HOUSTON, Oct. 29 /PRNewswire-FirstCall/ -- Grey Wolf, Inc. ("Grey Wolf" or the "Company") (AMEX:GW) reported net income of $35.6 million, or $0.17 per share on a diluted basis, for the three months ended September 30, 2007 compared with net income of $55.3 million, or $0.25 per share on a diluted basis, for the third quarter of 2006. Revenues for the third quarter of 2007 were $224.0 million compared with revenues of $242.7 million for the same quarter a year ago.
For the nine months ended September 30, 2007, Grey Wolf reported net income of $135.9 million, or $0.63 per share on a diluted basis, on revenues of $693.5 million compared to net income of $167.4 million, or $0.74 per share on a diluted basis, on revenues of $705.2 million for the nine months ended September 30, 2006. The 2006 results include a second quarter after-tax gain related to insurance proceeds of $2.7 million ($0.01 per diluted share) and a first quarter after-tax gain of $5.9 million ($0.03 per diluted share) from the sale of five rigs formerly held for refurbishment.
Thomas Richards, Chairman, President and Chief Executive Officer commented, "Grey Wolf continues to generate strong operating results reflecting the Company's strategy of operating premium equipment, utilizing long-term contracts and performing turnkey services. While leading edge dayrates have declined from a year ago, they have been relatively stable over the past several months. However, the influx of newly built drilling rigs into the market is pressuring Grey Wolf's year-over-year average rig days worked as well as contract renewal rates. Other contractual areas, such as mobilization recoveries, are experiencing pricing pressure as well. Our portfolio of long-term contracts helps to mitigate these market fluctuations, and we continue to pursue a successful strategy of owning high-quality rigs and enhancing our fleet under long-term contracts." As previously announced, Grey Wolf entered into contracts in the third quarter with two exploration and production companies to deploy two new 1,500-horsepower, built-for-purpose AC drive rigs under three-year commitments in the Rocky Mountain market. These rigs are expected to be delivered in the second and third quarters of 2008 and are designed to drill multiple wells from the same location and allow for simultaneous production and drilling operations. The expected purchase price per rig is approximately $21.0 million. The Company also purchased two 1,500-horsepower diesel electric SCR rigs, that were built in 2006, from a privately owned exploration and production company and deployed a recently constructed 1,000-horsepower diesel electric SCR rig during the third quarter.
Mr. Richards continued, "Grey Wolf's ability to provide equipment that addresses the challenges of deep, directional or multi-well site drilling is critical to meeting our customers' needs in the most active domestic land drilling markets. The Company's fleet is well suited to these drilling opportunities given the substantial upgrades completed during the past three years." Mr. Richards concluded, "Our ultimate goal is to bring value to our shareholders. Improving our rig fleet in a financially prudent manner is significant to the long-term success of Grey Wolf and our shareholders." The Company is now marketing 121 rigs, with 61 of those working under daywork term contracts, 37 working under spot-market daywork contracts and eight working under turnkey contracts. Grey Wolf averaged 104 rigs working in both the second and third quarters of 2007. This compares to an average of 107 rigs working in the third quarter of 2006. Under daywork term contracts, the Company has approximately 5,340 rig days, or an average of 58 rigs, contracted for the fourth quarter of 2007, approximately 11,350 rig days or an average of 31 rigs committed in 2008, and approximately 6,070 rig days, or an average of 17 rigs committed in 2009. Current leading edge daywork bid rates range from $14,000 to $22,000 per day without fuel or top drives.
The Company's earnings before interest expense, taxes, depreciation and amortization ("EBITDA") totaled $83.7 million in the third quarter of 2007 compared to $91.7 million for the second quarter 2007 and $108.9 million for the third quarter 2006. On a per-rig-day basis, EBITDA was $8,703 for the third quarter of 2007, $9,680 for the second quarter of 2007 and $11,046 for the third quarter of 2006. Turnkey EBITDA per rig day in the third quarter of 2007 was $12,133 and daywork EBITDA per rig day totaled $8,379.
Capital expenditures totaled $67.3 million in the third quarter of 2007 and $190.1 million for the nine months ended September 30, 2007. Based upon anticipated rig activity, capital expenditures for 2007 are projected to be $200.0 million to $210.0 million.
As previously announced, the Board of Directors in the third quarter authorized a $50.0 million increase in the Company's common stock repurchase program bringing the total authorization to $150.0 million. Grey Wolf may from time to time make purchases of common stock in open market or in privately negotiated block-trade transactions. To date, the Company has repurchased 13.6 million shares at a total cost of $93.1 million under the program leaving $56.9 million available for future purchases. The number of shares to be purchased and the timing of purchases will be based on a number of factors: the price of the common stock, general market conditions, available cash and alternate investment opportunities. The stock repurchase program is subject to termination prior to completion.
During the fourth quarter of 2007, the Company expects to average 97 to 100 rigs working with 7 to 9 of these rigs performing turnkey services. Average daywork EBITDA per day is expected to decrease by $600 to $800 in response to fewer rigs working and pricing pressure on contract renewals and mobilization recoveries. Depreciation expense of approximately $26.7 million, interest expense of approximately $3.4 million and an effective tax rate of approximately 37% are expected for the fourth quarter of 2007.
Grey Wolf has scheduled a conference call October 29, 2007 at 9:00 a.m. CT to discuss third quarter 2007 results. The call will be web cast live on the Internet through the Investor Relations page on the Company's website at: http://www.gwdrilling.com/ To participate by telephone, call (800) 952-4645 domestically or (212) 231-2902 internationally ten to fifteen minutes prior to the starting time. The reservation number is 21349527. A replay of the conference call will be available by telephone from 11:00 a.m. CT on October 29, 2007 until 11:00 a.m. CT on October 31, 2007. The telephone number for the replay of the call is (800) 633-8284 domestically or (402) 977-9140 internationally and the access code is 21349527. The call will be available for replay through the Grey Wolf website for approximately two weeks after the conclusion of the call.
This press release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The specific forward-looking statements cover our expectations and projections regarding: demand for the Company's services, deployment of rigs, excessive rig supply in the market, the benefits of term contracts, fourth quarter 2007 rig activity, average daywork EBITDA per day, dayrates, projected depreciation, projected tax rate and interest expense, expected new rig cost and delivery schedule, projected capital expenditures in 2007, and projected returns on new-build rigs. These forward-looking statements are subject to a number of important factors, many of which are beyond our control, that could cause actual results to differ materially, including oil and natural gas prices and trends in those prices, the pricing and other competitive policies of our competitors, uninsured or under-insured casualty losses, cost of insurance coverage, increasing rig supply, changes in interest rates, unexpected costs under turnkey drilling contracts, weather conditions, and the overall level of drilling activity in our market areas. Please refer to our 2006 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2007 for additional information concerning risk factors that could cause actual results to differ materially from these forward-looking statements.
Grey Wolf, Inc., headquartered in Houston, Texas, is a leading provider of turnkey and contract oil and gas land drilling services in the best natural gas producing regions in the United States with a current drilling rig fleet of 121, which will increase to 123 with the expected addition of two new rigs in 2008.
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
(In thousands, except per share amounts)
(Unaudited)
Revenues $223,999 $242,728 $693,532 $705,197
Costs and expenses:
Drilling operations 136,947 131,577 390,207 383,722
Depreciation and
amortization 24,355 18,700 68,166 54,047
General and administrative 6,757 6,249 21,315 17,428
Gain on the sale of assets (42) (839) (171) (10,376)
Gain on insurance proceeds - - - (4,159)
Total costs and expenses 168,017 155,687 479,517 440,662
Operating income (loss) 55,982 87,041 214,015 264,535
Other income (expense):
Interest income 3,334 3,199 10,086 8,380
Interest expense (3,521) (3,514) (10,451) (10,150)
Other income (expense), net (187) (315) (365) (1,770)
Net income (loss) before income
taxes 55,795 86,726 213,650 262,765
Income taxes expense (benefit):
Current 15,205 31,434 59,492 88,732
Deferred 5,002 30 18,284 6,607
Total income tax expense
(benefit) 20,207 31,464 77,776 95,339
Net income applicable to common
shares $35,588 $55,262 $135,874 $167,426
Net income per common share: (1)
Basic $0.19 $0.29 $0.74 $0.87
Diluted $0.17 $0.25 $0.63 $0.74
Weighted average common shares
outstanding:
Basic 182,599 190,391 182,875 191,795
Diluted 226,292 233,945 226,533 235,557 Three Months Ended
September 30,
2007 2006
Marketed Rigs at September 30 121 112
Average Rigs Working:
Ark-La-Tex 25 24
Gulf Coast 22 24
South Texas 28 26
Rocky Mountain 14 16
Mexico 1 -
Mid Continent 14 17
Total Average Rigs Working (2) 104 107 (1) Please see "Computation of Earnings Per Share" included in this
release. (2) For the week ending October 18, 2007, the Company averaged 105 rigs
working.
Operating data comparison for the three months ended September 30, 2007 and 2006.
Three Months Ended Three Months Ended
September 30, 2007 September 30, 2006
Daywork Turnkey Total Daywork Turnkey Total
Operations Operations Operations Operations
(1) (1)
(Dollars in thousands except averages per rig day worked)
(Unaudited) Rig days
worked 8,784 830 9,614 8,933 929 9,862 Contract
drilling
revenues $178,411 $45,588 $223,999 $192,445 $50,283 $242,728
Drilling
operating
expenses (101,634) (35,313) (136,947) (93,924) (37,653) (131,577)
General and
administrative
expenses (6,256) (501) (6,757) (5,688) (561) (6,249)
Interest
income 3,043 291 3,334 2,899 300 3,199
Gain on sale
of assets 37 5 42 763 76 839
Gain on
insurance
proceeds - - - - - -
EBITDA $73,601 $10,070 $83,671 $96,495 $12,445 $108,940 Average per
rig day
worked:
Contract
drilling
revenue $20,311 $54,925 $23,299 $21,543 $54,126 $24,612
EBITDA 8,379 12,133 8,703 10,802 13,396 11,046 (1) Turnkey operations include the results from turnkey and footage
contracts.
Operating data comparison for the nine months ended September 30, 2007 and 2006.
Nine Months Ended Nine Months Ended
September 30, 2007 September 30, 2006
Daywork Turnkey Total Daywork Turnkey Total
Operations Operations Operations Operations
(1) (1)
(Dollars in thousands except averages per rig day worked)
(Unaudited) Rig days
worked 26,802 2,210 29,012 26,319 3,129 29,448
Current
drilling
revenues $572,000 $121,532 $693,532 $535,065 $170,132 $705,197
Drilling
operating
expenses (302,259) (87,948) (390,207) (268,340) (115,382) (383,722)
General and
administrative
expenses (19,873) (1,442) (21,315) (15,642) (1,786) (17,428)
Interest
income 9,307 779 10,086 7,495 885 8,380
Gain on sale
of assets 147 24 171 9,250 1,126 10,376
Gain on
insurance
proceeds - - - 3,675 484 4,159
EBITDA $259,322 $32,945 292,267 $271,503 $55,459 $326,962 Average per
rig day
worked:
Contract
drilling
revenue $21,342 $54,992 $23,905 $20,330 $54,373 $23,947
EBITDA 9,675 14,907 10,074 10,316 17,724 11,103
(1) Turnkey operations include the results from turnkey and footage
contracts.
Reconciliation of
Earnings before interest expense, taxes, depreciation
and amortization (EBITDA) to net income
(loss) applicable to common shares
(In thousands)
(Unaudited) Three Months Ended Nine Months Ended
September June September September September
30, 30, 30, 30, 30,
2007 2007 2006 2007 2006 Earnings before
interest $83,671 $91,723 $108,940 $292,267 $326,962
expense, taxes,
depreciation,
and amortization
Depreciation
and
amortization (24,355) (22,397) (18,700) (68,166) (54,047)
Interest
expense (3,521) (3,438) (3,514) (10,451) (10,150)
Total income
tax (expense)
/benefit (20,207) (24,180) (31,464) (77,776) (95,339)
Net income (loss)
applicable
to common shares $35,588 $41,708 $55,262 $135,874 $167,426 September 30, December 31,
2007 2006
(Unaudited)
(In thousands)
Condensed Balance Sheet Data: Cash and cash equivalents $255,149 $229,773
Restricted cash 847 817
Other current assets 202,666 221,256
Total current assets 458,662 451,846
Net property and equipment 738,518 608,136
Other assets 21,871 27,002
Total assets $1,219,051 $1,086,984
Current liabilities $122,482 $147,082
Contingent convertible senior notes 275,000 275,000
Other long term liabilities 14,599 9,877
Deferred income taxes 149,450 121,231
Shareholders' equity 657,520 533,794
Total liabilities and equity $1,219,051 $1,086,984 Computation of Earnings Per Share
(In thousands, except per share amounts)
(Unaudited) A reconciliation of the numerators and denominators of the basic and
diluted earnings per share computation is as follows: Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Numerator:
Net income $35,588 $55,262 $135,874 $167,426 Add interest expense on
contingent convertible
senior notes, net of related
tax effects (1) 2,094 2,114 6,227 6,051
Adjusted net income - diluted $37,682 $57,376 $142,101 $173,477 Denominator:
Weighted average number of
shares outstanding - basic 182,599 190,391 182,875 191,795 Effect of dilutive securities:
Options - treasury
stock method 548 746 660 948
Restricted stock 688 351 541 357
Contingent convertible senior
notes (1) 42,457 42,457 42,457 42,457
Weighted average common shares
outstanding - diluted 226,292 233,945 226,533 235,557 Earnings Per Share:
Basic $0.19 $0.29 $0.74 $0.87
Diluted $0.17 $0.25 $0.63 $0.74 (1) Please see our latest quarterly report on Form 10-Q for a description
of our contingent convertible notes. DATASOURCE: Grey Wolf, Inc.
CONTACT: David W. Wehlmann, Executive Vice President & Chief Financial Officer of Grey Wolf, Inc., +1-713-435-6100, fax, +1-713-435-6170 Web site: http://www.gwdrilling.com/
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