2014

Pioneer Energy Services Reports First Quarter 2013 Results

SAN ANTONIO, April 30, 2013 /PRNewswire/ -- Pioneer Energy Services (NYSE: PES) today reported financial and operating results for the quarter ended March 31, 2013. Highlights include: 

  • During the first quarter, we deployed three new-build drilling rigs, with all ten rigs in our new-build program now deployed and working under long-term contracts.
  • Drilling operations in Colombia achieved 99% utilization, with six of the eight drilling rigs under term contracts that were renewed through the end of 2013.
  • Currently, we have 62 drilling rigs earning revenues under drilling contracts, 44 of which, or 71%, are under term contracts.
  • Well servicing rigs in the Production Services Segment achieved an 89% utilization rate and an average hourly rate of $596.

Consolidated Financial Results

Revenues for the first quarter of 2013 were $229.7 million, up slightly from revenues of $227.9 million in the fourth quarter of 2012 ("the prior quarter") and down slightly from revenues of $232.0 million for the first quarter of 2012 ("the year-earlier quarter"). Revenues in the first quarter were positively impacted by fleet additions in both the Drilling Services and Production Services Segments but negatively impacted by normal seasonality in the Production Services Segment and lower domestic drilling utilization and dayrate adjustments.

Net loss for the first quarter was $1.3 million, or $0.02 per diluted share, compared with net income of $3.6 million, or $0.06 per diluted share in the prior quarter and $14.2 million, or $0.23 per diluted share in the year-earlier quarter.

First quarter Adjusted EBITDA(1) was $55.9 million, down from $60.3 million in the prior quarter and from $70.1 million in the year-earlier quarter.

Operating Results

Drilling Services Segment

Revenue for the Drilling Services Segment was $133.1 million in the first quarter, a 2% increase from the prior quarter and a 7% increase from the year-earlier quarter. First quarter utilization was 84%, down from utilization of 87% in both comparative periods.

We deployed three new-build drilling rigs in the first quarter with all ten of our new-build drilling rigs currently operating in shale or unconventional plays under long-term drilling contracts. Currently, we have 62 drilling rigs earning revenues under drilling contracts, 44 of which are under term contracts. All eight of our drilling rigs in Colombia were working during the first quarter, six of which are under term contracts that have been extended through the end of 2013.

Average drilling revenues per day in the first quarter were $24,925, compared to $23,967 in the prior quarter and $24,547 in the year-earlier quarter. The increase was primarily due to higher dayrates generated by our new-build drilling rigs and increased utilization in Colombia, as our Colombian operations have higher revenues per day than our domestic drilling rigs.

Drilling Services margin(2) per day was $8,258 in the first quarter as compared to $8,103 in the prior quarter. Drilling Services margin per day in the first quarter was positively impacted by the higher margins generated by our new-build rigs and Colombian drilling operations.

Production Services Segment

Revenue for the Production Services Segment was $96.6 million in the first quarter, down 1% from the prior quarter and down 10% from the year-earlier quarter.

Production Services margin(2) as a percentage of revenue was 37% in the first quarter, compared to 38% in the prior quarter and 44% in the year-earlier quarter. Well servicing rig utilization was 89% in the first quarter, versus 83% in the prior quarter and 92% in the year-earlier quarter.  Pricing was $596 per hour in the first quarter, compared to $601 in the prior quarter and $581 in the year-earlier quarter. 

Comments from Our President and CEO 

"Our new-build drilling rig program is now complete, with 10 new-build rigs fully deployed and generating strong margins under multi-year contracts," said Wm. Stacy Locke, President and CEO of Pioneer Energy Services.  "We also had all eight of our drilling rigs working in Colombia.  Our strong performance record with our customer in Colombia has led to term contract extensions for six rigs through the end of the year.

"Utilization rates and drilling margin per day in the Drilling Services Segment were better than expected during the first quarter, in part due to the solid performance of our Colombian operations. We continue to see some pricing pressure and lower utilization in our drilling operations in South Texas and West Texas. In the second quarter of 2013, we expect drilling rig utilization to average between 80% and 83% based on a fleet of 71 rigs and Drilling Services Segment margin to be approximately $7,600 to $7,900 per day. In April, a mechanical drilling rig that was previously idle in our East Texas division was sold for a small gain.

"As expected, operating results for our Production Services Segment in the first quarter were impacted by the seasonality that affects these business lines early in the year. However, utilization for our well servicing rigs was better than expected at 89% and improved substantially when compared to the prior quarter. Our wireline operations continued to experience moderate pricing pressure in certain regions during the quarter, but we believe pricing has stabilized and we expect to see activity build throughout the rest of the year. In our coiled tubing business, operating results for our offshore units were lower than expected but have picked up in April and are expected to be steady going forward. Our onshore coiled tubing business was also softer than expected in the first quarter; however, we are seeing signs of improvement in the second quarter.

"Production Services revenues in the second quarter are expected to be up 6% to 10%, and margin as a percentage of revenues is expected be flat to slightly down as compared to the first quarter," Locke said.

Liquidity

Working capital at March 31, 2013 was $107.0 million, as compared to $62.2 million at December 31, 2012. Our cash and cash equivalents were $10.5 million, down from $23.7 million at year-end 2012. 

The change in cash and cash equivalents during the first quarter was primarily due to $71.3 million used for purchases of property and equipment, partially offset by $17.2 million of cash provided by operating activities and $39.3 million in net proceeds from debt borrowings.

We currently have $140.0 million outstanding and $8.9 million in committed letters of credit under our $250 million Revolving Credit Facility, leaving borrowing availability of $101.1 million.

Capital Expenditures

Cash capital expenditures in the first quarter were $71.3 million, including capitalized interest. We continue to estimate that our total capital expenditures in 2013 will be between $140 million and $160 million.  The 2013 capital expenditure budget includes funding for the completion of the new-build drilling rig program, upgrades to certain drilling rigs, additional Production Services equipment and routine capital expenditures. We expect to fund this lower capital expenditure program from operating cash flow in excess of our working capital requirements, and we plan to reduce debt levels.

Conference Call

Pioneer Energy Services' 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) 629-9819 10 minutes early and ask for the Pioneer Energy Services' conference call. A replay will be available after the call and will be accessible until May 7. To access the replay, dial (303) 590-3030 and enter the pass code 4612402#.

The conference call will also be webcast on the Internet and accessible from Pioneer Energy Services' Web site at www.pioneeres.com. To listen to the live call, visit Pioneer Energy Services' 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 Dennard - Lascar Associates, LLC  at (713) 529-6600 or e-mail dwashburn@dennardlascar.com.

About Pioneer

Pioneer Energy Services 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 Drilling Services Segment. 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 and Rocky Mountain regions through its Production Services Segment.

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 the following discussion 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 exploration and development projects to be made by oil and gas exploration and production companies, economic cycles and their impact on capital markets and liquidity, the continued demand for 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 servicing rigs, coiled tubing and wireline units within the industry, the continued availability of drilling rig, well servicing 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, 2012. 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 for the year ended December 31, 2012 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.

(1)

Adjusted EBITDA is a financial measure that is not in accordance with GAAP, and should not be considered (a) in isolation of, or as a substitute for, net income (loss), (b) as an indication of cash flows from operating activities or (c) as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. We define Adjusted EBITDA as income (loss) before interest income (expense), taxes, depreciation, amortization and any impairments. We use this measure, together with our GAAP financial metrics, to assess our financial performance and evaluate our overall progress towards meeting our long-term financial objectives. We believe that this non-GAAP financial measure is useful to investors and analysts in allowing for greater transparency of our operating performance and makes it easier to compare our results with those of other companies within our industry. Adjusted EBITDA, as we calculate it, may not be comparable to Adjusted EBITDA measures reported by other companies. A reconciliation of Adjusted EBITDA to net income (loss) as reported is included in the tables to this press release.



(2)

Drilling Services Segment margin represents contract drilling revenues less contract drilling operating costs. Production Services Segment margin represents production services revenue less production services operating costs. We believe that Drilling Services Segment margin and Production Services Segment margin are useful measures for evaluating financial performance, although they are not measures of financial performance under U.S. Generally Accepted Accounting Principles (GAAP). However, Drilling Services Segment margin and Production Services Segment margin are common measures of operating performance used by investors, financial analysts, rating agencies and Pioneer's management. Drilling Services Segment margin and Production Services Segment margin as presented may not be comparable to other similarly titled measures reported by other companies. A reconciliation of Drilling Services Segment margin and Production Services Segment margin to net income (loss) as reported is included in the tables to this press release.

- Financial Statements and Operating Information Follow -

Contacts:

Lorne E. Phillips, CFO


Pioneer Energy Services Corp.


(210) 828-7689




Lisa Elliott / lelliott@dennardlascar.com


Anne Pearson / apearson@dennardlascar.com


Dennard - Lascar Associates, LLC / (713) 529-6600

 

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)



Three months ended


March 31,


December 31,


2013


2012


2012

Revenues:






Drilling services

$

133,074


$

124,304


$

129,853

Production services

96,596


107,674


98,015

Total revenues

229,670


231,978


227,868







Costs and expenses:






Drilling services

88,986


81,077


85,950

Production services

60,465


60,696


61,001

Depreciation and amortization

46,285


38,373


44,288

General and administrative

23,208


21,143


20,926

Bad debt expense (recovery)

281


(91)


75

Impairment of equipment


1,032


99







Total costs and expenses

219,225


202,230


212,339

Income from operations

10,445


29,748


15,529







Other (expense) income:






Interest expense

(11,462)


(9,555)


(10,391)

Other

(821)


932


365

Total other expense

(12,283)


(8,623)


(10,026)







Income (loss) before income taxes

(1,838)


21,125


5,503

Income tax (expense) benefit

546


(6,953)


(1,943)







Net income (loss)

$

(1,292)


$

14,172


$

3,560







Income (loss) per common share:






Basic

$

(0.02)


$

0.23


$

0.06

Diluted

$

(0.02)


$

0.23


$

0.06







Weighted-average number of shares outstanding:






Basic

61,967


61,578


61,888

Diluted

61,967


62,647


62,900

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)










March 31,

2013


December 31,

2012


(unaudited)


(audited)





ASSETS




Current assets:




Cash and cash equivalents

10,508


23,733

Receivables, net of allowance for doubtful accounts

165,787


158,844

Deferred income taxes

12,387


11,058

Inventory

12,337


12,111

Prepaid expenses and other current assets

9,400


13,040

Total current assets

210,419


218,786





Net property and equipment

1,011,039


1,014,340

Intangible assets, net of accumulated amortization

41,667


43,843

Goodwill

41,683


41,683

Noncurrent deferred income taxes

1,740


5,519

Other long-term assets

17,709


15,605

Total assets

$

1,324,257


$

1,339,776





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

47,847


$

83,823

Current portion of long-term debt

222


872

Deferred revenues

2,217


3,880

Accrued expenses

53,084


67,975

Total current liabilities

103,370


156,550





Long-term debt, less current portion

558,949


518,725

Noncurrent deferred income taxes

105,145


108,838

Other long-term liabilities

8,936


7,983

Total liabilities

776,400


792,096

Total shareholders' equity

547,857


547,680

Total liabilities and shareholders' equity

$

1,324,257


$

1,339,776

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)



Three months ended


March 31,


2013


2012





Cash flows from operating activities:




Net income (loss)

$

(1,292)


$

14,172

Adjustments to reconcile net income (loss) to net cash provided by operating activities:




Depreciation and amortization

46,285


38,373

Allowance for doubtful accounts

281


(94)

Gain on dispositions of property and equipment

(321)


(733)

Stock-based compensation expense

1,512


2,000

Amortization of debt issuance costs, discount and premium

762


732

Impairment of equipment


1,032

Deferred income taxes

(1,287)


5,846

Change in other long-term assets

(2,658)


720

Change in other long-term liabilities

953


219

Changes in current assets and liabilities

(27,078)


(32,615)

Net cash provided by operating activities

17,157


29,652





Cash flows from investing activities:




Purchases of property and equipment

(71,313)


(95,109)

Proceeds from sale of property and equipment

1,567


1,357

Net cash used in investing activities

(69,746)


(93,752)





Cash flows from financing activities:




Debt repayments

(656)


(656)

Proceeds from issuance of debt

40,000


Proceeds from exercise of options

295


253

Purchase of treasury stock

(275)


(293)

Net cash provided by (used in) financing activities

39,364


(696)





Net decrease in cash and cash equivalents

(13,225)


(64,796)

Beginning cash and cash equivalents

23,733


86,197

Ending cash and cash equivalents

$

10,508


$

21,401

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Operating Statistics

(in thousands, except average number of drilling rigs, utilization rate, revenue days and per day information)

(unaudited)



Three months ended


March 31,


December 31,


2013


2012


2012







Drilling Services Segment:






Revenues

$

133,074


$

124,304


$

129,853

Operating costs

88,986


81,077


85,950

Drilling Services Segment margin (1)

$

44,088


$

43,227


$

43,903







Average number of drilling rigs

70.5


64.0


67.7

Utilization rate

84%


87%


87%

Revenue days

5,339


5,064


5,418







Average revenues per day

$

24,925


$

24,547


$

23,967

Average operating costs per day

16,667


16,010


15,864

Drilling Services Segment margin per day (2)

$

8,258


$

8,537


$

8,103







Production Services Segment:






Revenues

$

96,596


$

107,674


$

98,015

Operating costs

60,465


60,696


61,001

Production Services Segment margin (1)

$

36,131


$

46,978


$

37,014







Combined:






Revenues

$

229,670


$

231,978


$

227,868

Operating Costs

149,451


141,773


146,951

Combined margin

$

80,219


$

90,205


$

80,917







Adjusted EBITDA (3)

$

55,909


$

70,085


$

60,281








(1)     Drilling Services Segment margin represents contract drilling revenues less contract drilling operating costs. Production Services Segment margin represents production services revenue less production services operating costs. We believe that Drilling Services Segment margin and Production Services Segment margin are useful measures for evaluating financial performance, although they are not measures of financial performance under U.S. Generally Accepted Accounting Principles (GAAP). However, Drilling Services Segment margin and Production Services Segment margin are common measures of operating performance used by investors, financial analysts, rating agencies and Pioneer's management. Drilling Services Segment margin and Production Services Segment margin as presented may not be comparable to other similarly titled measures reported by other companies. A reconciliation of combined Drilling Services Segment margin and Production Services Segment margin to net income (loss) as reported is included in the table on the following page.


(2)     Drilling Services Segment margin per revenue day represents the Drilling Services Segment's average revenue per revenue day less average operating costs per revenue day.


(3)     Adjusted EBITDA is a financial measure that is not in accordance with GAAP, and should not be considered (a) in isolation of, or as a substitute for, net income (loss), (b) as an indication of cash flows from operating activities or (c) as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. We define Adjusted EBITDA as income (loss) before interest income (expense), taxes, depreciation, amortization and any impairments. We use this measure, together with our GAAP financial metrics, to assess our financial performance and evaluate our overall progress towards meeting our long-term financial objectives. We believe that this non-GAAP financial measure is useful to investors and analysts in allowing for greater transparency of our operating performance and makes it easier to compare our results with those of other companies within our industry. Adjusted EBITDA, as we calculate it, may not be comparable to Adjusted EBITDA measures reported by other companies.A reconciliation of Adjusted EBITDA to net income (loss) as reported is included in the table on the following page.

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Reconciliation of Combined Drilling Services and Production Services

Margin and Adjusted EBITDA to Net Income (Loss)

(in thousands)

(unaudited)




Three months ended


March 31,


December 31,


2013


2012


2012







Combined margin

$

80,219


$

90,205


$

80,917







General and administrative

(23,208)


(21,143)


(20,926)

Bad debt (recovery) expense

(281)


91


(75)

Other income (expense)

(821)


932


365

Adjusted EBITDA (3)

55,909


70,085


60,281







Depreciation and amortization

(46,285)


(38,373)


(44,288)

Impairment of equipment


(1,032)


(99)

Interest expense

(11,462)


(9,555)


(10,391)

Income tax (expense) benefit

546


(6,953)


(1,943)

Net (loss) income

$

(1,292)


$

14,172


$

3,560

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Capital Expenditures

(in thousands)

(unaudited)



Three months ended


March 31,


December 31,


2013


2012


2012







Drilling Services Segment:






Routine and tubulars

$

6,862


$

8,506


$

5,328

Discretionary

13,718


16,192


12,255

Fleet additions

33,462


40,482


28,084


54,042


65,180


45,667

Production Services Segment:






Routine

5,709


3,729


3,833

Discretionary

8,566


10,209


10,511

Fleet additions

2,996


15,991


13,262


17,271


29,929


27,606

Net cash used for purchases of property and equipment

71,313


95,109


73,273

Net effect of accruals

(29,263)


17,268


1,241

Total capital expenditures

$

42,050


$

112,377


$

74,514







 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Drilling Rig, Well Servicing Rig, Wireline and Coiled Tubing Unit

Current Information









Drilling Services Segment:

Rig Type




Mechanical


Electric


Total Rigs







Drilling rig horsepower ratings:






550 to 700 HP

1



1

750 to 950 HP

7


2


9

1000 HP

17


11


28

1200 to 2000 HP

7


26


33

Total

32


39


71







Drilling rig depth ratings:






Less than 10,000 feet

3


2


5

10,000 to 13,900 feet

17


6


23

14,000 to 25,000 feet

12


31


43

Total

32


39


71







Production Services Segment:












Well servicing rig horsepower ratings:






550 HP





10

600 HP





99

Total





109







Wireline units





119







Coiled tubing units





13







SOURCE Pioneer Energy Services



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