Grey Wolf, Inc. Announces Record Results for the Quarter Ended June 30, 2006
biz.yahoo.com
Monday July 31, 5:08 pm ET
HOUSTON, July 31 /PRNewswire-FirstCall/ -- Grey Wolf, Inc. (Amex: GW; "Grey Wolf" or the "Company") reported net income of $57.9 million, or $0.25 per share on a diluted basis, for the three months ended June 30, 2006 compared with net income of $27.6 million, or $0.12 per share on a diluted basis, for the second quarter of 2005. Revenues for the second quarter of 2006 were $239.6 million compared with revenues for the second quarter of 2005 of $161.3 million. The second quarter 2006 results included an after-tax gain of $2.7 million ($0.01 per diluted share) related to insurance proceeds.
For the six months ended June 30, 2006, Grey Wolf reported net income of $112.2 million, or $0.49 per share on a diluted basis, on revenues of $462.5 million compared to net income of $50.7 million, or $0.23 per share on a diluted basis, on revenues of $311.3 million for the six months ended June 30, 2005. The six-month 2006 results include the gain from insurance proceeds mentioned above along with a first quarter 2006 after-tax gain of $5.9 million ($0.03 per diluted share) from the sale of five rigs formerly held for refurbishment.
The Company reported record total earnings before interest expense, taxes, depreciation and amortization ("EBITDA") of $111.7 million in the second quarter of 2006, up from $106.3 million the first quarter of 2006 and $61.7 million for the second quarter of 2005. On a per-rig-day basis, EBITDA was $11,398 for the second quarter of 2006, $10,866 for the first quarter of 2006 and $6,820 for the second quarter of 2005. Turnkey EBITDA per rig day in the second quarter was $19,800, and daywork EBITDA per rig day totaled $10,314. Daywork and turnkey EBITDA as well as EBITDA per rig day for the second quarter were the highest in the Company's history.
"By logging record results in each of the past three quarters, Grey Wolf has provided substantial cash flow to finance current and future growth," commented Tom Richards, Chairman, President and Chief Executive Officer. "We are focused on a balanced strategy of investing this cash flow in the term contract-backed growth and upgrade of our rig fleet, the improvement of the Company's balance sheet and returning cash to our shareholders through the common stock repurchase program. We believe this balanced strategy will continue to build shareholder value in both the near-term and into the future."
"In line with this strategy, Grey Wolf recently entered into a three-year term contract to deploy a new 1,500-horsepower rig to be delivered in February 2007. With this contract and four similar contracts announced last quarter, Grey Wolf has ordered a total of five new 1,500-horsepower rigs that provide solid returns on the capital invested as well as full recovery of the purchase price (average of $15.1 million per rig) after projected operating expenses."
"Current natural gas prices continue to support improvements in our business," Mr. Richards added. "We have seen no reduction in activity levels or dayrates with the recent fluctuations in natural gas prices. In fact, we recently implemented an increase in dayrates, and demand for new and renewal term contracts on our rigs is undiminished. We added 11 rigs to our marketed fleet in 2005, and we expect to match that number during 2006 and early 2007. With the additional rigs working at higher rates, we expect future quarterly results to be stronger than the second quarter."
Mr. Richards concluded, "Grey Wolf has a significant portfolio of term contracts which is at the highest level in the Company's history. This portfolio provides a base of rig operating days and EBITDA throughout 2008."
Grey Wolf averaged 108 rigs working in the second quarter of 2006. This compares with an average of 109 rigs working in the first quarter of 2006 and 99 rigs working during the second quarter a year ago. Current leading edge rates are now $19,000 to $27,000 per day without fuel or top drives.
Grey Wolf's rig fleet includes 112 marketed rigs and two rigs available for refurbishment. Before year end, the Company intends to replace the 2,000- horsepower rig that was destroyed by fire and to reactivate the final two rigs it has available for refurbishment, significantly upgrading each rig. The average cost of these three rigs, which are scheduled to begin operations under term contracts in the third and fourth quarters, is expected to be $11.7 million. In the aggregate and after projected operating expenses, all of the incremental capital expended in deploying these rigs is expected to be recovered under the term contracts. Grey Wolf's rig fleet will total 120 rigs following the deployment of these three rigs and the delivery of the five new rigs that are on order.
Grey Wolf continues to enter into long-term contracts and as of July 31, 2006, has 76 rigs working under such contracts. The Company has approximately 14,500 days or an average of 79 rigs contracted for the remaining two quarters of 2006, 16,900 days or an average of 46 rigs committed under term contracts in 2007, and 5,900 days or an average of 16 rigs committed in 2008. The contracts range in length from one to three years but end at various times over this period providing an opportunity to reprice at then-current market rates. The average increase in the contracted revenue on the 18 long-term contracts renewed during the second quarter of 2006 was $5,500 per day.
Capital expenditures were $49.6 million during the second quarter. Based upon rig refurbishment plans, replacement of the 2,000-horsepower rig and the purchase of five new rigs, capital expenditures for 2006 are currently projected to be $210 million to $220 million.
During May 2006, the Company provided a wage increase (approximately $540 per rig operating day) to rig-based personnel that was contractually passed through to our customers in the form of higher dayrates. This increase reflects our commitment to retaining experienced crews that provide superior service to our customers and operate our rigs in a safe and efficient manner.
Under a previously announced plan that authorizes the repurchase of up to $100 million of Grey Wolf common stock, the Company repurchased 1.4 million shares during the second quarter of 2006 at a total cost of $10.4 million. In the third quarter to date, the Company has bought an additional 0.6 million shares for $3.9 million.
During the third quarter of 2006, the Company expects to average 109 rigs working with 11 of these rigs performing turnkey services. In addition, average daywork revenue per day is expected to increase by $800 with little or no change in average daywork operating expenses per day. Depreciation expense of approximately $19.0 million, interest expense of approximately $3.5 million and an effective tax rate of approximately 37% is expected for the third quarter of 2006. |
