Pioneer Completes Acquisition Venture
Pioneer Drilling Company completed its previously announced acquisition of WEDGE Well Services, L.L.C., WEDGE Wireline Services, Inc. and WEDGE Fishing and Rental Services, L.L.C from affiliates of WEDGE Group Incorporated. The WEDGE Companies provide oil and gas well workover, wireline and fishing and rental services to energy producers throughout the United States.
In a separate transaction, the Company also purchased Prairie Investors, d/b/a Competition Wireline, located in Billings, Montana. Competition Wireline brings the latest high-tech, pulsed-neutron tool for logging oil and gas wells to Pioneer's mix of services, along with six additional wireline trucks and an intact management team with an average of over 20 years of wireline experience.
Effective with these acquisitions, Pioneer has organized its operations into two divisions: the Pioneer Drilling Services Division and the new Pioneer Production Services Division. The company's Drilling Services Division operates 69 drilling rigs throughout the U.S. and Colombia. Franklin "Red" West, formerly the company's COO, will serve as president of Pioneer's Drilling Services Division. The WEDGE Companies and Competition Wireline comprise Pioneer's Production Services Division, which will operate 62 workover rigs, 51 wireline trucks and approximately $13 million in fishing and rental tools throughout the United States. Joseph Eustace, formerly president of the WEDGE Companies, will serve as president of Pioneer's Production Services Division. Both West and Eustace will report to Wm. Stacy Locke, the company's president and CEO.
The addition of the Pioneer Production Services Division allows Pioneer to add new platforms for growth both domestically and internationally, beginning with a complementary market footprint to develop cross-selling opportunities to existing customers, enhance Pioneer's exposure to the more stable, less cyclical production phase of the well life and add a well-seasoned management team and workforce to continue producing excellent results for Pioneer's shareholders.
Pioneer has secured a new $400 million, five-year, senior secured revolving credit facility in conjunction with these transactions, which have a combined purchase price of approximately $340 million. This new credit facility, along with the company's cash on hand and internally generated cash flow, is expected to provide adequate working capital for the company's operations and continued growth.
"We are thrilled to have completed the acquisitions of the WEDGE Companies and Competition Wireline," Locke said. "In addition to state-of-the-art equipment, these acquisitions bring experienced, proven management teams, along with solid operations and administrative personnel who have demonstrated the ability to create sustainable, profitable growth. We are proud to have them as part of the Pioneer team. By organizing our Company into operating divisions, each headed by experienced, proven leaders, we further position Pioneer to take advantage of this talent for continued expansion and growth. Our production services acquisitions, together with our recent international expansion in our Drilling Services Division, are major steps toward our long- held strategic goal of transforming Pioneer into a multi-national energy services provider."
Pioneer estimates its Production Services Division will contribute, on an annualized basis for the 2008 calendar year, $165 million to $185 million of revenue. In addition, Pioneer is committed to a consistent and dedicated growth strategy for these businesses, allocating approximately $30 million in capital expenditures for the Division during 2008. Considering current equipment and projected 2008 capital expenditures, the company estimates annualized 2008 depreciation and amortization to range between $17 million and $19 million and annualized 2008 interest expense to range between $12 million and $14 million. After considering integration costs, Pioneer expects annualized 2008 selling, general and administrative costs to approximate $18 million to $20 million.
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