Pioneer Energy Services Reports Third Quarter 2013 Results

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

• Production Services Segment revenues were up 3% over the second quarter of 2013.
• Well servicing rigs in the Production Services Segment achieved a 90% utilization rate and an average hourly rate of $628.
• After the sale of eight mechanical drilling rigs in October, our current drilling rig utilization is 89%.
• Currently, 55 drilling rigs are earning revenues, 38 of which are under term contracts.

Consolidated Financial Results

Revenues for the third quarter of 2013 were $244.0 million, down 2% from revenues of $248.4 million in the second quarter of 2013 ("the prior quarter") and up 6% from revenues of $229.8 million in the third quarter of 2012 ("the year-earlier quarter"). Revenues in the third quarter, as compared to the prior quarter, were negatively impacted by lower utilization for our Drilling Services Segment, which was partially offset by a modest improvement in the operating results for our Production Services Segments. 

Third quarter Adjusted EBITDA⁽¹⁾ was $59.4 million, down 7% from $63.6 million in the prior quarter and up 7% from $55.6 million in the year-earlier quarter.

Net loss as reported for the third quarter was $6.2 million, or $0.10 per share, which included a $9.5 million impairment charge primarily due to the sale of eight mechanical drilling rigs that were not expected to return to work in the near term. Adjusted net loss⁽²⁾, which excludes the impact of impairment charges, was $0.2 million and Adjusted EPS⁽³⁾ was zero for the third quarter.

Operating Results

Drilling Services Segment

Revenue for the Drilling Services Segment was $131.0 million in the third quarter, a 5% decrease from the prior quarter and a 4% increase from the year-earlier quarter. Third quarter utilization was 80%, down from 87% in the prior quarter and 86% in the year-earlier quarter. The decrease from the prior quarter is primarily due to the expiration of five drilling contracts for rigs that were earning standby dayrates but not working and a fuel cost reimbursement in the prior quarter that did not recur in the third quarter. Eight mechanical drilling rigs that were mostly idle during the quarter were classified as held for sale at September 30, 2013 and later sold in October. Excluding these eight rigs, utilization would have been 89% in the third quarter.

Currently, 55 drilling rigs are earning revenues, 38 of which are under term contracts. All eight of our drilling rigs in Colombia were working during the quarter, although one rig completed its contract term in August and has remained idle.

Average drilling revenues per day in the third quarter were $25,325, up slightly from $24,968 in the prior quarter and up from $24,101 in the year-earlier quarter. The increase over the year-earlier quarter 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 Segment margin⁽⁵⁾ per day was $8,056 in the third quarter, down from $8,841 in the prior quarter and up from $7,187 in the year-earlier quarter. The sequential decrease in Drilling Services margin per day was partially due to a reduction of approximately $4.4 million in revenue from rigs earning a standby dayrate and a $1.8 million fuel cost reimbursement in the prior quarter.

Production Services Segment

Revenue for the Production Services Segment was $112.9 million in the third quarter, up 3% from the prior quarter and up 8% from the year-earlier quarter. The increase in revenues from the prior quarter was generated mostly by wireline services that had higher pricing due to the mix of services provided during the third quarter. Well servicing pricing was $628 per hour in the third quarter, up from $606 both in the prior quarter and in the year-earlier quarter. Well servicing rig utilization decreased slightly to 90% in the third quarter, versus 92% in the prior quarter and 91% in the year-earlier quarter. Coiled tubing unit utilization was 53% in the third quarter, up from 46% in the prior quarter and down slightly from 56% in the year-earlier quarter.

Production Services Segment margin⁽⁴⁾ as a percentage of revenue remained steady at 36% for the third quarter, compared to 36% in the prior quarter and 37% in the year-earlier quarter.

Comments from Our President and CEO

"We achieved good operating results for the quarter, with pricing and utilization holding steady and some modest improvements in our Production Services Segment," said Wm. Stacy Locke, President and CEO of Pioneer Energy Services. "The third quarter is typically a strong quarter for Production Services due to seasonality and we saw wireline prices stabilize and some modest pricing improvement for well servicing.

"Our newly built drilling rigs are performing well and meeting our clients' needs for more efficient equipment.  With the continuing trend towards horizontal drilling, we have opted to reduce the size of our vertical drilling fleet by selling eight under-utilized rigs. Current utilization for our eight rigs in Colombia is 88% and we are negotiating the renewal of the term contracts for six rigs that expire at year end.

"For the remainder of the year, we will remain focused on maximizing our cash flow and reducing our debt. In 2014, we will benefit from a reduced capital expenditure program that we believe will position us to continue with our debt reduction focus."

Fourth Quarter Guidance

In the fourth quarter of 2013, drilling rig utilization is expected to average between approximately 84% and 87%, based on a fleet of 62 rigs. Moderate pricing pressure is expected in the fourth quarter and as a result, Drilling Services Segment margin is expected to be approximately $7,500 to $7,900 per day.

Production Services Segment revenue in the fourth quarter is expected to be down 7% to 9% due to late year budget constraints of our clients and typical seasonality.  Production Services Segment margin as a percentage of revenues is expected to be down 1% to 2% as compared to the third quarter.

Liquidity

Working capital at September 30, 2013 was $123.9 million, as compared to $62.2 million at December 31, 2012. Our cash and cash equivalents were $17.1 million, down from $23.7 million at year-end 2012. 

The decrease in cash and cash equivalents during the nine months ended September 30, 2013 is primarily due to $137.9 million used for purchases of property and equipment, which was mostly offset by $110.1 million of cash provided by operating activities, $14.1 million in proceeds from debt borrowings, net of repayments, and $6.9 million of proceeds from the sale of assets.

After making a $10.0 million debt payment in October, we currently have $105.0 million outstanding and $12.9 million in committed letters of credit under our $250 million Revolving Credit Facility.

Capital Expenditures

Cash capital expenditures in the third quarter were $25.8 million, including capitalized interest. We estimate that our total cash capital expenditures in 2013 will be approximately $165 million. The total 2013 capital expenditure budget includes funding that was used to complete the new-build drilling rig program, upgrades to certain drilling rigs, additional Production Services equipment and routine capital expenditures.

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) 629-9645 ten minutes early and ask for the Pioneer Energy Services' conference call. A replay will be available after the call and will be accessible until November 6^th. To access the replay, dial (303) 590-3030 and enter the pass code 4643766#.

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, changes in technology and improvements in our competitors' equipment, 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, 2012could 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.

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(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)   Adjusted net income (loss) represents net income (loss) as reported less impairment charges and the tax benefit from impairment charges. We believe that adjusted net income (loss) is a useful measure for evaluating our core operating performance, although it is not a measure of financial performance under GAAP. Adjusted net income (loss) may not be comparable to other similarly titled measures reported by other companies. A reconciliation of net income (loss) as reported to adjusted net income (loss) is included in the tables to this press release.

(3)   Adjusted (diluted) EPS represents adjusted net income (loss) divided by the weighted-average number of shares outstanding during the period, including the effect of dilutive securities as applicable. We believe that adjusted (diluted) EPS is a useful measure for evaluating our core operating performance, although it is not a measure of financial performance under GAAP. A reconciliation of (diluted) EPS as reported to adjusted (diluted) EPS is included in the tables to this press release. Adjusted (diluted) EPS may not be comparable to other similarly titled measures reported by other companies.

(4)   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.

(5)   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.

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SOURCE Pioneer Energy Services