Pioneer Drilling Highlights 2Q10 Financial, Operational Results
Pioneer Drilling reported financial and operating results for the three and six months ended June 30, 2010. Some of the highlights include:
- Drilling rig utilization increased to 58% in the second quarter from 49% in the first quarter and is currently 65%
- Workover rig utilization increased to 74% in the second quarter from 60% in the first quarter and is currently approximately 75%
- 27 drilling rigs, or 59% of our rigs currently working, are operating under term drilling contracts
- 65% of our working drilling rigs and 66% of our workover rigs are operating on wells that are targeting or producing oil
Second Quarter 2010 Results
Revenues for the second quarter were $117.0 million, compared with $86.0 million for the first quarter of 2010 ("the prior quarter") and $69.1 million for the second quarter of 2009 ("the year-earlier quarter"). The increase in second quarter revenues as compared to the prior and year-earlier quarters was primarily due to higher utilization rates for our drilling rig, workover rig and wireline unit fleets. Also, an increase in average revenue rates for both our Drilling Services and Production Services divisions has contributed to the increase in revenues in the second quarter as compared to the prior quarter.
Net loss for the second quarter was $10.1 million, or $0.19 per share, compared with a net loss for the prior quarter of $14.5 million, or $0.27 per share, and a net loss for the year-earlier quarter of $6.3 million, or $0.13 per share. The sequential improvement was due to better operating performance, partially offset by a $3.0 million increase in interest expense in the second quarter due to the issuance of $250 million of Senior Notes on March 11, 2010. Interest expense increased by $5.4 million in the second quarter as compared to the year-earlier quarter. EBITDA(1) increased to $22.0 million in the second quarter, compared to $9.2 million for the prior quarter and $17.9 million for the year-earlier quarter.
First Six Months of 2010 Results
Net loss for the six months ended June 30, 2010 was $24.7 million, or $0.46 per share, compared with a net loss of $5.6 million, or $0.11 per share, for the six months ended June 30, 2009. Revenues for the first six months of 2010 were $203.0 million, compared with $170.0 million for the prior year's first six months. EBITDA(1) for the first six months of 2010 was $31.3 million, compared to $45.7 million for the comparable period in 2009.
Revenues for the Drilling Services Division were $76.1 million in the second quarter, a 36% increase over revenues of $55.8 million in the prior quarter and a 66% increase from the year-earlier quarter. During the second quarter, the utilization rate for our drilling rig fleet averaged 58%, up from 49% in the prior quarter and 35% utilization in the year-earlier quarter. As demand for drilling services continued to improve in the second quarter, average drilling revenues per day increased 14% from the prior quarter and Drilling Services margin(2) increased 48% to $4,648 per day, versus $3,145 per day in the prior quarter. In contrast, average revenues per day in the second quarter were 1% lower when compared to the year-earlier quarter, since many drilling rigs during 2009 were earning standby revenue or operating under long-term contracts with historically high revenue rates. As a result, Drilling Services margin(2) decreased 40% in the second quarter when compared to the year-earlier period.
Revenues for the Production Services Division were $40.9 million in the second quarter, a 36% increase over revenues of $30.2 million in the prior quarter and a 75% increase from the year-earlier quarter. Production Services margin(2) as a percentage of revenue increased to 40% in the second quarter from 34% in the prior quarter and 36% in the year-earlier quarter. Currently, 72 of Pioneer's 74 workover rigs have crews assigned and are operating or being actively marketed, while the remaining two workover rigs are idle with no crews assigned.
"During the second quarter we grew our revenue 36% by continuing to improve utilization of our equipment at higher rates," said Wm. Stacy Locke, President and CEO of Pioneer Drilling. "Our strategy to upgrade and position our equipment to be attractive to our customers working in the active shale plays or on crude oil related projects has contributed to our improving results. Operating margins were higher across the board, with our Production Services Division contributing almost half of the gross margin for the quarter. In addition to the growing demand for our workover rigs, our wireline segment continues to grow. We now have 79 wireline units, after adding nine units in the second quarter and another four units so far this quarter.
"We also continued to upgrade our drilling fleet by adding seven topdrives in the second quarter, with another four added in the third quarter, resulting in 49% of our fleet being equipped with topdrives. These upgrades have positioned our fleet to be highly competitive in the most active markets, particularly the shale plays. We now have six drilling rigs operating in the Marcellus Shale play with a seventh drilling rig scheduled for September, 12 in the Eagle Ford Shale and eight in the Bakken Shale. Currently, we have 28 electric drilling rigs and 18 mechanical drilling rigs working. By September, we expect to have 35 drilling rigs with topdrives operating at 100% utilization with 80% supported by term contracts. Included in these 35 drilling rigs are eight mechanical rigs, of which five are supported by term contracts," continued Locke.
"In Colombia, revenues and margins are increasing steadily. In the second quarter, we installed a walking system on the seventh of the eight drilling rigs working in Colombia and plan to complete the installation of a walking system on the remaining drilling rig in October of this year. With these upgrades almost complete, operating margins in Colombia should continue to rise during the second half of the year.
"In the third quarter of 2010, we expect drilling rig utilization will average between 60% to 65% and Drilling Service margin(2) to be between $5,500 and $5,800 per day. In the Production Services division, we expect revenues to increase 2% to 5%, and margin as a percentage of revenue to be comparable to the second quarter," Locke said.
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