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
Email Alerts/RSS Feeds