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Company Overview
Pioneer Drilling Company provides contract land drilling services to independent and major oil and gas exploration and production companies. In addition to our drilling rigs, we provide the drilling crews and most of the ancillary equipment needed to operate our drilling rigs. We have focused our operations in selected oil and natural gas production regions in the United States. We are an oil and gas services company. We do not invest in oil and natural gas properties.
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.
Growth Strategy
Our growth strategy is to acquire or build rigs on attractive economic terms and focus on expanding our operations in geographic areas with substantial natural gas reserves that have historically maintained higher-than-average rig utilization rates. We prefer to acquire rigs during weaker periods of the drilling cycle because the cost per rig is lower. However, there are costs associated with upgrading and modernizing the older, acquired rigs because of our commitment to maintain an overall high-quality fleet. During strong periods of the drilling cycle, we prefer to build new, premium, state-of-the-art rigs.
This growth strategy has paid off with strong returns on invested capital, especially during the recent upturn in the cycle. Due to the increases in drilling activity, our customers have emphasized their needs for premium drilling rigs that are efficient and quick to transport to drilling sites and prepare for drilling operations, or rig-up. In response to this market demand, we have been focused on upgrading our existing rig fleet and implementing a rig-build program of high-quality drilling rigs.
Upgrade Program
We devote substantial resources to maintaining and upgrading our rig fleet. In the short term, these actions result in fewer revenue days and slightly lower utilization; however, in the long term, we believe the upgrades help the marketability of our rigs and improve their operating performance. We believe it is important to maintain a premium fleet of rigs that can be utilized in all phases of the demand cycle. Since April 2001, we have upgraded 29 of our 40 older rigs.
Rig-build Program
Under the rig-build program that we began in earnest in fiscal 2005, we added 15 state-of-the-art, mostly diesel electric, rigs to our fleet. Most of the rigs in this program are of a trailer-mounted design that are environmentally friendly and quick-to-move and rig-up. Since April 2001, we have built 25 new rigs.
Geographic Diversification
In fiscal 2005, we established operations in Western Oklahoma and the Williston Basin of North Dakota and Montana by completing two strategic acquisitions. We also moved into the Uinta Basin of Utah with several of our new rigs. In fiscal 2006, we added more new rigs to these regions and we upgraded some of the older acquired rigs in our fleet, which strengthened our market position and broadened our customer base in the Rocky Mountains. We now have a more diversified operation that provides additional growth opportunity and provides some protection from weakness in an individual market. Currently, we have 20 rigs in our East Texas division, 17 rigs in our South Texas division, 13 rigs in our Rocky Mountains divisions, ten rigs in our North Texas division and six rigs in Oklahoma division.
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