Pioneer Drilling Co. (PDC) Bank of America Merrill Lynch Global Energy Conference Call November 16, 2011 2:50 PM ET Executives Stacy Locke – President and CEO Lorne Phillips – Chief Financial Officer Analysts Presentation Unidentified Analyst … CFO, Lorne Phillips. Stacy Locke
The Production Service side of the business, you see over on the right, it’s significant to us, on a trailing basis it’s 44% of margin, in the third quarter it was actually 49% of margin as we’ve been growing it pretty rapidly.A couple of things to think about in terms of investment considerations. We have a lot of organic growth in these three core businesses. We put out an 8-K yesterday announcing several things, but we announced a 10th new-build drilling rig. These are all term contract drilling rigs that we have under construction. So we now have 10 rigs under construction that will be delivered during 2012. We’re adding 14 well service units this year in 2011 and 22 wireline units in 2011. In 2012, on our well service side, we’ve already ordered an additional 14 well service units and those will begin in the first half of the year. And we’ve only ordered six more wireline units for the first quarter so far into 2012 on the wireline side. So we do have a lot of growth plan, pretty much all of the incremental units are going into further penetration in shale plays or opening up into a newer shale play. We have 14 rigs operating out in our West Texas division, which we opened at the beginning of this year. We kind of repositioned our fleet in all the shale plays in ‘09 and ‘10. We started this year with what to do about the rigs that had been drilling vertical gas in the past. So we set out to find the home for that, founded in West Texas. And so we basically, shutdown our North Texas division and drastically reduced the rig count in our East Texas division, which the rigs that are there, most of the rigs that were there were not drilling Haynesville, they were drilling vertical gas, we’ve centrally located 14 rigs to West Texas.
We’ve got two more in Houston being ready for West Texas to begin contracts in December and then we’ve identified a couple of few more out of our East Texas fleet that we will probably move to West Texas over the next couple of quarters. So we’re getting our utilization back up, at our third quarter call we were 88% utilized.So we also announced in our third quarter call that we sold four of our lowest horsepower rigs, these were mechanical 550 horsepower rigs that are basically been stacked since the summer of 2008 and we couldn’t get anything form until this year with the rise in oil prices, we’ve had a pretty good market, so we sold those just last month. And we have since sold two more rigs that have been cannibalized as a result of high-grading rigs and taken them to West Texas, and we had just parts and pieces left of couple of rigs, so we sold those in auction last week. And so we -- and then we had another rig we sold or used most of the equipment and we just put it into inventory for potential future use. So our rig count down from 71 to 64 but then now we have 10 new-builds that will replace those with and be up to 74 rigs by the end of next year. We worked very, very hard at backing all of these rigs, the existing rigs with term contracts. We’ve got over 70% of our working rigs under term contracts and we’re rolling them over on a regular basis every month, either into six month or one year, probably more one year these days and six month term. Read the rest of this transcript for free on seekingalpha.com