Statements we make in the following discussion that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance or achievements, or industry results, could differ materially from those we express in the following discussion as a result of a variety of factors, including general economic and business conditions and industry trends, levels and volatility of oil and gas prices, decisions about onshore exploration and development projects to be made by oil and gas exploration and production companies, risks associated with economic cycles and their impact on capital markets and liquidity, the continued demand for the drilling services or production services in the geographic areas where we operate, the highly competitive nature of our business, our future financial performance, including availability, terms and deployment of capital, future compliance with covenants under our senior secured revolving credit facility and our senior notes, the supply of marketable drilling rigs, well service rigs, coiled tubing and wireline units within the industry, the continued availability of drilling rig, well service rig, coiled tubing and wireline unit components, the continued availability of qualified personnel, the success or failure of our acquisition strategy, including our ability to finance acquisitions, manage growth and effectively integrate acquisitions, and changes in, or our failure or inability to comply with, governmental regulations, including those relating to the environment. We have discussed many of these factors in more detail elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2011, including under the headings "Special Note Regarding Forward-Looking Statements" in the Introductory Note to Part I and "Risk Factors" in Item 1A. These factors are not necessarily all the important factors that could affect us. Unpredictable or unknown factors we have not discussed in this report or in our Annual Report on Form 10-K for the year ended December 31, 2011 could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. All forward-looking statements speak only as of the date on which they are made and we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. We advise our shareholders that they should (1) be aware that important factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.
Company Overview
Pioneer Drilling Company provides drilling services and production services to independent and major oil and gas exploration and production companies throughout much of the onshore oil and gas producing regions of the United States and internationally in Colombia. Pioneer Drilling Company was incorporated under the laws of the State of Texas in 1979 as the successor to a business that had been operating since 1968. Since September 1999, we have significantly expanded our drilling rig fleet through acquisitions and through the construction of rigs from new and used components. In March 2008, we significantly expanded our service offerings with the acquisition of two production services businesses, which provide well services, wireline services and fishing and rental services. We have continued to invest in the growth of all our service offerings through acquisitions and organic growth. On December 31, 2011, we acquired Go-Coil, LLC ("Go-Coil"), a coiled tubing service company based in Maurice, Louisiana, to complement our existing production services offerings. Drilling services and production services are fundamental to establishing and maintaining the flow of oil and natural gas throughout the productive life of a well site and enable us to meet multiple needs of our customers.

Business Segments
We currently conduct our operations through two operating segments: our Drilling Services Division and our Production Services Division. The following is a description of these two operating segments. Financial information about our operating segments is included in Note 7, Segment Information, of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1, Financial Statements and Supplementary Data, of this Quarterly Report on Form 10-Q.
• Drilling Services Division-Our Drilling Services Division provides contract land drilling services with its fleet of 62 drilling rigs which are currently assigned to the following locations:

Drilling Division Locations   Rig Count
South Texas                          15
East Texas                            3
West Texas                           19
North Dakota                          9
Utah                                  4
Appalachia                            4
Colombia                              8
                                     62

Drilling revenues and rig utilization steadily improved during 2010 and 2011, primarily due to increased demand for drilling services in domestic shale plays and oil or liquid rich regions. We capitalized on this trend by moving drilling rigs in our fleet to these higher demand regions from lower demand regions. As a result, we closed our Oklahoma and North Texas drilling division locations during 2011 and established our West Texas drilling division location in early 2011.
At March 31, 2012, we have 62 drilling rigs in our fleet. We currently have term contracts for ten new-build AC drilling rigs that are fit for purpose for domestic shale plays, for which we expect seven to begin working by the end of 2012, with the remaining three during the first quarter of 2013. As of April 20, 2012, 55 drilling rigs are operating under drilling contracts, 45 of which are under term contracts. We have seven drilling rigs that are idle and are actively marketing all our idle drilling rigs.
In addition to our drilling rigs, we provide the drilling crews and most of the ancillary equipment needed to operate our drilling rigs. We obtain our contracts for drilling oil and natural gas wells either through competitive bidding or through direct negotiations with customers. Our drilling contracts generally provide for compensation on either a daywork, turnkey or footage basis. Contract terms generally depend on the complexity and risk of operations, the on-site drilling conditions, the type of equipment used, and the anticipated duration of the work to be performed.
• Production Services Division-Our Production Services Division provides a range of services to exploration and production companies, including well services, wireline services, coiled tubing services, and fishing and rental services. Our production services operations are managed through locations concentrated in the major United States onshore oil and gas producing regions in the Gulf Coast, Mid-Continent, Rocky Mountain and Appalachian states. We provide our services to a diverse group of oil and gas exploration and production companies. The primary production services we offer are the following:

•          Well Services. Existing and newly-drilled wells require a range of
           services to establish and maintain production over their useful lives.
           We use our well service rig fleet to provide these required services,
           including maintenance of existing wells, workover of existing wells,
           completion of newly-drilled wells, and plugging and abandonment of
           wells at the end of their useful lives. We have acquired 8 well
           service rigs during 2012, resulting in a total of 97 well service rigs
           in 12 locations as of April 20, 2012. Our well service rig fleet
           consists of eighty-seven 550 horsepower rigs, nine 600 horsepower
           rigs, and one 400 horsepower rig. All our well service rigs are
           currently operating or are being actively marketed. We plan to add
           another 11 well service rigs to our fleet during 2012.


•          Wireline Services. In order for oil and gas exploration and production
           companies to better understand the reservoirs they are drilling or
           producing, they require logging services to accurately characterize
           reservoir rocks and fluids. When a producing well is completed, they
           also must perforate the production casing to establish a flow path
           between the reservoir and the wellbore. We use our fleet of wireline
           units to provide these important logging and perforating services. We
           provide both open and cased-hole logging services, including the
           latest pulsed-neutron technology.

In addition, we provide services which allow oil and gas exploration and production companies to evaluate the integrity of wellbore casing, recover pipe, or install bridge plugs. As of April 20, 2012, we operate in 25 locations with 108 wireline units and plan to add another 11 wireline units to our fleet during 2012.

•          Coiled Tubing Services. Coiled tubing is an important element of the
           well service industry today that allows operators to continue
           production during service operations without shutting in the well,
           thereby reducing the risk of formation damage. Coiled tubing services
           involve the use of a continuous metal pipe spooled on a large reel for
           oil and natural gas well applications, such as wellbore clean-outs,
           nitrogen jet lifts, through-tubing fishing, formation stimulation
           utilizing acid, chemical treatments and fracturing. Coiled tubing is
           also used for a number of horizontal well applications such as milling
           temporary plugs between frac stages. Our coiled tubing business
           consists of ten coiled tubing units which are currently deployed in
           Texas, Louisiana, Oklahoma and Pennsylvania. We plan to add another
           three coiled tubing units to our fleet during 2012.


•          Fishing and Rental Services. During drilling operations, oil and gas
           exploration and production companies frequently rent unique equipment
           such as power swivels, foam circulating units, blow-out preventers,
           air drilling equipment, pumps, tanks, pipe, tubing, and fishing tools.
           We provide rental services out of four locations in Texas and
           Oklahoma. As of March 31, 2012 our fishing and rental tools have a
           gross book value of $15.4 million.

Pioneer Drilling Company's corporate office is located at 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209. Our phone number is (210) 828-7689 and our website address is www.pioneerdrlg.com. We make available free of charge though our website our Annual Reports on our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (the "SEC"). Information on our website is not incorporated into this report or otherwise made part of this report. Market Conditions in Our Industry
Demand for oilfield services offered by our industry is a function of our customers' willingness to make operating expenditures and capital expenditures to explore for, develop and produce hydrocarbons, which in turn is affected by current and expected levels of oil and natural gas prices.
From 2004 through 2008, domestic exploration and production spending increased as oil and natural gas prices increased. From late 2008 and into late 2009, there was substantial volatility and a decline in oil and natural gas prices due to the downturn in the global economic environment. In response, our customers curtailed their drilling programs and reduced their production activities, particularly in natural gas producing regions, which resulted in a decrease in demand and revenue rates for certain of our drilling rigs and production services equipment. Additionally, there was uncertainty in the capital markets and access to financing was limited. These conditions adversely affected our business environment.
With increasing oil and natural gas prices during 2010, exploration and production companies modestly increased their exploration and production spending for 2010 and industry rig utilization and revenue rates improved, particularly in oil-producing regions and in certain shale regions. Increased natural gas production in the U.S. shale regions continues to depress natural gas prices, but oil prices continued to increase during 2011, resulting in continued increases in exploration and production spending during 2011 as compared to 2010. As a result, we experienced continued increases in industry rig utilization and revenue rates during 2011 as compared to 2010. We expect continued modest increases in exploration and production spending for 2012, which we expect will result in modest increases in industry equipment utilization and revenue rates in 2012, as compared to 2011. However, if for the remainder of 2012, oil prices remain steady but natural gas prices continue to decline below historically low levels, then industry equipment utilization and revenue rates could decrease.
For additional information concerning the effects of the volatility in oil and gas prices and uncertainty in capital markets, see Item 1A - "Risk Factors" in

On April 20, 2012, the spot price for West Texas Intermediate crude oil was $103.05, the spot price for Henry Hub natural gas was $1.85 and the Baker Hughes U.S. land rig count was 1,904, a 9% increase from 1,754 on April 22, 2011. The average weekly spot prices of West Texas Intermediate crude oil and Henry Hub natural gas, the average weekly domestic land rig count per the Baker Hughes land rig count, and the average monthly domestic well service rig count for each of the last five years were:

                        Three months                            Years ended March 31,
                      ended March 31,
                            2012            2012          2011          2010          2009          2008
Oil (West Texas
Intermediate)         $       102.99     $   99.03     $   83.05     $   70.42     $   86.35     $   82.50
Natural Gas (Henry
Hub)                  $         2.40     $    3.59     $    4.10     $    4.01     $    7.78     $    7.27
U.S. Land Rig Count            1,929         1,925         1,589         1,034         1,690         1,685
U.S. Well Service Rig
Count                          2,144         2,108         1,925         1,668         2,392         2,412

Since late 2009, increases primarily in oil prices have caused increases in exploration and production spending and the corresponding increases in drilling and well services activities are reflected by increases in the U.S. land rig counts and the U.S. well service rig counts in 2010, 2011 and 2012. Our business is influenced substantially by both operating and capital expenditures by exploration and production companies. Exploration and production spending is generally categorized as either a capital expenditure or operating expenditure.
Capital expenditures by oil and gas exploration and production companies tend to be relatively sensitive to volatility in oil or natural gas prices because project decisions are tied to a return on investment spanning a number of years. As such, capital expenditure economics often require the use of commodity price forecasts which may prove inaccurate in the amount of time required to plan and execute a capital expenditure project (such as the drilling of a deep well). When commodity prices are depressed for long periods of time, capital expenditure projects are routinely deferred until prices return to an acceptable level.
In contrast, both mandatory and discretionary operating expenditures are more stable than capital expenditures for exploration. Mandatory operating expenditure projects involve activities that cannot be avoided in the short term, such as regulatory compliance, safety, contractual obligations and certain projects to maintain the well and related infrastructure in operating condition. Discretionary operating expenditure projects may not be critical to the short-term viability of a lease or field, but these projects are less sensitive to commodity price volatility as compared to capital expenditures for exploration. Discretionary operating expenditure work is evaluated according to a simple short-term payout criterion which is far less dependent on commodity price forecasts.
Because existing oil and natural gas wells require ongoing spending to maintain production, expenditures by exploration and production companies for the maintenance of existing wells are relatively stable and predictable. In contrast, capital expenditures by exploration and production companies for exploration and drilling are more directly influenced by current and expected oil and natural gas prices and generally reflect the volatility of commodity prices.
Strategy
In past years, our strategy was to become a premier land drilling and production services company through steady and disciplined growth. We executed this strategy by acquiring and building a high quality drilling rig fleet and production services business that operate in active drilling markets in the United States and Colombia. Our long-term strategy is to maintain and leverage our position as a leading land drilling and production services company, continue to expand our relationships with existing customers, expand our customer base in the areas in which we currently operate and further enhance our geographic diversification through selective international expansion. The key elements of this long-term strategy include:
• Further Strengthen our Competitive Position in the Most Attractive Domestic Markets. Shale plays and non-shale oil or liquid rich environments are increasingly important to domestic hydrocarbon production and not all drilling rigs are capable of successfully drilling in these unconventional opportunities. We are currently operating in unconventional areas in the Bakken, Marcellus and Eagle Ford shales and Permian and Uintah Basins, and we intend to add ten new-build drilling rigs that will be operating in the shale plays in 2012. We also intend to continue adding capacity to our wireline, coiled tubing, and well servicing product offerings, which are well positioned to capitalize on increased shale development.

• Increase our Exposure to Oil-Driven Drilling Activity. We have intentionally increased our exposure to oil-related activities by redeploying certain of our assets into predominately oil-producing regions and actively seeking contracts with oil-focused producers. As of April 20, 2012, approximately 89% of our working drilling rigs and 80% of our production services assets are operating on wells that are targeting or producing oil or liquids rich natural gas. We believe that our flexible rig fleet and production services assets allow us to target opportunities focused on both natural gas and oil.

• Selectively Expand our International Operations. In early 2007, we announced our intention to selectively expand internationally and began a relationship with Ecopetrol S.A. in Colombia after a comprehensive review of international opportunities wherein we determined that Colombia offered an attractive mix of favorable business conditions, political stability, and a long-term commitment to expanding national oil and gas production. We are continuously evaluating additional international expansion opportunities and intend to target international markets that share the favorable characteristics of our Colombian operations and which would allow us to deploy sufficient assets in order to realize economies of scale.

• Continue Growth with Select Capital Deployment. We intend to invest in the growth of our business by continuing to strategically upgrade our existing assets, selectively engaging in new-build opportunities, and potentially making selective acquisitions. Our capital investment decisions are determined by an analysis of the projected return on capital employed, which is based on the terms of secured contracts whenever possible, and the investment must be consistent with our strategic objectives. We currently have term contracts for ten new-build AC drilling rigs that are fit for purpose for domestic shale plays, for which we expect seven to begin working by the end of 2012, with the remaining three during the first quarter of 2013. On December 31, 2011, we acquired the coiled tubing service company, Go-Coil, to complement our existing production services offerings. We currently plan to expand our production services fleets by adding a total of 16 wireline units, 19 well service rigs and three coiled tubing units during 2012.

Liquidity and Capital Resources
Sources of Capital Resources
Our principal liquidity requirements have been for working capital needs, capital expenditures and selective acquisitions. Our principal sources of liquidity consist of cash and cash equivalents (which equaled $21.4 million as of March 31, 2012), cash generated from operations, and the unused portion of our senior secured revolving credit facility (the "Revolving Credit Facility"). In July 2009, we filed a registration statement that permits us to sell equity or debt in one or more offerings up to a total dollar amount of $300 million. In November 2009, we obtained $24.0 million in net proceeds when we sold 3,820,000 shares of our common stock at $6.75 per share, less underwriters' discounts and commissions, pursuant to a public offering under the $300 million shelf registration statement. In July 2011, we obtained $94.3 million in net proceeds when we sold 6,900,000 shares of our common stock at $14.50 per share, less underwriters' commissions and other offering costs, pursuant to a public offering under the $300 million shelf registration statement. On July 22, 2011, we used $57.0 million of these proceeds to pay down the debt balance outstanding under our Revolving Credit Facility. The current availability under the $300 million shelf registration statement for equity or debt is $174.2 million as of April 20, 2012. In the future, we may consider equity or debt offerings, as appropriate, to meet our liquidity needs.
On March 11, 2010, we issued $250 million of senior notes with a coupon interest rate of 9.875% that are due in 2018 (the "2010 Senior Notes"). We received $234.8 million of net proceeds from the issuance of the 2010 Senior Notes that were used to repay a portion of the borrowings outstanding under our Revolving Credit Facility. On November 21, 2011, we issued an additional $175 million of senior notes (the "2011 Senior Notes") with the same terms and conditions as the 2010 Senior Notes. We received $172.7 million of net proceeds from the issuance of the 2011 Senior Notes, a portion of which were used to fund the acquisition of Go-Coil in December 2011.
Our Revolving Credit Facility provides for a senior secured revolving credit facility, with sub-limits for letters of credit and swing-line loans, of up to an aggregate principal amount of $250 million, all of which matures on June 30, 2016. As of April 27, 2012, we had $20.0 million outstanding under our Revolving Credit Facility and $9.0 million in committed letters of credit, which resulted in borrowing availability of $221.0 million under our Revolving Credit Facility. There are no limitations on our ability to access the full borrowing availability under the Revolving Credit Facility other than maintaining compliance with the covenants in the Revolving Credit Facility. Additional information regarding these covenants is provided in the Debt Requirements section below. Borrowings under the Revolving Credit Facility are available for selective acquisitions, working capital and other general corporate purposes. We currently expect that cash and cash equivalents, cash generated from operations and available borrowings under our Revolving Credit Facility are adequate to cover our liquidity requirements for at least the next 12 months.

Uses of Capital Resources
During the three months ended March 31, 2012, we had $112.4 million of additions to our property and equipment. Currently, we expect to spend approximately $300 million to $330 million on capital expenditures during 2012. We expect the total capital expenditures for 2012 will be allocated approximately 70% for our Drilling Services Division and approximately 30% for our Production Services Division. Our planned capital expenditures for the year ending December 31, 2012 include well services, coiled tubing and wireline fleet additions, partial construction of new-build AC drilling rigs, upgrades to certain drilling rigs and routine capital expenditures. Actual capital expenditures may vary depending on the level of new-build and other expansion opportunities that meet our strategic and return on capital criteria. We expect to fund the remaining capital expenditures from operating cash flow in excess of our working capital requirements and from borrowings under our Revolving Credit Facility. Working Capital
Our working capital was $81.5 million at March 31, 2012, compared to $129.9 million at December 31, 2011. Our current ratio, which we calculate by dividing our current assets by our current liabilities, was 1.6 at March 31, 2012 compared to 1.9 at December 31, 2011.
Our operations have historically generated cash flows sufficient to meet our requirements for debt service and normal capital expenditures. However, during periods when higher percentages of our drilling contracts are turnkey and footage contracts, our short-term working capital needs could increase. The changes in the components of our working capital were as follows (amounts in thousands):

                                               March 31,      December 31,
                                                  2012            2011           Change
Cash and cash equivalents                     $    21,401    $       86,197    $ (64,796 )
Receivables:
Trade, net of allowance for doubtful accounts     117,274           106,084       11,190
Unbilled receivables                               39,759            31,512        8,247
Insurance recoveries                                6,464             5,470          994
Income taxes                                          146             2,168       (2,022 )
Deferred income taxes                              16,259            15,433          826
Inventory                                          12,220            11,184        1,036
Prepaid expenses and other current assets          12,207            11,564          643
Current assets                                    225,730           269,612      (43,882 )
Accounts payable                                   85,117            66,440       18,677
Current portion of long-term debt                     873               872            1
Prepaid drilling contracts                          4,733             3,966          767
Accrued expenses:
Payroll and related employee costs                 23,260            29,057       (5,797 )
Insurance premiums and deductibles                 10,547            10,583          (36 )
Insurance claims and settlements                    6,464             5,470          994
. . .