Vantage Drilling Company Reports Third Quarter 2014 Results

HOUSTON, TX--(Marketwired - Oct 31, 2014) - Vantage Drilling Company ("Vantage" or the "Company") (NYSE MKT: VTG) reports net income for the three months ended September 30, 2014 of $751,000 or $0.00 per diluted share, excluding gains for the early retirement of debt and an upward revision to the tax provision, as compared to earnings of $6.8 million or $0.02 per diluted share for the three months ended September 30, 2013. Including approximately $1.1 million gain on the early retirement of debt and a $7.4 million revision to the tax provision for the three months ended September 30, 2014, the Company reported a net loss of $5.6 million or ($0.02) per diluted share.

The $1.1 million gain on the early retirement of debt represents discount to the face value of debt that we purchased in the open market, net of writing off related deferred financing costs. The total debt paydown for the quarter, including scheduled maturities and open market purchases of our Senior Notes, totaled $52.9 million.

During the third quarter, we revised our estimated annual effective tax rate based on changes to the timing of drilling programs and planned rig moves. The duration of our drilling activities has been extended in certain higher tax countries. These revisions resulted in the recognition of an additional $7.4 million tax provision for the third quarter.

Paul Bragg, Chairman and Chief Executive Officer, commented, "The highlight of the quarter was our debt paydown of nearly $53 million. We remain on track to reach our 2014 debt reduction goal, given our high level of contracted backlog." 

Vantage, a Cayman Islands exempted company, is an offshore drilling contractor, with an owned fleet of three ultra-deepwater drillships, the Platinum Explorer, the Titanium Explorer and the Tungsten Explorer, as well as an additional ultra-deepwater drillship, the Cobalt Explorer, now under construction, and four Baker Marine Pacific Class 375 ultra-premium jackup drilling rigs. Vantage's primary business is to contract drilling units, related equipment and work crews primarily on a dayrate basis to drill oil and natural gas wells. Vantage also provides construction supervision services for, and will operate and manage, drilling units owned by others. Through its fleet of seven owned drilling units, Vantage is a provider of offshore contract drilling services globally to major, national and large independent oil and natural gas companies.

The information above includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements are subject to certain risks, uncertainties and assumptions identified above or as disclosed from time to time in the company's filings with the Securities and Exchange Commission. As a result of these factors, actual results may differ materially from those indicated or implied by such forward-looking statements.

Vantage Drilling Company
Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
				Three Months Ended September 30,								Nine Months Ended September 30,
				2014				2013				2014				2013
Revenue
	Contract drilling services			$	189,648			$	158,887				602,859				449,354
	Management fees				1,923				3,903				12,474				9,511
	Reimbursables				15,947				13,095				44,368				34,658
		Total revenue			207,518				175,885				659,701				493,523
Operating costs and expenses
	Operating costs				111,271				84,132				310,995				236,566
	General and administrative				9,980				8,891				26,461				23,372
	Depreciation				31,639				24,886				94,894				74,727
		Total operating costs and expenses			152,890				117,909				432,350				334,665
Income from operations					54,628				57,976				227,351				158,858
Other income (expense)
	Interest income				14				26				38				195
	Interest expense and other financing charges				(53,376	)			(47,379	)			(162,149	)			(158,296	)
	Gain (loss) on debt extinguishment				1,051				-				(462	)			(98,327	)
	Other, net				376				305				616				2,195
		Total other income (expense)			(51,935	)			(47,048	)			(161,957	)			(254,233	)
Income (loss) before income taxes					2,693				10,928				65,394				(95,375	)
Income tax provision					8,309				4,084				36,008				16,766
Net income (loss)				$	(5,616	)		$	6,844			$	29,386			$	(112,141	)
Earnings (loss) per share
	Basic			$	(0.02	)		$	0.02			$	0.10			$	(0.37	)
	Diluted			$	(0.02	)		$	0.02			$	0.10			$	(0.37	)

Vantage Drilling Company
Supplemental Operating Data
(Unaudited, in thousands, except percentages)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2014				2013				2014				2013
Operating costs and expenses
Jackups		$	24,400			$	23,614			$	70,561			$	67,966
Deepwater			63,413				38,673				170,456				108,683
Operations support			9,937				8,383				31,039				25,159
Reimbursables			13,521				13,462				38,939				34,758
		$	111,271			$	84,132			$	310,995			$	236,566
Utilization
Jackups			99.2	%			89.5	%			99.6	%			93.9	%
Deepwater			83.1	%			97.3	%			89.8	%			92.9	%

Vantage Drilling Company
Consolidated Balance Sheet
(In thousands, except par value information)
				September 30, 2014				December 31, 2013
				(Unaudited)
ASSETS
Current assets
	Cash and cash equivalents			$	81,315			$	54,686
	Restricted cash				-				2,125
	Trade receivables				224,572				168,654
	Inventory				64,485				55,804
	Prepaid expenses and other current assets				15,821				23,717
		Total current assets			386,193				304,986
Property and equipment
	Property and equipment				3,509,267				3,472,407
	Accumulated depreciation				(376,280	)			(281,759	)
		Property and equipment, net			3,132,987				3,190,648
Other assets
	Investment in joint venture				1,571				32,482
	Other assets				83,083				100,027
		Total other assets			84,654				132,509
Total assets				$	3,603,834			$	3,628,143
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Accounts payable			$	57,848			$	65,115
	Accrued liabilities				131,168				96,382
	Current maturities of long-term debt and revolving credit agreement				53,500				63,500
		Total current liabilities			242,516				224,997
Long-term debt, net of discount of $30,253 and $39,325					2,731,970				2,852,050
Other long-term liabilities					87,966				45,640
Commitments and contingencies
Shareholders' equity
	Preferred shares, $0.001 par value, 10,000 shares authorized; none issued or outstanding				-				-
	Ordinary shares, $0.001 par value, 500,000 shares authorized; 307,732 and 304,101 shares issued and outstanding				308				304
	Additional paid-in capital				903,464				896,928
	Accumulated deficit				(362,390	)			(391,776	)
		Total shareholders' equity			541,382				505,456
Total liabilities and shareholders' equity				$	3,603,834			$	3,628,143

Vantage Drilling Company
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
				Nine Months Ended September 30,
				2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)				$	29,386			$	(112,141	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Depreciation expense				94,894				74,727
	Amortization of debt financing costs				8,713				9,425
	Amortization of debt discount				8,496				4,605
	Non-cash loss on debt extinguishment				462				6,070
	Share-based compensation expense				6,540				5,431
	Deferred income tax expense (benefit)				(184	)			858
	Equity in loss of joint venture				317				345
	Loss on disposal of assets				558				114
Changes in operating assets and liabilities:
	Restricted cash				2,125				162
	Trade receivables				(55,917	)			(25,463	)
	Inventory				(8,681	)			(15,146	)
	Prepaid expenses and other current assets				7,686				11,709
	Other assets				6,660				(6,866	)
	Accounts payable				(7,267	)			5,715
	Accrued liabilities and other long-term liabilities				81,194				(25,146	)
		Net cash provided by (used in) operating activities			174,982				(65,601	)
CASH FLOWS FROM INVESTING ACTIVITIES
	Additions to property and equipment				(34,137	)			(548,621	)
	Return of investment in joint venture				23,250				-
	Proceeds from sale of property and equipment				-				2
		Net cash used in investing activities			(10,887	)			(548,619	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from issuance of senior secured notes, net				-				775,000
	Proceeds from issuance of term loan, net				-				344,750
	Proceeds from the issuance of senior convertible notes				-				100,000
	Repayment of long-term debt				(127,466	)			(1,020,499	)
	Proceeds from (repayment of) revolving credit agreement, net				(10,000	)			10,000
	Debt issuance costs				-				(30,028	)
		Net cash provided by (used in) financing activities			(137,466	)			179,223
		Net increase (decrease) in cash and cash equivalents			26,629				(434,997	)
	Cash and cash equivalents-beginning of period				54,686				502,726
	Cash and cash equivalents-end of period			$	81,315			$	67,729