Parker Drilling Reports 2012 Fourth Quarter Results
HOUSTON, Feb. 21, 2013 /PRNewswire/ — Parker Drilling Company (NYSE-PKD), an international drilling contractor, drilling services and rental tools provider, today reported results for the quarter and year-to-date periods ended December 31, 2012. The Company’s results for the 2012 fourth quarter included a net loss of $20.1 million or $0.17 per diluted share on revenues of $157.2 million. Results for the period included $16.3 million, pre-tax, of non-routine expenses primarily related to the previously disclosed proposed settlement of U.S. Department of Justice and Securities and Exchange Commission investigations. Excluding the effects of non-routine items, the Company reported a net loss of $4.0 million or $0.03 per diluted share compared with similarly adjusted 2012 third quarter net income of $11.4 million or $0.10 per diluted share on revenues of $165.3 million, and 2011 fourth quarter net income of $20.2 million or $0.17 per diluted share on revenues of $181.1 million.
(Logo: http://photos.prnewswire.com/prnh/20050620/PARKERDRILLINGLOGO)
Adjusted EBITDA, excluding non-routine items, was $35.8 million, compared with $55.6 million for the preceding third quarter, and $66.7 million for the prior year’s fourth quarter.
Parker Drilling’s fourth quarter results primarily reflect the impacts of recent market trends, strategic decisions to better position the Company for profitable growth, and the charge taken for the proposed settlement with the U.S. Department of Justice and Securities and Exchange Commission.
“During the latter part of 2012, business trends and competitive conditions in a number of markets were challenging. Our responses have focused on leveraging our strategic position, preserving profitability, and improving future opportunities to grow. These efforts have already begun to have a favorable impact on performance,” said Parker Drilling President and Chief Executive Officer, Gary Rich. “Rental Tools utilization has risen for two consecutive months. Our barge rig fleet utilization is currently above the fourth quarter fleet average and the fleet’s average dayrate has continued to increase. Our international operations have four more rigs under contract than at year-end, including contracts to begin work in Kurdistan with two rigs to be relocated from Kazakhstan. And, we recently were awarded an O&M contract to operate three ExxonMobil platforms off the coast of California.
“In choosing to be selective and strategic in our response to market conditions, we believe we have enhanced our relationships with key customers in core markets, provided momentum to our 2013 performance potential, and built a stronger base from which to expand and grow,” noted Gary Rich.
Fourth Quarter Highlights
- During the quarter, the International Drilling operation began moving two rigs from their base in Algeria to reposition them for work in other markets and also committed to redeploy two rigs from Kazakhstan for work in Kurdistan. As a result, the Company incurred costs related to the rig moves and the write-off of unrecoverable VAT taxes of approximately $4.7 million.
- The Company made use of slowing activity in the U.S. Gulf of Mexico inland waters drilling market to bring forward dry-dock inspections, repairs and general maintenance for three barge drilling rigs. This took these units out of service for portions of the quarter and limited operating cost leverage.
- The first of Parker Drilling’s two AADU rigs completed its acceptance testing process and began operations under the terms of the Company’s five-year contract with BP.
- The Rental Tools segment addressed weakened conditions in the U.S. land drilling market with a balance of competitive price responses and other actions, strengthening its position with key customers in core markets.
- Parker Drilling reached an agreement in principle with the Department of Justice and staff of the Securities and Exchange Commission related to investigations of possible violations of U.S. law, recording a charge associated with the proposed settlement.
- The Company amended its $130 million Credit Agreement, consisting of a term loan and revolving credit facility, extending its expiration to 2017.
Outlook
“I believe we are making significant improvements in Parker’s fundamental performance potential,” commented Mr. Rich. “Our Rental Tools business is poised to make gains in the growing offshore Gulf of Mexico drilling market while strengthening its U.S. land-related operations. Our U.S. barge fleet is well-positioned for a period of sustained drilling in the Gulf of Mexico’s inland waters. The repositioning of several international rigs enhances our ability to participate in other large and growing markets. And, our Alaska operations are underway on a multi-year drilling program and our O&M portfolio is growing.
“In addition, our balance sheet is in sound condition and we are confident we have the financial capacity to sustain our businesses, invest in growth opportunities and fund the proposed settlement with the DOJ and SEC,” he concluded.
Fourth Quarter Review
Parker Drilling’s revenues for the 2012 fourth quarter, compared with the 2012 third quarter, declined 5 percent to $157.2 million from $165.3 million, segment gross margin declined 31 percent to $44.1 million from $63.8 million, while segment gross margin was 28.0 percent of revenues compared with 38.6 percent. Compared with the 2011 fourth quarter, the Company’s revenues declined 13 percent from revenues of $181.1 million, segment gross margin declined 40 percent from segment gross margin of $74.0 million, and segment gross margin as a percent of revenues was below the 2011 fourth quarter level of 40.9 percent. (Segment gross margin excludes depreciation and amortization expense).
Results for the 2012 fourth quarter included $16.3 million, pre-tax, of non-routine expenses primarily related to the proposed settlement of U.S. Department of Justice and Securities and Exchange Commission investigations. These non-routine expenses reduced after-tax earnings by $16.1 million, or approximately $0.14 per diluted share. The results for the 2012 third quarter and 2011 fourth quarter included non-routine, after-tax expense of $0.4 million and $110.4 million, respectively. Details of the non-routine items are provided in the attached financial tables.
- Rental Tools segment revenues were $55.7 million, segment gross margin was $32.8 million and segment gross margin as a percentage of revenues was 59.0 percent. Compared with the 2012 third quarter, segment revenues, gross margin and gross margin as a percent of revenues declined. Actions initiated earlier in response to weakened market conditions and more competitive pricing shored up profitability and began to restore utilization levels during the quarter.
- U.S. Barge Drilling segment revenues were $29.4 million, segment gross margin was $13.2 million, and segment gross margin as a percentage of revenues was 44.8 percent. Compared with the 2012 third quarter, segment revenues, gross margin and gross margin as a percent of revenues declined. As drilling activity slowed toward the year-end and in anticipation of the market’s future need for barge drilling rigs, the Company took three units out of service for drydock repairs and inspections and general maintenance work. While this reduced the number of the Company’s barge drilling rigs available to the market, the impact of this was partially offset by an increase in the fleet-average dayrate for the period.
- U.S. Drilling segment revenues were $1.4 million. The segment reported its first operating revenues in the 2012 fourth quarter as the first of two AADU rigs began operations late in the period. The increase in operating expense reflects the impact of the rig’s transition, during the 2012 third quarter, from a capitalized construction project to a deployed rig with operating costs.
- International Drilling segment revenues were $67.6 million, segment gross margin was $2.7 million, and segment gross margin as a percentage of revenues was 3.9 percent. Compared with the 2012 third quarter, segment revenues, gross margin and gross margin as a percent of revenues declined. The reduction in segment revenues was primarily due to the impact from a decline in average rig fleet utilization. This was partially offset by an increase in operating and maintenance (O&M) contract revenues. The decline in segment gross margin is primarily due to lower rig utilization and costs associated with strategic decisions to reposition rigs from Algeria and redeploy rigs from Kazakhstan. In addition, it reflects the transition to a new O&M contract in Sakhalin Island, Russia, from the previous, expired contract.
- Technical Services segment revenues were $3.1 million and the segment had a gross margin loss of $0.1 million. The reduction in segment revenues was primarily due to the completion of some early-phase engineering projects, while the segment’s earnings loss reflects this and the costs of retaining engineering expertise and experience during the transition between projects.
2012 Summary
The Company’s results for the 2012 year included net income of $37.3 million or $0.31 per diluted share on revenues of $678.0 million, compared with the prior year’s net loss of $50.5 million or $0.43 per diluted share on revenues of $686.6 million. Excluding the effects of non-routine items, the Company reported adjusted net income of $55.0 million or $0.46 per diluted share compared with similarly adjusted 2011 net income of $62.9 million or $0.54 per diluted share. Adjusted EBITDA, excluding non-routine items, was $234.6 million for 2012 and $242.6 million for the prior year.
Results for 2012 included $18.7 million, pre-tax, of non-routine expenses primarily related to the proposed settlement of U.S. Department of Justice and Securities and Exchange Commission investigations. These non-routine expenses reduced after-tax earnings by $17.7 million or $0.15 per diluted share. Earnings for the 2011 year included $113.4 million of after-tax expense for non-routine items, or $0.97 per diluted share.
Capital Expenditures
Capital expenditures were $43.9 million for the 2012 fourth quarter and $191.5 million for the year. Capital expenditures for 2012 included $86.0 million for the construction of two AADU rigs and $62.0 million for the purchase of tubular goods and other rental tools equipment. In addition, the Company invested $13.8 million in a new enterprise resource planning system that is expected to increase the ability to address business matters and to assess and leverage market opportunities.
Conference Call
Parker Drilling has scheduled a conference call for 10:00 a.m. CST (11:00 a.m. EST) on Thursday, February 21, 2013, to review 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 Feb. 21 through Feb. 28 by dialing (303) 590-3030 and using the access code 4591662#.
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 the proposed settlement of the Company’s Department of Justice and Securities and Exchange Commission investigations, 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 could 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 included 22 land rigs and two offshore barge rigs in international locations, 12 barge rigs in the U.S. Gulf of Mexico, and three land rigs in the U.S. 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)
December 31, 2012 December 31, 2011
----------------- -----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $87,886 $97,869
Accounts and Notes Receivable, Net 168,562 183,923
Rig Materials and Supplies 28,860 29,947
Deferred Costs 1,089 3,249
Deferred Income Taxes 8,742 6,650
Assets held for sale 11,550 5,315
Other Current Assets 46,345 40,660
TOTAL CURRENT ASSETS 353,034 367,613
------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 786,158 719,809
OTHER ASSETS
Deferred Income Taxes 95,295 108,311
Other Assets 21,246 20,513
------
TOTAL OTHER ASSETS 116,541 128,824
------- -------
TOTAL ASSETS $1,255,733 $1,216,246
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Current Portion of Long-Term Debt $10,000 $145,723
Accounts Payable and Accrued
Liabilities 141,866 140,087
------- -------
TOTAL CURRENT LIABILITIES 151,866 285,810
------- -------
LONG-TERM DEBT 469,205 337,000
LONG-TERM DEFERRED TAX LIABILITY 20,847 15,934
OTHER LONG-TERM LIABILITIES 23,182 33,452
TOTAL CONTROLLING INTEREST IN
STOCKHOLDERS' EQUITY 591,404 544,606
Noncontrolling interest (771) (556)
----
TOTAL EQUITY 590,633 544,050
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,255,733 $1,216,246
========== ==========
Current Ratio 2.32 1.29
Total Debt as a Percent of
Capitalization 45% 47%
Book Value Per Common Share $4.97 $4.65
PARKER DRILLING COMPANY
Consolidated Statement Of Operations
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended September 30,
--------------------------------
Three Months Ended December 31,
-------------------------------
2012 2011 2012
---- ---- ----
REVENUES: $157,187 $181,067 $165,301
EXPENSES:
Operating Expenses 113,122 107,044 101,484
Depreciation and Amortization 27,660 29,624 29,779
TOTAL OPERATING GROSS MARGIN 16,405 44,399 34,038
------ ------ ------
General and Administrative
Expense (24,230) (7,930) (8,905)
Impairment and other charges - (170,000) -
Provision for Reduction in
Carrying Value of Certain
Assets - (1,350) -
Gain (loss) on Disposition of
Assets, net (492) 1,666 606
---- -----
TOTAL OPERATING INCOME (LOSS) (8,317) (133,215) 25,739
------ -------- ------
OTHER INCOME AND (EXPENSE):
Interest Expense (8,409) (5,386) (8,171)
Interest Income 44 47 30
Loss on extinguishment of debt (364) - (117)
Change in fair value of
derivative positions 47 76 19
Other (444) 197 26
TOTAL OTHER EXPENSE (9,126) (5,066) (8,213)
------ ------ ------
INCOME (LOSS) BEFORE INCOME
TAXES (17,443) (138,281) 17,526
INCOME TAX EXPENSE (BENEFIT) 2,724 (48,112) 6,695
----- ------- -----
NET INCOME (LOSS) (20,167) (90,169) 10,831
------- ------- ------
Less: net income (loss)
attributable to
noncontrolling interest (69) 8 (105)
NET INCOME ATTRIBUTABLE TO
CONTROLLING INTEREST $(20,098) $(90,177) $10,936
======== ======== =======
EARNINGS PER SHARE - BASIC
Net Income (loss) $(0.17) $(0.77) $0.09
EARNINGS PER SHARE - DILUTED
Net Income (loss) $(0.17) $(0.77) $0.09
NUMBER OF COMMON SHARES USED
IN COMPUTING EARNINGS PER
SHARE
Basic 118,503,732 116,620,561 118,109,214
Diluted 118,503,732 116,620,561 119,201,019
PARKER DRILLING COMPANY
Consolidated Statement Of Operations
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Year Ended December 31,
-----------------------
2012 2011 2010
---- ---- ----
REVENUES: $677,982 $686,646 $659,475
EXPENSES:
Operating Expenses 414,064 418,144 471,278
Depreciation and Amortization 113,017 112,136 115,030
------- -------
527,081 530,280 586,308
------- ------- -------
TOTAL OPERATING GROSS MARGIN 150,901 156,366 73,167
------- ------- ------
General and Administrative
Expense (46,052) (31,314) (30,728)
Impairment and other charges - (170,000) -
Provision for Reduction in
Carrying Value of Certain
Assets - (1,350) (1,952)
Gain on Disposition of Assets,
Net 1,974 3,659 4,620
TOTAL OPERATING INCOME (LOSS) 106,823 (42,639) 45,107
------- ------- ------
OTHER INCOME AND (EXPENSE):
Interest Expense (33,542) (22,594) (26,805)
Interest Income 153 256 257
Loss on extinguishment of debt (2,130) - (7,209)
Change in fair value of
derivative positions 55 (110) -
Other (382) (325) 155
TOTAL OTHER EXPENSE (35,846) (22,773) (33,602)
INCOME (LOSS) BEFORE INCOME
TAXES 70,977 (65,412) 11,505
------ ------- ------
INCOME TAX EXPENSE (BENEFIT) 33,879 (14,767) 26,213
------ ------- ------
NET INCOME (LOSS) 37,098 (50,645) (14,708)
Less: net income (loss)
attributable to
noncontrolling interest (215) (194) (247)
NET INCOME ATTRIBUTABLE TO
CONTROLLING INTEREST $37,313 $(50,451) $(14,461)
======= ======== ========
EARNINGS PER SHARE - BASIC $0.32 $(0.43) $(0.13)
EARNINGS PER SHARE - DILUTED $0.31 $(0.43) $(0.13)
NUMBER OF COMMON SHARES USED
IN COMPUTING
EARNINGS PER SHARE:
Basic 117,721,135 116,081,590 114,258,965
Diluted 119,093,590 116,081,590 114,258,965
PARKER DRILLING COMPANY
Selected Financial Data
(Dollars in Thousands)
(Unaudited)
Three Months Ended Year Ended December 31,
------------------ -----------------------
December 31, September 30,
2012 2011 2012 2012 2011 2010
---- ---- ---- ---- ---- ----
REVENUES:
Rental Tools $55,666 $63,871 $59,947 $246,900 $237,068 $172,598
U.S. Barge Drilling 29,404 22,888 33,142 123,672 93,763 64,543
U.S. Drilling 1,387 - - 1,387 - -
International Drilling 67,596 89,229 68,503 291,772 318,482 294,821
Technical Services 3,134 5,079 3,709 14,251 27,695 36,423
Construction Contract - - - - 9,638 91,090
Total Revenues 157,187 181,067 165,301 677,982 686,646 659,475
OPERATING EXPENSES:
Rental Tools 22,823 19,952 21,879 88,884 74,491 60,036
U.S. Barge Drilling 16,217 16,503 17,257 69,405 65,143 53,334
U.S. Drilling 5,897 665 2,641 9,538 1,692 217
International Drilling 64,932 65,664 55,919 231,777 245,591 235,432
Technical Services 3,253 4,260 3,788 14,460 22,360 31,371
Construction Contract - - - - 8,867 90,888
Total Operating Expenses 113,122 107,044 101,484 414,064 418,144 471,278
OPERATING GROSS MARGIN:
Rental Tools 32,843 43,919 38,068 158,016 162,577 112,562
U.S. Barge Drilling 13,187 6,385 15,885 54,267 28,620 11,209
U.S. Drilling (4,510) (665) (2,641) (8,151) (1,692) (217)
International Drilling 2,664 23,565 12,584 59,995 72,891 59,389
Technical Services (119) 819 (79) (209) 5,335 5,052
Construction Contract - - - - 771 202
Depreciation and Amortization (27,660) (29,624) (29,779) (113,017) (112,136) (115,030)
Total Operating Gross Margin 16,405 44,399 34,038 150,901 156,366 73,167
PARKER DRILLING COMPANY
Adjusted EBITDA
(Dollars in Thousands)
Three Months Ended
------------------
December 31, 2012 September 30, 2012 June 30, 2012 March 31, 2012 December 31, 2011 September 30, 2011 June 30, 2011 March 31, 2011
----------------- ------------------ ------------- -------------- ----------------- ------------------ ------------- --------------
Net Income (Loss) Attributable to Controlling
Interest $(20,098) $10,936 $20,083 $26,392 $(90,177) $20,725 $14,173 $4,827
Adjustments:
Income Tax (Benefit) Expense 2,724 6,695 9,817 14,643 (48,112) 15,042 13,464 4,839
Total Other Income and Expense 9,126 8,213 10,463 8,044 5,066 6,268 5,636 5,803
Gain on Disposition of Assets, Net 492 (606) (1,368) (492) (1,666) (623) (366) (1,004)
Depreciation and Amortization 27,660 29,779 27,959 27,619 29,624 27,581 27,332 27,599
Impairment and other charges - - - - 170,000 - - -
Provision for Reduction in Carrying Value of Certain
Assets - - - - 1,350 - - -
--- --- --- --- ----- --- ---
Adjusted EBITDA 19,904 55,017 66,954 76,206 66,085 68,993 60,239 42,064
====== ====== ====== ====== ====== ====== ====== ======
Adjustments:
Non-routine Items* 15,921 564 42 23 567 1,517 2,451 685
------ --- --- --- --- ----- ---
Adjusted EBITDA after Non-routine Items $35,825 $55,581 $66,996 $76,229 $66,652 $70,510 $62,690 $42,749
======= ======= ======= ======= ======= ======= ======= =======
* Amended to include comparable expenses in all periods.
PARKER DRILLING COMPANY
Reconciliation of Non-Routine Items *
(Dollars in Thousands, except Per Share)
(Unaudited)
Three Months Ending Three Months Ending Three Months Ending
December 31, 2012 September 30, 2012 December 31, 2011
----------------- ------------------ -----------------
Net income attributable to controlling interest $(20,098) $10,936 $(90,177)
Earnings per diluted share $(0.17) $0.09 $(0.77)
Adjustments:
U.S. Department of Justice/Securities and Exchange
Commission proposed settlement $15,850 $ - $ -
Impairment and other charges - - 170,000
Extinguishment of debt 364 117 -
Provision for the reduction in carrying value - - 1,350
U.S. regulatory investigations / legal matters** 71 564 567
Total adjustments 16,285 681 171,917
Tax effect of non-routine adjustments (152) (238) (61,546)
Net non-routine adjustments 16,133 443 110,371
Adjusted net income attributable to controlling
interest $(3,965) $11,379 $20,194
======= ======= =======
Adjusted earnings per diluted share $(0.03) $0.10 $0.17
====== ===== =====
Year Ended Year Ended
December 31, 2012 December 31, 2011
----------------- -----------------
Net income attributable to controlling interest $37,313 $(50,451)
Earnings per diluted share $0.31 $(0.43)
Adjustments:
U.S. Department of Justice/Securities and Exchange
Commission proposed settlement $15,850 $ -
Impairment and other charges - 170,000
Extinguishment of debt 2,130 -
Provision for the reduction in carrying value - 1,350
U.S. regulatory investigations / legal matters** 699 5,220
Total adjustments 18,679 176,570
Tax effect of non-routine adjustments (990) (63,175)
Net non-routine adjustments 17,689 113,395
Adjusted net income attributable to controlling
interest $55,002 $62,944
======= =======
Adjusted earnings per diluted share $0.46 $0.54
===== =====
* 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
