Pioneer Reports for Its Third Quarter and Nine Month Reporting Year Ended December 31, 2007

Feb 27, 2008

February 27, 2008 – SAN ANTONIO, TEXAS – Pioneer Drilling Company, Inc. (“Pioneer” or the “Company”) (AMEX-PDC) reported financial results for the quarter and nine months ended December 31, 2007. As previously announced, the Company changed its fiscal year end from March 31 to December 31, resulting in a nine month reporting year from April 1, 2007 to December 31, 2007.

Net income for the three months ended December 31, 2007 (the “Third Quarter”) was $14.8 million, or $0.29 per diluted share, compared with net income of $11.8 million, or $0.23 per diluted share, for the three months ended September 30, 2007 (the “Second Quarter”) and net income of $24.0 million, or $0.48 per diluted share, for the three months ended December 31, 2006. Net income for the nine months ended December 31, 2007 was $39.6 million, or $0.79 per diluted share, compared to net income of $67.0 million, or $1.34 per diluted share, for the nine months ended December 31, 2006. The Third Quarter net income was impacted by a $0.04 per diluted share income tax benefit related to the completion of our federal income tax audit, certain tax benefits recognized for our investment in Colombia and a lower statutory tax rate for Colombian earnings as compared to the U.S. statutory tax rate.

Revenues for the Third Quarter were $104.6 million compared with $106.5 million for the Second Quarter and $112.4 million for the third quarter of 2006. The Third Quarter benefited from the increase in revenue generated by the start-up of operations in Colombia which was offset by the decrease in U.S. revenues of $9.3 million for the quarter over sequential quarter and $16.9 million for the quarter over the same quarter last year. For the nine months ended December 31, 2007, revenue increased $1.1 million to $313.9 million from $312.8 million for the comparable nine months in 2006 due to the advent of Colombian operations, the addition of an average of 7 rigs which were offset by an 8% decline in rig utilization rates and a decrease in average revenues of $621 per day.

Contract drilling costs for the Third Quarter were down $1.5 million over the Second Quarter primarily due to the decline in utilization rates offset by higher than normal supplies, repair and maintenance costs for the start-up of Colombian operations. When compared to the same quarter last year, drilling costs were up $6.5 million primarily due to the increase in the number of rigs in our fleet, the addition of our Colombian operations and higher supplies, repairs and maintenance costs in our U.S. operations. The increase in our fleet, both domestically and internationally, resulted in a $0.6 million increase in depreciation quarter over sequential quarter, $2.7 million increase over the same quarter last year, and $10.7 million increase for the nine month period ended December 31, 2007 over the same nine months in 2006.

General and administrative expenses increased $0.6 million quarter over sequential quarter, $1.7 million over the same quarter last year, and $3.0 million for the nine month period ended December 31, 2007 over the same nine months in 2006, primarily due to additional compensation-related costs and professional fees associated with enhancing the Company’s corporate operations to meet the demands of expanding both internationally and into other oilfield service sectors.

EBITDA(1) for the Third Quarter increased $1.7 million to $35.1 million from $33.4 million in the Second Quarter, noting that the Second Quarter was impacted by at $2.6 million write down of a receivable related to a customer bankruptcy. Third Quarter EBITDA was impacted by the revenue contribution from Colombia which was offset by higher supplies, repairs and maintenance costs. Cash flows from operations for the nine months ended December 31, 2007 increased 21% to $115.5 million compared to the same nine months in 2006.


Wm. Stacy Locke, President and CEO, commented, “We are pleased with our results for the third and final quarter of our reporting year. We’ve maintained solid margins despite experiencing some softness in the market. Our strong U.S. operations continue to provide a solid base for the expansion opportunities we are currently undertaking. Our Colombian operations are performing well with a contribution to pretax income of $1.6 million for the Third Quarter. Most of our international start-up expenses are behind us, we have commenced operations of our third rig in Colombia and we expect to add two more rigs this year.”


Mr. Locke continued, “We are also happy to report that the previously announced acquisition of WEDGE Well Services, L.L.C., WEDGE Wireline Services, Inc. and WEDGE Fishing and Rental Services, L.L.C. is progressing nicely. The acquisition of these oilfield service businesses, along with our international expansion, represents the next phase in our growth strategy and will transform Pioneer beyond a pure play land driller. We are on track to close the acquisition within the next week. Upon closing the acquisition, we will follow with another conference call to provide more detailed information related to the acquisition.”

Pioneer Conference Call
Pioneer’s management team will hold a conference call today, Wednesday, February 27, at 10:00 a.m. Eastern Time (9:00 a.m. Central), to discuss these results. To participate in the call, dial (303) 262-2125 at least 10 minutes before the conference call begins and ask for the Pioneer Drilling conference call. A replay of the call will be available approximately two hours after the call ends and will be accessible until March 5, 2008. To access the replay, dial (303) 590-3000 and enter the pass code 11108554#.


Investors, analysts and the general public can listen to the conference call over the Internet by accessing Pioneer’s Web site at http://www.pioneerdrlg.com. To listen to the live call on the Web, please visit Pioneer’s Web site at least 10 minutes early to register, download and install 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 provides land contract drilling services to independent and major oil and gas operators drilling wells in Texas, Louisiana, Oklahoma, Kansas and in the Rocky Mountain region and internationally in Colombia. Its fleet consists of 69 land drilling rigs that drill in depth ranges between 6,000 and 18,000 feet. The Company has also announced plans to acquire the well services, wireline services and fishing and rental services, comprised of 60 workover rigs, 45 wireline units and fishing and rental tools, respectively, from affiliates of WEDGE Group Incorporated.


Cautionary Statement Regarding Forward-Looking Statements, non-GAAP Financial Measures and Reconciliations Statements we make in this press 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. Such statements include, but are not limited to, statements relating to the pending acquisition and its closing date.

 

Our actual results, performance or achievements, or industry results, could differ materially from those we express in this press release as a result of a variety of factors, including general economic and business conditions and industry trends, the continued strength or weakness of the contract land drilling industry in the geographic areas in which we operate, decisions about onshore exploration and development projects to be made by oil and gas companies, the highly competitive nature of our business, the availability, terms and deployment of capital, the availability of qualified personnel, and 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, the terms of and ability to obtain permanent financing for the acquisition of the Wedge companies, difficulty in integrating the services of the Wedge companies into Pioneer in an efficient and effective manner; challenges in achieving strategic objectives; the risk that our markets do not evolve as anticipated; and the potential loss of the services of key employees of the Wedge companies .

 

We have discussed these factors in more detail in our annual report on Form 10-K for the fiscal year ended March 31, 2007 and in our Form 10-Qs for the quarters ended June 30, 2007 and September 30, 2007. These factors are not necessarily all the important factors that could affect us. Unpredictable or unknown factors we have not discussed in this press 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 press 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 can be found later in the 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.

  Contacts:  Joyce M. Schuldt, Executive VP & CFO
             Pioneer Drilling Company
             210-828-7689

             Ken Dennard / ksdennard@drg-e.com
             Lisa Elliott / lelliott@drg-e.com
             DRG&E / 713-529-6600

                           - Tables to Follow -


                PIONEER DRILLING COMPANY AND SUBSIDIARIES
             Condensed Consolidated Statements of Operations
                  (in thousands, except per share data)

                      Three Months Ended      Nine Months Ended  Year Ended
                   December 31,    Sept. 30,     December 31,     March 31,
                  2007      2006      2007      2007      2006      2007
                        (unaudited)          (audited) (unaudited)(audited)
  Revenues:
    Contract
     drilling   $104,589  $112,421  $106,516  $313,884  $312,831  $416,178


  Costs and
   Expenses:
    Contract
     drilling     65,159    58,659    66,645   195,596   164,017   224,423
    Depreciation  16,661    13,969    16,093    48,852    38,120    52,856
    General
     and
     admini-
     strative      4,399     2,743     3,844    11,564     8,516    11,123
    Bad debt
     expense         (15)      800     2,627     2,612       800       800
      Total
       operating
       costs      86,204    76,171    89,209   258,624   211,453   289,202

  Operating
   income         18,385    36,250    17,307    55,260   101,378   126,976

  Other income
   (expense):
    Interest expense  (1)       (9)      (14)      (16)      (73)      (73)
    Interest income  808       836       731     2,401     2,947     3,828
    Other             97        13        11       129        50        57
      Total other    904       840       728     2,514     2,924     3,812

  Income before
   taxes          19,289    37,090    18,035    57,774   104,302   130,788

  Income tax
   expense        (4,512)  (13,102)   (6,255)  (18,129)  (37,341)  (46,609)


  Net earnings   $14,777   $23,988   $11,780   $39,645   $66,961   $84,179

  Earnings per share:
        Basic      $0.30     $0.48     $0.24     $0.80     $1.35     $1.70
        Diluted    $0.29     $0.48     $0.23     $0.79     $1.34     $1.68

  Weighted average number
   of shares
   outstanding:
        Basic     49,651    49,603    49,651    49,645    49,598    49,603
        Diluted   50,188    50,146    50,205    50,201    50,148    50,132


                  PIONEER DRILLING COMPANY AND SUBSIDIARIES
                    Condensed Consolidated Balance Sheets
                               (in thousands)

                                       December 31, 2007    March 31, 2007
                 Assets
  Current assets:
     Cash and cash equivalents                   $76,703           $84,945
     Receivables, net                             47,370            57,698
     Contract drilling in progress                 7,861             9,837
     Deferred income taxes                         3,670             2,175
     Inventory                                     1,180                 -
     Prepaid expenses                              5,073             3,653
        Total current assets                     141,857           158,308

  Net property and equipment                     417,022           342,901
  Deferred income taxes                              573                 -
  Other assets                                       760               286
  Total assets                                  $560,212          $501,495

         Liabilities and Equity
  Current liabilities:
     Accounts payable                            $21,424           $18,626
     Prepaid drilling contracts                    1,933                 -
     Accrued expenses                             18,693            15,593
        Total current liabilities                 42,050            34,219
  Other non-current liability                        254               346
  Deferred taxes                                  46,836            38,821
        Total liabilities                         89,140            73,386
  Total shareholders' equity                     471,072           428,109
  Total liabilities and shareholders'
   equity                                       $560,212          $501,495


                  PIONEER DRILLING COMPANY AND SUBSIDIARIES
               Condensed Consolidated Statements of Cash Flows
                               (in thousands)

                                          Nine Months Ended    Year Ended
                                             December 31,       March 31,
                                           2007        2006        2007
                                                   (unaudited)
  Cash flows from operating activities:
    Net earnings                           $39,645     $66,961     $84,179
    Adjustments to reconcile net
     earnings to net
    provided by operating activities:
      Depreciation and amortization         48,852      38,120      52,856
      Allowance for doubtful accounts        2,612         800         800
      Loss on dispositions of property
       and equipment                         2,809       5,183       5,760
      Stock-based compensation expense       3,157       2,474       3,061
      Deferred income taxes                  5,947       4,474      10,653
      Change in other assets                  (519)         15          20
      Change in non-current liabilities        (92)         44         (41)
      Changes in current assets and
       liabilities                          13,044     (22,995)    (25,759)
  Net cash provided by operating
   activities                              115,455      95,076     131,530

  Cash flows from financing activities:
      Proceeds from exercise of options        107          64         174
      Excess tax benefit of stock
       option exercises                         54           8          27
  Net cash provided by financing
   activities                                  161          72         201

  Cash flows from investing activities:
      Purchases of property and
       equipment                          (126,158)   (116,638)   (144,507)
      Proceeds from sale of property
       and equipment                         2,300       5,070       6,547
  Net cash used in investing activities   (123,858)   (111,568)   (137,960)

  Net decrease in cash and cash
   equivalents                              (8,242)    (16,420)     (6,229)

  Beginning cash and cash equivalents       84,945      91,174      91,174
  Ending cash and cash equivalents         $76,703     $74,754     $84,945



                PIONEER DRILLING COMPANY AND SUBSIDIARIES
                           Operating Statistics
                              (in thousands)
                               (Unaudited)

                        Three Months Ended     Nine Months Ended  Year Ended
                      December 31,   Sept. 30,    December 31,     March 31,
                     2007     2006     2007     2007       2006      2007

  Revenues by contract:
    Daywork
     contracts     $95,265  $108,808  $98,925  $292,617  $302,273  $399,188
    Turnkey
     contracts       1,930         -    2,195     4,979         -     3,445
    Footage
     contracts       7,394     3,613    5,396    16,288    10,559    13,545
    Total         $104,589  $112,421 $106,516  $313,884  $312,832  $416,178

  Drilling costs by contract:
    Daywork
     contracts     $58,309   $55,726  $61,129  $179,521  $156,480  $211,334
    Turnkey
     contracts       1,000         -    1,427     3,168         -     2,615
    Footage
     contracts       5,850     2,933    4,089    12,907     7,538    10,474
    Total          $65,159   $58,659  $66,645  $195,596  $164,018  $224,423

  Drilling
   margin by
   contract (2):
    Daywork
     contracts     $36,956   $53,082  $37,796  $113,096  $145,793  $187,854
    Turnkey
     contracts         930         -      768     1,811         -       830
    Footage
     contracts       1,544       680    1,307     3,381     3,021     3,071
    Total          $39,430   $53,762  $39,871  $118,288  $148,814  $191,755

  EBITDA (1)       $35,143   $50,232  $33,411  $104,241  $139,548  $179,889

  Reconciliation
   of drilling
   margin and
   EBITDA to net earnings:

  Drilling margin  $39,430   $53,762  $39,871  $118,288  $148,814  $191,755

    General
     and
     administrative (4,399)   (2,743)  (3,844)  (11,564)   (8,516)  (11,123)
    Bad debt expense    15      (800)  (2,627)   (2,612)     (800)     (800)
    Other income
     (expense)          97        13       11       129        50        57

  EBITDA            35,143    50,232   33,411   104,241   139,548   179,889

    Interest
     income
     (expense), net    807       827      717     2,385     2,874     3,755
    Income tax
     expense        (4,512)  (13,102)  (6,255)  (18,129)  (37,341)  (46,609)
    Depreciation   (16,661)  (13,969) (16,093)  (48,852)  (38,120)  (52,856)

  Net earnings     $14,777   $23,988  $11,780   $39,645   $66,961   $84,179

  (1) See EBITDA footnote on Page 4 of this press release.

  (2) Drilling margin represents contract drilling revenues less contract
      drilling costs.  Pioneer believes that drilling margin is a useful
      measure for evaluating its financial performance, although it is not a
      measure of financial performance under generally accepted accounting
      principles.  However, drilling margin is a common measure of operating
      performance used by investors, financial analysts, rating agencies and
      Pioneer's management.  A reconciliation of drilling margin to net
      earnings is included in the operating statistics table above.
      Drilling margin as presented may not be comparable to other similarly
      titled measures reported by other companies.


                PIONEER DRILLING COMPANY AND SUBSIDIARIES
                           Operating Statistics
                               (Unaudited)

                         Three Months Ended    Nine Months Ended  Year Ended
                       December 31,   Sept. 30,    December 31,    March 31,
                     2007      2006     2007     2007       2006     2007

  Average number
   of rigs           67.0      62.3     67.3      66.7       59.6     60.8
  Utilization rate    86%       98%      90%       89%        97%      95%

  Revenue days by
   contract:
    Daywork
     contracts      4,877     5,312    5,196    15,203     15,084   19,995
    Turnkey
     contracts         49         -       42       118          -       81
    Footage
     contracts        417       260      321       968        643      854
    Total           5,343     5,572    5,559    16,289     15,727   20,930

  Average revenues
   per day:
    Daywork
     contracts    $19,534   $20,483  $19,039   $19,247    $20,039  $19,964
    Turnkey
     contracts    $39,388        $-  $52,262   $42,195         $-  $42,531
    Footage
     contracts    $17,731   $13,896  $16,810   $16,826    $16,421  $15,861
    All contracts $19,575   $20,176  $19,161   $19,270    $19,891  $19,884

  Average
   costs per day:
    Daywork
     contracts    $11,956   $10,491  $11,765   $11,808    $10,374  $10,569
    Turnkey
     contracts    $20,408        $-  $33,976   $26,847         $-  $32,284
    Footage
     contracts    $14,029   $11,281  $12,738   $13,334    $11,723  $12,265
    All contracts $12,195   $10,527  $11,989   $12,008    $10,429  $10,723

  Drilling margin
   per day (3):
    Daywork
     contracts     $7,578    $9,993   $7,274    $7,439     $9,665   $9,395
    Turnkey
     contracts    $18,980        $-  $18,286   $15,347         $-  $10,247
    Footage
     contracts     $3,703    $2,615   $4,072    $3,493     $4,698   $3,596
    All contracts  $7,380    $9,649   $7,172    $7,262     $9,462   $9,161

   (3) Drilling margin per revenue day represents average revenue per
       revenue day less average cost per revenue day.



                PIONEER DRILLING COMPANY AND SUBSIDIARIES
                           Capital Expenditures
                              (in thousands)

                         Three Months Ended     Nine Months Ended Year Ended
                      December 31,  September 30,  December 31,    March 31,
                    2007      2006      2007      2007      2006      2007

  Capital
   expenditures:

  Routine rigs      $5,570    $6,523   $5,585   $16,029   $11,637   $17,832
  Average per
   revenue day      $1,077    $1,171   $1,005    $1,002      $740      $852

  Discretionary:
    Rig upgrades    $8,843      $518   $7,016   $20,237   $16,734   $19,917
    Iron roughnecks
     and topdrives   3,375         -    6,397    11,748         -     3,602
    Spare equipment    773     1,185    2,603     5,534     6,631     8,457
    Other            1,359     3,266    1,295     3,555     5,406     9,022
      Total
       discre-
       tionary     $14,350    $4,969  $17,311   $41,073   $28,771   $40,999

  Tubulars          $2,740       $46   $6,621   $11,219   $11,825   $13,942

    Total routine,
     discretionary
     and
     tubulars      $22,660   $11,538  $29,517   $68,320   $52,233   $72,773

  New-builds
   and
   acquisitions      3,012    19,981   20,941    59,718    64,970    74,457

    Total capital
     expenditures  $25,672   $31,519  $50,458  $128,038  $117,203  $147,229



                  PIONEER DRILLING COMPANY AND SUBSIDIARIES
                               Rig Information

                                               Rig Type
                                        Mechanical   Electric   Total Rigs

  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

  Rig 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

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