Pioneer Drilling Reports Record Fiscal Second Quarter 2007 Results
Second quarter revenues were up 60% to $106.9 million
Nov 2, 2006
November 2, 2006 – SAN ANTONIO, TEXAS – Pioneer Drilling Company (AMEX: PDC) today reported results for the three months ended September 30, 2006, which is the second quarter of its 2007 fiscal year.
Revenues for the second quarter of fiscal 2007 grew to $106.9 million, compared to revenues of $67.0 million for the second quarter of fiscal 2006. This 60% increase in revenues was generated by a 35% increase in average revenues per revenue day to $20,272 per day, in addition to an 18% increase in the average number of rigs in Pioneer Drilling’s fleet to 59.7 rigs.
Average drilling margin per revenue day increased 61% to $9,689 in the second quarter of revenue day to $20,272 in our fiscal second quarter of 2007, compared to our fiscal first quarter of 2007. We continued to pursue term drilling contracts during the quarter.
Currently, 47 of our 62 rigs, or 76%, are operating under term contracts of six months to two years, of which 21 expire within the next six months, 14 have remaining terms of six to 12 months, seven have a remaining term of 12 to 18 months, and five have a remaining term in excess of 18 months. During the last 30 days, we have seen some softening in the market and a flattening in dayrates; however, we expect our customer demand and utilization rate to remain strong for the balance of the year. “To date, we have completed 11 rigs of our new-build program and expect to have the four remaining rigs working under contract by the end of March 2007. We canceled the construction of one of the rigs in our new-build program due to a customer’s change both in the type of rig needed and the drilling location, which would have required us to establish operations outside our operating regions,” continued Mr. Locke. “Since April 1, 2006, the beginning of our new fiscal year, we have added six 1000-hp electric rigs: one rig to the Utah division; two rigs to the South Texas division; and three rigs to the North Texas division. We also added a 1000-hp mechanical rig to the Oklahoma division. “Our investment in new-build rigs and our commitment to continue to upgrade and modernize our existing fleet has allowed Pioneer to expand its customer base. Currently, 58% of our rigs are working for publicly traded independents or major oil and gas companies. During the six months ended September 30, 2006, we spent approximately $14.1 million upgrading 14 rigs, using over 385 potential revenue days in the upgrade process. “Since April 2001, we have built or upgraded 82% of our fleet, which we believe gives Pioneer the second-youngest fleet in the industry, with rigs that are designed to be efficient and cost effective. Over 90% of our rigs can drill horizontal and directional wells, 92% have dual high-powered mud pumps, 53% have modern mud-cleaning systems, 37% are premium electric, and 34% are quick-to-move and rig-up. In addition, beginning in January 2007, we will be adding iron roughnecks to all of our rigs over an 18-month period. We believe that our fleet is well positioned to be highly competitive in any market conditions we encounter.” Revenues for the first six months of fiscal 2007 were $200.4 million, compared to revenues of $126.9 million for the first six months of fiscal 2006. Net earnings during the first six months of fiscal 2007 were $43.0 million, or $0.86 per diluted share, compared to net earnings of $18.8 million, or $0.40 per diluted share, during the same period in fiscal 2006. Pioneer Drilling’s management team will hold a conference call today, Thursday, November 2, 2006, at 11:00 a.m. Eastern time (10:00 a.m. Central), to discuss these results. To participate in the call, dial (303) 262-2137 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, 2006. To access the replay, dial (303) 590-3000 and enter the pass code 11073279#. Investors, analysts and the general public can listen to the conference call over the Internet by accessing Pioneer Drilling’s Web site at 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. For those who cannot listen to the live Webcast, an archive will be available shortly after the call. For more information, please contact Donna Washburn at DRG http://www.pioneerdrlg.com. To listen to&E at (713) 529-6600 or e-mail dmw@drg-e.com. Pioneer Drilling provides land contract drilling services to independent and major oil and gas operators drilling wells in Texas, Louisiana, Oklahoma and in the Rocky Mountain region. Its fleet consists of 62 land drilling rigs that drill in depth ranges between 6,000 and 18,000 feet. 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 in this release. Drilling margin as presented may not be comparable to other similarly titled measures reported by other companies. This press release contains various forward-looking statements and information that are based on management’s belief, as well as assumptions made by and information currently available to management. Forward-looking information includes statements regarding the anticipated timing for delivery of the rigs we are adding to our fleet, the effects of capital expenditures to upgrade our rigs, future demand and market competitiveness of our rig fleet, including our ability to continue to obtain term contracts, and the future employment of our rig fleet. Although the management of Pioneer Drilling believes that the expectations reflected in such forward-looking statements are reasonable, Pioneer Drilling can give no assurance that those expectations will prove to have been correct. Such statements are subject to various risks, uncertainties and assumptions, including, among other matters, risks and uncertainties relating to rig construction difficulties. Should one or more of those risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. These risks, as well as others, are discussed in greater detail in Pioneer’s filings with the Securities and Exchange Commission (the “SEC”), including the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2006 and subsequent filings with the SEC.
Revenue days were 10,155 during the first six months of fiscal 2007, compared to 8,749 revenue days for the comparable period of fiscal 2006. Pioneer Drilling’s rig utilization rate for the first six months of fiscal 2007 was 96%, compared to 95% in last year’s comparable six month period.
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,
2006 2005 2006 2006 2005
Revenues:
Contract drilling $106,917 $66,973 $93,493 $200,410 $126,849
Costs and Expenses:
Contract drilling 55,815 40,211 49,543 105,358 79,303
Depreciation 12,581 7,941 11,570 24,151 15,270
General and
administrative 2,847 1,650 2,925 5,772 3,202
Total operating costs 71,243 49,802 64,038 135,281 97,775
Operating income 35,674 17,171 29,455 65,129 29,074
Other income (expense):
Interest expense (1) (48) (63) (64) (204)
Interest income 1,013 449 1,098 2,110 951
Other 13 17 23 37 31
Total other 1,025 418 1,058 2,083 778
Income before taxes 36,699 17,589 30,513 67,212 29,852
Income tax expense (13,213) (6,508) (11,027) (24,239) (11,046)
Net earnings $23,486 $11,081 $19,486 $42,973 $18,806
Earnings per share:
Basic $0.47 $0.24 $0.39 $0.87 $0.41
Diluted $0.47 $0.24 $0.39 $0.86 $0.40
Weighted average number
of shares outstanding:
Basic 49,598 46,366 49,592 49,595 46,190
Diluted 50,140 47,086 50,168 50,153 46,868
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
September 30, 2006 March 31, 2006
Assets
Current assets:
Cash and cash equivalents $81,700 $91,174
Receivables, net 42,239 35,544
Contract drilling in progress 12,906 9,620
Current deferred income taxes 1,309 990
Prepaid expenses 691 2,208
Total current assets 138,845 139,536
Net property and equipment 315,116 260,784
Other assets 335 358
Total assets $454,296 $400,678
Liabilities and Equity
Current liabilities:
Accounts payable $23,400 $16,041
Federal income taxes payable 2,839 6,835
Prepaid drilling contracts 74 140
Accrued expenses 11,832 9,616
Total current liabilities 38,145 32,632
Other non-current liability 417 388
Deferred taxes 30,285 26,982
Total liabilities 68,847 60,002
Total shareholders' equity 385,449 340,676
Total liabilities and shareholders'
equity $454,296 $400,678
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,
2006 2005 2006 2006 2005
Revenues by contract:
Daywork contracts $103,404 $59,236 $90,061 $193,465 $105,110
Turnkey contracts - 2,237 - - 10,830
Footage contracts 3,513 5,500 3,432 6,945 10,909
Total $106,917 $66,973 $93,493 $200,410 $126,849
Drilling costs by contract:
Daywork contracts $53,273 $34,485 $47,480 $100,753 $63,534
Turnkey contracts - 1,314 - - 7,474
Footage contracts 2,542 4,412 2,063 4,605 8,295
Total $55,815 $40,211 $49,543 $105,358 $79,303
Drilling margin by
contract (1) (2):
Daywork contracts $50,131 $24,751 $42,581 $92,712 $41,576
Turnkey contracts - 923 - - 3,356
Footage contracts 971 1,088 1,369 2,340 2,614
Total $51,102 $26,762 $43,950 $95,052 $47,546
Capital expenditures:
Rig additions $19,863 $13,665 $25,126 $44,989 $22,978
Other 22,699 16,504 17,995 40,695 28,066
$42,562 $30,169 $43,121 $85,684 $51,044
(1) Reconciliation of
drilling margin to net
earnings:
Drilling margin $51,102 $26,762 $43,950 $95,052 $47,546
Depreciation (12,581) (7,941) (11,570) (24,151) (15,270)
General and
administrative (2,847) (1,650) (2,925) (5,772) (3,202)
Other income
(expense) 1,025 418 1,058 2,083 778
Income tax expense (13,213) (6,508) (11,027) (24,239) (11,046)
Net earnings $23,486 $11,081 $19,486 $42,973 $18,806
(2) Drilling margins represent drilling revenues less contract drilling
costs
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(Unaudited)
Three Months Ended Six Months Ended
September 30, June 30, September 30,
2006 2005 2006 2006 2005
Average number of rigs 59.7 50.7 56.7 58.2 50.3
Utilization rate 97% 95% 95% 96% 95%
Revenue days by contract:
Daywork contracts 5,077 3,942 4,695 9,772 7,366
Turnkey contracts - 96 - - 558
Footage contracts 197 408 186 383 825
Total 5,274 4,446 4,881 10,155 8,749
Average revenues per day:
Daywork contracts $20,367 $15,027 $19,182 $19,798 $14,270
Turnkey contracts $- $23,302 $- $- $19,409
Footage contracts $17,832 $13,480 $18,452 $18,133 $13,223
All contracts $20,272 $15,064 $19,154 $19,735 $14,499
Average costs per day:
Daywork contracts $10,493 $8,748 $10,113 $10,310 $8,625
Turnkey contracts $- $13,688 $- $- $13,394
Footage contracts $12,904 $10,814 $11,091 $12,023 $10,055
All contracts $10,583 $9,044 $10,150 $10,375 $9,064
Drilling margin per day (3):
Daywork contracts $9,874 $6,279 $9,069 $9,488 $5,644
Turnkey contracts $- $9,615 $- $- $6,014
Footage contracts $4,929 $2,667 $7,360 $6,110 $3,168
All contracts $9,689 $6,019 $9,004 $9,360 $5,434
(3) Drilling margin per revenue day represents average revenue per revenue
day less average cost per revenue day.
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Drilling Rig Information
Rig Type
Mechanical Electric Total Rigs
Rig horsepower ratings:
550 - 700 HP 6 - 6
750 - 900 HP 15 2 17
1000 HP 15 10 25
1200 - 1500 HP 3 11 14
Total 39 23 62
Rig drilling depth ratings:
Less than 10,000 feet 8 2 10
10,000 to 13,900 feet 28 5 33
14,000 to 18,000 feet 3 16 19
Total 39 23 62
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