Bronco Drilling Company, Inc. Announces Third Quarter Results

November 6, 2009 8:30 AM EST

OKLAHOMA CITY--(BUSINESS WIRE)-- Bronco Drilling Company, Inc., (Nasdaq/GS: BRNC), announced today financial and operational results for the three months and nine months ended September 30, 2009.

Consolidated Results

Revenues for the third quarter of 2009 were $16.2 million compared to revenue of $27.5 million for the previous quarter and $73.0 million for the third quarter of 2008. Net loss for the third quarter of 2009 was $42.7 million compared to a net loss of $7.2 million for the previous quarter and a net loss of $0.9 million for the third quarter of 2008. The Company's fully diluted earnings per share for the quarter ended September 30, 2009, were a loss of $1.60 based on 26.7 million shares.

Third quarter results include several non-recurring items. The company wrote down its investment in Challenger Limited by $21.2 million. The company recognized a loss of $24.0 million in conjunction with the company's sale of a 60% ownership interest in Bronco Drilling MX, S. de R.L. de C.V. ("Bronco MX") in the joint venture transaction with Carso Infraestructura y Constuccion, S.A.B. de C.V. The company also recognized expense of $1.3 million related to the drilling rigs contributed to Bronco MX in the joint venture transaction. The retirement of the company's previous credit facility resulted in a loss on early debt extinguishment of $2.9 million. The new credit facility with Banco Inbursa, S.A. and the joint venture transaction, which were both entered into during the quarter, resulted in certain advisory fees of $1.0 million. Additionally, the company recorded a loss of $1.6 million related to the change in fair value of the warrants issued in conjunction with the new credit facility. Excluding all non-recurring items and the loss on the warrants would result in a fully diluted loss per share for the quarter of $0.37.

Land Drilling

Average marketed land rigs for the third quarter of 2009 were 45 compared to 45 for the previous quarter and 42 for the third quarter of 2008. Revenue days for the quarter decreased to 980 from 1,311 for the previous quarter and from 3,208 for the third quarter of 2008. Utilization for the third quarter of 2009 was 23% compared to 32% for the previous quarter and 84% for the third quarter of 2008. Excluding non-recurring items, average daily cash margins for our land drilling fleet for the quarter ended September 30, 2009, were $3,576 compared to $6,304 for the previous quarter and $7,582 for the third quarter of 2008.

About Bronco Drilling

Bronco Drilling Company, Inc., a publicly held company headquartered in Edmond, Oklahoma, is a provider of contract land drilling services and workover services to oil and natural gas exploration and production companies. Bronco's common stock is quoted on The Nasdaq Global Select Market under the symbol "BRNC." For more information about Bronco Drilling Company, Inc., visit http://www.broncodrill.com.

Bronco Drilling Company, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share par value)

                                                    September 30,  December 31,

                                                    2009           2008

ASSETS                                              (Unaudited)

CURRENT ASSETS

 Cash and cash equivalents                            18,118       $ 26,676

 Receivables

             Trade and other, net of allowance for
             doubtful accounts of

             $3,229 and $3,830 in 2009 and 2008,      17,918         65,817
             respectively

             Unbilled receivables                     596            2,940

 Income tax receivable                                3,614          2,072

 Current deferred income taxes                        981            2,844

 Current maturities of note receivable from           2,501          6,900
 affiliate

 Prepaid expenses                                     1,069          572

 Other current assets                                 1,660          -

                     Total current assets             46,457         107,821

PROPERTY AND EQUIPMENT - AT COST

 Drilling rigs and related equipment                  436,753        512,158

 Transportation, office and other equipment           42,219         43,912

                                                      478,972        556,070

             Less accumulated depreciation            137,066        123,915

                                                      341,906        432,155

OTHER ASSETS

 Note receivable from affiliate, less current         1,024          3,451
 maturities

 Investment in Challenger                             39,800         62,875

 Investment in Bronco MX                              21,495         -

 Intangibles, net, and other                          3,217          6,052

                                                      65,536         72,378

                                                    $ 453,899      $ 612,354

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

 Accounts payable                                   $ 8,109        $ 18,473

 Accrued liabilities                                  6,678          16,249

 Current maturities of long-term debt                 88             1,464

                     Total current liabilities        14,875         36,186

LONG-TERM DEBT, less current maturities               51,613         116,083

WARRANT                                               6,257          -

DEFERRED INCOME TAXES                                 36,125         66,074

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

 Common stock, $.01 par value, 100,000

 shares authorized; 26,668 and 26,346 shares

 issued and outstanding at September 30, 2009 and     269            267
 December 31, 2008

 Additional paid-in capital                           306,552        304,015

 Retained earnings                                    38,208         89,729

             Total stockholders' equity               345,029        394,011

                                                    $ 453,899      $ 612,354

Bronco Drilling Company, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

                           Three Months Ended       Nine Months Ended September
                           September 30,            30,

                           2009         2008        2009         2008

                           (Unaudited)              (Unaudited)

REVENUES

         Contract
         drilling
         revenues,
         including 0%,
         1%, 0%, and 1%
         to related
         parties

                           $ 16,233     $ 63,509    $ 90,556     $ 178,076

         Well service,
         including 0%,
         5%, 0%, and 2%
         to related
         parties

                             -            9,474       3,799        27,017

                             16,233       72,983      94,355       205,093

EXPENSES

         Contract            14,031       39,190      62,109       109,099
         drilling

         Well service        443          8,201       4,015        19,222

         Depreciation and    11,664       12,939      36,152       37,321
         amortization

         General and         5,379        13,199      15,497       24,353
         administrative

         Loss on Bronco      23,964       -           23,964       -
         MX transaction

         Loss (gain) on
         Challenger          -            63          -            (3,138  )
         transactions

                             55,481       73,592      141,737      186,857

               Income
               (loss)        (39,248 )    (609   )    (47,382 )    18,236
               from
               operations

OTHER INCOME (EXPENSE)

         Interest expense    (1,494  )    (969   )    (5,648  )    (3,356  )

         Loss from early
         extinguishment      (2,859  )    -           (2,859  )    -
         of debt

         Interest income     73           43          237          1,052

         Equity in income
         (loss) of           (1,271  )    1,078       (1,828  )    2,854
         Challenger

         Impairment of
         investment in       (21,247 )    -           (21,247 )    -
         Challenger

         Other               (145    )    (520   )    (451    )    (67     )

         Change in fair      (1,578  )    -           (1,578  )    -
         value of warrant

                             (28,521 )    (368   )    (33,374 )    483

               Income
               (loss)
               before        (67,769 )    (977   )    (80,756 )    18,719
               income
               taxes

Income tax expense           (25,115 )    (60    )    (29,235 )    7,148
(benefit)

               NET INCOME  $ (42,654 )  $ (917   )  $ (51,521 )  $ 11,571
               (LOSS)

Income (loss) per common   $ (1.60   )  $ (0.03  )  $ (1.93   )  $ 0.44
share-Basic

Income (loss) per common   $ (1.60   )  $ (0.03  )  $ (1.93   )  $ 0.44
share-Diluted

Weighted average number
of shares                    26,663       26,290      26,637       26,275
outstanding-Basic

Weighted average number
of shares                    26,663       26,290      26,637       26,363
outstanding-Diluted

Non-GAAP Financial Measures

This press release includes a presentation of average daily cash margin for our land drilling fleet which is not a financial measure recognized under generally accepted accounting principles, or GAAP. Average daily cash margin is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, minus well service revenue, plus well service expense, income tax expense, other non-recurring expense, general and administrative expense, depreciation and amortization and impairments divided by revenue days for the period. We have presented average daily cash margin because we use this metric as an integral part of our internal reporting to measure our performance and to evaluate the performance of our senior management. We consider this metric to be an important indicator of the operational strength of our business. A limitation of this metric, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our business. Management evaluates the costs of such tangible and intangible assets through other financial measures, such as capital expenditures, investment spending and return on capital. Therefore, we believe that average daily cash margin provides useful information to our investors regarding our performance and overall results of operations. Average daily cash margin is not intended to be a performance measure that should be regarded as an alternative to, or more meaningful than, either net income as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. In addition, this metric not is intended to represent funds available for dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. This non-GAAP financial measure may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in our various agreements.

The following presents a reconciliation of average daily cash margin to net income, the most directly comparable GAAP financial measure (in thousands, except revenue days and average daily cash margin):

                                   Three Months Ended       Three Months Ended

                                   September 30,            June 30,

                                   2009         2008        2009

                                   (Unaudited)              (Unaudited)

Reconciliation of average daily

cash margin to net income (loss):

Net income (loss)                  $ (42,654 )  $ (917   )  $ (7,158 )

Well service revenue                 -            (9,474 )    (1,020 )

Well service expense                 443          8,201       1,257

Income tax expense (benefit)         (25,115 )    (60    )    (4,108 )

Other and non-recurring expense      53,788       435         2,401

General and administrative           5,379        13,199      4,930

Depreciation and amortization        11,664       12,939      11,962

Drilling margin                      3,505        24,323      8,264

Revenue days                         980          3,208       1,311

Average daily cash margin          $ 3,576      $ 7,582     $ 6,304

    Source: Bronco Drilling Company, Inc.

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