Pacific Drilling Announces First-Quarter 2019 Results

  • Pacific Khamsin contracted by Equinor for work in the
    Gulf of Mexico
  • Delivered revenue efficiency of 98.1% for the first quarter

LUXEMBOURG–(BUSINESS WIRE)–Pacific Drilling S.A. (NYSE: PACD) (“Pacific Drilling” or the “Company”)
today reported results for the first quarter of 2019. Net loss for the
first-quarter 2019 was $84.0 million or $1.12 per diluted share. EBITDA(a)
for the first-quarter 2019 was $1.9 million.

“Our strong operational performance, reflected by 98.1% revenue
efficiency for the quarter, and focus on spend management, delivered
improved results and positive EBITDA for the quarter. We continue to
make changes in our supply chain and maintenance processes that
meaningfully reduce our operating costs while delivering safe, reliable
and efficient operations,” said CEO Bernie Wolford.

“While the market remains challenging, we are encouraged by the upturn
in utilization within the sector and continued improvement in demand as
indicated by tender activity and direct discussions with clients. We are
ideally positioned to benefit from this increasing demand for our
available 6th and 7th generation drillships.”

“The contract with Equinor for the Pacific Khamsin is a clear
acknowledgement of our record of delivering exceptional performance.
Having capable and experienced crews maintaining our smart-stacked rigs
supported by a strong technical team committed to performance will allow
us to deliver the 7th generation Pacific Khamsin drillship in a
ready to work condition with economy and efficiency. Additionally, our
integrated service experience will play a key role in providing Equinor
with a package of services in support of their success.”

First-Quarter 2019 Operational and Financial
Commentary

First-quarter 2019 contract drilling revenue was $65.9 million, which
included $3.4 million in reimbursable revenue and $0.6 million of
deferred revenue amortization. This compared to fourth-quarter 2018
contract drilling revenue of $59.6 million, which included $1.4 million
in reimbursable revenue and $2.9 million of deferred revenue
amortization. The increase in revenue resulted primarily from the Pacific
Bora
operating for the full quarter under the contract with Nigerian
Agip Exploration Limited, a subsidiary of Eni, compared to only a
portion of the period in fourth-quarter 2018.

Operating expenses for the first quarter of 2019 were $52.3 million
compared to $44.8 million in the fourth quarter of 2018. The increase in
operating expenses was primarily due to costs of the Pacific Santa Ana
ramping up to commence its contract with Total E&P Senegal in Senegal.
Additionally, operating expenses included reimbursable revenue expenses
for first-quarter 2019 of $2.4 million compared to $1.1 million in
fourth-quarter 2018.

General and administrative expenses for the first quarter of 2019 were
$11.2 million, as compared to $13.8 million for the fourth quarter of
2018. The decrease in general and administrative expenses was primarily
due to the impact of a heightened emphasis on cost control and process
optimization.

Adjusted EBITDA(a) for first-quarter 2019 was $4.3 million,
compared to $3.3 million in fourth-quarter 2018.

Capital expenditures for the first quarter of 2019 were $17.6 million
compared to $6.2 million in the fourth quarter of 2018. The increase in
capital expenditures was primarily due to payments made to date to
purchase a managed pressure drilling device and controls.

Footnotes

   

(a)

 

EBITDA and Adjusted EBITDA are non-GAAP financial measures. For a
definition of EBITDA and Adjusted EBITDA and a reconciliation to
net income, 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.

2019 Guidance

A schedule of Pacific Drilling’s 2019 guidance as of May 13, 2019 is
available in the “Quarterly and Annual Results” subsection of the
“Investor Relations” section of our website, www.pacificdrilling.com.

Conference Call

Pacific Drilling will conduct a conference call at 10 a.m. Central time
on Tuesday, May 14, 2019 to discuss first-quarter 2019 results. To
access the conference call, participants should contact the Conference
Call Operator at +1 888-221-3881 within North America or +1 720-452-9217
outside of North America approximately 10 minutes prior to the scheduled
start time and provide confirmation code #4796567. A replay of the call
will be available on the company’s website or by dialing +1 888-203-1112
within North America or +1 719-457-0820 outside of North America and
providing confirmation code #4796567.

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, deepwater drilling contractor. 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 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 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 future
financial and operational performance and cash balances; 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; and the potential impact of our completed Chapter 11
proceedings on our future operations and ability to finance our business.

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: the global oil and gas market and its
impact on demand for our services; the offshore drilling market,
including reduced 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; possible cancellation,
renegotiation, termination or suspension of drilling contracts as a
result of mechanical difficulties, performance, market changes or other
reasons; costs related to stacking of rigs; downtime and other risks
associated with offshore rig operations, including unscheduled repairs
or maintenance, relocations, severe weather or hurricanes; our small
fleet and reliance on a limited number of clients; our ability to
execute our business plans; the effects of our completed Chapter 11
proceedings on our future operations; and the other risk factors
described in our 2018 Annual Report on Form 20-F filed with the
Securities and Exchange Commission on March 12, 2019 and our Reports on
Form 6-K. 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)

                   
Successor Predecessor
Period from Period from
Three Months November 20, October 1, Three Months
Ended March 31, through through Ended March 31,
2019 December 31, 2018 November 19, 2018 2018
Revenues
Contract drilling $ 65,916 $ 28,489 $ 31,073 $ 82,069
Costs and expenses
Operating expenses (52,296 ) (19,744 ) (25,050 ) (64,354 )
General and administrative expenses (11,246 ) (4,245 ) (9,572 ) (17,204 )
Depreciation and amortization expense   (58,899 )   (27,277 )   (38,187 )   (69,920 )
  (122,441 )   (51,266 )   (72,809 )   (151,478 )
Operating loss (56,525 ) (22,777 ) (41,736 ) (69,409 )
Other income (expense)
Interest expense (24,039 ) (10,904 ) (29,046 ) (14,929 )
Reorganization items (1,003 ) (1,300 ) (1,743,556 ) (12,032 )
Interest income 1,972 1,008 428 788
Equity earnings in unconsolidated subsidiaries (1,052 ) 392
Expenses to unconsolidated subsidiaries, net (272 ) (1,198 )
Other income (expense)   (91 )   526     350     (195 )
Loss before income taxes (81,010 ) (34,253 ) (1,813,560 ) (95,777 )
Income tax (expense) benefit   (2,969 )   6,769     3,261     (274 )
Net loss $ (83,979 ) $ (27,484 ) $ (1,810,299 ) $ (96,051 )
Loss per common share, basic $ (1.12 ) $ (0.37 ) $ (84.72 ) $ (4.50 )
Weighted average number of common shares, basic   75,031     75,010     21,368     21,339  
Loss per common share, diluted $ (1.12 ) $ (0.37 ) $ (84.72 ) $ (4.50 )
Weighted average number of common shares, diluted   75,031     75,010     21,368     21,339  
 

PACIFIC DRILLING S.A. AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets

(in thousands) (unaudited)

             
March 31, December 31,
2019 2018
Assets:
Cash and cash equivalents $ 337,173 $ 367,577
Restricted cash 16,965 21,498
Accounts receivable, net 46,895 40,549
Other receivable 28,000 28,000
Materials and supplies 40,598 40,429
Prepaid expenses and other current assets   16,390     9,149  
Total current assets   486,021     507,202  
Property and equipment, net 1,901,540 1,915,172
Receivable from unconsolidated subsidiaries 204,790 204,790
Intangible asset 53,025 85,053
Investment in unconsolidated subsidiaries 11,264 11,876
Other assets   29,630     24,120  
Total assets $ 2,686,270   $ 2,748,213  
 
Liabilities and shareholders’ equity:
Accounts payable $ 13,072 $ 14,941
Accrued expenses 17,716 25,744
Accrued interest 32,279 16,576
Deferred revenue, current   1,443      
Total current liabilities   64,510     57,261  
Long-term debt 1,047,431 1,039,335
Payable to unconsolidated subsidiaries 4,381 4,400
Other long-term liabilities   34,228     28,259  
Total liabilities   1,150,550     1,129,255  
Shareholders’ equity:
Common shares 750 750
Additional paid-in capital 1,646,557 1,645,692
Treasury shares, at cost (124 )
Accumulated deficit   (111,463 )   (27,484 )
Total shareholders’ equity   1,535,720     1,618,958  
Total liabilities and shareholders’ equity $ 2,686,270   $ 2,748,213  
                         

PACIFIC DRILLING S. A. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

(in thousands) (unaudited)

 
Successor Predecessor
Period From Period From
Three Months November 20, October 1, Three Months
Ended March 31, through through Ended March 31,
2019 December 31, 2018 November 19, 2018 2018
 
Cash flow from operating activities:
Net loss $ (83,979 ) $ (27,484 ) $ (1,810,299 ) $ (96,051 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization expense 58,899 27,277 38,187 69,920
Amortization of deferred revenue (570 ) (2,890 ) (6,150 )
Amortization of deferred costs 433 128 1,645 5,007
Amortization of deferred financing costs 1,639
Amortization of debt premium, net (112 ) (38 )
Interest paid-in-kind 8,208 3,732 4,477
Deferred income taxes 2,765 (6,507 ) 7,172 (1,762 )
Share-based compensation expense 865 599 932 723
Reorganization items 1,724,494 4,707
Changes in operating assets and liabilities:
Accounts receivable (6,346 ) (11,670 ) 6,096 (8,284 )
Materials and supplies (169 ) (122 ) 499 1,109
Prepaid expenses and other assets (14,222 ) (11,177 ) (39,254 ) 4,451
Accounts payable and accrued expenses 16,130 (16,490 ) (20,808 ) (12,745 )
Deferred revenue   2,013             (1,535 )
Net cash used in operating activities   (16,085 )   (41,752 )   (88,110 )   (40,610 )
Cash flow from investing activities:
Capital expenditures (17,613 ) (2,697 ) (3,544 ) (3,888 )
Deconsolidation of Zonda Debtors           (4,910 )    
Net cash used in investing activities   (17,613 )   (2,697 )   (8,454 )   (3,888 )
Cash flow from financing activities:
Payments for shares issued under share-based compensation plan (126 )
Payments from debtor-in-possession financing (50,000 )
Payments on long-term debt (1,136,478 )
Proceeds from equity offerings 500,000
Payments for financing costs (1,115 ) (13,525 ) (1,933 )
Purchases of treasury shares   (124 )            
Net cash used in financing activities   (1,239 )   (13,651 )   (688,411 )    
Net decrease in cash and cash equivalents (34,937 ) (58,100 ) (784,975 ) (44,498 )
Cash, cash equivalents and restricted cash, beginning of period   389,075     447,175     1,232,150     317,448  
Cash, cash equivalents and restricted cash, end of period $ 354,138   $ 389,075   $ 447,175   $ 272,950  
 

EBITDA and Adjusted EBITDA Reconciliation

EBITDA is defined as earnings before interest expense, taxes,
depreciation and amortization. Adjusted EBITDA is defined as earnings
before interest expense, taxes, depreciation, amortization, equity
earnings in unconsolidated subsidiaries, expenses to unconsolidated
subsidiaries, net 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)

                   
Successor Predecessor
Period From Period From
Three Months November 20, October 1, Three Months
Ended through through Ended
March 31, December 31, November 19, March 31,
2019 2018 2018 2018
 
Net loss $ (83,979 ) $ (27,484 ) $ (1,810,299 ) $ (96,051 )
Add:
Interest expense 24,039 10,904 29,046 14,929
Depreciation and amortization expense 58,899 27,277 38,187 69,920
Income tax expense (benefit)   2,969     (6,769 )   (3,261 )   274  
EBITDA $ 1,928 $ 3,928 $ (1,746,327 ) $ (10,928 )
 
Add:
Equity earnings in unconsolidated subsidiaries 1,052 (392 )
Expenses to unconsolidated subsidiaries, net 272 1,198
Reorganization items   1,003     1,300     1,743,556     12,032  
Adjusted EBITDA $ 4,255   $ 6,034   $ (2,771 ) $ 1,104  

Contacts

Investor Contact:
Johannes (John) P. Boots
Pacific Drilling
S.A.
+713 334 6662
Investor@pacificdrilling.com

Media
Contact:
Amy L. Roddy
Pacific Drilling S.A.
+713 334 6662
Media@pacificdrilling.com

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