Guarantor/Non-Guarantor Condensed Consolidated Financial Statements

3 Months Ended

Mar. 31, 2014

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 2010 and 2011 Indenture was supplemented to add Pioneer Coiled Tubing Services, LLC 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 March 31, 2014, 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, 2014
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	10,554			(4,237		)	14,493			—			$	20,810
Restricted cash	210,401			—			—			—			210,401
Receivables, net of allowance	881			143,967			40,070			(2,186		)	182,732
Intercompany receivable (payable)	(24,837		)	52,889			(28,052		)	—			—
Deferred income taxes	3,323			7,008			1,238			—			11,569
Inventory	—			8,016			5,734			—			13,750
Prepaid expenses and other current assets	816			4,923			871			—			6,610
Total current assets	201,138			212,566			34,354			(2,186		)	445,872
Net property and equipment	4,580			832,094			91,005			(750		)	926,929
Investment in subsidiaries	923,552			121,187			—			(1,044,739		)	—
Intangible assets, net of accumulated amortization	75			30,197			—			—			30,272
Noncurrent deferred income taxes	85,295			—			4,020			(85,295		)	4,020
Other long-term assets	11,983			1,853			5,448			—			19,284
Total assets	$	1,226,623		$	1,197,897		$	134,827		$	(1,132,970	)	$	1,426,377
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,198		$	47,517		$	5,254		—			$	53,969
Current portion of long-term debt	200,528			1,638			—			—			202,166
Deferred revenues	—			2,159			—			—			2,159
Accrued expenses	4,953			47,269			8,058			(2,186		)	58,094
Total current liabilities	206,679			98,583			13,312			(2,186		)	316,388
Long-term debt, less current portion	501,060			73			—			—			501,133
Noncurrent deferred income taxes	—			169,891			—			(85,295		)	84,596
Other long-term liabilities	580			5,798			328			—			6,706
Total liabilities	708,319			274,345			13,640			(87,481		)	908,823
Total shareholders’ equity	518,304			923,552			121,187			(1,045,489		)	517,554
Total liabilities and shareholders’ equity	$	1,226,623		$	1,197,897		$	134,827		$	(1,132,970	)	$	1,426,377
	December 31, 2013
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	28,368		$	(2,059	)	$	1,076		$	—		$	27,385
Receivables, net of allowance	905			125,979			49,476			—			176,360
Intercompany receivable (payable)	(24,837		)	52,671			(27,834		)	—			—
Deferred income taxes	1,143			8,005			3,944			—			13,092
Inventory	—			7,415			5,817			—			13,232
Prepaid expenses and other current assets	1,013			7,094			1,204			—			9,311
Total current assets	6,592			199,105			33,683			—			239,380
Net property and equipment	4,531			846,632			87,244			(750		)	937,657
Investment in subsidiaries	939,091			120,630			—			(1,059,721		)	—
Intangible assets, net of accumulated amortization	75			32,194			—			—			32,269
Noncurrent deferred income taxes	78,486			—			1,156			(78,486		)	1,156
Other long-term assets	7,513			2,009			9,639			—			19,161
Total assets	$	1,036,288		$	1,200,570		$	131,722		$	(1,138,957	)	$	1,229,623
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	757		$	37,797		$	5,164		$	—		$	43,718
Current portion of long-term debt	—			2,847			—			—			2,847
Deferred revenues	—			699			—			—			699
Accrued expenses	16,368			51,739			5,462			—			73,569
Total current liabilities	17,125			93,082			10,626			—			120,833
Long-term debt, less current portion	499,586			80			—			—			499,666
Noncurrent deferred income taxes	—			163,122			—			(78,486		)	84,636
Other long-term liabilities	394			5,195			466			—			6,055
Total liabilities	517,105			261,479			11,092			(78,486		)	711,190
Total shareholders’ equity	519,183			939,091			120,630			(1,060,471		)	518,433
Total liabilities and shareholders’ equity	$	1,036,288		$	1,200,570		$	131,722		$	(1,138,957	)	$	1,229,623

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands)

	Three months ended March 31, 2014
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	216,870		$	22,164		$	—		$	239,034
Costs and expenses:
Operating costs	—			139,487			14,603			—			154,090
Depreciation and amortization	269			41,864			3,393			—			45,526
General and administrative	6,735			17,198			688			(138		)	24,483
Intercompany leasing	—			(1,215		)	1,215			—			—
Bad debt expense (recovery)	—			(124		)	—			—			(124		)
Total costs and expenses	7,004			197,210			19,899			(138		)	223,975
Income (loss) from operations	(7,004		)	19,660			2,265			138			15,059
Other (expense) income:
Equity in earnings of subsidiaries	12,885			575			—			(13,460		)	—
Interest expense	(12,399		)	7			4			—			(12,388		)
Loss on extinguishment of debt	(7,887		)	—			—			—			(7,887		)
Other	2,879			671			(738		)	(138		)	2,674
Total other (expense) income	(4,522		)	1,253			(734		)	(13,598		)	(17,601		)
Income (loss) before income taxes	(11,526		)	20,913			1,531			(13,460		)	(2,542		)
Income tax (expense) benefit	8,947			(8,028		)	(956		)	—			(37		)
Net income (loss)	$	(2,579	)	$	12,885		$	575		$	(13,460	)	$	(2,579	)
	Three months ended March 31, 2013
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	198,895		$	30,775		$	—		$	229,670
Costs and expenses:
Operating costs	—			129,216			20,389			—			149,605
Depreciation and amortization	252			42,702			3,331			—			46,285
General and administrative	5,426			16,978			788			(138		)	23,054
Intercompany leasing	—			(1,215		)	1,215			—			—
Bad debt expense (recovery)	—			281			—			—			281
Total costs and expenses	5,678			187,962			25,723			(138		)	219,225
Income (loss) from operations	(5,678		)	10,933			5,052			138			10,445
Other (expense) income:
Equity in earnings of subsidiaries	9,189			2,342			—			(11,531		)	—
Interest expense	(11,449		)	(20		)	7			—			(11,462		)
Other	1			283			(967		)	(138		)	(821		)
Total other (expense) income	(2,259		)	2,605			(960		)	(11,669		)	(12,283		)
Income (loss) before income taxes	(7,937		)	13,538			4,092			(11,531		)	(1,838		)
Income tax (expense) benefit	6,645			(4,349		)	(1,750		)	—			546
Net income (loss)	$	(1,292	)	$	9,189		$	2,342		$	(11,531	)	$	(1,292	)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Three months ended March 31, 2014
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
Cash flows from operating activities	$	4,044		$	16,734		$	20,457		$	41,235
Cash flows from investing activities:
Purchases of property and equipment	(212		)	(24,300		)	(7,162		)	(31,674		)
Proceeds from sale of property and equipment	—			5,394			122			5,516
	(212		)	(18,906		)	(7,040		)	(26,158		)
Cash flows from financing activities:
Debt repayments	(119,472		)	(6		)	—			(119,478		)
Proceeds from issuance of debt	320,000			—			—			320,000
Debt issuance costs	(6,138		)	—			—			(6,138		)
Change in restricted cash	(210,401		)	—			—			(210,401		)
Tender premium costs	(5,479		)	—			—			(5,479		)
Proceeds from exercise of options	277			—			—			277
Purchase of treasury stock	(433		)	—			—			(433		)
	(21,646		)	(6		)	—			(21,652		)
Net increase (decrease) in cash and cash equivalents	(17,814		)	(2,178		)	13,417			(6,575		)
Beginning cash and cash equivalents	28,368			(2,059		)	1,076			27,385
Ending cash and cash equivalents	$	10,554		$	(4,237	)	$	14,493		$	20,810
	Three months ended March 31, 2013
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
Cash flows from operating activities	$	(48,340	)	$	68,190		$	(2,693	)	$	17,157
Cash flows from investing activities:
Purchases of property and equipment	(816		)	(66,164		)	(4,333		)	(71,313		)
Proceeds from sale of property and equipment	—			904			663			1,567
	(816		)	(65,260		)	(3,670		)	(69,746		)
Cash flows from financing activities:
Debt repayments	—			(656		)	—			(656		)
Proceeds from issuance of debt	40,000			—			—			40,000
Proceeds from exercise of options	295			—			—			295
Purchase of treasury stock	(275		)	—			—			(275		)
	40,020			(656		)	—			39,364
Net increase (decrease) in cash and cash equivalents	(9,136		)	2,274			(6,363		)	(13,225		)
Beginning cash and cash equivalents	18,479			(5,401		)	10,655			23,733
Ending cash and cash equivalents	$	9,343		$	(3,127	)	$	4,292		$	10,508