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Article Excerpt
OPERATOR: Welcome to the Union Drilling, Inc. fourth-quarter 2008 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this call is being recorded today, Friday, March 6, 2009. I would now like to turn the conference over to Mr. Ben Burnham with DRG&E.
BEN BURNHAM, IR, DRG&E: Thank you Patty and good morning everyone. We appreciate you joining us for Union Drilling's conference call today to review fourth-quarter 2008 results.
Before I turn the call over to management, I have the normal housekeeping details to run through. You may have received an e-mail of the earnings release yesterday afternoon. If you didn't get your release or would like to be added to the e-mail distribution list, please call DRG&E at 713-529-6600.
A recorded replay of today's call will be available until March 13. Information for accessing the telephonic replay is in yesterday's press release. The replay will also be available via webcast by going to the Company's website at www.UnionDrilling.com.
Please note that information reported on this call speaks only as of today, March 6, 2009 and therefore you are advised that time sensitive information may no longer be accurate at the time of any replay listening. Also, statements made on this conference call that are not historical facts, including statements accompanied by word such as will, believe, anticipate, expect, estimate or similar words are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding Union Drilling's plans and performance.
These statements are based on management's estimates, assumptions and projections as of the date of this call and they're not guarantees of future performance. Actual results may differ materially from the results express or implied in these statements as a result of risks, uncertainties and other factors including but not limited to the factors set forth in the Company's prior filings with the Securities and Exchange Commission. Union Drilling cautions you not to place undue reliance on forward-looking statements contained in this call.
Union Drilling does not undertake any obligation to publicly advise or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this call. For further information, please refer to the Company's filings with the SEC.
During today's call, management will discuss EBITDA and drilling margin which are non-GAAP financial measures. Please refer to yesterday's press release which can be found on the Company's website for disclosures about these measures and for reconciliation to the most directly comparable GAAP financial measures.
Now, with that out of the way, with me this morning are Chris Strong, the Company's President and Chief Executive Officer; and A.J. Verdecchia, Chief Financial Officer. Now I would like to turn the call over to Chris.
CHRISTOPHER STRONG, PRESIDENT AND CEO, UNION DRILLING, INC.: Good morning everyone and thank you for joining us today. Operationally, we had a solid fourth quarter.
Revenues totaled $81 million and EBITDA came to $19 million. Excluding a non-cash charge for the impairment of goodwill, which A.J. will discuss in a minute, net income was $4.2 million or $0.19 per share during the quarter.
Utilization of the fleet was 69.4%, up from 61.6% in the same period in 2007 but down sequentially from 73.8% in the third quarter of 2008. We typically have a decline in activity during the holiday season that negatively impacts utilization for the fourth quarter.
However, the decline in utilization we experienced in the recent quarter also marked the beginning of a massive erosion of demand for land drilling services in the domestic market. I will talk more about how that is impacting us and what we're doing about it in a few minutes.
But first, a few updates and highlights from the fourth quarter. While I'm clearly not happy with where the stock price has been trading over the last several months, the upside is that it presented an attractive investment opportunity for the Company.
During Q4, we repurchased approximately 1.7 million shares under our share repurchase authorization. Subsequent to the end of the quarter, we completed the balance of our authorized 2 million share repurchase.
In total, we spent $10.5 million for an average of $5.23 per share including commissions. As stated in the press release, we essentially bought nearly 10% of the Company for less than the price of a new rig.
Given that we have no plans to build additional rigs in the present environment and given this Company's strong balance sheet, we will continue to evaluate share repurchases as a potential use of free cash flow going forward. As discussed on the last call, we are adding four rigs to the fleet that will be operational in the very near future.
We have a walking rig built for pad drilling in the Barnett Shale that is going out in the field next week with a two-year term contract. We have had some delays on critical components for the two electric rigs being built for the Fayetteville, but I expect the first rig will be delivered at the end of the first quarter and the second, later in April. These rigs also have two-year term contracts.
We have owned the fourth rid for some time, but it has not been in our active rig count. It is a 1000 horsepower portable rig that we have refurbished and equipped with new pumps and a topdrive for horizontal drilling in the Marcellus Shale. It should be in the field by the end of this quarter and has a contract for 10 horizontal wells which should take the remainder of 2009 to complete.
So in total, we are adding four rigs to our fleet in the next month or so, which will bring our rig count to 75. If there is incremental demand for more equipment in the Marcellus, we do have two telescoping trailer mounted rigs in Arkansas that have large enough draw works and...
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