Pioneer Energy Services Corp. (PES)
Q3 2012 Results Earnings Call
November 1, 2012 11:00 AM ET
Anne Pearson - DRG&L Investor Relations
Stacy Locke - Chief Executive Officer
Lorne Phillips - Chief Financial Officer
Red West - President, Drilling Services Segment
Joe Eustace - President, Production Services Segment
Jim Rollyson - Raymond James
John Keller - Stephens Inc.
Blake Hancock - Howard Weil
Josh Lingsch - Simmons & Company
Previous Statements by PES
» Pioneer Energy Services' CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Pioneer Drilling CEO Presents at UBS Global Oil & Gas Conference. (Transcript)
» Pioneer Drilling's CEO Discusses Q1 2012 Results - Earnings Call Transcript
This conference is being recorded today, Thursday, the 1st of November, 2012. I would now like to turn the conference over to Anne Pearson of DRG&L Investor Relations. Please go ahead.
Thank you, Luke, and good morning to everyone. Before I turn the call over to Pioneer’s CEO, Stacy Locke; and to CFO, Lorne Phillips, for their formal remarks, I have a few of the usual items to cover.
First of all, a replay of today’s call will be available and accessible by webcast by going to the IR section of Pioneer’s website and also by telephone replay, and you can find the replay information for both in this morning’s news release.
As a reminder, information reported on this call speaks only of today October 1, 2012, so any time sensitive information may no longer be accurate at the time of a replay.
Management may -- make -- will make forward-looking statements today that are based on beliefs and assumptions and information currently available to them. While they believe the expectations in these statements are reasonable, they can give no assurance they will prove to be correct.
They are subject to certain risks and uncertainties that are described in this morning’s news release and also in recent public filings with the SEC. If one or more of these risks should prove to be incorrect, actual results may differ materially.
Also, please note that this conference call may contain references to non-GAAP measures. You’ll find a reconciliation in this morning’s news release.
Now, I’d like to turn the call over to Stacy Locke, Pioneer CEO and President. Stacy?
Thank you, Anne, and good morning, everybody. Joining me here in San Antonio is Red West, President of our Drilling Services Segment; and Joe Eustace, President of our Production Services Segment; and Lorne Phillips, our Chief Financial Officer.
When you look at our third quarter results, there were kind of three areas that led to the quarterly kind of under performance of what we expected and those three areas where U.S. land drilling, wirelines and coiled tubing services.
When you look at the U.S. land drilling sector, there were three primary factors that contributed to the softness there. One is that day rates adjusted downward closer to the 10% level for a number of these rigs and the 5% to 10% range that we had kind of anticipated at the second quarter call.
Also kind of in association with our, actually good utilization of 86% for the quarter, there was a lot more noise behind that number. In other words, we had to struggle a little harder to keep that good utilization up and as a result, we had occasional rigs that would go down and stack and incur stacking costs. We would keep the labor, knowing that we were going to go back to work and we were able to go back to work in most cases.
And then we had a couple of pretty good moves from one region to another embedded in there and those additional costs affect your margin. And we just had a little more of that than we anticipated. But I was very pleased frankly with the outcome of our utilization.
In addition, the newbuilds, we delivered very steadily here and I think that we experienced what we’ve always experience, really with these newbuilds and that is the initial startup months or kind of one time costs at the outset.
It usually affects your general costs for two to three months and then you kind of get back on track. And I just don’t think we really factored that in as we were looking at our guidance. We are just excited to get these newbuilds out and running. So that is really kind of what was behind U.S. land drilling.
If you look at wireline, there was number of factors there that influenced our wireline business. It was considerably softer than we had anticipated. There, again, industry-wide utilization was off a little and that just causes greater competition for the work, which then affects pricing kind of light drilling. And those adjustments were closer to 10% as well rather than the 5% to 10% we were anticipating.
Another aspect of the wireline business was during this quarter there was a shift in the mix a bit. There was a little less of the high margin, big ticket plug and perf work related to the long lateral horizontal activity and a little bit more towards the routine, and so you lose some profitability there as a result of that.
In addition, we -- related to that I guess, is some of the customers that are client of ours that have been good long standing clients have moved a little bit more towards sliding sleeve activity for their completions as opposed to the plug and perf. And that, therefore, causes us to go out and find clients to replace those and we are doing that. And we don’t feel like it’s a tidal wave of change, but we do need to replace those clients.