e425
 

Form 425
Filed by Bronco Drilling Company, Inc.
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Allis-Chalmers Energy, Inc.
Commission File No.: 001-02199
Bronco Drilling Company, Inc. Announces
Fourth Quarter and Fiscal Year 2007 Results
     OKLAHOMA CITY—(BUSINESS WIRE)—March 11, 2008—Bronco Drilling Company, Inc., (Nasdaq/GM:BRNC), announced today financial and operational results for the three months and year ended December 31, 2007.
     Revenues for the fourth quarter of 2007 were $69.0 million compared to $76.3 million for the third quarter of 2007 and $82.5 million for the fourth quarter of 2006. Average operating rigs for the fourth quarter of 2007 were 48 compared to 53 for the previous quarter and 50 for the fourth quarter of 2006. Revenue days for the quarter decreased to 3,250 from 3,739 for the previous quarter and from 4,176 for the fourth quarter of 2006. Utilization for the fourth quarter of 2007 was 73% compared to 76% for the previous quarter and 91% for the fourth quarter of 2006.
     Average daily cash margins for our land drilling fleet for the quarter ended December 31, 2007, were $8,747 compared to $8,373 for the previous quarter and $10,142 for the fourth quarter of 2006. Net income for the fourth quarter of 2007 was $6.4 million (see note below regarding non-recurring charge) compared to $11.1 million for the previous quarter and $16.4 million for the fourth quarter of 2006. The Company generated EBITDA of $24.6 million for the fourth quarter of 2007 compared to $28.3 million for the previous quarter and $38.5 million for the fourth quarter of 2006. Results for the fourth quarter of 2007 were impacted by the movement of the rigs to be contributed or sold to Challenger Limited to our various yards in preparation for mobilization to Libya.
     The Company’s fully diluted earnings per share for the quarter ended December 31, 2007, were $0.25. This number includes a non-recurring charge related to the recognition of sales and use tax on historical capital asset expenditures. This resulted in a cumulative adjustment to depreciation and interest expense. Excluding the non-recurring charge, fully diluted earnings per share would be $0.28. This compares to fully diluted earnings per share of $0.42 for the previous quarter and $0.66 for the fourth quarter of 2006.
     Revenues for the year ended December 31, 2007 were $299.0 million compared to $285.8 million for the year ended 2006. Average operating rigs for 2007 grew to 51 from 45 for the previous year. Revenue days for the year decreased to 14,245 from 15,202 for the previous year. Utilization for the year ended December 31, 2007 was 76% compared to 93% for 2006. Average daily cash margins for 2007 were $8,585 compared to $9,618 for the previous year. Net income for 2007 was $37.6 million compared to $59.8 million for 2006. The Company generated EBITDA of $109.7 million in 2007 compared to $130.0 million for the previous year. The Company’s fully diluted earnings per share for the year ended December 31, 2007, was $1.44 compared to $2.43 for 2006.
     On January 4, 2008, we completed our previously announced acquisition of a 25% equity interest in Challenger Limited in exchange for six drilling rigs and $5.0 million in cash. Challenger is an international provider of contract land drilling and workover services to oil and natural gas companies with its principal operations in Libya. Five of the contributed drilling rigs were from our existing marketed fleet and one was a newly constructed rig. In a separate transaction, we sold to Challenger four additional drilling rigs and ancillary equipment for $12.0 million.
     Three of the ten rigs arrived in Libya in late February. We anticipate all three rigs will be operating by early April. The remaining rigs are scheduled to ship periodically in April and May, and we anticipate that all of the rigs will be operating by the beginning of July.
     About Bronco Drilling
     Bronco Drilling Company, Inc., a publicly held company headquartered in Edmond, Oklahoma, is a provider of contract land drilling services and workover services to oil and natural gas exploration and production companies. Bronco’s common stock is quoted on The Nasdaq Global Market under the symbol “BRNC.” For more information about Bronco Drilling Company, Inc., visit http://www.broncodrill.com.

 


 

Bronco Drilling Company, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share par value)
                 
    December 31,  
    2007     2006  
ASSETS
               
 
CURRENT ASSETS
               
Cash and cash equivalents
  $ 5,721     $ 10,608  
Receivables
               
Trade and other, net of allowance for doubtful accounts of $1,834 and $400 in 2007 and 2006, respectively
    61,499       60,282  
Contract drilling in progress
    2,128       1,989  
Income tax receivable
    1,191        
Current deferred income taxes
    775       155  
Prepaid expenses
    705       338  
 
           
 
               
Total current assets
    72,019       73,372  
 
               
PROPERTY AND EQUIPMENT — AT COST
               
Drilling rigs and related equipment
    510,962       396,499  
Transportation, office and other equipment
    41,942       29,928  
 
           
 
    552,904       426,427  
Less accumulated depreciation
    86,274       44,505  
 
           
 
    466,630       381,922  
 
               
OTHER ASSETS
               
Goodwill
    23,908       21,280  
Restricted cash and deposit
    2,745       2,600  
Intangibles, net, and other
    3,303       3,314  
 
           
 
    29,956       27,194  
 
               
 
  $ 568,605     $ 482,488  
 
           
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
CURRENT LIABILITIES
               
Accounts payable
  $ 16,715     $ 19,677  
Accrued liabilities
    19,280       11,767  
Income tax payable
          3,724  
Current maturities of long-term debt
    1,256       636  
 
           
 
               
Total current liabilities
    37,251       35,804  
 
               
LONG-TERM DEBT, less current maturities
    66,862       64,091  
 
               
DEFERRED INCOME TAXES
    68,063       42,608  
 
               
COMMITMENTS AND CONTINGENCIES (Note 9)
               
 
               
STOCKHOLDERS’ EQUITY
               
Common stock, $.01 par value, 100,000 shares authorized; 26,031 and 24,938 shares issued and outstanding at December 31, 2007 and 2006
    262       250  
 
               
Additional paid-in capital
    298,195       279,355  
 
               
Retained earnings
    97,972       60,380  
 
           
Total stockholders’ equity
    396,429       339,985  
 
           
 
               
 
  $ 568,605     $ 482,488  
 
           

 


 

Bronco Drilling Company, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
                         
    Years Ended December 31,  
    2007     2006     2005  
REVENUES
                       
Contract drilling revenues, including 1%, 4% and 3% to related parties
    276,088     $ 285,828     $ 77,885  
Well service
    22,864              
 
                 
 
    298,952       285,828       77,885  
EXPENSES
                       
Contract drilling
    153,797       139,607       44,695  
Well service
    14,299              
Depreciation and amortization
    44,241       30,335       9,143  
General and administrative
    22,690       15,709       9,395  
 
                 
 
    235,027       185,651       63,233  
 
                 
 
                       
Income from operations
    63,925       100,177       14,652  
 
OTHER INCOME (EXPENSE)
                       
Interest expense
    (4,762 )     (1,736 )     (1,415 )
Loss from early extinguishment of debt
          (1,000 )     (2,062 )
Interest income
    1,239       164       432  
Other
    294       284       53  
 
                 
 
    (3,229 )     (2,288 )     (2,992 )
 
                 
Income before income taxes
    60,696       97,889       11,660  
Income tax expense
    23,104       38,056       6,529  
 
                 
 
                       
NET INCOME
  $ 37,592     $ 59,833     $ 5,131  
 
                 
 
                       
Income per common share-Basic
  $ 1.45     $ 2.43     $ 0.32  
 
                 
 
                       
Income per common share-Diluted
  $ 1.44     $ 2.43     $ 0.31  
 
                 
 
                       
Weighted average number of shares outstanding-Basic
    25,996       24,585       16,259  
 
                 
 
                       
Weighted average number of shares outstanding-Diluted
    26,101       24,623       16,306  
 
                 
 
                       
PRO FORMA INFORMATION (unaudited):
                       
 
                       
Historical income before income taxes
                  $ 11,660  
Pro forma provision for income taxes
                    4,396  
 
                     
Pro forma income
                  $ 7,264  
 
                     
 
                       
Pro forma income per common share-Basic and Diluted
                  $ 0.45  
 
                     
 
                       
Weighted average number of shares outstanding-Basic
                    16,259  
 
                     
 
                       
Weighted average number of shares outstanding-Diluted
                    16,306  
 
                     

 


 

Bronco Drilling Company Inc.
Quarterly Results
Year Ended December 31, 2007
(Amounts in thousands except per share amounts)
                                 
    First     Second     Third     Fourth  
    Quarter     Quarter     Quarter     Quarter  
2007
                               
Revenues
  $ 78,981     $ 74,720     $ 76,286     $ 68,965  
Income from operations
    19,643       14,633       18,648       11,001  
Income tax expense
    7,101       5,428       7,009       3,566  
Net income
    11,386       8,714       11,068       6,424  
Income per share:
                               
Basic
    0.44       0.33       0.43       0.25  
Diluted
    0.44       0.33       0.42       0.25  
     Non-GAAP Financial Measures
     This press release includes a presentation of average daily cash margin and EBITDA which are not financial measures recognized under generally accepted accounting principles, or GAAP. Average daily cash margin is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, minus well service revenue, plus well service expense, income tax expense, other expense, general and administrative expense and depreciation and amortization, and divided by revenue days for the period. EBITDA is a non-GAAP financial measure equal to net income, the most directly comparable GAAP financial measure, plus interest expense, income tax expense and depreciation and amortization. We have presented average daily cash margin and EBITDA because we use these metrics as an integral part of our internal reporting to measure our performance and to evaluate the performance of our senior management. We consider these metrics to be important indicators of the operational strength of our business. A limitation of these metrics, however, is that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our business. Management evaluates the costs of such tangible and intangible assets and the impact of related impairments through other financial measures, such as capital expenditures, investment spending and return on capital. Therefore, we believe that average daily cash margin and EBITDA provide useful information to our investors regarding our performance and overall results of operations. Neither average daily cash margin nor EBITDA is intended to be a performance measure that should be regarded as an alternative to, or more meaningful than, either net income as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. In addition, neither of these metrics is intended to represent funds available for dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. These non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in our various agreements.

 


 

     The following presents a reconciliation of average daily cash margin and EBITDA to net income, the most directly comparable GAAP financial measure (in thousands, except revenue days and average daily cash margin):
                         
    Three Months Ended     Three Months Ended  
    December 31,     September 30,  
    2007     2006     2007  
    (Unaudited)     (Unaudited)  
Reconciliation of average daily cash margin to net income:
                       
Net income
  $ 6,424     $ 16,352     $ 11,068  
Well service revenue
    (7,189 )           (5,845 )
Well service expense
    4,447             3,931  
Income tax expense
    3,566       11,867       7,009  
Other expense
    1,011       705       571  
General and administrative
    7,247       3,968       5,353  
Depreciation and amortization
    12,923       9,459       9,219  
 
                 
 
                       
Drilling margin
    28,429       42,351       31,306  
 
                       
Revenue days
    3,250       4,176       3,739  
 
                       
Average daily cash margin
  $ 8,747     $ 10,142     $ 8,373  
 
                 
                 
    Year Ended  
    December 31,  
    2007     2006  
Reconciliation of average daily cash margin to net income:
               
Net income
  $ 37,592     $ 59,833  
Well service revenue
    (22,864 )      
Well service expense
    14,299        
Income tax expense
    23,104       38,056  
Other expense
    3,229       2,288  
General and administrative
    22,690       15,709  
Depreciation and amortization
    44,241       30,335  
 
           
 
               
Drilling margin
    122,291       146,221  
 
               
Revenue days
    14,245       15,202  
 
               
Average daily cash margin
  $ 8,585     $ 9,618  
 
           
                         
    Three Months     Three Months  
    Ended     Ended  
    December 31,     September 30,  
    2007     2006     2007  
    (Unaudited)     (Unaudited)  
Calculation of EBITDA:
                       
Net income
  $ 6,424     $ 16,352     $ 11,068  
Interest expense
    1,690       844       1,009  
Income tax expense
    3,566       11,867       7,009  
Depreciation and amortization
    12,923       9,459       9,219  
 
                 
 
                       
EBITDA
  $ 24,603     $ 38,522     $ 28,305  
 
                 

 


 

                 
    Year Ended  
    December 31,  
    2007     2006  
Calculation of EBITDA:
               
Net income
  $ 37,592     $ 59,833  
Interest expense
    4,762       1,736  
Income tax expense
    23,104       38,056  
Depreciation and amortization
    44,241       30,335  
 
           
 
               
EBITDA
  $ 109,699     $ 129,960  
 
           
     Important Information
     On January 23, 2008, Bronco Drilling Company, Inc. (“Bronco Drilling”) entered into a merger agreement with Allis-Chalmers Energy Inc. (“Allis-Chalmers”), providing for the acquisition of Bronco Drilling by Allis-Chalmers. In connection with the proposed merger, Allis-Chalmers filed a registration statement on Form S-4 (Registration No. 333-149326) with the Securities and Exchange Commission (the “SEC”) on February 20, 2008, which registration statement contains a joint proxy statement/prospectus of both companies. Allis-Chalmers and Bronco Drilling may file other relevant documents concerning the proposed merger, including any amendments to such registration statement. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT INFORMATION REGARDING THE MERGER. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus and the other documents free of charge at the website maintained by the SEC at www.sec.gov.
     The documents filed with the SEC by Allis-Chalmers may be obtained free of charge from Allis-Chalmers’ website at www.alchenergy.com or by calling Allis-Chalmers’ Investor Relations department at (713) 369-0550.
     The documents filed with the SEC by Bronco Drilling may be obtained free of charge from Bronco Drilling’s website at www.broncodrill.com or by calling Bronco Drilling’s Investor Relations department at (405) 242-4444.
     Investors and security holders are urged to read the joint proxy statement/prospectus and the other relevant materials before making any voting or investment decision with respect to the proposed merger.
     Allis-Chalmers and Bronco Drilling and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the respective stockholders of each company in connection with the merger. Information about the directors and executive officers of Allis-Chalmers and their ownership of Allis-Chalmers common stock is set forth in its proxy statement filed with the SEC on April 30, 2007. Information about the directors and executive officers of Bronco Drilling and their ownership of Bronco Drilling common stock is set forth in its proxy statement filed with the SEC on April 30, 2007. Investors may obtain additional information regarding the interests of such participants by reading the joint proxy statement/prospectus for the merger.

 


 

     THIS PRESS RELEASE IS NOT AN OFFER TO SELL THE SECURITIES OF ALLIS-CHALMERS AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES.
     Cautionary Note Regarding Forward-Looking Statements
     The information in this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, comments pertaining to estimated contract duration. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, early termination by the customer pursuant to the contract or otherwise, cancellation or completion of certain contracts or projects earlier than expected, operating hazards and other factors described in Bronco Drilling Company, Inc’s. Annual Report on Form 10-K filed with the SEC on March 8, 2007 and other filings with the SEC, which are available free of charge on the SEC’s website at www.sec.gov. Bronco cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
         
 
  CONTACT:   Bob Jarvis
 
      Investor Relations
 
      Bronco Drilling Company
 
      (405) 242-4444 Ext: 102
 
      bjarvis@broncodrill.com