Pioneer Drilling Reports Fiscal First Quarter 2008 Results
First quarter revenues up 10% to $102.8 million Announces international expansion
Aug 2, 2007
August 2, 2007 – SAN ANTONIO, TEXAS – Pioneer Drilling Company (AMEX: PDC) today reported results for the three months ended June 30, 2007, which is the first quarter of its 2008 fiscal year.
Revenues for the first quarter of fiscal 2008 grew to $102.8 million, compared to revenues of $93.5 million for the first quarter of fiscal 2007. This 10% increase in revenues was generated primarily by a 16% increase in the number of rigs in Pioneer Drilling’s fleet during the period from an average of 56.7 rigs in the first quarter of fiscal 2007 to an average of 65.7 rigs.
Average revenue per revenue day for all types of contracts was $19,079 in the first quarter of fiscal 2008 compared to $19,154 per day in the first quarter of fiscal 2007. Average drilling margin(1) per revenue day was $7,237 in the first quarter of fiscal 2008, down from $9,004 in the first quarter of fiscal 2007. Net earnings for the first quarter of fiscal 2008 were $13.1 million, or $0.26 per diluted share, compared to net earnings of $19.5 million, or $0.39 per diluted share, for the first quarter of fiscal 2007.
Revenue days during the first quarter of fiscal 2008 increased to 5,387, compared to 4,881 revenue days for the first quarter of fiscal 2007. Pioneer Drilling’s rig utilization rate was 90% for the first quarter of fiscal 2008, down from 95% in the first quarter of fiscal 2007.
Currently, 25 of the Company’s 66 rigs, or 38%, are operating under term contracts of six months to two years. Five of the term contracts will expire in the current quarter, and an additional six will expire during the third quarter of fiscal 2008. Term contracts cover approximately 3,126 revenue days, or 31%, of the remainder of calendar 2007 and 3,059 revenue days, or 13%, of calendar 2008.
Wm. Stacy Locke, Pioneer Drilling’s President and Chief Executive Officer, stated, “We are pleased to announce that our 66th rig, the last of our 15-rig new build program, began operations under a three year term contract in Utah at the end of April 2007. We believe ourmodern rig fleet positions us well for sustained earnings through the current tenuous market conditions. While dayrates appear to be leveling off, as compared to the steep declines which began in December 2006, they continue to be soft and will likely continue to drift lower until natural gas prices improve and/or excess rigs in the U.S. are absorbed.”
“In addition, we have initiated our expansion into the international market, which is not experiencing the same softness as the domestic market. We recently acquired two newly-built 1500 horsepower SCR rigs and contracted for the purchase of a third 1500 horsepower SCR rig. These rigs are the first of our fleet designated for our Latin America expansion. We are excited to announce the execution of our first drilling contract in South America. The rig is currently moving to its first location south of Bogotá, Colombia, and should begin operations at the end of August. Based on the status of current negotiations and outstanding bids, we believe that our remaining two rigs designated for Latin America will begin operations later this year or early next year,” added Mr. Locke.
“We believe we are well positioned to take advantage of the international market, where demand remains strong and the supply of rigs is tight,” continued Mr. Locke, “Our solid domestic exposure and continuing strong cash flow provides the foundation for a successful international effort. As we successfully establish our initial base of operations in Colombia, we intend to prudently expand our international operations into other parts of Latin America. Our expansion into Colombia and other Latin American countries provides the possibility of increased drilling margins during the challenging period we are facing in the U.S., geographical diversification and access to a new customer base.”
Pioneer Drilling Conference Call
Pioneer Drilling’s management team will hold a conference call today, Thursday, August 2, at 2:00 p.m. eastern time (1:00 p.m. Central), to discuss these results. To participate in the call, dial (303) 262-2142 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 9, 2007. To access the replay, dial (303) 590-3000 and enter the pass code 11093228#.
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 e-mail 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 and in the Rocky Mountain region. Its fleet consists of 68 land drilling rigs that drill in depth ranges between 6,000 and 18,000 feet.
Cautionary Statement Regarding Forward-Looking Statements
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. These forward-looking statements speak only as of the date of this press release. Pioneer Drilling disclaims any obligation to update these statements and cautions you not to rely unduly on them. Forward-looking information includes, but is not limited to, statements regarding acquiring rigs for operations in South America and obtaining contracts for those rigs with customers in Colombia and other South American markets, the effect of Pioneer Drilling’s expansion into Latin American markets on its results of operations, future natural gas price trends, future dayrates, future demand and market competitiveness of Pioneer Drilling’s rig fleet, including our ability to continue to obtain term contracts, the future employment of Pioneer Drilling’s rig fleet, overall market demand and utilization rates for rigs.
Although the management of Pioneer Drilling believes that the expectations reflected in such forward-looking statements are reasonable, it 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 things: general and regional economic conditions; the level of activity in the industry; development of adequate management infrastructure; departure of key personnel; access to labor; competitive factors; government regulations; exposure to environmental and other liabilities; adverse weather; and general risks related to the industry and markets in which Pioneer Drilling operates.
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 Drilling’s filings with the Securities and Exchange Commission (the “SEC”), including the Pioneer Drilling’s annual report on Form 10-K for the fiscal year ended March 31, 2007 and subsequent filings with the SEC.
_____________________
(1) 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.
The forecasted capital expenditures set forth below contain
assumptions management believes are reasonable, based on information
available as of the date of this news release. Pioneer Drilling is
not undertaking any obligation to update this forecasted information
as conditions change or as additional information becomes available.
There can be no assurance that any of the forecast estimates can or
will be achieved.
Contacts: Joyce 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)
Three Months Ended (unaudited)
June 30, March 31,
2007 2006 2007
Revenues:
Contract drilling $102,779 $93,493 $103,347
Costs and Expenses:
Contract drilling 63,792 49,543 60,406
Depreciation 16,098 11,570 14,736
General and administrative 3,320 2,925 2,607
Total operating costs 83,210 64,038 77,749
Operating income 19,569 29,455 25,598
Other income (expense):
Interest expense (1) (63) ---
Interest income 862 1,098 881
Other 20 23 8
Total other 881 1,058 889
Income before income taxes 20,450 30,513 26,487
Income tax expense (7,362) (11,027) (9,269)
Net earnings $13,088 $19,486 $17,218
Earnings per share:
Basic $0.26 $0.39 $0.35
Diluted $0.26 $0.39 $0.34
Weighted average number of shares
outstanding:
Basic 49,634 49,592 49,619
Diluted 50,212 50,168 50,127
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
June 30, 2007 March 31, 2007
Assets
Current assets:
Cash and cash equivalents $79,884 $84,945
Receivables, net 53,012 57,698
Contract drilling in progress 10,615 9,837
Deferred income taxes 2,542 2,175
Prepaid expenses 2,918 3,653
Total current assets 148,971 158,308
Net property and equipment 377,526 342,901
Other assets 272 286
Total assets $526,769 $501,495
Liabilities and Equity
Current liabilities:
Accounts payable $21,529 $18,626
Federal income taxes payable 5,874 ---
Prepaid drilling contracts 140 ---
Accrued expenses 15,266 15,593
Total current liabilities 42,809 34,219
Other non-current liability 361 346
Deferred taxes 41,166 38,821
Total liabilities 84,336 73,386
Total shareholders' equity 442,433 428,109
Total liabilities and shareholders'
equity $526,769 $501,495
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(in thousands)
(unaudited)
Three Months Ended
June 30, March 31,
2007 2006 2007
Revenues by contract:
Daywork contracts $98,427 $90,061 $96,915
Turnkey contracts 853 --- 3,445
Footage contracts 3,499 3,432 2,987
Total $102,779 $93,493 $103,347
Drilling costs by contract:
Daywork contracts $60,084 $47,480 $54,856
Turnkey contracts 741 --- 2,615
Footage contracts 2,967 2,063 2,935
Total $63,792 $49,543 $60,406
Drilling margin by
contract (1) (2):
Daywork contracts $38,343 $42,581 $42,059
Turnkey contracts 112 --- 830
Footage contracts 532 1,369 52
Total $38,987 $43,950 $42,941
(1) Reconciliation of drilling
margin to net earnings:
Drilling margin $38,987 $43,950 $42,941
Depreciation (16,098) (11,570) (14,736)
General and administrative (3,320) (2,925) (2,607)
Other income (expense) 881 1,058 889
Income tax expense (7,362) (11,027) (9,269)
Net earnings $13,088 $19,486 $17,218
(2) Drilling margins represent drilling revenues less contract
drilling costs.
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(unaudited)
Three Months Ended
June 30, March 31,
2007 2006 2007
Average number of rigs 65.7 56.7 64.3
Utilization rate 90% 95% 91%
Revenue days by contract:
Daywork contracts 5,130 4,695 4,911
Turnkey contracts 27 --- 81
Footage contracts 230 186 211
Total 5,387 4,881 5,203
Average revenues per day:
Daywork contracts $19,187 $19,182 $19,734
Turnkey contracts $31,593 $--- $42,531
Footage contracts $15,213 $18,452 $14,156
All contracts $19,079 $19,154 $19,863
Average costs per day:
Daywork contracts $11,712 $10,113 $11,170
Turnkey contracts $27,444 $--- $32,284
Footage contracts $12,900 $11,091 $13,910
All contracts $11,842 $10,150 $11,610
Drilling margin per day (3):
Daywork contracts $7,474 $9,069 $8,564
Turnkey contracts $4,148 $--- $10,247
Footage contracts $2,313 $7,360 $246
All contracts $7,237 $9,004 $8,253
(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)
Budget
Year
Three Months Ended Ending
June 30, March 31, March 31,
2007 2006 2007 2008
Capital expenditures:
Routine rig $4,874 $2,843 $4,724 $18,739
Average per revenue day $904 $582 $908
Discretionary:
Rig upgrades $4,377 $10,467 $3,183 $15,400
Iron roughnecks and topdrives 1,976 --- 3,602 18,250
Spare equipment 2,158 1,221 1,736 3,500
Other 1,005 679 3,706 5,400
Total discretionary $9,516 $12,367 $12,227 $42,550
Tubulars $1,858 $2,785 $3,589 $16,450
Total routine, discretionary
and tubulars $16,248 $17,995 $20,540 $77,739
New-builds and acquisitions 35,658 25,126 9,487 56,000
Total capital expenditures $51,906 $43,121 $30,027 $133,739
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 11 14
Total 41 25 66
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 16 19
Total 41 25 66
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