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Second Quarter 2009 Results
Net loss for the second quarter was $6.3 million, or $0.13 per share, compared with net income of $618,000, or $0.01 per diluted share for the three months ended March 31, 2009 ("the prior quarter"). Net income for the three months ended June 30, 2008 ("the year-earlier quarter") was $19.1 million, or $0.38 per diluted share.
Revenues for the second quarter were $69.1 million, compared with $100.8 million for the prior quarter and $152.5 million for the year-earlier quarter. EBITDA(1) for the second quarter was $17.9 million, compared to $27.8 million for the prior quarter and $53.4 million for the year-earlier quarter.
First Six Months of 2009 Results
Net loss for the six months ended June 30, 2009 was $5.6 million, or $0.11 per share, compared with net income of $31.0 million, or $0.61 per diluted share for the six months ended June 30, 2008. Revenues for the first six months of 2009 were $170.0 million, compared with $265.9 million for the prior year's first six months. EBITDA for the first six months of 2009 was $45.7 million, compared to $89.6 million for the comparable period in 2008.
Operating Results
Revenues for the Drilling Services Division were $45.7 million for the second quarter, a 36% decline from the prior quarter. During the second quarter, the utilization rate for our drilling rigs averaged 35%, down from 52% in the prior quarter and 90% in the year-earlier quarter. With the lower utilization rate, the number of revenue days dropped to 2,238, a 32% decline from the prior quarter. The Drilling Services margin(2) per day decreased $541, or 7%, to $7,723 in the second quarter as compared to the prior quarter.
Revenues for the Production Services Division declined 21% to $23.4 million for the second quarter, compared to $29.5 million in the prior quarter. Production Services margin(2) decreased 21% to $8.5 million, compared to $10.8 million in the prior quarter. Margin as a percentage of revenue remained steady from the prior quarter at 36%. Currently, 60 of Pioneer's 74 workover rigs have crews assigned and are operating or being actively marketed, while the remaining 14 workover rigs are idle with no crews assigned.
"As we anticipated, U.S. land rig counts and production services activity may have bottomed at the end of the second quarter, and while the market seems to be stabilizing, there are limited signs of improvement," said Wm. Stacy Locke, President and CEO of Pioneer Drilling. "Certain regions of the country are showing signs of increasing activity, in part due to improving oil prices, but we believe improvement this year will be gradual and modest.
"During the second quarter, we established an Appalachian drilling division to focus on operations in the Marcellus Shale. We currently have one drilling rig operating in our Appalachian division, with a second rig expected to begin operating by late August 2009. In addition, we launched wireline operations in the Marcellus Shale play.
"Currently, we have 26 of our 71 drilling rigs, or 37%, earning revenue under drilling contracts," continued Mr. Locke. "Four of these drilling rigs are earning revenue through early contract termination fees while the rigs are stacked. In Colombia, all five of our drilling rigs are under contract.
"We continue to focus on reducing costs where possible. Our selling, general and administrative expenses were reduced 11% to $9 million in the second quarter, and operating costs were reduced in conjunction with declining revenues in both our Drilling Services and Production Services divisions. These reductions enabled us to hold margin percentages steady when compared to the prior quarter. Also, we are closely monitoring liquidity and will continue to focus our capital expenditures primarily on routine expenditures that are required to maintain safe and efficient operations and discretionary expenditures that may be required to obtain new contracts," Locke said.
Pioneer's working capital was $70.0 million at June 30, 2009, up from $67.3 million at March 31, and our cash and cash equivalents were $43.7 million at the end of the second quarter, up $13.7 million from the prior quarter. For the year, cash and cash equivalents increased $16.9 million, primarily due to cash provided by operations of $80.7 million, offset by $47.7 million of property and equipment expenditures and $16.4 million of debt payments. We have $131.0 million of borrowing availability on our senior secured revolving credit facility, with $257.5 million due at maturity in February 2013.
Conference Call
Pioneer's management team will hold a conference call today at 11:00 a.m. Eastern Time (10:00 a.m. Central Time), to discuss these results. To participate in the call, dial 480-629-9645 at least 10 minutes early and ask for the Pioneer Drilling conference call. A replay will be available approximately two hours after the call ends and will be accessible until August 13. To access the replay, dial (303) 590-3030 and enter the pass code 4106201#.
The conference call will also be available on the Internet at Pioneer's Web site at www.pioneerdrlg.com. To listen to the live call, visit Pioneer's Web site at least 10 minutes early to register and download 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 Drilling Company provides contract land drilling services to independent and major oil and gas operators in Texas, Louisiana, Oklahoma, Kansas, the Rocky Mountain and Appalachian regions and internationally in Colombia through its Pioneer Drilling Services Division. The Company also provides workover rig, wireline and fishing and rental services to producers in the U.S. Gulf Coast, Mid-Continent, Rocky Mountain and Appalachian regions through its Pioneer Production Services Division. Its fleet consists of 71 land drilling rigs that drill at depths ranging from 6,000 to 25,000 feet, 74 workover rigs (sixty-nine 550 horsepower rigs, four 600 horsepower rigs and one 400 horsepower rig), 61 wireline units, and fishing and rental tools.
Cautionary Statement Regarding Forward-Looking Statements,
Non-GAAP Financial Measures and Reconciliations
Statements we make in this news 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. Our actual results, performance or achievements, or industry results, could differ materially from those we express in this news release as a result of a variety of factors, including general economic and business conditions and industry trends, risks associated with the current global economic crisis and its impact on capital markets and liquidity, the continued strength or weakness of the oil and gas production industry in the geographic areas in which we operate including the price of oil and natural gas in general, and the recent precipitous decline in prices in particular, and the impact of commodity prices and other factors upon future decisions about onshore exploration and development projects to be made by oil and gas companies and their ability to obtain necessary financing, the highly competitive nature of our business, difficulty in integrating the services of acquired companies, including the production services businesses of WEDGE, Competition, Paltec and Pettus in an efficient and effective manner, the availability, terms and deployment of capital, the availability of qualified personnel, 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, challenges in achieving strategic objectives, and the risk that our markets do not evolve as anticipated. We have discussed many of these factors in more detail in our annual report on Form 10-K for the year ended December 31, 2008. These factors are not necessarily all the important factors that could affect us. Unpredictable or unknown factors we have not discussed in this news release, or in our annual report on Form 10-K 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 news 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 in the following tables.
(1) We define EBITDA as earnings (loss) before interest income (expense),
taxes, depreciation, amortization and impairments. 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 earnings (loss) to EBITDA is included in the
tables to this press 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.
(2) Drilling Services margin represents contract drilling revenues less
contract drilling operating costs. Production Services margin
represents production services revenues less production services
operating costs. We believe that Drilling Services margin and
Production Services margin are useful measures for evaluating
financial performance, although they are not measures of financial
performance under GAAP. However, Drilling Services margin and
Production Services margin are common measures of operating
performance used by investors, financial analysts, rating agencies and
Pioneer management. A reconciliation of Drilling Services margin and
Production Services margin to net earnings (loss) is included in the
tables to this press release. Drilling Services margin and Production
Services margin as presented may not be comparable to other similarly
titled measures reported by other companies.
Contacts: Lorne E. Phillips, CFO
Pioneer Drilling Company
210-828-7689
Lisa Elliott / lelliott@drg-e.com
Anne Pearson / apearson@drg-e.com
DRG&E / 713-529-6600
- Financial Statements and Information Follow -
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, March 31, June 30,
2009 2008 2009 2009 2008
---- ---- ---- ---- ----
Revenues:
Drilling services $45,720 $109,250 $71,366 $117,086 209,291
Production services 23,400 43,297 29,474 52,874 56,653
------ ------ ------ ------ ------
Total revenue 69,120 152,547 100,840 169,960 265,944
------ ------- ------- ------- -------
Costs and Expenses:
Drilling services 28,437 64,277 44,128 72,565 127,774
Production services 14,906 21,916 18,716 33,622 28,845
Depreciation and
amortization 26,069 20,580 25,446 51,515 37,699
Selling, general and
administrative 8,951 12,150 10,027 18,978 19,872
Bad debt (recovery)
expense 30 (92) (334) (304) 43
--- --- ---- ---- ---
Total costs and
expenses 78,393 118,831 97,983 176,376 214,233
------ ------- ------ ------- -------
Income (loss) from
operations (9,273) 33,716 2,857 (6,416) 51,711
------ ------ ----- ------ ------
Other (expense) income:
Interest expense (1,728) (4,265) (1,988) (3,716) (5,839)
Interest income 55 205 84 139 790
Other 1,140 (930) (515) 625 162
----- ---- ---- --- ---
Total other
(expense) income (533) (4,990) (2,419) (2,952) (4,887)
---- ------ ------ ------ ------
Income (loss) before
income taxes (9,806) 28,726 438 (9,368) 46,824
Income tax benefit
(expense) 3,547 (9,609) 180 3,727 (15,859)
----- ------ --- ----- -------
Net earnings (loss) $(6,259) $19,117 $618 $(5,641) $30,965
======= ======= ==== ======= =======
Earnings (loss) per
common share:
Basic $(0.13) $0.38 $0.01 $(0.11) $0.62
====== ===== ===== ====== =====
Diluted $(0.13) $0.38 $0.01 $(0.11) $0.61
====== ===== ===== ====== =====
Weighted average number
of shares outstanding:
Basic 49,826 49,789 49,824 49,825 49,774
Diluted 49,826 50,483 49,929 49,825 50,369
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
June 30, 2009 December 31, 2008
------------- -----------------
ASSETS (unaudited) (audited)
------
Current assets:
Cash and cash equivalents $43,700 $26,821
Receivables, net of allowance for
doubtful accounts 73,071 99,423
Deferred income taxes 4,919 6,270
Inventory 4,649 3,874
Prepaid expenses and other current
assets 4,194 8,902
----- -----
Total current assets 130,533 145,290
Net property and equipment 623,975 627,562
Intangible assets, net of
amortization 27,696 29,969
Other long-term assets 19,401 21,658
------ ------
Total assets $801,605 $824,479
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $12,215 $21,830
Current portion of long-term debt 2,081 17,298
Prepaid drilling contracts - 1,171
Accrued expenses 46,191 40,619
------ ------
Total current liabilities 60,487 80,918
Long-term debt, less current portion 260,914 262,115
Other long term liabilities 6,135 6,413
Deferred taxes 62,507 60,915
------ ------
Total liabilities 390,043 410,361
Total shareholders' equity 411,562 414,118
------- -------
Total liabilities and shareholders'
equity $801,605 $824,479
======== ========
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months ended
June 30,
2009 2008
---- ----
Cash flows from operating activities:
Net earnings (loss) $(5,641) $30,965
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 51,515 37,699
Allowance for doubtful accounts 96 320
(Gain) loss on dispositions of property and
equipment 91 (377)
Stock-based compensation expense 3,889 1,848
Deferred income taxes 3,450 2,919
Change in other assets 907 256
Change in non-current liabilities (991) (168)
Changes in current assets and liabilities 27,397 1,964
------ -----
Net cash provided by operating activities 80,713 75,426
------ ------
Cash flows from investing activities:
Acquisition of WEDGE - (313,610)
Acquisition of Competition Wireline - (26,101)
Purchases of property and equipment (47,677) (58,936)
Purchase of auction rate securities - (16,475)
Proceeds from sale of property and equipment 261 1,851
Proceeds from insurance recoveries 36 2,301
--- -----
Net cash used in investing activities (47,380) (410,970)
------- --------
Cash flows from financing activities:
Debt repayments (16,418) (32,170)
Proceeds from issuance of debt - 311,500
Debt issuance costs - (3,323)
Proceeds from sale of common stock - 653
Excess tax benefit (reductions) for stock
option exercises (36) 250
--- ---
Net cash used in by financing activities (16,454) 276,910
------- -------
Net increase (decrease) in cash and cash
equivalents 16,879 (58,634)
Beginning cash and cash equivalents 26,821 76,703
------ ------
Ending cash and cash equivalents $43,700 $18,069
======= =======
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(in thousands)
(unaudited)
Three months ended Six months ended
June 30, March 31, June 30,
2009 2008 2009 2009 2008
---- ---- ---- ---- ----
Drilling Services
Division:
Revenues $45,720 $109,250 $71,366 $117,086 $209,291
Operating costs 28,437 64,277 44,128 72,565 127,774
------ ------ ------ ------ -------
Drilling services
margin (1) $17,283 $44,973 $27,238 $44,521 $81,517
======= ======= ======= ======= =======
Average number of
drilling rigs 70.7 66.7 70.0 70.3 66.6
Utilization rate 35% 90% 52% 44% 87%
Revenue days 2,238 5,475 3,296 5,534 10,511
Average revenues
per day $20,429 $19,954 $21,652 $21,158 $19,912
Average operating
costs per day 12,706 11,740 13,388 13,113 12,156
------ ------ ------ ------ ------
Drilling services
margin per day (2) $7,723 $8,214 $8,264 $8,045 $7,756
====== ====== ====== ====== ======
Production Services
Division:
Revenues $23,400 $43,297 $29,474 $52,874 $56,653
Operating costs 14,906 21,916 18,716 33,622 28,845
------ ------ ------ ------ ------
Production services
margin (1) $8,494 $21,381 $10,758 $19,252 $27,808
====== ======= ======= ======= =======
Combined:
Revenues $69,120 $152,547 $100,840 $169,960 $265,944
Operating Costs 43,343 86,193 62,844 106,187 156,619
------ ------ ------ ------- -------
Combined margin $25,777 $66,354 $37,996 $63,773 $109,325
======= ======= ======= ======= ========
EBITDA (3) $17,936 $53,366 $27,788 $45,724 $89,572
======= ======= ======= ======= =======
(1) Drilling services margin represents contract drilling revenues less
contract drilling operating costs. Production services margin
represents production services revenue less production services
operating costs. Pioneer believes that Drilling services margin and
Production services margin are useful measures for evaluating
financial performance, although they are not measures of financial
performance under generally accepted accounting principles. However,
Drilling services margin and Production services margin are common
measures of operating performance used by investors, financial
analysts, rating agencies and Pioneer's management. A reconciliation
of Drilling services margin and Production services margin to net
earnings (loss) is included in the table below. Drilling services
margin and production services margin as presented may not be
comparable to other similarly titled measures reported by other
companies.
(2) Drilling services margin per revenue day represents the Drilling
Services Division's average revenue per revenue day less average
operating costs per revenue day.
(3) We define EBITDA as earnings (loss) before interest income (expense),
taxes, depreciation, amortization and impairments. 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 earnings (loss) as an indication of operating
performance or cash flows from operating activities or as a measure of
liquidity. A reconciliation of net earnings (loss) to EBITDA is
included in the table below. 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.
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Reconciliation of Combined Drilling Services Margin and Production
Services Margin and EBITDA to Net Earnings (Loss)
(in thousands)
(unaudited)
Three months ended Six months ended
June 30, March 31, June 30,
2009 2008 2009 2009 2008
---- ---- ---- ---- ----
Combined margin $25,777 $66,354 $37,996 $63,773 $109,325
General and
administrative (8,951) (12,150) (10,027) (18,978) (19,872)
Bad debt expense
(recoveries) (30) 92 334 304 (43)
Other income
(expense) 1,140 (930) (515) 625 162
----- ---- ---- --- ---
EBITDA 17,936 53,366 27,788 45,724 89,572
Depreciation
and amortization (26,069) (20,580) (25,446) (51,515) (37,699)
Interest income
(expense), net (1,673) (4,060) (1,904) (3,577) (5,049)
Income tax
expense 3,547 (9,609) 180 3,727 (15,859)
----- ------ --- ----- -------
Net earnings
(loss) $(6,259) $19,117 $618 $(5,641) $30,965
======= ======= ==== ======= =======
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Capital Expenditures
(in thousands)
(unaudited)
Budget
Three Six ------
months ended months ended Year Ending
June 30, March 31, June 30, December 31,
2009 2008 2009 2009 2008 2009
---- ---- ---- ---- ---- ----
Capital expenditures:
Drilling Services
Division:
Routine rigs $1,788 $3,814 $3,896 $5,684 $7,821 $13,100
Discretionary 5,455 13,704 6,063 11,518 32,718 32,100
Tubulars 1,102 3 868 1,970 1,050 5,000
New-builds and
acquisitions - 1,087 - - 1,833 -
----- ----- ----- ----- ----- -----
Total Drilling
Services Division
capital
expenditures 8,345 18,608 10,827 19,172 43,422 50,200
----- ------ ------ ------ ------ ------
Production Services
Division:
Routine 1,023 835 1,713 2,736 943 5,800
Discretionary 90 - 81 171 - 2,200
New-builds and
acquisitions 246 6,008 4,479 4,725 9,039 7,000
--- ----- ----- ----- ----- -----
Total Production
Services Division
capital
expenditures 1,359 6,843 6,273 7,632 9,982 15,000
----- ----- ----- ----- ----- ------
Actual and budgeted
capital expenditures 9,704 25,451 17,100 26,804 53,404 65,200
----- ------ ------ ------ ------ ------
Budgeted capital
expenditures
approved in 2008
that will be
incurred in
2009 8,778 - 9,638 18,416 - 19,310
----- ----- ----- ------ ------ ------
$18,482 $25,451 $26,738 $45,220 $53,404 $84,510
======= ======= ======= ======= ======= =======
PIONEER DRILLING COMPANY AND SUBSIDIARIES
Drilling Rig, Workover Rig and Wireline Unit Information
Rig Type
Mechanical Electric Total Rigs
---------- -------- ----------
Drilling Services Division:
Drilling rig horsepower ratings:
550 to 700 HP 6 - 6
750 to 900 HP 14 2 16
1000 HP 18 12 30
1200 to 2000 HP 3 16 19
--- --- ---
Total 41 30 71
=== === ===
Drilling rig depth ratings:
Less than 10,000 feet 8 2 10
10,000 to 13,900 feet 30 7 37
14,000 to 25,000 feet 3 21 24
--- --- ---
Total 41 30 71
=== === ===
Production Services Division:
Workover rig horsepower ratings:
400 HP 1
550 HP 69
600 HP 4
---
Total 74
===
Wireline units 61
===
Fishing & Rental Tools Inventory $15 Million
===========
SOURCE Pioneer Drilling Company, Inc.
http://www.pioneerdrlg.com
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