Lower prices for oil and natural gas liquids have led to softening in drilling services markets and caused Pioneer Drilling Co. to dial down its operations guidance for the second quarter, the company said Monday. However, the Permian Basin of West Texas and the Bakken Shale offer some bright spots.
Pioneer said it now expects revenue growth in its production services division to be at the low end of the previous estimate of 5-10%. Margin as a percentage of revenues in that division is now expected to be 40-42%, compared to the previous guidance of being flat with the first quarter margin of 43.6%. In drilling services the company said it now expects average rig utilization in the second quarter to be at the low end of previous guidance of 89-91%. The drilling services margin is expected to be $7,600 to $8,000 per day, compared to previous guidance of $8,000 to $8,300 per day.
"Lower coiled tubing utilization in the second quarter accounted for most of our revised margin guidance for our production services division, although pricing has remained firm for all of our production services," said CEO Wm. Stacy Locke.
He said the company has relocated one coiled tubing unit from Oklahoma to South Texas and plans to move another from the Marcellus Shale to South Louisiana next month. "We currently believe coiled tubing utilization will improve for the remainder of the year and are already seeing modest improvement in the month of June," Locke said.
"In our drilling services division, we have seen some softening for renewals of drilling rigs in the Eagle Ford. Also, our drilling rig in northwest Montana has been released, and we are currently relocating our fifth rig from the Marcellus to Utah on a one-year term.
"However, in West Texas we renewed six drilling rigs for one-year terms with modest increases in dayrates. We are also continuing to successfully deploy our newbuild rigs with one rig commencing operations in the Bakken in early June and a second newbuild rig currently mobilizing to the Marcellus."