Pioneer Energy Services' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Start Time: 11:00

End Time: 11:51

Pioneer Energy Services (PES)

Q2 2012 Earnings Call

August 7, 2012 11:00 a.m. ET

Executives

Anne Pearson – SVP & IR Counsel

Stacy Locke – President & CEO

Lorne Phillips – CFO

Analysts

Brian Uhlmer – Global Hunter Securities

James Rollyson – Raymond James

Michael Cerasoli – Goldman Sachs

Josh Lingsch – Simmons & Company

John Keller – Stephens

Mike Urban – Deutsche Bank

Daniel Burke – Johnson Rice

Jeff Geygan – Milwaukee Wealth Management

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Pioneer Energy Services Second Quarter 2012 Earnings Conference Call. (Operator Instructions ). Following the presentation, the conference will be open for questions. (Operator Instructions ) This conference is being recorded today, August 7, 2012.

I would now like to turn the conference over to Anne Pearson of BRG&L. Please go ahead.

Anne Pearson

Thank you, Erin, and good morning, everyone. Before I turn the call over to CEO, Stacy Locke, and CFO, Lorne Phillips, for their formal remarks, I have a few of the usual items to cover.

First of all, a replay of today’s call will be available and will be accessible by webcast by going to the IR section of Pioneer’s website and also by telephone replay. And you can find the replay information for both in this morning’s news release.

Just as a reminder, information reported on this call speaks only as of today, August 7, 2012, so any time sensitive information may no longer be accurate at the time of a replay. Management may make forward-looking statements today that are based on beliefs and assumptions and information currently available to them. While they believe the expectations reflecting in these statements are reasonable, they have no assurance that they will prove to be correct. They are subject to certain risks and uncertainties and assumptions described in this morning’s new release and also in recent public filings with the SEC. If one or more of these risk materializes or should underlying assumptions prove to be incorrect actual results may vary materially.

Also, please note that this conference call may contain references to non-GAAP measures. You’ll find a reconciliation to the GAAP measures in this mornings news release.

So, now I’d like to turn the call over to Stacy Locke, Pioneer Energy Services President and CEO.

Stacy Locke

Thank you, Anne, and good morning, everyone. Sorry for the brief delay. We were trying to get the webcast on our website working this morning since we have a new website and so we delayed this just a bit, and I’m not sure it’s even working yet but, anyway.

Joining me on the call this morning and sitting in for Red West, President of the Drilling Services segment, is Blaine David, our Senior Vice President of Operations. Blaine’s also in charge of our Colombian operation. Joe Eustace, President of the Production Services segment of the business, and Lorne Phillips, our Chief Financial Officer.

As most of you have seen by now, effective July 30 we’ve changed the name of the company to Pioneer Energy Services and we began trading under the ticker symbol PES. This is a culmination of a multi-year strategic plan. We now have all of our core businesses flying under the same name with the same brand look and feel, which we believe will strengthen the companies ability to cross sell the various services to each of the business clients from the different business line.

With respect to the second quarter, no real surprises from the revised guidance that we issued on June 25. Really the whole story in the second quarter was a coil tubing myth. Drilling was a little bit softer and it came in at the low end of our range that we provided in the original guidance, but both well service and wireline had record quarter in terms of revenue and EBITDA. In fact, Production Services as a whole, excluding coiled tubing, was up 7% in revenues. So it was a great quarter in all respects except for coiled tubing.

Now discussing coiled tubing. Let me first say that we have complete confidence in the senior management team and believe that the coiled tubing business is still a very good business and it’s still an important service for Pioneer to offer. Long term we think we will be one of the best service providers in coil just like we are in well service and in wireline.

In a nutshell, the issue this quarter in coil was onshore utilization. It averaged below 60% and that cannot sustain the high fixed cost in that business. In the first quarter by contrast, we were averaging close to 70% utilization and the margins were very good.

Part of the problem in the quarter, we had two units that had previously been on term transition over to spot. In addition, we moved one of those units out of the Marcellus, which became the weaker market down to South Louisiana, and we’ve made a number of important personnel changes. So we think the outlook is good for coil. It may take a quarter or two to get things sorted out but we’re still optimistic about coil in the medium term and long term.

The offshore aspect of the business where we have three units has performed very well, very stable, steady pricing, steady utilization. And we just this month in August added our fourth unit to the offshore so that brings our total unit count currently to 11 and we have two additional land units on order that we should receive in September that’ll become operational probably in October of this year. So we end the year at 13 units in coil.

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