Pacific Drilling S.A., an offshore drilling contractor, reported net income for third-quarter 2014 of $48.1 million compared to net income of $30.3 million in third-quarter 2013.
CEO Chris Beckett said, “Despite challenging market conditions, Pacific Drilling continues to execute on our plan to expand our operations and deliver exceptional performance. We delivered a third consecutive quarter of strong cash-flow generation and a new record-high quarterly EBITDA. With the start-up of Pacific Sharav in August, we again demonstrated our ability to introduce new rigs efficiently, with our strongest shakedown performance to date.
“The company’s financial performance also benefited from higher dayrates, driven by start-up of Pacific Sharav and extension of Pacific Bora bringing our average contractual dayrate in the fourth quarter to more than $540,000 per day. This financial performance lays the groundwork to initiate a share repurchase program before the end of this year.”
Contract drilling revenue for third-quarter 2014 was $279.6 million, which included $27.3 million of deferred revenue amortization, compared to contract drilling revenue of $260.8 million for second-quarter 2014, which included $28.0 million of deferred revenue amortization. During the three months ended Sept. 30, 2014, Pacific Drilling’s operating fleet of six drillships achieved average revenue efficiency of 94.4 percent.
Strong uptime
The company said that its revenue efficiency resulted from strong operational uptime on Pacific Drilling’s five mature rigs, partially offset by the impact of shakedown on Pacific Sharav.
Contract drilling expenses for third-quarter 2014 were $116.9 million, compared to $108.0 million for second-quarter 2014. Contract drilling expenses for third-quarter 2014 included $12.9 million in amortization of deferred costs, $8.4 million in reimbursable expenses, and $8.9 million in shore-based and other support costs. Direct rig-related daily operating expenses, excluding reimbursable costs, averaged $175,500 in third-quarter 2014, compared to $177,800 for second-quarter 2014.
General and administrative expenses for third-quarter 2014 were $16.5 million, compared to $13.8 million for second-quarter 2014. The increase in general and administrative expenses was primarily the result of non recurring costs related to the relocation of the company’s Houston office to support the growth of its operating fleet.
EBITDA for third-quarter 2014 was $145.5 million, compared to EBITDA of $137.9 million during the prior quarter. A reconciliation of net income to EBITDA is included in the accompanying schedules to this release. EBITDA margin for the quarter was 52.0 percent.
Interest expense for the third quarter was $35.6 million, compared to $28.6 million for the prior quarter.
Share Repurchase
Pacific Drilling S.A. also announced that the company’s Board of Directors will recommend at an Extraordinary General Meeting of Shareholders (EGM) the approval of a share repurchase program of up to 8 million shares.
Upon approval, the Board intends to immediately initiate the process to repurchase up to $30 million of the company’s issued and outstanding shares as a first tranche in the program.
CEO Chris Beckett commented, “I am pleased that the Board of Directors has accepted management’s proposal and will make this recommendation to initiate share repurchases. As we outlined in February of this year, we are committed to a capital allocation strategy which includes distributions to shareholders. We believe in the long-term fundamentals of our business and expect to initiate pro rata quarterly distributions to shareholders in first-quarter 2015. The share repurchases are intended to take advantage of recent market valuation weakness in the company and are an acceleration of our strategy to distribute up to $152 million by the end of 2015. This repurchase recommendation illustrates our commitment to appropriate deployment of cash to increase value for all shareholders.”