Pioneer Drilling Company's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Pioneer Drilling Company ( PDC)

Q3 2011 Earnings Call

November 3, 2011 11:00 AM ET

Executives

Anne Pearson – IR

Stacy Locke – President and CEO

Lorne Phillips – EVP and CFO

Analysts

John Daniel – Simmons & Co

Brian Uhlmer – Global Hunter

John Keller – Stephens Inc.

Roger Read – Morgan Keegan

Donald Lacombe – SVP, Marketing

Marshall Adkins – Raymond James

Presentation

Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Pioneer Drilling Third Quarter 2011 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Thursday, November 3, 2011.

I’d now like to turn the conference over to Anne Pearson with DRG&L Investor Relations. Please go ahead ma’am

Anne Pearson

Thank you, Mitch and good morning to everyone. Before I call – I turn the call over to Pioneer CEO, Stacy Locke and to CFO, Lorne Phillips for their formal remarks; I have a few usual items to cover. First of all replay of today’s call will be available and accessible by webcast by going to the Investor Relations’ section of Pioneer’s website and also by telephone replay. You’ll find the details on how to access those replays in this morning’s news release.

Also as a reminder, information reported on this call speaks only as of today, November 3, 2011, so any time sensitive information may no longer be accurate at the time of the replay. Management may make forward-looking statements today that are based on beliefs and assumptions and on information currently available to them. Although they believe the expectations reflected in these statements are reasonable, but there is no assurance that they will prove to be correct. They are subject to certain risks and uncertainties and assumptions that are described in this morning’s release, and also in recent public filings with the SEC.

If one or more of these risks materialize or should underlying assumptions prove to be incorrect, actual results may differ materially. Also please note that the call may contain references to certain non-GAAP measures, you’ll find reconciliation to the GAAP measures in this morning’s news release.

Now I would like to turn the call over to Stacy Locke, Pioneer President and CEO.

Stacy Locke

Thank you, Anne and good morning everyone. Joining me on the call this morning is Red West, President of our Drilling Services division; and Lorne Phillips, our Chief Financial Officer. With respect to the quarter overall another very nice quarter for the company, top line revenue was up another 10% after being up 12% in the second quarter. EBITDA was up 14% to 52 million, after being up 16% in the second quarter. As in our second quarter, the Production Services division was the big driver for both revenue and EBITDA growth for the third quarter.

Looking at our Drilling Services division, some of the things going on there, as the press release stated in October we sold four of our lowest horsepower rigs that have been stacked in Western Oklahoma since about the summer of 2008. As you recall, we had six back there and we have been successful this year inactivating two of those six, the larger horsepower rigs, and mobilizing them to work in West Texas.

But the other four were at roughly a 550 horsepower and we just – they were non-core strategically to the company, and we made a very successful sale of those rigs in October. In addition to those four, we have put in auction for this month, two additional rigs or really what I would call fragmental rigs and those will be sold this month in auction. And then we have a seventh rig where we are not selling the mass sub and carrier, we’re going to keep that as spare equipment in our yard for the potentially reactivation at some point into the future.

So, that takes our marketed fleet down from 71 to 64 rigs, so we are down seven, and the entire fleet is now a good solid marketed fleet. Today we are actually operating that fleet at 88% utilization, all 14 of our rigs in the Permian are active and utilized under contract, all nine of our rigs in the Bakken are active, all seven of our rigs in the Marcellus shale are active, all eight of our rigs in Columbia are active, and both of the rigs in the Uinta Basin are active as well. And we are in the process of working on two additional 60 series rigs to mobilize for long-term contract in the Uinta basin.

In South Texas, 13 of our 14 rigs are utilized. We have one mechanical and 50 down for a short period of time, most of these rigs are working in the Eagle Ford shale. East Texas is really our only soft market. Today we have four of the seven rigs back in East Texas, three working. It continues to be a weak market gas oriented drilling.

In addition to these active rigs, we have three rigs in Houston being ready for distribution into other markets. Two of those are rigs that are being worked on and upgraded a little bit for West Texas, where we hope to have those two rigs working there by the end of this year. And we have one 60 series rig from South Texas being winterized and ready for its move to Utah in December.

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