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[dec212012]

Grey Wolf, Inc. Announces Operating Results for the Quarter and Year Ended December 31, 2004
Wednesday February 23, 6:30 pm ET


HOUSTON, Feb. 23 /PRNewswire-FirstCall/ -- Grey Wolf, Inc. (Amex: GW - News; "Grey Wolf" or the "Company"), reported net income of $10.5 million, or $0.05 per share on a diluted basis, for the three months ended December 31, 2004 compared with net income of $0.6 million, or $0.00 per share on a diluted basis, for the fourth quarter of 2003. Revenues for the fourth quarter of 2004 were $129.4 million compared with revenues for the fourth quarter of 2003 of $84.3 million.
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For the year ended December 31, 2004, Grey Wolf reported net income of $8.1 million, or $0.04 per share on a diluted basis, on revenues of $424.6 million. This compares with a net loss of $30.2 million, or $0.17 per share on a diluted basis, on revenues of $286.0 million for the year ended December 31, 2003.

"Grey Wolf's positive results for the fourth quarter and the year reflect ongoing improvements in the level of U.S. land drilling and dayrates during 2004 as well as our internal efforts to cut interest expense and expand markets for our rigs," commented Tom Richards, Chairman, President and Chief Executive Officer. "Oil and natural gas commodity prices are providing our customers with the cash flow to pursue natural gas prospects in the nation's best producing regions where we are a leading contractor."

"Our average number of rigs working increased to 96 during the fourth quarter of 2004 including 10 rigs acquired in the acquisition of Wyoming-based New Patriot Drilling Corp. ("Patriot") in April 2004. This compares with an average 62 rigs working during the fourth quarter of 2003," said Richards. "Because of our expansion in the past two years into West Texas and the Rocky Mountains and the redeployment of cold-stacked rigs, we've recently increased our marketed rig fleet to 102, reflecting our ability to obtain higher dayrates."

"Dayrates, which moved upward throughout 2004, rose an average of $1,059 per day across rigs and regions in the fourth quarter of 2004 over the third quarter," Richards added. "Leading edge bid rates now range from $10,500 to $17,000 per day without fuel or top drives. In a tighter market for quality rigs, Grey Wolf is signing an increasing number of term contracts at attractive rates. Looking at 2005, the fundamentals are solid for our business."

Grey Wolf has 22 rigs currently working under term contracts with a term of six months to two years. Nine more are scheduled to go to work under term contracts by mid second quarter and the Company has approximately 7,600 days contracted in 2005 under term contracts.

In addition to its 102 marketed rigs, Grey Wolf has 10 cold-stacked rigs which can be deployed quickly. There are also 15 inventory rigs available for refurbishment and reactivation as demand dictates.

Earnings before interest expense, taxes, depreciation and amortization ("EBITDA") for the fourth quarter of 2004 were $32.7 million, up from $25.6 million the previous quarter and $16.3 million for the fourth quarter of 2003. On a per rig day basis, EBITDA was $3,725 for the fourth quarter of 2004, $2,972 for the third quarter of 2004 and $2,833 for the fourth quarter of 2003.

Totaling $84.3 million for 2004, EBITDA rose substantially from $30.8 million a year earlier. Turnkey operations continued to contribute significantly to the Company's results, representing 11% of days worked and 25% of total EBITDA for 2004.

Capital expenditures rose from $35.1 million in 2003 to $89.3 million in 2004, including $15.9 million for the fourth quarter. The increase is the result of the $42.4 million investment in Patriot and more rig days worked in 2004 as well as the redeployment of previously cold-stacked rigs. Capital expenditures for 2005 are currently projected to be $65.0 million to $75.0 million. This projection is subject to the actual level of rig activity and the ultimate number of rigs returned to service during 2005.

Interest expense was reduced significantly to $14.8 million for 2004, down from $27.8 million in 2003. The Company completed activities to refinance its 8 7/8% senior notes with two issues of contingent convertible senior notes in transactions that also extended the maturity of Grey Wolf's long-term debt by 10 years.

The Company has estimated results for the first quarter of 2005 based on currently anticipated levels of activity and dayrates. During the first quarter of 2005, the Company expects to average 98 rigs working and to generate EBITDA of approximately $40.6 million. The Company expects depreciation expense of approximately $14.7 million and interest expense of approximately $2.6 million in the first quarter of 2005. Net income per share is expected to be approximately $0.07 on a diluted basis, using a tax rate of approximately 39% based upon the expected level of net income.

Grey Wolf has scheduled a conference call February 24, 2005 at 9:00 a.m. CT to discuss fourth quarter and year end 2004 results. The call will be web cast live on the Internet through the Investor Relations page on the Company's website at:

http://www.gwdrilling.com

To participate by telephone, call [phone] domestically or [phone] internationally ten to fifteen minutes prior to the starting time. The reservation number is 21229821. A replay of the conference call will be available by telephone from 11:00 a.m. CT on February 24, 2005 until 11:00 a.m. CT on February 26, 2005. The telephone number for the replay of the call is [phone] domestically or [phone] internationally and the access code is 21229821. The call will be available for replay through the Grey Wolf website for approximately two weeks after the conclusion of the call.

This press release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The specific forward-looking statements cover our expectations and projections regarding demand for the Company's services, spending by customers, the availability of term contracts, first quarter 2005 rig activity, dayrates and financial results, projected net income per share, projected EBITDA, projected tax rate, projected interest expense, the sufficiency of our capital resources and liquidity, depreciation and capital expenditures in 2005. These forward- looking statements are subject to a number of important factors, many of which are beyond our control, that could cause actual results to differ materially, including oil and natural gas prices and trends in those prices, the pricing and other competitive policies of our competitors, uninsured or under-insured casualty losses, cost of insurance coverage, changes in interest rates, unexpected costs under turnkey drilling contracts, weather conditions, and the overall level of drilling activity in our market areas. Please refer to our Registration Statement on Form S-8 filed with the Securities and Exchange Commission on November 22, 2004 for additional information concerning risk factors that could cause actual results to differ materially from these forward-looking statements.

Grey Wolf, Inc., headquartered in Houston, Texas, is a leading provider of turnkey and contract oil and gas land drilling services in the best natural gas producing regions in the United States with a total drilling rig fleet of 127.

Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
(In thousands, except per share amounts)
(Unaudited) (Unaudited)
Revenues $129,394 $84,255 $424,634 $285,974
Costs and expenses:
Drilling operations 93,258 64,916 327,797 244,287
Depreciation and
amortization 13,995 12,935 55,329 50,521
General and administrative 3,632 3,199 13,317 11,966
(Gain) loss on the sale
of assets 24 9 (45) (81)
Total costs and expenses 110,909 81,059 396,398 306,693
Operating income (loss) 18,485 3,196 28,236 (20,719)
Other income (expense):
Interest income 267 142 777 954
Interest expense (2,485) (3,669) (14,759) (27,832)
Other --- --- --- 14
Other income (expense),
net (2,218) (3,527) (13,982) (26,864)
Net income (loss) before
income taxes 16,267 (331) 14,254 (47,583)
Income taxes expense
(benefit):
Current 200 (938) 200 (938)
Deferred 5,538 51 5,976 (16,445)
Total income tax expense
(benefit) 5,738 (887) 6,176 (17,383)
Net income (loss) applicable
to common shares $10,529 $556 $8,078 $(30,200)
Net income (loss) per
common share: (A)
Basic $0.06 $0.00 $0.04 $(0.17)
Diluted $0.05 $0.00 $0.04 $(0.17)
Weighted average common
shares outstanding:
Basic 188,932 181,283 185,868 181,210
Diluted 233,138 182,773 187,654 181,210


Three Months Ended
December 31,
2004 2003
Number of Marketed Rigs (B) 99 80
Average Rigs Working:
Ark-La-Tex 21 13
Gulf Coast 22 18
South Texas 28 23
Rocky Mountain 14 3
Mexico 1 ---
West Texas 10 5
Total Average Rigs Working (B) 96 62

(A) Please see "Computation of Earnings Per Share" included in this
release.
(B) For the week ending February 17, 2005, the Company averaged 98 rigs
working.




Operating data comparison for the three months ended December 31, 2004 and 2003.

Three Months Ended Three Months Ended
December 31, 2004 December 31, 2003
Daywork Turnkey Daywork Turnkey
Operations Operations Total Operations Operations Total
(A) (A)
(Dollars in thousands except averages per rig day worked)
(Unaudited)

Rig days
worked 8,062 729 8,791 4,622 1,123 5,745
Contract
drilling
revenue $100,400 $28,994 $129,394 $47,789 $36,466 $84,255
Drilling
operating
expenses 69,952 23,306 93,258 37,937 26,979 64,916
General and
administrative
expenses 3,341 291 3,632 2,707 492 3,199
Interest
income (245) (22) (267) (114) (28) (142)
(Gain) loss
on sale of
assets 27 (3) 24 7 2 9
Other, net --- --- --- --- --- ---
EBITDA $27,325 $5,422 $32,747 $7,252 $9,021 $16,273

Average per
rig day
worked:
Contract
drilling
revenue $12,453 $39,772 $14,719 $10,339 $32,472 $14,666
EBITDA 3,389 7,438 3,725 1,569 8,033 2,833




Operating data comparison for the twelve months ended December 31, 2004 and 2003.

Year Ended Year Ended
December 31, 2004 December 31, 2003
Daywork Turnkey Daywork Turnkey
Operations Operations Total Operations Operations Total
(A) (A)
(Dollars in thousands except averages per rig day worked)
(Unaudited)

Rig days
worked 27,616 3,561 31,177 18,700 3,447 22,147
Contract
drilling
revenue $308,851 $115,783 $424,634 $178,818 $107,156 $285,974
Drilling
operating
expenses 234,630 93,167 327,797 158,141 86,146 244,287
General and
administrative
expenses 11,935 1,382 13,317 10,472 1,494 11,966
Interest
income (691) (86) (777) (812) (142) (954)
(Gain) loss on
sale of assets (34) (11) (45) (69) (12) (81)
Other, net --- --- --- (12) (2) (14)
EBITDA $63,011 $21,331 $84,342 $11,098 $19,672 $30,770

Average per
rig day worked:
Contract
drilling
revenue $11,184 $32,515 $13,620 $9,562 $31,087 $12,913
EBITDA 2,282 5,990 2,705 593 5,707 1,389

(A) Turnkey operations include the results from turnkey and footage
contracts.



Reconciliation of Earnings before interest expense, taxes, depreciation and
amortization (EBITDA) to net income (loss) applicable to common shares

Three Months Ended Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2004 2004 2003 2004 2003
(In thousands)
(Unaudited)

Earnings before
interest expense,
taxes, depreciation
and amortization $32,747 $25,644 $16,273 $84,342 $30,770
Depreciation and
amortization (13,995) (14,271) (12,935) (55,329) (50,521)
Interest expense (2,485) (2,200) (3,669) (14,759) (27,832)
Total income tax
(expense) benefit (5,738) (3,711) 887 (6,176) 17,383
Net income (loss)
applicable to
common shares $10,529 $5,462 $556 $8,078 $(30,200)



December 31, December 31,
2004 2003
(Unaudited)
(In thousands)
Condensed Balance Sheet Data:

Cash and cash equivalents $71,710 $54,350
Restricted cash 758 749
Other current assets 103,162 64,560
Total current assets 175,630 119,659
Net property and equipment 437,330 404,278
Other assets 19,866 5,141
Total assets $632,826 $529,078


Current liabilities $60,584 $50,932
Contingent convertible senior notes 275,000 150,000
Senior notes --- 84,898
Other long term liabilities 7,509 4,115
Deferred income taxes 52,251 43,496
Shareholders' equity 237,482 195,637
Total liabilities and equity $632,826 $529,078



Computation of Earnings Per Share
(In thousands, except per share amounts)
(Unaudited)


A reconciliation of the numerators and denominators of the basic and diluted earnings per share computation is as follows:

Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
Numerator
Net income (loss) $10,529 $556 $8,078 $(30,200)
Add interest expense on
contingent convertible
notes net of tax:
3.75% notes due 2023 (A) 976 --- --- ---
Floating rate notes due
2024 (A) 469 --- --- ---
Adjusted net income - diluted $11,974 $556 $8,078 $(30,200)

Denominator
Weighted average number of
shares outstanding - basic 188,932 181,283 185,868 181,210
Net effect of dilutive stock
options based upon treasury
stock method 1,749 1,490 1,786 ---
Assumed conversion of contingent
convertible senior notes:
3.75% notes due 2023 (A) 23,256 --- --- ---
Floating rate notes due
2024 (A) 19,201 --- --- ---

Weighted average number of
shares outstanding - diluted 233,138 182,773 187,654 181,210

Earnings Per Share:
Basic $0.06 $0.00 $0.04 $(0.17)
Diluted $0.05 $0.00 $0.04 $(0.17)

(A) For periods where amounts are not shown, the appropriate security
was either not outstanding or was not dilutive. Please see our
latest 10-Q for a description of our contingent convertible notes.




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Source: Grey Wolf, Inc.