August 3, 2006 – SAN ANTONIO, TEXAS – Pioneer Drilling Company (AMEX: PDC) today reported results for the three months ended June 30, 2006, which is the first quarter of its 2007 fiscal year.

 

Revenues for the first quarter of fiscal 2007 grew to $93.5 million, compared to revenues of $59.9 million for the first quarter of fiscal 2006. This 56% increase in revenues was generated by a 38% increase in average revenues per revenue day to $19,154 per day, in addition to a 13% increase in the average number of rigs in Pioneer Drilling’s fleet to 56.7 rigs.

 

Average drilling margin per revenue day increased 86% to $9,004 in the first quarter of fiscal 2007, expenses resulted in a $0.02 reduction reconciliation of these expenses to diluted earnings per share can be found later in this release.”

 

Revenue days during the first quarter of fiscal 2007 increased 13% to 4,881, compared to 4,303 revenue days for the first quarter of fiscal 2006. In the first quarter of fiscal 2007, revenue days by type of contract were 4,695 for daywork contracts, zero for turnkey contracts and 186 for footage contracts. In contrast, revenue days by type of contract in the first quarter of fiscal 2006 were 3,424 for daywork contracts, 462 for turnkey contracts and 417 for footage contracts.

 

Pioneer Drilling’s rig utilization rate was 95% for the first quarter of fiscal 2007; the same as in the first quarter of fiscal 2006.

 

Wm. Stacy Locke, Pioneer Drilling’s President and Chief Executive Officer, stated, “Demand for our rigs has remained strong and we have continued to see increases in dayrates in each of our operating areas. Average drilling revenues per day increased $1,532 per revenue day to $19,154 in our fiscal first quarter of 2007, compared to our fourth quarter of fiscal 2006.

 

Average drilling costs increased $801 per revenue day during the same period, of which $541 related to labor costs and $241 to supply, repair, maintenance and equipment disposal costs. As a result, average drilling margins per revenue day increased $731 per day to $9,004, or an increase of 9% over the fourth quarter of fiscal 2006. We continued to pursue term drilling contracts during the quarter.

Currently, 44 of our 59 rigs, or 75%, are operating under term contracts of six months to two years in duration, of which 15 have remaining terms of six to 12 months, eight have a remaining term of 12 to 18 months and four have a remaining term in excess of 18 months.”

 

“To date, we have completed eight rigs of our 16 rig new-build program and expect to have the eight remaining rigs begin working under contract over the next nine months or so,” continued Mr. Locke. “Since April 1, 2006, the beginning of our new fiscal year, we have added four 1000-hp electric rigs: one rig to the Utah division; one rig to the South Texas division; and two rigs to the North Texas division. Each of these rigs is designed to be quick-to-move and rig up, contains modern mud-cleaning equipment and has two independently powered, highhorsepower mud pumps.”

 

“Our investment in new-build rigs and our commitment to upgrade and modernize our existing fleet has allowed Pioneer to expand its customer base. Currently, 59% of the rigs are working for publicly traded independents or major oil and gas companies. In the June quarter, we spent approximately $8,300,000 upgrading six rigs, using over 230 potential revenue days in the upgrade process. We believe that our fleet is well positioned to be highly competitive in any market conditions we encounter.”

Pioneer Drilling’s management team will be holding a conference call today, Thursday, August 3, 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 August 10, 2006. To access the replay, dial (303) 590-3000 and enter the pass code 11066376#.

 

Investors, analysts and the general public will also have the opportunity to listen to the conference call over the Internet by accessing Pioneer Drilling’s Web site at http://www.pioneerdrlg.com.

 

For those who cannot listen to the live Webcast, an archive will be available shortly after the call. For more information, please contact Karen Roan at DRG . To listen to the live call on the Web, please visit Pioneer Drilling’s&E at (713) 529-6600 or e-mail  kcroan@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 59 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 income 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, the anticipated compensation expenses for stock options, and our ability to continue to obtain term contracts. 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 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.

 

March 31,

2006 2005 2006

 

Revenues:

Contract drilling $ 93,493 $ 59,877 $ 82,840

 

Costs and Expenses:

Contract drilling 49,543 39,096 43,950

Depreciation 11,570 7,330 9,519

General and administrative 2,925 1,549 1,975

Bad debt expense (recovery) - - (177)

Total operating costs 64,038 47,975 55,267

Operating income 29,455 11,902 27,573

 

Other income (expense):

Interest expense ( 63) ( 155) ( 32)

Interest income 1,098 501 720

Other 23 14 32

Total other 1,058 360 720

Income before taxes 30,513 12,262 28,293

Income tax expense ( 11,027) ( 4,537) (10,325)

Net earnings $ 19,486 $ 7,725 $ 17,968

 

Earnings per share:

Basic $ 0.39 $ 0.17 $ 0.37

Diluted $ 0.39 $ 0.17 $ 0.36

 

Weighted average number of shares outstanding:

Basic 49,592 46,012 48,337

Diluted 50,168 46,765 49,105

 

Reconciliation of earnings to adjusted earnings:

Net earnings $ 19,486 $ 7,725 $ 17,968

Stock compensation expense 595 - -

Nonrecurring deferred taxes charge 362 - -

Adjusted earnings $ 20,443 $ 7,725 $ 17,968

 

Earnings per share:

Diluted $ 0.39 $ 0.17 $ 0.36

Stock compensation expense 0.01 - -

Nonrecurring deferred taxes charge 0.01 - -

Adjusted earnings per diluted share $ 0.41 $ 0.17 $ 0.37

 

June 30,

Condensed Consolidated Statements of Operations (in thousands, except per share data)

Three Months Ended (Unaudited)

 

June 30, 2006 March 31, 2006

 

Assets

 

Current assets:

Cash and cash equivalents $ 7 1,114 $ 9 1,174

Marketable securities 1 5,000 -

Receivables, net 4 5,470 3 5,544

Contract drilling in progress 9 ,520 9 ,620

Current deferred income taxes 1 ,157 9 90

Prepaid expenses 1 ,675 2,208

Total current assets 1 43,936 1 39,536

Net property and equipment 2 88,012 2 60,784

Other assets 3 47 358

Total assets $ 4 32,295 $ 400,678

 

Liabilities and Equity

 

Current liabilities:

Accounts payable $ 2 1,526 $ 1 6,041

Federal income taxes payable 1 0,528 6 ,835

Prepaid drilling contracts 4 65 1 40

Accrued expenses 9 ,859 9,616

Total current liabilities 4 2,378 3 2,632

Long-term debt - -

Other non-current liability 4 02 3 88

Deferred taxes 2 8,438 26,982

Total liabilities 7 1,218 6 0,002

Total shareholders' equity 3 61,077 340,676

$ 4 32,295 $ 400,678

 

Condensed Consolidated Balance Sheets (in thousands)

 

March 31,

2006 2005 2006

 

Revenues by contract:

Daywork contracts $ 90,061 $ 45,874 $ 79,097

Turnkey contracts - 8,593 -

Footage contracts 3,432 5,410 3,743

Total $ 93,493 $ 59,877 $ 82,840

 

Drilling costs by contract:

Daywork contracts $ 47,480 $ 29,052 $ 41,689

Turnkey contracts - 6,161 -

Footage contracts 2,063 3,883 2,261

Total $ 49,543 $ 39,096 $ 43,950

 

Drilling margin by contract

Daywork contracts $ 42,581 $ 16,822 $ 37,408

Turnkey contracts - 2,432 -

Footage contracts 1,369 1,527 1,482

Total $ 43,950 $ 20,781 $ 38,890

 

Capital expenditures:

Rig additions $ 25,126 $ 9,317 $ 26,739

Other 17,995 11,557 10,489

$ 43,121 $ 20,874 $ 37,228

 Reconciliation of drilling margin to net earnings:

Drilling margin $ 43,950 $ 20,781 $ 38,890

Depreciation (11,570) (7,330) (9,519)

General and administrative (2,925) (1,549) (1,975)

Bad debt recovery - - 177

Other income 1,058 360 720

Income tax expense (11,027) (4,537) (10,325)

Net earnings $ 19,486 $ 7,725 $ 17,968

 

Drilling margins represent drilling revenues less drilling costs:

Three Months Ended

 

June 30,

Operating Statistics (in thousands, except averages per day)

(Unaudited)

 

March 31,

2006 2005 2006

 

Average number of rigs 56.7 50.0 55.3

Utilization rate 95% 95% 95%

 

Revenue days by contract:

Daywork contracts 4,695 3,424 4,503

Turnkey contracts - 462 -

Footage contracts 186 417 198

Total 4,881 4,303 4,701

 

Average revenues per revenue day:

Daywork contracts $ 19,182 $ 13,398 $ 17,565

Turnkey contracts $ - $ 18,600 $ -

Footage contracts $ 18,452 $ 12,974 $ 18,904

All contracts $ 19,154 $ 13,915 $ 17,622

 

Average costs per revenue day:

Daywork contracts $ 10,113 $ 8,485 $ 9,258

Turnkey contracts $ - $ 13,335 $ -

Footage contracts $ 11,091 $ 9,312 $ 11,419

All contracts $ 10,150 $ 9,086 $ 9,349

 

Drilling margin per revenue day

Daywork contracts $ 9,069 $ 4,913 $ 8,307

Turnkey contracts $ - $ 5,264 $ -

Footage contracts $ 7,360 $ 3,662 $ 7,485

All contracts $ 9,004 $ 4,829 $ 8,273