LUXEMBOURG--(BUSINESS WIRE)--Pacific Drilling S.A. (NYSE:PACD) today announced net income for second-quarter 2016 of $8.2 million or $0.39 per diluted share, compared to a net loss of $2.5 million or $0.12 per diluted share for first-quarter 2016 and net income of $47.1 million or $2.23 per diluted share for second-quarter 2015. All share and per share information has been adjusted retroactively to reflect the reverse stock split that became effective on May 25, 2016.

CEO Chris Beckett said, "Market conditions continue to be very challenging, with limited new tender opportunities and continued pressure on existing contracts. In this environment it is increasingly important to deliver exceptional service to our customers and our second-quarter results evidence our success in doing so. Our operating fleet, including the Pacific Scirocco, continues to deliver excellent operational performance, including a third consecutive quarter with record revenue efficiency. Our focus on optimizing what we control continues to yield strong cost management, resulting in an Adjusted EBITDA margin of 53.9%. Pacific Scirocco’s contract with Total continues to be in force and after a period of standby at reduced rate, on or about September 15, we expect the rig to restart operations in Nigeria for the remainder of its contract term.”

Beckett continued, “Our innovative smart-stacking approach has redefined the right way to warm stack a drillship for the industry. We have achieved idle rig costs of approximately $30,000/day for the smart-stacked vessels. The smart-stack process ensures 5-year survey work is complete, the rig can start operations within 90 days, and we are included in client tenders as ready to work.”

Second-Quarter 2016 Operational and Financial Commentary

Contract drilling revenue for second-quarter 2016 was $203.7 million, which included $12.7 million of deferred revenue amortization, compared to first-quarter 2016 contract drilling revenue of $205.4 million, which also included $12.7 million of deferred revenue amortization. Contract drilling revenue decreased in the second-quarter primarily as a result of the Pacific Scirocco being on an 80% standby rate starting in May 2016. During the three months ended June 30, 2016, our operating fleet achieved average revenue efficiency of 99.0%, a further improvement from first-quarter 2016’s previous record high of 97.7%.

Operating expenses for second-quarter 2016 were $76.0 million, compared to $79.0 million for first-quarter 2016. The reduction in operating expenses was primarily the result of decreased costs across each of the rigs in our fleet and shore-based and other support costs. Operating expenses for second-quarter 2016 included $6.1 million in reimbursable costs, $7.1 million in shore-based and other support costs, and $3.3 million in amortization of deferred costs.

Direct rig-related daily operating expenses for our four operating rigs, excluding reimbursable costs, averaged $140,100 per rig in second-quarter 2016, down from an average of $145,800 per operating rig in first-quarter 2016. The reduction in direct rig-related daily operating expenses was primarily the result of continued fleet-wide cost saving measures. Direct rig-related daily operating expenses for our three idle rigs averaged $31,300 per rig in second-quarter 2016, down from an average of $36,500 per rig in first-quarter 2016.

CFO Paul Reese commented, “Compared to the height of the market in 2014, we have now reduced our daily operating expenses by approximately 24%, or $44,000 per day per operating rig.”

General and administrative expenses for second-quarter 2016 were $14.2 million, compared to $15.1 million for first-quarter 2016. Excluding certain legal and financial advisory fees of $2.9 million in second-quarter 2016 and $2.7 million in first-quarter 2016, our corporate overhead expenses(d) for second-quarter 2016 were $11.3 million, compared to $12.4 million for first-quarter 2016. This decrease of $1.1 million or 9% reflects our continued focus on cost savings measures and optimization of our overhead support structure.

Other expense for second-quarter 2016 of $3.8 million includes an unusual $2.9 million foreign exchange loss primarily due to the greater than 40% devaluation of the Nigerian Naira by the Nigerian Central Bank in June.

Net income for second-quarter 2016 was $8.2 million, compared to net loss of $2.5 million for first-quarter 2016. The increase in the second-quarter 2016 net income was primarily the result of a $14.2 million gain on the extinguishment of $23.7 million in principal amount of our senior notes due 2017.

Adjusted EBITDA for second-quarter 2016 was $109.7 million, compared to Adjusted EBITDA of $112.9 million for first-quarter 2016. A reconciliation of net income to EBITDA and Adjusted EBITDA is included in the schedules accompanying this release.

Investor Toolkit

Updated schedules of expected amortization of deferred revenue, depreciation expense, and interest expense for our existing financing are available in the “Quarterly and Annual Results” subsection of the “Investor Relations” section of our website, www.pacificdrilling.com.

Footnotes

(a) Revenue efficiency is defined as actual contractual dayrate revenue (excluding mobilization fees, upgrade reimbursements and other revenue sources) divided by the maximum amount of contractual dayrate revenue that could have been earned during such period.

(b) EBITDA and Adjusted EBITDA are non-GAAP financial measures. For a definition of EBITDA and Adjusted EBITDA and a reconciliation to net income, please refer to the schedule included in this release.

(c) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by contract drilling revenue. Management uses this operational metric to track company results and believes that this measure provides additional information that consolidates the impact of our operating efficiency as well as the operating and support costs incurred in achieving the revenue performance.

(d) Corporate overhead expenses is a non-GAAP financial measure. For a definition of corporate overhead expenses and a reconciliation to general and administrative expenses, please refer to the schedule included in this release.

About Pacific Drilling

With its best-in-class drillships and highly experienced team, Pacific Drilling is committed to becoming the industry’s preferred high-specification, floating-rig drilling contractor. Pacific Drilling’s fleet of seven drillships represents one of the youngest and most technologically advanced fleets in the world. For more information about Pacific Drilling, including our current Fleet Status, please visit our website at www.pacificdrilling.com.