Pioneer Drilling Reports Second Quarter 2008 Results
Nov 2, 2007
November 2, 2007 – SAN ANTONIO, TEXAS – Pioneer Drilling Company, Inc. (“Pioneer” or the “Company”) (AMEX-PDC) reported net income of $11.8 million, or $0.23 per diluted share, for the three months ended September 30, 2007 (its “Second Quarter”) compared with net income of $13.1 million, or $0.26 per diluted share, for the three months ended June 30, 2007 (its “First Quarter”) and net income of $23.5 million, or $0.47 per diluted share, for the three months ended September 30, 2006.
Revenues for the Second Quarter were $106.5 million compared with $102.8 million for the First Quarter and $106.9 million for the same quarter last year. The Second Quarter included the impact of an after-tax charge of $1.7 million due to a write-down related to an on-going customer bankruptcy. Costs for the Second Quarter were up over the previous quarter by approximately $3 million primarily due to the commencement of operations in Colombia, additional turnkey and footage contracts as well as slightly higher labor costs, as expected.
As compared to the same quarter last year, costs increased by $10.8 million primarily due to the increase in the number of rigs in our fleet. Depreciation remained constant quarter over quarter at $16.1 million but increased $3.5 million over the second quarter ended September 30, 2006 primarily due to the additional number of rigs in our fleet.
EBITDA(1) for the Second Quarter was $33.4 million, down slightly from First Quarter results of $35.7 million, primarily due to the impact of the customer bankruptcy write-down. EBITDA for the second quarter of 2006 was $48.3 million. Cash flow from operations for the six months ended September 30, 2007 remained strong at $78.8 million compared to $67.3 million for the comparable period in 2006.
Wm. Stacy Locke, President and CEO, commented, “Our Second Quarter performance was solid despite the continued softness in the market and the attendant pressure on spot market dayrates. Utilization in the Second Quarter remained unchanged from the First Quarter.
Additionally, we have adjusted to the market pressures by implementing steps to reduce our costs both generally and more quickly when rigs become inactive.” Mr. Locke continued, “We are pleased that our first two Colombian rigs have begun daywork operations, the first on September 21st and the second, just after Second Quarter end, on October 25th.
The upgrade to the third rig we purchased for international expansion is just about complete and we expect to deploy it prior to the end of our fiscal year. While we are concentrating on a successful start to our international business in Colombia, we are continuing to explore other opportunities in the region.”
Pioneer Drilling Conference Call
Pioneer Drilling’s management team will hold a conference call today, Friday, November 2, 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 November 9, 2007. To access the replay, dial (303) 590-3000 and enter the pass code 11099358#.
Investors, analysts and the general public can listen to the conference call over the Internet by accessing Pioneer Drilling’s Web site at http://www.pioneerdrlg.com. To listen to the live call on the Web, please visit Pioneer Drilling’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 email dmw@drg-e.com.
About Pioneer Drilling
Pioneer Drilling provides land contract drilling services to independent and major oil and gas operators drilling wells in Texas, Louisiana, Oklahoma, Kansas, 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. 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.
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, and the economic and business conditions of our international operations.
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 2007 fiscal year. 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.
Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended
September 30, June 30, September 30,
2007 2006 2007 2007 2006
Revenues:
Contract drilling $ 106,516 $ 106,917 $ 102,779 $ 209,295 $ 200,410
Costs and Expenses:
Contract drilling 66,645 55,815 63,792 130,437 105,358
Depreciation and amortization 16,093 12,581 16,098 32,191 24,151
General and administrative 3,844 2,847 3,320 7,164 5,772
Bad debt expense 2,627 - - 2,627 -
Total operating costs 89,209 71,243 83,210 172,419 135,281
Operating income 17,307 35,674 19,569 36,876 65,129
Other income (expense):
Interest expense(14) (1) (1) (15) (64)
Interest income 731 1,013 862 1,593 2,110
Other 11 13 20 31 37
Total other 728 1,025 881 1,609 2,083
Income before taxes 18,035 36,699 20,450 38,485 67,212
Income tax expense (6,255) (13,213) (7,362) (13,617) (24,239)
Net earnings $ 11,780 $ 23,486 $ 13,088 $ 24,868 $ 42,973
Earnings per share:
Basic $ 0.24 $ 0.47 $ 0.26 $ 0.50 $ 0.87
Diluted $ 0.23 $ 0.47 $ 0.26 $ 0.50 $ 0.86
Weighted average number of shares outstanding:
Basic 49,651 49,598 49,634 49,643 49,595
Diluted 50,205 50,140 50,212 50,210 50,153
Condensed Consolidated Balance Sheets (in thousands) (Unaudited)
September 30,
2007 March 31, 2007
Assets
Cash and cash equivalents $ 66,303 $ 84,945
Other current assets 72,121 73,363
Total current assets 138,424 158,308
Net property and equipment 409,685 342,901
Other assets 257 286
Total assets $ 548,366 $ 501,495
Liabilities and Shareholders' Equity
Total current liabilities $ 49,142 $ 34,219
Other non-current liability 357 346
Deferred taxes 43,602 38,821
Total liabilities 93,101 73,386
Total shareholders' equity 455,265 428,109
Total liabilities and shareholders' equity $ 548,366 $ 501,495
2007 2006
Cash flows from operating activities:
Net earnings $ 24,868 $ 42,973
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 32,191 24,151
Loss on disposal of properties and equipment 1,925 3,601
Allowance for doubtful accounts 2,627 -
Change in deferred income taxes 4,275 2,984
Stock-based compensation expense 2,127 1,753
Deferred operating lease liability 11 29
Changes in current assets and liabilities 10,804 ( 8,152)
Net cash provided by operating activities 78,828 67,339
Cash flows from financing activities:
Proceeds from exercise of stock options 107 48
Excess tax benefit of stock option exercise 54 -
Net cash provided by financing activities 1 61 4 8
Cash flows from investing activities:
Purchase of property and equipment ( 99,124) ( 80,484)
Proceeds from sale of property and equipment 1,493 3,623
Net cash used in investing activities ( 97,631) ( 76,861)
Net decrease in cash and cash equivalents ( 18,642) ( 9,474)
Beginning cash and cash equivalents 84,945 91,174
Ending cash and cash equivalents $ 66,303 $ 81,700
Six Months Ended September 30,
Condensed Consolidated Statements of Cash flows (in thousands) (Unaudited)
Operating Statistics (in thousands, except averages per day) (Unaudited)
Three Months Ended Six Months Ended
September 30, June 30, September 30,
2007 2006 2007 2007 2006
Revenues by contract:
Daywork contracts $ 98,925 $ 103,404 $ 98,427 $ 197,352 $ 193,465
Turnkey contracts 2,195 - 853 3,049 -
Footage contracts 5,396 3,513 3,499 8,894 6,945
Total $ 106,516 $ 106,917 $ 102,779 $ 209,295 $ 200,410
Drilling costs by contract:
Daywork contracts $ 61,129 $ 53,273 $ 60,084 $ 121,212 $ 100,753
Turnkey contracts 1,427 - 741 2,168 -
Footage contracts 4,089 2,542 2,967 7,057 4,605
Total $ 66,645 $ 55,815 $ 63,792 $ 130,437 $ 105,358
Drilling margin by contract (2):
Daywork contracts $ 37,796 $ 50,131 $ 38,343 $ 76,140 $ 92,712
Turnkey contracts 768 - 112 881 -
Footage contracts 1,307 971 532 1,837 2,340
Total $ 39,871 $ 51,102 $ 38,987 $ 78,858 $ 95,052
EBITDA (1) $ 33,411 $ 48,268 $ 35,687 $ 69,098 $ 89,317
(2) Drilling margin represents contract drilling revenues less contract drilling costs. Pioneer Drilling 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 Drilling’s management. A reconciliation of drilling margin to net earnings is included in the operating statistics table below. Drilling margin as presented may not be comparable to other similarly titled measures reported by other companies.
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
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
September 30, June 30, September 30,
2007 2006 2007 2007 2006
Revenues:
Contract
drilling $106,516 $106,917 $102,779 $209,295 $200,410
Costs and
Expenses:
Contract
drilling 66,645 55,815 63,792 130,437 105,358
Depreciation
and
amorti-
zation 16,093 12,581 16,098 32,191 24,151
General and
admini-
strative 3,844 2,847 3,320 7,164 5,772
Bad debt
expense 2,627 - - 2,627 -
Total
operating
costs 89,209 71,243 83,210 172,419 135,281
Operating
income 17,307 35,674 19,569 36,876 65,129
Other income
(expense):
Interest
expense (14) (1) (1) (15) (64)
Interest
income 731 1,013 862 1,593 2,110
Other 11 13 20 31 37
Total other 728 1,025 881 1,609 2,083
Income before
taxes 18,035 36,699 20,450 38,485 67,212
Income tax
expense (6,255) (13,213) (7,362) (13,617) (24,239)
Net earnings $11,780 $23,486 $13,088 $24,868 $42,973
Earnings per
share:
Basic $0.24 $0.47 $0.26 $0.50 $0.87
Diluted $0.23 $0.47 $0.26 $0.50 $0.86
Weighted
average number
of shares
outstanding:
Basic 49,651 49,598 49,634 49,643 49,595
Diluted 50,205 50,140 50,212 50,210 50,153
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
September 30, March 31,
2007 2007
Assets
Cash and cash equivalents $66,303 $84,945
Other current assets 72,121 73,363
Total current assets 138,424 158,308
Net property and equipment 409,685 342,901
Other assets 257 286
Total assets $548,366 $501,495
Liabilities and Shareholders' Equity
Total current liabilities $49,142 $34,219
Other non-current liability 357 346
Deferred taxes 43,602 38,821
Total liabilities 93,101 73,386
Total shareholders' equity 455,265 428,109
Total liabilities and shareholders' equity $548,366 $501,495
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash flows
(in thousands)
(Unaudited)
Six Months Ended September 30,
2007 2006
Cash flows from operating activities:
Net earnings $24,868 $42,973
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation and amortization 32,191 24,151
Loss on disposal of properties
and equipment 1,925 3,601
Allowance for doubtful accounts 2,627 -
Change in deferred income taxes 4,275 2,984
Stock-based compensation expense 2,127 1,753
Deferred operating lease
liability 11 29
Changes in current assets and
liabilities 10,804 (8,152)
Net cash provided by operating
activities 78,828 67,339
Cash flows from financing activities:
Proceeds from exercise of stock
options 107 48
Excess tax benefit of stock option
exercise 54 -
Net cash provided by financing
activities 161 48
Cash flows from investing activities:
Purchase of property and equipment (99,124) (80,484)
Proceeds from sale of property and
equipment 1,493 3,623
Net cash used in investing activities (97,631) (76,861)
Net decrease in cash and cash
equivalents (18,642) (9,474)
Beginning cash and cash equivalents 84,945 91,174
Ending cash and cash equivalents $66,303 $81,700
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(in thousands, except averages per day)
(Unaudited)
Three Months Ended Six Months Ended
September 30, June 30, September 30,
2007 2006 2007 2007 2006
Revenues by
contract:
Daywork
contracts $98,925 $103,404 $98,427 $197,352 $193,465
Turnkey
contracts 2,195 - 853 3,049 -
Footage
contracts 5,396 3,513 3,499 8,894 6,945
Total $106,516 $106,917 $102,779 $209,295 $200,410
Drilling costs
by contract:
Daywork
contracts $61,129 $53,273 $60,084 $121,212 $100,753
Turnkey
contracts 1,427 - 741 2,168 -
Footage
contracts 4,089 2,542 2,967 7,057 4,605
Total $66,645 $55,815 $63,792 $130,437 $105,358
Drilling margin
by contract
(2):
Daywork
contracts $37,796 $50,131 $38,343 $76,140 $92,712
Turnkey
contracts 768 - 112 881 -
Footage
contracts 1,307 971 532 1,837 2,340
Total $39,871 $51,102 $38,987 $78,858 $95,052
EBITDA (1) $33,411 $48,268 $35,687 $69,098 $89,317
(2) Drilling margin represents contract drilling revenues less contract
drilling costs. Pioneer Drilling 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 Drilling's management.A reconciliation of drilling margin to net
earnings is included in the operating statistics table below. Drilling
margin as presented may not be comparable to other similarly titled
measures reported by other companies.
Reconciliation of
drilling margin
and EBITDA to net earnings:
Drilling
margin $39,871 $51,102 $38,987 $78,858 $95,052
General and
administrative (3,844) (2,847) (3,320) (7,164) (5,772)
Bad debt
expense (2,627) - - (2,627) -
Other income
(expense) 11 13 20 31 37
EBITDA $33,411 $48,268 $35,687 $69,098 $89,317
Interest
income
(expense), net 717 1,012 861 1,578 2,046
Income tax
expense (6,255) (13,213) (7,362) (13,617) (24,239)
Depreciation
and
amortization (16,093) (12,581) (16,098) (32,191) (24,151)
Net earnings $11,780 $23,486 $13,088 $24,868 $42,973
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(Unaudited)
Three Months Ended Six Months Ended
September 30, June 30, September 30,
2007 2006 2007 2007 2006
Average number
of rigs 67.3 59.7 65.7 66.5 58.2
Utilization rate 90% 97% 90% 90% 96%
Revenue days
by contract:
Daywork
contracts 5,196 5,077 5,130 10,326 9,772
Turnkey
contracts 42 - 27 69 -
Footage
contracts 321 197 230 551 383
Total 5,559 5,274 5,387 10,946 10,155
Average revenues
per day:
Daywork
contracts $19,039 $20,367 $19,187 $19,112 $19,798
Turnkey
contracts $52,262 $ - $31,593 $44,188 $ -
Footage
contracts $16,810 $17,832 $15,213 $16,142 $18,133
All
contracts $19,161 $20,272 $19,079 $19,121 $19,735
Average costs
per day:
Daywork
contracts $11,765 $10,493 $11,712 $11,739 $10,310
Turnkey
contracts $33,976 $ - $27,444 $31,420 $ -
Footage
contracts $12,738 $12,904 $12,900 $12,808 $12,023
All
contracts $11,989 $10,583 $11,842 $11,916 $10,375
Drilling
margin
per day (3):
Daywork
contracts $7,274 $9,874 $7,474 $7,374 $9,488
Turnkey
contracts $18,286 $ - $4,148 $12,768 $ -
Footage
contracts $4,072 $4,929 $2,313 $3,334 $6,110
All
contracts $7,172 $9,689 $7,237 $7,204 $9,360
(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)
(Unaudited)
Three Months Ended Six Months Ended
September 30, June 30, September 30,
2007 2006 2007 2007 2006
Capital
expenditures:
Routine rig $5,585 $2,829 $4,874 $10,459 $5,114
Average per
revenue day $1,005 $536 $904 $956 $504
Discretionary:
Rig upgrades $7,016 $5,750 $4,377 $11,394 $16,217
Iron
roughnecks
and
topdrives 6,397 - 1,976 8,372 -
Spare
equipment 2,603 2,698 2,158 4,761 3,918
Other 1,295 1,370 1,005 2,301 2,051
Total
discre-
tionary $17,311 $9,818 $9,516 $26,828 $22,186
Tubulars $6,621 $9,963 $1,858 $8,478 $13,305
Total
routine,
discre-
tionary
and
tubulars $29,517 $22,610 $16,248 $45,765 $40,605
New-builds
and
acquisitions 20,941 19,953 35,658 56,599 45,079
Total
capital
expend-
itures $50,458 $42,563 $51,906 $102,364 $85,684
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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