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Parker Drilling Reports First Quarter 2012 Results

May 2, 2012

HOUSTON, May 2, 2012 /PRNewswire/ — Parker Drilling Company (NYSE: PKD), a drilling contractor and services provider, today reported results for the 2012 first quarter that include net income of $26.4 million, or $0.22 per diluted share, on revenues of $176.6 million, compared with 2011 first quarter net income of $4.8 million, or $0.04 per diluted share, on revenues of $156.2 million. (Net income represents net income attributable to Parker Drilling Company). The 2012 first quarter adjusted EBITDA was $76.2 million, compared with $42.1 million for the prior year’s first quarter.

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“Parker’s first quarter results demonstrate the strength and durability of our business strategy and success in adapting to the effects of declining U.S. natural gas prices,” said Parker Drilling Chairman, President and Chief Executive Officer, Robert Parker Jr. “We produced solid year-to-year revenue and earnings growth this quarter through effective responses to the diverging trends in oil and gas prices in North America and the uneven growth in international E&P spending. This led to the sixth consecutive quarter of year-to-year increases in the Company’s quarterly adjusted EBITDA and net income, excluding non-routine items. Our Rental Tools segment continued to grow, serving the increased need for premium drill pipe in shale plays with an expanded inventory while dynamically repositioning our equipment in response to the shifting focus of U.S. drilling activity. The U.S. Barge Drilling segment’s performance reflects increased drilling for oil and gas liquids in the shallow water of the U.S. Gulf of Mexico. Our International Drilling segment benefited from improved activity in several of the markets we serve and an increase in the number of O&M projects.”

First Quarter Highlights

  • Parker’s Rental Tools segment continued to grow, with increased revenues, gross margin and gross margin as a percentage of revenues, compared with the prior year’s first quarter. (Segment gross margin excludes depreciation and amortization expense.)
  • The Company’s U.S. Barge Drilling segment increased its average utilization and average dayrate which significantly improved its gross margin as a percentage of revenues.
  • The International Drilling segment raised its average utilization and average dayrate and benefited from an increase in the number of O&M projects.

“Our current business activity and the expected trends in our markets should support continued strength in our business,” commented Mr. Parker. “Oil-directed and gas liquids-directed drilling continues to expand in the U.S., both on land and in the coastal waters of the U.S. Gulf of Mexico. In addition, the U.S. land drilling market continues to grow footage drilled, a prime indicator of demand for drill pipe and other rental tools. The industry’s increased spending to develop oil and natural gas resources worldwide is expected to lead to more international drilling activity, including an expanded reach into challenging environments that require safe and efficient operations and more fit-for-purpose drilling solutions. We believe these trends and Parker’s balanced and diversified operations position us to continue to deliver solid results,” concluded Parker.

First Quarter Review

Parker’s revenues for the 2012 first quarter increased 13 percent to $176.6 million from 2011 first quarter revenues of $156.2 million. The Company’s 2012 first quarter gross margin, before depreciation and amortization expense, rose 67 percent to $81.6 million compared with 2011 first quarter gross margin of $48.8 million, and gross margin as a percentage of revenues increased to 46.2 percent from 31.2 percent. There was no significant impact from non-routine items on 2012 first quarter results. The results for the 2011 first quarter include non-routine, after-tax expenses of $0.4 million or $0.01 per diluted share. Details of the non-routine items are provided in the attached financial tables.

At year end 2011, the Company updated the composition of its reported business segments to reflect the strategic focus of the Company and align more closely with its organizational structure and management responsibilities. Prior period amounts have been revised to reflect this change. Following is a review of segment results for the 2012 first quarter with comparisons to results for the 2011 first quarter.

  • Rental Tools segment revenues increased 27 percent to $66.3 million from $52.3 million, segment gross margin rose 31 percent to $44.7 million from $34.2 million, and segment gross margin as a percentage of revenues improved to 67.4 percent from 65.3 percent. Demand for premium drill pipe and related products for U.S. drilling applications continued to expand, driven by the widening use of lateral drilling and further growth in footage drilled. Throughout the period Parker’s Rental Tools operation continued to acquire inventory and to actively reposition products across its locations to efficiently serve customer needs and maintain effective asset utilization.
  • U.S. Barge Drilling segment revenues increased 75 percent to $27.8 million from $15.9 million, segment gross margin rose significantly to $10.7 million from $1.8 million, and segment gross margin as a percentage of revenues improved to 38.4 percent from 11.4 percent. Drilling demand in the coastal waters of the U.S. Gulf of Mexico remained solid, primarily focused on oil- and gas liquids-related targets. With its offering of safe and efficient equipment operated by experienced and well trained crews, Parker’s barge drilling business increased its average utilization to 75 percent and improved its average dayrate by 35 percent. For the quarter, the business had an average of 9.8 barge rigs employed at an average dayrate of $30,400 compared with an average of 7.5 barge rigs working at an average dayrate of $22,600 in the 2011 first quarter.
  • The U.S. Drilling segment includes two Arctic Alaska Drilling Unit (AADU) rigs located in Alaska and one land rig located in Louisiana. The AADU rigs are undergoing commissioning and the available land rig is idle. As a result, this segment earned no revenues in the 2012 first quarter and prior periods. The segment’s operating costs consist of expenses incurred in preparation for future activities in Alaska, primarily for labor, training and facility leases.
  • International Drilling segment revenues increased 13 percent to $78.8 million from $69.9 million, segment gross margin rose 117 percent to $26.5 million from $12.2 million, and segment gross margin as a percentage of revenues improved to 33.7 percent from 17.4 percent. Revenues rose as a result of an increase in average utilization and average dayrate for the Parker-owned rig fleet. The average dayrate increase included the return to an operating dayrate for the Company’s Caspian Sea Arctic Class barge rig. Average utilization for the 2012 first quarter was 58 percent, compared with 46 percent for the prior year’s first quarter. For the 2012 first quarter, the ten-rig Latin America regional fleet operated at 80 percent average utilization and the sixteen-rig Eastern Hemisphere regional fleet operated at 44 percent average utilization. (Additional rig fleet information is available on Parker’s website). The segment realized lower O&M contract revenues due to the completion in late 2011 of a rig relocation project with significant reimbursable expenses. This was partially offset by the impact of two O&M projects added during 2011. The prior year’s segment gross margin included $3.0 million of expense related to local tax costs.
  • The Technical Services segment’s 2012 first quarter revenues declined to $3.7 million from $8.4 million, and segment gross margin declined to $0.2 million from $1.6 million, while segment gross margin as a percentage of revenues was 6.7 percent compared to 18.7 percent. The decline in revenues, gross margin and gross margin as a percentage of revenues was primarily due to the completion of the Liberty project in early 2011 and the transition of our role on the Berkut platform project from engineering to construction oversight. This was partially offset by increased contributions from other engineering projects.
  • Construction Contract segment recorded no revenues or segment gross margin for the 2012 first quarter, compared with $9.6 million of revenues and a $0.7 million segment gross margin loss in the prior year’s first quarter related to the construction of the BP-owned Liberty rig. The construction contract for the rig ended in the 2011 first quarter and project-related work since then has been included in the Technical Services segment.

Capital Expenditures

Capital expenditures were $59.4 million for the 2012 first quarter and include $26.9 million for the construction of the AADU rigs and $25.1 million for the purchase of rental tools inventory and equipment.

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. CDT (11:00 a.m. EDT) on Wednesday, May 2, 2012, to discuss its reported results. Those interested in listening to the call by telephone may do so by dialing (480) 629-9692. The call can also be accessed through the Investor Relations section of the Company’s website at http://www.parkerdrilling.com. A replay of the call can be accessed on the Company’s website for 12 months and will be available by telephone from May 2 through May 9 by dialing (303) 590-3030 and using 4531531 as the access code.

Cautionary Statement

This press release contains certain statements that may be deemed to be “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements in this press release other than statements of historical facts that address activities, events or developments that the Company expects, projects, believes, or anticipates will or may occur in the future are forward-looking statements. These statements include, but are not limited to, statements about anticipated future financial or operational results; the outlook for rig utilization and dayrates; general industry conditions such as the demand for drilling and the factors affecting demand; competitive advantages such as technological innovation; future operating results of the Company’s rigs, rental tools operations and projects under management; capital expenditures; expansion and growth opportunities; acquisitions or joint ventures; asset sales; successful negotiation and execution of contracts; scheduled delivery of drilling rigs for operation; the strengthening of the Company’s financial position; increases in market share; outcomes of legal proceedings and investigations; compliance with credit facility and indenture covenants; and similar matters. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Although the Company believes that its expectations stated in this press release are based on reasonable assumptions, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, that may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to changes in worldwide economic and business conditions that could adversely affect market conditions, fluctuations in oil and natural gas prices that could reduce the demand for drilling services, changes in laws or government regulations that could adversely affect the cost of doing business, our ability to refinance our debt and other important factors that could cause actual results to differ materially from those projected as described in the Company’s reports filed with the Securities and Exchange Commission. See “Risk Factors” in the Company’s Annual Report filed on Form 10-K and other public filings and press releases. Each forward-looking statement speaks only as of the date of this press release and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Company Description

Parker Drilling (NYSE: PKD) provides high-performance contract drilling solutions, rental tools and project management services to the energy industry. Parker’s rig fleet includes 24 land rigs and two offshore barge rigs in international locations, 13 barge rigs in the U.S. Gulf of Mexico, one land rig located in the U.S., and two land rigs in Alaska undergoing commissioning. The Company’s rental tools business supplies premium equipment to operators on land and offshore in the U.S. and select international markets. Parker also performs contract drilling for customer-owned rigs and provides technical services addressing drilling challenges for E&P customers worldwide. More information about Parker Drilling can be found at http://www.parkerdrilling.com, including operating status reports for the Company’s Rental Tools segment and its international and U.S. rig fleets, updated monthly.

                                                 PARKER DRILLING COMPANY
                                          Consolidated Condensed Balance Sheets

                                                     March 31, 2012             December 31, 2011
                                                     --------------             -----------------
                                                       (Unaudited)
                        ASSETS                   (Dollars in Thousands)
    CURRENT ASSETS
    Cash and Cash Equivalents                                       $68,996                     $97,869
    Accounts and Notes Receivable,
     Net                                                            191,206                     183,923
    Rig Materials and Supplies                                       25,413                      29,947
    Deferred Costs                                                    4,989                       3,249
    Deferred Income Taxes                                             5,823                       6,650
    Assets held for sale                                              5,315                       5,315
    Other Current Assets                                             42,704                      40,660
    TOTAL CURRENT ASSETS                                            344,446                     367,613
                                                                    -------                     -------

    PROPERTY, PLANT AND EQUIPMENT,
     NET                                                            750,804                     719,809

    OTHER ASSETS
    Deferred Income Taxes                                           106,018                     108,311
    Other Assets                                                     24,685                      20,513
                                                                     ------
    TOTAL OTHER ASSETS                                              130,703                     128,824
                                                                    -------                     -------

    TOTAL ASSETS                                                 $1,225,953                  $1,216,246
                                                                 ==========                  ==========

            LIABILITIES AND STOCKHOLDERS'
                        EQUITY
    CURRENT LIABILITIES
    Current  Portion of Long-Term
     Debt                                                          $147,249                    $145,723
    Accounts Payable and Accrued
     Liabilities                                                    124,983                     140,087
                                                                    -------                     -------
    TOTAL CURRENT LIABILITIES                                       272,232                     285,810
                                                                    -------                     -------

    LONG-TERM DEBT                                                  331,000                     337,000

    LONG-TERM DEFERRED TAX
     LIABILITY                                                       18,250                      15,934

    OTHER LONG-TERM LIABILITIES                                      30,087                      33,452

    TOTAL CONTROLLING INTEREST IN
     STOCKHOLDERS' EQUITY                                           575,006                     544,606
    Noncontrolling interest                                            (622)                       (556)
                                                                       ----
    TOTAL EQUITY                                                    574,384                     544,050

    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY                                        $1,225,953                  $1,216,246
                                                                 ==========                  ==========

    Current Ratio                                                      1.27                        1.29

    Total Debt as a  Percent of
     Capitalization                                                      45%                         47%

    Book Value Per Common Share                                       $4.89                       $4.65

                                PARKER DRILLING COMPANY
                    Consolidated Condensed Statements of Operations
                                      (Unaudited)

                          Three Months Ended March 31,
                          ----------------------------
                                                    2012                   2011
                                                    ----                   ----
                             (Dollars in Thousands)

    REVENUES:                                    176,569                156,179

    EXPENSES:
    Operating
     Expenses                                     94,932                107,376
     Depreciation
     and
     Amortization                                 27,619                 27,599

    TOTAL
     OPERATING
     GROSS
     MARGIN                                       54,018                 21,204
                                                  ------                 ------

    General and
     Administrative
     Expense                                      (5,497)                (6,806)
    Gain on
     Disposition
     of Assets,
     Net                                             492                  1,004
                                                     ---                  -----

    TOTAL
     OPERATING
     INCOME                                       49,013                 15,402
                                                  ------                 ------

    OTHER
     INCOME AND
     (EXPENSE):
    Interest
     Expense                                      (8,037)                (5,861)
    Interest
     Income                                           26                     47
    Change in
     fair of
     derivative
     positions                                       (49)                     -
    Other
     Income
     (Expense)                                        16                     11
    TOTAL OTHER
     INCOME AND
     (EXPENSE)                                    (8,044)                (5,803)
                                                  ------                 ------

    INCOME
     (LOSS)
     BEFORE
     INCOME
     TAXES                                        40,969                  9,599

    INCOME TAX
     EXPENSE
     (BENEFIT)
    Current                                        9,631                  4,018
    Deferred                                       5,012                    821
    TOTAL
     INCOME TAX
     EXPENSE
     (BENEFIT)                                    14,643                  4,839
                                                  ------                  -----

    NET INCOME
     (LOSS)                                       26,326                  4,760
                                                  ------                  -----
    Less: net
     loss
     attributable
     to
     noncontrolling
     interest                                        (66)                   (67)
    NET INCOME
     (LOSS)
     ATTRIBUTABLE
     TO
     CONTROLLING
     INTEREST                                    $26,392                 $4,827
                                                 =======                 ======

    EARNINGS
     PER SHARE
     -BASIC
    Net Income
     (loss)                                        $0.23                  $0.04

    EARNINGS
     PER SHARE
     -DILUTED
    Net Income
     (loss)                                        $0.22                  $0.04

    NUMBER OF
     COMMON
     SHARES
     USED IN
     COMPUTING
     EARNINGS
     PER SHARE
    Basic                                    116,848,516            115,119,277
    Diluted                                  118,404,491            116,322,199

                                                      PARKER DRILLING COMPANY
                                                      Selected Financial Data
                                                            (Unaudited)

                                                      Three Months Ended
                                                      ------------------
                                                    March 31,                 December
                                                                2012                       2011       2011
                                                                ----                       ----       ----
                                                    (Dollars in Thousands)
    REVENUES:
               Rental Tools                                 $66,284                    $52,319    $63,871
               U.S. Barge Drilling                           27,835                     15,920     22,888
               U.S. Drilling                                      -                          -          -
               International Drilling                        78,750                     69,936     89,229
               Technical Services                             3,700                      8,366      5,079
               Construction Contract                              -                      9,638          -
                 Total Revenues                             176,569                    156,179    181,067

    OPERATING
     EXPENSES:
               Rental Tools                                  21,630                     18,137     19,952
               U.S. Barge Drilling                           17,140                     14,102     16,503
               U.S. Drilling                                    466                        213        665
               International Drilling                        52,243                     57,744     65,664
               Technical Services                             3,453                      6,799      4,260
               Construction Contract                              -                     10,381          -
                 Total Operating Expenses                    94,932                    107,376    107,044

    OPERATING
     GROSS
     MARGIN:
               Rental Tools                                  44,654                     34,182     43,919
               U.S. Barge Drilling                           10,695                      1,818      6,385
               U.S. Drilling                                   (466)                      (213)      (665)
               International Drilling                        26,507                     12,192     23,565
               Technical Services                               247                      1,567        819
               Construction Contract                              -                       (743)         -
               Depreciation and Amortization                (27,619)                   (27,599)   (29,624)

                 Total Operating Gross Margin                54,018                     21,204     44,399

               General and Administrative Expense            (5,497)                    (6,806)    (7,930)
               Impairment and other charges                       -                          -   (170,000)
                Provision for Reduction in Carrying
                Value of Certain Assets                           -                          -     (1,350)
               Gain on Disposition of Assets, Net               492                      1,004      1,666

    TOTAL
     OPERATING
     INCOME                                                 $49,013                    $15,402  $(133,215)
                                                            =======                    =======  =========

                                                                                                                               PARKER DRILLING COMPANY
                                                                                                                                   Adjusted EBITDA
                                                                                                  (Dollars in Thousands)

                                                         Three Months Ended
                                                         ------------------
                            March 31, 2012        December 31, 2011         September 30, 2011                        June 30, 2011                    March 31, 2011       December 31, 2010       September 30, 2010       June 30, 2010        March 31, 2010
                            --------------        -----------------         ------------------                        -------------                    --------------       -----------------       ------------------       -------------        --------------

    Net Income (Loss)
     Attributable to
     Controlling Interest                $26,392                $(90,177)                   $20,725                               $14,173                           $4,827                $(13,409)                    $492                 $507                 $(2,051)
      Adjustments:
    Income Tax (Benefit)
     Expense                              14,643                 (48,112)                    15,042                                13,464                            4,839                  25,362                      786                1,624                  (1,559)
    Total Other Income and
     Expense                               8,044                   5,066                      6,268                                 5,636                            5,803                   6,196                    6,277               11,182                   9,736
    Loss/(Gain) on
     Disposition of Assets,
     Net                                    (492)                 (1,666)                      (623)                                 (366)                          (1,004)                 (1,060)                  (1,176)              (1,712)                   (672)
    Depreciation and
     Amortization                         27,619                  29,624                     27,581                                27,332                           27,599                  28,526                   28,904               29,012                  28,588
    Impairment and other
     charges                                   -                 170,000                          -                                     -                                -                       -                        -
    Provision for Reduction
     in Carrying Value of
     Certain Assets                            -                   1,350                          -                                     -                                -                   1,952                        -                    -                       -
                                             ---                   -----                        ---                                                                    ---                   -----                      ---

    Adjusted EBITDA                      $76,206                 $66,085                    $68,993                               $60,239                          $42,064                 $47,567                  $35,283              $40,613                 $34,042
                                         =======                 =======                    =======                               =======                          =======                 =======                  =======              =======                 =======

    Adjustments:
         Non-routine Items                    23                     567                      1,517                                 2,451                              685                     460                      930                  694                   3,811
                                             ---                     ---                      -----                                                                    ---                     ---                      ---                  ---

    Adjusted EBITDA after
     Non-routine Items                   $76,229                 $66,652                    $70,510                               $62,690                          $42,749                 $48,027                  $36,213              $41,307                 $37,853
                                         =======                 =======                    =======                               =======                          =======                 =======                  =======              =======                 =======

                                              PARKER DRILLING COMPANY
                                       Reconciliation of Non-Routine Items *
                                                    (Unaudited)
                                     (Dollars in Thousands, except Per Share)

                                                                          Three Months Ending
                                                                             March 31, 2012
                                                                             --------------

     Net (loss) attributable to
      controlling interest                                                            $26,392
     Earnings per diluted share                                                         $0.22

     Adjustments:
                                   U.S. regulatory investigations /
                                    legal matters                                               23
                                             Total adjustments                                 $23
                                   Tax effect of non-routine
                                    adjustments                                                 (8)
                                             Net non-routine adjustments                       $15

     Adjusted net income
      attributable to controlling
      interest                                                                        $26,407
                                                                                      =======
     Adjusted earnings per diluted
      share                                                                             $0.22
                                                                                        =====

                                                                          Three Months Ending
                                                                             March 31, 2011
                                                                             --------------
     Net (loss) attributable to
      controlling interest                                                             $4,827
     Earnings per diluted share                                                         $0.04

     Adjustments:
                                   U.S. regulatory investigations /
                                    legal matters**                                            685
                                             Total adjustments                                $685
                                   Tax effect of non-routine
                                    adjustments                                               (240)
                                             Net non-routine adjustments                      $445

     Adjusted net income
      attributable to controlling
      interest                                                                         $5,272
                                                                                       ======
     Adjusted earnings per diluted
      share                                                                             $0.05
                                                                                        =====
                 Adjusted net
                 income, a
                 non-GAAP
                 financial
                 measure,
                 excludes
                 items that
                 management
                 believes are
                 of a non-
                 routine
                 nature and
                 which detract
                 from an
                 understanding
                 of normal
                 operating
                 performance
                 and
                 comparisons
                 with other
                 periods.
                 Management
                 also believes
                 that results
                 excluding
                 these items
                 are more
                 comparable to
                 estimates
                 provided by
                 securities
                 analysts and
                 used by them
                 in evaluating
                 the Company's
             *   performance.

                 Amended to
                 include
                 comparable
                 expenses in
            **   all periods.

SOURCE Parker Drilling


Source: PR Newswire