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  • PIONEER DRILLING COMPANY2008 Annua l Repor t1250 N.E. Loop 410

    Suite 1000San Antonio, Texas 78209www.pioneerdrlg.com

    PIO

    NE

    ER

    DR

    ILLING

    CO

    MP

    AN

    Y 20

    08 A

    NN

    UA

    L RE

    PO

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    24148rrdD1R1.indd 1 4/1/09 4:29 PM

  • MONTANA

    UTAHKANSAS

    OKLAHOMA

    LOUISANA

    COLOMBIA

    TEXAS

    COLORADO

    NORTHDAKOTA

    Areas of Operations

    Drilling Services Division Offices:Corpus Christi, TexasHenderson, TexasParadise, TexasWoodward, Oklahoma

    Corporate Office San Antonio, Texas

    Vernal, UtahWilliston, North DakotaBogot, Colombia

    Well Servicing> 74 newly built well-service

    rigs in service> Average age 1.5 years

    Wireline> 61 wireline trucks> Average age 3 years

    Fishing and Rental Services> Fishing and rental services

    and equipment

    Year Ended Nine Months Ended(In thousands, except per share data) December 31, 2008(2) December 31, 2007(1) 2007 2006 2005

    Revenues $610,884 $313,884 $416,178 $284,148 $185,246

    Income (loss) before income taxes (56,688) 57,774 130,789 79,813 17,161

    Net earnings (loss) (62,745) 39,645 84,180 50,567 10,812

    Earnings (loss) per common share - diluted (1.26) 0.79 1.68 1.06 0.30

    Total assets 824,479 560,212 501,495 400,678 276,009

    Long-term debt and capital lease obligations, less current portion 262,115 13,445

    Shareholders equity 414,118 471,072 428,109 340,676 221,615

    Net cash provided by operating activities 186,391 115,455 131,530 97,084 33,665

    (1) Effective December 31, 2007, Pioneer Drilling Company changed its fiscal year end from March 31 to December 31, resulting in a nine month reporting period from April 1, 2007 to December 31, 2007. (2) Includes goodwill and intangible asset impairment charges of $171.493 ($136,607 net of tax).

    Selected Financial Data Years Ended March 31,

    Production Services Division Offices:

    DirectorsDean A. BurkhardtChairman of the Board Pioneer Drilling Company, Rancher, Investor and Consultant

    Wm. Stacy LockePresident and Chief Executive OfficerPioneer Drilling Company

    John Michael RauhRetired, Former Vice President and Corporate Controller Kerr-McGee Corporation

    C. John ThompsonChairman and Chief Executive OfficerVentana Capital Advisors, Inc.

    Scott D. UrbanPartner in Edgewater Energy Partners

    OfficersWm. Stacy LockePresident and Chief Executive Officer

    Lorne E. PhillipsExecutive Vice President and Chief Financial Officer

    F.C. Red West Executive Vice President and President of Drilling Services Division

    Joseph B. Eustace Executive Vice President and President of Production Services Division

    Carlos R. PeaVice President, General Counsel, Corporate Secretary, and Compliance Officer

    Corporate InformationCorporate HeadquartersPioneer Drilling Company1250 N.E. Loop 410, Suite 1000San Antonio, Texas 78209210.828.7689Fax 210.828.8228

    Stock ListingThe American Stock Exchange: PDC (NYSE Alternext US)

    AuditorsKPMG LLP300 Convent, Suite 1200 San Antonio, Texas 78205

    Shareholder ContactLorne E. PhillipsExecutive Vice President andChief Financial Officer210.828.7689Fax 210.828.8228lphillips@pioneerdrlg.com

    Investor RelationsKenneth S. DennardDennard Rupp Gray & Easterly, LLC713.529.6600Fax 713.529.9989

    Certain information in this Annual Report, and other statements that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. Forward-looking statements are generally accompanied by words such as estimate, project, predict, believe, expect, anticipate, plan, intend, seek, will, should, goal or other words and phrases of similar import that convey the uncertainty of future events or outcomes. We disclaim any obligation to update any of these forward-looking statements, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties include, among other matters, the risks set forth in Item 1ARisk Factors of our Form 10-K for the year ended December 31, 2008. These risks, contingencies and uncertainties could cause our actual results to differ materially from those expressed in a forward-looking statement contained in this Annual Report. Unpredictable or unknown factors we have not discussed in this Annual Report or elsewhere could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. We advise our shareholders to (1) be aware that important factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.

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  • 2008 was indeed a year of transformation for Pioneer. We

    completed our first ten months of operations with our new

    Production Services Division, achieved our goal of operating

    five rigs in Colombia, and obtained the highest contracted

    dayrates for land rigs in our history. Our evolution into a

    multi-service, geographically diversified and international

    oilfield services provider has begun.

    This growth and success is reflected in our financial results. After excluding

    the impact of non-cash impairment charges, Pioneer generated $611 million

    in revenues, $215 million in earnings before interest, taxes, depreciation and

    amortization (EBITDA) and $74 million in net earnings for calendar year 2008.

    Goodwill and intangible assets were recorded earlier in the year in connection

    with the acquisitions that comprise our Production Services Division. During

    the fourth quarter of 2008, we recognized $171 million in non-cash impairment

    charges to goodwill and intangible assets as a result of an overall downturn in

    our industry brought on by the rapid decline in commodity prices, the weakening

    economy and high levels of natural gas in storage.

    During the year, we added one newly-built, 1500 horsepower diesel electric

    rig to our U.S. land fleet, 12 new, high-horsepower workover rigs, eight

    wireline units and $2 million in additional fishing and rental equipment.

    These additions bring our current fleet counts to 71 land rigs, five of which

    are in Colombia, 74 workover rigs, 61 wireline units and approximately

    $15 million of fishing and rental equipment. Our 71st land rig will begin

    operating in April 2009 in the Bakken Shale in North Dakota under a three

    year contract. This rig is a state of the art 1500 horsepower AC electric rig.

    To Our Shareholders

    Wm. Stacy LockePresident and Chief Executive Officer

    2008 Annual Report 1

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  • 2 Pioneer Drilling Company

    As we transition into 2009, we have an entirely different set of market

    conditions at work when compared to the recent past. Challenged by

    declining oil and natural gas prices, credit market turmoil, a worldwide

    recession and suppressed equity valuations, our customers have reduced

    capital spending dramatically. As a result, the U.S. land rig count has declined

    over 900 rigs, or 45%, from October 2008 to March 2009, and continues

    to decline today. Along with declining utilizations, land rig dayrates have

    declined by roughly 35%. These same market forces are driving utilization

    and profitability down in our Production Services Division as well.

    In this challenging market, our posture has become cautious. We have taken

    measures to downsize our cost structure, such as reducing our workforce

    by roughly 40%, rolling back hourly wages, reducing salaried employee

    compensation, discontinuing the Company match to our 401(k) and

    curtailing other expenses. In addition, we have scaled back our projected

    capital expenditure budget for 2009 by 63% to $65 million, down from

    $176 million last year. We will continue to reduce costs and cash outlays as

    required by changing market conditions.

    We are very fortunate to have a seasoned and effective management team

    that will take the necessary steps and make the difficult decisions to ensure

    the Companys long term well-being. As with every down cycle, an up cycle

    will follow. Please be patient as we navigate through this difficult year and

    trust that your management team and Board of Directors are working hard

    on your behalf.

    Sincerely,

    Wm. Stacy LockePresident and Chief Executive Officer

    DrillingServices

    75%

    REVENUE

    2008 contributions by Service Line

    DrillingServices

    72%

    ProductionServices

    28%

    ProductionServices

    25%

    MARGIN

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  • UNITED STATESSECURITIES AND EXCHANGE COMMISSION

    Washington, D. C. 20549

    FORM 10-K(Mark one) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

    ACT OF 1934For the period ended December 31, 2008

    or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

    ACT OF 1934

    Commission File Number: 1-8182

    PIONEER

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