Service & Supply | Quarterly / Earnings Reports | Oilfield Services
Pioneer Maintains Momentum Onshore Colombia; Ups Revenues
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Pioneer Energy Services reported financial and operating results for the quarter ended June 30, 2013.
Highlights include:
- Production Services revenues were up 14% over the first quarter of 2013.
- Well servicing rigs in the Production Services Segment achieved a 92% utilization rate and an average hourly rate of $606.
- Drilling Services revenues were up 4% over the first quarter of 2013 with a utilization rate of 87%.
- Currently, 58 drilling rigs are earning revenues under contracts, 43 of which, or 74%, are under term contracts.
Consolidated Financial Results
Revenues for the second quarter of 2013 were $248.4 million, up 8% from revenues of $229.7 million in the first quarter of 2013 and from revenues of $229.8 million in the second quarter of 2012. Revenues in the second quarter were positively impacted by the full benefit of fleet additions in both the Drilling Services and Production Services Segments and higher seasonal activity contributed to increased revenues for the Production Services Segment over the prior quarter.
Second quarter Adjusted EBITDA was $63.6 million, up 14% from $55.9 million in the prior quarter and up slightly from $63.3 million in the year-earlier quarter. Adjusted EBITDA was higher primarily due to increased margin per day in our Drilling Services Segment and increased revenues in our Production Services Segment.
Net loss as reported for the second quarter, which includes the impact of impairment charges of $44.8 million, was $25.9 million, or $0.42 per diluted share, compared with a net loss of $1.3 million, or $0.02 per diluted share in the prior quarter and net income of $9.7 million, or $0.15 per diluted share in the year-earlier quarter. Adjusted net income, which excludes the impact of impairment charges, was $1.2 million, and Adjusted diluted EPS was $0.02 for the second quarter of 2013.
The second quarter impairment charges represent a $41.7 million charge against goodwill and a $3.1 million charge against the intangible assets that were acquired in connection with the acquisition of our coiled tubing services business in December 2011.
Operating Results
Drilling Services Segment
Revenue for the Drilling Services Segment was $138.3 million in the second quarter, a 4% increase from the prior quarter and a 16% increase from the year-earlier quarter. Second quarter utilization was 87%, up from 84% in the prior quarter and down from utilization of 89% in the year-earlier quarter.
Currently, 58 drilling rigs are earning revenues under contracts, 43 of which, or 74%, are under term contracts. All eight of our drilling rigs in Colombia were working during the quarter, although we experienced some planned downtime for mobilization and maintenance of one of our Colombian rigs that was between wells.
Average drilling revenues per day in the second quarter were $24,968, compared to $24,925 in the prior quarter and $23,658 in the year-earlier quarter. The increase over the year-earlier quarter was primarily due to higher dayrates generated by our new-build drilling rigs and increased utilization in Colombia, as our Colombian operations have higher revenues per day than our domestic drilling rigs.
Drilling Services margin per day was $8,841 in the second quarter, up from $8,258 in the prior quarter. Drilling Services margin per day was positively impacted by the higher margins generated by our new-build rigs, a fuel cost reimbursement of $1.8 million for our rigs in Colombia and a gain on the sale of two drilling rigs of $0.8 million in the second quarter. The increase in Drilling Services margin per day was partially offset by the effect of slightly lower dayrates on some expiring drilling contracts in the U.S. that were renewed during the second quarter.
Production Services Segment
Revenue for the Production Services Segment was $110.1 million in the second quarter, up 14% from the prior quarter and down 1% from the year-earlier quarter.
Production Services margin as a percentage of revenue was 36% in the second quarter, compared to 37% in the prior quarter and 41% in the year-earlier quarter. Well servicing rig utilization was 92% in the second quarter, versus 89% in the prior quarter and 97% in the year-earlier quarter. Pricing was $606 per hour in the second quarter, compared to $596 in the prior quarter and $592 in the year-earlier quarter. Coiled tubing unit utilization was 46% in the second quarter, compared to 41% in the prior quarter and 61% in the year-earlier quarter. Despite higher utilization, Production Services margin was negatively impacted by moderately higher labor costs during the second quarter.
Wm. Stacy Locke, President and CEO of Pioneer Energy Services, commented: "We saw steady activity in our Production Services Segment which resulted in improved utilization for all our business units in this segment quarter over quarter. Pricing showed modest improvement for well servicing in the second quarter, but was flat to slightly down for wireline services and coiled tubing services.
"The offshore coiled tubing services market improved in the second quarter primarily due to more favorable weather conditions, but the land market has continued to be soft. Increased coiled tubing services competition has resulted in pricing and utilization levels that have been lower than what we expected when we acquired the business in December 2011. Given our current outlook for coiled tubing services, we recognized impairment charges and reduced the carrying values of goodwill and intangible assets during the second quarter. We continue to focus on improving coiled tubing services utilization and profitability and expect to see modest improvements in the second half of the year.
"In our Drilling Services Segment, activity remained steady throughout the quarter and resulted in higher than expected utilization, but was partially offset by slightly lower dayrates on some drilling contracts that were renewed during the second quarter. Our 10 new-build rigs are performing very well, and with the higher integration costs now behind us, we are getting the full benefit from their increased earning power.
"During June and July, we reduced our revolver by a combined $20 million and we are well positioned to make meaningful reductions to our debt levels in the second half of the year."
Third Quarter Guidance
In the third quarter of 2013, drilling contracts for four or five lower horsepower rigs that are currently working are not expected to renew. Overall drilling rig utilization is expected to average between approximately 78% and 82%, based on a fleet of 70 rigs. Moderate pricing pressure is expected in the third quarter and certain earnings benefits such as the fuel cost adjustment and the gain on the sale of two drilling rigs are not expected to repeat in the third quarter. As a result, Drilling Services Segment margin is expected to be approximately $7,600 to $8,000 per day.
Production Services Segment revenue in the third quarter is expected to be flat and margin as a percentage of revenues is expected be flat to slightly down as compared to the second quarter.
Liquidity
Working capital at June 30, 2013 was $118.8 million, as compared to $62.2 million at December 31, 2012. Our cash and cash equivalents were $17.6 million, down from $23.7 million at year-end 2012.
The change in cash and cash equivalents during the first half of the year was primarily due to $112.2 million used for purchases of property and equipment, which was mostly offset by $70.7 million of cash provided by operating activities, $29.1 million in proceeds from debt borrowings, net of repayments, and $6.1 million of proceeds from the sale of assets.
After making a $10 million debt payment in late July, we currently have $120.0 million outstanding and $8.9 million in committed letters of credit under our $250 million Revolving Credit Facility.
Capital Expenditures
Cash capital expenditures in the second quarter were $40.9 million, including capitalized interest. We continue to estimate that our total cash capital expenditures in 2013 will be between $140 million and $160 million. The total 2013 capital expenditure budget includes funding that was used to complete the new-build drilling rig program, upgrades to certain drilling rigs, additional Production Services equipment and routine capital expenditures.