HOUSTON, Feb. 26 /PRNewswire-FirstCall/ -- Grey Wolf, Inc. (AMEX:GW) ("Grey Wolf" or the "Company") reported net income of $52.5 million, or $0.24 per share on a diluted basis, for the three months ended December 31, 2006 compared with net income of $38.2 million, or $0.17 per share on a diluted basis, for the fourth quarter of 2005. Revenues for the fourth quarter of 2006 were $240.3 million compared with revenues for the fourth quarter of 2005 of $204.1 million.
For the year ended December 31, 2006, Grey Wolf reported record net income of $220.0 million, or $0.98 per share on a diluted basis, on revenues of $945.5 million. This compares with net income of $120.6 million, or $0.54 per share on a diluted basis, on revenues of $697.0 million for the year ended December 31, 2005. The 2006 results include a second quarter after-tax gain related to insurance proceeds of $2.7 million ($0.01 per diluted share) along with after-tax gains of $7.6 million ($0.03 per diluted share) from the sale of five rigs formerly held for refurbishment and other spare equipment.
"2006 was the second straight year in which the Company set record levels of revenue, net income, and EBITDA," commented Tom Richards, Chairman, President and Chief Executive Officer. "Year-over-year the Company's net income rose by 82% and revenues were up 36%. EBITDA for 2006 totaled $432.0 million, up 63% from 2005. Not only did we break the record for all of these financial metrics, but we also improved our year-over-year safety recordable incident rate by 31% at the same time that man hours worked increased by almost 10%." Mr. Richards continued, "Three of the six new 1,500 horsepower rigs we ordered in 2006 have been delivered and are working. One of the remaining three new rigs is scheduled for delivery later in the first quarter of 2007, one in the second quarter, and the last rig is expected by the end of the third quarter. All six of the new rigs, as well as the 17 refurbishments completed over the last two years are supported by long-term contracts under which the Company fully expects to recover the cost of the capital expended during the initial contract term. After deployment of these rigs, our fleet will total 121 rigs. Our continuing strategy is to add new rigs to our fleet only when supported by term contracts." As of February 26, 2007, the Company is marketing 118 rigs, with 83 of those working under daywork term contracts, 23 working under spot market daywork contracts, eight working under turnkey contracts and four rigs are idle. Grey Wolf averaged 110 rigs working in the fourth quarter of 2006. This compares with an average of 107 rigs working in the third quarter of 2006 and 108 rigs working during the fourth quarter of 2005.
The Company renewed 14 of 19 term contracts that were scheduled for renewal in the fourth quarter of 2006, and to date has renewed two of the fourteen first quarter 2007 renewals and one second quarter renewal. The Company has approximately 21,600 days, or an average of 59 rigs, contracted for all of 2007 and 6,800 days or an average of 19 rigs committed in 2008.
Mr. Richards concluded, "There is currently some excess capacity in the land drilling market and newly-built rigs are coming into the market. With this additional capacity, we have seen a softening in some spot market dayrates over the past two months. While there are differences depending on market and rig size, the average decline in dayrates is between 5% and 15%. Grey Wolf's extensive portfolio of term contracts and our premium quality equipment coupled with our skilled rig crews buffer our exposure to the recent erosion in spot market dayrates and the effects of extra capacity." Capital expenditures totaled $197.2 million in 2006, including $65.1 million during the fourth quarter. Based upon the remaining payments for the new rig purchases and 2007 rig activity, capital expenditures for 2007 are projected to be $130.0 million to $140.0 million.
The Company reported total earnings before interest expense, taxes, depreciation and amortization ("EBITDA") of $105.0 million in the fourth quarter of 2006, compared to $108.9 million for the previous quarter and $81.2 million for the fourth quarter of 2005. On a per-rig-day basis, EBITDA was $10,384 for the fourth quarter of 2006, $11,046 for the third quarter of 2006 and $8,212 for the fourth quarter of 2005. Turnkey EBITDA per rig day in the fourth quarter was $7,444 and daywork EBITDA per rig day totaled $10,626.
Although turnkey EBITDA per rig day for the fourth quarter of 2006 was lower compared to the previous quarter, our turnkey business added $61.2 million, or 14%, of total Company EBITDA for 2006 and outpaced daywork EBITDA per rig day by 51% for the year.
Under the previously announced plan that authorizes the repurchase of up to $100 million of Grey Wolf common stock, the Company repurchased 9.3 million shares during 2006 at a total cost of $65.1 million. In the first quarter of 2007 to date, the Company repurchased an additional 1.2 million shares for $8.0 million.
During the first quarter of 2007, the Company expects to average 108 to 110 rigs working with six to eight of these rigs performing turnkey services. In addition, average daywork revenue per day is expected to increase by $200 to $300 as the Company's new rigs enter the market and the effect of higher term contract dayrates from fourth quarter term contract renewals is realized. Depreciation expense of approximately $20.7 million, interest expense of approximately $3.5 million and an effective tax rate of approximately 37% are expected for the first quarter of 2007.
Grey Wolf has scheduled a conference call February 26, 2007 at 9:00 a.m. CT to discuss fourth quarter and year-end 2006 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) 416-4612 domestically or (415) 908-4755 internationally ten to fifteen minutes prior to the starting time. The reservation number is 21322446. A replay of the conference call will be available by telephone from 11:00 a.m. CT on February 26, 2007 until 11:00 a.m. CT on February 28, 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 21322446. 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; the benefits of term contracts; first quarter 2007 rig activity, dayrates, projected depreciation, projected tax rate and interest expense; expected new rig delivery schedule; projected capital expenditures in 2007 and projected returns on new build and refurbished 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, 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 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2006 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 total drilling rig fleet of 118, which will increase to 121 with the expected addition of three new rigs by the end of the third quarter of 2007.
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
(In thousands, except per share amounts)
(Unaudited) (Unaudited)
Revenues $240,330 $204,149 $945,527 $696,979
Costs and expenses:
Drilling operations 133,065 119,846 516,787 418,644
Depreciation and
amortization 19,963 16,469 74,010 61,279
General and
administrative 6,877 4,563 24,305 16,248
(Gain) loss on
the sale of assets (1,519) (110) (11,895) (115)
Gain on insurance
proceeds --- --- (4,159) ---
Total costs and
expenses 158,386 140,768 599,048 496,056
Operating income
(loss) 81,944 63,381 346,479 200,923
Other income
(expense):
Interest income 3,106 1,387 11,486 3,573
Interest expense (3,464) (3,034) (13,614) (11,364)
Other income (expense),
net (358) (1,647) (2,128) (7,791)
Net income before income
taxes 81,586 61,734 344,351 193,132
Income taxes expense:
Current 34,382 9,072 123,114 11,717
Deferred (5,321) 14,481 1,286 60,778
Total income tax
expense (benefit) 29,061 23,553 124,400 72,495
Net income applicable
to common shares $52,525 $38,181 $219,951 $120,637
Net income per
common share:(1)
Basic $0.28 $0.20 $1.16 $0.63
Diluted $0.24 $0.17 $0.98 $0.54
Weighted average
common shares
outstanding:
Basic 185,023 192,413 190,088 191,364
Diluted 228,657 236,327 233,818 235,412 Three Months Ended
December 31,
2006 2005
Marketed Rigs at
December 31 115 110
Average Rigs Working:
Ark-La-Tex 26 21
Gulf Coast 23 26
South Texas 28 29
Rocky Mountain 16 16
Mexico --- 1
Mid-Continent 17 15
Total Average Rigs
Working (2) 110 108 (1) Please see "Computation of Earnings Per Share" included in this
release. (2) For the week ending February 15, 2007, the Company averaged 114 rigs
working.
Operating data comparison for the three months ended December 31, 2006 and 2005.
Three Months
Three Months Ended Ended
December 31, 2006 December 31, 2005
Daywork Turnkey Daywork Turnkey
Operations Operations Total Operations Operations Total
(Dollars in thousands except
averages per rig day worked)
(Unaudited)
Rig days
worked 9,343 770 10,113 8,811 1,081 9,892
Contract
drilling
revenue $201,708 $38,622 $240,330 $152,137 $52,012 $204,149
Drilling
operating
expenses (100,297) (32,768) (133,065) (85,494) (34,353) (119,847)
General
and
administrative
expenses (6,383) (494) (6,877) (4,075) (488) (4,563)
Interest
income 2,870 236 3,106 1,236 151 1,387
Gain (loss)
on sale of
assets 1,383 136 1,519 103 8 111
EBITDA $99,281 $5,732 $105,013 $63,907 $17,330 $81,237 Average per
rig day
worked:
Contract
drilling
revenue $21,589 $50,158 $23,764 $17,267 $48,115 $20,638
EBITDA $10,626 $7,444 $10,384 $7,253 $16,031 $8,212 Operating data comparison for the year ended December 31, 2006 and 2005. Year Ended Year Ended
December 31, 2006 December 31, 2005
Daywork Turnkey Daywork Turnkey
Operations Operations Total Operations Operations Total
(Dollars in thousands except
averages per rig day worked)
(Unaudited) Rig days
worked 35,662 3,899 39,561 33,718 3,511 37,229
Contract
drilling
revenue $736,773 $208,754 $945,527 $538,250 $158,729 $696,979
Drilling
operating
expenses (368,637) (148,150) (516,787) (308,708) (109,936) (418,644)
General
and
administrative
expenses (22,025) (2,280) (24,305) (14,750) (1,498) (16,248)
Interest
income 10,365 1,121 11,486 3,236 337 3,573
Gain (loss)
on sale of
assets 10,633 1,262 11,895 111 4 115
Gain on
insurance
proceeds 3,675 484 4,159 --- --- ---
EBITDA $370,784 $61,191 $431,975 $218,139 $47,636 $265,775 Average per
rig day
worked:
Contract
drilling
revenue $20,660 $53,540 $23,901 $15,963 $45,209 $18,721
EBITDA $10,397 $15,694 $10,919 $6,470 $13,568 $7,139 Reconciliation of
Earnings before interest expense, taxes, depreciation
and amortization (EBITDA) to net income
applicable to common shares
(in thousands)
(Unaudited) Three Months Ended Year Ended
December September December December December
31, 30, 31, 31, 31,
2006 2006 2005 2006 2005
Earnings before
interest expense,
taxes,
depreciation,
and amortization $105,013 $108,940 $81,237 $431,975 $265,775
Depreciation and
amortization (19,963) (18,700) (16,469) (74,010) (61,279)
Interest expense (3,464) (3,514) (3,034) (13,614) (11,364)
Total income tax
expense (29,061) (31,464) (23,553) (124,400) (72,495)
Net income
applicable to
common shares $52,525 $55,262 $38,181 $219,951 $120,637
December 31, December 31,
2006 2005
(Unaudited)
(In thousands)
Condensed Balance Sheet Data: Cash and cash equivalents $229,773 $173,145
Restricted cash 817 780
Other current assets 221,256 171,670
Total current assets 451,846 345,595
Net property and equipment 608,136 499,965
Other assets 27,002 23,475
Total assets $1,086,984 $869,035
Current liabilities $147,082 $95,149
Contingent convertible senior notes 275,000 275,000
Other long-term liabilities 9,877 12,403
Deferred income taxes 121,231 117,251
Shareholders' equity 533,794 369,232
Total liabilities and equity $1,086,984 $869,035 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 Year Ended
December 31, December 31,
2006 2005 2006 2005
Numerator:
Net income $52,525 $38,181 $219,951 $120,637 Add interest
expense on
contingent convertible
senior notes, net of
related tax effects:(1) 2,088 1,780 8,117 6,596 Adjusted net income
- diluted $54,613 $39,961 $228,068 $127,233 Denominator:
Weighted average
number of shares
outstanding - basic 185,023 192,413 190,088 191,364 Effect of dilutive
securities: Options-treasury
stock method 703 1,399 887 1,552
Restricted stock 474 58 386 39
Contingent convertible
senior notes(1) 42,457 42,457 42,457 42,457 Weighted average
common shares outstanding - diluted 228,657 236,327 233,818 235,412
Earnings per share:
Basic $0.28 $0.20 $1.16 $0.63
Diluted $0.24 $0.17 $0.98 $0.54
(1) Please see our latest 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, or fax, +1-713-435-6170 Web site: http://www.gwdrilling.com/
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