Pioneer Drilling Reports Record Fiscal Second Quarter 2006 Results
Second quarter revenues were up 57% to $67 million
Nov 3, 2005
NOVEMBER 3, 2005 – SAN ANTONIO, TEXAS – Pioneer Drilling Company (AMEX: PDC) today reported results for the three months ended September 30, 2005, which is the second quarter of its current fiscal year.
Revenues for the second quarter of fiscal 2006 grew to $67.0 million, compared to revenues of $42.8 million in the second quarter of fiscal 2005. This 57% increase in revenues was due to an 11.5% increase in average revenues per day for all contracts to $15,064 per day, coupled with a 41% increase in the average number of rigs in Pioneer Drilling’s fleet.
The growing demand for rigs in the Company’s operating markets continued to drive improvement in drilling margins, resulting in an increase of 132% in average drilling margin per day for all contracts to $6,004 in the second quarter of fiscal 2006 compared to $2,587 in the second quarter of fiscal 2005 and an increase of 25% in average drilling margin per day for all contracts compared to the first quarter of fiscal 2006. Net earnings in the second quarter of fiscal 2006 were $11.1 million, or $0.24 per diluted share, versus net earnings of $923,000, or $0.03 per diluted share, for the second quarter of fiscal 2005. Weighted average shares of common stock outstanding on a diluted basis increased 37% to 47.1 million shares for the second quarter of fiscal 2006 from 34.3 million shares for the second quarter of fiscal 2005.
Revenue days during the second quarter of fiscal 2006 increased 40% to 4,446, compared to 3,166 revenue days for the second quarter of fiscal 2005. As compared to a year ago, the revenue days by type of contract shifted significantly toward daywork contracts. In the second quarter of fiscal 2006, the revenue days by type were 3,942 for daywork contracts, 96 for turnkey contracts and 408 for footage contracts. In contrast, revenue days by type of contract in the second quarter of fiscal 2005 were 1,674 for daywork contracts, 1,347 for turnkey contracts and 145 for footage contracts.
Wm. Stacy Locke, Pioneer Drilling’s President and Chief Executive Officer, stated, “To meet the needs of our customers’ expanding drilling budgets, we have increased our rig-building program from five to 13 rigs. The rigs will be spread between our two divisions in the Rockies and our three divisions in Texas. Three of the rigs will be 1500-horsepower and the remainder will be 1000-horsepower. Twelve of the 13 rigs will be diesel electric. The first rig began operations in early October and the second rig should be working under contract by mid- November, with the remaining 11 rigs expected to be placed into service incrementally by December 2006.
“The majority of these rigs have two-year term contracts, with dayrates in excess of $16,000 per day. As a result, most of our investment in each rig will be returned during the primary term of the initial contract. As always, we remain focused on achieving attractive returns on investment while building a fleet of top quality and technologically advanced rigs. Our rig-building team, led by Red West, Chief Operating Officer, continues to innovate, design and assemble rigs that are well-suited to our customers’ needs.
By constructing these rigs internally from a combination of new and used components, we believe we save approximately 25% on costs and end up with dependable rigs. “Our total capital budget for the 13 rigs being added to our fleet is approximately $88 million, or an average of $6.8 million per rig. We plan to fund this expansion from cash on hand and from operating cash flow. As a result, we should maintain a strong cash position and healthy balance sheet. This rig-building program will further strengthen our existing high quality fleet.
At the culmination of this program, 28% of the rigs will be capable of drilling depths between 15,000 feet to 18,000 feet and 40% of the rigs will be diesel electric,” concluded Mr. Locke. Revenues for the first six months of fiscal year 2006 were $126.8 million, compared to revenues of $83.5 million for the first six months of fiscal year 2005. Net earnings during the first six months of fiscal 2006 were $18.8 million, or $0.40 per diluted share, compared to a net income of $1.1 million, or $0.04 per diluted share, during the first six months of fiscal 2005.
Revenue days were 8,749 during the first six months of fiscal 2006, compared to 6,163 revenue days for the comparable period of fiscal 2005. Pioneer Drilling’s rig utilization rate for the first six-months of fiscal 2006 was 95%, versus 94% in last year’s comparable six-month period.
Pioneer Drilling’s management team will be holding a conference call on Thursday, November 3, 2005, at 11:00 a.m., Eastern time (10:00 a.m., Central), to discuss these results. To participate in the call, dial (303) 262-2139 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 10, 2005. To access the replay, dial (303) 590-3000 and enter the pass code 11042703#.
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 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 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 North, East and South Texas, Western Oklahoma and in the Rocky Mountain region. Its fleet consists of 53 land drilling rigs that drill in depth ranges between 6,000 and 18,000 feet.
Drilling margin represents drilling revenues less drilling costs. The Company believes that drilling margin is a useful measure of 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 our 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 capital costs and funding of our rig-building program, the anticipated timing for commencement of operations for the rigs we are adding to our fleet, the minimum dayrates and contract terms for those rigs and the rigs we have recently added to our fleet, the anticipated funding for and return of our investment in the rigs being added to our fleet and our maintenance of a strong cash position and healthy balance sheet. 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 and turnkey and footage drilling contracts in progress. 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, 2005 and subsequent filings with the SEC.
- Tables to Follow -
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share per data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, September 30, September 30,
2005 2005 2004 2005 2004
Revenues:
Contract drilling $59,877 $66,973 $42,783 $126,849 $83,502
Costs and Expenses:
Contract drilling 39,158 40,279 34,591 79,437 68,445
Depreciation 7,330 7,941 5,306 15,270 10,355
General and
administrative 1,487 1,581 926 3,068 1,696
Total operating
costs 47,975 49,801 40,823 97,775 80,496
Operating income 11,902 17,172 1,960 29,074 3,006
Other income
(expense):
Interest expense (155) (49) (398) (204) (1,116)
Loss on early
extinguishment
of debt --- --- (101) --- (101)
Interest income 501 449 40 951 64
Other 14 17 12 31 15
Total other 360 417 (447) 778 (1,138)
Income before taxes 12,262 17,589 1,513 29,852 1,868
Income tax expense (4,537) (6,508) (590) (11,046) (728)
Net earnings $7,725 $11,081 $923 $18,806 $1,140
Earnings per share:
Basic $0.17 $0.24 $0.03 $0.41 $0.04
Diluted $0.17 $0.24 $0.03 $0.40 $0.04
Weighted average
number of shares
outstanding:
Basic 46,012 46,366 33,211 46,190 30,272
Diluted 46,765 47,086 34,271 46,868 31,289
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
September 30, March 31,
2005 2005
Assets
Current assets:
Cash and cash equivalents $45,382 $69,673
Marketable securities --- 1,000
Receivables, net 30,387 26,108
Contract drilling in progress 7,042 5,365
Current deferred income taxes 1,359 570
Prepaid expenses 566 1,877
Total current assets 84,736 104,593
Net property and equipment 204,110 170,566
Other assets 563 850
$289,409 $276,009
Liabilities and Equity
Current liabilities:
Notes payable $--- $682
Current long-term debt 50 4,733
Accounts payable 13,600 15,622
Federal income taxes payable 1,079 196
Prepaid drilling contracts --- 173
Accrued expenses 8,594 6,860
Total current liabilities 23,323 28,266
Long-term debt 9 13,445
Other non-current liability 447 400
Deferred taxes 20,551 12,283
Total liabilities 44,330 54,394
Total shareholders' equity 245,079 221,615
$289,409 $276,009
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(in thousands, except averages per day)
(Unaudited)
Three Months Ended Six Months Ended
June 30, September 30, September 30,
2005 2005 2004 2005 2004
Revenues by
contract:
Daywork contracts $45,874 $59,236 $17,277 $105,110 $31,418
Turnkey contracts 8,593 2,237 23,821 10,830 48,440
Footage contracts 5,410 5,500 1,685 10,909 3,644
Total $59,877 $66,973 $42,783 $126,849 $83,502
Drilling costs
by contract:
Daywork contracts $29,114 $34,554 $13,743 $63,668 $25,272
Turnkey contracts 6,161 1,313 19,476 7,474 40,336
Footage contracts 3,883 4,412 1,372 8,295 2,837
Total $39,158 $40,279 $34,591 $79,437 $68,445
Drilling margin by
contract (A):
Daywork contracts $16,760 $24,682 $3,534 $41,442 $6,146
Turnkey contracts 2,432 924 4,345 3,356 8,104
Footage contracts 1,527 1,088 313 2,614 807
Total $20,719 $26,694 $8,192 $47,412 $15,057
Capital expenditures:
Rig additions $9,312 $13,665 $1,628 $22,977 $4,242
Other 11,562 16,504 7,296 28,067 13,098
$20,874 $30,169 $8,924 $51,044 $17,340
Reconciliation of
drilling margin to
net earnings:
Drilling margin $20,719 $26,694 $8,192 $47,412 $15,057
Depreciation (7,330) (7,941) (5,306) (15,270) (10,355)
General and
administrative (1,487) (1,581) (926) (3,068) (1,696)
Other income
(expense) 360 417 (447) 778 (1,138)
Income tax
expense (4,537) (6,508) (590) (11,046) (728)
Net earnings $7,725 $11,081 $923 $18,806 $1,140
(A) Drilling margin represents drilling revenues less drilling costs
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(Unaudited)
Three Months Ended Six Months Ended
June 30, September 30, September 30,
2005 2005 2004 2005 2004
Average number
of rigs 50.0 50.7 36.0 50.3 35.7
Utilization rate 95% 95% 96% 95% 94%
Revenue days by
contract:
Daywork contracts 3,424 3,942 1,674 7,366 3,151
Turnkey contracts 462 96 1,347 558 2,723
Footage contracts 417 408 145 825 289
Total 4,303 4,446 3,166 8,749 6,163
Average revenues
per day:
Daywork contracts $13,398 $15,027 $10,321 $14,270 $9,971
Turnkey contracts $18,600 $23,302 $17,684 $19,409 $17,789
Footage contracts $12,974 $13,480 $11,621 $13,223 $12,609
All contracts $13,915 $15,064 $13,513 $14,499 $13,549
Average costs
per day:
Daywork contracts $8,503 $8,766 $8,210 $8,643 $8,020
Turnkey contracts $13,335 $13,677 $14,459 $13,394 $14,813
Footage contracts $9,312 $10,814 $9,462 $10,055 $9,817
All contracts $9,100 $9,060 $10,926 $9,080 $11,106
Average drilling
margin per day:
Daywork contracts $4,895 $6,261 $2,111 $5,626 $1,950
Turnkey contracts $5,264 $9,625 $3,226 $6,014 $2,976
Footage contracts $3,662 $2,667 $2,159 $3,168 $2,792
All contracts $4,815 $6,004 $2,587 $5,419 $2,443
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