Guarantor/Non-Guarantor Condensed Consolidated Financial Statements

12 Months Ended

Dec. 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 all existing domestic subsidiaries, except for Pioneer Services Holdings, LLC, and certain of our future domestic subsidiaries. Effective October 1, 2012, the Indenture was supplemented to add Pioneer Coiled Tubing Services, LLC (formerly Go-Coil, L.L.C.) as a subsidiary guarantor. 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 December 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)

	December 31, 2012
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	18,479		$	(5,401	)	$	10,655		$	—		$	23,733
Receivables, net of allowance	440			129,570			29,128			(294		)	158,844
Intercompany receivable (payable)	(124,516		)	146,652			(22,136		)	—			—
Deferred income taxes	869			8,162			2,027			—			11,058
Inventory	—			5,956			6,155			—			12,111
Prepaid expenses and other current assets	655			9,163			3,222			—			13,040
Total current assets	(104,073		)	294,102			29,051			(294		)	218,786
Net property and equipment	3,474			921,393			90,223			(750		)	1,014,340
Investment in subsidiaries	1,122,814			114,416			—			(1,237,230		)	—
Intangible assets, net of accumulated amortization	68			43,775			—			—			43,843
Goodwill	—			41,683			—			—			41,683
Noncurrent deferred income taxes	51,834			—			5,519			(51,834		)	5,519
Other long-term assets	9,582			2,340			3,683			—			15,605
Total assets	$	1,083,699		$	1,417,709		$	128,476		$	(1,290,108	)	$	1,339,776
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,558		$	76,828		$	5,437		—			$	83,823
Current portion of long-term debt	—			872			—			—			872
Deferred revenues	—			1,954			1,926			—			3,880
Accrued expenses	14,905			48,892			4,472			(294		)	67,975
Total current liabilities	16,463			128,546			11,835			(294		)	156,550
Long-term debt, less current portion	518,618			107			—			—			518,725
Noncurrent deferred income taxes	(4		)	160,676			—			(51,834		)	108,838
Other long-term liabilities	192			5,566			2,225			—			7,983
Total liabilities	535,269			294,895			14,060			(52,128		)	792,096
Total shareholders’ equity	548,430			1,122,814			114,416			(1,237,980		)	547,680
Total liabilities and shareholders’ equity	$	1,083,699		$	1,417,709		$	128,476		$	(1,290,108	)	$	1,339,776
	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	(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 accumulated 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
Deferred revenues	—			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)

	Year ended December 31, 2012
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	779,163		$	140,280		$	—		$	919,443
Costs and expenses:
Operating costs	—			485,342			101,279			—			586,621
Depreciation and amortization	873			142,972			20,872			—			164,717
General and administrative	22,212			54,715			9,228			(552		)	85,603
Intercompany leasing	—			(4,860		)	4,860			—			—
Bad debt expense (recovery)	—			(612		)	172			—			(440		)
Impairment of equipment	—			1,131			—			—			1,131
Total costs and expenses	23,085			678,688			136,411			(552		)	837,632
Income (loss) from operations	(23,085		)	100,475			3,869			552			81,811
Other (expense) income:
Equity in earnings of subsidiaries	68,352			4,029			—			(72,381		)	—
Interest expense	(37,011		)	(59		)	21			—			(37,049		)
Other	268			940			968			(552		)	1,624
Total other (expense) income	31,609			4,910			989			(72,933		)	(35,425		)
Income (loss) before income taxes	8,524			105,385			4,858			(72,381		)	46,386
Income tax expense (benefit)	21,508			(37,033		)	(829		)	—			(16,354		)
Net income (loss)	$	30,032		$	68,352		$	4,029		$	(72,381	)	$	30,032
	Year ended December 31, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	606,402		$	109,539		$	—		$	715,941
Costs and expenses:
Operating costs	—			372,945			83,979			—			456,924
Depreciation and amortization	847			119,520			12,465			—			132,832
General and administrative	19,797			45,152			2,921			(552		)	67,318
Intercompany leasing	—			(4,860		)	4,857			3			—
Bad debt expense (recovery)	—			925			—			—			925
Impairment of equipment	—			484			—			—			484
Total costs and expenses	20,644			534,166			104,222			(549		)	658,483
Income (loss) from operations	(20,644		)	72,236			5,317			549			57,458
Other (expense) income:
Equity in earnings of subsidiaries	43,182			(2,982		)	—			(40,200		)	—
Interest expense	(29,497		)	(248		)	24			—			(29,721		)
Other	311			1,163			(7,829		)	(549		)	(6,904		)
Total other (expense) income	13,996			(2,067		)	(7,805		)	(40,749		)	(36,625		)
Income (loss) before income taxes	(6,648		)	70,169			(2,488		)	(40,200		)	20,833
Income tax expense (benefit)	17,825			(26,987		)	(494		)	—			(9,656		)
Net income (loss)	$	11,177		$	43,182		$	(2,982	)	$	(40,200	)	$	11,177
	Year ended December 31, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	400,778		$	86,432		$	—		$	487,210
Costs and expenses:
Operating costs	—			263,649			68,782			—			332,431
Depreciation and amortization	1,271			109,971			9,569			—			120,811
General and administrative	15,337			34,177			2,959			(426		)	52,047
Intercompany leasing	—			(4,323		)	4,323			—			—
Bad debt expense (recovery)	—			493			—			—			493
Total costs and expenses	16,608			403,967			85,633			(426		)	505,782
Income (loss) from operations	(16,608		)	(3,189		)	799			426			(18,572		)
Other (expense) income:
Equity in earnings of subsidiaries	(1,982		)	1,335			—			647			—
Interest expense	(26,240		)	(333		)	6			—			(26,567		)
Impairment of investments	(3,331		)	—			—			—			(3,331		)
Other	—			953			385			(426		)	912
Total other (expense) income	(31,553		)	1,955			391			221			(28,986		)
Income (loss) before income taxes	(48,161		)	(1,234		)	1,190			647			(47,558		)
Income tax expense (benefit)	14,900			(748		)	145			—			14,297
Net income (loss)	$	(33,261	)	$	(1,982	)	$	1,335		$	647		$	(33,261	)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Year ended December 31, 2012
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities	$	(171,541	)	$	338,418		$	32,489		$	—	$	199,366
Cash flows from investing activities:
Purchases of property and equipment	(2,187		)	(332,082		)	(30,055		)	—		(364,324		)
Proceeds from sale of property and equipment	—			2,998			95			—		3,093
	(2,187		)	(329,084		)	(29,960		)	—		(361,231		)
Cash flows from financing activities:
Debt repayments	—			(856		)	(18		)	—		(874		)
Proceeds from issuance of debt	100,000			—			—			—		100,000
Debt issuance costs	(58		)	—			—			—		(58		)
Proceeds from exercise of options	693			—			—			—		693
Purchase of treasury stock	(360		)	—			—			—		(360		)
	100,275			(856		)	(18		)	—		99,401
Net increase (decrease) in cash and cash equivalents	(73,453		)	8,478			2,511			—		(62,464		)
Beginning cash and cash equivalents	91,932			(13,879		)	8,144			—		86,197
Ending cash and cash equivalents	$	18,479		$	(5,401	)	$	10,655		$	—	$	23,733
	Year ended December 31, 2011
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities	$	(164,032	)	$	300,198		$	8,713		$	—	$	144,879
Cash flows from investing activities:
Acquisition of production services business of Go-Coil	—			(109,035		)	—			—		(109,035		)
Acquisition of other production services businesses	—			(6,502		)	—			—		(6,502		)
Purchases of property and equipment	(485		)	(200,887		)	(8,694		)	—		(210,066		)
Proceeds from sale of property and equipment	7			5,532			11			—		5,550
Proceeds from sale of auction rate securities	12,569			—			—			—		12,569
	12,091			(310,892		)	(8,683		)	—		(307,484		)
Cash flows from financing activities:
Debt repayments	(111,813		)	(1,345		)	—			—		(113,158		)
Proceeds from issuance of debt	250,750			—			—			—		250,750
Debt issuance costs	(7,285		)	—			—			—		(7,285		)
Proceeds from exercise of options	2,884			—			—			—		2,884
Proceeds from common stock, net of offering costs of $5,707	94,343			—			—			—		94,343
Purchase of treasury stock	(743		)	—			—			—		(743		)
	228,136			(1,345		)	—			—		226,791
Net increase (decrease) in cash and cash equivalents	76,195			(12,039		)	30			—		64,186
Beginning cash and cash equivalents	15,737			(1,840		)	8,114			—		22,011
Ending cash and cash equivalents	$	91,932		$	(13,879	)	$	8,144		$	—	$	86,197
	Year ended December 31, 2010
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities	$	(31,841	)	$	115,650		$	14,542		$	—	$	98,351
Cash flows from investing activities:
Acquisition of other production services businesses	—			(1,340		)	—			—		(1,340		)
Purchases of property and equipment	(478		)	(114,313		)	(16,212		)	—		(131,003		)
Proceeds from sale of property and equipment	—			2,290			41			—		2,331
Proceeds from insurance recoveries	—			531			—			—		531
	(478		)	(112,832		)	(16,171		)	—		(129,481		)
Cash flows from financing activities:
Debt repayments	(254,914		)	(1,942		)	—			—		(256,856		)
Proceeds from issuance of debt	274,375			—			—			—		274,375
Debt issuance costs	(4,865		)	—			—			—		(4,865		)
Proceeds from exercise of options	238			—			—			—		238
Purchase of treasury stock	(130		)	—			—			—		(130		)
	14,704			(1,942		)	—			—		12,762
Net increase (decrease) in cash and cash equivalents	(17,615		)	876			(1,629		)	—		(18,368		)
Beginning cash and cash equivalents	33,352			(2,716		)	9,743			—		40,379
Ending cash and cash equivalents	$	15,737		$	(1,840	)	$	8,114		$	—	$	22,011