BRNC Bronco Drilling Company, Inc. (MM)

Bronco Drilling Company, Inc., (Nasdaq/GM:BRNC), announced today financial and operational results for the three months ended June 30, 2008. Consolidated Results Revenues for the second quarter of 2008 were $69.8 million compared to $62.3 million for the first quarter of 2008 and $74.7 million for the second quarter of 2007. Net income for the second quarter of 2008 was $4.3 million compared to $8.1 million for the previous quarter and $8.7 million for the second quarter of 2007. The Company generated EBITDA of $20.6 million for the second quarter of 2008 compared to $25.9 million for the previous quarter and $25.8 million for the second quarter of 2007. The Company�s fully diluted earnings per share for the quarter ended June 30, 2008 were $0.16. Results for the second quarter of 2008 include non-recurring charges related to Bronco�s equity investment in Challenger Limited. Second quarter results were negatively impacted by a pre-tax loss of $1.5 million related to the sale and or contribution of rigs to Challenger and adjustments made to Challenger�s financial statements for the first quarter resulting in a $1.9 million reduction in Challenger�s pre-tax net income. These adjustments were made subsequent to Bronco filing its first quarter 10-Q and therefore recognized by Bronco in the second quarter. Without these non-recurring charges, fully diluted earnings per share for the quarter would be $0.21. Land Drilling Average operating land rigs for the first and second quarters of 2008 were 45 compared to 52 for the second quarter of 2007. Revenue days for the quarter increased to 3,355 from 2,848 for the previous quarter and decreased from 3,624 for the second quarter of 2007. Utilization for the second quarter of 2008 was 82% compared to 69% for the previous quarter and 76% for the second quarter of 2007. Average daily cash margins for our land drilling fleet for the quarter ended June 30, 2008 were $7,088 compared to $7,333 for the previous quarter and $7,941 for the second quarter of 2007. Well Servicing Average operating workover rigs for the second quarter of 2008 were 53 compared to 48 for the previous quarter and 29 for the second quarter of 2007. Revenue hours for the quarter increased to 25,533 from 23,865 for the previous quarter and from 14,427 for the second quarter of 2007. Utilization for the second quarter of 2008 was 75% compared to 77% for the previous quarter and 78% for the second quarter of 2007. Average hourly cash margins for our well servicing fleet for the quarter ended June 30, 2008, were $127 compared to $137 for the previous quarter and $149 for the second quarter of 2007. Challenger Eight of the rigs contributed or sold to Challenger are in Libya with three of the rigs currently operating. Challenger is still in the process of securing a debt facility to meet short-term capital needs including those related to start-up of the Bronco rigs and to mitigate downtime that has plagued Challenger�s operations due to past underinvestment in adequate rig supplies and spare equipment. Bronco considers the debt facility a pivotal component in determining the long-term success of Challenger and expects Challenger will continue to have unpredictable financial results in the near-term. Recent Events and Outlook Bronco increased its number of term contracts during the second quarter and now has approximately 57% of its estimated revenue days for the last two quarters of 2008 and 32% of its estimated revenue days for 2009 covered via term contracts. Total contracted revenue days do not include days attributable to our multi-well contracts, as we do not attempt to quantify the duration of those contracts. Inclusion of such contracts would increase the percentages stated above. During the second quarter, Bronco bid and won a tender in Mexico with Pemex. This tender will require three rigs operating in the Chicontepec basin near Poza Rica, Mexico. Two of the rigs have begun to mobilize to Mexico with the third to follow in the coming weeks. We anticipate all three will be operating in Mexico by the end of August. The duration of the contract with Pemex for these rigs is through the end of 2009. Bronco currently has six rigs contractually committed to the Bakken Shale. All of these rigs will require winterization and other modifications. Two of the rigs will require major modifications and refurbishment which will include a conversion from mechanical to electric power. We expect these rigs to be deployed to the Bakken during the third and fourth quarters of 2008. About Bronco Drilling Bronco Drilling Company, Inc., a publicly held company headquartered in Edmond, Oklahoma, is a provider of contract land drilling services and workover services to oil and natural gas exploration and production companies. Bronco's common stock is quoted on The Nasdaq Global Market under the symbol �BRNC.� For more information about Bronco Drilling Company, Inc., visit http://www.broncodrill.com. Bronco Drilling Company, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share par value) � � June 30, December 31, 2008 2007 ASSETS (Unaudited) � CURRENT ASSETS Cash and cash equivalents $ 9,914 $ 5,721 Receivables Trade and other, net of allowance for doubtful accounts of $1,215 and $1,834 in 2008 and 2007, respectively 56,601 61,499 Contract drilling in progress 1,402 2,128 Income tax receivable 1,626 1,191 Current deferred income taxes 618 775 Current maturities of note receivable 4,860 - Prepaid expenses � 1,363 � 705 Total current assets 76,384 72,019 � PROPERTY AND EQUIPMENT - AT COST Drilling rigs and related equipment 469,417 510,962 Transportation, office and other equipment � 41,734 � 41,942 511,151 552,904 Less accumulated depreciation � 100,939 � 86,274 410,212 466,630 � OTHER ASSETS Goodwill 23,909 23,908 Note receivable, less current maturities 5,085 - Investment in Challenger 76,876 - Restricted cash and deposit 2,815 2,745 Intangibles, net, and other � 4,508 � 3,303 113,193 29,956 � $ 599,789 $ 568,605 � LIABILITIES AND STOCKHOLDERS' EQUITY � CURRENT LIABILITIES Accounts payable $ 15,079 $ 16,715 Accrued liabilities 21,147 19,280 Current maturities of long-term debt � 71,358 � 1,256 � Total current liabilities 107,584 37,251 � LONG-TERM DEBT, less current maturities 5,587 66,862 � DEFERRED INCOME TAXES 75,114 68,063 � COMMITMENTS AND CONTINGENCIES � STOCKHOLDERS' EQUITY Common stock, $.01 par value, 100,000 shares authorized; 26,270 and 26,031 shares issued and outstanding at June 30, 2008 and December 31, 2007 264 262 � Additional paid-in capital 300,781 298,195 � Retained earnings � 110,459 � 97,972 Total stockholders' equity � 411,504 � 396,429 � $ 599,789 $ 568,605 � � � � � Bronco Drilling Company, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands, except per share amounts) � � Three Months EndedJune 30, Six Months EndedJune 30, 2008 2007 2008 2007 (Unaudited) (Unaudited) REVENUES Contract drilling revenues, including 2%, 0%, 1%, and 2% to related parties $ 60,494 $ 69,291 $ 114,567 $ 143,870 Well service 9,320 5,429 17,543 9,831 Gain (loss) on Challenger transactions � (1,507 ) � - � � 3,200 � � - � � 68,307 � � 74,720 � � 135,310 � � 153,701 � EXPENSES Contract drilling 36,715 40,514 69,909 81,313 Well service 6,079 3,280 11,022 5,922 Depreciation and amortization 12,457 10,894 24,382 22,099 General and administrative � 5,414 � � 5,399 � � 11,153 � � 10,091 � � 60,665 � � 60,087 � � 116,466 � � 119,425 � � Income from operations 7,642 14,633 18,844 34,276 � OTHER INCOME (EXPENSE) Interest expense (1,161 ) (795 ) (2,387 ) (2,062 ) Interest income 274 203 1,009 250 Equity in income of investment (69 ) - 1,776 - Other � 308 � � 101 � � 453 � � 166 � � (648 ) � (491 ) � 851 � � (1,646 ) Income before income taxes 6,994 14,142 19,695 32,630 Income tax expense � 2,655 � � 5,428 � � 7,208 � � 12,529 � � NET INCOME $ 4,339 � $ 8,714 � $ 12,487 � $ 20,101 � � Income per common share-Basic $ 0.17 � $ 0.33 � $ 0.48 � $ 0.77 � � Income per common share-Diluted $ 0.16 � $ 0.33 � $ 0.47 � $ 0.77 � � Weighted average number of shares outstanding-Basic � 26,270 � � 26,019 � � 26,267 � � 25,963 � � Weighted average number of shares outstanding-Diluted � 26,388 � � 26,116 � � 26,340 � � 26,028 � Non-GAAP Financial Measures This press release includes a presentation of average daily cash margin for our land drilling fleet, average hourly cash margin for our well servicing fleet and EBITDA which are not financial measures recognized under generally accepted accounting principles, or GAAP. Average daily cash margin is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, minus well service revenue, plus well service expense, income tax expense, other expense, general and administrative expense and depreciation and amortization, and divided by revenue days for the period. Average hourly cash margin is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, minus contract drilling revenue, plus contract drilling expense, income tax expense, other expense, general and administrative expense and depreciation and amortization, and divided by operating hours for the period. EBITDA is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, plus interest expense, income tax expense and depreciation and amortization. We have presented average daily cash margin, average hourly cash margin and EBITDA because we use these metrics as an integral part of our internal reporting to measure our performance and to evaluate the performance of our senior management. We consider these metrics to be important indicators of the operational strength of our business. A limitation of these metrics, however, is that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our business. Management evaluates the costs of such tangible and intangible assets and the impact of related impairments through other financial measures, such as capital expenditures, investment spending and return on capital. Therefore, we believe that average daily cash margin, average hourly cash margin and EBITDA provide useful information to our investors regarding our performance and overall results of operations. Neither average daily cash margin, average hourly cash margin nor EBITDA is intended to be a performance measure that should be regarded as an alternative to, or more meaningful than, either net income as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. In addition, none of these metrics is intended to represent funds available for dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. These non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in our various agreements. The following presents a reconciliation of average daily cash margin and EBITDA to net income, the most directly comparable GAAP financial measure (in thousands, except revenue days and average daily cash margin): � Three Months Ended � Three Months Ended June 30, March 31, 2008 � 2007 2008 (Unaudited) (Unaudited) Reconciliation of average daily cash margin to net income: Net income $ 4,339 $ 8,714 $ 8,148 Well service revenue (9,320 ) (5,429 ) (8,223 ) Well service expense 6,079 3,280 4,943 Income tax expense 2,655 5,428 4,552 Other expense 2,155 491 (6,201 ) General and administrative 5,414 5,399 5,739 Depreciation and amortization � 12,457 � � 10,894 � � 11,925 � � Drilling margin 23,779 28,777 20,883 � Revenue days 3,355 3,624 2,848 � Average daily cash margin $ 7,088 � $ 7,941 � $ 7,333 � � � Three Months Ended Three Months Ended June 30, March 31, 2008 2007 2008 (Unaudited) (Unaudited) Reconciliation of average hourly cash margin to net income: Net income $ 4,339 $ 8,714 $ 8,148 Contract drilling revenue (60,494 ) (69,291 ) (54,073 ) Contract drilling expense 36,715 40,514 33,190 Income tax expense 2,655 5,428 4,552 Other expense 2,155 491 (6,201 ) General and administrative 5,414 5,399 5,739 Depreciation and amortization � 12,457 � � 10,894 � � 11,925 � � Well service margin 3,241 2,149 3,280 � Operating hours 25,533 14,427 23,865 � Average hourly cash margin $ 127 � $ 149 � $ 137 � � Three Months Ended � Three Months Ended June 30, March 31, 2008 � 2007 2008 (Unaudited) (Unaudited) Calculation of EBITDA: Net income $ 4,339 $ 8,714 $ 8,148 Interest expense 1,161 795 1,226 Income tax expense 2,655 5,428 4,552 Depreciation and amortization � 12,457 � 10,894 � 11,925 � EBITDA $ 20,612 $ 25,831 $ 25,851 Cautionary Note Regarding Forward-Looking Statements The information in this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, comments pertaining to anticipated domestic and international operations. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, commodity price fluctuations, barriers to entry in international markets, operating hazards and other factors described in Bronco�s Annual Report on Form 10-K filed with the SEC on March 8, 2007, as amended, and other filings with the SEC, which are available free of charge on the SEC�s website at www.sec.gov. Bronco cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements. Important Information On January 23, 2008, Bronco entered into a merger agreement with Allis-Chalmers Energy Inc. (�Allis-Chalmers�), as amended as of June 1, 2008, providing for the acquisition of Bronco by Allis-Chalmers. In connection with the proposed merger, Allis-Chalmers and Bronco have filed a joint proxy statement/prospectus and both companies have filed and will file other relevant documents concerning the proposed merger transaction with the SEC. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION REGARDING THE MERGER. Investors and security holders may obtain a free copy of the definitive joint proxy statement/prospectus and the other documents free of charge at the website maintained by the SEC at www.sec.gov. The documents filed with the SEC by Allis-Chalmers may be obtained free of charge from Allis-Chalmers� website at www.alchenergy.com or by calling Allis-Chalmers� Investor Relations department at (713) 369-0550. The documents filed with the SEC by Bronco may be obtained free of charge from Bronco�s website at www.broncodrill.com or by calling Bronco�s Investor Relations department at (405) 242-4444. Investors and security holders are urged to read the joint proxy statement/prospectus, as it may be amended or supplemented from time to time, and the other relevant materials before making any voting or investment decision with respect to the proposed merger. Allis-Chalmers, Bronco and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the respective stockholders of Allis-Chalmers and Bronco in connection with the merger. Information regarding such persons and a description of their interests in the merger are contained in the joint proxy statement/prospectus filed with the SEC, as it may be amended or supplemented from time to time. Information about the directors and executive officers of Allis-Chalmers and their ownership of Allis-Chalmers common stock is set forth in its amended annual report on Form 10-K/A filed with the SEC on April 29, 2008, as further amended, and in subsequent statements of changes in beneficial ownership on file with the SEC. Information about the directors and executive officers of Bronco and their ownership of Bronco common stock is set forth in its amended annual report on Form 10-K/A filed with the SEC on April 29, 2008 and in subsequent statements of changes in beneficial ownership on file with the SEC. Investors may obtain additional information regarding the interests of such participants by reading the joint proxy statement/prospectus for the merger, as it may be amended or supplemented from time to time. THIS PRESS RELEASE IS NOT AN OFFER TO SELL THE SECURITIES OF ALLIS-CHALMERS AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES.