Pioneer Energy Services Reports Fourth Quarter 2012 Results

Feb 13, 2013, 06:10 ET from Pioneer Energy Services

SAN ANTONIO, Texas, Feb. 13, 2013 /PRNewswire/ -- Pioneer Energy Services (NYSE: PES) today reported financial and operating results for the three and twelve months ended December 31, 2012. Financial and operational highlights include: 

  • Two new-build drilling rigs were added in the fourth quarter and one more has been added since year end;
  • Four well servicing rigs and two coiled tubing units have been added since the end of the third quarter;
  • All eight drilling rigs in Colombia are operating under contract;
  • 43 of the Company's 59 working drilling rigs, or 73%, are operating under term drilling contracts;
  • 93% of our working drilling rigs and 78% of production services assets are operating on wells that are targeting or producing oil or liquids-rich natural gas.

Consolidated Financial Results

Revenues for the fourth quarter of 2012 were $227.9 million, flat when compared to revenues in the third quarter of 2012 ("the prior quarter") and a 12% increase over $203.7 million of revenues for the fourth quarter of 2011 ("the year-earlier quarter"). The increase from the year-earlier quarter was primarily due to fleet additions in both the Drilling Services Segment and the Production Services Segment and to the contribution from our coiled tubing business acquired at year end 2011.

Net income for the fourth quarter was $3.6 million, or $0.06 per diluted share, compared with $2.6 million, or $0.04 per diluted share in the prior quarter and $6.8 million, or $0.11 per diluted share in the year-earlier quarter.

Fourth quarter Adjusted EBITDA(1) was $60.3 million, an 8% increase from $55.6 million in the prior quarter and a 9% increase from $55.5 million in the year-earlier quarter.

Operating Results

Drilling Services Segment

Revenue for the Drilling Services Segment was $129.9 million in the fourth quarter, a 3% increase from the prior quarter and a 9% increase from the year-earlier quarter. Fourth quarter utilization was 87%, up slightly from the prior quarter, and flat with the year-earlier quarter.

We deployed two new-build drilling rigs in the fourth quarter and one more rig thus far in 2013 which brings our current fleet count to 70 drilling rigs. Our drilling rig fleet count has fluctuated due to the addition of eight new-build rigs, offset by the retirement of seven lower horsepower rigs effective September 30, 2011 and two more rigs effective March 31, 2012. We are currently deploying our ninth drilling rig and we plan to deploy the tenth new-build drilling rig by the end of the first quarter of 2013.

Average drilling revenues per day in the fourth quarter were $23,967, compared to $24,101 in the prior quarter and $23,169 in the year-earlier quarter. The slight sequential decrease was primarily due to lower average drilling revenues per day during the initial mobilization period for two rigs deployed in Colombia and due to moderate pricing pressure in the U.S. market. The decrease in average drilling revenues per day was partially offset by the impact of the new-build rigs and higher turnkey revenues. Drilling Services margin(2) per day was $8,103 in the fourth quarter as compared to $7,187 in the prior quarter and $7,686 in the year-earlier quarter. Drilling Services margin per day was higher than both of the comparative periods primarily due to the earnings benefit of deploying our new-build rigs. Additionally, our continued focus on safety performance helped us lower expenses and enhance margin.

Production Services Segment

Revenue for the Production Services Segment was $98.0 million in the fourth quarter, down 6% from the prior quarter and up 16% from the year-earlier quarter. Revenue declined sequentially as expected due to fewer daylight working hours, holiday downtime and a pull back by some clients on spending at year-end. Production Services margin(2) as a percentage of revenue was 38%, compared to 37% in the prior quarter and 42% in the year-earlier quarter. Well servicing rig utilization declined to 83% from 91% in the prior quarter and 86% in the year-earlier quarter, while pricing was $601 per hour in the fourth quarter compared to $606 in the prior quarter and $577 in the year-earlier quarter. 

"We have almost completed our new-build drilling rig program, with our final two rigs scheduled to go to work by the end of the first quarter," said Wm. Stacy Locke, President and CEO of Pioneer Energy Services.  "We have been pleased with the program and over time have reduced the initial start-up costs associated with deploying each new rig. They are performing well, and under their multi-year contracts, they will generate substantial cash flows to support our shift in strategy towards debt reduction in 2013. 

"In Colombia, we again have all eight drilling rigs working with six of these rigs working under contract extensions through March.  We are currently in discussions with our client on contract renewal terms. 

"Fourth quarter Drilling Services Segment utilization was better than expected despite some reductions in client spending. We continue to see some pricing pressure on our drilling operations in South Texas and West Texas, but we believe prices could be stabilizing in other regions of the U.S. In the first quarter of 2013, we expect drilling rig utilization to average between 81% and 83% and Drilling Services Segment margin to be approximately $7,300 to $7,600 per day.

"Operating results for our Production Services Segment in the fourth quarter were impacted by typical seasonality and year-end client slow-downs.  We added four well servicing rigs and two coiled tubing units in the fourth quarter and we expect to add another well servicing rig in the first quarter of 2013.  We saw some improvement in the operating results of our coiled tubing business as we continued to focus on driving better performance of that group. 

"We believe pricing has stabilized in most areas for Production Services and we could see some improved activity later in the year as clients resume spending. Production Services revenues in the first quarter are expected to be flat, and margin as a percentage of revenues is expected be flat to down 2% as compared to the fourth quarter. In Production Services, the first quarter is typically the weakest quarter of the year," Locke said.

Liquidity

Working capital was $62.2 million at December 31, 2012, compared to $129.9 million at December 31, 2011. Our cash and cash equivalents at year-end 2012 were $23.7 million, down from $86.2 million at year-end 2011. 

The change in cash and cash equivalents during 2012 was primarily due to $364.3 million used for purchases of property and equipment, partially offset by $199.4 million of cash provided by operating activities and $99.1 million of net proceeds from debt borrowings.

As of January 31, 2013 we had $100 million outstanding and $9.0 million in committed letters of credit under our $250 million Revolving Credit Facility, leaving borrowing availability of $141 million.

Capital Expenditures

Cash capital expenditures in the fourth quarter were $73.3 million, including capitalized interest, bringing capital expenditures for the full year to $364.3 million. We estimate 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 remaining new-build drilling rigs, 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) 629-9835 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 February 20. To access the replay, dial (303) 590-3030 and enter the pass code 4589184#.

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 DRG&L at (713) 529-6600 or e-mail dmw@drg-l.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 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 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, 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 (i) in isolation of, or as a substitute for, net income (loss), (ii) as an indication of operating performance or cash flows from operating activities or (iii) 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) is included in the tables to this press release.

(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. Drilling Services margin and Production Services margin as presented may not be comparable to other similarly titled measures reported by other companies. A reconciliation of Drilling Services margin and Production Services margin to net income (loss) as reported is included in the tables to this press release.

 

 

- Financial Statements and Operating Information Follow -

 

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

Three months ended

Years Ended

December 31,

September 30,

December 31,

2012

2011

2012

2012

2011

(unaudited)

(audited)

Revenues:

Drilling services

$

129,853

$

118,859

$

125,662

$

498,867

$

433,902

Production services

98,015

84,797

104,111

420,576

282,039

Total revenues

227,868

203,656

229,773

919,443

715,941

Costs and expenses:

Drilling services

85,950

79,430

88,188

333,846

292,559

Production services

61,001

48,989

65,395

252,775

164,365

Depreciation and amortization

44,288

35,160

42,067

164,717

132,832

General and administrative

20,926

19,232

21,269

85,603

67,318

Bad debt expense (recovery)

75

548

(368)

(440)

925

Impairment of equipment

99

1,131

484

Total costs and expenses

212,339

183,359

216,551

837,632

658,483

Income from operations

15,529

20,297

13,222

81,811

57,458

Other (expense) income:

Interest expense

(10,391)

(8,062)

(9,453)

(37,049)

(29,721)

Other

365

52

307

1,624

(6,904)

Total other expense

(10,026)

(8,010)

(9,146)

(35,425)

(36,625)

Income before income taxes

5,503

12,287

4,076

46,386

20,833

Income tax expense

(1,943)

(5,469)

(1,461)

(16,354)

(9,656)

Net income

$

3,560

$

6,818

$

2,615

$

30,032

$

11,177

Income per common share:

Basic

$

0.06

$

0.11

$

0.04

$

0.49

$

0.19

Diluted

$

0.06

$

0.11

$

0.04

$

0.48

$

0.19

Weighted-average number of shares outstanding:

Basic

61,888

61,380

61,881

61,780

57,390

Diluted

62,900

62,568

62,825

62,762

58,779

 

 

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(audited)

December 31,

2012

December 31,

2011

ASSETS

Current assets:

Cash and cash equivalents

23,733

86,197

Receivables, net of allowance for doubtful accounts

158,844

145,234

Deferred income taxes

11,058

15,433

Inventory

12,111

11,184

Prepaid expenses and other current assets

13,040

11,564

Total current assets

218,786

269,612

Net property and equipment

1,014,340

793,956

Intangible assets, net of accumulated amortization

43,843

52,680

Goodwill

41,683

41,683

Noncurrent deferred income taxes

5,519

735

Other long-term assets

15,605

14,088

Total assets

$

1,339,776

$

1,172,754

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

83,823

$

66,440

Current portion of long-term debt

872

872

Deferred revenues

3,880

3,966

Accrued expenses

67,975

68,402

Total current liabilities

156,550

139,680

Long-term debt, less current portion

518,725

418,728

Noncurrent deferred income taxes

108,838

94,745

Other long-term liabilities

7,983

9,156

Total liabilities

792,096

662,309

Total shareholders' equity

547,680

510,445

Total liabilities and shareholders' equity

$

1,339,776

$

1,172,754

 

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(audited)

Years Ended

December 31,

2012

2011

Cash flows from operating activities:

Net income

$

30,032

$

11,177

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

164,717

132,832

Allowance for doubtful accounts

76

787

(Gain) loss on dispositions of property and equipment

(1,199)

151

Stock-based compensation expense

7,319

6,705

Amortization of debt issuance costs, discount and premium

2,985

3,302

Impairment of equipment

1,131

484

Deferred income taxes

13,303

8,098

Change in other long-term assets

(3,865)

2,828

Change in other long-term liabilities

(1,173)

(623)

Changes in current assets and liabilities

(13,960)

(20,862)

Net cash provided by operating activities

199,366

144,879

Cash flows from investing activities:

Acquisition of production services business of Go-Coil

(109,035)

Acquisition of other production services businesses

(6,502)

Purchases of property and equipment

(364,324)

(210,066)

Proceeds from sale of property and equipment

3,093

5,550

Proceeds from sale of auction rate securities

12,569

Net cash used in investing activities

(361,231)

(307,484)

Cash flows from financing activities:

Debt repayments

(874)

(113,158)

Proceeds from issuance of debt

100,000

250,750

Debt issuance costs

(58)

(7,285)

Proceeds from exercise of options

693

2,884

Proceeds from stock, net of underwriters' commissions and offering costs of $5,707

94,343

Purchase of treasury stock

(360)

(743)

Net cash provided by financing activities

99,401

226,791

Net (decrease) increase in cash and cash equivalents

(62,464)

64,186

Beginning cash and cash equivalents

86,197

22,011

Ending cash and cash equivalents

$

23,733

$

86,197

 

 

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

Years Ended

December 31,

September 30,

December 31,

2012

2011

2012

2012

2011

Drilling Services Segment:

Revenues

$

129,853

$

118,859

$

125,662

$

498,867

$

433,902

Operating costs

85,950

79,430

88,188

333,846

292,559

Drilling Services margin (1)

$

43,903

$

39,429

$

37,474

$

165,021

$

141,343

Average number of drilling rigs

67.7

64.0

66.0

65.0

69.3

Utilization rate

87%

87%

86%

87%

73%

Revenue days

5,418

5,130

5,214

20,728

18,383

Average revenues per day

$

23,967

$

23,169

$

24,101

$

24,067

$

23,603

Average operating costs per day

15,864

15,483

16,914

16,106

15,915

Drilling Services margin per day (2)

$

8,103

$

7,686

$

7,187

$

7,961

$

7,688

Production Services Segment:

Revenues

$

98,015

$

84,797

$

104,111

$

420,576

$

282,039

Operating costs

61,001

48,989

65,395

252,775

164,365

Production Services margin (1)

$

37,014

$

35,808

$

38,716

$

167,801

$

117,674

Combined:

Revenues

$

227,868

$

203,656

$

229,773

$

919,443

$

715,941

Operating Costs

146,951

128,419

153,583

586,621

456,924

Combined margin

$

80,917

$

75,237

$

76,190

$

332,822

$

259,017

Adjusted EBITDA (3) & (4)

$

60,281

$

55,509

$

55,596

$

249,283

$

183,870

(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.  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's management. A reconciliation of Drilling Services margin and Production Services margin to net income (loss) as reported is included in the table on the following page. 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' 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 (i) in isolation of, or as a substitute for, net income (loss), (ii) as an indication of operating performance or cash flows from operating activities or (iii) 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) is set forth below.

See following page for footnote (4).

 

 

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Reconciliation of Combined Drilling Services and Production Services

Margin and Adjusted EBITDA to Net Income

(in thousands)

(unaudited)

Three months ended

Years Ended

December 31,

September 30,

December 31,

2012

2011

2012

2012

2011

Combined margin

$

80,917

$

75,237

$

76,190

$

332,822

$

259,017

General and administrative

(20,926)

(19,232)

(21,269)

(85,603)

(67,318)

Bad debt (recovery) expense

(75)

(548)

368

440

(925)

Other income (expense)

365

52

307

1,624

(6,904)

Adjusted EBITDA (3) & (4)

60,281

55,509

55,596

249,283

183,870

Depreciation and amortization

(44,288)

(35,160)

(42,067)

(164,717)

(132,832)

Impairment of equipment

(99)

(1,131)

(484)

Interest expense

(10,391)

(8,062)

(9,453)

(37,049)

(29,721)

Income tax expense

(1,943)

(5,469)

(1,461)

(16,354)

(9,656)

Net income (loss)

$

3,560

$

6,818

$

2,615

$

30,032

$

11,177

(4)

Our Adjusted EBITDA for the year ended December 31, 2011 was reduced by a $7.3 million net-worth tax expense for our Colombian operations that was a non-recurring charge and was included in other (expense) income.

 

 

PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES

Capital Expenditures

(in thousands)

(unaudited)

Three months ended

Years Ended

December 31,

September 30,

December 31,

2012

2011

2012

2012

2011

Drilling Services Segment:

Routine and tubulars

$

5,328

$

9,685

$

17,887

$

39,051

$

35,252

Discretionary

12,255

21,862

8,569

56,430

67,352

Fleet additions

28,084

14,768

47,985

162,677

41,005

45,667

46,315

74,441

258,158

143,609

Production Services Segment:

Routine

3,833

2,691

4,306

15,311

8,168

Discretionary

10,511

11,322

8,091

37,562

31,523

Fleet additions

13,262

9,173

10,329

53,293

26,766

27,606

23,186

22,726

106,166

66,457

Net cash used for purchases of property and equipment

73,273

69,501

97,167

364,324

210,066

Net effect of accruals

1,241

9,948

(13,762)

14,948

27,721

Total capital expenditures

$

74,514

$

79,449

$

83,405

$

379,272

$

237,787

 

 

 

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

18

11

29

1200 to 2000 HP

7

24

31

Total

33

37

70

Drilling rig depth ratings:

Less than 10,000 feet

3

2

5

10,000 to 13,900 feet

18

6

24

14,000 to 25,000 feet

12

29

41

Total

33

37

70

Production Services Segment:

Well servicing rig horsepower ratings:

550 HP

98

600 HP

10

Total

108

Wireline units

119

Coiled tubing units

13

 

Contacts:

Lorne E. Phillips, CFO

Pioneer Energy Services Corp.

(210) 828-7689

 

Lisa Elliott / lelliott@drg-l.com

Anne Pearson / apearson@drg-l.com

DRG&L / (713) 529-6600

 

SOURCE Pioneer Energy Services



RELATED LINKS

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