Pioneer Energy Services Reports Fourth Quarter 2015 Results

SAN ANTONIO, Texas, Feb. 17, 2016 /PRNewswire/ -- Pioneer Energy Services (NYSE: PES) today reported financial and operating results for the year and quarter ended December 31, 2015. Notable items for the fourth quarter include: 

• Sold four SCR drilling rigs for aggregate gross proceeds of $17.3 million and classified four additional rigs as held-for-sale at year-end.
• Amended revolving credit facility, which reduced borrowing capacity while providing more flexible covenants through maturity in 2019.
• Completed construction of the final 1,500-horsepower AC new-build drilling rig.
• Well servicing rig utilization was 55% with average pricing of $562 per hour.
• Drilling utilization was 54% based on an average fleet of 37 rigs.

Consolidated Financial Results

Revenues for the fourth quarter of 2015 were $104.5 million, down 3% from revenues of $107.5 million in the third quarter of 2015 ("the prior quarter") and down 63% from revenues of $283.1 million in the fourth quarter of 2014 ("the year-earlier quarter"). The decline from the year-earlier quarter was due to reduced activity and pricing as a result of lower demand for our services due to lower oil and gas prices.

Net loss for the fourth quarter of 2015 was $48.3 million, or $0.75 per share, compared with net loss of $17.5 million, or $0.27 per share, in the prior quarter and net loss of $47.6 million, or $0.75 per share, in the year-earlier quarter. Excluding the after-tax impact of impairment charges and loss on extinguishment of debt, our Adjusted Net Loss(1) for the fourth quarter was $16.1 million and Adjusted EPS(2) was a loss of $0.25 per share, as compared to Adjusted Net Loss of $15.8 million, or $0.24 per share, in the prior quarter. During the fourth quarter, we recognized impairment charges of $49.5 million, primarily for the reduction of carrying values of assets related to our coiled tubing operations, as well as five domestic SCR drilling rigs. Our Adjusted Net Income for the year-earlier quarter was $2.9 million or $0.04 per diluted share.

Fourth quarter Adjusted EBITDA(3) was $20.0 million, including a gain on disposal of assets of $1.7 million. This was up 6% from $18.8 million in the prior quarter, which included a loss on disposal of assets of $0.6 million, and down 70% from $66.0 million in the year-earlier quarter.

Operating Results

Drilling Services Segment

Revenue for the Drilling Services Segment was $51.1 million in the fourth quarter, a 24% increase from the prior quarter and a 64% decrease from the year-earlier quarter.

Average drilling revenues per day were $27,730 in the fourth quarter, up from $25,487 in the prior quarter and down from $28,298 in the year-earlier quarter. Drilling Services Segment margin(4) per day(5) was $13,578 in the fourth quarter, up from $11,349 in the prior quarter and up from $9,037 in the year-earlier quarter. The increase in Drilling Services Segment margin per day in the fourth quarter as compared to the year-earlier quarter was primarily attributable to rigs earning early termination revenue but not working and the sale of 32 lower horsepower electric and mechanical drilling rigs from our fleet that typically earned a lower margin per day. The increase in Drilling Services Segment margin per day from the prior quarter was primarily due to the full quarter impact of the new-build drilling rigs on term contract, the contribution from rigs in Colombia returning to daywork, and accelerated early termination revenue recognition resulting from a rig sale. Excluding the impact from early terminated rigs earning revenue but not working, margin per day in the fourth quarter was approximately $11,000.

In response to the downturn in our industry, term contracts for 19 of our drilling rigs have been early terminated since late 2014, resulting in approximately $62.8 million of early termination payments. Revenues derived from these early terminations are deferred and recognized over the remainder of the original term of the drilling contracts. We recognized $0.3 million of revenue for early termination payments during 2014 and $49.2 million during 2015, $10.3 million of which was recognized during the fourth quarter. Additionally, we will recognize the remaining $13.3 million in 2016, which includes three early termination notices received in January of 2016. We have received all but $9 million of the early termination payments associated with these 19 early terminations which we expect to collect by the end of the first quarter 2016.

We sold 32 drilling rigs and other equipment during 2015 for aggregate net proceeds of $53.6 million and designated an additional four drilling rigs as held-for-sale at year-end. We completed construction of our final 1,500 horsepower AC new-build drilling rig during the fourth quarter, bringing our total fleet count to 31 drilling rigs as of December 31, 2015. We currently have 14 domestic drilling rigs earning revenues, 12 of which are under term contracts.  Of these 12, four are earning early termination revenues. Three of our eight drilling rigs in Colombia are currently under term contracts, but are on standby and not earning revenue.

Production Services Segment

Revenue for the Production Services Segment was $53.4 million in the fourth quarter, down 19% from the prior quarter and down 62% from the year-earlier quarter due to decreased activity and pricing for our services. Production Services Segment margin(4) as a percentage of revenue was 19% in the fourth quarter, down from 27% in the prior quarter and down from 36% in the year-earlier quarter. Production Services Segment margin was down as compared to the prior quarter due to continued weakening in activity and pricing, partially offset by actions we have taken to reduce our cost structure in response to the downturn. Well servicing average pricing was $562 per hour in the fourth quarter, down from $577 in the prior quarter and $675 in the year-earlier quarter. Well servicing rig utilization was 55% in the fourth quarter, down from 62% in the prior quarter and 90% in the year-earlier quarter. Coiled tubing utilization was 25% in the fourth quarter, as compared to 25% in the prior quarter and down from 47% in the year-earlier quarter.

Comments from Our President and CEO 

"Throughout 2015 we continued to work diligently to steer our business through a very challenging market and believe that we have positioned the Company to successfully manage what is expected to be another difficult year in 2016," said Wm. Stacy Locke, President and CEO of Pioneer Energy Services.

"Since the beginning of the market downturn, we have reacted quickly to monetize non-core assets, reduce our debt and interest expense, negotiate more flexible bank covenants, cut costs and right-size our workforce. We've continued reducing costs throughout the company in the first quarter, with the full impact of these savings to be realized beginning in the second quarter.

"We moved aggressively in early 2015 to begin monetizing non-core drilling assets and continued throughout the year. I believe selling 32 drilling rigs, which were mostly mechanical, for an average price of $1.8 million per rig, was a great accomplishment, and believe it positions us well with a high-performing, 94% pad-capable fleet.

"On the production services side of our business, we continually strive to find the appropriate balance of equipment to market relative to the demand for those services.  Today, we are marketing 90 of 125 well servicing rigs, 60 of 125 wireline units and seven of 17 coiled tubing units.

"In December, we amended our credit facility, which reduced the commitments from $300 million to $200 million and also adjusted the covenants to help us through the downturn.  We eliminated the Total Debt to EBITDA covenant and increased the flexibility on the Senior Debt to EBITDA and Interest Coverage ratios.  Also in December, we sold four rigs for aggregate gross proceeds of $17.3 million and applied the proceeds to reduce borrowings on the credit facility.

"As a result, we entered 2016 as a leaner company with a high-quality asset base.  We believe that we should be able to fund most, if not all, of our capital needs in 2016 from our operating cash flow and with proceeds from the sale of a few SCR drilling rigs. With these actions, we believe we are well-positioned to take advantage of a market recovery when it ultimately occurs."

First Quarter 2016 Guidance

In the first quarter of 2016, drilling rig utilization is estimated to average 45% to 50%. Drilling Services Segment margin is estimated to be approximately $12,000 to $12,500 per day, which includes recognition of $7.2 million of revenues from rigs earning early termination revenue but not working. Excluding early termination revenue, we estimate Drilling Services Segment margin to be $9,500 to $10,000 per day in the first quarter, which assumes the three contracted rigs in Colombia remain idle for the remainder of the first quarter. Production Services Segment revenue in the first quarter is estimated to be down approximately 10% to 15% compared to the fourth quarter of 2015 reflecting the decrease in customer spending as well as the typical seasonal impacts.  Production Services Segment margin is estimated to be 15% to 20% of revenues in the first quarter.

Liquidity

Working capital at December 31, 2015 was $45.2 million, down from $121.9 million at December 31, 2014. Our cash and cash equivalents were $14.2 million, down from $34.9 million at year-end 2014.

The decrease in cash and cash equivalents during the year ended December 31, 2015 is primarily due to $159.6 million of cash used for purchases of property and equipment and $60 million used for debt repayment, offset by $142.7 million of cash provided by operating activities, which includes early termination payments made on certain drilling contracts and $57.7 million of proceeds from the sale of assets. We currently have $17.3 million in committed letters of credit and $95 million outstanding under our $200 million revolving credit facility, down from $155 million outstanding at the beginning of 2015.

Capital Expenditures

Cash capital expenditures in the fourth quarter were $29.2 million, including capitalized interest. We now estimate that our total cash capital expenditures for 2016 will be approximately $25 million, which includes approximately $8 million of carryover expenditures for the remaining payments for our new-build drilling rigs delivered in 2015 and certain drilling equipment that was ordered in 2014, but required a long lead time for delivery.

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 conference call, dial (412) 902-0003 approximately 10 minutes prior to the call and ask for the Pioneer Energy Services conference call. A telephone replay will be available after the call and will be accessible until February 24. To access the replay, dial (201) 612-7415 and enter the pass code 13628315.

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.  A replay will be available shortly after the call. For more information, please contact Donna Washburn at Dennard ▪ Lascar Associates, LLC at (713) 529-6600 or e-mail [email protected].

About Pioneer

Pioneer Energy Services provides contract land drilling services to oil and gas operators in Texas, the Mid-Continent and Appalachian regions and internationally in Colombia through its Drilling Services Segment. Pioneer also provides well, wireline, and coiled tubing 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 the following discussion 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, the continued demand for drilling services or production services in the geographic areas where we operate, decisions about exploration and development projects to be made by oil and gas exploration and production companies, the highly competitive nature of our business, technological advancements and trends in our industry and improvements in our competitors' equipment, the loss of one or more of our major clients or a decrease in their demand for our services, future compliance with covenants under our senior secured revolving credit facility and our senior notes, operating hazards inherent in our operations, 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, the political, economic, regulatory and other uncertainties encountered by our operations, 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, 2015, including under the headings "Special Note Regarding Forward-Looking Statements" in the Introductory Note to Part I and "Risk Factors" in Item 1A. These factors are not necessarily all the important factors that could affect us. Other unpredictable or unknown factors 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) recognize 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 U.S. Generally Accepted Accounting Principles (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.

 - Financial Statements and Operating Information Follow -

 

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SOURCE Pioneer Energy Services