Pioneer Drilling Reports Record Fiscal Third Quarter 2007 Results
Revenues were up 51% to $112.4 million
Feb 1, 2007
February 1, 2007 – SAN ANTONIO, TEXAS – Pioneer Drilling Company (AMEX: PDC) today reported results for the three months ended December 31, 2006, which is the third quarter of its 2007 fiscal year.
Revenues for the third quarter of fiscal 2007 grew to $112.4 million, compared to revenues of $74.5 million for the third quarter of fiscal 2006. This 51% increase in revenues was generated by a 28% increase in average revenues per revenue day to $20,176 per day, in addition to a 17% increase in the average number of rigs in Pioneer Drilling’s fleet to 62.3 rigs.
Average drilling margin (1) per revenue day increased 44% to $9,649 in the third quarter of fiscal 2007, compared to our second quarter of fiscal 2007. Daywork costs per day remained roughly flat quarter over quarter, yielding a 1% increase in average daywork margin per day. In contrast, average drilling revenues per day for footage contracts, which represented the remaining 5% of our revenue days and are predominately in the shallow rig western Oklahoma market, declined 22% to $13,896, as compared to $17,832 for the second quarter of fiscal 2007.
This yielded an average margin of $2,615 per day for footage contracts in the third quarter, as compared to $4,929 per day for footage contracts in the second quarter of fiscal 2007. Our exposure to the shallow rig market is limited to five low-horsepower rigs in our fleet of 64 rigs.
“If rig supply continues to exceed rig demand, we anticipate that daywork and footage rates will continue to weaken, as newly built and newly refurbished rigs come into the market,” added Mr. Locke. “Furthermore, we anticipate rig utilization rates would gradually decline with a softening market, which historically has initially affected older and less efficient rigs. Despite the potentially weaker U.S. land drilling market, Pioneer Drilling is very well positioned to compete effectively. Our focus on building a premium fleet has helped us maintain aboveaverage utilization rates over the last six years.
“Our new-build program is essentially complete, with only two rigs of our 15-rig program remaining to be completed within the next 60 days. In addition, the vast majority of our rig upgrade program is complete. At February 1, 2007, 82% of our fleet was either built new or was upgraded and refurbished in the last six years, giving us one of the youngest fleets in the industry.
Over 90% of our rigs are well suited for drilling horizontal and directional wells, 91% have two independently powered triplex mud pumps, 54% have modern mud-cleaning systems and 37% are premium electric. We continue to invest in upgrading our equipment.
In February, we will install a 350-ton topdrive and an iron-roughneck on two rigs. In March, we will begin installing roughly three to four iron-roughnecks per month until each of our rigs has been upgraded with an iron-roughneck. We believe our fleet is well positioned to be highly competitive in any market conditions we encounter.
“Currently, 37 of our 64 rigs, or 58%, are operating under term contracts of six months to two years, of which 18 will expire by August 31, 2007, 11 have a remaining term of six to 12 months, three have a remaining term of 12 to 18 months and five have a remaining term in excess of 18 months. We also have term contracts of two and three years for the two rigs under construction at February 1, 2007. Our term contracts cover approximately 9,200 days of calendar 2007 and 2,800 days of calendar 2008.”
Revenues for the first nine months of fiscal 2007 increased 55% to $312.8 million, compared to revenues of $201.3 million for the first nine months of fiscal 2006, while net earnings more than doubled during the first nine months of fiscal 2007 to $67.0 million, or $1.34 per diluted share, compared to net earnings of $32.6 million, or $0.69 per diluted share, during the same period in fiscal 2006.
Revenue days were 15,727 during the first nine months of fiscal 2007, compared to 13,463 revenue days for the comparable period of fiscal 2006. Pioneer Drilling’s rig utilization rate for the first nine months of fiscal 2007 was 97%, compared to 95% in last year’s comparable nine-month period.
Pioneer Drilling’s management team will hold a conference call today, Thursday, February 1, 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 February 8, 2007. To access the replay, dial (303) 590-3000 and enter the pass code 11082176#.
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, Kansas and in the Rocky Mountain region. Its fleet consists of 64 land drilling rigs that drill in depth ranges between 6,000 and 18,000 feet.
(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.
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, the future employment of our rig fleet and 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, 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.
- Tables to Follow -
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, Sept. 30, December 31,
2006 2005 2006 2006 2005
Revenues:
Contract drilling $112,421 $74,459 $106,917 $312,831 $201,308
Costs and Expenses:
Contract drilling 58,659 42,936 55,815 164,017 122,239
Depreciation 13,969 8,598 12,581 38,120 23,869
General and
administrative 2,743 1,638 2,847 8,516 4,839
Bad debt expense 800 25 --- 800 25
Total operating costs 76,171 53,197 71,243 211,453 150,972
Operating income 36,250 21,262 35,674 101,378 50,336
Other income (expense):
Interest expense (9) (1) (1) (73) (204)
Interest income 836 398 1,013 2,947 1,349
Other 13 9 13 50 39
Total other 840 406 1,025 2,924 1,184
Income before taxes 37,090 21,668 36,699 104,302 51,520
Income tax expense (13,102) (7,876) (13,213) (37,341) (18,922)
Net earnings $23,988 $13,792 $23,486 $66,961 $32,598
Earnings per share:
Basic $0.48 $0.30 $0.47 $1.35 $0.70
Diluted $0.48 $0.29 $0.47 $1.34 $0.69
Weighted average number
of shares outstanding:
Basic 49,603 46,542 49,598 49,598 46,308
Diluted 50,146 47,326 50,140 50,148 47,010
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
December 31, 2006 March 31, 2006
Assets
Current assets:
Cash and cash equivalents $74,754 $91,174
Receivables, net 55,677 35,544
Contract drilling in progress 14,006 9,620
Current deferred income taxes 1,754 990
Prepaid expenses 4,027 2,208
Total current assets 150,218 139,536
Net property and equipment 329,649 260,784
Other assets 306 358
Total assets $480,173 $400,678
Liabilities and Equity
Current liabilities:
Accounts payable $19,639 $16,041
Federal income taxes payable 3,791 6,835
Prepaid drilling contracts --- 140
Accrued expenses 13,916 9,616
Total current liabilities 37,346 32,632
Other non-current liability 432 388
Deferred taxes 32,221 26,982
Total liabilities 69,999 60,002
Total shareholders' equity 410,174 340,676
Total liabilities and shareholders'
equity $480,173 $400,678
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
December 31, Sept. 30, December 31,
2006 2005 2006 2006 2005
Revenues by contract:
Daywork contracts $108,808 $67,896 $103,404 $302,273 $173,006
Turnkey contracts --- --- --- --- 10,830
Footage contracts 3,613 6,563 3,513 10,559 17,472
Total $112,421 $74,459 $106,917 $312,832 $201,308
Drilling costs by
contract:
Daywork contracts $55,726 $37,885 $53,273 $156,480 $101,419
Turnkey contracts --- --- --- --- 7,463
Footage contracts 2,933 5,051 2,542 7,538 13,357
Total $58,659 $42,936 $55,815 $164,018 $122,239
Drilling margin by
contract (1) (2):
Daywork contracts $53,082 $30,011 $50,131 $145,793 $71,587
Turnkey contracts --- --- --- --- 3,367
Footage contracts 680 1,512 971 3,021 4,115
Total $53,762 $31,523 $51,102 $148,814 $79,069
(1) Reconciliation of
drilling margin to
net earnings:
Drilling margin $53,762 $31,523 $51,102 $148,814 $79,069
Depreciation (13,969) (8,598) (12,581) (38,120) (23,869)
General and
administrative (2,743) (1,638) (2,847) (8,516) (4,839)
Bad debt expense (800) (25) --- (800) (25)
Other income
(expense) 840 406 1,025 2,924 1,184
Income tax expense (13,102) (7,876) (13,213) (37,341) (18,922)
Net earnings $23,988 $13,792 $23,486 $66,961 $32,598
(2) Drilling margins represent drilling revenues less contract drilling
costs.
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(Unaudited)
Three Months Ended Nine Months Ended
December 31, Sept. 30, December 31,
2006 2005 2006 2006 2005
Average number of rigs 62.3 53.3 59.7 59.6 51.3
Utilization rate 98% 96% 97% 97% 95%
Revenue days by contract:
Daywork contracts 5,312 4,269 5,077 15,084 11,635
Turnkey contracts --- --- --- --- 558
Footage contracts 260 445 197 643 1,270
Total 5,572 4,714 5,274 15,727 13,463
Average revenues per day:
Daywork contracts $20,483 $15,904 $20,367 $20,039 $14,869
Turnkey contracts $--- $--- $--- $--- $19,409
Footage contracts $13,896 $14,748 $17,832 $16,421 $13,757
All contracts $20,176 $15,795 $20,272 $19,891 $14,953
Average costs per day:
Daywork contracts $10,491 $8,874 $10,493 $10,374 $8,717
Turnkey contracts $--- $--- $--- $--- $13,375
Footage contracts $11,281 $11,351 $12,904 $11,723 $10,517
All contracts $10,527 $9,108 $10,583 $10,429 $9,080
Drilling margin per day
(3):
Daywork contracts $9,993 $7,030 $9,874 $9,665 $6,153
Turnkey contracts $--- $--- $--- $--- $6,034
Footage contracts $2,615 $3,398 $4,929 $4,698 $3,240
All contracts $9,649 $6,687 $9,689 $9,462 $5,873
(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
December 31, Sept. 30, December 31,
2006 2005 2006 2006 2005
Capital expenditures:
Routine rigs $6,523 $3,870 $2,829 $11,637 $8,368
Average per revenue day $1,171 $821 $536 $740 $622
Discretionary:
Rig upgrades $518 $4,545 $5,750 $16,734 $16,350
Spare equipment 1,185 1,316 2,698 6,631 4,674
Other 3,266 1,294 1,460 5,406 4,353
Total discretionary $4,969 $7,155 $9,908 $28,771 $25,377
Tubulars $46 $6,980 $9,963 $11,825 $12,297
Total routine,
discretionary and
tubulars $11,538 $18,005 $22,700 $52,233 $46,042
Total routine,
discretionary and
tubulars
New-builds and
acquisitions 19,981 22,595 19,863 64,970 45,572
Total capital
expenditures $31,519 $40,600 $42,563 $117,203 $91,614
Forecast Actual
Three Months Fiscal Year Fiscal Year
Ending Ending Ended
March 31, March 31, March 31,
2007 2007 (4) 2006
Capital expenditures:
Routine rigs $6,000 $17,637 $12,898
Discretionary:
Rig upgrades $9,600 26,334 21,446
Spare equipment 700 7,331 5,060
Other 5,600 11,006 5,157
Total discretionary $15,900 $44,671 $31,663
Tubulars $7,600 $19,425 $11,999
Total routine, discretionary
and tubulars $29,500 $81,733 $56,560
New-builds and acquisitions 9,700 74,670 72,311
Total capital expenditures $39,200 $156,403 $128,871
(4) The forecasted capital expenditures for the fiscal year ending
March 31, 2007 represent actual capital expenditures for the nine
months ended December 31, 2006 plus forecasted capital expenditures
for the three months ending March 31, 2007.
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Rig Information as of December 31, 2006
Rig Type
Mechanical Electric Total Rigs
Rig horsepower ratings:
550 to 700 HP 6 --- 6
750 to 900 HP 15 2 17
1000 HP 16 10 26
1200 to 1500 HP 3 11 14
Total 40 23 63
Rig drilling depth ratings:
Less than 10,000 feet 8 2 10
10,000 to 13,900 feet 29 5 34
14,000 to 18,000 feet 3 16 19
Total 40 23 63
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