Grey Wolf Third Quarter Results
Grey Wolf reported net income of $35.6 million, or $0.17 per share on a diluted basis, for the three months ended September 30, 2007 compared with net income of $55.3 million, or $0.25 per share on a diluted basis, for the third quarter of 2006. Revenues for the third quarter of 2007 were $224.0 million compared with revenues of $242.7 million for the same quarter a year ago.
For the nine months ended September 30, 2007, Grey Wolf reported net income of $135.9 million, or $0.63 per share on a diluted basis, on revenues of $693.5 million compared to net income of $167.4 million, or $0.74 per share on a diluted basis, on revenues of $705.2 million for the nine months ended September 30, 2006. The 2006 results include a second quarter after-tax gain related to insurance proceeds of $2.7 million ($0.01 per diluted share) and a first quarter after-tax gain of $5.9 million ($0.03 per diluted share) from the sale of five rigs formerly held for refurbishment.
"While leading-edge dayrates have declined from a year ago, they have been relatively stable over the past several months," said Thomas Richards, Chairman, President and CEO. "However, the influx of newly built drilling rigs into the market is pressuring Grey Wolf's year-over-year average rig days worked as well as contract renewal rates. Other contractual areas, such as mobilization recoveries, are experiencing pricing pressure as well. Our portfolio of long-term contracts helps to mitigate these market fluctuations, and we continue to pursue a successful strategy of owning high-quality rigs and enhancing our fleet under long-term contracts."
Grey Wolf is now marketing 121 rigs, with 61 of those working under daywork term contracts, 37 working under spot-market daywork contracts and eight working under turnkey contracts. Grey Wolf averaged 104 rigs working in both the second and third quarters of 2007. This compares to an average of 107 rigs working in the third quarter of 2006.
Under daywork term contracts, the company has approximately 5,340 rig days, or an average of 58 rigs, contracted for the fourth quarter of 2007, approximately 11,350 rig days or an average of 31 rigs committed in 2008, and approximately 6,070 rig days, or an average of 17 rigs committed in 2009. Current leading edge daywork bid rates range from $14,000 to $22,000 per day without fuel or top drives.
During the fourth quarter of 2007, Grey Wolf expects to average 97 to 100 rigs working with 7 to 9 of these rigs performing turnkey services. Average daywork EBITDA per day is expected to decrease by $600 to $800 in response to fewer rigs working and pricing pressure on contract renewals and mobilization recoveries. Depreciation expense of approximately $26.7 million, interest expense of approximately $3.4 million and an effective tax rate of approximately 37% are expected for the fourth quarter of 2007.
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