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Pacific Drilling Announces Second Half And Full Year 2011 Results

Stocks in this article: PACD

Pacific Drilling S.A. (NYSE:PACD) (NOTC:PDSA) today announced net income of $0.5 million or $0.00 per diluted share on revenue of $65.4 million for the six months ended December 31, 2011. In the comparable prior year period, net loss after adjusting for the divestiture of our joint venture with Transocean was $12.0 million or $0.08 per diluted share on no revenue. Including income from the joint venture, reported earnings for the six months ended December 31, 2010 were $21.3 million or $0.14 per diluted share.

For the year ended December 31, 2011, the net loss after adjusting for the excluded joint venture was $22.0 million or $0.11 per diluted share on revenue of $65.4 million. In the prior year period, after adjusting for the excluded joint venture, net loss was $20.1 million or $0.13 per diluted share on no revenue. For the year ended December 31, 2011, the reported net loss was $2.9 million or $0.01 per diluted share as compared with reported net income of $37.3 million or $0.25 per diluted share for the prior year period.

Christian J. Beckett, Chief Executive Officer, stated, “2011 was a defining year for Pacific Drilling, as we became a public company listed on the New York Stock Exchange. We are proud to cite a long list of achievements during our transition from rig construction to operations. We successfully took delivery of three more drillships, commenced drilling operations in Nigeria on two rigs, ordered two more drillships, increased our backlog to $2.1 billion through contracts with world-class integrated oil companies and continued to grow the Pacific Drilling team, onshore and offshore, to nearly 900 staff.”

Regarding the company’s progress in 2012, Mr. Beckett commented, “To date in 2012, we have started operations on our third rig, the Pacific Mistral, with Petrobras in Brazil, representing our entry into that growing market. The Pacific Santa Ana is en route to the U.S. Gulf of Mexico to begin drilling operations with Chevron as the world’s first Dual Gradient drillship. We are in advanced discussions with several parties interested in both the Pacific Khamsin and the Pacific Sharav, which are available in 2013, and we believe that the market for rigs delivered in 2013 and 2014 will continue to be very robust. Our recently exercised option for a seventh ultra-deepwater drillship provides further attractive market exposure with delivery scheduled for May 2014.”

Operational Commentary

During 2011, our company started drilling operations with the Pacific Bora and earned its first contract drilling revenue. Consequently, our financial results for the year ended December 31, 2011, included several items normal for start-up of operations. These items comprised primarily the expensing of shore-based and other operational support costs in advance of actual rig operations, legal and other professional fees incurred in connection with financing transactions, and specific issues related to engine performance on one of our delivered vessels.

Contract drilling revenue for the second half of 2011 was $65.4 million as compared to no drilling revenue in the prior year. Pacific Bora commenced drilling operations in Nigeria on August 26, 2011, with a subsidiary of Chevron. Through December 31, 2011, Pacific Bora achieved revenue efficiency of 93.2%. Revenue efficiency is defined as actual contractual dayrate revenue (excludes mobilization fees, upgrade reimbursements and other revenue sources) divided by the maximum amount of contractual dayrate revenue that could have been earned during such period. The total 2011 contract drilling revenue included $8.6 million in recognition of deferred revenue for mobilization and contract preparation.

In the third quarter 2011, the Pacific Scirocco underwent repairs and upgrades to ensure engine reliability. The lost time was a covered event under Pacific Drilling’s loss of hire policy and resulted in $18.5 million in loss of hire insurance recovery recognized in 2011. In February 2012, the company received an additional $23.7 million in net loss of hire insurance recovery. Following the repairs and upgrades, Pacific Scirocco entered service in Nigeria on December 31, 2011, with a subsidiary of Total.

Financial Commentary

Chief Financial Officer William Restrepo commented, “Over the past year our financial position has strengthened considerably due to the visibility of the cash flow provided by our $2.1 billion backlog and by the approximately $1 billion in incremental financing raised since March of 2011, from both equity and debt capital markets. We have demonstrated to our shareholders the willingness to continue the disciplined growth of our fleet, by funding our capital projects with solid financing that reinforces the strength of our balance sheet.”

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