
Fiscal
Year
Nine months ended Ending
September 30, December 31,
2008 2007 2008
Capital expenditures:
Drilling Services Division:
Routine rigs $11,557 $15,183 $21,590
Discretionary 47,929 39,055 50,150
Tubulars 1,050 12,067 12,600
New-builds and acquisitions 13,365 66,086 43,500
Total Drilling Services Division
capital expenditures 73,901 132,391 127,840
Average routine rig capital
expenditures per revenue day (1) $699 $940 $976
Production Services Division:
Routine 3,403 - 2,330
Discretionary 1,029 4,500
New-builds and acquisitions 22,443 - 39,500
Total Production Services
Division capital expenditures 26,875 - 46,330
Total capital expenditures $100,776 $132,391 $174,170
(1) Average routine rig capital expenditures per revenue day represents
the Drilling Services Division's routine rig capital expenditures
divided by the number of revenue days for each period presented.
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Drilling Rig, Workover Rig and Wireline Unit Information
Rig Type
Mechanical Electric Total Rigs
Drilling Services Division:
Drilling rig horsepower ratings:
550 to 700 HP 6 - 6
750 to 900 HP 15 2 17
1000 HP 17 12 29
1200 to 1500 HP 3 14 17
Total 41 28 69
Drilling depth ratings:
Less than 10,000 feet 8 2 10
10,000 to 13,900 feet 30 7 37
14,000 to 18,000 feet 3 19 22
Total 41 28 69
Production Services Division:
Workover rig horsepower ratings:
400 HP 1
550 HP 65
600 HP 4
Total 70
Wireline units 55
Fishing & Rental Tools Inventory $15 Million
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