Pioneer Drilling Ups Ante in Shale Plays; Capex Approved for 2010
Pioneer Drilling has reported financial and operating results for the three and twelve months ended December 31, 2009.
Some of the highlights during the fourth quarter include:
- Drilling rig utilization increased to 41% from 35% in the prior quarter
- Three more drilling rigs were contracted to work in Colombia, bringing the total to eight rigs
- Expanded presence in shale plays in both the Drilling Services and Production Services divisions
- Capital expenditures budget of $80 million approved for 2010
Fourth Quarter 2009 Results
Net loss for the fourth quarter was $8.4 million, or $0.16 per diluted share, compared with a net loss for the third quarter of 2009 ("the prior quarter") of $9.2 million, or $0.18 per diluted share. The net loss for the fourth quarter of 2009 included the positive earnings impact of a $3.5 million tax benefit from the reversal of a valuation allowance on deferred tax assets associated with foreign net operating losses that we expect to apply against future taxable income. Net loss adjusted to exclude that tax benefit was $11.9 million, or $0.23 per diluted share for the fourth quarter of 2009(1).
Net loss for the fourth quarter of 2008 ("the year-earlier quarter") was $117.9 million, or $2.37 per diluted share. The fourth quarter 2008 net loss included a $118.6 million goodwill impairment charge and a $52.8 million intangible asset impairment charge.
Revenues for the latest quarter were $81.2 million, compared with $74.4 million for the prior quarter and $170.7 million for the year-earlier quarter. The increase in fourth quarter revenue compared to the prior quarter was primarily due to an increase in Drilling Services revenues as a result of higher rig utilization. EBITDA(2) for the fourth quarter was $14.1 million, compared to $15.2 million for the prior quarter and $60.4 million for the year-earlier quarter.
Full Year 2009 Results
Net loss for the twelve months ended December 31, 2009, was $23.2 million, or $0.46 per share, compared with a net loss of $62.7 million, or $1.26 per diluted share for the twelve months ended December 31, 2008. The net loss for 2008 included a $118.6 million goodwill impairment charge and a $52.8 million intangible asset impairment charge. Revenues for 2009 were $325.5 million, compared with $610.9 million for the same period last year. EBITDA(2) for 2009 was $74.9 million, compared to $214.8 million for 2008.
Revenues for the Drilling Services Division were $54.6 million for the fourth quarter, a 14% increase from the prior quarter. During the fourth quarter, the utilization rate for our drilling rig fleet averaged 41%, up from 35% in the prior quarter, but down from 87% utilization in the year-earlier quarter. Average drilling revenues per day decreased 4% during the fourth quarter primarily due to the expiration of two long-term contracts that were earning relatively high daywork rates when compared to current rates. Average operating costs were $14,692 per day for the fourth quarter, a 6% decrease when compared to the prior quarter. Drilling Services margin(3) was flat at $5,629 per day in the fourth quarter, versus $5,623 per day in the prior quarter.
Revenues for the Production Services Division increased modestly to $26.6 million in the fourth quarter from $26.3 million in the prior quarter. Production Services margin(3) as a percentage of revenue decreased to 33% in the fourth quarter from 37% in the prior quarter. Currently, 68 of Pioneer's 74 workover rigs have crews assigned and are operating or being actively marketed, while the remaining six workover rigs are idle with no crews assigned.
"As 2010 gets under way, we are continuing to see an increase in demand for our equipment, driven by the growing activity in the U.S. shale plays and in Colombia," said Wm. Stacy Locke, President and CEO of Pioneer Drilling. "Our Drilling Services Division now has five rigs working in the Marcellus Shale, five operating in the Bakken Shale and five additional rigs operating in various other shale plays. While we averaged 41% utilization in the fourth quarter, demand has improved, and the utilization rate in our Drilling Services Division is currently 56%.
"We currently have seven rigs operating under drilling contracts in Colombia, of which, five rigs are drilling and two rigs have moved to their initial well site locations and are expected to begin drilling in late February. An eighth drilling rig is expected to begin drilling operations in Colombia in April. Six of these drilling rigs assigned to Colombia have term contracts that expire in December 2012, and the remaining two rigs have term contracts that expire in September 2010. As a result of the new contracts in Colombia as well as new contracts in the U.S., we have increased the number of rigs operating under term contracts from four rigs at the end of the 2009 to 15 rigs, or 21% of our fleet, currently.
"In our Production Services Division, we are continuing to expand well servicing operations in the shale plays. Today, we have well services rigs operating in the Bakken Shale, Fayetteville Shale, Haynesville Shale, and we have secured a yard to service the Eagle Ford Shale. Other regions such as South Louisiana and the Black Warrior Basin in Mississippi are also showing signs of strength. Like our Drilling Services Division, demand was soft at the beginning of 2010, but has gradually improved over the last several weeks. Utilization for workover rigs has grown from an average of 53% in the fourth quarter to about 60% today. Likewise, our wireline business is improving and we are now positioned for work in the Marcellus Shale, Haynesville Shale and South Louisiana where we will provide both onshore and offshore wireline services," Locke said.
"In November, we raised $24 million in net proceeds from an equity offering in order to provide additional financial flexibility and position us to market our equipment to maximize our revenue. In 2010, we intend to continue to expand our operations in the most active basins and make selective upgrades to our equipment as needed by our customer base."
Pioneer's working capital was $90.3 million at December 31, 2009, up from $64.4 million at December 31, 2008. Income taxes receivable increased $36.1 million as of December 31, 2009 when compared to December 31, 2008 primarily due to net operating loss carry-backs that we expect will result in income tax refunds in the second quarter of 2010. Our cash and cash equivalents were $40.4 million at the end of the fourth quarter, up from $26.8 million at December 31, 2008. The year-over-year increase in cash and cash equivalents was primarily due to $123.3 million of cash provided by operating activities and $24.0 million in net proceeds from our equity offering in November 2009. The increase in cash and cash equivalents was partially offset by our use of $114.7 million for property and equipment expenditures, debt payments of $17.3 million and debt costs of $2.6 million incurred to amend our senior secured revolving credit facility.
Currently, $257.5 million is outstanding under our senior secured revolving credit facility, of which, $1.9 million is due in the first quarter of 2010 and the remaining $255.6 million is due at maturity on August 31, 2012. There are no limitations on our ability to borrow funds under our senior secured revolving credit facility other than maintaining compliance with the applicable covenants.
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