Pioneer Drilling CEO Discusses Q4 2010 Results - Earnings Call Transcript

Pioneer Drilling Company ( PDC)

Q4 2010 Earnings Call

February 17, 2011 11:00 am ET

Executives

Lisa Elliott - Investor Relations, DRG&E

Stacy Locke - President and Chief Executive Officer

Lorne E. Phillips - Executive Vice President and Chief Financial Officer

F.C. Red West - President of Drilling Services

Joe Eustace - President of Production Services

Analysts

Christopher Butschek – Raymond James

Brian Uhlmer - Global Hunter Securities

John Keller - Stephens Investment Management

John Daniel - Simmons & Company

Judd Bailey - Jefferies & Company

Presentation

Operator

Good day ladies and gentlemen, thank you for standing by. Welcome to the Pioneer Drilling’s Fourth Quarter Earnings Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Thursday, February 17, 2011.

I’d now like to turn the conference over to Ms. Lisa Elliott with DRG&L, please go ahead ma’am.

Lisa Elliott

Thank you, and good morning, everyone. Before management makes their formal remarks, I do have a few items to cover. First, a replay of today's call will be available and can be accessed by via webcast by going to the Investor Relations section of Pioneer's website and also by telephone replay. You can find all of the replay information in today's news release.

Information on this call speaks only as of today, February 17, 2011, so any time-sensitive information may no longer be accurate as of the time of any replay. And during the call today, management may make forward-looking statements that are based on its beliefs and assumptions and information currently available to them. Although management believes the expectations in these statements are reasonable, they can give no assurance that they will prove to be correct. The statements are subject to certain risks, uncertainties, and assumptions that are described in this morning's release and also in the most recent filings with the SEC. Should one or more of these risks materialize or should underlying assumptions prove to be incorrect, actual results may differ materially.

Also please note that this conference call may contain certain references to non-GAAP measures. And you can find reconciliation to the GAAP financial measures in the Form 8-K, as well as in today's news release and SEC filings.

Now with that, I'll turn the call over to Stacy Locke, Pioneer's President and CEO. Stacy?

Stacy Locke

Thank you, Lisa. Good morning, everyone. Joining me on the call today is Red West, the President of our Land Drilling Division; Joe Eustace, our President of our Production Services Division and Lorne Phillips, our Chief Financial Officer.

We were very pleased with our fourth quarter results. Revenue was up again 10% this time to $149 million of revenues. EBITDA up also up 10% to $38 million. Again, oil was the primary driver of activity levels and comprised over 60% of revenues in the fourth quarter.

On the land drilling side of the business, utilization was 64%, about where we had anticipated, but we are running a little bit better today at 66%, and we've been averaging between 65% and 69% here for a while.

Average drilling margins per day was considerably above our expectations, up $1,412 a day to 7,679. This is always a difficult number to forecast, but we are nonetheless pleased with those results.

Our primary strategic objectives for the land-drilling segment in 2011 are, one, to add new builds. We are still confident that we'll be able to add two to three new builds in the fourth quarter of this year and additional new builds into 2012.

Our engineering department has three new rig designs that we are currently marketing and in discussion with customers on. One of these is a fit for purpose, 555,000 pound upload mass stub for the kind of Marcellus type of market. The other is the more traditional 750,000 pound hook load, 1,500 horsepower. All of these are AC, all have capable of taking walking systems, all can be rigged up without a crane.

And then we're also working on one other walking or pad site design for a specific customer. Don't have the work yet, but it's for pad drilling where they want to drill parallel rows of wells, and therefore, you’ve got to be able to walk and get over stacks, get over Christmas trees, and do that efficiently.

So that also is a crane-less rig design. But so any way we're excited about these new designs. Two of them aren't too different from our 50 series designs, but they've got a few tweaks to them that make them a little faster, little more efficient, and we're excited about that.

The other big initiative for 2011 is to put some our conventional rigs that have been stacked back to work. Most of these are the North Texas rigs that used to work in the Barnett, the East Texas rigs and them in some of the Western Oklahoma rigs. They're all pretty much gas-price dependent and that market has been soft and so we're making a concerted effort this year now that we've gotten all the other rigs back to work in the shale plays that were appropriate for the shale, that's our goal for 2011, is to get these rigs contributing for 2011 and into 2012.

As part of the effort, we're very pleased to announce our new West Texas division. We've opened offices there, we’ve hired a Division Manager and a Superintendent, a safety man, and we're going to work out there. We’ve got one rig currently drilling its first horizontal well, it’s a 1,200 horsepower mechanical rig with a top drive.

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