Exhibit 99.1
![(PIONEER DRIILLING LOGO)](https://capedge.com/proxy/8-K/0000950129-08-004309/h59359h5935901.gif)
Contacts: | Joyce M. Schuldt, Executive VP & CFO | |||
Pioneer Drilling Company | ||||
210-828-7689 |
FOR IMMEDIATE RELEASE | Lisa Elliott /lelliott@drg-e.com | |
Anne Pearson /apearson@drg-e.comm | ||
DRG&E / 713-529-6600 |
Pioneer Reports Second Quarter 2008 Financial Results
Second quarter revenues were up 48% to $152.5 million
and earnings per diluted share increased 46% to $0.38 over prior year
and earnings per diluted share increased 46% to $0.38 over prior year
SAN ANTONIO, Texas, August 7, 2008 – Pioneer Drilling Company, Inc. (AMEX: PDC) today reported financial results for the three and six months ended June 30, 2008. As previously announced, the Company has transitioned to a December 31 fiscal year end; accordingly, the three months ended June 30 is reported as the second quarter of 2008.
Net income for the second quarter was $19.1 million, or $0.38 per diluted share, compared with net income of $11.8 million, or $0.24 per diluted share, for the three months ended March 31, 2008 (“the prior quarter”), and net income of $13.1 million, or $0.26 per diluted share, for the three months ended June 30, 2007 (“the year-earlier quarter”). The second quarter of 2008 included three months of operating results from our Production Services Division, which was formed on March 1, 2008 as a result of the acquisitions of the production service businesses of the WEDGE Group and Competition Wireline, as well as contributions from our Colombian operations, which commenced in the third quarter of 2007.
Revenues for the second quarter were $152.5 million, compared with $113.4 million for the prior quarter and $102.8 million for the year-earlier quarter. EBITDA(1) for the second quarter increased 47% to $53.4 million from the prior quarter and 50% from the year-earlier quarter. Additionally, the second quarter was impacted by a charge to selling, general and administrative expenses of approximately $1.0 million related to the Company’s investigation of internal control over financial reporting and a charge to interest expense of approximately $0.2 million related to bank fees and incremental interest for obtaining a debt covenant waiver.
Net income for the six months ended June 30, 2008 was $31.0 million, or $0.61 per diluted share, compared with net income of $30.3 million, or $0.60 per diluted share, for the six months ended June 30, 2007. Revenues for the six months of 2008 were $266.0 million, compared with $206.1 million for the comparable period in 2007. EBITDA for the six months of 2008 increased 18% to $89.6 million from the comparable period in 2007 of $76.0 million.
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“Our Drilling Services and Production Services divisions both performed well in the second quarter,” said Wm. Stacy Locke, President and CEO. “Our drilling rig utilization and average margins per day for our Drilling Services division improved significantly from the prior quarter and our Production Services margins remained very solid. As a result of the strong demand in both divisions, we have approved the purchase of additional wireline units, fishing and rental equipment and in July, we secured a two-year term contract to build a land rig for the U.S. market. The rig, a 1500 horsepower SCR rig equipped with an automatic catwalk, iron roughneck and top-drive, is under construction and expected to be placed in service in December in the Rocky Mountain region.”
The Drilling Services Division contributed $109.3 million of revenues for the second quarter, an increase of $9.2 million over the prior quarter and $6.5 million over the year-earlier quarter. Drilling Services revenues improved due to an increase in rig utilization to 90%, as compared to 84% in the first quarter, and a 14% increase in the Drilling Services margin(2) to $8,026 per day, up from $7,047 in the first quarter. Mr. Locke stated, “In June, dayrates reached their highest level so far this year and we anticipate continued improvement throughout the remainder of the year. In our international operations, we moved a fourth drilling rig into Colombia, which commenced drilling operations this week, and we are marketing another 1500 horsepower SCR rig that could be placed in service prior to year-end if we secure a drilling contract.”
The Production Services Division contributed revenues of $43.3 million in the second quarter, compared to $13.4 million for the one-month period in the first quarter of 2008. Mr. Locke further stated, “The Production Services Division is performing better than expected and generated a margin(2) of 49% in the second quarter. We remain optimistic about the outlook for workover, wireline and fishing and rental services for the remainder of the year.”
Pioneer Conference Call
Pioneer’s management team will hold a conference call today at 2:00 p.m. Eastern Daylight Time (1:00 p.m. Central Daylight Time), to discuss these results. To participate in the call, dial (303) 205-0066 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 14. To access the replay, dial (303) 590-3000 and enter the pass code 11118059#.
The conference call will also be available on the Internet at Pioneer’s Web site atwww.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.
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About Pioneer
Pioneer Drilling Company provides land contract drilling services to independent and major oil and gas operators in Texas, Louisiana, Oklahoma, Kansas, the Rocky Mountain region and internationally in Colombia though it’s 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 and Rocky Mountain regions through its Pioneer Production Services Division. Its fleet consists of 69 land drilling rigs that drill at depths of 6,000 and 18,000 feet, 66 workover rigs (61 — 550 horsepower rigs, four 600 horsepower rigs and one 400 horsepower rig), 51 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, 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, difficulty in integrating the services of acquired companies, including the production services businesses of WEDGE and Competition, 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 these factors in more detail in our transition report on Form 10-KT for the fiscal year ended December 31, 2007 and our quarterly report on Form 10-Q for the quarter ended March 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, 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 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 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 is included in the operating statistic table in 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. |
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(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 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 management. A reconciliation of Drilling Services margin and Production Services margin to net earnings is included in the operating statistics table in this press release. Drilling Services margin and Production Services margin as presented my not be comparable to other similarly titled measures reported by other companies. |
- Financial Statements Follow –
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PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months ended | Six months ended | |||||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||||||
2008 | 2007 | 2008 | 2008 | 2007 | ||||||||||||||||
Revenues | $ | 152,547 | $ | 102,779 | $ | 113,397 | $ | 265,944 | $ | 206,126 | ||||||||||
Costs and Expenses: | ||||||||||||||||||||
Operating Costs | 86,193 | 62,388 | 70,426 | 156,619 | 121,578 | |||||||||||||||
Depreciation | 20,580 | 16,098 | 17,119 | 37,699 | 30,834 | |||||||||||||||
Selling, general and administrative | 12,150 | 4,724 | 7,722 | 19,872 | 8,547 | |||||||||||||||
Bad debt expense (recovery) | (92 | ) | — | 135 | 43 | — | ||||||||||||||
Total operating costs | 118,831 | 83,210 | 95,402 | 214,233 | 160,959 | |||||||||||||||
Operating income | 33,716 | 19,569 | 17,995 | 51,711 | 45,167 | |||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest expense | (4,265 | ) | (1 | ) | (1,574 | ) | (5,839 | ) | (1 | ) | ||||||||||
Interest income | 205 | 862 | 585 | 790 | 1,743 | |||||||||||||||
Other | (930 | ) | 20 | 1,092 | 162 | 28 | ||||||||||||||
Total other | (4,990 | ) | 881 | 103 | (4,887 | ) | 1,770 | |||||||||||||
Income before taxes | 28,726 | 20,450 | 18,098 | 46,824 | 46,937 | |||||||||||||||
Income tax expense | (9,609 | ) | (7,362 | ) | (6,250 | ) | (15,859 | ) | (16,631 | ) | ||||||||||
Net earnings | $ | 19,117 | $ | 13,088 | $ | 11,848 | $ | 30,965 | $ | 30,306 | ||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 0.38 | $ | 0.26 | $ | 0.24 | $ | 0.62 | $ | 0.61 | ||||||||||
Diluted | $ | 0.38 | $ | 0.26 | $ | 0.24 | $ | 0.61 | $ | 0.60 | ||||||||||
Weighted average number of shares outstanding: | ||||||||||||||||||||
Basic | 49,789 | 49,634 | 49,759 | 49,774 | 49,627 | |||||||||||||||
Diluted | 50,483 | 50,212 | 50,291 | 50,369 | 50,167 |
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PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
Condensed Consolidated Balance Sheets
(in thousands)
June 30, 2008 | December 31, 2007 | |||||||
(unaudited) | (audited) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 18,069 | $ | 76,703 | ||||
Receivables, net | 78,838 | 47,370 | ||||||
Contract drilling in progress | 14,398 | 7,861 | ||||||
Deferred income taxes | 6,243 | 3,670 | ||||||
Inventory | 3,159 | 1,180 | ||||||
Prepaid expenses and other | 5,854 | 5,073 | ||||||
Total current assets | �� | 126,561 | 141,857 | |||||
Net property and equipment | 575,344 | 417,022 | ||||||
Deferred income taxes | 638 | 573 | ||||||
Goodwill | 172,228 | — | ||||||
Other long-term assets | 42,294 | 760 | ||||||
Total assets | $ | 917,065 | $ | 560,212 | ||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 13,811 | $ | — | ||||
Accounts payable | 25,251 | 21,424 | ||||||
Income tax payable | 3,640 | — | ||||||
Prepaid drilling contracts | 1,789 | 1,933 | ||||||
Accrued expenses | 35,291 | 18,693 | ||||||
Total current liabilities | 79,782 | 42,050 | ||||||
Long-term debt | 271,820 | — | ||||||
Other non-current liabilities | 5,580 | 254 | ||||||
Deferred taxes | 54,618 | 46,836 | ||||||
Total liabilities | 411,800 | 89,140 | ||||||
Total shareholders’ equity | 505,265 | 471,072 | ||||||
Total liabilities and shareholders’ equity | $ | 917,065 | $ | 560,212 | ||||
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PIONEER DRILLING COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months ended | ||||||||
June 30, | ||||||||
2008 | 2007 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 30,965 | $ | 30,306 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 37,699 | 30,834 | ||||||
Allowance for doubtful accounts | 320 | — | ||||||
Loss (gain) on dispositions of property and equipment | (377 | ) | 1,434 | |||||
Stock-based compensation expense | 1,848 | 1,662 | ||||||
Deferred income taxes | 2,919 | 8,157 | ||||||
Change in other assets | 256 | 5 | ||||||
Change in non-current liabilities | (168 | ) | (70 | ) | ||||
Changes in current assets and liabilities | 1,964 | 9,214 | ||||||
Net cash provided by operating activities | 75,426 | 81,542 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of WEDGE, net of cash acquired | (313,610 | ) | — | |||||
Acquisition of Competition Wireline, net of cash acquired | (26,101 | ) | — | |||||
Purchases of property and equipment | (58,936 | ) | (78,519 | ) | ||||
Proceeds from insurance recoveries | 2,301 | — | ||||||
Purchase of auction rate securities, net | (16,475 | ) | — | |||||
Proceeds from sale of property and equipment | 1,851 | 1,817 | ||||||
Net cash used in investing activities | (410,970 | ) | (76,702 | ) | ||||
Cash flows from financing activities: | ||||||||
Payments of debt | (32,170 | ) | — | |||||
Proceeds from issuance of debt | 311,500 | — | ||||||
Debt issuance costs | (3,323 | ) | — | |||||
Proceeds from sale of common stock | 653 | 217 | ||||||
Excess tax benefit of stock option exercises | 250 | 73 | ||||||
Net cash provided by financing activities | 276,910 | 290 | ||||||
Net increase (decrease) in cash and cash equivalents | (58,634 | ) | 5,130 | |||||
Beginning cash and cash equivalents | 76,703 | 74,754 | ||||||
Ending cash and cash equivalents | $ | 18,069 | $ | 79,884 | ||||
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PIONEER DRILLING COMPANY AND SUBSIDIARIES
Operating Statistics
(in thousands)
(unaudited)
Operating Statistics
(in thousands)
(unaudited)
Three months ended | Six months ended | |||||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||||||
2008 | 2007 | 2008 | 2008 | 2007 | ||||||||||||||||
Drilling Services Division: | ||||||||||||||||||||
Revenues | $ | 109,250 | $ | 102,779 | $ | 100,041 | $ | 209,291 | $ | 206,126 | ||||||||||
Operating costs | 64,277 | 62,388 | 63,497 | 127,774 | 121,578 | |||||||||||||||
Drilling services margin (1) | $ | 44,973 | $ | 40,391 | $ | 36,544 | $ | 81,517 | $ | 84,548 | ||||||||||
Average number of drilling rigs | 67.0 | 65.7 | 67.0 | 67.0 | 65.0 | |||||||||||||||
Utilization rate | 90 | % | 90 | % | 84 | % | 87 | % | 90 | % | ||||||||||
Revenue days | 5,603 | 5,387 | 5,186 | 10,789 | 10,590 | |||||||||||||||
Average revenues per day | $ | 19,498 | $ | 19,079 | $ | 19,291 | $ | 19,399 | $ | 19,464 | ||||||||||
Average operating costs per day | 11,472 | 11,581 | 12,244 | 11,843 | 11,480 | |||||||||||||||
Drilling services margin per day (2) | $ | 8,026 | $ | 7,498 | $ | 7,047 | $ | 7,556 | $ | 7,984 | ||||||||||
Production Services Division: | ||||||||||||||||||||
Revenues | $ | 43,297 | $ | — | $ | 13,356 | $ | 56,653 | $ | — | ||||||||||
Operating costs | 21,916 | — | 6,929 | 28,845 | — | |||||||||||||||
Production services margin (1) | $ | 21,381 | $ | — | $ | 6,427 | $ | 27,808 | $ | — | ||||||||||
EBITDA (3) | $ | 53,366 | $ | 35,687 | $ | 36,206 | $ | 89,572 | $ | 76,029 | ||||||||||
Reconciliation of combined Drilling services margin and Production services margin and EBITDA to net earnings: | ||||||||||||||||||||
Drilling services margin | $ | 44,973 | $ | 40,391 | $ | 36,544 | $ | 81,517 | $ | 84,548 | ||||||||||
Production services margin | 21,381 | — | 6,427 | 27,808 | — | |||||||||||||||
Combined margin | 66,354 | 40,391 | 42,971 | 109,325 | 84,548 | |||||||||||||||
General and administrative | (12,150 | ) | (4,724 | ) | (7,722 | ) | (19,872 | ) | (8,547 | ) | ||||||||||
Bad debt (expense) recovery | 92 | — | (135 | ) | (43 | ) | — | |||||||||||||
Other income (expense) | (930 | ) | 20 | 1,092 | 162 | 28 | ||||||||||||||
EBITDA | 53,366 | 35,687 | 36,206 | 89,572 | 76,029 | |||||||||||||||
Depreciation | (20,580 | ) | (16,098 | ) | (17,119 | ) | (37,699 | ) | (30,834 | ) | ||||||||||
Interest income (expense), net | (4,060 | ) | 861 | (989 | ) | (5,049 | ) | 1,742 | ||||||||||||
Income tax expense | (9,609 | ) | (7,362 | ) | (6,250 | ) | (15,859 | ) | (16,631 | ) | ||||||||||
Net earnings | $ | 19,117 | $ | 13,088 | $ | 11,848 | $ | 30,965 | $ | 30,306 | ||||||||||
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(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 is included in the operating statistics table. 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 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. |
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PIONEER DRILLING COMPANY AND SUBSIDIARIES
Capital Expenditures
(in thousands)
Capital Expenditures
(in thousands)
Budget | ||||||||||||||||||||||||
Three months ended | Six months ended | Fiscal Year Ending | ||||||||||||||||||||||
June 30, | March 31, | June 30, | December 31, | |||||||||||||||||||||
2008 | 2007 | 2008 | 2008 | 2007 | 2008 | |||||||||||||||||||
Capital expenditures: | ||||||||||||||||||||||||
Drilling Services Division: | ||||||||||||||||||||||||
Routine rigs | $ | 3,814 | $ | 4,874 | $ | 4,007 | $ | 7,821 | $ | 9,598 | $ | 21,200 | ||||||||||||
Discretionary | 13,704 | 9,516 | 19,014 | 32,718 | 21,743 | 47,600 | ||||||||||||||||||
Tubulars | 3 | 1,858 | 1,047 | 1,050 | 5,447 | 12,600 | ||||||||||||||||||
New-builds and acquisitions | 1,087 | 35,658 | 746 | 1,833 | 45,145 | 20,000 | ||||||||||||||||||
Total Drilling Services Division capital expenditures | 18,608 | 51,906 | 24,814 | 43,422 | 81,933 | 101,400 | ||||||||||||||||||
Average routine rig capital expenditures per revenue day (1) | $ | 681 | $ | 905 | $ | 773 | $ | 725 | $ | 906 | $ | 998 | ||||||||||||
Production Services Division: | ||||||||||||||||||||||||
Routine | 835 | — | 108 | 943 | — | 2,030 | ||||||||||||||||||
New-builds and acquisitions | 6,008 | — | 3,031 | 9,039 | — | 39,800 | ||||||||||||||||||
Total Production Services Division capital expenditures | 6,843 | — | 3,139 | 9,982 | — | 41,830 | ||||||||||||||||||
Total capital expenditures | $ | 25,451 | $ | 51,906 | $ | 27,953 | $ | 53,404 | $ | 81,933 | $ | 143,230 | ||||||||||||
(1) | Average routine rig capital expenditures per revenue day represents the Drilling Services Division’s routine rig capital expenditures divided by the number of revenue days for each period presented. |
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PIONEER DRILLING COMPANY AND SUBSIDIARIES
Drilling Rig, Workover Rig and Wireline Unit Information
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 | 15 | 2 | 17 | |||||||||
1000 HP | 17 | 12 | 29 | |||||||||
1200 to 1500 HP | 3 | 14 | 17 | |||||||||
Total | 41 | 28 | 69 | |||||||||
Drilling 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 | |||||||||
Production Services Division: | ||||||||||||
Workover rig horsepower ratings: | ||||||||||||
400 HP | 1 | |||||||||||
550 HP | 61 | |||||||||||
600 HP | 4 | |||||||||||
Total | 66 | |||||||||||
Wireline units | 51 | |||||||||||
Fishing & Rental Tools Inventory | $14 Million | |||||||||||
# # #
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