Conference call set 9 a.m. Central time
Tuesday, May 5
- EBITDA(a) for the first quarter of
$147.3 million, a 46 percent increase over the prior year’s
first-quarter EBITDA and representing an EBITDA margin(b) of 52.0
percent
- Revenue efficiency(c) of 95.2 percent
for the first quarter yielded revenue of $283.4 million, a 25.6
percent increase over the prior year’s first-quarter revenue
- Record cash flow from operations of
$147.9 million for the quarter
Pacific Drilling S.A. (NYSE: PACD) today announced net income
for first-quarter 2015 of $51.7 million or $0.24 per diluted share,
compared to net income of $68.0 million or $0.32 per diluted share
for fourth-quarter 2014. Net income for first-quarter 2014 was
$22.2 million or $0.10 per diluted share.
CEO Chris Beckett said, "The company had an exceptional fourth
quarter in 2014, and our first-quarter operational and financial
performance very nearly matched it. With an operating fleet of five
and a half rigs, during the quarter we generated a record level of
cash flow from operations.”
Turning to the state of the offshore drilling market, Beckett
added, "We continue to experience a very weak market, but are
pleased to have the highest-quality contract portfolio in the
industry. The market for offshore rigs continues to develop as we
anticipated, with clients increasingly focused on the capabilities
and efficiencies of the rigs in their contracted fleets. In this
regard, clients are more and more discerning about both the quality
of the asset and the drilling service delivered, and we believe our
high-specification fleet and focus on the client relationship will
provide a competitive advantage. We expect industry-wide
contracting activity in the remainder of 2015 to be limited, but
provided oil prices continue to rebound, exploration drilling picks
up, and industry rationalization of supply does not falter, we
should begin to see market improvement."
First-Quarter 2015 Operational and
Financial Commentary
Contract drilling revenue for first-quarter 2015 was $283.4
million, which included $22.7 million of deferred revenue
amortization, compared to contract drilling revenue of $319.7
million for fourth-quarter 2014, which included $25.9 million of
deferred revenue amortization. Contract drilling revenue was
impacted by the conclusion on Feb. 5, 2015, of the drilling
contract for Pacific Mistral. During the three months ended March
31, 2015, our operating fleet achieved average revenue efficiency
of 95.2 percent.
Contract drilling expenses for first-quarter 2015 were $117.7
million, compared to $123.8 million for fourth-quarter 2014.
Contract drilling expenses for first-quarter 2015 included $5.8
million in reimbursable costs, $9.3 million in shore-based and
other support costs, and $8.5 million in amortization of deferred
costs. Direct rig-related daily operating expenses, excluding
reimbursable costs, averaged $174,200 in first-quarter 2015, in
line with the prior quarter.
General and administrative expenses for first-quarter 2015 were
$16.4 million, compared to $14.9 million for fourth-quarter 2014.
The increase was primarily the result of non-recurring personnel
expenses.
EBITDA for first-quarter 2015 was $147.3 million, compared to
EBITDA of $179.1 million for the prior quarter. EBITDA margin for
the quarter was 52.0 percent. A reconciliation of net income to
EBITDA is included in the accompanying schedules to this
release.
Interest expense for the first quarter was $36.7 million,
compared to $39.9 million for the prior quarter. The decrease in
interest expense was primarily due to the repayment of our
unsecured bonds.
Income tax expense for first-quarter 2015 was $1.8 million,
compared to $14.6 million for the prior quarter. The decrease in
income tax expense was primarily the result of a decrease in
uncertain tax positions of $9.6 million in first-quarter 2015.
Liquidity and Capital
Expenditures
During first-quarter 2015, cash flow from operations was $147.9
million. Cash balances totaled $132.9 million as of March 31, 2015,
and total outstanding debt was $3.0 billion. During the quarter, we
used a portion of our cash on hand and $180 million under our 2014
revolving credit facility to fund the $286.5 million repayment of
the outstanding principal on our unsecured bonds. We also amended
financial covenants in our senior secured credit facility (SSCF)
and revolving credit facilities to address delays in our newbuild
deliveries.
On April 24, 2015, we drew an additional $85 million under the
SSCF, while the remaining $15 million in undrawn SSCF availability
will expire on May 8, 2015. Subsequent to the first quarter, we
also repaid $80 million of the $180 million in outstanding balance
on our 2014 revolving credit facility. Consequently, we now have
$550 million of available and undrawn liquidity under our existing
credit facilities, including $300 million under the 2013 revolving
credit facility and $250 million under the 2014 revolving credit
facility. We will have access to an additional $150 million
available under the 2014 revolving credit facility upon delivery of
the Pacific Zonda and entry into a satisfactory drilling
contract.
During first-quarter 2015, capital expenditures were $57.5
million, of which $34.1 million related to newbuild rig
construction. Capitalized interest amounted to $13.0 million. The
remaining expenditures primarily related to fleet spares. We
estimate the remaining capital expenditures required to complete
construction of our newbuild drillship and develop spare equipment
will be approximately $459.2 million, excluding capitalized
interest. We expect to cover these capital expenditures with a
combination of existing cash balances, future operating cash flows,
and undrawn capacity under existing credit facilities.
During the quarter, we repurchased 4.3 million of our shares at
an average price of $3.69 per share for a total purchase price of
$15.9 million. To date, we have repurchased 7.1 million shares of
the authorized and approved 8 million shares under our share
repurchase program.
Updates to 2015 Guidance
We reiterate our guidance on revenue efficiency provided with
the fleet status report posted today, May 4, 2015. The average
revenue efficiency ranges apply to our operating rigs on contract
and include our expectations for unplanned downtime as well as
planned events such as maintenance. With respect to our newbuild
rigs, we expect an average revenue efficiency of 90 percent during
a rig's first six months of operations and 95 percent thereafter.
However, revenue efficiency for individual rigs tends to be
volatile on a monthly and even on a quarterly basis.
We are updating our income tax expense
guidance for full-year 2015:
Item
Range Income tax expense as percent of
total contract drilling revenue 3.5% - 4%
We reiterate our guidance for other certain expenses as
summarized in our fourth-quarter and full-year 2014 results release
issued on Feb. 23, 2015.
Updated schedules of expected amortization of deferred revenue,
depreciation expense, interest expense for our existing financing,
and capital expenditures are available in the “Quarterly and Annual
Results” subsection of the “Investor Relations” section of our
website, www.pacificdrilling.com.
Please note that our guidance is based on management’s
current expectations about the future, and both stated and unstated
assumptions, and does not constitute any form of guarantee,
assurance or promise that the matters indicated will actually be
achieved. Actual conditions and assumptions are subject to change.
The guidance we provide is subject to all cautionary statements and
limitations described under the “Forward-Looking Statements”
section of this press release.
Footnotes
(a)
EBITDA is a non-GAAP financial measure. For a definition of EBITDA
and a reconciliation to net income, please refer to the schedule
included in this release.
(b)
EBITDA margin is defined as EBITDA divided by contract drilling
revenue. Management uses this operational metric to track company
results and believes that this measure provides additional
information that consolidates the impact of our operating
efficiency as well as the operating and support costs incurred in
achieving the revenue performance.
(c)
Revenue efficiency is defined as actual contractual dayrate revenue
(excluding mobilization fees, upgrade reimbursements and other
revenue sources) divided by the maximum amount of contractual
dayrate revenue that could have been earned during such period.
Conference Call
Pacific Drilling will conduct a conference call at 9 a.m.
Central time on Tuesday, May 5, to discuss first-quarter 2015
results. To participate in the May 5 call, please dial +1
913-312-0643 or 1-800-753-9057 and refer to confirmation code
8339610 five to 10 minutes prior to the scheduled start time. The
call also will be webcast on www.pacificdrilling.com and can be
accessed by a link posted in the “Events & Presentations”
subsection of the “Investor Relations” section.
An audio replay of the call may be accessed after noon Central
time on Tuesday, May 5, 2015, by dialing +1 719-457-0820 or
1-888-203-1112, and using access code 8339610. A replay of the call
also will be available on the company’s website.
About Pacific Drilling
With its best-in-class drillships and highly experienced team,
Pacific Drilling is committed to becoming the industry’s preferred
high-specification, floating-rig drilling contractor. Pacific
Drilling’s fleet of eight drillships represents one of the youngest
and most technologically advanced fleets in the world. For more
information about Pacific Drilling, including our current Fleet
Status, please visit our website at www.pacificdrilling.com.
Forward-Looking
Statements
Certain statements and information contained in this press
release (and oral statements made regarding the subjects of this
press release, including the conference call announced herein)
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Where any
forward-looking statement includes a statement about the
assumptions of bases underlying the forward-looking statement, we
caution that, while we believe these assumptions or bases to be
reasonable and made in good faith, assumed facts or bases almost
always vary from actual results, and the differences between
assumed facts or bases and actual results can be material,
depending on the circumstances. Where, in any forward-looking
statement, our management expresses an expectation or belief as to
future results, such expectation or belief is expressed in good
faith and is believed to have a reasonable basis as and when made.
We cannot assure you, however, that the future result will be
achieved or accomplished. These statements relate to analyses and
other information that are based on forecasts of future results and
estimates of amounts not yet determinable. These statements also
relate to our future prospects, developments and business
strategies. Forward-looking statements typically include words or
phrases such as “believe,” “expect,” “anticipate,” “project,”
“plan,” “intend,” “tends to,” “foresee,” “our ability to,”
“estimate,” “potential,” “will,” “should,” “would,” “could” or
other similar words, which are generally not historical in nature.
Such forward-looking statements specifically include statements
involving: future client contract opportunities; market outlook;
contract dayrate amounts; competition in our industry; future
operational performance; revenue efficiency levels; estimated
duration of client contracts; future contract commencement dates
and locations; backlog; construction, timing and delivery of
newbuild drillships; capital expenditures; cost adjustments;
estimated rig availability; direct rig operating costs; shore based
support costs; general and administrative expenses; income tax
expense; expected amortization of deferred revenue and deferred
mobilization expenses; growth opportunities and expected
depreciation and interest expense for the existing credit
facilities and senior bonds. These forward-looking statements are
based on our current expectations and beliefs concerning future
developments and their potential effect on us. While management
believes that these forward-looking statements are reasonable as
and when made, there can be no assurance that future developments
affecting us will be those that we anticipate. All comments
concerning our expectations for future revenue and operating
results are based on our forecasts for our existing operations and
do not include the potential impact of any future acquisitions. Our
forward-looking statements involve significant risks and
uncertainties (many of which are beyond our control) and
assumptions that could cause actual results to differ materially
from our historical experience and our present expectations or
projections. Important factors that could cause actual results to
differ materially from projected cash flows and other projections
in the forward-looking statements include, but are not limited to:
changes in worldwide rig supply and demand, competition and
technology; our ability to secure new and maintain existing
drilling contracts, including possible cancellation or suspension
of drilling contracts as a result of mechanical difficulties,
performance, market changes or other reasons; future levels of
offshore drilling activity; actual contract commencement dates;
downtime and other risks associated with offshore rig operations,
including unscheduled repairs or maintenance; relocations, severe
weather or hurricanes; adequacy of and access to sources of
liquidity; governmental action, civil unrest and political and
economic uncertainties; impact of potential licensing or patent
litigation; risks inherent to shipyard rig construction, repair,
maintenance or enhancement; environmental or other liabilities,
risks or losses; governmental regulatory, legislative and
permitting requirements affecting drilling operations; our ability
to attract and retain skilled personnel on commercially reasonable
terms; terrorism, piracy and military action; and the outcome of
litigation, legal proceedings, investigations or other claims or
contract disputes.
For additional information regarding known material risk factors
that could cause our actual results to differ from our projected
results, please see our filings with the Securities and Exchange
Commission (SEC), including our Annual Report on Form 20-F and
Current Reports on Form 6-K. These documents are available through
our website at www.pacificdrilling.com
or through the SEC’s Electronic Data and Analysis Retrieval System
at www.sec.gov.
Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
We undertake no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as
a result of new information, future events or otherwise.
PACIFIC DRILLING S.A. AND
SUBSIDIARIES
Condensed Consolidated Statements of
Income
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,2015
December 31,2014
March 31,2014
Revenues Contract drilling $ 283,392 $ 319,737 $ 225,591
Costs and expenses Contract drilling (117,669 ) (123,836 )
(110,966 ) General and administrative expenses (16,366 ) (14,889 )
(12,533 ) Depreciation expense (57,072 ) (56,547 ) (46,154 )
(191,107 ) (195,272 ) (169,653 )
Operating income 92,285
124,465 55,938
Other expense Interest expense (36,709 )
(39,874 ) (26,031 ) Other expense (2,051 ) (1,902 ) (1,169 )
Income before income taxes 53,525 82,689 28,738 Income tax
expense (1,795 ) (14,645 ) (6,508 )
Net income $ 51,730
$ 68,044 $ 22,230
Earnings per common
share, basic $ 0.24 $ 0.32 $ 0.10
Weighted average number of common shares, basic 213,627
217,132 217,121
Earnings per common share,
diluted $ 0.24 $ 0.32 $ 0.10
Weighted
average number of common shares, diluted 213,686 217,197
217,464
PACIFIC DRILLING S.A. AND
SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except par value)
(unaudited)
March 31,2015
December 31,2014
Assets: Cash and cash equivalents $ 132,868 $ 167,794
Accounts receivable 165,653 231,027 Materials and supplies 99,745
95,660 Deferred financing costs, current 14,561 14,665 Deferred
costs, current 19,523 25,199 Prepaid expenses and other current
assets 27,587 17,056 Total current assets 459,937
551,401 Property and equipment, net 5,433,878
5,431,823 Deferred financing costs 42,717 45,978 Other assets
32,965 48,099 Total assets $ 5,969,497 $
6,077,301
Liabilities and shareholders’ equity:
Accounts payable $ 39,291 $ 40,577 Accrued expenses 31,438 45,963
Long-term debt, current 82,500 369,000 Accrued interest 37,219
24,534 Derivative liabilities, current 10,067 8,648 Deferred
revenue, current 74,238 84,104 Total current
liabilities 274,753 572,826 Long-term debt, net of
current maturities 2,959,678 2,781,242 Deferred revenue 96,480
108,812 Other long-term liabilities 28,921 35,549
Total long-term liabilities 3,085,079 2,925,603
Shareholders’ equity: Common shares, $0.01 par value per share,
5,000,000 shares authorized,
232,770 shares issued and 211,556 and
215,784 shares outstanding as
of March 31, 2015 and December 31, 2014,
respectively
2,175 2,175 Additional paid-in capital 2,372,497 2,369,432 Treasury
shares, at cost (24,133 ) (8,240 ) Accumulated other comprehensive
loss (28,314 ) (20,205 ) Retained earnings 287,440 235,710
Total shareholders’ equity 2,609,665 2,578,872
Total liabilities and shareholders’ equity $ 5,969,497 $
6,077,301
PACIFIC DRILLING S. A. AND
SUBSIDIARIES
Condensed Consolidated Statements of Cash
Flows
(in thousands) (unaudited)
Three Months Ended
March 31,2015
December 31,2014
March 31,2014
Cash flow from operating activities: Net income $ 51,730 $
68,044 $ 22,230 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation expense 57,072
56,547 46,154 Amortization of deferred revenue (22,689 ) (25,884 )
(28,008 ) Amortization of deferred costs 8,483 11,531 13,210
Amortization of deferred financing costs 2,725 2,951 2,578
Amortization of debt discount 227 235 173 Deferred income taxes
(5,507 ) 15,281 (12 ) Share-based compensation expense 3,107 2,952
1,966 Changes in operating assets and liabilities: Accounts
receivable 65,374 (46,736 ) 29,685 Materials and supplies (4,085 )
(3,564 ) (8,336 ) Prepaid expenses and other assets 2,412 (16,123 )
(14,600 ) Accounts payable and accrued expenses (11,404 ) (964 )
(4,682 ) Deferred revenue 491 8,267 62,474 Net
cash provided by operating activities 147,936 72,537
122,832
Cash flow from investing activities: Capital
expenditures (57,503 ) (386,519 ) (88,826 ) Net cash used in
investing activities (57,503 ) (386,519 ) (88,826 )
Cash flow
from financing activities: Net proceeds (payments) from shares
issued under share-based compensation plan (42 ) (79 ) 750 Proceeds
from long-term debt 180,000 400,000
-
Payments on long-term debt (288,375 ) (36,208 ) (1,875 ) Payments
for financing costs (500 ) (7,069 ) (500 ) Purchases of treasury
shares (16,442 ) (7,227 )
-
Net cash provided by (used in) financing activities (125,359
) 349,417 (1,625 ) Increase (decrease) in cash and cash
equivalents (34,926 ) 35,435 32,381 Cash and cash equivalents,
beginning of period 167,794 132,359 204,123
Cash and cash equivalents, end of period $ 132,868 $ 167,794
$ 236,504
EBITDA Reconciliation
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. EBITDA does not represent and should
not be considered an alternative to net income, operating income,
cash flow from operations or any other measure of financial
performance presented in accordance with generally accepted
accounting principles in the United States of America (“GAAP”) and
our calculation of EBITDA may not be comparable to that reported by
other companies. EBITDA is included herein because it is used by
management to measure the company's operations. Management believes
that EBITDA presents useful information to investors regarding the
company's operating performance during the first quarter of
2015.
PACIFIC DRILLING S.A. AND
SUBSIDIARIES
Supplementary Data—Reconciliation of Net
Income to Non-GAAP EBITDA
(in thousands) (unaudited)
Three Months Ended
March 31,2015
December 31,2014
March 31,2014
Net income $ 51,730 $ 68,044 $ 22,230
Add: Interest
expense 36,709 39,874 26,031 Depreciation expense 57,072 56,547
46,154 Income tax expense 1,795 14,645 6,508
EBITDA $ 147,306 $ 179,110 $ 100,923
Pacific Drilling Services, Inc.Amy Roddy, +1 832 255
0502Investor@pacificdrilling.com
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