Pacific Drilling’s contracted backlog, cash flow and available financing sufficient through 2017

By Lisa Kerner

Charlotte, N.C., Feb. 23 – Pacific Drilling SA’s contracted backlog is expected to provide the company with “strong support for liquidity over the next couple years,” said chief executive officer Chris Beckett.

“In fact, despite the challenging market, it provides us with the expected cash flow we need to meet all of our obligations through 2017,” Beckett said during the company’s fourth-quarter earnings conference call on Monday.

The company ended 2014 with a cash balance of $167.8 million, debt outstanding of $3.15 billion and more than $800 million of available liquidity, chief financial officer Paul Reese said on the call.

Liquidity includes up to about $720 million of undrawn capacity under existing credit facilities.

Reese also discussed Pacific Drilling’s efforts to proactively strengthen the balance sheet. The company refinanced its project facilities in 2013, and in October it put in place the necessary financing for Pacific Zonda at “a very attractive rate.”

“Last week, we repaid our unsecured bonds, which was our most expensive debt outstanding,” said Reese.

Pacific Drilling used cash on hand and $180 million under its 2014 revolving credit facility to fund the repayment.

As a result, Pacific Drilling’s average cost of debt now stands at below 5%.

“We are also in the process of obtaining remaining bank approvals needed for amending some of our financial covenants to address the delays in newbuild deliveries,” the CFO said.

Cash flow from operations for the fourth quarter totaled $72.5 million, and full-year cash flow from operations totaled $396.4 million.

Reese said future operational cash flow and current available financing will be ample to meet Pacific Drilling’s commitments until late 2017 when its 7¼% bonds mature.

Despite “an outstanding quarter capping a year of strong operations in 2014,” according to Beckett, the company’s board has deferred the decision on further distributions to shareholders in 2015, beyond purchases under the existing share buyback program.

Under the share repurchase program approved in November, the company has repurchased 4.2 million shares at an average price of $4.17 per share. The company intends to continue the program up to the full 8 million shares as approved.

“Although visibility of new offshore rig contract opportunities is limited, we also see limited competitive supply between now and the end of the year, with only two or three rigs available with latest-generation 2.5 million pound hook loads,” he said.

Pacific Drilling had net income of $68 million, or $0.32 per diluted share, for the fourth quarter. This compares to net income of $25.7 million, or $0.12 per diluted share, for the prior-year period, according to the earnings news release.

For the year ended Dec. 31, net income was $188.3 million, or $0.87 per diluted share, an increase of $96.1 million over the prior-year net income.

Pacific Drilling is an ultra-deepwater drilling contractor with corporate offices in Houston and other offices in Brazil, Luxembourg, Nigeria, Singapore and South Korea.

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