Union Drilling Reports 2006 Fourth Quarter Results
FORT WORTH, Texas, March 7 /PRNewswire-FirstCall/ — Union Drilling, Inc. announced today financial and operating results for the three months and fiscal year ended December 31, 2006.
Revenues for the fourth quarter of 2006 were $72.1 million, up 55.1% compared to revenues of $46.5 million in the fourth quarter of 2005. EBITDA for the fourth quarter of 2006 was $23.5 million, compared to $11.3 million reported in the same period last year. For additional information regarding EBITDA as a non-GAAP financial measure, please refer to the disclosures contained at the end of this release. Net income in the fourth quarter of 2006 was $8.6 million, or $0.40 per diluted share, versus net income of $4.3 million, or $0.23 per diluted share, during the fourth quarter of 2005. Results for the 2006 fourth quarter include a $1 million ($0.05 per diluted share, after tax) non-cash charge for the write-off of the Thornton Drilling trade name intangible asset as the Company brought all operations under the Union Drilling trade name.
For the full year 2006, Union Drilling reported revenues of $256.9 million, EBITDA of $80.6 million and net income of $31.9 million, or $1.47 per diluted share, compared to 2005 when the company had revenues of $141.6 million, EBITDA of $27.2 million and net income of $5.6 million, or $0.34 per diluted share.
Christopher D. Strong, Union Drilling’s President and Chief Executive Officer, stated, “We are pleased with our results from the fourth quarter as the Company produced record revenues, drilling margins and EBITDA. Operationally, we benefited from additional rigs that came online during the third and fourth quarters of 2006, as well as firm dayrates across our rig fleet. The sequential increase in drilling margin per day was somewhat offset by normal seasonal declines in utilization during the fourth quarter due to off hire days over the holidays. We expect utilization rates to remain relatively constant in the first quarter as we continue to relocate our Rocky Mountain fleet.
“Looking ahead, we remain optimistic about our business prospects during the first half of 2007. While most customers have expressed less interest in term contracts compared to 2006, we have experienced little, if any, erosion of dayrates in our respective markets. Our focus on higher growth unconventional drilling markets should provide some insulation against minor slowdowns in the market. Since December 31, 2006, we have taken delivery of two of the three remaining 1,500 horsepower Ideal(R) rigs, each of which is currently under contract in the Barnett Shale, and expect to receive the final Ideal rig near the end of the first quarter. Additionally, we assembled one rig during the first quarter that is now under contract in the Arkoma basin. With these four additions, our marketed fleet will increase to 77 rigs.
“Effective June 1, 2007, Dan Steigerwald, our Chief Financial Officer, will be retiring. As part of our succession plan, A.J. Verdecchia, our Corporate Controller, will become Chief Financial Officer effective April 1, 2007. Dan joined the company in January 2000 and has been a major contributor to the success we have achieved. I wish him well and look forward to working with A.J. in his new role.
“Finally, I would like to thank John Moon for his years of service to Union on its Board. John is leaving our Board following his recent departure from Metalmark Capital Partners, which controls the largest single block of the company’s stock. Howard Hoffen and Greg Myers of Metalmark will continue to serve on our Board.”
Operating Statistics
The Company’s average revenue per revenue day was $15,677 for the fourth quarter of 2006 compared to $12,035 for the fourth quarter of 2005. Revenue days totaled 4,597 days, compared to 3,860 days for the same period last year. Drilling margins totaled $30.2 million, or 42% of revenues, for the fourth quarter of 2006, versus $14.6 million, or 32% of revenues, in the fourth quarter of 2005. For additional information regarding drilling margin as a non-GAAP financial measure, please refer to the disclosures contained at the end of this release. Average marketed rig utilization for the fourth quarter was 74%, up from 69% in the same period last year.
Average dayrates for the year were $14,252 for 2006 compared to $11,557 per day for 2005. The Company totaled 18,028 revenue days at 76% utilization during 2006 compared to 12,254 revenue days at 62% utilization during 2005. Drilling margin was $101.8 million, or 40% of revenues, for 2006, versus $39.4 million, or 28% of revenues, for 2005.
Conference Call
Union Drilling’s management team will be holding a conference call on Thursday, March 8, 2007, at 9:30 a.m. eastern time. To participate in the call, dial (303) 262-2140 at least ten minutes before the conference call begins and ask for the Union Drilling conference call. To listen to the live call on the web, please visit Union Drilling’s web site at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live call, a telephonic replay will be available through March 15, 2007 and may be accessed by calling (303) 590-3000 and using the pass code 11083575#. Also, an archive of the webcast will be available after the call for a period of 60 days on the “Investor Relations” section of the Company’s website at http://www.uniondrilling.com/ .
About Union Drilling
Union Drilling, Inc., headquartered in Fort Worth, Texas, provides contract land drilling services and equipment, primarily to natural gas producers, in the United States. Union Drilling currently owns 76 rigs and specializes in unconventional drilling techniques.
This press release contains various forward-looking statements and information that are based on management’s belief as well as assumptions made by and information currently available to management. Forward-looking information includes statements regarding the Company’s anticipated growth, demand from the Company’s customers, capital spending by oil and gas companies and the Company’s expectations regarding its new rigs and the U. S. land drilling sector. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Such statements are subject to certain risks, uncertainties and assumptions, including, among other matters: general and regional economic conditions and industry trends; the continued strength or weakness of the contract land drilling industry in the geographic areas where the Company operates; decisions about onshore exploration and development projects to be made by oil and gas companies; the highly competitive nature of the contract land drilling business; the Company’s future financial performance, including availability, terms and deployment of capital; the continued availability of qualified personnel; and changes in governmental regulations, including those relating to the environment. Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. These risks, as well as others, are discussed in greater detail in the Company’s filings with the Securities and Exchange Commission, including the Company’s 10-K.
– Tables to follow – Union Drilling, Inc. Consolidated Statements of Income (in thousands, except per share data) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2006 2005 2006 2005 Revenues Nonaffiliates $72,067 $45,363 $256,944 $136,389 Related party — 1,094 — 5,232 Total revenues 72,067 46,457 256,944 141,621 Cost and expenses Drilling operations 41,825 31,818 155,123 102,266 Depreciation and amortization 7,741 4,734 24,820 15,121 Trade name impairment charge 1,000 — 1,000 — General and administrative 6,480 3,845 21,514 13,020 Total cost and expenses 57,046 40,397 202,457 130,407 Operating income 15,021 6,060 54,487 11,214 Interest expense (314) (462) (527) (2,366) (Loss) gain on sale of assets (278) 496 4 649 Other income 27 42 306 202 Income before income taxes 14,456 6,136 54,270 9,699 Income tax expense 5,829 1,807 22,418 4,100 Net income $8,627 $4,329 $31,852 $5,599 Earnings per common share: Basic $0.40 $0.24 $1.50 $0.35 Diluted $0.40 $0.23 $1.47 $0.34 Weighted-average common shares outstanding: Basic 21,415,539 18,374,207 21,284,047 16,012,486 Diluted 21,693,734 19,148,265 21,660,792 16,553,894 Union Drilling, Inc. Operating Statistics (in thousands, except per day data) Three Months Ended Twelve Months Ended December 31, December 31, 2006 2005 2006 2005 Revenues $72,067 $46,457 $256,944 $141,621 Drilling margins $30,242 $14,639 $101,821 $39,355 Revenue days 4,597 3,860 18,028 12,254 Marketed rig utilization 74.5% 69.2% 76.4% 61.9% Revenue per revenue day $15,677 $12,035 $14,252 $11,557 Drilling margin per revenue day $6,579 $3,792 $5,648 $3,212 Union Drilling, Inc. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, December 31, 2006 2005 (unaudited) Assets: Current assets: Cash and cash equivalents $20 $2,388 Accounts receivable (net of allowance for doubtful accounts of $839 and $313 at December 31, 2006 and 2005, respectively) 47,613 27,579 Accounts receivable – related party — 482 Inventories 1,073 860 Prepaid expenses and deposits 3,921 4,930 Assets held for sale 2,144 — Deferred taxes 4,686 7,093 Total current assets 59,457 43,332 Goodwill 7,909 5,425 Intangible assets (net of accumulated amortization of $528 and $203 at December 31, 2006 and 2005, respectively) 2,472 3,798 Property, buildings and equipment (net of accumulated depreciation of $69,338 and $46,251 at December 31, 2006 and 2005, respectively) 187,084 120,783 Deferred taxes 483 3,450 Other assets 496 700 Total assets $257,901 $177,488 Liabilities and Stockholders’ Equity: Current liabilities: Accounts payable $17,018 $9,241 Current portion of long-term obligations 2,508 2,014 Other current obligations 2,333 3,308 Current portion of advances from customers 1,613 1,265 Accrued expense and other liabilities 8,972 5,353 Total current liabilities 32,444 21,181 Revolving credit facility 27,810 — Long-term obligations 5,256 5,812 Deferred taxes 23,964 17,917 Advances from customers 828 139 Total liabilities 90,302 45,049 Stockholders’ equity: Common stock, par value $.01 per share; 75,000,000 shares authorized; 21,523,577 and 21,166,109 shares issued and outstanding at December 31, 2006 and 2005, respectively 215 212 Additional paid in capital 136,686 133,381 Retained earnings (deficit) 30,698 (1,154) Total stockholders’ equity 167,599 132,439 Total liabilities and stockholders’ equity $257,901 $177,488
EBITDA is earnings before net interest, income taxes, depreciation and amortization and non-cash impairment. The Company believes EBITDA is a useful measure of evaluating its financial performance because of its focus on the Company’s results from operations before net interest, income taxes, depreciation and amortization. EBITDA is not a measure of financial performance under generally accepted accounting principles. However, EBITDA is a common alternative measure of operating performance used by investors, financial analysts and rating agencies. A reconciliation of EBITDA to net earnings is included below. EBITDA as presented may not be comparable to other similarly titled measures reported by other companies.
Union Drilling, Inc. (in thousands) Three Months Twelve Months Ended Ended December 31, December 31, 2006 2005 2006 2005 Calculation of EBITDA: Net income $8,627 $4,329 $31,852 $5,599 Interest expense 314 462 527 2,366 Income tax expense 5,829 1,807 22,418 4,100 Depreciation and amortization 7,741 4,734 24,820 15,121 Trade name impairment charge 1,000 — 1,000 — EBITDA $23,511 $11,332 $80,617 $27,186
Drilling margin represents contract drilling revenues less contract drilling costs. Union Drilling believes that drilling margin is a useful measure for evaluating its financial performance, although it is not a measure of financial performance under generally accepted accounting principles. However, drilling margin is a common measure of operating performance used by investors, financial analysts, rating agencies and Union Drilling’s management. A reconciliation of drilling margin to operating income is included below. Drilling margin as presented may not be comparable to other similarly titled measures reported by other companies.
Union Drilling, Inc. (in thousands) Three Months Ended Twelve Months Ended December 31, December 31, 2006 2005 2006 2005 Calculation of drilling margin: Operating income $15,021 $6,060 $54,487 $11,214 Depreciation and amortization 7,741 4,734 24,820 15,121 Trade name impairment charge 1,000 — 1,000 — General and administrative 6,480 3,845 21,514 13,020 Drilling margin $30,242 $14,639 $101,821 $39,355 Revenue days during the period 4,597 3,860 18,028 12,254 Drilling margin per revenue day $6,579 $3,792 $5,648 $3,212 Contacts: Union Drilling, Inc. Christopher D. Strong, CEO 817-735-8777 Dan Steigerwald, CFO 817-735-8776 DRG&E Ken Dennard / Ben Burnham 713-529-6600
UDRL-E
Union Drilling, Inc.
CONTACT: Christopher D. Strong, CEO, +1-817-735-8777, or DanSteigerwald, CFO, +1-817-735-8776, both of Union Drilling, Inc.; or KenDennard or Ben Burnham, both of DRG&E, +1-713-529-6600, for Union Drilling,Inc.
Web site: http://www.uniondrilling.com/