Pioneer Drilling Reports First Quarter 2012 Results

SAN ANTONIO, May 8, 2012 /PRNewswire/ -- Pioneer Drilling Company, Inc. (NYSE Amex: PDC) today reported financial and operating results for the three months ended March 31, 2012.  Financial and operational highlights include: 

• Net income for the first quarter of 2012 was $14.2 million, or $0.23 per diluted share, an increase of 109% over the fourth quarter of 2011
• Production Services revenue increased 27% over the fourth quarter of 2011, represented 46% of total revenues and generated 52% of total gross margin in the first quarter of 2012
• Approximately 88% of the working drilling rigs and 80% of the Production Services assets are currently operating on wells in oil and liquids-rich plays
• Currently 79% of the working drilling rigs in our fleet are operating under term drilling contracts

Financial Results

Revenues for the first quarter of 2012 were $232.0 million, a 14% increase over $203.7 million for the fourth quarter of 2011 ("the prior quarter") and a 51% increase over $153.3 million for the first quarter of 2011 ("the year-earlier quarter").  The increase in first quarter revenues as compared to the prior quarter  was primarily due to higher pricing in Drilling Services, fleet additions and higher utilization and pricing in Production Services, as well as contributions from our new coiled tubing business that was acquired at year end 2011.  Utilization and pricing improved for both Drilling Services and Production Services when compared to the year-earlier quarter.

First quarter Adjusted EBITDA(1) was $70.1 million, a 26% increase over $55.5 million in the prior quarter and a 121% increase over Adjusted EBITDA of $31.7 million in the year-earlier quarter.

Net income for the first quarter was $14.2 million, or $0.23 per diluted share, compared with net income for the prior quarter of $6.8 million, or $0.11 per diluted share, and a net loss for the year-earlier quarter of $6.0 million, or $0.11 per share. 

Partially offsetting our first quarter revenue growth as compared to the prior quarter were increases in general and administrative expense of $1.9 million and depreciation expense of $3.2 million, primarily due to the addition of our new coiled tubing business. In addition, interest expense increased by $1.5 million due to the issuance of Senior Notes in November 2011, and the retirement of two drilling rigs and two wireline units resulted in an equipment impairment charge of $1.0 million.

Operating Results

Revenues for the Drilling Services Division were $124.3 million in the first quarter, a 5% increase over the prior quarter and a 25% increase from the year-earlier quarter.  During the first quarter, the utilization rate for our fleet of 64 drilling rigs averaged 87%, the same as in the prior quarter, and up from 65% a year ago when the fleet count was 71 rigs. We retired seven drilling rigs at the end of the third quarter of 2011. The drilling rig count has been further reduced to 62 rigs effective March 31, 2012 due to the retirement of two stacked mechanical rigs that will be used for spare parts. First quarter average drilling revenues per day increased 6% from the prior quarter as a result of higher turnkey revenue, a fuel cost reimbursement that was negotiated for our rigs operating in Colombia and higher contract pricing. Drilling Services margin(2) was $8,537 per day in the first quarter as compared to $7,686 per day in the prior quarter and $7,769 per day in the year-earlier quarter. 

Revenues for the Production Services Division were $107.7 million in the first quarter, up 27% from the prior quarter and up 101% from the year-earlier quarter. First quarter Production Services margin(2) as a percentage of revenue was 44%, compared to 42% in the prior quarter and 38% in the year-earlier quarter.  During the first quarter, our well service rig utilization was approximately 92%, compared to 86% in the prior quarter and 82% in the year-earlier quarter, while pricing increased to $581 from $577 per hour as compared to the prior quarter and $509 per hour in the year-earlier quarter.

"We are pleased with our strong start to 2012, including the better-than-expected results we achieved in our Production Services Division," said Wm. Stacy Locke, President and CEO of Pioneer Drilling. "Although much of the industry is working to adjust to lower natural gas prices, we continued to see good demand for our services in oil and liquids-rich basins and generated both top-line and bottom-line improvements across all of our businesses. 

"With over 80% of our assets operating in oil and natural gas liquids-producing areas, we believe we will continue to have good equipment utilization and solid margins throughout 2012.  We also expect to generate revenue growth this year as we bring on additional equipment.  We added six well service rigs and five wireline units in the first quarter. During the last nine months of 2012, we expect to add seven new-build drilling rigs, 13 well service rigs, 11 wireline units and three coiled tubing units. The remaining three new-build drilling rigs are expected to begin operating in the first quarter of 2013. Our Drilling Services revenue will be substantially supported by term contracts, with all of the new-build drilling rigs being deployed under multi-year contracts and much of our existing fleet continuing to attract new or renewing term contracts. 

"In the first quarter, our Drilling Services Division moved two drilling rigs out of a dry gas area of the Marcellus Shale in Appalachia to oil and liquids-rich basins under term contracts and successfully negotiated higher day rates on six of our rigs operating in Colombia. In the second quarter, we expect drilling rig utilization to average between 89% and 91%. We expect our Drilling Services margin to be approximately $8,000 to $8,300 per day, which is down slightly from the first quarter when we had more turnkey work and we benefited from a fuel cost reimbursement for our rigs operating in Colombia.

"Our Production Services Division maintained its strong performance in the first quarter, with a less-than-typical seasonal impact, a solid contribution from our new coiled tubing business and well service rig and wireline unit additions.  In the second quarter, we anticipate that Production Services revenues will increase approximately 5% to 10% due to fleet additions, and margin as a percentage of revenues will be flat," Locke said.

Liquidity

Working capital was $81.5 million at March 31, 2012, compared to $129.9 million at December 31, 2011.  Our cash and cash equivalents at the end of the first quarter were $21.4 million, down from $86.2 million at year-end 2011. 

The change in cash and cash equivalents during the quarter is primarily due to $95.1 million used for purchases of property and equipment, partially offset by cash provided by operations of $29.7 million. Our $250 million Revolving Credit Facility remained undrawn at the end of the first quarter, but now has $20 million outstanding and $9 million in committed letters of credit, resulting in borrowing availability under our Revolving Credit Facility of $221 million.

Capital Expenditures

For the quarter ended March 31, 2012, total cash capital expenditures were $95.1 million. Currently, we expect to spend approximately $300 million to $330 million in 2012, which includes a portion of the construction costs for new-build drilling rigs, upgrades to certain drilling rigs, additional well service rigs, wireline units, coiled tubing units, and routine capital expenditures.  We expect to fund the remaining capital expenditures from operating cash flow in excess of our working capital requirements and from borrowings under our Revolving Credit Facility.

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 480-629-9818 approximately 10 minutes early and ask for the Pioneer Drilling conference call.  A replay will be available after the call ends and will be accessible until May 15.  To access the replay, dial (303) 590-3030 and enter the pass code 4529955#. A broadcast of the conference call will also be webcast on the Internet and accessible from 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&L at (713) 529-6600 or e-mail [email protected].

About Pioneer

Pioneer Drilling Company provides contract land drilling services to independent and major oil and gas operators in Texas, Louisiana, the Mid-Continent, Rocky Mountain and Appalachian regions and internationally in Colombia through its Pioneer Drilling Services Division. Pioneer also provides well, wireline, coiled tubing and fishing and rental services to producers in the U.S. Gulf Coast, offshore Gulf of Mexico, Mid-Continent, Rocky Mountain and Appalachian regions through its Pioneer Production Services Division.

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; levels and volatility of oil and gas prices; decisions about onshore exploration and development projects to be made by oil and gas exploration and production companies; risks associated with economic cycles and their impact on capital markets and liquidity; the continued demand for the drilling services or production services in the geographic areas where we operate; the highly competitive nature of our business; our future financial performance, including availability, terms and deployment of capital; future compliance with covenants under our senior secured revolving credit facility and our senior notes; the supply of marketable drilling rigs, well service rigs, coiled tubing and wireline units within the industry; the continued availability of drilling rig, well service rig, coiled tubing and wireline unit components; the continued availability of qualified personnel; the success or failure of our acquisition strategy, including our ability to finance acquisitions, manage growth and effectively integrate acquisitions; and changes in, or our failure or inability to comply with, governmental regulations, including those relating to the environment.  We have discussed many of these factors in more detail in our annual report on Form 10-K for the year ended December 31, 2011.  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 of the date on which they are made and we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.  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.

   - Financial Statements and Operating Information Follow -

SOURCE Pioneer Drilling Company, Inc.

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