Grey Wolf, Inc. Announces Operating Results for the Quarter and Year Ended December 31, 2007
Wednesday February 20, 6:00 pm ET
HOUSTON--(BUSINESS WIRE)--Grey Wolf, Inc. (“Grey Wolf” or the “Company”) (AMEX:GW - News) reported net income of $34.0 million, or $0.16 per share on a diluted basis, for the three months ended December 31, 2007 compared with net income of $52.5 million, or $0.24 per share on a diluted basis, for the fourth quarter of 2006. Revenues for the fourth quarter of 2007 were $213.0 million compared with revenues for the fourth quarter of 2006 of $240.3 million.
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For the year ended December 31, 2007, Grey Wolf reported net income of $169.9 million, or $0.79 per share on a diluted basis, on revenues of $906.6 million. This compares with net income of $220.0 million, or $0.98 per share on a diluted basis, on revenues of $945.5 million for the year ended December 31, 2006. The 2006 results include an after-tax gain related to insurance proceeds of $2.7 million ($0.01 per diluted share) and after-tax gains of $7.6 million ($0.03 per diluted share) from the sale of five rigs formerly held for refurbishment and other spare equipment.
“Grey Wolf delivered the second highest annual financial results in its history in 2007,” commented Thomas P. Richards, Chairman, President and Chief Executive Officer. “Throughout the year, U.S. land drilling activity was fairly stable, but an influx of new rigs into the market reduced contract renewal rates, mobilization recoveries and rig utilization. This moderated Grey Wolf’s year-over-year results, and EBITDA was $376.7 million for 2007, down from $432.0 million a year ago.”
“The Company’s portfolio of long-term contracts helps buffer these market trends, and our technically enhanced fleet, capable of addressing the well-construction challenges facing our customers, has supported our strong utilization relative to our peers,” Mr. Richards continued. “Over the past three years, Grey Wolf has spent approximately $168.0 million to upgrade the drilling capacity of our rig fleet and $120.0 million for eight newly built rigs with best in class capabilities. Additionally, our two new multi-well PaDSRigsTM will be deployed in the Rockies in the second and third quarters of 2008, bringing Grey Wolf’s fleet to 123 rigs.”
Mr. Richards concluded, “We are looking forward to continued strong financial results in 2008. While additional new rigs are still entering the market, the rate of entry has slowed significantly and we expect the new supply to be partially offset by the rationalization of our competitors’ older less capable equipment. Commodity prices remain a strong incentive for our customers to drill.”
The Company is marketing 121 rigs with 102 rigs working today. Of the 102 rigs working, 53 are working under daywork term contracts, 44 are working under spot market daywork contracts and five are working under turnkey contracts. Grey Wolf averaged 103 rigs working in the fourth quarter of 2007. This compares with an average of 104 rigs working in the third quarter of 2007 and 110 rigs working during the fourth quarter of 2006. The Company averaged 105 rigs working for the full year of 2007.
Under daywork term contracts, the Company has approximately 13,600 days, or an average of 37 rigs, contracted for 2008 and 6,500 days, or an average of 18 rigs, committed in 2009. Leading edge daywork bid rates range from $14,000 to $20,000 per day without fuel or top drives, and this range has been fairly consistent over the past several months.
Capital expenditures totaled $220.2 million in 2007, including $30.1 million during the fourth quarter. Capital expenditures for 2008 are projected to be $150.0 million to $160.0 million. This includes $34.5 million for the remaining payments on the two new rigs to be delivered in 2008 and another $41.0 million for the continued upgrade of our fleet.
The Company reported total earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) of $84.4 million in the fourth quarter of 2007, compared to $83.7 million for the previous quarter and $105.0 million for the fourth quarter of 2006. On a per-rig-day basis, EBITDA was $8,916 for the fourth quarter of 2007, $8,703 for the third quarter of 2007 and $10,384 for the fourth quarter of 2006. Turnkey EBITDA per rig day in the fourth quarter was $11,219, and daywork EBITDA per rig day totaled $8,743. Our turnkey business added $40.4 million, or 11%, of total Company EBITDA for all of 2007 and outpaced daywork EBITDA per rig day by 49% for the year, reflecting the greater margins that can be achieved in this strategic business.
Under a plan initiated in 2006 that currently authorizes the repurchase of up to a cumulative total of $150 million of Grey Wolf common stock, the Company has repurchased 19.0 million shares and spent approximately $121.9 million of the authorization of this program. This includes repurchases of $33.7 million in the fourth quarter of 2007 and $2.1 million to date in the first quarter of 2008.
During the first quarter of 2008, the Company expects to average 99 to 102 rigs working with five to seven of these rigs performing turnkey services. In addition, average daywork EBITDA per rig day is expected to decrease by $700 to $800 in relation to the fourth quarter of 2007. Approximately half of this decline is related to an expected increase in daywork operating expenses per rig day as compared to the fourth quarter of 2007. The other half of the decline expected in the first quarter EBITDA per rig day is the result of reduced pricing on contract renewals and lower mobilization recoveries. Depreciation expense of approximately $26.2 million, interest expense of approximately $3.3 million and an effective tax rate of approximately 37% are expected for the first quarter of 2008.
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