- Revenues for second-quarter of $67.1
million with a revenue efficiency(a) of 95.5%
- Net loss of $138.1 million, resulting
in $6.48 loss per diluted share
- Operating and G&A costs of $85.1
million, a reduction of 5.6% from a year ago
- 2017 Senior Secured Notes consent
solicitation has expired without receiving sufficient consents to
approve the maturity extension
Pacific Drilling S.A. (NYSE: PACD) today announced a net loss
for second-quarter 2017 of $138.1 million or $6.48 per diluted
share, compared to a net loss of $99.8 million or $4.69 per diluted
share for first-quarter 2017, and net income of $8.2 million or
$0.39 per diluted share for second-quarter 2016.
CEO Paul Reese said, “Despite a very challenging market which
has significantly impacted our revenues, we achieved solid
operational performance with a second-quarter revenue efficiency of
95.5% and continued strong cost control. Lately, we have received
an increase in market inquiries for projects in several deepwater
regions of the world starting sometime in 2018, which is
promising.”
Mr. Reese continued, “On behalf of the entire Company, I would
like to personally thank Chris Beckett, my predecessor as CEO,
under whose leadership Pacific Drilling has grown into a highly
respected and established offshore drilling contractor.”
Second-Quarter 2017 Operational and
Financial Commentary
Contract drilling revenue for second-quarter 2017 was $67.1
million, which included $5.1 million of deferred revenue
amortization, compared to first-quarter 2017 contract drilling
revenue of $105.5 million, which included $31.1 million of deferred
revenue amortization. The decrease in revenues resulted primarily
from the Pacific Santa Ana completing its contract in January 2017
compared to being offhire throughout the second-quarter 2017,
partially offset by the Pacific Scirocco starting its contract with
Hyperdynamics in second-quarter 2017 compared to being offhire
throughout the first-quarter 2017. During second-quarter 2017, our
operating fleet achieved average revenue efficiency of 95.5%.
Operating expenses for second-quarter 2017 were $65.0 million as
compared to $60.4 million for first-quarter 2017. Operating
expenses for second-quarter 2017 included $2.6 million in
amortization of deferred costs, $1.1 million in reimbursable
expenses, and $5.9 million in shore-based and other support
costs.
General and administrative expenses for second-quarter 2017 were
$20.1 million, compared to $22.5 million for first-quarter 2017.
Excluding certain legal and financial advisory fees of $6.4 million
in second-quarter 2017 and $6.1 million in first-quarter 2017, our
corporate overhead expenses(b) for second-quarter 2017 were $13.7
million, compared to $16.4 million for first-quarter 2017.
EBITDA(c) for second-quarter 2017 was $(17.6) million, compared
to EBITDA of $21.9 million in the first-quarter 2017.
For second-quarter 2017, cash flow from operations was $(73.5)
million. Cash balances, including $8.5 million in restricted cash,
totaled $415.6 million as of June 30, 2017, and total outstanding
debt was $3.0 billion.
On July 5, 2017, we announced the launch of a private consent
solicitation pursuant to which we solicited the consent of the
holders of the 2017 Senior Secured Notes to an extension of the
maturity date of the notes to June 1, 2018 in order to give us more
time to negotiate a refinancing transaction or undertake a holistic
restructuring with all of our creditors. The solicitation expired
in accordance with its terms on August 2, 2017 without receiving
sufficient consents to approve the maturity extension.
In light of the results of the solicitation and to ensure the
Company has sufficient liquidity in light of current market
conditions and its debt obligations, the Company is considering
various means to increase its available liquidity, including
potentially seeking to raise additional debt financing. The Company
is also reviewing various ways to further reduce costs.
If the Company is unable to complete a restructuring, or
refinance or extend the maturity of the 2017 Senior Secured Notes
prior to their maturity in December 2017, the Company may be unable
to repay the Notes at maturity, which would trigger cross-default
provisions in the Company’s other debt instruments. In addition, as
previously disclosed, the Company expects that it will be in
violation of the maximum leverage ratio covenant in its 2013
Revolving Credit Facility and its Senior Secured Credit Facility
for the fiscal quarter ending on September 30, 2017. If the Company
is unable to obtain waivers of such covenants or amendments to the
debt agreements, such covenant default would entitle the lenders
under such facilities to declare all outstanding amounts under such
debt agreements to be immediately due and payable. Such
acceleration would also trigger the cross-default provisions in the
Company's other debt instruments. The Company is evaluating various
alternatives to address its liquidity and capital structure, which
may include a private restructuring or a negotiated restructuring
of its debt under the protection of Chapter 11 of the U.S.
Bankruptcy Code.
CFO John Boots commented, “We continue to engage in discussions
with our shareholders, the bank lenders and the ad hoc group of
holders of our public debt on the terms of a restructuring,
although there is currently no consensus as to the form or
structure of any restructuring.”
The Company will not be holding an earnings conference call this
quarter.
Footnotes
(a)
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.
(b) Corporate overhead expenses is a non-GAAP financial
measure. For a definition of corporate overhead expenses and a
reconciliation to general and administrative expenses, please refer
to the schedule included in this release. (c) EBITDA is a
non-GAAP financial measure. For a definition of EBITDA and a
reconciliation to net income, please refer to the schedules
included in this release.
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 seven 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 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 the use of
words such as “believe,” “estimate,” “expect,” “forecast,” “ability
to,” “plan,” “potential,” “projected,” “target,” “would,” or other
similar words, which are generally not historical in nature.
Forward-looking statements express current expectations or
forecasts of possible future results or events, including future
financial and operational performance; revenue efficiency levels;
market outlook; forecasts of trends; future client contract
opportunities; contract dayrates; business strategies and plans and
objectives of management; estimated duration of client contracts;
backlog; ability to repay indebtedness; expectations regarding
potential future covenant defaults on long-term indebtedness;
expected capital expenditures and projected costs and savings.
Although the Company believes that the assumptions and
expectations reflected in their 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, many of which are beyond the Company’s
control.
Important factors that could cause actual results to differ
materially from expectations include: the global oil and gas market
and its impact on demand for services; the offshore drilling
market, including reduced capital expenditures by 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 the Company’s fleet; costs related to
stacking of rigs; the Company’s ability to enter into and negotiate
favorable terms for new drilling contracts or extensions; possible
cancellation, renegotiation, termination or suspension of drilling
contracts as a result of market changes or other reasons; the
Company’s substantial level of indebtedness; the Company’s ability
to obtain waivers or amendments to its maximum leverage ratio
covenant at the end of the third quarter of 2017 if necessary, or
with respect to other potential future debt covenant defaults; the
Company’s ability to continue as a going concern and any potential
bankruptcy proceeding; the Company’s ability to repay debt and
adequacy of and access to sources of liquidity; and the other risk
factors described in the Company’s filings with the SEC, including
the Company’s 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.
The Company does not undertake any 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
Operations
(in thousands, except per share
information) (unaudited)
Three Months Ended Six Months Ended June 30,
June 30, March 31, June 30, 2017
2017 2016 2017 2016 Revenues
Contract drilling $ 67,073 $ 105,509 $ 203,710 $ 172,582 $ 409,088
Costs and expenses Operating expenses (64,988 ) (60,448 )
(75,988 ) (125,436 ) (154,961 ) General and administrative expenses
(20,149 ) (22,461 ) (14,195 ) (42,610 ) (29,321 ) Depreciation
expense (69,863 ) (69,631 ) (68,213 )
(139,494 ) (136,289 ) (155,000 ) (152,540 )
(158,396 ) (307,540 ) (320,571 )
Operating
income (loss) (87,927 ) (47,031 ) 45,314 (134,958 ) 88,517
Other income (expense) Interest expense (50,388 ) (50,011 )
(46,116 ) (100,399 ) (91,609 ) Gain on debt extinguishment — —
14,231 — 14,231 Other income (expense) 496
(729 ) (3,816 ) (233 ) (2,184 )
Income
(loss) before income taxes (137,819 ) (97,771 ) 9,613 (235,590
) 8,955 Income tax expense (247 ) (2,076 )
(1,379 ) (2,323 ) (3,232 )
Net income (loss) $
(138,066 ) $ (99,847 ) $ 8,234 $ (237,913 ) $ 5,723
Earnings (loss) per common share, basic $ (6.48 ) $ (4.69 )
$ 0.39 $ (11.17 ) $ 0.27
Weighted average number
of common shares, basic 21,317 21,273
21,178 21,295 21,150
Earnings (loss) per common share, diluted $ (6.48 ) $
(4.69 ) $ 0.39 $ (11.17 ) $ 0.27
Weighted average
number of common shares, diluted 21,317
21,273 21,178 21,295
21,150
PACIFIC DRILLING S.A. AND
SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except par value)
(unaudited)
June 30, March 31, December 31,
2017 2017 2016 Assets: Cash and cash
equivalents $ 407,059 $ 498,890 $ 585,980 Restricted cash 8,500
8,505 40,188 Accounts receivable 36,138 40,411 94,622 Materials and
supplies 92,029 94,482 95,679 Deferred costs, current 10,854 10,183
10,454 Prepaid expenses and other current assets 15,155
8,505 13,892 Total current
assets 569,735 660,976 840,815
Property and equipment, net 4,783,814 4,848,409 4,909,873
Long-term receivable 202,575 202,575 202,575 Other assets
51,017 46,942 44,944 Total
assets $ 5,607,141 $ 5,758,902 $ 5,998,207
Liabilities and shareholders’ equity: Accounts
payable $ 18,573 $ 20,671 $ 17,870 Accrued expenses 46,010 37,020
45,881 Long-term debt, current 1,692,024 467,802 496,790 Accrued
interest 12,827 33,059 14,164 Deferred revenue, current
25,964 24,327 45,755 Total
current liabilities 1,795,398 582,879
620,460 Long-term debt, net of current maturities
1,322,232 2,547,888 2,648,659 Deferred revenue 22,899 27,430 32,233
Other long-term liabilities 32,801 30,473
30,655 Total long-term liabilities
1,377,932 2,605,791 2,711,547
Shareholders’ equity:
Common shares, $0.01 par value per share,
5,000,000 shares authorized, 22,551 shares
issued and 21,325, 21,284 and 21,184
shares outstanding as of June 30, 2017,
March 31, 2017 and December 31, 2016,
respectively
213 213 212 Additional paid-in capital 2,363,659 2,362,458
2,360,398 Accumulated other comprehensive loss (16,931 ) (17,375 )
(19,193 ) Retained earnings 86,870 224,936
324,783 Total shareholders’ equity
2,433,811 2,570,232 2,666,200
Total liabilities and shareholders’ equity $ 5,607,141 $
5,758,902 $ 5,998,207
PACIFIC DRILLING S. A. AND
SUBSIDIARIES
Condensed Consolidated Statements of Cash
Flows
(in thousands) (unaudited)
Three Months Ended Six Months Ended June
30, March 31, June 30, June 30, June
30, 2017 2017 2016 2017 2016
Cash flow from operating activities: Net income
(loss) $ (138,066 ) $ (99,847 ) $ 8,234 $ (237,913 ) $ 5,723
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation expense 69,863 69,631 68,213 139,494 136,289
Amortization of deferred revenue (5,118 ) (31,079 ) (12,658 )
(36,197 ) (25,316 ) Amortization of deferred costs 2,556 3,306
3,253 5,862 6,088 Amortization of deferred financing costs 8,310
8,091 3,641 16,401 7,266 Amortization of debt discount 314 305 322
619 645 Deferred income taxes (959 ) 908 741 (51 ) 2,456
Share-based compensation expense 1,791 2,215 1,511 4,006 3,675 Gain
on debt extinguishment — — (14,231 ) — (14,231 ) Changes in
operating assets and liabilities: Accounts receivable 4,273 54,211
(723 ) 58,484 29,868 Materials and supplies 513 1,197 988 1,710
2,998 Prepaid expenses and other assets (8,531 ) (1,495 ) (3,848 )
(10,026 ) (10,903 ) Accounts payable and accrued expenses (10,687 )
16,421 (27,456 ) 5,734 (29,868 ) Deferred revenue 2,224
4,848 — 7,072
— Net cash provided by (used in) operating activities
(73,517 ) 28,712 27,987
(44,805 ) 114,690
Cash flow from investing
activities: Capital expenditures (3,297 ) (10,127 ) (13,089 )
(13,424 ) (41,677 ) Purchase of available-for-sale securities
(4,000 ) — — (4,000 )
— Net cash used in investing activities (7,297
) (10,127 ) (13,089 ) (17,424 ) (41,677
)
Cash flow from financing activities: Payments for shares
issued under share-based compensation plan (37 ) (154 ) (87 ) (191
) (87 ) Proceeds from long-term debt — — — — 235,000 Payments on
long-term debt (10,058 ) (134,540 ) (51,000 ) (144,598 ) (52,875 )
Payments for financing costs (927 ) (2,664 ) —
(3,591 ) — Net cash provided by (used
in) financing activities (11,022 ) (137,358 )
(51,087 ) (148,380 ) 182,038 Net increase
(decrease) in cash and cash equivalents (91,836 ) (118,773 )
(36,189 ) (210,609 ) 255,051 Cash, cash equivalents and restricted
cash, beginning of period 507,395 626,168
407,273 626,168 116,033
Cash, cash equivalents and restricted cash, end of period $
415,559 $ 507,395 $ 371,084 $ 415,559 $
371,084
EBITDA and Adjusted EBITDA
Reconciliation
EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. Adjusted EBITDA is defined as
earnings before interest, taxes, depreciation and amortization, and
gain from debt extinguishment. 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
generally accepted accounting principles in the United States of
America (“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
Income (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, 2017 2017 2016 2017 2016
Net income (loss) $ (138,066 ) $ (99,847 ) $ 8,234 $
(237,913 ) $ 5,723
Add: Interest expense 50,388 50,011
46,116 100,399 91,609 Depreciation expense 69,863 69,631 68,213
139,494 136,289 Income tax expense 247 2,076
1,379 2,323 3,232
EBITDA $ (17,568 ) $ 21,871 $ 123,942 $ 4,303 $ 236,853
Subtract: Gain on debt extinguishment —
— (14,231 ) — (14,231 )
Adjusted EBITDA $ (17,568 ) $ 21,871 $ 109,711
$ 4,303 $ 222,622
Corporate Overhead Expenses
Reconciliation
Corporate overhead expenses is a non-GAAP financial measure
defined as general and administrative expenses less certain unusual
legal expenses related to our arbitration proceeding and patent
litigation, as well as legal and financial advisory expenses
related to our on-going debt restructuring efforts. We included
corporate overhead herein because it is used by management to
measure the Company's ongoing corporate overhead. Management
believes that ongoing corporate overhead expenses present useful
information to investors regarding the financial impact of
Company's cost savings measures and optimization of overhead
support structure during the periods presented below. Non-GAAP
financial measures should be considered as a supplement to, and not
as a substitute for, or superior to, financial measures prepared in
accordance with GAAP.
PACIFIC DRILLING S.A. AND
SUBSIDIARIES
Supplementary Data—Reconciliation of
General and Administrative Expenses to Non-GAAP Corporate Overhead
Expenses
(in thousands) (unaudited)
Three Months Ended Six Months Ended June
30, March 31, June 30, June 30, June
30, 2017 2017 2016 2017 2016
General and administrative expenses $ 20,149 $ 22,461 $
14,195 $ 42,610 $ 29,321
Subtract: Legal and advisory
expenses (6,400 ) (6,067 ) (2,861 )
(12,468 ) (5,650 )
Corporate overhead expenses $
13,749 $ 16,394 $ 11,334 $ 30,142 $
23,671
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version on businesswire.com: http://www.businesswire.com/news/home/20170803005645/en/
Pacific Drilling S.A.Johannes (John) P. Boots, +352 26 84 57
81Investor@pacificdrilling.com
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