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As the need for drilling
and related services continues to increase, Pioneer Drilling has grown through
acquisitions and the building of their own rigs for use in Texas, North Dakota, Utah,
Colorado and Oklahoma
Basic Materials
Oil & Gas Drilling & Exploration
(PDC-AMEX)
Pioneer Drilling Company
1250 NE Loop 410 – Suite 1000
San Antonio, TX 78209
Phone: 210-828-7689
William D. Hibbetts
Senior V.P. & CFO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
February 9, 2006
BIO:
William D. Hibbetts, Senior Vice President and Chief Financial Officer
Mr. Hibbetts is a CPA and has served as Chief Financial Officer since December 2003 and
was Chief Accounting Officer from December 2000 to December 2003. He served as a director
from June 1984 to May 2004, when he resigned to make room for an independent director. He
served as Chief Accounting Officer of Southwest Venture Management Company from July 1988
to May 1999. He previously served as an officer of the Company from January 1982 to May
1986.
Company Profile:
Our business strategy is to own and operate a high-quality fleet of land drilling rigs in
active drilling markets, and position ourselves to maximize rig utilization and dayrates
and to enhance shareholder value. We intend to continue making additions to our drilling
fleet, either through acquisitions of businesses or selected assets or through the
construction of new or refurbished drilling rigs.
CEOCFO: Mr. Hibbetts,
will you tell us about your background with the company?
Mr. Hibbetts: “I have been associated with Pioneer
Drilling since January of 1982. I was here for about four-and-a-half years, and then
demand for rigs became very slow. I left, but stayed associated with the company as a
director. I came back to the company in December of 2000. I became CFO in December,
2003.”
CEOCFO: Will you tell us more about Pioneer Drilling?
Mr. Hibbetts: “We are a pure play land contract driller.
We currently operate 55 land rigs. We have grown substantially in the last few years
primarily from acquisitions, but over the last year, acquisitions have become very
expensive with the improvement in the industry. We have gone primarily to building new
rigs. We currently have 10 rigs in our new build program scheduled for delivery between
now and December of 2006.”
CEOCFO: That is a nice increase to what is available!
Mr. Hibbetts: “Up until November 30th of
2004, we were operating all in Texas, then we made an acquisition of seven rigs in North
Dakota and have built four rigs for our Utah division. In December of 2004, we bought five
rigs in western Oklahoma. Now we have 15 rigs working is south Texas, 18 in east Texas, 5
in north Texas, 5 in western Oklahoma, 5 in our Vernal, Utah division of the Rockies, and
7 in our North Dakota division.”
CEOCFO: How does being
geographically distributed, change the company?
Mr. Hibbetts: “Our business is relatively simple. We had
to move some people from Texas into our division manager positions in Utah, North Dakota
and Western Oklahoma.”
CEOCFO: Is it difficult to get qualified people, given all
the drilling that is going on?
Mr. Hibbetts: “Yes, obtaining people is difficult now.
Back in the summer of 2004, we started a training program in each of our divisions. We
have had to bring people in from outside the industry. We have floor hand trainees and
assistant driller trainees in each of our divisions.”
CEOCFO: What attracts
customers to your company?
Mr. Hibbetts: “Many of our customer relationships are
long-term. We have some rigs that have been working with the same customer for years. For
example, rig 25 that was placed in service in May of 2003 and has been working for the
same customer ever since. All the new rigs we are building have one to two year contracts.
We are building rigs because operators cannot find rigs. We try to maintain a high-quality
rig fleet and are constantly upgrading our older rigs. We have quality personnel and we do
a lot of training. Our senior VP of marketing has good contacts within the industry. We
place a lot of emphasis on safety and we listen to our customers needs and try to fulfill
those needs.”
CEOCFO: What is on the
new rigs, that is different?
Mr. Hibbetts: “Substantially all of the new rigs we are
building are electric rigs. They are more efficient and easier to operate. A number of
these rigs are going into the Rockies where our customers are environmentally sensitive,
so we have made them more environmentally friendly. They are also designed to be fast
moving and easy to rig up.”
CEOCFO: What are the
rigs going for today?
Mr. Hibbetts: “These rigs are running $7 to $8 million a
piece. We actually build them ourselves and rig them up in a yard in Houston that is owned
by a company that builds the mast and sub structures. Then we buy the components and bring
in our crews about a month or so before the rig is ready to go out. We then start pulling
all the components together and rigging it up. A couple years ago, we were able to buy
some used components and refurbished them to like new. Then, 70% of the rig was new, 30%
used components refurbished to like new. Today, probably 90% of the components are new and
only about 10% are used and refurbished to like new. We feel like we are saving $2 to $2½
million per rig by assembling them ourselves rather than having them built for us.
We also feel we can assemble a rig in less time.”
CEOCFO: How is the
company financially today?
Mr. Hibbetts: “We are debt free, and have about $250
million equity. We have about a $300 million balance sheet; cash flow is very strong now.
We did three equity offerings in the last two years, and raised approximately $130 million
and paid off all our debt. Between the cash that we have on our balance sheet and our cash
flow, we anticipate that we will be building all our new build rigs from cash flow and
cash on hand. Things are looking very healthy right now. We have also taken the public
float in our company, from about five million shares two years ago, up to about 38 million
shares today.”
CEOCFO: Why should
potential investors be interested?
Mr. Hibbetts: “We have been a growth company and we plan
to continue our growth strategy. The industry is strong now and we see it continuing to
grow. We have gone from very little analyst coverage a couple of years ago, to nine
analysts covering us today and eight of the nine have buy recommendations.”
CEOCFO: Is reaching
investors a focus for you?
Mr. Hibbetts: “The analysts that are covering us want us
to get out and visit with some of their clients from time-to-time. We average getting out
at least once a month for an investment conference or traveling a few days with one of the
investment firms covering us. We believe that keeping investors informed and introducing
the Company to potential new investors on a regular basis will help our equity maintain an
attractive valuation.”
CEOCFO: In closing, why are rigs a good area?
Mr. Hibbetts: “Rigs are a good investment because demand
for oil and gas production remains strong. It now takes more rigs to drill holes to
maintain the same level of gas production year over year. Commodity prices have made it
more economical to get into some new areas which were not previously economical to
drill.”
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