Pacific Drilling S.A. (NYSE: PACD) (“Pacific Drilling” or the
“Company”) today reported results for the first quarter of 2020.
Net loss for first-quarter 2020 was $61.0 million or $0.81 per
diluted share, compared to net loss of $308.1 million or $4.11 per
diluted share in fourth-quarter 2019.
Pacific Drilling CEO Bernie Wolford commented, “The first
quarter of this year started strong with improving market
fundamentals and solid demand growth for high-specification
drillships, reflected in increased utilization and rising dayrates.
Pacific Khamsin worked through the quarter in the U.S. Gulf of
Mexico on a contract that is expected to keep the rig busy
operating with Equinor and Total into the fourth quarter of this
year. Pacific Bora and Pacific Sharav both completed their projects
for Eni and Chevron respectively, just after the end of the
quarter. And, Pacific Santa Ana worked under contract for Petronas
in Mauritania until March 29 when the client provided us with a
notice of suspension due to force majeure. We have subsequently
agreed to a reduced standby rate, which we believe is likely to
continue through the end of this year.
Mr. Wolford continued, “Since mid-March, we have seen
significant cuts in our clients’ current year’s capital expenditure
budgets as a result of COVID-19 pandemic related oil demand
destruction and the resulting severe oversupply of oil. We expect a
significant reduction in exploration drilling in the near term as
well as deferral of major development programs until 2021 or later.
As we look ahead, we see significant uncertainty in the global
market for our services as our customers have cancelled or delayed
to 2021 work that had been scheduled or awarded to us for 2020.
These market conditions will negatively affect our revenue,
profitability and cash flows for 2020 and 2021. In light of these
unprecedented market conditions and in an abundance of caution to
protect our access to working capital, we drew the full
availability under our $50 million revolving credit facility on
March 20, 2020. We continue to work closely with our clients to
keep our employees safe and our rigs sanitary as we navigate
through these challenging times.”
First-Quarter 2020 Operational and
Financial Commentary
First-quarter 2020 contract drilling revenue was $89.4 million,
which included $6.4 million in reimbursable revenue. This compared
to fourth-quarter 2019 contract drilling revenue of $33.1 million,
which included $1.7 million in reimbursable revenue. The increase
in revenue resulted primarily from the Pacific Santa Ana returning
to work with Petronas in Mauritania, the Pacific Khamsin operating
for the full-quarter with Equinor in the U.S. Gulf of Mexico, and
the Pacific Bora starting operations with Eni in Oman.
Operating expenses for first-quarter 2020 were $86.5 million
compared to $63.3 million in fourth-quarter 2019. The change in
operating expenses was due to the large increase in the number of
days operating under contract. Additionally, operating expenses
included reimbursable expenses for first-quarter 2020 of $5.8
million compared to $1.4 million in the fourth quarter of 2019.
General and administrative expenses for the first quarter of
2020 were $9.6 million, as compared to $8.2 million for the fourth
quarter of 2019.
Adjusted EBITDA(a) for first-quarter 2020 was $(1.8) million,
compared to $(36.8) million in fourth-quarter 2019 as a result of
the increase in the number of drillships operating under
contract.
Capital expenditures for the first quarter of 2020 were $5.9
million compared to $4.0 million in the fourth quarter of 2019.
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.
2020 Guidance
Given the uncertainty caused by recent market conditions, the
Company is withdrawing its full year 2020 financial guidance that
was provided with its March 11, 2020 Fourth-Quarter and Full-Year
2019 Results Announcement. We expect Full-Year 2020 results to
reflect substantial reductions from our previous guidance as a
result of initiated cost reduction measures, including reducing
operating expenses and general and administrative expenses via
layoffs and non-labor spend cuts and decreasing capex.
Conference Call
Pacific Drilling will conduct a conference call at 10 a.m.
Central time on Friday, May 8, 2020 to discuss first-quarter 2020
results. To access the conference call, participants are invited to
register in advance by visiting bit.ly/RegisterQ12020Call. 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
866-595-5357 and providing access code 8638133#.
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 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; 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 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 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 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
March 31,
December 31,
March 31,
2020
2019
2019
Revenues
Contract drilling
$
89,433
$
33,131
$
65,916
Costs and expenses
Operating expenses
86,475
63,269
52,296
General and administrative expenses
9,643
8,182
11,246
Depreciation and amortization expense
26,931
27,165
58,899
Loss from unconsolidated subsidiaries
—
217,640
1,324
123,049
316,256
123,765
Operating loss
(33,616
)
(283,125
)
(57,849
)
Other income (expense)
Interest expense
(25,127
)
(24,794
)
(24,039
)
Reorganization items
(114
)
(70
)
(1,003
)
Interest income
807
1,145
1,972
Other expense
(213
)
(9
)
(91
)
Loss before income taxes
(58,263
)
(306,853
)
(81,010
)
Income tax expense
2,700
1,264
2,969
Net loss
$
(60,963
)
$
(308,117
)
$
(83,979
)
Loss per common share, basic
$
(0.81
)
$
(4.11
)
$
(1.12
)
Weighted average shares outstanding,
basic
75,184
75,007
75,031
Loss per common share, diluted
$
(0.81
)
$
(4.11
)
$
(1.12
)
Weighted average shares outstanding,
diluted
75,184
75,007
75,031
PACIFIC DRILLING S.A. AND
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(in thousands) (unaudited)
March 31,
December 31,
2020
2019
Assets:
Cash and cash equivalents
$
273,957
$
278,620
Restricted cash
6,106
6,089
Accounts receivable, net
65,629
29,252
Materials and supplies
45,577
43,933
Deferred costs, current
10,979
16,961
Prepaid expenses and other current
assets
21,532
15,732
Total current assets
423,780
390,587
Property and equipment, net
1,816,969
1,842,549
Other assets
26,158
23,423
Total assets
$
2,266,907
$
2,256,559
Liabilities and shareholders’
equity:
Accounts payable
$
24,017
$
24,223
Accrued expenses
25,733
27,924
Accrued interest
31,406
15,703
Deferred revenue, current
5,428
7,567
Total current liabilities
86,584
75,417
Long-term debt
1,132,826
1,073,734
Other long-term liabilities
38,061
38,577
Total liabilities
1,257,471
1,187,728
Shareholders’ equity:
Common shares
752
751
Additional paid-in capital
1,654,248
1,652,681
Treasury shares, at cost
(652
)
(652
)
Accumulated deficit
(644,912
)
(583,949
)
Total shareholders’ equity
1,009,436
1,068,831
Total liabilities and shareholders’
equity
$
2,266,907
$
2,256,559
PACIFIC DRILLING S. A. AND
SUBSIDIARIES
Condensed Consolidated Statements
of Cash Flows
(in thousands) (unaudited)
Three Months Ended
March 31,
March 31,
2020
2019
Cash flow from operating
activities:
Net loss
$
(60,963
)
$
(83,979
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization expense
26,931
58,899
Amortization of deferred revenue
(7,021
)
(570
)
Amortization of deferred costs
11,354
433
Amortization of deferred financing
costs
108
—
Amortization of debt premium, net
(145
)
(112
)
Interest paid-in-kind
9,237
8,208
Deferred income taxes
587
2,765
Share-based compensation expense
1,847
865
Loss on unconsolidated subsidiaries
—
1,324
Changes in operating assets and
liabilities:
Accounts receivable
(36,377
)
(6,346
)
Materials and supplies
(1,644
)
(169
)
Deferred costs
(7,259
)
(1,381
)
Prepaid expenses and other assets
(7,343
)
(14,165
)
Accounts payable and accrued expenses
19,044
16,130
Deferred revenue
4,882
2,013
Net cash used in operating activities
(46,762
)
(16,085
)
Cash flow from investing
activities:
Capital expenditures
(5,920
)
(17,613
)
Net cash used in investing activities
(5,920
)
(17,613
)
Cash flow from financing
activities:
Payments for shares issued under
share-based compensation plan
(279
)
—
Proceeds from long-term debt
50,000
—
Payments for financing costs
(1,685
)
(1,115
)
Purchases of treasury shares
—
(124
)
Net cash provided by (used in) financing
activities
48,036
(1,239
)
Net decrease in cash and cash
equivalents
(4,646
)
(34,937
)
Cash, cash equivalents and restricted
cash, beginning of period
284,709
389,075
Cash, cash equivalents and restricted
cash, end of period
$
280,063
$
354,138
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
March 31,
December 31,
March 31,
2020
2019
2019
Net loss
$
(60,963
)
$
(308,117
)
$
(83,979
)
Add:
Interest expense
25,127
24,794
24,039
Depreciation and amortization expense
26,931
27,165
58,899
Other amortization, net(a)
4,333
395
(137
)
Income tax expense
2,700
1,264
2,969
EBITDA
$
(1,872
)
$
(254,499
)
$
1,791
Add:
Loss from unconsolidated subsidiaries
—
217,640
1,324
Reorganization items
114
70
1,003
Adjusted EBITDA
$
(1,758
)
$
(36,789
)
$
4,118
(a) Other amortization, net includes
amortization of deferred costs less amortization of deferred
revenue.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200507005909/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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