Pacific Drilling S.A. (NYSE: PACD) (“Pacific Drilling” or the
“Company”) today reported results for the second quarter of 2020.
Net loss for second-quarter 2020 was $87.4 million or $1.16 per
diluted share, compared to net loss of $61.0 million or $0.81 per
diluted share in first-quarter 2020.
Pacific Drilling CEO Bernie Wolford commented, “In the second
quarter, our crews and leadership continued to exemplify our
commitment to safe and efficient operations, including adopting
measures to manage risks associated with COVID-19 transmission,
delivering exceptional results for our clients, efficiently
preserving the value of our assets and significantly reducing
overhead costs.”
Mr. Wolford continued, “Although oil prices began to rebound
during the second quarter, clients have generally reduced their
drilling investments, as evidenced by Equinor’s decision to cancel
the previously exercised third firm well for Pacific Khamsin, and
Murphy’s decision to cancel the two well Mexico contract for the
Pacific Sharav. In both cases our clients chose to pay a
termination fee rather than perform the drilling programs. We
expect the current contract for Pacific Khamsin to end in September
2020. Despite these headwinds for 2020, we are actively pursuing
opportunities for contracts and are proud to extend our
relationship with Murphy through a new contract for Pacific Sharav
for 10 firm wells and 5 option wells in the U.S. Gulf of Mexico,
which we expect to commence in the second quarter of 2021.”
Mr. Wolford concluded, “Although we currently see more contract
opportunities for 2021, compared to 2020, contract durations remain
relatively short, on average, and we expect excess rig supply to
maintain downward pressure on dayrates. We have no debt maturities
until 2023, and cash in excess of $252 million as of June 30, 2020.
We project that we have sufficient liquidity to fund our cash needs
over the next 12 months. However, due to current market conditions
and our outlook for contracting opportunities through 2020 and
2021, we do not believe our current capital structure will be
sustainable. We have engaged financial and legal advisors to assist
us in evaluating various alternatives to address our longer-term
liquidity outlook and capital structure, which may include a
negotiated restructuring of our debt that is implemented under the
protection of Chapter 11 of the U.S. Bankruptcy Code. We are
currently engaged in discussions with a group of our creditors
seeking to reach acceptable terms for a restructuring. Any such
agreement that we may reach may include the equitization of all or
certain of the Company’s indebtedness, which would place our common
shareholders at significant risk of losing all of their interests
in the Company. While we evaluate our strategic alternatives to
address our liquidity outlook and current capital structure, we
continue to deliver the safe, efficient and high-quality drilling
services for which Pacific Drilling is recognized in our
industry.”
Second-Quarter 2020 Operational and
Financial Commentary
Contract drilling revenue for second-quarter 2020 was $38.9
million, which included $6.6 million in reimbursable revenue. This
compared to first-quarter 2020 contract drilling revenue of $89.4
million, which included $6.4 million in reimbursable revenue. The
decrease in revenue resulted primarily from the Pacific Sharav and
the Pacific Bora completing their contracts in early April, and the
Pacific Santa Ana earning a lower force majeure rate in April and a
reduced standby rate for the reminder of the second quarter.
Operating expenses for second-quarter 2020 were $61.9 million,
which included $4.5 million in reimbursable expenses. This compared
to first-quarter 2020 operating expenses of $86.5 million, which
included $5.8 million in reimbursable expenses. The decrease in
operating expenses was due to the ramp down of costs on rigs
transitioning from operating to standby and idle status.
General and administrative expenses for the second quarter of
2020 were $10.9 million, as compared to $9.6 million for the first
quarter of 2020. The increase was due to advisory fees of $2.6
million and severance costs of $0.3 million incurred in the second
quarter of 2020. Excluding the impact of such charges, the decrease
in general and administrative expenses for the second quarter of
2020 resulted from a reduction in force implemented in May 2020 and
a decrease in salaries for all employees.
Adjusted EBITDA(a) for second-quarter 2020 was $(31.1) million,
compared to $(1.8) million in first-quarter 2020.
Capital expenditures for the second quarter of 2020 were $1.0
million compared to $5.9 million in the first quarter of 2020. The
decrease was from deferral or elimination of rig projects with
resulting second-quarter activity limited to required sustaining
capital expenditures.
Footnotes
(a)
EBITDA and Adjusted EBITDA are non-GAAP
financial measures. For a definition of EBITDA and Adjusted EBITDA
and a reconciliation to net loss, please refer to the schedule
included in this release. Management uses this operational metric
to track company results and believes that this measure provides
additional information that highlights the impact of our operating
efficiency as well as the operating and support costs incurred in
achieving the revenue performance.
Conference Call
Pacific Drilling will conduct a conference call at 10 a.m.
Central time on Friday, August 7, 2020 to discuss second-quarter
2020 results. To access the conference call, participants are
invited to register in advance by visiting
bit.ly/Register2Q2020Call. Once registered an email will be
immediately sent with dial-in and access code details. A replay of
the call will be available the following day on the company’s
website or by dialing +1 866-583-1035 and providing access code
9928370#.
About Pacific Drilling
With its best-in-class drillships and highly experienced team,
Pacific Drilling is committed to exceeding our customers’
expectations by delivering the safest, most efficient and reliable
deepwater drilling services in the industry. Pacific Drilling’s
fleet of seven drillships represents one of the youngest and most
technologically advanced fleets in the world. Pacific Drilling has
principal offices in Luxembourg and Houston. 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 constitute “forward-looking statements” within the meaning
of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, and are generally identifiable by their use of
words such as “anticipate,” “believe,” “could,” “estimate,”
“expect,” “forecast,” “intend,” “our ability to,” “may,” “plan,”
“potential,” “predict,” “project,” “projected,” “should,” “will,”
“would”, or other similar words which are not generally historical
in nature. The forward-looking statements speak only as of the date
hereof, and 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.
Our forward-looking statements express our current expectations
or forecasts of possible future results or events, including the
future impact of the COVID-19 pandemic on our business, future
financial and operational performance and cash balances; the
potential outcome of our discussions with our creditors and
evaluation of our alternatives regarding our liquidity outlook and
capital structure; our future liquidity position and future efforts
to improve our liquidity position; revenue efficiency levels;
market outlook; forecasts of trends; future client contract
opportunities; future contract dayrates; our business strategies
and plans or objectives of management; estimated duration of client
contracts; backlog; expected capital expenditures; projected costs
and savings; expectations regarding our two subsidiaries’
application to appeal the arbitration award against them related to
the drillship known as the Pacific Zonda in favor of Samsung Heavy
Industries Co. Ltd. (“SHI”), the outcome of such subsidiaries’
ongoing bankruptcy proceedings and the potential impact of the
Tribunal’s decision on our future operations, financial position,
result of operations and liquidity.
Although we believe that the assumptions and expectations
reflected in our forward-looking statements are reasonable and made
in good faith, these statements are not guarantees, and actual
future results may differ materially due to a variety of factors.
These statements are subject to a number of risks and uncertainties
and are based on a number of judgments and assumptions as of the
date such statements are made about future events, many of which
are beyond our control. Actual events and results may differ
materially from those anticipated, estimated, projected or implied
by us in such statements due to a variety of factors, including if
one or more of these risks or uncertainties materialize, or if our
underlying assumptions prove incorrect.
Important factors that could cause actual results to differ
materially from our expectations include: evolving risks from the
COVID-19 pandemic and resulting significant disruption in
international economies, and international financial and oil
markets, including a substantial decline in the price of oil during
2020; the willingness and ability of existing lenders and holders
of our notes to agree to any modifications to the terms of our
long-term debt that we may request; whether additional capital at a
reasonable cost becomes available to us; the global oil and gas
market and its impact on demand for our services; the offshore
drilling market, including changes in capital expenditures by our
clients; changes in worldwide oil and gas supply and demand; rig
availability and supply and demand for high-specification
drillships and other drilling rigs competing with our fleet; our
ability to enter into and negotiate favorable terms for new
drilling contracts or extensions; our ability to successfully
negotiate and consummate definitive contracts and satisfy other
customary conditions with respect to letters of intent and letters
of award that we receive for our drillships; actual contract
commencement dates; possible cancellation, renegotiation,
termination or suspension of drilling contracts as a result of
force majeure, mechanical difficulties, performance, market changes
or other reasons; costs related to stacking of rigs and costs to
reactivate a stacked rig; downtime and other risks associated with
offshore rig operations, including unscheduled repairs or
maintenance, relocations, severe weather or hurricanes or
accidents; our small fleet and reliance on a limited number of
clients; the risks of litigation in foreign jurisdictions and
delays caused by third parties in connection with such litigation;
the outcome of our two subsidiaries’ bankruptcy proceedings and any
actions that SHI or others may take in the bankruptcy or other
proceedings against the Company and its subsidiaries; the risk that
our common shares could be delisted from trading on the New York
Stock Exchange should we fail to regain compliance with the minimum
share price continued listing standard during the cure period, or
fail to meet other continued listing criteria; and the other risk
factors described in our 2019 Annual Report on Form 10-K filed with
the Securities and Exchange Commission (“SEC”) on March 12, 2020
and our subsequent filings with the SEC. These documents are
available through our website at www.pacificdrilling.com or through
the SEC’s website at www.sec.gov.
PACIFIC DRILLING S.A. AND
SUBSIDIARIES
Condensed Consolidated Statements
of Operations
(in thousands, except per share
information) (unaudited)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Revenues
Contract drilling
$
38,910
$
89,433
$
76,415
$
128,343
$
142,331
Costs and expenses
Operating expenses
61,854
86,475
52,254
148,329
104,550
General and administrative expenses
10,857
9,643
10,010
20,500
21,256
Depreciation and amortization expense
26,811
26,931
59,330
53,742
118,229
Loss from unconsolidated subsidiaries
—
—
700
—
2,024
99,522
123,049
122,294
222,571
246,059
Operating loss
(60,612
)
(33,616
)
(45,879
)
(94,228
)
(103,728
)
Other income (expense)
Interest expense
(26,607
)
(25,127
)
(24,406
)
(51,734
)
(48,445
)
Reorganization items
(248
)
(114
)
(878
)
(362
)
(1,881
)
Interest income
520
807
1,665
1,327
3,637
Other income (expense)
1
(213
)
(220
)
(212
)
(311
)
Loss before income taxes
(86,946
)
(58,263
)
(69,718
)
(145,209
)
(150,728
)
Income tax expense
452
2,700
3,868
3,152
6,837
Net loss
$
(87,398
)
$
(60,963
)
$
(73,586
)
$
(148,361
)
$
(157,565
)
Loss per common share, basic
$
(1.16
)
$
(0.81
)
$
(0.98
)
$
(1.97
)
$
(2.10
)
Weighted average shares outstanding,
basic
75,199
75,184
75,001
75,191
75,016
Loss per common share, diluted
$
(1.16
)
$
(0.81
)
$
(0.98
)
$
(1.97
)
$
(2.10
)
Weighted average shares outstanding,
diluted
75,199
75,184
75,001
75,191
75,016
PACIFIC DRILLING S.A. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(in thousands) (unaudited)
June 30,
March 31,
December 31,
2020
2020
2019
Assets:
Cash and cash equivalents
$
246,311
$
273,957
$
278,620
Restricted cash
6,106
6,106
6,089
Accounts receivable, net
27,084
65,629
29,252
Materials and supplies
45,101
45,577
43,933
Deferred costs, current
8,441
10,979
16,961
Prepaid expenses and other current
assets
13,196
21,532
15,732
Total current assets
346,239
423,780
390,587
Property and equipment, net
1,790,927
1,816,969
1,842,549
Other assets
29,777
26,158
23,423
Total assets
$
2,166,943
$
2,266,907
$
2,256,559
Liabilities and shareholders’
equity:
Accounts payable
$
19,046
$
24,017
$
24,223
Accrued expenses
23,738
25,733
27,924
Accrued interest
15,703
31,406
15,703
Deferred revenue, current
4,129
5,428
7,567
Total current liabilities
62,616
86,584
75,417
Long-term debt
1,142,431
1,132,826
1,073,734
Other long-term liabilities
38,052
38,061
38,577
Total liabilities
1,243,099
1,257,471
1,187,728
Shareholders’ equity:
Common shares
752
752
751
Additional paid-in capital
1,656,054
1,654,248
1,652,681
Treasury shares, at cost
(652
)
(652
)
(652
)
Accumulated deficit
(732,310
)
(644,912
)
(583,949
)
Total shareholders’ equity
923,844
1,009,436
1,068,831
Total liabilities and shareholders’
equity
$
2,166,943
$
2,266,907
$
2,256,559
PACIFIC DRILLING S. A. AND
SUBSIDIARIES
Condensed Consolidated Statements
of Cash Flows
(in thousands) (unaudited)
Six Months Ended
June 30,
June 30,
2020
2019
Cash flow from operating
activities:
Net loss
$
(148,361
)
$
(157,565
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization expense
53,742
118,229
Amortization of deferred revenue
(8,943
)
(1,146
)
Amortization of deferred costs
15,422
586
Amortization of deferred financing
costs
269
—
Amortization of debt premium, net
(332
)
(221
)
Interest paid-in-kind
19,029
16,923
Deferred income taxes
82
4,760
Share-based compensation expense
3,654
3,064
Loss on unconsolidated subsidiaries
—
2,024
Changes in operating assets and
liabilities:
Accounts receivable
2,168
(24,854
)
Materials and supplies
(1,168
)
(2,012
)
Deferred costs
(12,713
)
(4,347
)
Prepaid expenses and other assets
3,460
(12,906
)
Accounts payable and accrued expenses
(5,041
)
3,155
Deferred revenue
5,505
2,444
Net cash used in operating activities
(73,227
)
(51,866
)
Cash flow from investing
activities:
Capital expenditures
(6,967
)
(21,454
)
Net cash used in investing activities
(6,967
)
(21,454
)
Cash flow from financing
activities:
Payments for shares issued under
share-based compensation plan
(280
)
—
Proceeds from long-term debt
50,000
—
Payments for financing costs
(1,818
)
(1,115
)
Purchases of treasury shares
—
(652
)
Net cash provided by (used in) financing
activities
47,902
(1,767
)
Net decrease in cash and cash
equivalents
(32,292
)
(75,087
)
Cash, cash equivalents and restricted
cash, beginning of period
284,709
389,075
Cash, cash equivalents and restricted
cash, end of period
$
252,417
$
313,988
EBITDA and Adjusted EBITDA
Reconciliation
EBITDA is defined as earnings before interest expense, taxes,
depreciation and amortization. Beginning with the fourth quarter of
2019, management has redefined EBITDA for the current and
comparative periods to exclude amortization of deferred revenue and
deferred costs, which are included in contract drilling revenues
and operating expenses respectively in the statements of
operations. Management believes such measure of EBITDA is
consistent with the conventional definition of EBITDA, allows for
greater transparency of the Company’s core operating performance,
and is in line with historical treatment by certain other major
offshore drilling contractors and supply vessel owners. Adjusted
EBITDA is defined as EBITDA before loss from unconsolidated
subsidiaries and reorganization items. EBITDA and Adjusted EBITDA
do 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 U.S.
generally accepted accounting principles (“GAAP”) and our
calculation of EBITDA and Adjusted EBITDA may not be comparable to
that reported by other companies. EBITDA and Adjusted EBITDA are
included herein because they are used by management to measure the
Company’s operations. Management believes that EBITDA and Adjusted
EBITDA present useful information to investors regarding the
Company’s operating performance.
PACIFIC DRILLING S.A. AND
SUBSIDIARIES
Supplementary Data—Reconciliation
of Net Loss to Non-GAAP EBITDA and Adjusted EBITDA
(in thousands) (unaudited)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Net loss
$
(87,398
)
$
(60,963
)
$
(73,586
)
$
(148,361
)
$
(157,565
)
Add:
Interest expense
26,607
25,127
24,406
51,734
48,445
Depreciation and amortization expense
26,811
26,931
59,330
53,742
118,229
Other amortization, net (a)
2,146
4,333
(423
)
6,479
(560
)
Income tax expense
452
2,700
3,868
3,152
6,837
EBITDA (b)
$
(31,382
)
$
(1,872
)
$
13,595
$
(33,254
)
$
15,386
Add:
Loss from unconsolidated subsidiaries
—
—
700
—
2,024
Reorganization items
248
114
878
362
1,881
Adjusted EBITDA (b)
$
(31,134
)
$
(1,758
)
$
15,173
$
(32,892
)
$
19,291
(a)
Other amortization, net includes
amortization of deferred costs less amortization of deferred
revenue.
(b)
EBITDA and Adjusted EBITDA include $2.6
million in advisory fees and $2.5 million in severance for both the
three and six months ended June 30, 2020; advisory fees are
included in general and administrative expenses, $0.3 million of
severance is included in general and administrative expenses and
the balance of severance is in operating expenses.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806006020/en/
Investor: James Harris Pacific Drilling S.A. +713 334 6662
Investor@pacificdrilling.com
Media: Amy Roddy Pacific Drilling S.A. +713 334 6662
Media@pacificdrilling.com
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