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Pioneer Energy Services Reports Fourth Quarter 2012 Results

         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 dmw@drg-l.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 / lelliott@drg-l.com

          Anne Pearson / apearson@drg-l.com

          DRG&L / (713) 529-6600

          

SOURCE Pioneer Energy Services

Website: http://www.pioneeres.com
 
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