Pioneer Energy Services Reports Fourth Quarter 2012 Results PR Newswire SAN ANTONIO, Texas, Feb. 13, 2013 SAN ANTONIO, Texas, Feb.13, 2013 /PRNewswire/ --Pioneer Energy Services (NYSE: PES) today reported financial and operating results for the three and twelve months ended December31, 2012. Financial and operational highlights include: oTwo new-build drilling rigs were added in the fourth quarter and one more has been added since year end; oFour well servicing rigs and two coiled tubing units have been added since the end of the third quarter; oAll eight drilling rigs in Colombia are operating under contract; o43 of the Company's 59 working drilling rigs, or 73%, are operating under term drilling contracts; o93% of our working drilling rigs and 78% of production services assets are operating on wells that are targeting or producing oil or liquids-rich natural gas. Consolidated Financial Results Revenues for the fourth quarter of 2012 were $227.9 million, flat when compared to revenues in the third quarter of 2012 ("the prior quarter") and a 12% increase over $203.7 million of revenues for the fourth quarter of 2011 ("the year-earlier quarter"). The increase from the year-earlier quarter was primarily due to fleet additions in both the Drilling Services Segment and the Production Services Segment and to the contribution from our coiled tubing business acquired at year end 2011. Net income for the fourth quarter was $3.6 million, or $0.06 per diluted share, compared with $2.6 million, or $0.04 per diluted share in the prior quarter and $6.8 million, or $0.11 per diluted share in the year-earlier quarter. Fourth quarter Adjusted EBITDA^(1) was $60.3 million, an 8% increase from $55.6 million in the prior quarter and a 9% increase from $55.5 million in the year-earlier quarter. Operating Results Drilling Services Segment Revenue for the Drilling Services Segment was $129.9 million in the fourth quarter, a 3% increase from the prior quarter and a 9% increase from the year-earlier quarter. Fourth quarter utilization was 87%, up slightly from the prior quarter, and flat with the year-earlier quarter. We deployed two new-build drilling rigs in the fourth quarter and one more rig thus far in 2013 which brings our current fleet count to 70 drilling rigs. Our drilling rig fleet count has fluctuated due to the addition of eight new-build rigs, offset by the retirement of seven lower horsepower rigs effective September 30, 2011 and two more rigs effective March 31, 2012. We are currently deploying our ninth drilling rig and we plan to deploy the tenth new-build drilling rig by the end of the first quarter of 2013. Average drilling revenues per day in the fourth quarter were $23,967, compared to $24,101 in the prior quarter and $23,169 in the year-earlier quarter. The slight sequential decrease was primarily due to lower average drilling revenues per day during the initial mobilization period for two rigs deployed in Colombia and due to moderate pricing pressure in the U.S. market. The decrease in average drilling revenues per day was partially offset by the impact of the new-build rigs and higher turnkey revenues. Drilling Services margin^(2) per day was $8,103 in the fourth quarter as compared to $7,187 in the prior quarter and $7,686 in the year-earlier quarter. Drilling Services margin per day was higher than both of the comparative periods primarily due to the earnings benefit of deploying our new-build rigs. Additionally, our continued focus on safety performance helped us lower expenses and enhance margin. Production Services Segment Revenue for the Production Services Segment was $98.0 million in the fourth quarter, down 6% from the prior quarter and up 16% from the year-earlier quarter. Revenue declined sequentially as expected due to fewer daylight working hours, holiday downtime and a pull back by some clients on spending at year-end. Production Services margin^(2) as a percentage of revenue was 38%, compared to 37% in the prior quarter and 42% in the year-earlier quarter. Well servicing rig utilization declined to 83% from 91% in the prior quarter and 86% in the year-earlier quarter, while pricing was $601 per hour in the fourth quarter compared to $606 in the prior quarter and $577 in the year-earlier quarter. "We have almost completed our new-build drilling rig program, with our final two rigs scheduled to go to work by the end of the first quarter," said Wm. Stacy Locke, President and CEO of Pioneer Energy Services. "We have been pleased with the program and over time have reduced the initial start-up costs associated with deploying each new rig. They are performing well, and under their multi-year contracts, they will generate substantial cash flows to support our shift in strategy towards debt reduction in 2013. "In Colombia, we again have all eight drilling rigs working with six of these rigs working under contract extensions through March. We are currently in discussions with our client on contract renewal terms. "Fourth quarter Drilling Services Segment utilization was better than expected despite some reductions in client spending. We continue to see some pricing pressure on our drilling operations in South Texas and West Texas, but we believe prices could be stabilizing in other regions of the U.S. In the first quarter of 2013, we expect drilling rig utilization to average between 81% and 83% and Drilling Services Segment margin to be approximately $7,300 to $7,600 per day. "Operating results for our Production Services Segment in the fourth quarter were impacted by typical seasonality and year-end client slow-downs. We added four well servicing rigs and two coiled tubing units in the fourth quarter and we expect to add another well servicing rig in the first quarter of 2013. We saw some improvement in the operating results of our coiled tubing business as we continued to focus on driving better performance of that group. "We believe pricing has stabilized in most areas for Production Services and we could see some improved activity later in the year as clients resume spending. Production Services revenues in the first quarter are expected to be flat, and margin as a percentage of revenues is expected be flat to down 2% as compared to the fourth quarter. In Production Services, the first quarter is typically the weakest quarter of the year," Locke said. Liquidity Working capital was $62.2 million at December 31, 2012, compared to $129.9 million at December 31, 2011. Our cash and cash equivalents at year-end 2012 were $23.7 million, down from $86.2 million at year-end 2011. The change in cash and cash equivalents during 2012 was primarily due to $364.3 million used for purchases of property and equipment, partially offset by $199.4 million of cash provided by operating activities and $99.1 million of net proceeds from debt borrowings. As of January 31, 2013 we had $100 million outstanding and $9.0 million in committed letters of credit under our $250 million Revolving Credit Facility, leaving borrowing availability of $141 million. Capital Expenditures Cash capital expenditures in the fourth quarter were $73.3 million, including capitalized interest, bringing capital expenditures for the full year to $364.3 million. We estimate our total capital expenditures in 2013 will be between $140 million and $160 million. The 2013 capital expenditure budget includes funding for the completion of the remaining new-build drilling rigs, upgrades to certain drilling rigs, additional Production Services equipment and routine capital expenditures. We expect to fund this lower capital expenditure program from operating cash flow in excess of our working capital requirements, and we plan to reduce debt levels. Conference Call Pioneer Energy Services' management team will hold a conference call today at 11:00 a.m. Eastern Time (10:00 a.m. Central Time), to discuss these results. To participate in the call, dial (480) 629-9835 10 minutes early and ask for the Pioneer Energy Services' conference call. A replay will be available after the call and will be accessible until February 20. To access the replay, dial (303) 590-3030 and enter the pass code 4589184#. The conference call will also be webcast on the Internet and accessible from Pioneer Energy Services' Web site at www.pioneeres.com. To listen to the live call, visit Pioneer Energy Services' Web site at least 10 minutes early to register and download any necessary audio software. An archive will be available shortly after the call. For more information, please contact Donna Washburn at DRG&L at (713) 529-6600 or e-mail email@example.com. About Pioneer Pioneer Energy Services provides contract land drilling services to independent and major oil and gas operators in Texas, Louisiana, the Mid-Continent, Rocky Mountain and Appalachian regions and internationally in Colombia through its Drilling Services Segment. Pioneer also provides well, wireline, coiled tubing and fishing and rental services to producers in the U.S. Gulf Coast, offshore Gulf of Mexico, Mid-Continent and Rocky Mountain regions through its Production Services Segment. Cautionary Statement Regarding Forward-Looking Statements, Non-GAAP Financial Measures and Reconciliations Statements we make in this news release that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance or achievements, or industry results, could differ materially from those we express in this news release as a result of a variety of factors, including general economic and business conditions and industry trends; levels and volatility of oil and gas prices; decisions about onshore exploration and development projects to be made by oil and gas exploration and production companies; risks associated with economic cycles and their impact on capital markets and liquidity; the continued demand for the drilling services or production services in the geographic areas where we operate; the highly competitive nature of our business; our future financial performance, including availability, terms and deployment of capital; future compliance with covenants under our senior secured revolving credit facility and our senior notes; the supply of marketable drilling rigs, well servicing rigs, coiled tubing and wireline units within the industry; the continued availability of drilling rig, well servicing rig, coiled tubing and wireline unit components; the continued availability of qualified personnel; the success or failure of our acquisition strategy, including our ability to finance acquisitions, manage growth and effectively integrate acquisitions; and changes in, or our failure or inability to comply with, governmental regulations, including those relating to the environment.We have discussed many of these factors in more detail in our annual report on Form 10-K for the year ended December 31, 2012.These factors are not necessarily all the important factors that could affect us.Unpredictable or unknown factors we have not discussed in this news release, or in our annual report on Form 10-K, could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. All forward-looking statements speak only as of the date on which they are made and we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. We advise our shareholders that they should (1) be aware that important factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements. This news release contains non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each such measure to its most directly comparable GAAP financial measure, together with an explanation of why management believes that these non-GAAP financial measures provide useful information to investors, is provided in the following tables. Adjusted EBITDA is a financial measure that is not in accordance with GAAP, and should not be considered (i) in isolation of, or as a substitute for, net income (loss), (ii) as an indication of operating performance or cash flows from operating activities or (iii) as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. We define Adjusted EBITDA as income (loss) before interest income (expense), taxes, depreciation, amortization and any impairments. We use this measure, together with our GAAP financial (1) metrics, to assess our financial performance and evaluate our overall progress towards meeting our long-term financial objectives. We believe that this non-GAAP financial measure is useful to investors and analysts in allowing for greater transparency of our operating performance and makes it easier to compare our results with those of other companies within our industry. Adjusted EBITDA, as we calculate it, may not be comparable to Adjusted EBITDA measures reported by other companies. A reconciliation of Adjusted EBITDA to net income (loss) is included in the tables to this press release. Drilling Services margin represents contract drilling revenues less contract drilling operating costs. Production Services margin represents production services revenues less production services operating costs. We believe that Drilling Services margin and Production Services margin are useful measures for evaluating financial performance, although they are not measures of financial performance under GAAP. However, Drilling (2) Services margin and Production Services margin are common measures of operating performance used by investors, financial analysts, rating agencies and Pioneer management. Drilling Services margin and Production Services margin as presented may not be comparable to other similarly titled measures reported by other companies. A reconciliation of Drilling Services margin and Production Services margin to net income (loss) as reported is included in the tables to this press release. - Financial Statements and Operating Information Follow - PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except per share data) Three months ended Years Ended December31, September30, December31, 2012 2011 2012 2012 2011 (unaudited) (audited) Revenues: Drilling services $ 129,853 $ 118,859 $ 125,662 $ 498,867 $ 433,902 Production services 98,015 84,797 104,111 420,576 282,039 Total revenues 227,868 203,656 229,773 919,443 715,941 Costs and expenses: Drilling services 85,950 79,430 88,188 333,846 292,559 Production services 61,001 48,989 65,395 252,775 164,365 Depreciation and 44,288 35,160 42,067 164,717 132,832 amortization General and 20,926 19,232 21,269 85,603 67,318 administrative Bad debt expense 75 548 (368) (440) 925 (recovery) Impairment of 99 — — 1,131 484 equipment Total costs and 212,339 183,359 216,551 837,632 658,483 expenses Income from 15,529 20,297 13,222 81,811 57,458 operations Other (expense) income: Interest expense (10,391) (8,062) (9,453) (37,049) (29,721) Other 365 52 307 1,624 (6,904) Total other expense (10,026) (8,010) (9,146) (35,425) (36,625) Income before income 5,503 12,287 4,076 46,386 20,833 taxes Income tax expense (1,943) (5,469) (1,461) (16,354) (9,656) Net income $ 3,560 $ 6,818 $ 2,615 $ 30,032 $ 11,177 Income per common share: Basic $ 0.06 $ 0.11 $ 0.04 $ 0.49 $ 0.19 Diluted $ 0.06 $ 0.11 $ 0.04 $ 0.48 $ 0.19 Weighted-average number of shares outstanding: Basic 61,888 61,380 61,881 61,780 57,390 Diluted 62,900 62,568 62,825 62,762 58,779 PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) (audited) December31, December31, 2012 2011 ASSETS Current assets: Cash and cash equivalents 23,733 86,197 Receivables, net of allowance for doubtful accounts 158,844 145,234 Deferred income taxes 11,058 15,433 Inventory 12,111 11,184 Prepaid expenses and other current assets 13,040 11,564 Total current assets 218,786 269,612 Net property and equipment 1,014,340 793,956 Intangible assets, net of accumulated amortization 43,843 52,680 Goodwill 41,683 41,683 Noncurrent deferred income taxes 5,519 735 Other long-term assets 15,605 14,088 Total assets $ 1,339,776 $ 1,172,754 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 83,823 $ 66,440 Current portion of long-term debt 872 872 Deferred revenues 3,880 3,966 Accrued expenses 67,975 68,402 Total current liabilities 156,550 139,680 Long-term debt, less current portion 518,725 418,728 Noncurrent deferred income taxes 108,838 94,745 Other long-term liabilities 7,983 9,156 Total liabilities 792,096 662,309 Total shareholders' equity 547,680 510,445 Total liabilities and shareholders' equity $ 1,339,776 $ 1,172,754 PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (audited) Years Ended December31, 2012 2011 Cash flows from operating activities: Net income $ 30,032 $ 11,177 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 164,717 132,832 Allowance for doubtful accounts 76 787 (Gain) loss on dispositions of property and equipment (1,199) 151 Stock-based compensation expense 7,319 6,705 Amortization of debt issuance costs, discount and premium 2,985 3,302 Impairment of equipment 1,131 484 Deferred income taxes 13,303 8,098 Change in other long-term assets (3,865) 2,828 Change in other long-term liabilities (1,173) (623) Changes in current assets and liabilities (13,960) (20,862) Net cash provided by operating activities 199,366 144,879 Cash flows from investing activities: Acquisition of production services business of Go-Coil — (109,035) Acquisition of other production services businesses — (6,502) Purchases of property and equipment (364,324) (210,066) Proceeds from sale of property and equipment 3,093 5,550 Proceeds from sale of auction rate securities — 12,569 Net cash used in investing activities (361,231) (307,484) Cash flows from financing activities: Debt repayments (874) (113,158) Proceeds from issuance of debt 100,000 250,750 Debt issuance costs (58) (7,285) Proceeds from exercise of options 693 2,884 Proceeds from stock, net of underwriters' commissions and — 94,343 offering costs of $5,707 Purchase of treasury stock (360) (743) Net cash provided by financing activities 99,401 226,791 Net (decrease) increase in cash and cash equivalents (62,464) 64,186 Beginning cash and cash equivalents 86,197 22,011 Ending cash and cash equivalents $ 23,733 $ 86,197 PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES Operating Statistics (in thousands, except average number of drilling rigs, utilization rate, revenue days and per day information) (unaudited) Three months ended Years Ended December31, September30, December31, 2012 2011 2012 2012 2011 Drilling Services Segment: Revenues $ 129,853 $ 118,859 $ 125,662 $ 498,867 $ 433,902 Operating costs 85,950 79,430 88,188 333,846 292,559 Drilling Services $ 43,903 $ 39,429 $ 37,474 $ 165,021 $ 141,343 margin (1) Average number of 67.7 64.0 66.0 65.0 69.3 drilling rigs Utilization rate 87% 87% 86% 87% 73% Revenue days 5,418 5,130 5,214 20,728 18,383 Average revenues per $ 23,967 $ 23,169 $ 24,101 $ 24,067 $ 23,603 day Average operating 15,864 15,483 16,914 16,106 15,915 costs per day Drilling Services $ 8,103 $ 7,686 $ 7,187 $ 7,961 $ 7,688 margin per day (2) Production Services Segment: Revenues $ 98,015 $ 84,797 $ 104,111 $ 420,576 $ 282,039 Operating costs 61,001 48,989 65,395 252,775 164,365 Production Services $ 37,014 $ 35,808 $ 38,716 $ 167,801 $ 117,674 margin (1) Combined: Revenues $ 227,868 $ 203,656 $ 229,773 $ 919,443 $ 715,941 Operating Costs 146,951 128,419 153,583 586,621 456,924 Combined margin $ 80,917 $ 75,237 $ 76,190 $ 332,822 $ 259,017 Adjusted EBITDA (3) $ 60,281 $ 55,509 $ 55,596 $ 249,283 $ 183,870 & (4) Drilling Services margin represents contract drilling revenues less contract drilling operating costs. Production Services margin represents production services revenue less production services operating costs. We believe that Drilling Services margin and Production Services margin are useful measures for evaluating financial performance, although they are not measures of financial performance under generally accepted accounting (1) principles. However, Drilling Services margin and Production Services margin are common measures of operating performance used by investors, financial analysts, rating agencies and Pioneer's management. A reconciliation of Drilling Services margin and Production Services margin to net income (loss) as reported is included in the table on the following page. Drilling Services margin and Production Services margin as presented may not be comparable to other similarly titled measures reported by other companies. Drilling Services margin per revenue day represents the Drilling Services' (2) average revenue per revenue day less average operating costs per revenue day. Adjusted EBITDA is a financial measure that is not in accordance with GAAP, and should not be considered (i) in isolation of, or as a substitute for, net income (loss), (ii) as an indication of operating performance or cash flows from operating activities or (iii) as a measure of liquidity. In addition, Adjusted EBITDA does not represent funds available for discretionary use. We define Adjusted EBITDA as income (loss) before interest income (expense), taxes, depreciation, amortization and any (3) impairments. We use this measure, together with our GAAP financial metrics, to assess our financial performance and evaluate our overall progress towards meeting our long-term financial objectives. We believe that this non-GAAP financial measure is useful to investors and analysts in allowing for greater transparency of our operating performance and makes it easier to compare our results with those of other companies within our industry. Adjusted EBITDA, as we calculate it, may not be comparable to Adjusted EBITDA measures reported by other companies. A reconciliation of Adjusted EBITDA to net income (loss) is set forth below. See following page for footnote (4). PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES Reconciliation of Combined Drilling Services and Production Services Margin and Adjusted EBITDA to Net Income (in thousands) (unaudited) Three months ended Years Ended December31, September30, December31, 2012 2011 2012 2012 2011 Combined margin $ 80,917 $ 75,237 $ 76,190 $ 332,822 $ 259,017 General and (20,926) (19,232) (21,269) (85,603) (67,318) administrative Bad debt (recovery) (75) (548) 368 440 (925) expense Other income (expense) 365 52 307 1,624 (6,904) Adjusted EBITDA (3) & 60,281 55,509 55,596 249,283 183,870 (4) Depreciation and (44,288) (35,160) (42,067) (164,717) (132,832) amortization Impairment of (99) — — (1,131) (484) equipment Interest expense (10,391) (8,062) (9,453) (37,049) (29,721) Income tax expense (1,943) (5,469) (1,461) (16,354) (9,656) Net income (loss) $ 3,560 $ 6,818 $ 2,615 $ 30,032 $ 11,177 Our Adjusted EBITDA for the year ended December 31, 2011 was reduced by a (4) $7.3 million net-worth tax expense for our Colombian operations that was a non-recurring charge and was included in other (expense) income. PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES Capital Expenditures (in thousands) (unaudited) Three months ended Years Ended December 31, September30, December31, 2012 2011 2012 2012 2011 Drilling Services Segment: Routine and tubulars $ 5,328 $ 9,685 $ 17,887 $ 39,051 $ 35,252 Discretionary 12,255 21,862 8,569 56,430 67,352 Fleet additions 28,084 14,768 47,985 162,677 41,005 45,667 46,315 74,441 258,158 143,609 Production Services Segment: Routine 3,833 2,691 4,306 15,311 8,168 Discretionary 10,511 11,322 8,091 37,562 31,523 Fleet additions 13,262 9,173 10,329 53,293 26,766 27,606 23,186 22,726 106,166 66,457 Net cash used for purchases of property 73,273 69,501 97,167 364,324 210,066 and equipment Net effect of accruals 1,241 9,948 (13,762) 14,948 27,721 Total capital $ 74,514 $ 79,449 $ 83,405 $ 379,272 $ 237,787 expenditures PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES Drilling Rig, Well Servicing Rig, Wireline and Coiled Tubing Unit Current Information Drilling Services Segment: Rig Type Mechanical Electric Total Rigs Drilling rig horsepower ratings: 550 to 700 HP 1 — 1 750 to 950 HP 7 2 9 1000 HP 18 11 29 1200 to 2000 HP 7 24 31 Total 33 37 70 Drilling rig depth ratings: Less than 10,000 feet 3 2 5 10,000 to 13,900 feet 18 6 24 14,000 to 25,000 feet 12 29 41 Total 33 37 70 Production Services Segment: Well servicing rig horsepower ratings: 550 HP 98 600 HP 10 Total 108 Wireline units 119 Coiled tubing units 13 Lorne E. Phillips, CFO Pioneer Energy Services Corp. (210) 828-7689 Contacts: Lisa Elliott / firstname.lastname@example.org Anne Pearson / email@example.com DRG&L / (713) 529-6600 SOURCE Pioneer Energy Services Website: http://www.pioneeres.com
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Pioneer Energy Services Reports Fourth Quarter 2012 Results
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