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FORT WORTH, Texas, Aug 09, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Union Drilling, Inc. (Nasdaq: UDRL) announced today financial and operating results for the three and six month periods ended June 30, 2006.
Revenues for the second quarter of 2006 were $58.8 million, up 69% compared to revenues of $34.8 million in the second quarter of 2005. EBITDA for the second quarter of 2006 was $16.5 million, compared to $5.9 million reported in the same period last year. Second quarter 2006 EBITDA includes a $271,000 ($184,000 net of tax) charge for stock-based compensation expense related to the impact of FAS 123R, which became effective January 1, 2006. Excluding this charge, EBITDA was $16.8 million for the second quarter of 2006. 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 second quarter of 2006 was $6.5 million or $0.30 per diluted share versus net income of $1.0 million or $0.06 per diluted share during the second quarter of 2005. The latest quarterly results include the impact of FAS 123R which was $0.01 per share. Without the loss of margin, insurance deductibles and investigation expense related to a derrick collapse and fatality, EBITDA and diluted EPS would have been $17.3 million and $0.33, respectively.
Christopher D. Strong, Union Drilling's chief executive officer, stated, "During the second quarter, it appears that heavy rains in the Northeast contributed to uneven settling as well as a reduction to the anchoring system capability on one of our rigs. This resulted in a derrick collapse and tragic loss of life. Our safety and operations people, who are working with outside engineers, are implementing additional procedures to prevent this type of accident from occurring in the future.
"We continue to see high demand for our rigs and have entered into a number of additional term contracts, the most notable of which involves moving the five rigs we have in the Rockies to eastern Arkansas for work in the Fayetteville Shale. The move will take place primarily during the fourth quarter of 2006 after the rigs fulfill their current contractual obligations. This will bring the total number of rigs working in the Fayetteville Shale to seven and result in the closing of our Rocky Mountain operations for the time being.
"Various bottlenecks have resulted in delayed delivery of rigs we expected to be working for most of the third quarter. The first of our new 1,500 horsepower Ideal rigs started drilling last week. At this point, delivery of the next two is scheduled before the end of the third quarter and the final three remain scheduled for the fourth quarter."
For the first six months of 2006, Union Drilling reported revenues of $115.4 million, EBITDA of $33.5 million and net income of $13.4 million, or $0.62 per share, compared to the first half of 2005 when the company had revenues of $51.9 million, EBITDA of $8.4 million and net income of $1.3 million, or $0.08 per share.
Operating Statistics
The Company's average revenue per revenue day was $13,444 for the second quarter of 2006 compared to $11,084 for the second quarter of 2005. Revenue days totaled 4,375 days, compared to 3,137 days for the same period last year. Drilling margins totaled $21.3 million or 36% of revenues for the second quarter of 2006, versus $8.7 million or 25% of revenues in the second quarter of 2005. Lost margin due to the rig collapse was an estimated $794,000 which would have put the drilling margin for the quarter at approximately $22.1 million. 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 second quarter was 76.1%, up from 58.8% in the same period last year.
Average dayrates for the six months ending June 30 were $13,265 per day for 2006 compared to $11,031 per day for 2005. The Company totaled 8,699 revenue days on 76.5% utilization during the first half of 2006 compared to 4,708 days on 53.8% utilization during the same period of 2005. Drilling margin was $42.9 million, or 37% of revenues, for the first six months of 2006, versus $13.1 million, or 25% of revenues for the first six months of 2005.
New Board Appointment
Union Drilling's board has approved the appointment of Ronald Harrell to the board of directors, effective today. Harrell most recently served as Chairman and CEO of Ryder Scott, and has over 40 years of industry experience. He will become a member of the Audit committee, replacing John Moon. Strong commented, "I am excited that Ron has decided to join our board. His understanding of the reserve development process and areas likely to experience accelerated capital spending will be a valuable asset to this company as we refine our strategy."
Union Drilling's management team will be holding a conference call on Thursday, August 10, 2006, at 9:30 a.m. Eastern Time. To participate in the call, dial (303) 262-2139 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 August 17, 2006 and may be accessed by calling (303) 590-3000 and using the pass code 11066640#. 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 .
Union Drilling, Inc., headquartered in Ft. Worth, Texas, provides contract land drilling services and equipment, primarily to natural gas producers, in the United States. Union Drilling currently owns or operates 71 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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Revenues
Nonaffiliates $58,816 $33,633 $115,394 $48,984
Related party --- 1,138 --- 2,950
Total revenues 58,816 34,771 115,394 51,934
Cost and expenses
Drilling operations 37,494 26,023 72,462 38,809
Depreciation and
amortization 5,557 4,030 10,744 6,136
General and
administrative 5,134 2,876 9,834 4,851
Total cost and expenses 48,185 32,929 93,040 49,796
Operating income 10,631 1,842 22,354 2,138
Interest expense --- (852) (1) (1,005)
Gain on sale of assets 242 14 323 71
Other income 90 11 127 53
Income before income taxes 10,963 1,015 22,803 1,257
Income tax expense 4,503 --- 9,372 ---
Net income $6,460 $1,015 $13,431 $1,257
Earnings per common share:
Basic $0.30 $0.06 $0.63 $0.09
Diluted $0.30 $0.06 $0.62 $0.08
Weighted-average common
shares outstanding:
Basic 21,213,705 16,226,591 21,190,038 14,686,301
Diluted 21,611,700 16,711,125 21,585,427 15,170,870
Union Drilling, Inc.
Operating Statistics
(in thousands, except per day data)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Revenues $58,816 $34,771 $115,394 $51,934
Drilling Margins $21,322 $8,748 $42,932 $13,125
Revenue Days 4,375 3,137 8,699 4,708
Marketed Rig Utilization 76.1% 58.8% 76.5% 53.8%
Revenue per revenue day $13,444 $11,084 $13,265 $11,031
Drilling Margin per revenue day $4,874 $2,788 $4,935 $2,788
Union Drilling, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
June 30, December 31,
2006 2005
(unaudited)
Assets:
Current assets:
Cash and cash equivalents $758 $2,388
Accounts receivable (net of
allowance for doubtful accounts of
$357 and $313 at June 30, 2006 and
December 31, 2005, respectively) 40,686 27,579
Accounts receivable - related party --- 482
Inventories 1,195 860
Prepaid expenses and deposits 2,512 4,930
Deferred taxes 5,240 10,543
Total current assets 50,391 46,782
Goodwill 5,362 5,425
Intangible assets (net of accumulated
amortization of $338 and $203 at
June 30, 2006 and December 31, 2005,
respectively) 3,663 3,798
Property, buildings and equipment (net
of accumulated depreciation of
$55,985 and $46,251 at June 30, 2006
and December 31, 2005, respectively) 152,672 120,783
Other assets 545 700
Total assets $212,633 $177,488
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $13,991 $9,241
Current portion of long-term obligations 2,259 2,014
Current portion of other obligations 1,818 3,308
Current portion of advances from customers 420 1,265
Accrued expense and other liabilities 8,037 5,353
Total current liabilities 26,525 21,181
Revolving credit facility 15,041 ---
Long-term obligations 5,446 5,812
Deferred taxes 17,903 17,917
Advances from customers 139 139
Total liabilities 65,054 45,049
Stockholders' equity:
Common stock, par value $.01 per
share; 75,000,000 shares authorized;
21,314,192 and 21,166,109 shares issued
and outstanding at June 30, 2006 and
December 31, 2005, respectively 213 212
Additional paid in capital 135,089 133,381
Retained earnings (deficit) 12,277 (1,154)
Total stockholders' equity 147,579 132,439
Total liabilities and stockholders' equity $212,633 $177,488
EBITDA is earnings before net interest, income taxes and depreciation and amortization. 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 Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Calculation of EBITDA:
Net income $6,460 $1,015 $13,431 $1,257
Interest expense --- 852 1 1,005
Income tax expense 4,503 --- 9,372 ---
Depreciation expense 5,557 4,030 10,744 6,136
EBITDA $16,520 $5,897 $33,548 $8,398
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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Calculation of drilling margin:
Operating income $10,631 $1,842 $22,354 $2,138
Depreciation and amortization 5,557 4,029 10,744 6,136
General and administrative 5,134 2,876 9,834 4,851
Drilling margin $21,322 $8,747 $42,932 $13,125
Revenue days during the period 4,375 3,137 8,699 4,708
Drilling margin per revenue day 4,874 2,788 4,935 2,788
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
SOURCE Union Drilling, Inc.
Christopher D. Strong, CEO of Union Drilling, Inc., +1-817-735-8777, or Dan Steigerwald, CFO, +1-817-735-8776; or Ken Dennard or Ben Burnham, both of DRG&E, +1-713-529-6600, for Union Drilling, Inc.
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