There were many challenges during the first quarter. As you are all aware, the weak pricing environment for natural gas led many of our customers to reallocate their capital spending plans towards oil and liquids-rich basins. On the Contract Drilling side, we have moved people and equipment out of natural gas basins to better align ourselves with our customers' drilling plans. In the Pressure Pumping business, the slowdown in natural gas activity, some seasonal weakness in the Northeast and the overall excess supply of frac equipment have combined to create a difficult Pressure Pumping market in terms of both utilization and pricing. Despite these challenges, our first quarter results are actually slightly better than the expectations we had in the beginning of February 2012.
In terms of revenue, we saw sequential growth at both of our core businesses, but the majority of the growth came from our Contract Drilling, in which day rates continue to improve and activities levels benefited from 5 new Apex rigs that were added to the fleet. In Pressure Pumping, despite the challenges in this market, we were able to achieve a slight sequential increase in revenues as our growth in our Southwest market offset the decline in the Northeast. In the current natural gas pricing environment, our customers in the Northeast seem to be delaying well completions, which accentuated the problems arising from the oversupply of equipment in this market. The lower utilization, combined with some pricing erosion in the Northeast, negatively impacted our margins. But because of the strength in the Southwest, our overall gross margin percentage only fell by approximately 80 basis points, outperforming our internal expectations.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV