For the six months ended June 30, 2007, Grey Wolf reported net income of $100.3 million, or $0.46 per share on a diluted basis, on revenues of $469.5 million compared to net income of $112.2 million, or $0.49 per share on a diluted basis, on revenues of $462.5 million for the six months ended June 30, 2006. The six-month 2006 results include the gain from insurance proceeds mentioned above along with a first quarter 2006 after-tax gain of $5.9 million ($0.03 per diluted share) from the sale of five rigs formerly held for refurbishment.
Subsequent to the end of the second quarter, Grey Wolf purchased two operating rigs from a privately owned exploration and production company. Concurrent with the purchase, the Company signed a term contract totaling 1,095 rig days for each of the rigs to provide drilling services to the seller. The cash purchase price for the two rigs, which were manufactured within the past 15 months, was $28.0 million, or approximately 80% of the current cost to build comparable rigs. Grey Wolf assumed operation of the rigs July 1, 2007, which are operating in East Texas. Both of the rigs are IDM 1,500 horsepower diesel electric SCR rigs capable of drilling to 18,000 feet.
Thomas Richards, Chairman, President and Chief Executive Officer commented, "Our second quarter results were solid despite the anticipated leveling off of rig activity and declines in spot market dayrates due to the influx of new rigs in the market. As new rigs enter the market, older rigs are displaced and idled, and over the past three months, we have seen the most competitive pressure on the smaller horsepower mechanical rigs."
Mr. Richards continued, "We believe the addition of high-end equipment to our fleet creates one avenue for ongoing growth of our Company. The recent two-rig acquisition is an example of this and the Company is in the process of constructing a 1,000 horsepower diesel electric SCR rig capable of drilling to 15,000 feet. The rig will be deployed under a two-year term contract and is expected to commence work in Colorado in the third quarter."
Mr. Richards concluded, "Our strategy is to own high quality rigs that address our customers' needs in the domestic land drilling markets and operate a substantial portion of these rigs under long-term contracts to reduce the impact of short-term market fluctuations. The addition of these three rigs is consistent with this strategy and augments our fleet in a financially prudent manner by adding over 2,900 rig days to our long-term daywork contracted days. This three rig addition will bring our total rig fleet to 124 by the end of the third quarter."
The Company is now marketing 123 rigs, with 70 of those working under daywork term contracts, 29 working under spot market daywork contracts and ten working under turnkey contracts. Grey Wolf averaged 104 rigs working in the second quarter of 2007. This compares with an average of 108 rigs working in the second quarter of 2006 and 110 rigs working during the first quarter of this year. Under daywork term contracts, the Company has approximately 10,700 rig days, or an average of 58 rigs, contracted for the remaining two quarters of 2007 and approximately 9,500 rig days or an average of 26 rigs committed in 2008. Current leading edge bid rates range from $14,000 to $22,000 per day without fuel or top drives.
The Company's earnings before interest expense, taxes, depreciation and amortization ("EBITDA") totaled $91.7 million in the second quarter of 2007 compared to $116.9 million for the first quarter 2007 and $111.7 million for the second quarter 2006. On a per-rig-day basis, EBITDA was $9,680 for the second quarter of 2007, $11,780 for the first quarter of 2007 and $11,398 for the second quarter of 2006. Turnkey EBITDA per rig day in the second quarter of 2007 was $12,541 and daywork EBITDA per rig day totaled $9,430.
Capital expenditures totaled $55.5 million in the second quarter of 2007 and $122.8 million for the first half of 2007. Based upon anticipated rig activity, capital expenditures for 2007 are projected to be $200 million to $210 million, including the cost of the three rigs mentioned above.
During the third quarter of 2007, the Company expects to average 104 to 106 rigs working with 8 to 10 of these rigs performing turnkey services. Average daywork EBITDA per day is expected to decrease by $600 to $800 in response to continued pressure on spot market dayrates. Depreciation expense of approximately $24.0 million, interest expense of approximately $3.5 million and an effective tax rate of approximately 37% are expected for the third quarter of 2007.
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