Pioneer Energy Services Reports Second Quarter 2013 Results
SAN ANTONIO, July 30, 2013 /PRNewswire/ -- Pioneer Energy Services (NYSE: PES) today reported financial and operating results for the quarter ended June 30, 2013. Highlights include:
- Production Services revenues were up 14% over the first quarter of 2013.
- Well servicing rigs in the Production Services Segment achieved a 92% utilization rate and an average hourly rate of $606.
- Drilling Services revenues were up 4% over the first quarter of 2013 with a utilization rate of 87%.
- Currently, 58 drilling rigs are earning revenues under contracts, 43 of which, or 74%, are under term contracts.
Consolidated Financial Results
Revenues for the second quarter of 2013 were $248.4 million, up 8% from revenues of $229.7 million in the first quarter of 2013 ("the prior quarter") and from revenues of $229.8 million in the second quarter of 2012 ("the year-earlier quarter"). Revenues in the second quarter were positively impacted by the full benefit of fleet additions in both the Drilling Services and Production Services Segments and higher seasonal activity contributed to increased revenues for the Production Services Segment over the prior quarter.
Second quarter Adjusted EBITDA(1) was $63.6 million, up 14% from $55.9 million in the prior quarter and up slightly from $63.3 million in the year-earlier quarter. Adjusted EBITDA was higher primarily due to increased margin per day in our Drilling Services Segment and increased revenues in our Production Services Segment.
Net loss as reported for the second quarter, which includes the impact of impairment charges of $44.8 million, was $25.9 million, or $0.42 per diluted share, compared with a net loss of $1.3 million, or $0.02 per diluted share in the prior quarter and net income of $9.7 million, or $0.15 per diluted share in the year-earlier quarter. Adjusted net income(2), which excludes the impact of impairment charges, was $1.2 million, and Adjusted diluted EPS(3) was $0.02 for the second quarter of 2013.
The second quarter impairment charges represent a $41.7 million charge against goodwill and a $3.1 million charge against the intangible assets that were acquired in connection with the acquisition of our coiled tubing services business in December 2011.
Operating Results
Drilling Services Segment
Revenue for the Drilling Services Segment was $138.3 million in the second quarter, a 4% increase from the prior quarter and a 16% increase from the year-earlier quarter. Second quarter utilization was 87%, up from 84% in the prior quarter and down from utilization of 89% in the year-earlier quarter.
Currently, 58 drilling rigs are earning revenues under contracts, 43 of which, or 74%, are under term contracts. All eight of our drilling rigs in Colombia were working during the quarter, although we experienced some planned downtime for mobilization and maintenance of one of our Colombian rigs that was between wells.
Average drilling revenues per day in the second quarter were $24,968, compared to $24,925 in the prior quarter and $23,658 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 margin(4) per day was $8,841 in the second quarter, up from $8,258 in the prior quarter. Drilling Services margin per day was positively impacted by the higher margins generated by our new-build rigs, a fuel cost reimbursement of $1.8 million for our rigs in Colombia and a gain on the sale of two drilling rigs of $0.8 million in the second quarter. The increase in Drilling Services margin per day was partially offset by the effect of slightly lower dayrates on some expiring drilling contracts in the U.S. that were renewed during the second quarter.
Production Services Segment
Revenue for the Production Services Segment was $110.1 million in the second quarter, up 14% from the prior quarter and down 1% from the year-earlier quarter.
Production Services margin(4) as a percentage of revenue was 36% in the second quarter, compared to 37% in the prior quarter and 41% in the year-earlier quarter. Well servicing rig utilization was 92% in the second quarter, versus 89% in the prior quarter and 97% in the year-earlier quarter. Pricing was $606 per hour in the second quarter, compared to $596 in the prior quarter and $592 in the year-earlier quarter. Coiled tubing unit utilization was 46% in the second quarter, compared to 41% in the prior quarter and 61% in the year-earlier quarter. Despite higher utilization, Production Services margin was negatively impacted by moderately higher labor costs during the second quarter.
Comments from Our President and CEO
"We saw steady activity in our Production Services Segment which resulted in improved utilization for all our business units in this segment quarter over quarter," said Wm. Stacy Locke, President and CEO of Pioneer Energy Services. "Pricing showed modest improvement for well servicing in the second quarter, but was flat to slightly down for wireline services and coiled tubing services.
"The offshore coiled tubing services market improved in the second quarter primarily due to more favorable weather conditions, but the land market has continued to be soft. Increased coiled tubing services competition has resulted in pricing and utilization levels that have been lower than what we expected when we acquired the business in December 2011. Given our current outlook for coiled tubing services, we recognized impairment charges and reduced the carrying values of goodwill and intangible assets during the second quarter. We continue to focus on improving coiled tubing services utilization and profitability and expect to see modest improvements in the second half of the year.
"In our Drilling Services Segment, activity remained steady throughout the quarter and resulted in higher than expected utilization, but was partially offset by slightly lower dayrates on some drilling contracts that were renewed during the second quarter. Our 10 new-build rigs are performing very well, and with the higher integration costs now behind us, we are getting the full benefit from their increased earning power.
"During June and July, we reduced our revolver by a combined $20 million and we are well positioned to make meaningful reductions to our debt levels in the second half of the year," Locke said.
Third Quarter Guidance
In the third quarter of 2013, drilling contracts for four or five lower horsepower rigs that are currently working are not expected to renew. Overall drilling rig utilization is expected to average between approximately 78% and 82%, based on a fleet of 70 rigs. Moderate pricing pressure is expected in the third quarter and certain earnings benefits such as the fuel cost adjustment and the gain on the sale of two drilling rigs are not expected to repeat in the third quarter. As a result, Drilling Services Segment margin is expected to be approximately $7,600 to $8,000 per day.
Production Services Segment revenue in the third quarter is expected to be flat and margin as a percentage of revenues is expected be flat to slightly down as compared to the second quarter.
Liquidity
Working capital at June 30, 2013 was $118.8 million, as compared to $62.2 million at December 31, 2012. Our cash and cash equivalents were $17.6 million, down from $23.7 million at year-end 2012.
The change in cash and cash equivalents during the first half of the year was primarily due to $112.2 million used for purchases of property and equipment, which was mostly offset by $70.7 million of cash provided by operating activities, $29.1 million in proceeds from debt borrowings, net of repayments, and $6.1 million of proceeds from the sale of assets.
After making a $10 million debt payment in late July, we currently have $120.0 million outstanding and $8.9 million in committed letters of credit under our $250 million Revolving Credit Facility.
Capital Expenditures
Cash capital expenditures in the second quarter were $40.9 million, including capitalized interest. We continue to estimate that our total cash capital expenditures in 2013 will be between $140 million and $160 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 August 7. To access the replay, dial (303) 590-3030 and enter the pass code 4627810#.
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) | Adjusted net income represents net loss as reported less impairment charges and the tax benefit from impairment charges. We believe that adjusted net income is a useful measure for evaluating our core operating performance, although it is not a measure of financial performance under GAAP. A reconciliation of net loss as reported to adjusted net income is included in the tables to this press release. Adjusted net income may not be comparable to other similarly titled measures reported by other companies. | |||
| (3) | Adjusted diluted EPS represents adjusted net income 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 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. | |||
