Guarantor/Non-Guarantor Condensed Consolidated Financial Statements

3 Months Ended

Mar. 31, 2012

Guarantor Non-Guarantor Condensed Consolidated Financial Statements

Guarantor/Non-Guarantor Condensed Consolidated Financial Statements

Guarantor/Non-Guarantor Condensed Consolidated Financial Statements

Our Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by our existing domestic subsidiaries, except for Pioneer Services Holdings, LLC, Go-Coil, LLC, and certain of our future domestic subsidiaries. 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, 2012, 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 consolidated balance sheets, statements of operations and statements of cash flows of the issuer, the guarantor subsidiaries and the non-guarantor subsidiaries.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

	March 31, 2012
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	21,142		$	(6,505	)	$	6,764		$	—		$	21,401
Receivables, net of allowance for doubtful accounts	2			123,415			43,844			(3,618		)	163,643
Intercompany receivable (payable)	(126,574		)	142,819			(16,245		)	—			—
Deferred income taxes	553			6,656			9,050			—			16,259
Inventory	—			4,971			7,249			—			12,220
Prepaid expenses and other current assets	246			7,890			4,071			—			12,207
Total current assets	(104,631		)	279,246			54,733			(3,618		)	225,730
Net property and equipment	1,751			743,910			123,577			(750		)	868,488
Investment in subsidiaries	1,004,501			225,515			—			(1,230,016		)	—
Intangible assets, net of amortization	176			17,768			32,559			—			50,503
Goodwill	—			—			41,683			—			41,683
Noncurrent deferred income taxes	36,436			—			—			(36,436		)	—
Other long-term assets	11,208			1,457			15			—			12,680
Total assets	$	949,441		$	1,267,896		$	252,567		$	(1,270,820	)	$	1,199,084
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	452		$	76,081		$	8,584		—			$	85,117
Current portion of long-term debt	—			850			23			—			873
Prepaid drilling contracts	—			2,722			2,011			—			4,733
Accrued expenses	3,541			43,997			9,545			(3,618		)	53,465
Total current liabilities	3,993			123,650			20,163			(3,618		)	144,188
Long-term debt, less current portion	417,954			200			125			—			418,279
Noncurrent deferred income taxes	—			134,255			2,882			(36,436		)	100,701
Other long-term liabilities	203			5,290			3,882			—			9,375
Total liabilities	422,150			263,395			27,052			(40,054		)	672,543
Total shareholders’ equity	527,291			1,004,501			225,515			(1,230,766		)	526,541
Total liabilities and shareholders’ equity	$	949,441		$	1,267,896		$	252,567		$	(1,270,820	)	$	1,199,084
	December 31, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	91,932		$	(13,879	)	$	8,144		$	—		$	86,197
Receivables, net of allowance for doubtful accounts	(2		)	112,531			32,724			(19		)	145,234
Intercompany receivable (payable)	(122,552		)	131,585			(9,033		)	—			—
Deferred income taxes	1,408			8,644			5,381			—			15,433
Inventory	—			4,533			6,651			—			11,184
Prepaid expenses and other current assets	285			6,304			4,975			—			11,564
Total current assets	(28,929		)	249,718			48,842			(19		)	269,612
Net property and equipment	1,605			675,679			117,422			(750		)	793,956
Investment in subsidiaries	932,237			221,201			—			(1,153,438		)	—
Intangible assets, net of amortization	171			18,829			33,680			—			52,680
Goodwill	—			—			41,683			—			41,683
Noncurrent deferred income taxes	30,835			—			735			(30,835		)	735
Other long-term assets	11,949			2,124			15			—			14,088
Total assets	$	947,868		$	1,167,551		$	242,377		$	(1,185,042	)	$	1,172,754
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,090		$	57,150		$	8,200		$	—		$	66,440
Current portion of long-term debt	—			850			22			—			872
Prepaid drilling contracts	—			1,297			2,669			—			3,966
Accrued expenses	16,779			45,012			6,631			(20		)	68,402
Total current liabilities	17,869			104,309			17,522			(20		)	139,680
Long-term debt, less current portion	417,747			850			131			—			418,728
Noncurrent deferred income taxes	921			124,659			—			(30,835		)	94,745
Other long-term liabilities	137			5,496			3,523			—			9,156
Total liabilities	436,674			235,314			21,176			(30,855		)	662,309
Total shareholders’ equity	511,194			932,237			221,201			(1,154,187		)	510,445
Total liabilities and shareholders’ equity	$	947,868		$	1,167,551		$	242,377		$	(1,185,042	)	$	1,172,754

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands)

	Three months ended March 31, 2012
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	190,842		$	41,136		$	—		$	231,978
Costs and expenses:
Operating costs	—			114,941			26,832			—			141,773
Depreciation and amortization	165			32,689			5,519			—			38,373
General and administrative	5,508			13,032			2,741			(138		)	21,143
Intercompany leasing	—			(1,215		)	1,231			(16		)	—
Bad debt expense	—			(180		)	89			—			(91		)
Impairment of equipment	—			1,032			—			—			1,032
Total costs and expenses	5,673			160,299			36,412			(154		)	202,230
Income from operations	(5,673		)	30,543			4,724			154			29,748
Other (expense) income:
Equity in earnings of subsidiaries	23,550			4,648			—			(28,198		)	—
Interest expense	(9,513		)	(40		)	(2		)	—			(9,555		)
Other	(68		)	250			904			(154		)	932
Total other expense	13,969			4,858			902			(28,352		)	(8,623		)
Income (loss) before income taxes	8,296			35,401			5,626			(28,198		)	21,125
Income tax (expense) benefit	5,876			(11,851		)	(978		)	—			(6,953		)
Net income (loss)	$	14,172		$	23,550		$	4,648		$	(28,198	)	$	14,172
	Three months ended March 31, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	129,115		$	24,234		$	—		$	153,349
Costs and expenses:
Operating costs	—			81,878			18,859			—			100,737
Depreciation and amortization	275			29,118			2,863			—			32,256
General and administrative	4,131			9,890			608			(108		)	14,521
Intercompany leasing	—			(1,215		)	1,215			—			—
Bad debt recovery	—			(84		)	—			—			(84		)
Total costs and expenses	4,406			119,587			23,545			(108		)	147,430
Income from operations	(4,406		)	9,528			689			108			5,919
Other income (expense):
Equity in earnings of subsidiaries	807			(5,027		)	—			4,220			—
Interest expense	(7,472		)	(73		)	6			—			(7,539		)
Other	532			236			(7,177		)	(108		)	(6,517		)
Total other income (expense)	(6,133		)	(4,864		)	(7,171		)	4,112			(14,056		)
Income (loss) before income taxes	(10,539		)	4,664			(6,482		)	4,220			(8,137		)
Income tax (expense) benefit	4,504			(3,857		)	1,455			—			2,102
Net earnings (loss)	$	(6,035	)	$	807		$	(5,027	)	$	4,220		$	(6,035	)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Three months ended March 31, 2012
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities	$	(70,272	)	$	91,273		$	8,651		$	—	$	29,652
Cash flows from investing activities:
Purchases of property and equipment	(478		)	(84,565		)	(10,066		)	—		(95,109		)
Proceeds from sale of property and equipment	—			1,316			41			—		1,357
	(478		)	(83,249		)	(10,025		)	—		(93,752		)
Cash flows from financing activities:
Debt repayments	—			(650		)	(6		)	—		(656		)
Proceeds from exercise of options	253			—			—			—		253
Purchase of treasury stock	(293		)	—			—			—		(293		)
	(40		)	(650		)	(6		)	—		(696		)
Net increase (decrease) in cash and cash equivalents	(70,790		)	7,374			(1,380		)	—		(64,796		)
Beginning cash and cash equivalents	91,932			(13,879		)	8,144			—		86,197
Ending cash and cash equivalents	$	21,142		$	(6,505	)	$	6,764		$	—	$	21,401
	Three months ended March 31, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities	$	(17,846	)	$	30,450		$	(3,560	)	$	—	$	9,044
Cash flows from investing activities:
Acquisition of production services businesses	—			(2,000		)	—			—		(2,000		)
Purchases of property and equipment	(90		)	(29,492		)	(1,797		)	—		(31,379		)
Proceeds from sale of property and equipment	—			782			4			—		786
Proceeds from sale of auction rate securities	12,569			—			—			—		12,569
	12,479			(30,710		)	(1,793		)	—		(20,024		)
Cash flows from financing activities:
Debt repayments	(12,800		)	(729		)	—			—		(13,529		)
Proceeds from issuance of debt	17,000			—			—			—		17,000
Proceeds from exercise of options	560			—			—			—		560
Purchase of treasury stock	(210		)	—			—			—		(210		)
Excess tax benefit of stock option exercises	459			—			—			—		459
	5,009			(729		)	—			—		4,280
Net decrease in cash and cash equivalents	(358		)	(989		)	(5,353		)	—		(6,700		)
Beginning cash and cash equivalents	15,737			(1,840		)	8,114			—		22,011
Ending cash and cash equivalents	$	15,379		$	(2,829	)	$	2,761		$	—	$	15,311