Pacific Drilling Announces Third Quarter 2012 Results

  Pacific Drilling Announces Third Quarter 2012 Results

Business Wire

LUXEMBOURG -- November 07, 2012

Pacific Drilling S.A. (NYSE: PACD) today announced revenues of $172.0 million
and a net loss of $2.0 million or $0.01 per diluted share for the three months
ended September 30, 2012. In the comparable prior year period, the company had
revenues of $17.0 million and a net loss of $11.0 million or $0.05 per diluted
share.

CEO Chris Beckett commented, “The ultra-deepwater market continues to provide
strong fundamentals with recent awards firmly in the high $500,000 to $600,000
per day range and demand exceeding the limited supply well into 2014 and
possibly beyond. With this backdrop, the third quarter of 2012 reflected
continued strong revenue efficiency for the Pacific Scirocco, Pacific Bora and
Pacific Mistral, which have all completed the shakedown period. These three
rigs averaged 97.2% efficiency during the third quarter. The Pacific Santa
Ana, still in its shakedown phase, has experienced several issues with its
blowout preventer that have resulted in a lower than anticipated efficiency
level.

Our focus on achieving optimal operating efficiency means that our operational
expenses did not meet our expectations, but instead increased as a result of
costs associated with equipment, maintenance and repair events and personnel,
particularly for the Santa Ana and the Mistral. We will continue to focus our
efforts on bringing our operational expenses in line with our post shakedown
expectations.”

Mr. Beckett added, “We have signed a letter of intent with a major oil company
for the Pacific Khamsin and will provide more details once a final drilling
contract is signed. Our operational track record has enhanced our active
client discussions regarding future contracts, and when combined with ongoing
market strength for ultra-deepwater drillships, contributes to our continued
optimism regarding contract opportunities for the Pacific Meltem.”

Third Quarter 2012 Operational Commentary

Contract drilling revenue for the third quarter of 2012 was $172.0 million
including recognition of $26.0 million of deferred revenue for mobilization,
contract preparation and asset upgrades. During the three months ended
September 30, 2012, our operating fleet of four drillships achieved an average
revenue efficiency of 83.1%^(a), in line with the guidance provided at the end
of the second quarter. Our three drillships that have operated the longest
exceeded our expectations for revenue efficiency for the third quarter 2012.
Pacific Bora, Pacific Scirocco and Pacific Mistralachieved average revenue
efficiency for the quarter ended September 30, 2012, of 97.8%, 99.5% and 94.1%
respectively. As communicated last quarter, Pacific Santa Ana experienced
problems with its blowout preventer (BOP), which were primarily responsible
for the Santa Ana’s average revenue efficiency of 42.1% during the third
quarter.

Contract drilling expenses for the third quarter of 2012 were $96.2 million,
including $18.8 million in amortization of deferred mobilization costs and
$6.6 million in shore-based and other support costs. The sequential increase
in daily contract drilling expenses to an average of $192,500 was primarily
driven by equipment and maintenance costs for Pacific Santa Ana and Pacific
Mistral and personnel costs related to Pacific Bora and Pacific Scirocco.

EBITDA^(b) for the third quarter of 2012 was $65.3 million, compared to $63.3
million during the second quarter of 2012.

Third Quarter 2012 Financial Commentary

Our cash balances on September 30, 2012, stood at $457 million, including $303
million of restricted cash related primarily to our project financing facility
and collateral for our bonds and lines of credit.

We invested $114 million in the construction of the fleet during the third
quarter. At the end of the quarter, we estimated the remaining capital
expenditures to complete construction of our committed drillships at
approximately $1.5 billion.

We anticipate funding the remaining costs of our three newbuilds with a
combination of a $1 billion credit facility and senior secured bonds. The
choice and timing for the specific elements of the financing plan will be
determined by financial market conditions. We intend to take advantage of
attractive opportunities in the bond market as available.

Updates to Fourth Quarter 2012 Guidance and Investor Toolkit

From a review of our third quarter operating expenses, we have identified
approximately $5 million of costs predominantly related to rig shakedown and
acceptance that we do not expect to be ongoing. Accordingly, we now expect
direct rig operating costs per day per rig will range between $175,000 and
$185,000 during the fourth quarter 2012 as a result of the above mentioned
cost increases which will continue at least in part during the quarter. We
reiterate other guidance provided with our second quarter 2012 results.

Due to the newbuild status of our fleet, deferred revenues and cost
amortizations, as well as our depreciation profile, are significant to our
financial results. Therefore, updated schedules of expected amortization of
deferred revenue, amortization of deferred mobilization expenses, depreciation
and interest expense for the existing credit facilities and senior bonds as
well as capital expenditures are included in the “Investor Toolkit” subsection
of the “Investor Relations” section of our website, www.pacificdrilling.com.
Please note the guidanceprovided above is based on current expectations and
certain management assumptions, and is subject to change.

Footnotes

(a) Revenue efficiency is defined as actual contractual dayrate revenue
(excludes mobilization fees, upgrade reimbursements and other revenue sources)
divided by the maximum amount of contractual dayrate revenue that could have
been earned during such period.

(b) EBITDA is a non-GAAP measure. Please refer to the reconciliation to net
income included later in this press release.

Conference Call

Pacific Drilling will conduct a conference call at 9:00 a.m. U.S. Central
Standard Time on Thursday, November 8, 2012, to discuss third quarter 2012
results. To participate, dial +1 719-325-2307 or 1-888-296-4206 and refer to
confirmation code 8466610 approximately five to ten minutes prior to the
scheduled start time of the call. The call will also be broadcast live over
the Internet in a listen-only mode and can be accessed by a link posted in the
“Events & Presentations” subsection of the “Investor Relations” section of our
website, www.pacificdrilling.com.

An audio replay of the conference call will be available after 12:00 p.m. U.S.
Central Standard Time on Thursday, November 8, 2012, by dialing +1
719-457-0820 or 1-888-203-1112 and using access code 8466610. A replay of the
call will also be available on the company’s website.

About Pacific Drilling

With its best-in-class drillships and highly experienced team, Pacific
Drilling is a fast growing company that is committed to becoming the
industry’s preferred ultra-deepwater drilling contractor. Pacific Drilling’s
fleet of seven ultra-deepwater drillships will represent one of the youngest
and most technologically advanced fleets in the world. The company currently
operates four recently delivered drillships under customer contract and has
three drillships under construction at Samsung, one of which is under customer
contract. For more information about Pacific Drilling, including our current
Fleet Status, please visit our website at www.pacificdrilling.com.

Forward-Looking Statements

Certain statements and information in this press release concerning results
for the fiscal period ended September 30, 2012, may constitute
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include words or
phrases such as “believe,” “expect,” “anticipate,” “plan,” “intend,”
“foresee,” “should,” “would,” “could” or other similar words, which are
generally not historical in nature, and specifically include statements
involving future operational performance; estimated duration of client
contracts; contract dayrate amounts; future contract opportunities; future
contract commencement dates and locations; backlog; timing and delivery of
newbuilds; capital expenditures; growth opportunities; market outlook; revenue
efficiency; cost adjustments; estimated rig availability; customers; new rig
commitments; the expected period of time and number of rigs that will be in a
shipyard for repairs, maintenance, enhancement or construction; direct rig
operating costs; expected amortization of deferred revenue; expected
amortization of deferred mobilization expenses; and expected depreciation and
interest expense for the existing credit facilities and senior bonds. These
forward-looking statements are based on our current expectations and beliefs
concerning future developments and their potential effect on us. While
management believes that these forward-looking statements are reasonable as
and when made, there can be no assurance that future developments affecting us
will be those that we anticipate. All comments concerning our expectations for
future revenues and operating results are based on our forecasts for our
existing operations and do not include the potential impact of any future
acquisitions. Our forward-looking statements involve significant risks and
uncertainties (some of which are beyond our control) and assumptions that
could cause actual results to differ materially from our historical experience
and our present expectations or projections. Important factors that could
cause actual results to differ materially from those in the forward-looking
statements include, but are not limited to governmental regulatory,
legislative and permitting requirements affecting drilling operations; changes
in worldwide rig supply and demand, competition and technology; future levels
of offshore drilling activity; downtime and other risks associated with
offshore rig operations, relocations, severe weather or hurricanes; possible
cancellation or suspension of drilling contracts as a result of mechanical
difficulties, performance or other reasons; risks inherent to shipyard rig
construction, repair, maintenance or enhancement; actual contract commencement
dates; environmental or other liabilities, risks or losses; our ability to
attract and retain skilled personnel on commercially reasonable terms;
governmental action, civil unrest and political and economic uncertainties;
terrorism, piracy and military action; and the outcome of litigation, legal
proceedings, investigations or other claims or contract disputes.

For additional information regarding known material factors that could cause
our actual results to differ from our projected results, please see our
filings with the SEC, including our Annual Report on Form 20-F and Current
Reports on Form 6-K.

Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date hereof. We undertake no obligation
to publicly update or revise any forward-looking statements after the date
they are made, whether as a result of new information, future events or
otherwise.

                                                            
PACIFIC DRILLING S.A. AND SUBSIDIARIES
                                                                  
Condensed Consolidated Balance Sheets
(in thousands, except par value and share amounts)
                                                                  
                                              September 30,       December 31,
                                              2012                2011
Assets:                                       (unaudited)
Cash and cash equivalents                   $ 153,512           $ 107,278
Restricted cash                               100,675             168,681
Accounts receivable                           134,706             62,578
Materials and supplies                        48,673              42,986
Deferred financing costs                      15,815              15,124
Current portion of deferred mobilization      46,489              54,523
costs
Prepaid expenses and other current assets     23,759             10,376     
Total current assets                          523,629            461,546    
Property and equipment, net                   3,680,234           3,436,010
Restricted cash                               202,403             208,287
Deferred financing costs                      25,562              32,386
Other assets                                  62,183             46,060     
Total assets                                $ 4,494,011        $ 4,184,289  
Liabilities and shareholders' equity:
Accounts payable                            $ 26,460            $ 26,845
Accrued expenses                              43,073              39,095
Current portion of long-term debt             218,750             218,750
Accrued interest payable                      17,051              12,099
Derivative liabilities, current               22,058              20,466
Current portion of deferred revenue           74,465             28,829     
Total current liabilities                     401,857            346,084    
Long-term debt, net of current maturities     1,646,875           1,456,250
Deferred revenue                              110,515             73,110
Other long-term liabilities                   50,325             34,772     
Total long-term liabilities                   1,807,715          1,564,132  
Commitments and contingencies
Shareholders' equity:
Common shares, $0.01 par value,
5,000,000,000 shares authorized,
224,100,000 shares issued and 216,902,000     2,169               2,169
and 216,900,000 shares outstanding as of
September 30, 2012 and December 31, 2011,
respectively
Additional paid-in capital                    2,348,106           2,344,226
Accumulated other comprehensive loss          (71,322    )        (60,284    )
Retained earnings (accumulated deficit)       5,486              (12,038    )
Total shareholders' equity                    2,284,439          2,274,073  
Total liabilities and shareholders'         $ 4,494,011        $ 4,184,289  
equity

                                                                  
PACIFIC DRILLING S.A. AND SUBSIDIARIES
                                                                         
Condensed Consolidated Statements of Operations
(in thousands, except share and per share information) (unaudited)
                                                       
                   Three Months Ended September        Nine Months Ended September 30,
                   30,
                   2012              2011              2012              2011^(a)
Revenues
Contract         $ 171,986         $ 17,030          $ 446,160         $ 17,030
drilling
                                                                         
Costs and
expenses
Contract           (96,190     )     (9,690      )     (244,564    )     (9,690      )
drilling
General and
administrative     (10,506     )     (13,131     )     (33,750     )     (36,943     )
expenses
Depreciation       (36,129     )     (3,240      )     (91,235     )     (3,556      )
expense
                   (142,825    )     (26,061     )     (369,549    )     (50,189     )
Loss of hire
insurance          -                -                23,671           -           
recovery
Operating          29,161            (9,031      )     100,282           (33,159     )
income (loss)
Other income
(expense)
Equity in
earnings of        -                 -                 -                 18,955
Joint Venture
Interest
income from        -                 -                 -                 495
Joint Venture
Interest           (26,992     )     (2,603      )     (71,938     )     (2,908      )
expense
Other income       35               1,271            3,859            2,433       
Income (loss)
before income      2,204             (10,363     )     32,203            (14,184     )
taxes
Income tax         (4,180      )     (681        )     (14,679     )     (273        )
expense
Net income       $ (1,976      )   $ (11,044     )   $ 17,524         $ (14,457     )
(loss)
Earnings
(loss) per       $ (0.01       )   $ (0.05       )   $ 0.08           $ (0.08       )
common share,
basic
Weighted
average number     216,902,000      210,000,000      216,900,665      189,340,660 
of common
shares, basic
Earnings
(loss) per       $ (0.01       )   $ (0.05       )   $ 0.08           $ (0.08       )
common share,
diluted
Weighted
average number
of common          216,902,000      210,000,000      216,902,566      189,340,660 
shares,
diluted

(a) See accompanying schedule: Supplementary Data – Reconciliation of Net Loss
to Pro Forma Net Loss.

                                                            
PACIFIC DRILLING S.A. AND SUBSIDIARIES
                                                                  
Condensed Consolidated Statements of Cash Flows
(in thousands) (unaudited)
                                               
                                               Nine Months Ended September 30,
                                               2012               2011
Cash flow from operating activities:
Net income (loss)                            $ 17,524           $ (14,457    )
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Interest income from Joint Venture             -                  (495       )
Depreciation expense                           91,235             3,556
Equity in earnings of Joint Venture            -                  (18,955    )
Amortization of deferred revenue               (69,219   )        (2,210     )
Amortization of deferred mobilization          52,033             1,165
costs
Amortization of deferred financing costs       10,236             270
Deferred income taxes                          2,451              (2,740     )
Share-based compensation expense               3,880              3,533
Changes in operating assets and
liabilities:
Accounts receivable                            (72,128   )        (26,963    )
Materials and supplies                         (5,687    )        (27,598    )
Prepaid expenses and other assets              (77,956   )        (72,179    )
Accounts payable and accrued expenses          28,221             28,336
Deferred revenue                               152,260           80,093     
Net cash provided by (used in) operating       132,850           (48,644    )
activities
Cash flow from investing activities:
Capital expenditures                           (344,128  )        (1,113,733 )
Decrease (increase) in restricted cash         73,890            (122,428   )
Net cash used in investing activities          (270,238  )        (1,236,161 )
Cash flow from financing activities:
Proceeds from issuance of common shares,       -                  575,485
net
Proceeds from long-term debt                   300,000            681,000
Payments on long-term debt                     (109,375  )        (25,000    )
Deferred financing costs                       (7,003    )        (6,803     )
Proceeds from related-party loan               -                 142,205    
Net cash provided by financing activities      183,622           1,366,887  
Increase in cash and cash equivalents          46,234             82,082
Cash and cash equivalents, beginning of        107,278           40,307     
period
Cash and cash equivalents, end of period     $ 153,512         $ 122,389    

                              
PACIFIC DRILLING S.A. AND SUBSIDIARIES
                                                                           
Supplementary Data - Average Revenue Efficiency
(unaudited)
                                                                           
                   Three Months Ended                         Six Months
                                                              Ended
                   September 30,   June 30,     March 31,     December 31,
                   2012            2012         2012          2011
                                                                           
Pacific Bora       97.8     %      87.2  %      93.6   %      93.2    %    (a)
Pacific            94.1     %      76.1  %      63.7   %  (b) -
Mistral
Pacific            42.1     %      84.1  %  (c) -             -
Santa Ana
Pacific            99.5     %      93.1  %      97.7   %      -
Scirocco

    (a)  For the operating period of August 26, 2011, to December 31,
              2011.
        (b)   For the operating period of February 6, 2012, to March 31, 2012.
        (c)   For the operating period of May 4, 2012, to June 30, 2012.
              

EBITDA Reconciliation

EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA does not represent and should not be considered as an
alternative to net income, operating income, cash flow from operations or any
other measure of financial performance presented in accordance with generally
accepted accounting principles in the United States of America (“GAAP”) and
our calculation of EBITDA may not be comparable to that reported by other
companies. EBITDA is included herein because it is used by the Company to
measure its operations. We believe that EBITDA presents useful information to
investors regarding the company's operating performance.

                                                           
PACIFIC DRILLING S.A. AND SUBSIDIARIES
                               
Supplementary Data - Reconciliation of Net Income (Loss) to EBITDA
(in thousands) (unaudited)
                                                     
                    Three Months Ended September     Nine Months Ended
                    30,                              September 30,
                    2012             2011            2012           2011
                                                                    
Net income        $ (1,976  )     $  (11,044  )    $ 17,524      $  (14,457  )
(loss)
                                                                    
Add:
Interest            26,992           2,603           71,938         2,413
expense, net
Depreciation        36,129           3,240           91,235         3,556
expense
Income taxes        4,180           681            14,679         273      
EBITDA              65,325          (4,520   )      195,376        (8,215   )

                                                    
PACIFIC DRILLING S.A. AND SUBSIDIARIES
                                                         
Supplementary Data - Reconciliation of Net Loss to Pro Forma Net Loss
(in thousands, except per share information) (unaudited)
                                                         
                                                         Nine Months Ended
                                                         September 30, 2011
                                                         
Net loss                                               $ (14,457      )
                                                         
Pro forma adjustments:
Equity in earnings of Joint Venture (a)                  (18,955      )
Interest income from Joint Venture (b)                   (495         )
Interest expense (c)                                     305
                                                        
Pro forma net loss                                     $ (33,602      )
                                                         
Loss per common share, basic and diluted               $ (0.08        )
                                                         
Pro forma adjustments per share:
Equity in earnings of Joint Venture (a)                  (0.10        )
Interest income from Joint Venture (b)                   (0.00        )
Interest expense (c)                                     0.00
                                                         
Pro forma loss per common share, basic and diluted     $ (0.18        )

(a)  Reflects the pro forma elimination of our equity method share of
      earnings from Joint Venture.
(b)   Reflects the pro forma elimination of interest income on notes
      receivable from Joint Venture.
      Reflects the pro forma elimination of interest expense incurred on a
(c)   letter of credit agreement with Transocean directly related to the Joint
      Venture.

Contact:

Pacific Drilling Services, Inc.
Amy Roddy, +1 832 255 0502
Investor@pacificdrilling.com
 
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