10-Q 1 form10q-q12017.htm 10-Q Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
______________________________________________ 
FORM 10-Q
______________________________________________ 
(Mark one)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-8182
PIONEER ENERGY SERVICES CORP.
(Exact name of registrant as specified in its charter)
_____________________________________________ 
TEXAS
 
74-2088619
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
 
 
1250 NE Loop 410, Suite 1000
San Antonio, Texas
 
78209
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (855) 884-0575
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x  No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
x
 
 
 
 
Non-accelerated filer
o
Smaller reporting company
o
   (Do not check if a small reporting company.)
 
 
Emerging Growth Company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No x
As of April 17, 2017, there were 77,280,191 shares of common stock, par value $0.10 per share, of the registrant outstanding.
 



PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
March 31,
2017
 
December 31,
2016
 
(unaudited)
 
(audited)
 
(in thousands, except share data)
ASSETS
 
Current assets:
 
 
 
Cash and cash equivalents
$
7,290

 
$
10,194

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts
54,340

 
38,764

Unbilled receivables
11,050

 
7,417

Insurance recoveries
12,713

 
17,003

Other receivables
2,385

 
8,939

Inventory
11,571

 
9,660

Assets held for sale
11,405

 
15,093

Prepaid expenses and other current assets
5,859

 
6,926

Total current assets
116,613

 
113,996

Property and equipment, at cost
1,082,463

 
1,058,261

Less accumulated depreciation
492,239

 
474,181

Net property and equipment
590,224

 
584,080

Other long-term assets
1,491

 
2,026

Total assets
$
708,328

 
$
700,102

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
22,793

 
$
19,208

Deferred revenues
581

 
1,449

Accrued expenses:
 
 
 
Payroll and related employee costs
15,947

 
14,813

Insurance premiums and deductibles
6,134

 
6,446

Insurance claims and settlements
12,713

 
13,667

Interest
921

 
5,395

Other
4,408

 
5,024

Total current liabilities
63,497

 
66,002

Long-term debt, less debt issuance costs
373,633

 
339,473

Deferred income taxes
8,044

 
8,180

Other long-term liabilities
5,917

 
5,049

Total liabilities
451,091

 
418,704

Commitments and contingencies (Note 9)

 

Shareholders’ equity:
 
 
 
Preferred stock, 10,000,000 shares authorized; none issued and outstanding

 

Common stock $.10 par value; 100,000,000 shares authorized; 77,280,191 and 77,146,906 shares outstanding at March 31, 2017 and December 31, 2016, respectively
7,786

 
7,766

Additional paid-in capital
543,184

 
541,823

Treasury stock, at cost; 575,148 and 515,546 shares at March 31, 2017 and December 31, 2016, respectively
(4,246
)
 
(3,883
)
Accumulated deficit
(289,487
)
 
(264,308
)
Total shareholders’ equity
257,237

 
281,398

Total liabilities and shareholders’ equity
$
708,328

 
$
700,102


See accompanying notes to condensed consolidated financial statements.

2




PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
Three months ended March 31,
 
2017
 
2016
 
(in thousands, except per share data)
Revenues:
 
 
 
Drilling services
$
39,016

 
$
33,184

Production services
56,741

 
41,768

Total revenues
95,757

 
74,952

 
 
 
 
Costs and expenses:
 
 
 
Drilling services
27,107

 
17,440

Production services
45,641

 
34,849

Depreciation and amortization
24,992

 
29,824

General and administrative
17,724

 
16,508

Bad debt recovery
(363
)
 
(55
)
Gain on dispositions of property and equipment, net
(471
)
 
(600
)
Total costs and expenses
114,630

 
97,966

Loss from operations
(18,873
)
 
(23,014
)
 
 
 
 
Other expense:
 
 
 
Interest expense, net of interest capitalized
(6,059
)
 
(6,254
)
Other
(144
)
 
(389
)
Total other expense
(6,203
)
 
(6,643
)
 
 
 
 
Loss before income taxes
(25,076
)
 
(29,657
)
Income tax (expense) benefit
(48
)
 
1,958

Net loss
$
(25,124
)
 
$
(27,699
)
 
 
 
 
Loss per common share—Basic
$
(0.33
)
 
$
(0.43
)
 
 
 
 
Loss per common share—Diluted
$
(0.33
)
 
$
(0.43
)
 
 
 
 
Weighted average number of shares outstanding—Basic
77,072

 
64,576

 
 
 
 
Weighted average number of shares outstanding—Diluted
77,072

 
64,576














See accompanying notes to condensed consolidated financial statements.

3




PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
Three months ended March 31,
 
2017
 
2016
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net loss
$
(25,124
)
 
$
(27,699
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
24,992

 
29,824

Allowance for doubtful accounts, net of recoveries
(363
)
 
(55
)
Gain on dispositions of property and equipment, net
(471
)
 
(600
)
Stock-based compensation expense
1,327

 
1,177

Amortization of debt issuance costs
465

 
424

Deferred income taxes
(169
)
 
(2,201
)
Change in other long-term assets
466

 
15

Change in other long-term liabilities
868

 
492

Changes in current assets and liabilities:
 
 
 
Receivables
(17,795
)
 
13,189

Inventory
(1,911
)
 
629

Prepaid expenses and other current assets
1,012

 
734

Accounts payable
778

 
(2,684
)
Deferred revenues
(672
)
 
1,656

Accrued expenses
(5,223
)
 
(5,274
)
Net cash provided by (used in) operating activities
(21,820
)
 
9,627

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(24,683
)
 
(5,532
)
Proceeds from sale of property and equipment
7,148

 
477

Proceeds from insurance recoveries
3,119

 

Net cash used in investing activities
(14,416
)
 
(5,055
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Debt repayments
(6,305
)
 

Proceeds from issuance of debt
40,000

 

Debt issuance costs

 
(20
)
Purchase of treasury stock
(363
)
 
(43
)
Net cash provided by (used in) financing activities
33,332

 
(63
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(2,904
)
 
4,509

Beginning cash and cash equivalents
10,194

 
14,160

Ending cash and cash equivalents
$
7,290

 
$
18,669

 
 
 
 
Supplementary disclosure:
 
 
 
Interest paid
$
10,272

 
$
10,606

Income tax paid
$
261

 
$
279

Noncash investing and financing activity:
 
 
 
Change in capital expenditure accruals
$
2,924

 
$
(39
)

 






See accompanying notes to condensed consolidated financial statements.

4




PIONEER ENERGY SERVICES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Business
Pioneer Energy Services Corp. (formerly called “Pioneer Drilling Company”) provides land-based drilling services and production services to a diverse group of independent and large oil and gas exploration and production companies in the United States and internationally in Colombia. We also provide two of our services (coiled tubing and wireline services) offshore in the Gulf of Mexico.
Our Drilling Services Segment provides contract land drilling services through our four domestic divisions which are located in the Marcellus, Eagle Ford, Permian Basin and Bakken regions, and internationally in Colombia. In addition to our drilling rigs, we provide the drilling crews and most of the ancillary equipment needed to operate our drilling rigs. Our drilling rig fleet is 100% pad-capable and consists of the following:
 
Multi-well, Pad-capable
 
AC rigs
SCR rigs
Total
Domestic rigs
16


16
Colombia rigs

8

8
 
 
 
24
Our Production Services Segment provides a range of services to a diverse group of exploration and production companies, with our operations concentrated in the major United States onshore oil and gas producing regions in the Mid-Continent and Rocky Mountain states and in the Gulf Coast, both onshore and offshore. As of March 31, 2017, our production services fleets are as follows:
 
550 HP
600 HP
Total
Well servicing rigs, by horsepower (HP) rating
113

12

125

 
Offshore
Onshore
Total
Wireline units
6

108
114

Coiled tubing units
5

12

17

Revenues and Cost Recognition
Drilling ContractsOur drilling contracts generally provide for compensation on a daywork basis. Spot market contracts generally provide for the drilling of a single well and typically permit the client to terminate on short notice. We typically enter into longer-term drilling contracts for our newly constructed rigs and/or during periods of high rig demand. We recognize revenues on daywork contracts for the days completed based on the dayrate specified in each contract.
With most drilling contracts, we receive payments contractually designated for the mobilization of rigs and other equipment. Payments received, and costs incurred for the mobilization services are deferred and recognized on a straight line basis over the related contract term. Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred. Reimbursements that we receive for out-of-pocket expenses are recorded as revenues and the out-of-pocket expenses for which they relate are recorded as operating costs. Amortization of deferred mobilization revenues was $0.8 million and $0.3 million for the three months ended March 31, 2017 and 2016, respectively.

5




Our current and long-term deferred revenues and costs as of March 31, 2017 and December 31, 2016 were as follows (amounts in thousands):
 
March 31, 2017
 
December 31, 2016
Current:
 
 
 
Deferred revenues
$
581

 
$
1,449

Deferred costs
984

 
2,290

Long-term:
 
 
 
Deferred revenues
$
61

 
$
202

Deferred costs
51

 
212

As of May 1, 2017, 15 of our 16 domestic drilling rigs are earning revenues, eleven of which are under term contracts, and the final domestic rig is undergoing an upgrade, which we expect to deploy under its new term contract late in the second quarter. Of the eight rigs in Colombia, three are earning revenues, two of which are under term contracts. The term contracts in Colombia are cancelable by our client without penalty, and by us if rig operations are suspended without an associated dayrate. We are actively marketing our idle drilling rigs in Colombia to various operators and we are evaluating other options, including the possibility of the sale of some or all of our assets in Colombia.
Unbilled Accounts Receivable
The asset “unbilled receivables” represents revenues we have recognized in excess of amounts billed on drilling contracts and production services completed but not yet invoiced. We typically invoice our clients at 15-day intervals during the performance of daywork drilling contracts and upon completion of the daywork contract.
Our unbilled receivables as of March 31, 2017 and December 31, 2016 were as follows (amounts in thousands):
 
March 31, 2017
 
December 31, 2016
Daywork drilling contracts in progress
$
10,416

 
$
7,042

Production services
634

 
375

 
$
11,050

 
$
7,417

Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets include items such as insurance, rent deposits and fees. We routinely expense these items in the normal course of business over the periods these expenses benefit. Prepaid expenses and other current assets also include the current portion of deferred mobilization costs for certain drilling contracts that are recognized on a straight-line basis over the contract term.
Other Long-Term Assets
Other long-term assets consist of cash deposits related to the deductibles on our workers’ compensation insurance policies, deferred compensation plan investments, the long-term portion of deferred mobilization costs, and intangible assets.
Other Current Liabilities
Our other accrued expenses include accruals for items such as property tax, sales tax, and professional and other fees. We routinely expense these items in the normal course of business over the periods these expenses benefit.
Other Long-Term Liabilities
Our other long-term liabilities consist of the noncurrent portion of liabilities associated with our long-term compensation plans, deferred lease liabilities, and the long-term portion of deferred mobilization revenues.
Related-Party Transactions
During the three months ended March 31, 2017 and 2016, the Company paid approximately $17,000 and $24,000, respectively, for trucking and equipment rental services, which represented arms-length transactions, to Gulf Coast Lease

6




Service. Joe Freeman, our Senior Vice President of Well Servicing, serves as the President of Gulf Coast Lease Service, which is owned and operated by Mr. Freeman’s two sons. Mr. Freeman does not receive compensation from Gulf Coast Lease Service, and he serves primarily in an advisory role to his sons.
Comprehensive Income
We have not reported comprehensive income due to the absence of items of other comprehensive income in the periods presented.
Recently Issued Accounting Standards
Changes to accounting principles generally accepted in the United States of America (“U.S. GAAP”) are established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification (ASC). We consider the applicability and impact of all ASUs; any ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.
Revenue Recognition. In May 2014, the FASB issued ASU No. 2014-09, a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance. The standard outlines a single comprehensive model for revenue recognition based on the core principle that a company will recognize revenue when promised goods or services are transferred to clients, in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services.
We have performed a scoping and preliminary assessment of the impact of this new standard. We continue to evaluate the impact of this guidance, but currently expect the adoption of this new standard to primarily affect the timing for the recognition of certain types of revenues derived from drilling contracts, and to require expanded disclosure. We are required to apply this new standard beginning January 1, 2018. Two methods of transition are permitted under this standard: the full retrospective method, in which the standard would be applied retrospectively to each prior reporting period presented, subject to certain allowable exceptions; or the modified retrospective method, in which the standard would be applied to all contracts existing as of the date of initial application, with the cumulative effect of applying the standard recognized in retained earnings. We currently anticipate adopting this standard using the modified retrospective method.
Leases. In February 2016, the FASB issued ASU No. 2016-02, Leases, which among other things, requires lessees to recognize substantially all leases on the balance sheet, with expense recognition that is similar to the current lease standard, and aligns the principles of lessor accounting with the principles of the FASB’s new revenue guidance (referenced above). This ASU is effective for us beginning January 1, 2019. We are currently evaluating the potential impact of this guidance and have not yet determined its impact on our financial position and results of operations.
Stock-Based Compensation. In March 2016, the FASB issued ASU No. 2016-09, Stock Compensation: Improvements to Employee Share-Based Payment Accounting, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.
We adopted this ASU as of January 1, 2017 and we recognized a $3.1 million deferred tax asset for previously unrecognized tax benefits, which was then fully reserved by a valuation allowance (see Note 3, Valuation Allowances on Deferred Tax Assets). Additionally, we elected to prospectively account for forfeitures as they occur, rather than estimating future forfeitures. The total cumulative-effect impact of adoption, net of valuation allowances, was approximately $55,000 relating to our change in accounting for forfeitures, and was recognized as a reduction to retained earnings. The adoption of this ASU also results in the presentation of any excess tax benefits resulting from the exercise of stock options as operating cash flows in the statement of cash flows, which we will apply retrospectively for any comparative periods affected.
Reclassifications
Certain amounts in the unaudited condensed consolidated financial statements for the prior years have been reclassified to conform to the current year’s presentation.

7




Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Pioneer Energy Services Corp. and our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of our management, all adjustments (consisting of normal, recurring accruals) necessary for a fair presentation have been included. We suggest that you read these unaudited condensed consolidated financial statements together with the consolidated financial statements and the related notes included in our annual report on Form 10-K for the year ended December 31, 2016.
In preparing the accompanying unaudited condensed consolidated financial statements, we make various estimates and assumptions that affect the amounts of assets and liabilities we report as of the dates of the balance sheets and income and expenses we report for the periods shown in the income statements and statements of cash flows. Our actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to our estimate of the allowance for doubtful accounts, our determination of depreciation and amortization expenses, our estimates of projected cash flows and fair values for impairment evaluations, our estimate of the valuation allowance for deferred tax assets, our estimate of the liability relating to the self-insurance portion of our health and workers’ compensation insurance, our estimate of compensation related accruals and our estimate of sales tax audit liability.
In preparing the accompanying unaudited condensed consolidated financial statements, we have reviewed events that have occurred after March 31, 2017, through the filing of this Form 10-Q, for inclusion as necessary.
2.    Property and Equipment
Capital Expenditures—Our capital expenditures were $27.6 million and $5.5 million, during the three months ended March 31, 2017 and 2016, respectively, which includes $0.1 million and $0.2 million, respectively, of capitalized interest costs incurred. Capital expenditures during 2017 primarily related to the acquisition of 20 well servicing rigs, upgrades to drilling rigs and other new drilling equipment. Capital expenditures during 2016 consisted primarily of routine expenditures to maintain our drilling and production services fleets.
At March 31, 2017, capital expenditures incurred for property and equipment not yet placed in service was $29.6 million, primarily related to 15 well servicing rigs and upgrades to drilling rigs not yet completed. At December 31, 2016, property and equipment not yet placed in service was $9.0 million, primarily related to new drilling equipment that was ordered in 2014 and required a long lead-time for delivery, which will either be used to construct new drilling rigs or as spare equipment for our AC rig fleet, as well as deposits for the 20 well servicing rigs delivered in the first quarter of 2017 and four new wireline units that are on order to be delivered in the second quarter of 2017.
Assets Held for SaleAs of March 31, 2017, our condensed consolidated balance sheet reflects assets held for sale of $11.4 million, which primarily represents the fair value of three domestic mechanical drilling rigs, three domestic SCR drilling rigs, certain drilling equipment, 13 wireline units, and certain coiled tubing equipment.
ImpairmentsWe evaluate for potential impairment of long-lived assets when indicators of impairment are present, which may include, among other things, significant adverse changes in industry trends (including revenue rates, utilization rates, oil and natural gas market prices, and industry rig counts). Beginning in late 2014, oil prices declined significantly resulting in a downturn in our industry that persisted through 2016, affecting both drilling and production services. Despite the recent modest recovery in commodity prices, we continue to monitor all indicators of potential impairments in accordance with ASC Topic 360, Property, Plant and Equipment, and concluded there are no triggers present that require impairment testing as of March 31, 2017.
In performing an impairment evaluation, we estimate the future undiscounted net cash flows from the use and eventual disposition of the assets grouped at the lowest level that cash flows can be identified. For our Production Services Segment, we perform an impairment evaluation and estimate future undiscounted cash flows for the individual reporting units (well servicing, wireline and coiled tubing). For our Drilling Services Segment, we perform an impairment evaluation and estimate future undiscounted cash flows for individual domestic drilling rig assets and for our Colombian drilling rig assets as a

8




group. If the sum of the estimated future undiscounted net cash flows is less than the carrying amount of the asset group, then we determine the fair value of the asset group. The amount of an impairment charge is measured as the difference between the carrying amount and the fair value of the assets. The assumptions used in the impairment evaluation are inherently uncertain and require management judgment.
3.
Valuation Allowances on Deferred Tax Assets
As of March 31, 2017, we had $144.4 million of deferred tax assets related to domestic and foreign net operating losses that are available to reduce future taxable income. In assessing the realizability of our deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
In performing this analysis as of March 31, 2017 in accordance with ASC Topic 740, Income Taxes, we assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. A significant piece of objective negative evidence evaluated is the cumulative loss incurred over the three-year period ended December 31, 2016. Such objective negative evidence limits the ability to consider other subjective positive evidence, such as projections for taxable income in future years. As a result, we may recognize a benefit only to the extent that reversals of deferred income tax liabilities are expected to generate taxable income in each relevant jurisdiction in future periods which would offset our deferred tax assets.
Our domestic net operating losses have a 20 year carryforward period and can be used to offset future domestic taxable income until their expiration, beginning in 2030, with the latest expiration in 2036. However, we determined that a valuation allowance should be recorded against a significant portion of the benefit generated in 2017. The valuation allowance is the primary factor causing our effective tax rate to be significantly lower than the statutory rate of 35%. The amount of the deferred tax asset considered realizable, however, would be increased if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projected future taxable income.
The majority of our foreign net operating losses have an indefinite carryforward period. However, as a result of the conditions leading to the impairment of our assets in Colombia during 2015 and the continued industry downturn, we have a valuation allowance that fully offsets our foreign deferred tax assets at March 31, 2017.
4.     Debt
Our debt consists of the following (amounts in thousands):
 
March 31, 2017
 
December 31, 2016
Senior secured revolving credit facility
$
79,695

 
$
46,000

Senior notes
300,000

 
300,000

 
379,695

 
346,000

Less unamortized debt issuance costs
(6,062
)
 
(6,527
)
 
$
373,633

 
$
339,473

Senior Secured Revolving Credit Facility
We have a credit agreement, as most recently amended on June 30, 2016, with Wells Fargo Bank, N.A. and a syndicate of lenders which provides for a senior secured revolving credit facility, with sub-limits for letters of credit and swing-line loans, of up to a current aggregate commitment amount of $150 million, subject to availability under a borrowing base comprised of certain eligible cash, certain eligible receivables, certain eligible inventory, and certain eligible equipment of ours and certain of our subsidiaries, all of which matures in March 2019 (the “Revolving Credit Facility”). The Revolving Credit Facility contains customary mandatory prepayments from the proceeds of certain asset dispositions or equity or debt issuances, which are applied to reduce outstanding revolving and swing-line loans and to cash-collateralize letter of credit exposure, and in certain cases, also reduce the commitment amount available.
Borrowings under the Revolving Credit Facility bear interest, at our option, at the LIBOR rate or at the bank prime rate, plus an applicable per annum margin of 5.50% and 4.50%, respectively. The Revolving Credit Facility requires a commitment

9




fee due quarterly based on the average daily unused amount of the commitments of the lenders, a fronting fee due for each letter of credit issued, and a quarterly letter of credit fee due based on the average undrawn amount of letters of credit outstanding during such period. Additionally, the Revolving Credit Facility requires that if on the last business day of each week, our aggregate amount of cash at the end of the preceding day (as calculated pursuant to the Revolving Credit Facility) exceeds $20 million, we pay down the outstanding principal balance by the amount of such excess.
Our obligations under the Revolving Credit Facility are secured by substantially all of our domestic assets (including equity interests in Pioneer Global Holdings, Inc. and 65% of the outstanding voting equity interests, and 100% of non-voting equity interests, of any first-tier foreign subsidiaries owned by Pioneer Global Holdings, Inc., but excluding any equity interest in, and any assets of, Pioneer Services Holdings, LLC) and are guaranteed by certain of our domestic subsidiaries, including Pioneer Global Holdings, Inc. Borrowings under the Revolving Credit Facility are available for acquisitions, working capital and other general corporate purposes.
As of March 31, 2017, we had $79.7 million outstanding under our Revolving Credit Facility and $11.8 million in committed letters of credit, which resulted in borrowing availability of $58.5 million under our Revolving Credit Facility. There are no limitations on our ability to access the borrowing capacity provided there is no default, all representations and warranties are true and correct, and compliance with financial covenants under the Revolving Credit Facility is maintained. At March 31, 2017, we were in compliance with our financial covenants under the Revolving Credit Facility.
The financial covenants contained in our Revolving Credit Facility include the following:
A maximum senior consolidated leverage ratio, calculated as senior consolidated debt at the period end, which excludes unsecured and subordinated debt, divided by EBITDA for the trailing twelve month period at each quarter end, as defined in the Revolving Credit Facility. The senior consolidated leverage ratio cannot exceed the maximum amounts as follows:
w
5.00

to 1.00
on
September 30, 2017
w
4.00

to 1.00
on
December 31, 2017
w
3.50

to 1.00
on
March 31, 2018
w
3.25

to 1.00
on
June 30, 2018
w
2.50

to 1.00
at any time after June 30, 2018
A minimum interest coverage ratio, calculated as EBITDA for the trailing twelve month period at each quarter end, as defined in the Revolving Credit Facility, divided by interest expense for the same period. The interest coverage ratio cannot be less than the minimum amounts as follows:
w
1.00

to 1.00
for the quarterly period ending
September 30, 2017
w
1.25

to 1.00
for the quarterly period ending
December 31, 2017
w
1.50

to 1.00
at any time after December 31, 2017
A minimum EBITDA requirement, for the periods indicated in, and as defined in the Revolving Credit Facility. EBITDA required at the end of forthcoming fiscal quarter cannot be less than the minimum amount as follows:
w
$12 million
for the four-fiscal quarter period ending June 30, 2017
The Revolving Credit Facility restricts capital expenditures to the following amounts during each forthcoming fiscal year as follows:
w
$35 million
in fiscal year 2017
w
$50 million
in fiscal year 2018
w
$50 million
in fiscal year 2019
The capital expenditure threshold for each of the fiscal years above may be increased by up to 50% of the unused portion of the capital expenditure threshold for the immediate preceding fiscal year, limited to a maximum of $5 million in 2017, and $7.5 million in each of the years 2018 and 2019. In addition to the above requirements, additional capital expenditures may be made up to the amount of net proceeds from equity issuances, or if the following conditions are satisfied:
the aggregate outstanding commitments under the Revolving Credit Facility do not exceed $150 million;

10




the pro forma senior leverage and total leverage ratios, calculated as defined in the Revolving Credit Facility, are less than 2.00 to 1.00 and 4.50 to 1.00, respectively.
Pursuant to the terms above, our capital expenditures are limited to a total of $101.7 million for the fiscal year 2017.
The Revolving Credit Facility has additional restrictive covenants that, among other things, limit our ability to:
incur additional debt or make prepayments of existing debt;
create liens on or dispose of our assets;
pay dividends on stock or repurchase stock;
enter into acquisitions, mergers, consolidations, sale leaseback transactions, or hedging contracts;
make other restricted investments;
conduct transactions with affiliates; and
limits our use of the net proceeds of any offering of our equity securities to the repayment of debt outstanding under the Revolving Credit Facility.
In addition, the Revolving Credit Facility contains customary events of default, including without limitation:
payment defaults;
breaches of representations and warranties;
covenant defaults;
cross-defaults to certain other material indebtedness in excess of specified amounts;
certain events of bankruptcy and insolvency;
judgment defaults in excess of specified amounts;
failure of any guaranty or security document supporting the credit agreement; and
change of control.
Senior Notes
In 2014, we issued $300 million of unregistered senior notes at face value, with a coupon interest rate of 6.125% that are due in 2022 (the “Senior Notes”). The Senior Notes will mature on March 15, 2022 with interest due semi-annually in arrears on March 15 and September 15 of each year. We have the option to redeem the Senior Notes, in whole or in part, at any time on or after March 15, 2017 in each case at the redemption price specified in the Indenture dated March 18, 2014 (the “Indenture”) plus any accrued and unpaid interest and any additional interest (as defined in the Indenture) thereon to the date of redemption.
In accordance with a registration rights agreement with the holders of our Senior Notes, we filed an exchange offer registration statement on Form S-4 with the Securities and Exchange Commission that became effective on October 2, 2014. The exchange offer registration statement enabled the holders of our Senior Notes to exchange their senior notes for publicly registered notes with substantially identical terms. References to the “Senior Notes” herein include the senior notes issued in the exchange offer.
If we experience a change of control (as defined in the Indenture), we will be required to make an offer to each holder of the Senior Notes to repurchase all or any part of the Senior Notes at a purchase price equal to 101% of the principal amount of each Senior Note, plus accrued and unpaid interest, if any, to the date of repurchase. If we engage in certain asset sales, within 365 days of such sale we will be required to use the net cash proceeds from such sale, to the extent we do not reinvest those proceeds in our business, to make an offer to repurchase the Senior Notes at a price equal to 100% of the principal amount of each Senior Note, plus accrued and unpaid interest to the repurchase date.

11




The Indenture, among other things, limits us and certain of our subsidiaries in our ability to:
pay dividends on stock, repurchase stock, redeem subordinated indebtedness or make other restricted payments and investments;
incur, assume or guarantee additional indebtedness or issue preferred or disqualified stock;
create liens on our or their assets;
enter into sale and leaseback transactions;
sell or transfer assets;
borrow, pay dividends, or transfer other assets from certain of our subsidiaries;
consolidate with or merge with or into, or sell all or substantially all of our properties to any other person;
enter into transactions with affiliates; and
enter into new lines of business.
The Senior Notes are not subject to any sinking fund requirements. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by certain of our existing domestic subsidiaries and by certain of our future domestic subsidiaries. (See Note 10, Guarantor/Non-Guarantor Condensed Consolidated Financial Statements.)
Debt Issuance Costs
Costs incurred in connection with the Revolving Credit Facility were capitalized and are being amortized using the straight-line method over the term of the Revolving Credit Facility which matures in March 2019. Costs incurred in connection with the issuance of our Senior Notes were capitalized and are being amortized using the straight-line method (which approximates amortization using the interest method) over the term of the Senior Notes which mature in March 2022.
5.
Fair Value of Financial Instruments
The FASB’s Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, defines fair value and provides a hierarchal framework associated with the level of subjectivity used in measuring assets and liabilities at fair value. At March 31, 2017 and December 31, 2016, our financial instruments consist primarily of cash, trade and other receivables, trade payables, phantom stock unit awards and long-term debt.
The carrying value of cash, trade and other receivables, and trade payables are considered to be representative of their respective fair values due to the short-term nature of these instruments. At March 31, 2017 and December 31, 2016, the aggregate estimated fair value of our phantom stock unit awards was $5.8 million and $7.0 million, respectively, for which the vested portion recognized as a liability in our condensed consolidated balance sheets was $2.1 million and $2.0 million, respectively. The phantom stock unit awards, and the measurement of fair value for these awards, are described in more detail in Note 7, Stock-Based Compensation Plans.
The fair value of our long-term debt is estimated using a discounted cash flow analysis, based on rates that we believe we would currently pay for similar types of debt instruments. This discounted cash flow analysis is based on inputs defined by ASC Topic 820 as level 2 inputs, which are observable inputs for similar types of debt instruments. The following table presents the supplemental fair value information about long-term debt at March 31, 2017 and December 31, 2016 (amounts in thousands):
 
March 31, 2017
 
December 31, 2016
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Total debt, net of debt issuance costs
$
373,633

 
$
363,548

 
$
339,473

 
$
326,249


12




6.
Earnings (Loss) Per Common Share
The following table presents a reconciliation of the numerators and denominators of the basic earnings per share and diluted earnings per share computations (amounts in thousands, except per share data):
 
Three months ended March 31,
 
2017
 
2016
Numerator (both basic and diluted):
 
 
 
Net loss
$
(25,124
)
 
$
(27,699
)
Denominator:
 
 
 
Weighted-average shares (denominator for basic earnings (loss) per share)
77,072

 
64,576

Diluted effect of outstanding stock options, restricted stock and restricted stock unit awards

 

Denominator for diluted earnings (loss) per share
77,072

 
64,576

Loss per common share—Basic
$
(0.33
)
 
$
(0.43
)
Loss per common share—Diluted
$
(0.33
)
 
$
(0.43
)
Potentially dilutive securities excluded as anti-dilutive
4,944

 
5,909

7.
Stock-Based Compensation Plans
We grant stock option and restricted stock awards with vesting based on time of service conditions. We grant restricted stock unit awards with vesting based on time of service conditions, and in certain cases, subject to performance and market conditions. In 2016, we granted phantom stock unit awards with vesting based on time of service, performance and market conditions, which were classified as liability awards under ASC Topic 718, Compensation—Stock Compensation since we expect to settle the awards in cash when they become vested.
We recognize compensation cost for our stock-based compensation awards based on the fair value estimated in accordance with ASC Topic 718. For our awards with graded vesting, we recognize compensation expense on a straight-line basis over the service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. We adopted ASU 2016-09 in the first quarter of 2017 and elected to prospectively recognize forfeitures when they occur, rather than estimating future forfeitures.
The following table summarizes the stock-based compensation expense recognized, by award type, and the compensation expense recognized for phantom stock unit awards during the three months ended March 31, 2017 and 2016 (amounts in thousands):
 
Three months ended March 31,
 
2017
 
2016
Stock option awards
$
231

 
$
193

Restricted stock awards
112

 
87

Restricted stock unit awards
984

 
897

 
$
1,327

 
$
1,177

Phantom stock unit awards
$
100

 
$
118

Stock Options
We grant stock option awards which generally become exercisable over a three-year period and expire ten years after the date of grant. Our stock-based compensation plans require that all stock option awards have an exercise price that is not less than the fair market value of our common stock on the date of grant. We issue shares of our common stock when vested stock option awards are exercised.

13




We estimate the fair value of each option grant on the date of grant using a Black-Scholes option pricing model. The following table summarizes the assumptions used in the Black-Scholes option pricing model based on a weighted-average calculation for the options granted during the three months ended March 31, 2017 and 2016:
 
Three months ended March 31,
 
2017
 
2016
Expected volatility
76
%
 
70
%
Risk-free interest rates
2.1
%
 
1.5
%
Expected life in years
5.86

 
5.70

Options granted
268,185
 
905,966
Grant-date fair value
$4.28
 
$0.80
The assumptions used in the Black-Scholes option pricing model are based on multiple factors, including historical exercise patterns of homogeneous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for these same homogeneous groups and volatility of our stock price. As we have not declared dividends since we became a public company, we did not use a dividend yield. In each case, the actual value that will be realized, if any, will depend on the future performance of our common stock and overall stock market conditions. There is no assurance the value an optionee actually realizes will be at or near the value we have estimated using the Black-Scholes options-pricing model.
Restricted Stock
We grant restricted stock awards that vest over a one-year period with a fair value based on the closing price of our common stock on the date of the grant. When restricted stock awards are granted, or when restricted stock unit awards are converted to restricted stock, shares of our common stock are considered issued, but subject to certain restrictions. We did not grant any restricted stock awards during the three months ended March 31, 2017 or 2016.
Restricted Stock Units
We grant restricted stock unit awards with vesting based on time of service conditions only (“time-based RSUs”), and we grant restricted stock unit awards with vesting based on time of service, which are also subject to performance and market conditions (“performance-based RSUs”). Shares of our common stock are issued to recipients of restricted stock units only when they have satisfied the applicable vesting conditions.
The following table summarizes the number and weighted-average grant-date fair value of the restricted stock unit awards granted during the three months ended March 31, 2017 and 2016:
 
Three months ended March 31,
 
2017
 
2016
Time-based RSUs:
 
 
 
Time-based RSUs granted
66,728

 
231,834

Weighted-average grant-date fair value
$
6.33

 
$
1.31

Performance-based RSUs:
 
 
 
Performance-based RSUs granted
563,469

 

Weighted-average grant-date fair value
$
7.75

 
$

Our time-based RSUs generally vest over a three-year period, with fair values based on the closing price of our common stock on the date of grant.
Our performance-based RSUs generally cliff vest after 39 months from the date of grant and are granted at a target number of issuable shares, for which the final number of shares of common stock is adjusted based on our actual achievement levels that are measured against predetermined performance conditions. The number of shares of common stock awarded will be based upon the Company’s achievement in certain performance conditions, as compared to a predefined peer group, over the performance period, generally three years.

14




Approximately half of the performance-based RSUs outstanding are subject to a market condition based on relative total shareholder return, as compared to that of our predetermined peer group, and therefore the fair value of these awards is measured using a Monte Carlo simulation model. Compensation expense for equity awards with a market condition is reduced only for estimated forfeitures; no adjustment to expense is otherwise made, regardless of the number of shares issued. The remaining performance-based RSUs are subject to performance conditions, based on our EBITDA and EBITDA return on capital employed, relative to our predetermined peer group, and therefore the fair value is based on the closing price of our common stock on the date of grant, applied to the estimated number of shares that will be awarded. Compensation expense ultimately recognized for awards with performance conditions will be equal to the fair value of the restricted stock unit award based on the actual outcome of the service and performance conditions.
In April 2017, we determined that 121% of the target number of shares granted during 2014 were actually earned based on the Company’s achievement of the performance measures as described above. As of March 31, 2017, we estimate that our actual achievement level for our outstanding performance-based RSUs will be approximately 100% of the predetermined performance conditions.
Phantom Stock Unit Awards
In 2016, we granted 1,268,068 phantom stock unit awards with a weighted-average grant-date fair value of $1.35 per share. These awards cliff-vest after 39 months from the date of grant, with vesting based on time of service, performance and market conditions. The number of units ultimately awarded will be based upon the Company’s achievement in certain performance conditions, as compared to a predefined peer group, over the three-year performance period, and each unit awarded will entitle the employee to a cash payment equal to the stock price of our common stock on the date of vesting, subject to a maximum of four times the stock price on the date of grant.
These awards are classified as liability awards under ASC Topic 718, Compensation—Stock Compensation, because we expect to settle the awards in cash when they vest, and are remeasured at fair value at each reporting period until they vest. Approximately half of the phantom stock unit awards granted are subject to a market condition based on relative total shareholder return, as compared to that of our predetermined peer group, and therefore the fair value of these awards is measured using a Monte Carlo simulation model. The remaining phantom stock unit awards are subject to performance conditions, based on our EBITDA and EBITDA return on capital employed, relative to our predetermined peer group, and the fair value of these awards is measured using a Black-Scholes pricing model. The fair value of these awards is measured using inputs that are defined as Level 3 inputs under ASC Topic 820, Fair Value Measurements and Disclosures.
As of March 31, 2017, we estimate that our actual achievement level for our outstanding phantom stock unit awards will be approximately 130% of the predetermined performance conditions.
8.
Segment Information
We have two operating segments referred to as the Drilling Services Segment and the Production Services Segment which is the basis management uses for making operating decisions and assessing performance.
Our Drilling Services Segment provides contract land drilling services to a diverse group of exploration and production companies through our four drilling divisions in the US and internationally in Colombia. In addition to our drilling rigs, we provide the drilling crews and most of the ancillary equipment needed to operate our drilling rigs.
Our Production Services Segment provides a range of services, including well servicing, wireline services and coiled tubing services, to a diverse group of exploration and production companies, with our operations concentrated in the major United States onshore oil and gas producing regions in the Mid-Continent and Rocky Mountain states and in the Gulf Coast, both onshore and offshore.

15




The following table sets forth certain financial information for our two operating segments and corporate as of and for the three months ended March 31, 2017 and 2016 (amounts in thousands):
 
As of and for the three months ended March 31,
 
2017
 
2016
Drilling Services Segment:
 
 

Revenues
$
39,016

 
$
33,184

Operating costs
27,107

 
17,440

Segment margin
$
11,909

 
$
15,744

Identifiable assets
$
448,552

 
$
495,442

Depreciation and amortization
13,101

 
15,678

Capital expenditures
9,838

 
2,108

 
 
 
 
Production Services Segment:
 
 

Revenues
$
56,741

 
$
41,768

Operating costs
45,641

 
34,849

Segment margin
$
11,100

 
$
6,919

Identifiable assets
$
248,476

 
$
270,741

Depreciation and amortization
11,591

 
13,814

Capital expenditures
17,628

 
3,289

 
 
 
 
Corporate:
 
 

Identifiable assets
$
11,300

 
$
20,342

Depreciation and amortization
300

 
332

Capital expenditures
141

 
96

 
 
 
 
Total:
 
 

 
 
 
 
Revenues
$
95,757

 
$
74,952

Operating costs
72,748

 
52,289

Consolidated margin
$
23,009

 
$
22,663

Identifiable assets
$
708,328

 
$
786,525

Depreciation and amortization
24,992

 
29,824

Capital expenditures
27,607

 
5,493

The following table reconciles the consolidated margin of our two operating segments and corporate reported above to income (loss) from operations as reported on the condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016 (amounts in thousands):
 
Three months ended March 31,
 
2017
 
2016
Consolidated margin
$
23,009

 
$
22,663

Depreciation and amortization
(24,992
)
 
(29,824
)
General and administrative
(17,724
)
 
(16,508
)
Bad debt recovery
363

 
55

Gain on dispositions of property and equipment, net
471

 
600

Loss from operations
$
(18,873
)
 
$
(23,014
)
The following table sets forth certain financial information for our international operations in Colombia as of and for the three months ended March 31, 2017 and 2016 (amounts in thousands):
 
As of and for the three months ended March 31,
 
2017
 
2016
Revenues
$
10,671

 
$
1,096

Identifiable assets (1)
34,788

 
48,729

(1)
Identifiable assets for our international operations in Colombia include five drilling rigs that are owned by our Colombia subsidiary and three drilling rigs that are owned by one of our domestic subsidiaries and leased to our Colombia subsidiary.

16




9.
Commitments and Contingencies
In connection with our operations in Colombia, our foreign subsidiaries have obtained bonds for bidding on drilling contracts, performing under drilling contracts, and remitting customs and importation duties. We have guaranteed payments of $37.4 million relating to our performance under these bonds as of March 31, 2017.
We are currently undergoing sales and use tax audits for multi-year periods and we are working to resolve all relevant issues. As of March 31, 2017 and December 31, 2016, our accrued liability was $0.8 million and $0.6 million, respectively, based on our estimate of the sales and use tax obligations that are expected to result from these audits. Due to the inherent uncertainty of the audit process, we believe that it is reasonably possible that we may incur additional tax assessments with respect to one or more of the audits in excess of the amount accrued. We believe that such an outcome would not have a material adverse effect on our results of operations or financial position. Because certain of these audits are in a preliminary stage, an estimate of the possible loss or range of loss from an adverse result in all or substantially all of these cases cannot reasonably be made.
Due to the nature of our business, we are, from time to time, involved in litigation or subject to disputes or claims related to our business activities, including workers’ compensation claims and employment-related disputes. Legal costs relating to these matters are expensed as incurred. In the opinion of our management, none of the pending litigation, disputes or claims against us will have a material adverse effect on our financial condition, results of operations or cash flow from operations.
10.
Guarantor/Non-Guarantor Condensed Consolidating Financial Statements
Our Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all existing 100% owned domestic subsidiaries, except for Pioneer Services Holdings, LLC. The subsidiaries that generally operate our non-U.S. business concentrated in Colombia do not guarantee our Senior Notes. The non-guarantor subsidiaries do not have any payment obligations under the Senior Notes, the guarantees or the Indenture.
In the event of a bankruptcy, liquidation or reorganization of any non-guarantor subsidiary, such non-guarantor subsidiary will pay the holders of its debt and other liabilities, including its trade creditors, before it will be able to distribute any of its assets to us. In the future, any non-U.S. subsidiaries, immaterial subsidiaries and subsidiaries that we designate as unrestricted subsidiaries under the Indenture will not guarantee the Senior Notes. As of March 31, 2017, there were no restrictions on the ability of subsidiary guarantors to transfer funds to the parent company.
As a result of the guarantee arrangements, we are presenting the following condensed consolidating balance sheets, statements of operations and statements of cash flows of the issuer, the guarantor subsidiaries and the non-guarantor subsidiaries.

17




CONDENSED CONSOLIDATING BALANCE SHEETS
(unaudited, in thousands)
 
March 31, 2017
 
Parent
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
7,269

 
$
(851
)
 
$
872

 
$

 
$
7,290

Receivables, net of allowance
3

 
64,990

 
15,462

 
33

 
80,488

Intercompany receivable (payable)
(24,836
)
 
43,657

 
(18,821
)
 

 

Inventory

 
6,358

 
5,213

 

 
11,571

Assets held for sale

 
11,347

 
58

 

 
11,405

Prepaid expenses and other current assets
1,225

 
3,793

 
841

 

 
5,859

Total current assets
(16,339
)
 
129,294

 
3,625

 
33

 
116,613

Net property and equipment
2,341

 
563,362

 
24,521

 

 
590,224

Investment in subsidiaries
591,347

 
23,572

 

 
(614,919
)
 

Deferred income taxes
60,672

 

 

 
(60,672
)
 

Other long-term assets
461

 
997

 
33

 

 
1,491

Total assets
$
638,482

 
$
717,225

 
$
28,179

 
$
(675,558
)
 
$
708,328

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
442

 
$
20,158

 
$
2,193

 
$

 
$
22,793

Deferred revenues

 
334

 
247

 

 
581

Accrued expenses
4,447

 
33,562

 
2,081

 
33

 
40,123

Total current liabilities
4,889

 
54,054

 
4,521

 
33

 
63,497

Long-term debt, less debt issuance costs
373,633

 

 

 

 
373,633

Deferred income taxes

 
68,716

 

 
(60,672
)
 
8,044

Other long-term liabilities
2,723

 
3,108

 
86

 

 
5,917

Total liabilities
381,245

 
125,878

 
4,607

 
(60,639
)
 
451,091

Total shareholders’ equity
257,237

 
591,347

 
23,572

 
(614,919
)
 
257,237

Total liabilities and shareholders’ equity
$
638,482

 
$
717,225

 
$
28,179

 
$
(675,558
)
 
$
708,328

 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
Parent
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
9,898

 
$
(764
)
 
$
1,060

 
$

 
$
10,194

Receivables, net of allowance
480

 
64,946

 
7,210

 
(513
)
 
72,123

Intercompany receivable (payable)
(24,836
)
 
35,427

 
(10,591
)
 

 

Inventory

 
5,659

 
4,001

 

 
9,660

Assets held for sale

 
15,035

 
58

 

 
15,093

Prepaid expenses and other current assets
1,280

 
4,014

 
1,632

 

 
6,926

Total current assets
(13,178
)
 
124,317

 
3,370

 
(513
)
 
113,996

Net property and equipment
2,501

 
556,062

 
25,517

 

 
584,080

Investment in subsidiaries
577,965

 
24,270

 

 
(602,235
)
 

Deferred income taxes
65,041

 

 

 
(65,041
)
 

Other long-term assets
583

 
1,029

 
414

 

 
2,026

Total assets
$
632,912

 
$
705,678

 
$
29,301

 
$
(667,789
)
 
$
700,102

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
546

 
$
16,317

 
$
2,345

 
$

 
$
19,208

Deferred revenues

 
680

 
769

 

 
1,449

Accrued expenses
9,316

 
34,765

 
1,777

 
(513
)
 
45,345

Total current liabilities
9,862

 
51,762

 
4,891

 
(513
)
 
66,002

Long-term debt, less debt issuance costs
339,473

 

 

 

 
339,473

Deferred income taxes

 
73,249

 
(28
)
 
(65,041
)
 
8,180

Other long-term liabilities
2,179

 
2,702

 
168

 

 
5,049

Total liabilities
351,514

 
127,713

 
5,031

 
(65,554
)
 
418,704

Total shareholders’ equity
281,398

 
577,965

 
24,270

 
(602,235
)
 
281,398

Total liabilities and shareholders’ equity
$
632,912

 
$
705,678

 
$
29,301

 
$
(667,789
)
 
$
700,102


18




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)

 
Three months ended March 31, 2017
 
Parent
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$

 
$
85,086

 
$
10,671

 
$

 
$
95,757

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating costs

 
65,155

 
7,593

 

 
72,748

Depreciation and amortization
301

 
23,069

 
1,622

 

 
24,992

General and administrative
5,829

 
11,583

 
450

 
(138
)
 
17,724

Bad debt recovery

 
(363
)
 

 

 
(363
)
Gain on dispositions of property and equipment, net

 
(456
)
 
(15
)
 

 
(471
)
Intercompany leasing

 
(1,215
)
 
1,215

 

 

Total costs and expenses
6,130

 
97,773

 
10,865

 
(138
)
 
114,630

Income (loss) from operations
(6,130
)
 
(12,687
)
 
(194
)
 
138

 
(18,873
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Equity in earnings of subsidiaries
(8,585
)
 
(648
)
 

 
9,233

 

Interest expense, net of interest capitalized
(6,016
)
 
(43
)
 

 

 
(6,059
)
Other
16

 
213

 
(235
)
 
(138
)
 
(144
)
Total other (expense) income
(14,585
)
 
(478
)
 
(235
)
 
9,095

 
(6,203
)
Income (loss) before income taxes
(20,715
)
 
(13,165
)
 
(429
)
 
9,233

 
(25,076
)
Income tax (expense) benefit 1
(4,409
)
 
4,580

 
(219
)
 

 
(48
)
Net income (loss)
$
(25,124
)
 
$
(8,585
)
 
$
(648
)
 
$
9,233

 
$
(25,124
)
 
 
 
Three months ended March 31, 2016
 
Parent
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$

 
$
73,856

 
$
1,096

 
$

 
$
74,952

Costs and expenses:
 
 
 
 
 
 
 
 
 
Operating costs

 
50,310

 
1,979

 

 
52,289

Depreciation and amortization
332

 
27,731

 
1,761

 

 
29,824

General and administrative
5,885

 
10,548

 
213

 
(138
)
 
16,508

Bad debt recovery

 
(55
)
 

 

 
(55
)
Gain on dispositions of property and equipment, net

 
(555
)
 
(45
)
 

 
(600
)
Intercompany leasing

 
(1,215
)
 
1,215

 

 

Total costs and expenses
6,217

 
86,764

 
5,123

 
(138
)
 
97,966

Income (loss) from operations
(6,217
)
 
(12,908
)
 
(4,027
)
 
138

 
(23,014
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Equity in earnings of subsidiaries
(16,417
)
 
(4,846
)
 

 
21,263

 

Interest expense, net of interest capitalized
(6,234
)
 
(22
)
 
2

 

 
(6,254
)
Other
(7
)
 
320

 
(564
)
 
(138
)
 
(389
)
Total other (expense) income
(22,658
)
 
(4,548
)
 
(562
)
 
21,125

 
(6,643
)
Income (loss) before income taxes
(28,875
)
 
(17,456
)
 
(4,589
)
 
21,263

 
(29,657
)
Income tax (expense) benefit 1
1,176

 
1,039

 
(257
)
 

 
1,958

Net income (loss)
$
(27,699
)
 
$
(16,417
)
 
$
(4,846
)
 
$
21,263

 
$
(27,699
)
 
 
 
 
 
 
 
 
 
 
1  The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings (losses) of subsidiaries.





19




CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Three months ended March 31, 2017
 
Parent
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Cash flows from operating activities
$
(14,236
)
 
$
(8,233
)
 
$
649

 
$

 
$
(21,820
)
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
(127
)
 
(24,013
)
 
(813
)
 
270

 
(24,683
)
Proceeds from sale of property and equipment

 
7,387

 
31

 
(270
)
 
7,148

Proceeds from insurance recoveries

 
3,119

 

 

 
3,119

 
(127
)
 
(13,507
)
 
(782
)
 

 
(14,416
)
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Debt repayments
(6,305
)
 

 

 

 
(6,305
)
Proceeds from issuance of debt
40,000

 

 

 

 
40,000

Purchase of treasury stock
(363
)
 

 

 

 
(363
)
Intercompany contributions/distributions
(21,598
)
 
21,653

 
(55
)
 

 

 
11,734

 
21,653

 
(55
)
 

 
33,332

 
 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(2,629
)
 
(87
)
 
(188
)
 

 
(2,904
)
Beginning cash and cash equivalents
9,898

 
(764
)
 
1,060

 

 
10,194

Ending cash and cash equivalents
$
7,269

 
$
(851
)
 
$
872

 
$

 
$
7,290

 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2016
 
Parent
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Cash flows from operating activities
$
(15,583
)
 
$
24,998

 
$
212

 
$

 
$
9,627

 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
(68
)
 
(5,424
)
 
(40
)
 

 
(5,532
)
Proceeds from sale of property and equipment

 
432

 
45

 

 
477

 
(68
)
 
(4,992
)
 
5

 

 
(5,055
)
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Debt issuance costs
(20
)
 

 

 

 
(20
)
Purchase of treasury stock
(43
)
 

 

 

 
(43
)
Intercompany contributions/distributions
14,275

 
(14,242
)
 
(33
)
 

 

 
14,212

 
(14,242
)
 
(33
)
 

 
(63
)
 
 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(1,439
)
 
5,764

 
184

 

 
4,509

Beginning cash and cash equivalents
17,221

 
(5,612
)
 
2,551

 

 
14,160

Ending cash and cash equivalents
$
15,782

 
$
152

 
$
2,735

 
$

 
$
18,669

 
 




20




ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements we make in the following discussion that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance or achievements, or industry results, could differ materially from those we express in the following discussion as a result of a variety of factors, including general economic and business conditions and industry trends, levels and volatility of oil and gas prices, the continued demand for drilling services or production services in the geographic areas where we operate, decisions about exploration and development projects to be made by oil and gas exploration and production companies, the highly competitive nature of our business, technological advancements and trends in our industry and improvements in our competitors' equipment, the loss of one or more of our major clients or a decrease in their demand for our services, future compliance with covenants under our senior secured revolving credit facility and our senior notes, operating hazards inherent in our operations, the supply of marketable drilling rigs, well servicing rigs, coiled tubing and wireline units within the industry, the continued availability of drilling rig, well servicing rig, coiled tubing and wireline unit components, the continued availability of qualified personnel, the success or failure of our acquisition strategy, including our ability to finance acquisitions, manage growth and effectively integrate acquisitions, the political, economic, regulatory and other uncertainties encountered by our operations, and changes in, or our failure or inability to comply with, governmental regulations, including those relating to the environment. We have discussed many of these factors in more detail elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2016, including under the headings “Special Note Regarding Forward-Looking Statements” in the Introductory Note to Part I and “Risk Factors” in Item 1A. These factors are not necessarily all the important factors that could affect us. Other unpredictable or unknown factors could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. All forward-looking statements speak only as of the date on which they are made and we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. We advise our shareholders that they should (1) recognize that important factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.
Company Overview
Pioneer Energy Services Corp. (formerly called “Pioneer Drilling Company”) provides land-based drilling services and production services to a diverse group of independent and large oil and gas exploration and production companies in the United States and internationally in Colombia. We also provide two of our services (coiled tubing and wireline services) offshore in the Gulf of Mexico. Drilling services and production services are fundamental to establishing and maintaining the flow of oil and natural gas throughout the productive life of a well and enable us to meet multiple needs of our clients.
Drilling Services Segment— From 1999 to 2011, we significantly expanded our fleet through acquisitions and the construction of new drilling rigs. As our industry changed with the evolution of shale drilling, we began a transformation process in 2011, by selectively disposing of our older, less capable rigs, while we continued to invest in our rig building program to construct more technologically advanced, pad-optimal rigs to meet the changing needs of our clients.
As of March 31, 2017, our drilling rig fleet is 100% pad-capable. We offer the latest advancements in pad drilling with our fleet of 16 AC rigs in the US and eight SCR rigs in Colombia, all of which have 1,500 horsepower or greater drawworks. The removal of older, less capable rigs from our fleet and the recent investments in the construction of new drilling rigs has transformed our fleet into a highly capable, pad optimal fleet focused on the horizontal drilling market. We believe this positions us to compete well, grow our presence in the significant shale basins in the US, and improve profitability as the recovery of our industry continues.

21




In addition to our drilling rigs, we provide the drilling crews and most of the ancillary equipment needed to operate our drilling rigs. The drilling rigs in our fleet are currently assigned to the following divisions:
Drilling Division
 
Rig Count
South Texas
 
1

West Texas
 
7

North Dakota
 
2

Appalachia
 
6

Colombia
 
8

 
 
24

Production Services Segment— Our Production Services Segment provides a range of services to a diverse group of exploration and production companies, with our operations concentrated in the major United States onshore oil and gas producing regions in the Mid-Continent and Rocky Mountain states and in the Gulf Coast, both onshore and offshore. The primary production services we offer are the following:
Well Servicing. A range of services are required in order to establish production in newly-drilled wells and to maintain production over the useful lives of active wells. We use our well servicing rig fleet to provide these necessary services, including the completion of newly-drilled wells, maintenance and workover of active wells, and plugging and abandonment of wells at the end of their useful lives. As of March 31, 2017, we have a fleet of 113 rigs with 550 horsepower and 12 rigs with 600 horsepower with operations in 11 locations, mostly in the Gulf Coast states, as well as in Arkansas, North Dakota, and Colorado.
Wireline Services. Oil and gas exploration and production companies require wireline services to better understand the reservoirs they are drilling or producing, and use logging services to accurately characterize reservoir rocks and fluids. To complete a cased-hole well, the production casing must be perforated to establish a flow path between the reservoir and the wellbore. We use our fleet of wireline units to provide these important logging and perforating services in addition to a range of other mechanical services that are needed in order to place equipment in or retrieve equipment or debris from the wellbore, install bridge plugs and control pressure. As of March 31, 2017, we have a fleet of 114 wireline units in 18 operating locations in the Gulf Coast, Mid-Continent and Rocky Mountain states.
Coiled Tubing Services. Coiled tubing is another important element of the well servicing industry that allows operators to continue production during service operations on a well under pressure without shutting in the well, thereby reducing the risk of formation damage. Coiled tubing services involve the use of a continuous metal pipe spooled on a large reel for oil and natural gas well applications, such as wellbore clean-outs, nitrogen jet lifts, through-tubing fishing, formation stimulation utilizing acid, chemical treatments and fracturing. Coiled tubing is also used for a number of horizontal well applications such as milling temporary plugs between frac stages. As of March 31, 2017, our coiled tubing business consists of 12 onshore and five offshore coiled tubing units which are deployed through three locations in Texas and Louisiana.
Pioneer Energy Services Corp. was incorporated under the laws of the State of Texas in 1979 as the successor to a business that had been operating since 1968. Over the last 15 years, we have significantly expanded and transformed our business through acquisitions and organic growth. We conduct our operations through two operating segments: our Drilling Services Segment and our Production Services Segment. Financial information about our operating segments is included in Note 8, Segment Information, of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.
Pioneer Energy Services Corp.’s corporate office is located at 1250 NE Loop 410, Suite 1000, San Antonio, Texas 78209. Our phone number is (855) 884-0575 and our website address is www.pioneeres.com. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (SEC). Information on our website is not incorporated into this report or otherwise made part of this report.

22




Market Conditions in Our Industry
Industry Overview — Demand for oilfield services offered by our industry is a function of our clients’ willingness to make operating expenditures and capital expenditures to explore for, develop and produce hydrocarbons, which is primarily driven by current and expected oil and natural gas prices.
Our business is influenced substantially by exploration and production companies’ spending that is generally categorized as either a capital expenditure or an operating expenditure. Capital expenditures for the drilling and completion of exploratory and development wells in proven areas are more directly influenced by current and expected oil and natural gas prices and generally reflect the volatility of commodity prices. In contrast, operating expenditures for the maintenance of existing wells, for which a range of production services are required in order to maintain production, are relatively more stable and predictable.
Drilling and production services have historically trended similarly in response to fluctuations in commodity prices. However, because exploration and production companies often adjust their budgets for exploration and development drilling first in response to a shift in commodity prices, the demand for drilling services is generally impacted first and to a greater extent than the demand for production services which is more dependent on ongoing expenditures that are necessary to maintain production. Additionally, within the range of production services businesses, those that derive more revenue from production related activity, as opposed to completion of a new well, tend to be less affected by fluctuations in commodity prices and temporary reductions in industry activity.
However, in a severe downturn that is prolonged, both operating and capital expenditures are significantly reduced, and the demand for all our service offerings is significantly impacted. After a prolonged downturn, among the production services, the demand for completion-oriented services generally improves first, as exploration and production companies begin to complete wells that were previously drilled but not completed during the downturn, and to complete newly drilled wells as the demand for drilling services improves during recovery.
For additional information concerning the effects of the volatility in oil and gas prices and the effects of technological advancements and trends in our industry, see Item 1A – “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2016.
Market Conditions — Our industry has experienced a severe down cycle since late 2014 and which persisted through 2016. A modest recovery in commodity prices began in the latter half of 2016, with prices that have since remained relatively stable through early 2017.
The trends in spot prices of WTI crude oil and Henry Hub natural gas, and the resulting trends in domestic land rig counts (per Baker Hughes) and domestic well servicing rig counts (per Guiberson/Association of Energy Service Companies) over the last three years are illustrated in the graphs below.
a3yeartrends3.jpg

23




The trends in commodity pricing and domestic rig counts over the last 12 months are illustrated below:
a1yeartrend2.jpg
With the recent modest recovery and stability in commodity prices, we have experienced a resulting increase in activity and pricing for our services.
Our well servicing and coiled tubing utilization rates for the quarter ended March 31, 2017 were 43% and 22%, respectively, based on total fleet count, up from 40% and 21% during the previous quarter, while the number of wireline jobs completed during the quarter ended March 31, 2017 increased by 22%, as compared to the previous quarter. As compared to the first quarter of last year, our well servicing and coiled tubing utilization rates are slightly down from 44% and 24%, respectively, while the number of wireline jobs completed increased by 53%.
All of our domestic rigs have been placed on new contracts. As of May 1, 2017, the current utilization of our AC rig fleet is 94%, with the final AC rig undergoing an upgrade, which we expect to deploy under its new term contract late in the second quarter. A year ago, the utilization of our AC fleet was 75%, but 2 of the 12 rigs that were earning were not working, and there were no rigs working in Colombia. Of the eight rigs in Colombia, three are earning revenues, two of which are under term contracts. The term contracts in Colombia are cancelable by our client without penalty, and by us if rig operations are suspended without an associated dayrate. We are actively marketing our idle drilling rigs in Colombia to various operators and we are evaluating other options, including the possibility of the sale of some or all of our assets in Colombia.
As of May 1, 2017, 19 of our 24 drilling rigs are under contract, 14 of which are under term contracts which if not canceled or renewed prior to the end of their terms, will expire as follows:
 
Spot Market Contracts
 
 
 
Term Contract Expiration by Period
 
 
Total Term Contracts
 
Within
6 Months
 
6 Months
to 1 Year
 
1 Year to
18 Months
 
18 Months
to 2 Years
 
2 to 4 Years
Domestic rigs:
 
 
 
 
 
 
 
 
 
 
 
 
 
Earning under contract
4

 
11

 
1

 
5

 
4

 
1

 

Contracted, pending operations

 
1

 

 
1

 

 

 

Colombia rigs:
 
 
 
 
 
 
 
 
 
 
 
 
 
Earning under contract
1

 
2

 
1

 

 

 

 
1

 
5

 
14

 
2

 
6

 
4

 
1

 
1

Although we expect a highly competitive environment in 2017 as our industry continues to recover, we expect the stability in commodity prices, if it continues, to further increase industry activity and pricing levels and we believe our high-quality equipment and services are well positioned to compete.

24




Liquidity and Capital Resources
Sources of Capital Resources
Our principal sources of liquidity currently consist of:
cash and cash equivalents ($7.3 million as of March 31, 2017);
cash generated from operations;
proceeds from sales of certain non-strategic assets; and
the unused portion of our senior secured revolving credit facility (the “Revolving Credit Facility”).
As of March 31, 2017, we had $79.7 million outstanding under our Revolving Credit Facility and $11.8 million in committed letters of credit, which resulted in borrowing availability of $58.5 million under our Revolving Credit Facility. Our Revolving Credit Facility, as most recently amended on June 30, 2016, provides for a senior secured revolving credit facility, with sub-limits for letters of credit and swing-line loans, of up to a current aggregate commitment amount of $150 million, subject to availability under a borrowing base comprised of certain eligible cash, certain eligible receivables, certain eligible inventory, and certain eligible equipment of ours and certain of our subsidiaries, all of which matures in March 2019.
Borrowings under the Revolving Credit Facility are available for selective acquisitions, working capital and other general corporate purposes. There are no limitations on our ability to access the borrowing capacity provided there is no default, all representations and warranties are true and correct, and compliance with financial covenants under the Revolving Credit Facility is maintained. Additional information regarding these covenants is provided in the Debt Compliance Requirements section below.
At March 31, 2017, we were in compliance with our financial covenants under the Revolving Credit Facility. However, continued compliance with our covenants is largely dependent on our ability to generate sufficient levels of EBITDA, as defined in the Revolving Credit Facility, and/or reduce our debt levels. If we expect our future operating results to decline to a level that indicates we may become unable to comply with the financial covenants in the Revolving Credit Facility, we may seek to amend such provisions to remain in compliance or we may pursue other capital sources, such as equity or other debt transactions. Although we believe that our bank lenders are well-secured under the terms of our Revolving Credit Facility, there is no assurance that the bank lenders will waive or amend our financial covenants under the Revolving Credit Facility.
In the future, we may also consider equity and/or debt offerings, as appropriate, to meet our liquidity needs. On May 15, 2015, we filed a registration statement that permits us to sell equity or debt in one or more offerings up to a total dollar amount of $300 million. As of March 31, 2017, $234.6 million under the shelf registration statement is available for equity or debt offerings, subject to the limitations imposed by our Revolving Credit Facility and Senior Notes, as well as our Restated Articles of Incorporation which currently limits our issuance of common stock to 100 million shares. At our 2017 Annual Meeting of Shareholders, scheduled to be held on May 17, 2017, we are asking our shareholders to approve an amendment to our Restated Articles of Incorporation to increase our authorized shares of common stock to 200 million shares.
We currently expect that cash and cash equivalents, cash generated from operations, proceeds from sales of certain non-strategic assets, and available borrowings under our Revolving Credit Facility are adequate to cover our liquidity requirements for at least the next 12 months.
Uses of Capital Resources
Our principal liquidity requirements are currently for:
working capital needs;
debt service; and
capital expenditures.
Our operations have historically generated cash flows sufficient to meet our requirements for debt service and normal capital expenditures. However, our working capital requirements generally increase during periods when rig construction projects are in progress or during periods of expansion in our production services business, at which times we have been more likely to access capital through equity or debt financing. Additionally, our working capital needs may increase in periods of increasing activity following a sustained period of low activity, which is the primary reason for the $21.8 million of net

25




cash used in operating activities during the three months ended March 31, 2017. During periods of sustained low activity and pricing, we may access additional capital through the use of available funds under our Revolving Credit Facility.
Working Capital — Our working capital was $53.1 million at March 31, 2017, compared to $48.0 million at December 31, 2016. Our current ratio, which we calculate by dividing current assets by current liabilities, was 1.8 at March 31, 2017, compared to 1.7 at December 31, 2016. The changes in the components of our working capital were as follows (amounts in thousands), and as described below:
 
March 31,
2017
 
December 31,
2016
 
Change
Cash and cash equivalents
$
7,290

 
$
10,194

 
$
(2,904
)
Receivables:
 
 
 
 
 
Trade, net of allowance for doubtful accounts
54,340

 
38,764

 
15,576

Unbilled receivables
11,050

 
7,417

 
3,633

Insurance recoveries
12,713

 
17,003

 
(4,290
)
Other receivables
2,385

 
8,939

 
(6,554
)
Inventory
11,571

 
9,660

 
1,911

Assets held for sale
11,405

 
15,093

 
(3,688
)
Prepaid expenses and other current assets
5,859

 
6,926

 
(1,067
)
Current assets
116,613

 
113,996

 
2,617

Accounts payable
22,793

 
19,208

 
3,585

Deferred revenues
581