Pioneer Drilling Company, Inc. reported financial and operating results for the three months ended March 31, 2009.
Net income for the first quarter was $618,000, or $0.01 per diluted share, compared with adjusted net income of $18.7 million, or $0.37 per diluted share for the three months ended December 31, 2008 ("the prior quarter") adjusted to exclude the impact of impairment charges(1). At December 31, 2008, we recognized a $118.6 million goodwill impairment charge and a $52.8 million intangible asset impairment charge associated with the acquisitions that make up our Production Services Division. Net income for the three months ended March 31, 2008 ("the year-earlier quarter") was $11.8 million, or $0.24 per diluted share. The first quarter of 2008 included only one month of operating results from our Production Services Division, which was formed on March 1, 2008.
Revenues for the first quarter were $100.8 million, compared with $170.7 million for the prior quarter and $113.4 million for the year-earlier quarter. EBITDA(2) for the first quarter was $27.8 million, compared to $60.4 million for the prior quarter and $36.2 million for the year-earlier quarter.
"During the first quarter, the utilization rate for our drilling rigs averaged 52%, down from 87% in the fourth quarter of 2008, with a significant portion of those rigs operating under longer-term drilling contracts that were established when rig demand and day rates were at higher levels," said Wm. Stacy Locke, President and CEO of Pioneer Drilling. "As those contracts have progressively expired and demand has continued to be negatively impacted by the dramatic decline in commodity prices, the number of idle rigs has increased.
"Currently, out of 70 rigs in the U.S. and Colombia, we have 27 rigs operating, 7 of which are idle but earning revenue under the remaining terms of their contracts," added Mr. Locke. "We will soon add to our fleet a newly built, 1500 horsepower AC electric drilling rig. We are very excited about this advanced, next-generation rig that will begin operating in May 2009 in North Dakota under a three-year contract. In Colombia, we are maintaining relatively high utilization with four of our five international drilling rigs generating revenues."
Revenues for the Drilling Services Division were $71.4 million for the first quarter, a 42% decline from the prior quarter. The Drilling Services margin(3) declined 47% to $27.2 million. With the lower utilization rate in the first quarter, the number of revenue days dropped 2,230, or 40%, and the Drilling Services margin(3) per day decreased $1,070, or 11%, to $8,257 in the first quarter.
Revenues for the Production Services Division declined 38% to $29.5 million for the first quarter, compared to $47.4 million in the prior quarter. Production Services margin(3) decreased 49% to $10.8 million, compared to $21.2 million in the prior quarter. Margin as a percentage of revenue also decreased to 36% as compared to 45% in the prior quarter. Currently, 58 of Pioneer's 74 workover rigs have crews assigned and are operating or being actively marketed, while the remaining 16 workover rigs are idle with no crews assigned.
"It seems clear that the current downturn is the worst this industry has faced in decades, and while we do not know when conditions will improve, we have begun to see signs that utilization rate declines are slowing and that we may be approaching a bottom.
Accordingly, in this challenging environment, we are continuing to reduce costs, although certain costs are fixed and can't be reduced at the same pace as revenue," Locke said. "Selling, general and administrative expense declined 17% to $10.0 million for the first quarter, compared to $12.1 million for the prior quarter as a result of cost cutting measures. Additionally, we are monitoring our capital expenditures closely and focusing on routine expenditures necessary to keep our equipment in safe and efficient working order and limiting our discretionary expenditures for new equipment and upgrades.
"Our working capital was $67.3 million at March 31, up from $64.4 million at December 31, and our cash and cash equivalents were $30.0 million at the end of the first quarter, up $3.2 million from the prior quarter. The increase in cash and cash equivalents was due to cash provided by operations of $43.9 million, offset by $24.8 million of property and equipment expenditures and $16.1 million of debt payments. We have $132.1 million of borrowing availability on our senior secured revolving credit facility, with $257.5 million due at maturity in February 2013," he said.
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