Parker Drilling Reports 2012 Second Quarter Results
HOUSTON, Aug. 2, 2012 /PRNewswire/ — Parker Drilling Company (NYSE-PKD), a drilling contractor, drilling services and rental tools provider, today reported results for the quarter and year-to-date periods ended June 30, 2012. The Company’s results for the 2012 second quarter included net income of $20.1 million or $0.17 per diluted share on revenues of $178.9 million compared with net income of $14.2 million or $0.12 per diluted share on revenues of $172.8 million for the 2011 second quarter. Excluding the effects of non-routine items, the Company reported net income of $21.3 million or $0.18 per diluted share compared with similarly adjusted 2011 second quarter net income of $15.8 million or $0.13 per diluted share. Adjusted EBITDA, excluding non-routine items, was $67.2 million compared with $62.7 million for the prior year’s second quarter.
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“Parker’s operating results for the 2012 second quarter included year-to-year increases in revenues, adjusted EBITDA, net income and earnings per share,” said Parker Drilling Company Chairman, President and Chief Executive Officer, Robert L. Parker Jr. “We achieved revenue growth in our Rental Tools and U.S. Barge Drilling segments, driven by increases in drilling activity and the quality and value of our rental tools and barge drilling services. We also realized an improved operating performance from our international drilling rig fleet, though this was offset by reduced revenues and earnings from our operations and maintenance (O&M) contracts. In addition, we made progress toward the completion of our two Arctic Alaska Drilling Unit (AADU) rigs,” stated Mr. Parker.
Second Quarter Highlights
- Parker Drilling achieved year-to-year increases of 4 percent in revenues, 7 percent in adjusted EBITDA, 35 percent in net income and 38 percent in earnings per share, excluding non-routine items.
- The Company’s Rental Tools segment produced year-to-year increases in revenues and segment gross margin, and benefitted from a growing offshore Gulf of Mexico market that supplemented the contribution from a slowing U.S. land drilling market. The segment continued to position rental tools inventory in line with the shifting geographic focus of U.S. land drilling and invested in added inventory to meet customer needs. (Gross margins mentioned here and later exclude depreciation and amortization expense).
- The U.S. Gulf of Mexico shallow water drilling market remained active and Parker’s U.S. Barge Drilling segment achieved further increases in average dayrate and full utilization of its actively marketed rig fleet.
- The U.S. Barge Drilling and International Drilling segments contributed significantly to the 2012 second quarter year-to-year increase in operating gross margin.
- The Company issued an additional $125 million of Senior Notes due 2018, using the proceeds during the quarter to refinance its Convertible Notes that matured in July.
Outlook
“The market’s current uncertainty about future prices for oil and natural gas and the future level of U.S. drilling has begun to lead to slower growth in some U.S. drilling markets and has us alert for changing conditions that may further impact our business. We believe that our competitive position, geographic and market diversity, and other strategic strengths, position us to face these market challenges and take advantage of competitive opportunities to produce relatively resilient operating results,” commented Mr. Parker. “While the broader application of lateral drilling and the trend toward more complex well designs continue to lead to demand for premium drill pipe and premier customer service, we expect near-term market conditions for rental tools to reflect the recent slower growth in U.S. land drilling. We believe current market prices for oil and natural gas liquids will provide some support to the pace of activity in the U.S. Gulf of Mexico barge drilling market. Due to current contract terms and market conditions, we expect near-term declines in utilization of our international rig fleet and reduced levels of revenues and earnings from our O&M contract portfolio. Growing interest among international operators to expand land drilling in several regions where we are focused has led to a notable increase in rig tender requests recently and could provide operational momentum for 2013,” he concluded.
Second Quarter Review
Parker Drilling’s revenues for the 2012 second quarter increased 4 percent to $178.9 million from revenues of $172.8 million for the 2011 second quarter. The Company’s 2012 second quarter gross margin increased 9 percent to $74.4 million from gross margin of $68.1 million for the 2011 second quarter, while gross margin was 41.6 percent of revenues for the 2012 second quarter compared with 39.4 percent for the 2011 second quarter. Results for the 2012 second quarter included $1.9 million, pre-tax, of non-routine expenses primarily related to debt extinguishment costs associated with the refinancing of the Company’s Convertible Notes. These non-routine items reduced after-tax earnings by $1.3 million or $0.01 per diluted share. The results for the 2011 second quarter included non-routine, after-tax expense of $1.6 million or $0.01 per diluted share. Details of the non-routine items are provided in the attached financial tables.
- Rental Tools segment revenues increased 11 percent to $65.0 million from $58.5 million, segment gross margin rose 4 percent to $42.5 million from $40.8 million, and segment gross margin as a percentage of revenues was 65.3 percent compared with 69.7 percent for the prior year’s second quarter. The segment benefitted from the expanded use of lateral drilling and the trend toward more complex well designs in the U.S. land market, and renewed growth in Gulf of Mexico drilling. Rental tool utilization and pricing in the U.S. land market has trended back to more typical levels, impacting the segment’s revenue growth and gross margin.
- U.S. Barge Drilling segment revenues increased 28 percent to $33.3 million from $26.1 million, segment gross margin rose 60 percent to $14.5 million from $9.1 million, and segment gross margin as a percentage of revenues increased to 43.6 percent from 34.7 percent for the prior year’s second quarter. The increase in revenues, segment gross margin and gross margin as a percentage of revenues resulted from higher utilization and an increase in the average dayrate. For the quarter, the business had all eleven of its actively marketed drilling rigs employed, compared with an average of approximately 10.5 barge drilling rigs employed in the 2011 second quarter. In addition, the barge drilling rig fleet’s average dayrate increased 23 percent, to $31,900 for the 2012 second quarter from $26,000 for the 2011 second quarter.
- U.S. Drilling segment includes two 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 second 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 declined 4 percent to $76.9 million from $79.7 million, segment gross margin increased 20 percent to $18.2 million from $15.2 million, and segment gross margin as a percentage of revenues increased to 23.7 percent from 19.1 percent for the prior year’s second quarter. The reduction in revenues was primarily driven by significantly lower reimbursable expenses from O&M contracts. The increases in segment gross margin and gross margin as a percentage of revenues are due to higher average utilization and a higher average dayrate for the Parker Drilling-owned drilling rig fleet. Average rig fleet utilization for the 2012 second quarter was 51 percent, compared with 48 percent for the prior year’s second quarter.
- Technical Services segment revenues declined 57 percent to $3.7 million from $8.5 million for the prior year’s second quarter. The segment reported a gross margin loss of $0.3 million compared with gross margin of $1.8 million in the prior year’s second quarter. The revenue change was primarily due to the completion of the “pre-operating” phase of the Liberty project in early 2011 and the transition of our role on the Berkut platform project from engineering to construction oversight. The segment’s earnings loss reflects retained overhead costs as we transition from recently competed projects.
- The Construction Contract segment includes only the results of activities related to the construction of the BP-owned Liberty rig. The construction contract for the Liberty rig ended in the 2011 first quarter. The Construction Contract segment reported no revenues or gross margin in the 2012 second quarter compared with $1.5 million of segment gross margin in the 2011 second quarter.
2012 Year-to-Date Summary
The Company’s results for the first six months of 2012 included net income of $46.5 million or $0.39 per diluted share on revenues of $355.5 million compared with the prior year’s first six month net income of $19.0 million or $0.16 per diluted share on revenues of $329.0 million. Excluding the effects of non-routine items, the Company reported adjusted net income of $47.8 million or $0.40 per diluted share compared with similarly adjusted 2011 first-half net income of $21.0 million or $0.18 per diluted share. Adjusted EBITDA, excluding non-routine items, was $143.5 million for the first six months of 2012 and $105.4 million for the same period of the prior year.
Results for the first six months of 2012 included $2.0 million, pre-tax, of non-routine expenses primarily related to debt extinguishment costs associated with the refinancing of the Company’s Convertible Notes. These non-routine items reduced after-tax earnings by $1.3 million or $0.01 per diluted share. Earnings for the comparable period of 2011 included $2.0 million of after-tax expense for non-routine items.
Capital Expenditures
Capital expenditures were $50.1 million for the 2012 second quarter and $109.5 for the year-to-date period. Year-to-date 2012 capital expenditures included $48.5 million for the construction of Parker Drilling’s two newbuild arctic land rigs and $41.6 million for the purchase of tubular goods and other rental tools equipment.
Conference Call
Parker Drilling has scheduled a conference call for 10:00 a.m. CDT (11:00 a.m. EDT) on Thursday, August 2, 2012, to review its reported results. Those interested in listening to the call by telephone may do so by dialing (480) 629-9868. 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 Aug. 2 through Aug. 9 by dialing (303) 590-3030 and using the access code 4553665#.
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 Drilling’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 Drilling 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
(Dollars in Thousands)
June 30, 2012 December 31, 2011
------------- -----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $77,467 $97,869
Accounts and Notes Receivable, Net 176,190 183,923
Rig Materials and Supplies 24,246 29,947
Deferred Costs 2,859 3,249
Deferred Income Taxes 6,380 6,650
Assets held for sale 5,312 5,315
Other Current Assets 46,880 40,660
TOTAL CURRENT ASSETS 339,334 367,613
------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 770,761 719,809
OTHER ASSETS
Deferred Income Taxes 99,622 108,311
Other Assets 27,649 20,513
------
TOTAL OTHER ASSETS 127,271 128,824
------- -------
TOTAL ASSETS $1,237,366 $1,216,246
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Current Portion of Long-Term Debt $51,136 $145,723
Accounts Payable and Accrued
Liabilities 112,732 140,087
------- -------
TOTAL CURRENT LIABILITIES 163,868 285,810
------- -------
LONG-TERM DEBT 429,888 337,000
LONG-TERM DEFERRED TAX LIABILITY 17,830 15,934
OTHER LONG-TERM LIABILITIES 29,535 33,452
TOTAL CONTROLLING INTEREST IN
STOCKHOLDERS' EQUITY 596,843 544,606
Noncontrolling interest (598) (556)
----
TOTAL EQUITY 596,245 544,050
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,237,366 $1,216,246
========== ==========
Current Ratio 2.07 1.29
Total Debt as a Percent of
Capitalization 45% 47%
Book Value Per Common Share $5.05 $4.65
PARKER DRILLING COMPANY
Consolidated Condensed Statements of Operations
(Dollars in Thousands, Except Per Share and Weighted Average Shares Outstanding)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2012 2011 2012 2011
---- ---- ---- ----
REVENUES: 178,925 172,812 355,494 328,991
EXPENSES:
Operating Expenses 104,526 104,683 199,458 212,059
Depreciation and Amortization 27,959 27,332 55,578 54,931
TOTAL OPERATING GROSS MARGIN 46,440 40,797 100,458 62,001
------ ------ ------- ------
General and Administrative
Expense (7,420) (7,948) (12,917) (14,752)
Gain on Disposition of Assets,
Net 1,368 366 1,860 1,370
----- --- ----- -----
TOTAL OPERATING INCOME 40,388 33,215 89,401 48,619
------ ------ ------ ------
OTHER INCOME AND (EXPENSE):
Interest Expense (8,925) (5,755) (16,962) (11,616)
Interest Income 53 133 79 179
Loss on extinguishment of debt (1,649) - (1,649) -
Change in fair of derivative
positions 38 (137) (11) (137)
Other 20 123 36 134
TOTAL OTHER EXPENSE (10,463) (5,636) (18,507) (11,440)
------- ------ ------- -------
INCOME BEFORE INCOME TAXES 29,925 27,579 70,894 37,179
INCOME TAX EXPENSE 9,817 13,464 24,460 18,303
----- ------ ------ ------
NET INCOME 20,108 14,115 46,434 18,876
------ ------ ------ ------
Less: net income (loss)
attributable to
noncontrolling interest 25 (58) (41) (125)
NET INCOME ATTRIBUTABLE TO
CONTROLLING INTEREST $20,083 $14,173 $46,475 $19,001
======= ======= ======= =======
EARNINGS PER SHARE - BASIC
Net Income $0.17 $0.12 $0.40 $0.16
EARNINGS PER SHARE - DILUTED
Net Income $0.17 $0.12 $0.39 $0.16
NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS PER SHARE
Basic 117,410,212 116,144,818 117,129,364 115,634,881
Diluted 118,526,879 117,253,588 118,623,037 116,750,717
PARKER DRILLING COMPANY
Selected Financial Data
(Dollars in Thousands)
(Unaudited)
Three Months Ended
------------------
June 30, March 31,
2012 2011 2012
---- ---- ----
REVENUES:
Rental Tools $65,002 $58,490 $66,284
U.S. Barge Drilling 33,292 26,060 27,835
U.S. Drilling - - -
International Drilling 76,923 79,725 78,750
Technical Services 3,708 8,537 3,700
Construction Contract - - -
Total Revenues 178,925 172,812 176,569
OPERATING EXPENSES:
Rental Tools 22,552 17,719 21,630
U.S. Barge Drilling 18,792 17,006 17,140
U.S. Drilling 533 212 466
International Drilling 58,683 64,513 52,243
Technical Services 3,966 6,748 3,453
Construction Contract - (1,515) -
Total Operating Expenses 104,526 104,683 94,932
OPERATING GROSS MARGIN:
Rental Tools 42,450 40,771 44,654
U.S. Barge Drilling 14,500 9,054 10,695
U.S. Drilling (533) (212) (466)
International Drilling 18,240 15,212 26,507
Technical Services (258) 1,789 247
Construction Contract - 1,515 -
Depreciation and Amortization (27,959) (27,332) (27,619)
Total Operating Gross Margin 46,440 40,797 54,018
General and Administrative Expense (7,420) (7,948) (5,497)
Gain on Disposition of Assets, Net 1,368 366 492
TOTAL OPERATING INCOME $40,388 $33,215 $49,013
======= ======= =======
PARKER DRILLING COMPANY
Adjusted EBITDA
(Dollars in Thousands)
Three Months Ended
------------------
June 30, 2012 March 31, 2012 December 31, 2011 September 30, 2011 June 30, 2011 March 31, 2011 December 31, 2010 September 30, 2010 June 30, 2010
------------- -------------- ----------------- ------------------ ------------- -------------- ----------------- ------------------ -------------
Net Income (Loss) Attributable to Controlling Interest $20,083 $26,392 $(90,177) $20,725 $14,173 $4,827 $(13,409) $492 $507
Adjustments:
Income Tax (Benefit) Expense 9,817 14,643 (48,112) 15,042 13,464 4,839 25,362 786 1,624
Total Other Income and Expense 10,463 8,044 5,066 6,268 5,636 5,803 6,196 6,277 11,182
Gain on Disposition of Assets, Net (1,368) (492) (1,666) (623) (366) (1,004) (1,060) (1,176) (1,712)
Depreciation and Amortization 27,959 27,619 29,624 27,581 27,332 27,599 28,526 28,904 29,012
Impairment and other charges - - 170,000 - - - - -
Provision for Reduction in Carrying Value of Certain Assets - - 1,350 - - - 1,952 - -
--- --- ----- --- --- ----- ---
Adjusted EBITDA $66,954 $76,206 $66,085 $68,993 $60,239 $42,064 $47,567 $35,283 $40,613
======= ======= ======= ======= ======= ======= ======= ======= =======
Adjustments:
Non-routine Items 289 23 567 1,517 2,451 685 460 930 694
--- --- --- ----- --- --- --- ---
Adjusted EBITDA after Non-routine Items $67,243 $76,229 $66,652 $70,510 $62,690 $42,749 $48,027 $36,213 $41,307
======= ======= ======= ======= ======= ======= ======= ======= =======
PARKER DRILLING COMPANY
Reconciliation of Non-Routine Items *
(Dollars in Thousands, except Per Share)
(Unaudited)
Three Months Ending Six Months Ended
June 30, 2012 June 30, 2012
------------- -------------
Net income attributable to controlling
interest $20,083 $46,475
Earnings per diluted share $0.17 $0.39
Adjustments:
Extinguishment of debt 1,649 1,649
U.S. regulatory investigations /legal
matters** 289 312
Total adjustments $1,938 $1,961
Tax effect of non-routine adjustments (678) (686)
Net non-routine adjustments $1,260 $1,275
Adjusted net income attributable to
controlling interest $21,343 $47,750
======= =======
Adjusted earnings per diluted share $0.18 $0.40
===== =====
Three Months Ending Six Months Ended
June 30, 2011 June 30, 2011
------------- -------------
Net income attributable to controlling
interest $14,173 $19,001
Earnings per diluted share $0.12 $0.16
Adjustments:
Extinguishment of debt - -
U.S. regulatory investigations /legal
matters** 2,451 3,136
Total adjustments $2,451 $3,136
Tax effect of non-routine adjustments (858) (1,098)
Net non-routine adjustments $1,593 $2,038
Adjusted net income attributable to
controlling interest $15,766 $21,039
======= =======
Adjusted earnings per diluted share $0.13 $0.18
===== =====
* 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 Company
