Pacific Drilling Announces First-Quarter 2018 Results

LUXEMBOURG–(BUSINESS WIRE)–Pacific Drilling S.A. (OTC: PACDQ) today reported results for the first
quarter of 2018. Net loss for the first-quarter 2018 was $96.1 million
or $4.50 per diluted share, compared to net loss of $129.7 million or
$6.08 per diluted share for the fourth-quarter 2017, and net loss of
$99.8 million or $4.69 per diluted share for first-quarter 2017.

Pacific Drilling CEO Paul Reese commented, ÔÇ£During the quarter the
Pacific Drilling team again delivered the industry-leading excellence
our clients have come to expect. In the midst of a continually
challenging market environment, we further reduced average daily
expenses for operating rigs to $110 thousand per day while achieving
strong safety performance and revenue efficiencies. Pacific Scirocco
achieved 7 years without a lost time incident, a remarkable milestone in
safety performance and a reflection of Pacific DrillingÔÇÖs focus on
safety and customer service. Pacific Santa Ana provided
outstanding service to Petronas in Mauritania under a unique,
integrated-services contract structure. Pacific Sharav also
continued its stellar performance in some of the worldÔÇÖs most
challenging well conditions by delivering 100 percent revenue efficiency
for the quarter.

Mr. Reese continued, ÔÇ£We also successfully implemented our innovative,
clustered smart-stacking process in Las Palmas, using one rig to feed
power to three other vessels. We expect this approach to reduce our
stacking costs by more than 50% while allowing us to maintain the
condition of our rigs and thereby return to work without any material
capital expenditure.

Mr. Reese concluded, ÔÇ£This operational performance is even more notable
in light of our ongoing restructuring efforts. We continue to engage in
active discussions with our stakeholders for the purpose of agreeing to
the terms of a Chapter 11 plan of reorganization.ÔÇØ

Update on Financial Restructuring under the
Protection of Chapter 11

On November 12, 2017 (the ÔÇ£Petition DateÔÇØ), we and certain of our
subsidiaries filed voluntary petitions (the ÔÇ£Bankruptcy PetitionsÔÇØ) for
relief under Chapter 11 of Title 11 of the United States Code (the
ÔÇ£Bankruptcy CodeÔÇØ) in the United States Bankruptcy Court for the
Southern District of New York (the ÔÇ£Bankruptcy CourtÔÇØ). This process
aims to optimize Pacific DrillingÔÇÖs capital structure pending recovery
in the floating rig drilling industry.

We are currently operating our business as debtors-in-possession in
accordance with the applicable provisions of the Bankruptcy Code and
orders of the Bankruptcy Court. After we filed our Bankruptcy Petitions,
we sought and obtained approval from the Bankruptcy Court for a variety
of ÔÇ£first dayÔÇØ motions, including authority to maintain bank accounts
and other customary relief. The relief granted in these motions allows
us to continue to operate our business in the normal course.

Under the Bankruptcy Code, we had the exclusive right to file a plan of
reorganization under Chapter 11 through March 12, 2018. On March 22,
2018, the Bankruptcy Court approved our request for an order under which
we, our secured creditor groups and our majority shareholder would take
part in mediation before the Honorable James R. Peck, retired Bankruptcy
Court Judge for the Southern District of New York. The scope of the
mediation is to facilitate discussions among us and our stakeholders for
the purpose of agreeing to the terms of a binding term sheet or
restructuring support agreement describing a Chapter 11 plan of
reorganization. On May 16, 2018, the Bankruptcy Court approved our
request for an agreed order under which we, our secured creditor groups
and our majority shareholder agreed to extend the mediation and the
exclusive filing period to June 4, 2018 without prejudice to seek
further extensions of the exclusive period. We are currently in the
midst of the mediation.

First-Quarter 2018 Operational and Financial
Commentary

First-quarter 2018 contract drilling revenue was $82.1 million, which
included $6.2 million of deferred revenue amortization. This compared to
fourth-quarter 2017 contract drilling revenue of $65.0 million, which
included $5.1 million of deferred revenue amortization. The increase in
revenue resulted primarily from the Pacific Santa Ana operating
for the full quarter under a contract with Petronas in Mauritania, as
compared to only 12 days in the fourth-quarter 2017 when it started its
contract on December 20, 2017.

During the first quarter, our operating fleet of drillships achieved an
average rig-related revenue efficiency of 97.6%. Including unpaid
downtime related to integrated services on the Pacific Santa Ana,
our average revenue efficiency was 95.4% for the first quarter. Revenue
efficiency is defined as the actual contractual dayrate revenue
(excluding mobilization fees, upgrade reimbursements and other revenue
sources) divided by the maximum amount of contractual dayrate revenue
that could have been earned during such period.

Operating expenses were $64.4 million compared to $59.7 million in the
fourth-quarter 2017. The increase in operating expenses was primarily
the result of costs from the Pacific Santa Ana working for the
full first quarter in 2018.

First-quarter 2018 general and administrative expenses were $17.2
million compared to $22.4 million for the fourth-quarter 2017. Certain
legal and advisory expenses related to our debt restructuring efforts
are classified as reorganization items subsequent to the Petition Date
of November 12, 2017. Net of the legal costs associated with the
arbitration proceeding, our corporate overhead(a) for the
first-quarter 2018 was $11.6 million. This compares to $11.0 million for
fourth-quarter 2017, which is net of legal costs associated with the
arbitration proceeding and the restructuring.

Adjusted EBITDA(b) for the first-quarter 2018 was $1.1
million, compared to ($16.5) million in the fourth-quarter 2017.

Interest expense for the first-quarter 2018 was $14.9 million, as
compared to $27.4 million for the fourth-quarter 2017, primarily due to
interest expense that we have not accrued subsequent to the Petition
Date for the 2017 Senior Secured Notes, the 2020 Senior Secured Notes
and the Senior Secured Term Loan B, as we believe this interest is not
probable of being treated as an allowable claim in the Chapter 11
proceedings.

Income tax expense for the first-quarter 2018 was $0.3 million, compared
to $8.8 million for the fourth-quarter 2017, primarily as a result of
the non-cash write-off of deferred tax assets in the fourth-quarter 2017.

For the first-quarter 2018, cash flow from operations was $(40.6)
million. Cash balances, including $8.5 million in restricted cash,
totaled $273.0 million as of March 31, 2018, and liabilities subject to
compromise totaled approximately $3.1 billion.

Additional information about our financial results and the Chapter 11
proceedings can be found (i) in the Form 20-F containing our annual
report for the period ended December 31, 2017 as filed with the SEC,
(ii) on the CompanyÔÇÖs website at www.pacificdrilling.com/investor-relations/sec-filings,
and www.pacificdrilling.com/restructuring
or (iii) via the CompanyÔÇÖs restructuring information line at +1
866-396-3566 (Toll Free) or +1 646-795-6175 (International Number).

The Company intends to continue to file quarterly and annual reports
with the SEC, which will also be available on the CompanyÔÇÖs website. The
Company will not hold an earnings conference call this quarter.

Footnotes

(a) Corporate overhead expenses is a non-GAAP (U.S. generally accepted
accounting principles) financial measure. For a definition of corporate
overhead expenses and a reconciliation to general and administrative
expenses, please refer to the schedule included in this release.

(b) EBITDA and Adjusted EBITDA are non-GAAP financial measures. For a
definition of EBITDA and Adjusted EBITDA and a reconciliation to net
income, please refer to the schedule included in this release.
Management uses this operational metric to track company results and
believes that this measure provides additional information that
highlights the impact of our operating efficiency as well as the
operating and support costs incurred in achieving the revenue
performance.

About Pacific Drilling

With its best-in-class drillships and highly experienced team, Pacific
Drilling is committed to becoming the industryÔÇÖs preferred
high-specification, floating-rig drilling contractor. Pacific DrillingÔÇÖs
fleet of seven drillships represents one of the youngest and most
technologically advanced fleets in the world.

Pacific Drilling has its principal offices in Luxembourg and Houston.
For more information about Pacific Drilling, including our current Fleet
Status, please visit our website at www.pacificdrilling.com.

Forward-Looking Statements

Certain statements and information contained in this first-quarter 2018
earnings press release, constitute ÔÇ£forward-looking statementsÔÇØ within
the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, and are generally identifiable by the use
of words such as ÔÇ£anticipate,ÔÇØ ÔÇ£believe,ÔÇØ ÔÇ£could,ÔÇØ ÔÇ£estimate,ÔÇØ
ÔÇ£expect,ÔÇØ ÔÇ£forecast,ÔÇØ ÔÇ£intend,ÔÇØ ÔÇ£our ability to,ÔÇØ ÔÇ£plan,ÔÇØ ÔÇ£potential,ÔÇØ
ÔÇ£projected,ÔÇØ ÔÇ£should,ÔÇØ ÔÇ£will,ÔÇØ ÔÇ£would,ÔÇØ or other similar words, which
are generally not historical in nature. Our forward-looking statements
express our current expectations or forecasts of possible future results
or events, including future financial and operational performance;
revenue efficiency levels; market outlook; forecasts of trends, future
client contract opportunities, contract dayrates; our business
strategies and plans and objectives of management; estimated duration of
client contracts; backlog; expected capital expenditures; projected
costs and savings; the potential impact of our Chapter 11 proceedings on
our future operations and ability to finance our business; and our
ability to emerge from our Chapter 11 proceedings and continue as a
going concern. Although we believe that the assumptions and expectations
reflected in our forward-looking statements are reasonable and made in
good faith, these statements are not guarantees, and actual future
results may differ materially due to a variety of factors. These
statements are subject to a number of risks and uncertainties, many of
which are beyond our control. Important factors that could cause actual
results to differ materially from our expectations include: the global
oil and gas market and its impact on demand for our services; the
offshore drilling market, including reduced capital expenditures by our
clients; changes in worldwide oil and gas supply and demand; rig
availability and supply and demand for high-specification drillships and
other drilling rigs competing with our fleet; costs related to stacking
of rigs; our ability to enter into and negotiate favorable terms for new
drilling contracts or extensions; our substantial level of indebtedness;
possible cancellation, renegotiation, termination or suspension of
drilling contracts as a result of mechanical difficulties, performance,
market changes or other reasons; our ability to continue as a going
concern in the long term, including our ability to confirm a plan of
reorganization that restructures our debt obligations to address our
liquidity issues and allows emergence from our Chapter 11 proceedings;
our ability to obtain Bankruptcy Court approval with respect to motions
or other requests made to the Bankruptcy Court in our Chapter 11
proceedings, including maintaining strategic control as
debtor-in-possession͝ our ability to negotiate, develop, confirm and
consummate a plan of reorganization; the effects of our Chapter 11
proceedings on our operations and agreements, including our
relationships with employees, regulatory authorities, customers,
suppliers, banks and other financing sources, insurance companies and
other third parties͝ the effects of our Chapter 11 proceedings on our
Company and on the interests of various constituents, including holders
of our common shares and debt instruments; Bankruptcy Court rulings in
our Chapter 11 proceedings as well as the outcome of all other pending
litigation and arbitration matters and the outcome of our Chapter 11
proceedings in general; the length of time that we will operate under
Chapter 11 protection and the continued availability of operating
capital during the pendency of the proceedings͝ risks associated with
third-party motions in our Chapter 11 proceedings, which may interfere
with our ability to confirm and consummate a plan of reorganization and
restructuring generally; increased advisory costs to execute a plan of
reorganization͝ our ability to access adequate debtor-in-possession
financing or use cash collateral͝ the potential adverse effects of our
Chapter 11 proceedings on our liquidity, results of operations, or
business prospects͝ increased administrative and legal costs related to
our Chapter 11 proceedings and other litigation and the inherent risks
involved in a bankruptcy process; the cost, availability and access to
capital and financial markets, including the ability to secure new
financing after emerging from our Chapter 11 proceedings; and the other
risk factors described in our 2017 Annual Report on Form 20-F and our
Current Reports on Form 6-K. These documents are available through our
website at www.pacificdrilling.com
or through the SECÔÇÖs website at www.sec.gov.
Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date hereof. We undertake no
obligation to publicly update or revise any forward-looking statements
after the date they are made, whether as a result of new information,
future events or otherwise.

PACIFIC DRILLING S.A. (DEBTOR IN POSSESSION) AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (in thousands, except per share information) (unaudited)
Three Months Ended
March 31,	December 31,	March 31,
2018	2017	2017
Revenues
Contract drilling	$	82,069	$	65,024	$	105,509
Costs and expenses
Operating expenses	(64,354	)	(59,728	)	(60,448	)
General and administrative expenses	(17,204	)	(22,448	)	(22,461	)
Depreciation expense	(69,920	)	(69,894	)	(69,631	)
(151,478	)	(152,070	)	(152,540	)
Operating loss	(69,409	)	(87,046	)	(47,031	)
Other income (expense)
Interest expense	(14,929	)	(27,438	)	(50,011	)
Reorganization items	(12,032	)	(6,474	)	ÔÇö
Other income (expense)	593	(4	)	(729	)
Loss before income taxes	(95,777	)	(120,962	)	(97,771	)
Income tax expense	(274	)	(8,770	)	(2,076	)
Net loss	$	(96,051	)	$	(129,732	)	$	(99,847	)
Loss per common share, basic	$	(4.50	)	$	(6.08	)	$	(4.69	)
Weighted average number of common shares, basic	21,339	21,338	21,273
Loss per common share, diluted	$	(4.50	)	$	(6.08	)	$	(4.69	)
Weighted average number of common shares, diluted	21,339	21,338	21,273

PACIFIC DRILLING S.A. (DEBTOR IN POSSESSION) AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (in thousands) (unaudited)
March 31,	December 31,
2018	2017
Assets:
Cash and cash equivalents	$	264,450	$	308,948
Restricted cash	8,500	8,500
Accounts receivable, net	49,193	40,909
Materials and supplies	86,223	87,332
Deferred costs, current	12,789	14,892
Prepaid expenses and other current assets	11,964	14,774
Total current assets	433,119	475,355
Property and equipment, net	4,585,463	4,652,001
Long-term receivable	202,575	202,575
Other assets	30,380	33,030
Total assets	$	5,251,537	$	5,362,961
Liabilities and shareholdersÔÇÖ equity:
Accounts payable	$	14,600	$	11,959
Accrued expenses	27,863	36,174
Accrued interest	5,774	6,088
Deferred revenue, current	20,946	23,966
Total current liabilities	69,183	78,187
Deferred revenue	8,308	12,973
Other long-term liabilities	30,963	32,323
Total liabilities not subject to compromise	108,454	123,483
Liabilities subject to compromise	3,086,417	3,087,677
ShareholdersÔÇÖ equity:
Common shares	213	213
Additional paid-in capital	2,367,187	2,366,464
Accumulated other comprehensive loss	(14,300	)	(14,493	)
Accumulated deficit	(296,434	)	(200,383	)
Total shareholdersÔÇÖ equity	2,056,666	2,151,801
Total liabilities and shareholdersÔÇÖ equity	$	5,251,537	$	5,362,961

PACIFIC DRILLING S. A. (DEBTOR IN POSSESSION) AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
Three Months Ended
March 31,	December 31,	March 31,
2018	2017	2017
Cash flow from operating activities:
Net loss	$	(96,051	)	$	(129,732	)	$	(99,847	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense	69,920	69,894	69,631
Amortization of deferred revenue	(6,150	)	(5,145	)	(31,079	)
Amortization of deferred costs	5,007	3,080	3,306
Amortization of deferred financing costs	ÔÇö	ÔÇö	8,091
Amortization of debt discount	ÔÇö	ÔÇö	305
Deferred income taxes	(1,762	)	7,497	908
Share-based compensation expense	723	781	2,215
Other-than-temporary impairment of available-for-sale securities	ÔÇö	682	ÔÇö
Reorganization items	4,707	5,315	ÔÇö
Changes in operating assets and liabilities:
Accounts receivable	(8,284	)	(4,548	)	54,211
Materials and supplies	1,109	1,999	1,197
Prepaid expenses and other assets	4,329	(10,327	)	(1,495	)
Accounts payable and accrued expenses	(12,745	)	20,472	16,421
Deferred revenue	(1,413	)	3,056	4,848
Net cash provided by (used in) operating activities	(40,610	)	(36,976	)	28,712
Cash flow from investing activities:
Capital expenditures	(3,888	)	(3,883	)	(10,127	)
Net cash used in investing activities	(3,888	)	(3,883	)	(10,127	)
Cash flow from financing activities:
Payments for shares issued under share-based compensation plan	ÔÇö	ÔÇö	(154	)
Payments on long-term debt	ÔÇö	ÔÇö	(134,540	)
Payments for financing costs	ÔÇö	ÔÇö	(2,664	)
Net cash used in financing activities	ÔÇö	ÔÇö	(137,358	)
Net decrease in cash and cash equivalents	(44,498	)	(40,859	)	(118,773	)
Cash, cash equivalents and restricted cash, beginning of period	317,448	358,307	626,168
Cash, cash equivalents and restricted cash, end of period	$	272,950	$	317,448	$	507,395

EBITDA and Adjusted EBITDA Reconciliation

EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. Adjusted EBITDA is defined as earnings before interest,
taxes, depreciation and amortization, other-than-temporary impairment of
available-for-sale securities and reorganization items. EBITDA and
Adjusted EBITDA do not represent and should not be considered an
alternative to net income, operating income, cash flow from operations
or any other measure of financial performance presented in accordance
with generally accepted accounting principles in the United States of
America (ÔÇ£GAAPÔÇØ) and our calculation of EBITDA and Adjusted EBITDA may
not be comparable to that reported by other companies. EBITDA and
Adjusted EBITDA are included herein because they are used by management
to measure the CompanyÔÇÖs operations. Management believes that EBITDA and
Adjusted EBITDA present useful information to investors regarding the
CompanyÔÇÖs operating performance.

PACIFIC DRILLING S.A. AND SUBSIDIARIES
Supplementary DataÔÇöReconciliation of Net Loss to Non-GAAP EBITDA and Adjusted EBITDA (in thousands) (unaudited)
Three Months Ended
March 31,	December 31,	March 31,
2018	2017	2017
Net loss	$	(96,051	)	$	(129,732	)	$	(99,847	)
Add:
Interest expense	14,929	27,438	50,011
Depreciation expense	69,920	69,894	69,631
Income tax expense	274	8,770	2,076
EBITDA	$	(10,928	)	$	(23,630	)	$	21,871
Add:
Other-than-temporary impairment of available-for-sale securities	ÔÇö	682	ÔÇö
Reorganization items	12,032	6,474	ÔÇö
Adjusted EBITDA	$	1,104	$	(16,474	)	$	21,871

Corporate Overhead Expenses Reconciliation

Corporate overhead expenses is a non-GAAP financial measure defined as
general and administrative expenses less certain legal expenses related
to the arbitration proceeding and patent litigation, as well as legal
and financial advisory expenses related to debt restructuring efforts
incurred prior to the Petition Date. We included corporate overhead
herein because it is used by management to measure the Company's ongoing
corporate overhead. Management believes that ongoing corporate overhead
expenses present useful information to investors regarding the financial
impact of Company's cost savings measures and optimization of overhead
support structure during the periods presented below. Non-GAAP financial
measures should be considered as a supplement to, and not as a
substitute for, or superior to, financial measures prepared in
accordance with GAAP.

PACIFIC DRILLING S.A. AND SUBSIDIARIES
Supplementary DataÔÇöReconciliation of General and Administrative Expenses to Non-GAAP Corporate Overhead Expenses (in thousands) (unaudited)
Three Months Ended
March 31,	December 31,	March 31,
2018	2017	2017
General and administrative expenses	$	17,204	$	22,448	$	22,461
Subtract:
Legal and advisory expenses	(5,648	)	(11,439	)	(6,067	)
Corporate overhead expenses	$	11,556	$	11,009	$	16,394

Contacts

Pacific Drilling S.A.
Investor Contact:
Johannes (John) P.
Boots, +352 26 84 57 81
[email protected]
or
Media
Contact:
Amy L. Roddy, +713 334 6662
[email protected]