Bronco Drilling Company, Inc., (Nasdaq/GM:BRNC), announced today financial and operational results for the three months ended June 30, 2008.
Consolidated Results
Revenues for the second quarter of 2008 were $69.8 million compared to $62.3 million for the first quarter of 2008 and $74.7 million for the second quarter of 2007. Net income for the second quarter of 2008 was $4.3 million compared to $8.1 million for the previous quarter and $8.7 million for the second quarter of 2007. The Company generated EBITDA of $20.6 million for the second quarter of 2008 compared to $25.9 million for the previous quarter and $25.8 million for the second quarter of 2007. The Company’s fully diluted earnings per share for the quarter ended June 30, 2008 were $0.16.
Results for the second quarter of 2008 include non-recurring charges related to Bronco’s equity investment in Challenger Limited. Second quarter results were negatively impacted by a pre-tax loss of $1.5 million related to the sale and or contribution of rigs to Challenger and adjustments made to Challenger’s financial statements for the first quarter resulting in a $1.9 million reduction in Challenger’s pre-tax net income. These adjustments were made subsequent to Bronco filing its first quarter 10-Q and therefore recognized by Bronco in the second quarter. Without these non-recurring charges, fully diluted earnings per share for the quarter would be $0.21.
Land Drilling
Average operating land rigs for the first and second quarters of 2008 were 45 compared to 52 for the second quarter of 2007. Revenue days for the quarter increased to 3,355 from 2,848 for the previous quarter and decreased from 3,624 for the second quarter of 2007. Utilization for the second quarter of 2008 was 82% compared to 69% for the previous quarter and 76% for the second quarter of 2007. Average daily cash margins for our land drilling fleet for the quarter ended June 30, 2008 were $7,088 compared to $7,333 for the previous quarter and $7,941 for the second quarter of 2007.
Well Servicing
Average operating workover rigs for the second quarter of 2008 were 53 compared to 48 for the previous quarter and 29 for the second quarter of 2007. Revenue hours for the quarter increased to 25,533 from 23,865 for the previous quarter and from 14,427 for the second quarter of 2007. Utilization for the second quarter of 2008 was 75% compared to 77% for the previous quarter and 78% for the second quarter of 2007. Average hourly cash margins for our well servicing fleet for the quarter ended June 30, 2008, were $127 compared to $137 for the previous quarter and $149 for the second quarter of 2007.
Challenger
Eight of the rigs contributed or sold to Challenger are in Libya with three of the rigs currently operating. Challenger is still in the process of securing a debt facility to meet short-term capital needs including those related to start-up of the Bronco rigs and to mitigate downtime that has plagued Challenger’s operations due to past underinvestment in adequate rig supplies and spare equipment. Bronco considers the debt facility a pivotal component in determining the long-term success of Challenger and expects Challenger will continue to have unpredictable financial results in the near-term.
Recent Events and Outlook
Bronco increased its number of term contracts during the second quarter and now has approximately 57% of its estimated revenue days for the last two quarters of 2008 and 32% of its estimated revenue days for 2009 covered via term contracts. Total contracted revenue days do not include days attributable to our multi-well contracts, as we do not attempt to quantify the duration of those contracts. Inclusion of such contracts would increase the percentages stated above.
During the second quarter, Bronco bid and won a tender in Mexico with Pemex. This tender will require three rigs operating in the Chicontepec basin near Poza Rica, Mexico. Two of the rigs have begun to mobilize to Mexico with the third to follow in the coming weeks. We anticipate all three will be operating in Mexico by the end of August. The duration of the contract with Pemex for these rigs is through the end of 2009.
Bronco currently has six rigs contractually committed to the Bakken Shale. All of these rigs will require winterization and other modifications. Two of the rigs will require major modifications and refurbishment which will include a conversion from mechanical to electric power. We expect these rigs to be deployed to the Bakken during the third and fourth quarters of 2008.
About Bronco Drilling
Bronco Drilling Company, Inc., a publicly held company headquartered in Edmond, Oklahoma, is a provider of contract land drilling services and workover services to oil and natural gas exploration and production companies. Bronco's common stock is quoted on The Nasdaq Global Market under the symbol “BRNC.” For more information about Bronco Drilling Company, Inc., visit http://www.broncodrill.com.
| Bronco Drilling Company, Inc. and Subsidiaries | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (Amounts in thousands, except share par value) | ||||||||
| June 30, | December 31, | |||||||
| 2008 | 2007 | |||||||
| ASSETS | (Unaudited) | |||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 9,914 | $ | 5,721 | ||||
| Receivables | ||||||||
Trade and other, net of allowance for doubtful accounts of $1,215 and $1,834 in 2008 and 2007, respectively | 56,601 | 61,499 | ||||||
| Contract drilling in progress | 1,402 | 2,128 | ||||||
| Income tax receivable | 1,626 | 1,191 | ||||||
| Current deferred income taxes | 618 | 775 | ||||||
| Current maturities of note receivable | 4,860 | - | ||||||
| Prepaid expenses | 1,363 | 705 | ||||||
| Total current assets | 76,384 | 72,019 | ||||||
| PROPERTY AND EQUIPMENT - AT COST | ||||||||
| Drilling rigs and related equipment | 469,417 | 510,962 | ||||||
| Transportation, office and other equipment | 41,734 | 41,942 | ||||||
| 511,151 | 552,904 | |||||||
| Less accumulated depreciation | 100,939 | 86,274 | ||||||
| 410,212 | 466,630 | |||||||
| OTHER ASSETS | ||||||||
| Goodwill | 23,909 | 23,908 | ||||||
| Note receivable, less current maturities | 5,085 | - | ||||||
| Investment in Challenger | 76,876 | - | ||||||
| Restricted cash and deposit | 2,815 | 2,745 | ||||||
| Intangibles, net, and other | 4,508 | 3,303 | ||||||
| 113,193 | 29,956 | |||||||
| $ | 599,789 | $ | 568,605 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 15,079 | $ | 16,715 | ||||
| Accrued liabilities | 21,147 | 19,280 | ||||||
| Current maturities of long-term debt | 71,358 | 1,256 | ||||||
| Total current liabilities | 107,584 | 37,251 | ||||||
| LONG-TERM DEBT, less current maturities | 5,587 | 66,862 | ||||||
| DEFERRED INCOME TAXES | 75,114 | 68,063 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||
Common stock, $.01 par value, 100,000 shares authorized; 26,270 and 26,031 shares issued and outstanding at June 30, 2008 and December 31, 2007 | 264 | 262 | ||||||
| Additional paid-in capital | 300,781 | 298,195 | ||||||
| Retained earnings | 110,459 | 97,972 | ||||||
| Total stockholders' equity | 411,504 | 396,429 | ||||||
| $ | 599,789 | $ | 568,605 | |||||
| Bronco Drilling Company, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| REVENUES | ||||||||||||||||
Contract drilling revenues, including 2%, 0%, 1%, and 2% to related parties | $ | 60,494 | $ | 69,291 | $ | 114,567 | $ | 143,870 | ||||||||
| Well service | 9,320 | 5,429 | 17,543 | 9,831 | ||||||||||||
| Gain (loss) on Challenger transactions | (1,507 | ) | - | 3,200 | - | |||||||||||
| 68,307 | 74,720 | 135,310 | 153,701 | |||||||||||||
| EXPENSES | ||||||||||||||||
| Contract drilling | 36,715 | 40,514 | 69,909 | 81,313 | ||||||||||||
| Well service | 6,079 | 3,280 | 11,022 | 5,922 | ||||||||||||
| Depreciation and amortization | 12,457 | 10,894 | 24,382 | 22,099 | ||||||||||||
| General and administrative | 5,414 | 5,399 | 11,153 | 10,091 | ||||||||||||
| 60,665 | 60,087 | 116,466 | 119,425 | |||||||||||||
| Income from operations | 7,642 | 14,633 | 18,844 | 34,276 | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest expense | (1,161 | ) | (795 | ) | (2,387 | ) | (2,062 | ) | ||||||||
| Interest income | 274 | 203 | 1,009 | 250 | ||||||||||||
| Equity in income of investment | (69 | ) | - | 1,776 | - | |||||||||||
| Other | 308 | 101 | 453 | 166 | ||||||||||||
| (648 | ) | (491 | ) | 851 | (1,646 | ) | ||||||||||
| Income before income taxes | 6,994 | 14,142 | 19,695 | 32,630 | ||||||||||||
| Income tax expense | 2,655 | 5,428 | 7,208 | 12,529 | ||||||||||||
| NET INCOME | $ | 4,339 | $ | 8,714 | $ | 12,487 | $ | 20,101 | ||||||||
| Income per common share-Basic | $ | 0.17 | $ | 0.33 | $ | 0.48 | $ | 0.77 | ||||||||
| Income per common share-Diluted | $ | 0.16 | $ | 0.33 | $ | 0.47 | $ | 0.77 | ||||||||
| Weighted average number of shares outstanding-Basic | 26,270 | 26,019 | 26,267 | 25,963 | ||||||||||||
| Weighted average number of shares outstanding-Diluted | 26,388 | 26,116 | 26,340 | 26,028 | ||||||||||||
Non-GAAP Financial Measures
This press release includes a presentation of average daily cash margin for our land drilling fleet, average hourly cash margin for our well servicing fleet and EBITDA which are not financial measures recognized under generally accepted accounting principles, or GAAP. Average daily cash margin is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, minus well service revenue, plus well service expense, income tax expense, other expense, general and administrative expense and depreciation and amortization, and divided by revenue days for the period. Average hourly cash margin is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, minus contract drilling revenue, plus contract drilling expense, income tax expense, other expense, general and administrative expense and depreciation and amortization, and divided by operating hours for the period. EBITDA is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, plus interest expense, income tax expense and depreciation and amortization. We have presented average daily cash margin, average hourly cash margin and EBITDA because we use these metrics as an integral part of our internal reporting to measure our performance and to evaluate the performance of our senior management. We consider these metrics to be important indicators of the operational strength of our business. A limitation of these metrics, however, is that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our business. Management evaluates the costs of such tangible and intangible assets and the impact of related impairments through other financial measures, such as capital expenditures, investment spending and return on capital. Therefore, we believe that average daily cash margin, average hourly cash margin and EBITDA provide useful information to our investors regarding our performance and overall results of operations. Neither average daily cash margin, average hourly cash margin nor EBITDA is intended to be a performance measure that should be regarded as an alternative to, or more meaningful than, either net income as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. In addition, none of these metrics is intended to represent funds available for dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. These non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in our various agreements.
The following presents a reconciliation of average daily cash margin and EBITDA to net income, the most directly comparable GAAP financial measure (in thousands, except revenue days and average daily cash margin):
| Three Months Ended | Three Months Ended | |||||||||||
| June 30, | March 31, | |||||||||||
| 2008 | 2007 | 2008 | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
Reconciliation of average daily cash margin to net income: | ||||||||||||
| Net income | $ | 4,339 | $ | 8,714 | $ | 8,148 | ||||||
| Well service revenue | (9,320 | ) | (5,429 | ) | (8,223 | ) | ||||||
| Well service expense | 6,079 | 3,280 | 4,943 | |||||||||
| Income tax expense | 2,655 | 5,428 | 4,552 | |||||||||
| Other expense | 2,155 | 491 | (6,201 | ) | ||||||||
| General and administrative | 5,414 | 5,399 | 5,739 | |||||||||
| Depreciation and amortization | 12,457 | 10,894 | 11,925 | |||||||||
| Drilling margin | 23,779 | 28,777 | 20,883 | |||||||||
| Revenue days | 3,355 | 3,624 | 2,848 | |||||||||
| Average daily cash margin | $ | 7,088 | $ | 7,941 | $ | 7,333 | ||||||
| Three Months Ended | Three Months Ended | |||||||||||
| June 30, | March 31, | |||||||||||
| 2008 | 2007 | 2008 | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
Reconciliation of average hourly cash margin to net income: | ||||||||||||
| Net income | $ | 4,339 | $ | 8,714 | $ | 8,148 | ||||||
| Contract drilling revenue | (60,494 | ) | (69,291 | ) | (54,073 | ) | ||||||
| Contract drilling expense | 36,715 | 40,514 | 33,190 | |||||||||
| Income tax expense | 2,655 | 5,428 | 4,552 | |||||||||
| Other expense | 2,155 | 491 | (6,201 | ) | ||||||||
| General and administrative | 5,414 | 5,399 | 5,739 | |||||||||
| Depreciation and amortization | 12,457 | 10,894 | 11,925 | |||||||||
| Well service margin | 3,241 | 2,149 | 3,280 | |||||||||
| Operating hours | 25,533 | 14,427 | 23,865 | |||||||||
| Average hourly cash margin | $ | 127 | $ | 149 | $ | 137 | ||||||
| Three Months Ended | Three Months Ended | ||||||||
| June 30, | March 31, | ||||||||
| 2008 | 2007 | 2008 | |||||||
| (Unaudited) | (Unaudited) | ||||||||
| Calculation of EBITDA: | |||||||||
| Net income | $ | 4,339 | $ | 8,714 | $ | 8,148 | |||
| Interest expense | 1,161 | 795 | 1,226 | ||||||
| Income tax expense | 2,655 | 5,428 | 4,552 | ||||||
| Depreciation and amortization | 12,457 | 10,894 | 11,925 | ||||||
| EBITDA | $ | 20,612 | $ | 25,831 | $ | 25,851 | |||
Cautionary Note Regarding Forward-Looking Statements
The information in this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, comments pertaining to anticipated domestic and international operations. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, commodity price fluctuations, barriers to entry in international markets, operating hazards and other factors described in Bronco’s Annual Report on Form 10-K filed with the SEC on March 8, 2007, as amended, and other filings with the SEC, which are available free of charge on the SEC’s website at www.sec.gov. Bronco cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
Important Information
On January 23, 2008, Bronco entered into a merger agreement with Allis-Chalmers Energy Inc. (“Allis-Chalmers”), as amended as of June 1, 2008, providing for the acquisition of Bronco by Allis-Chalmers. In connection with the proposed merger, Allis-Chalmers and Bronco have filed a joint proxy statement/prospectus and both companies have filed and will file other relevant documents concerning the proposed merger transaction with the SEC. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION REGARDING THE MERGER. Investors and security holders may obtain a free copy of the definitive joint proxy statement/prospectus and the other documents free of charge at the website maintained by the SEC at www.sec.gov.
The documents filed with the SEC by Allis-Chalmers may be obtained free of charge from Allis-Chalmers’ website at www.alchenergy.com or by calling Allis-Chalmers’ Investor Relations department at (713) 369-0550. The documents filed with the SEC by Bronco may be obtained free of charge from Bronco’s website at www.broncodrill.com or by calling Bronco’s Investor Relations department at (405) 242-4444. Investors and security holders are urged to read the joint proxy statement/prospectus, as it may be amended or supplemented from time to time, and the other relevant materials before making any voting or investment decision with respect to the proposed merger.
Allis-Chalmers, Bronco and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the respective stockholders of Allis-Chalmers and Bronco in connection with the merger. Information regarding such persons and a description of their interests in the merger are contained in the joint proxy statement/prospectus filed with the SEC, as it may be amended or supplemented from time to time. Information about the directors and executive officers of Allis-Chalmers and their ownership of Allis-Chalmers common stock is set forth in its amended annual report on Form 10-K/A filed with the SEC on April 29, 2008, as further amended, and in subsequent statements of changes in beneficial ownership on file with the SEC. Information about the directors and executive officers of Bronco and their ownership of Bronco common stock is set forth in its amended annual report on Form 10-K/A filed with the SEC on April 29, 2008 and in subsequent statements of changes in beneficial ownership on file with the SEC. Investors may obtain additional information regarding the interests of such participants by reading the joint proxy statement/prospectus for the merger, as it may be amended or supplemented from time to time.
THIS PRESS RELEASE IS NOT AN OFFER TO SELL THE SECURITIES OF ALLIS-CHALMERS AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES.
Contacts:
Bob Jarvis, 405-242-4444 EXT: 102
Investor
Relations
bjarvis@broncodrill.com
