Grey Wolf, Inc. (�Grey Wolf� or the �Company�) (AMEX:GW) reported
net income of $24.3 million, or $0.12 per share on a diluted basis,
for the three months ended September 30, 2008 compared with net
income of $35.6 million, or $0.17 per share on a diluted basis, for
the third quarter of 2007. Revenues for the third quarter of 2008
were $234.2 million compared with revenues the same quarter a year
ago of $224.0 million. For the nine months ended September 30,
2008, Grey Wolf reported net income of $87.9 million, or $0.42 per
share on a diluted basis, on revenues of $652.4 million compared to
net income of $135.9 million, or $0.63 per share on a diluted
basis, on revenues of $693.5 million for the nine months ended
September 30, 2007. Third quarter and nine month net income for
2008 reflect a pre-tax expense of approximately $18.3 million (or
an after-tax amount of $0.05 per diluted share) as a result of the
shareholder vote and related termination in July of a proposed
merger with Basic Energy Services, Inc. and the ongoing costs
related to entering into a definitive merger agreement with
Precision Drilling Trust (�Precision�) (TSX: PD.UN, NYSE: PDS) in
August. �With the highest average rig count in Company history and
historically strong dayrates, Grey Wolf achieved higher operating
results in the third quarter of 2008 compared to the previous
quarter,� commented Thomas P. Richards, Chairman, President and
Chief Executive Officer. �We averaged 112 rigs working during the
quarter, reflecting the quality of our crews and rigs, which are
well-suited to the natural gas resource plays many of our customers
are focusing on today.� The Company reported total earnings before
interest expense, income taxes, depreciation and amortization
(�EBITDA�) of $68.4 million in the third quarter of 2008, compared
to $80.5 million for the previous quarter and $83.7 million for the
third quarter of 2007. On a per-rig-day basis, EBITDA was $6,651
for the third quarter of 2008, $8,451 for the second quarter of
2008 and $8,703 for the third quarter of 2007. Turnkey EBITDA per
rig day in the third quarter of 2008 was $8,584 and daywork EBITDA
per rig day totaled $6,504. Turnkey EBITDA totaled $6.2 million,
which is 9% of total EBITDA for the third quarter of 2008. The
EBITDA and EBITDA per rig day results were also reduced by the
$18.3 million in merger related expenses in the third quarter of
2008. �As we enter the fourth quarter, dayrates range from $18,500
to $24,000 without fuel and top drives � up about $500 from rates
reported last quarter,� continued Mr. Richards. �This increase is
primarily related to a wage increase that went into effect in
August. Oil and natural gas commodity prices have substantially
pulled back from their second-quarter peak. Given the current
economic trends and global financial crisis, coupled with announced
budget reductions by a number of E&P companies, we anticipate a
decrease in demand for land drilling as we move into 2009. Grey
Wolf is well positioned with its premium equipment, strong
portfolio of term contracts and strong balance sheet to weather a
slowdown in drilling activity.� Under daywork term contracts, the
Company has approximately 6,300 days, or an average of 68 rigs,
contracted for the remaining quarter of 2008 and approximately
16,100 days, or an average of 44 rigs, contracted in 2009. This
2009 amount is an increase of six rigs since the Company�s second
quarter earnings release in late July 2008. Grey Wolf currently
markets 122 drilling rigs with 114 rigs working today. Of the 114
rigs contracted, 71 are working under daywork term contracts, 34
are working under spot market daywork contracts and nine are
working under turnkey contracts. In addition, Grey Wolf is
currently refurbishing and upgrading two 1,500 horsepower rigs that
are contracted, under two-year term contracts, to go to work in the
Bakken Shale play late in 2008 and early 2009. Grey Wolf averaged
112 rigs working in the third quarter of 2008 compared with an
average of 105 rigs working in the second quarter of 2008 and 104
rigs working during the third quarter of 2007. Capital expenditures
totaled $35.9 million in the third quarter of 2008 and $131.9
million for the first nine months of the year. For the full year
2008 capital expenditures are projected to be between $160.0
million and $170.0 million depending on the level of rig activity.
During the fourth quarter of 2008, the Company expects to average
108 to 112 rigs working with seven to nine of these rigs performing
turnkey services. In addition, average daywork EBITDA per rig day
before the effect of any merger related expenses is expected to
remain relatively consistent with the third quarter of 2008.
Depreciation expense of approximately $28.2 million, interest
expense of approximately $3.0 million and an effective tax rate of
approximately 37% are expected for the fourth quarter of 2008. As
previously reported, Precision and Grey Wolf announced in August
that their Board of Trustees and Board of Directors, respectively,
unanimously approved a definitive merger agreement pursuant to
which Precision will acquire Grey Wolf for US$5.00 in cash and
0.1883 newly-issued Precision trust units (�Units�) for each Grey
Wolf common share on a fully-diluted basis, for aggregate
consideration of US$1.115 billion in cash and 42.0 million Units.
Grey Wolf shareholders will be able to elect to receive cash or
Units, subject to proration. The combination of Precision and Grey
Wolf will have land drilling operations in virtually every
conventional and unconventional oil and gas basin in the lower 48
United States and Canada with an emerging presence in Mexico. The
combination of Grey Wolf�s deep drilling capabilities and
Precision�s high performance systems and technology provides a
foundation for international expansion to pursue global oil
drilling opportunities. The process of the anticipated merger has
progressed on schedule with successful completion of key steps
including early termination of the Hart-Scott-Rodino waiting
period. Additionally, the Committee on Foreign Investment in the
United States (�CIFUS�) determined that there are no unresolved
national security concerns associated with the merger. On October
28, 2008, the Securities and Exchange Commission declared effective
the registration statement on Form F-4 containing the
prospectus/proxy statement relating to the proposed merger. The
prospectus/proxy statement for Grey Wolf�s special meeting of
shareholders to approve the merger is expected to be mailed
beginning on or about October 30, 2008, to Grey Wolf shareholders
of record at the close of business on October 27, 2008, the record
date for the special meeting. The Grey Wolf special meeting of
shareholders is scheduled for 9:00 a.m. local time on December 9,
2008 at the Marriott Houston Westchase, Houston, Texas. Grey Wolf
has scheduled a conference call October 30, 2008 at 8:00 a.m. CT to
discuss third quarter 2008 results. The call will be web cast live
on the Internet through the Investor Relations page on the
Company�s website at: http://www.gwdrilling.com To participate by
telephone, call (800) 734-4208 domestically or (212) 231-2903
internationally ten to fifteen minutes prior to the starting time.
The reservation number is 21394624. A replay of the conference call
will be available by telephone from 10:00 a.m. CT on October 31,
2008 until 10:00 a.m. CT on November 3, 2008. The telephone number
for the replay of the call is (800) 633-8284 domestically or (402)
977-9140 internationally and the access code is 21394624. The call
will be available for replay through the Grey Wolf website for
approximately two weeks. Grey Wolf, Inc., headquartered in Houston,
Texas, is a leading provider of turnkey and contract oil and gas
land drilling services in the best natural gas producing regions in
the United States with a fleet of 122 drilling rigs, which will
increase to 123 with the addition of a new rig during the fourth
quarter of 2008. This press release contains forward-looking
statements within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934. The specific forward-looking
statements cover our expectations and projections regarding: demand
for the Company�s services, deployment of rigs, rig supply in the
market, the benefits of term contracts, 2008 and 2009 rig activity,
average daywork EBITDA per day, dayrates, projected depreciation,
projected tax rate and interest expense, expected new rig cost and
delivery schedule, 2008 financial results, projected capital
expenditures in 2008 and the anticipated benefits of the Precision
merger. These forward-looking statements are subject to risks and
uncertainties, many of which are beyond our control, that could
cause actual results to differ materially, including oil and
natural gas prices and trends in those prices, the pricing and
other competitive policies of our competitors, uninsured or
under-insured casualty losses, cost of insurance coverage,
increasing rig supply, changes in interest rates, unexpected costs
under turnkey drilling contracts, weather conditions, the overall
level of drilling activity in our market areas and the risk that
the Precision merger may not be completed or anticipated benefits
will not be realized. Please refer to reports filed with the
Securities and Exchange Commission by Grey Wolf for additional
information concerning risk factors that could cause actual results
to differ materially from these forward-looking statements.
Additional Information and Where to Find It In connection with the
proposed merger, Precision has filed a registration statement on
Form F-4, which includes a proxy statement of Grey Wolf with the
Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS
OF GREY WOLF ARE URGED TO CAREFULLY READ IN THEIR ENTIRETY THE
REGISTRATION STATEMENT, THE PROXY STATEMENT/PROSPECTUS AND OTHER
MATERIALS REGARDING THE PROPOSED TRANSACTION WHEN THEY BECOME
AVAILABLE, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT GREY
WOLF, PRECISION, PRECISION LOBOS CORPORATION, A WHOLLY-OWNED
SUBSIDIARY OF PRECISION CREATED AS A SPECIAL PURPOSE VEHICLE, AND
THE PROPOSED MERGER. Prospective investors and security holders may
obtain a free copy of the registration statement and the proxy
statement/prospectus and other documents containing information
about Grey Wolf and Precision, without charge, at the SEC�s web
site at www.sec.gov, at Precision�s web site at
www.precisiondrilling.com, and at Grey Wolf�s web site at
www.gwdrilling.com. Copies of the registration statement and the
proxy statement/prospectus and the SEC filings that will be
incorporated by reference therein may also be obtained for free by
directing a request to either Investor Relations, Precision
Drilling Trust, (403) 716-4500 or to Investor Relations, Grey Wolf,
Inc., (713) 435-6100. Participants in the Solicitation Grey Wolf
and Precision and their respective directors, officers, trustees
and other persons may be deemed to be participants in the
solicitation of proxies from Grey Wolf�s shareholders in respect of
the proposed merger. Information about the directors and executive
officers of Grey Wolf and their ownership of Grey Wolf common stock
can be found in Grey Wolf�s proxy statement filed October 29, 2008
(the �proxy statement/prospectus�). Information concerning the
directors and executive officers of Precision is included in the
proxy statement/prospectus. Additional information regarding the
identity of potential participants in the solicitation of proxies
in respect of the proposed merger and a description of their direct
and indirect interests, by security holdings or otherwise, is also
included in the proxy statement/prospectus. � Three Months Ended �
� Nine Months Ended September 30, September 30, 2008 � � 2007 2008
� � 2007 (In thousands, except per share amounts) (Unaudited)
Revenues $ 234,150 $ 223,999 $ 652,379 $ 693,532 Costs and
expenses: Drilling operations 141,341 136,947 384,802 390,207
Depreciation and amortization 27,744 24,355 82,497 68,166 General
and administrative 7,721 6,757 24,554 21,315 (Gain) loss on the
sale of assets (11 ) (42 ) 39 (171 ) Merger activity costs � 18,327
� � - � � 18,327 � � - � Total costs and expenses � 195,122 � �
168,017 � � 510,219 � � 479,517 � Operating income (loss) 39,028
55,982 142,160 214,015 Other income (expense): Interest income
1,656 3,334 6,134 10,086 Interest expense � (2,564 ) � (3,521 ) �
(8,610 ) � (10,451 ) Other income (expense), net � (908 ) � (187 )
� (2,476 ) � (365 ) Net income (loss) before income taxes 38,120
55,795 139,684 213,650 Income taxes expense (benefit): Current
11,602 15,205 38,731 59,492 Deferred � 2,207 � � 5,002 � � 13,021 �
� 18,284 � Total income tax expense (benefit) � 13,809 � � 20,207 �
� 51,752 � � 77,776 � Net income applicable to common shares $
24,311 � $ 35,588 � $ 87,932 � $ 135,874 � Net income per common
share: (1) Basic $ 0.14 � $ 0.19 � $ 0.50 � $ 0.74 � Diluted $ 0.12
� $ 0.17 � $ 0.42 � $ 0.63 � Weighted average common shares
outstanding: Basic � 176,221 � � 182,599 � � 175,999 � � 182,875 �
Diluted � 220,595 � � 226,292 � � 219,991 � � 226,533 � � Three
Months Ended September 30, 2008 2007 Marketed Rigs at September 30
� 122 � � 121 � Average Rigs Working: Ark-La-Tex 24 25 Gulf Coast
24 22 South Texas 28 28 Rocky Mountain 16 14 Mexico 2 1 Mid
Continent � 18 � � 14 � Total Average Rigs Working (2) � 112 � �
104 � � (1) Please see �Computation of Earnings Per Share� included
in this release. (2) For the week ending October 23, 2008, the
Company averaged 114 rigs working. Operating data comparison for
the three months ended September 30, 2008 and 2007. � Three Months
Ended September 30, 2008 � Three Months Ended September 30, 2007
Daywork Operations � Turnkey Operations � Total Daywork Operations
� Turnkey Operations � Total (Dollars in thousands except averages
per rig day worked) (Unaudited) � Rig days worked 9,563 726 10,289
8,784 830 9,614 � Contract drilling revenues $ 194,492 $ 39,658 $
234,150 $ 178,411 $ 45,588 $ 223,999 Drilling operating expenses
(109,589 ) (31,752 ) (141,341 ) (101,634 ) (35,313 ) (136,947 )
General and administrative expenses (7,215 ) (506 ) (7,721 ) (6,256
) (501 ) (6,757 ) Merger activity costs (17,034 ) (1,293 ) (18,327
) - - - Interest income 1,532 124 1,656 3,043 291 3,334 Gain (loss)
on sale of assets � 10 � � 1 � � 11 � � 37 � � 5 � � 42 � EBITDA $
62,196 � $ 6,232 � $ 68,428 � $ 73,601 � $ 10,070 � $ 83,671 � �
Average per rig day worked: Contract drilling revenue $ 20,338 $
54,625 $ 22,757 $ 20,311 $ 54,925 $ 23,299 EBITDA 6,504 8,584 6,651
8,379 12,133 8,703 Operating data comparison for the nine months
ended September 30, 2008 and 2007. � Nine Months Ended September
30, 2008 � Nine Months Ended September 30, 2007 Daywork Operations
� Turnkey Operations � Total Daywork Operations � Turnkey
Operations � Total (Dollars in thousands except averages per rig
day worked) (Unaudited) � Rig days worked 26,958 1,995 28,953
26,802 2,210 29,012 � Contract drilling revenues $ 542,473 $
109,906 $ 652,379 $ 572,000 $ 121,532 $ 693,532 Drilling operating
expenses (302,769 ) (82,033 ) (384,802 ) (302,259 ) (87,948 )
(390,207 ) General and administrative expenses (23,065 ) (1,489 )
(24,554 ) (19,873 ) (1,442 ) (21,315 ) Merger activity costs
(17,034 ) (1,293 ) (18,327 ) - - - Interest income 5,714 420 6,134
9,307 779 10,086 Gain (loss) on sale of assets � (38 ) � (1 ) � (39
) � 147 � � 24 � � 171 � EBITDA $ 205,281 � $ 25,510 � $ 230,791 �
$ 259,322 � $ 32,945 � $ 292,267 � � Average per rig day worked:
Contract drilling revenue $ 20,123 $ 55,091 $ 22,532 $ 21,342 $
54,992 $ 23,905 EBITDA 7,615 12,787 7,971 9,675 14,907 10,074
Reconciliation of Earnings before interest expense, income taxes,
depreciation and amortization (EBITDA) to net income (loss)
applicable to common shares (In thousands) (Unaudited) � � � � �
Three Months Ended Nine Months Ended September 30,2008 June30,2008
September 30,2007 September 30,2008 September 30,2007 � Earnings
before interest expense, income taxes, depreciation, and
amortization $ 68,428 $ 80,512 $ 83,671 $ 230,791 $ 292,267
Depreciation and amortization (27,744 ) (26,994 ) (24,355 ) (82,497
) (68,166 ) Interest expense (2,564 ) (2,709 ) (3,521 ) (8,610 )
(10,451 ) Total income tax (expense)/ benefit � (13,809 ) � (18,511
) � (20,207 ) � (51,752 ) � (77,776 ) � Net income (loss)
applicable to common shares $ 24,311 � $ 32,298 � $ 35,588 � $
87,932 � $ 135,874 � � September 30, � December 31, 2008 2007
(Unaudited) (In thousands) Condensed Balance Sheet Data: � Cash and
cash equivalents $ 290,226 $ 247,701 Restricted cash 867 847 Other
current assets � 199,751 � 194,948 Total current assets 490,844
443,496 Net property and equipment 789,881 737,944 Other assets �
41,162 � 26,530 Total assets $ 1,321,887 $ 1,207,970 � Current
liabilities $ 108,389 $ 104,692 Contingent convertible senior notes
274,725 275,000 Other long term liabilities 20,563 18,126 Deferred
income taxes 165,468 150,643 Shareholders� equity � 752,742 �
659,509 Total liabilities and equity $ 1,321,887 $ 1,207,970
Computation of Earnings Per Share (In thousands, except per share
amounts) (Unaudited) � � � � A reconciliation of the numerators and
denominators of the basic and diluted earnings per share
computation is as follows: � Three Months Ended Nine Months Ended
September 30, September 30, 2008 2007 2008 2007 Numerator: Net
income $ 24,311 $ 35,588 $ 87,932 $ 135,874 � Add interest expense
on contingent convertible senior notes, net of related tax effects
(1) � 1,573 � 2,094 � 5,012 � 6,227 Adjusted net income � diluted $
25,884 $ 37,682 $ 92,944 $ 142,101 � Denominator: Weighted average
number of shares outstanding � basic 176,221 182,599 175,999
182,875 � Effect of dilutive securities: Options � treasury stock
method 869 548 687 660 Restricted stock 1,087 688 861 541
Contingent convertible senior notes (1) � 42,418 � 42,457 � 42,444
� 42,457 � Weighted average common shares outstanding � diluted �
220,595 � 226,292 � 219,991 � 226,533 Earnings Per Share: Basic $
0.14 $ 0.19 $ 0.50 $ 0.74 Diluted $ 0.12 $ 0.17 $ 0.42 $ 0.63 � (1)
Please see our latest quarterly report on Form 10-Q for a
description of our contingent convertible notes.
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