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Parker Drilling Reports 2013 First Quarter Results

May 1, 2013

HOUSTON, May 1, 2013 /PRNewswire/ — Parker Drilling Company (NYSE-PKD), an international drilling contractor and drilling services and rental tools provider, today reported results for the quarter ended March 31, 2013. The Company’s results for the period included net income of $0.6 million or $0.00 per diluted share on revenues of $167.2 million. This included $3.5 million, pre-tax, of non-routine expenses related to the April acquisition of International Tubular Services Limited and certain affiliates (ITS) and the April settlement of the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) investigations. Excluding the effects of non-routine items, the Company reported net income of $3.9 million or $0.03 per diluted share compared with a similarly adjusted 2012 fourth quarter net loss of $4.0 million or $0.03 per diluted share on revenues of $157.2 million. Adjusted EBITDA, excluding non-routine items, was $40.7 million, compared with $35.8 million for the preceding quarter. Details of the non-routine items are provided in the attached tables.

(Logo: http://photos.prnewswire.com/prnh/20050620/PARKERDRILLINGLOGO)

Parker Drilling’s first quarter results reflect the Company’s operating performance, the impacts of strategic decisions to better position the Company’s international rig fleet for profitable growth, and expenses related to the recent acquisition of ITS.

“We had an active, challenging and constructive start to the year,” began Gary Rich, president and chief executive officer of Parker Drilling. “During the closing months of 2012 and beginning of 2013, the demand for U.S. rental tools and Gulf of Mexico barge drilling services softened. We focused on maintaining our high level of customer service, safety and efficiency while being responsive to competitive conditions and upholding our market position. By the end of the quarter, the barge drilling market firmed and competitive pressures in the rental tools market eased. As a result, our barge drilling operations returned to high levels of utilization and rising dayrates and our rental tools utilization improved.

“During the quarter, we reached an important milestone on the North Slope of Alaska, completing the launch of our Arctic Alaska Drilling Unit (AADU) rigs when the second of our two new-design rigs commenced operations in February. This achievement in our U.S. drilling activities was complemented by the successful startup of a new contract to operate and maintain three drilling platforms located offshore California.

“We continued our program to restore the performance of our international operations, and ended the quarter with three more rigs under contract than at year-end. These included contracts to begin work in Kurdistan later in 2013 with two rigs to be relocated from Kazakhstan. This puts us on a path toward improved results from higher utilization and increased operating scale in our focus regions.

“Following due diligence and negotiations during the first quarter, we concluded the acquisition of ITS in April. The addition of this international rental tools and drilling services business adds international presence to our rental tools segment with immediate scale from which to grow and increase profitability, two of our key corporate objectives,” noted Mr. Rich.

First Quarter Highlights

  • The U.S. barge drilling segment operated at full utilization throughout the month of March, and, for the quarter, achieved its highest average dayrate since 2008.
  • Rental Tools equipment utilization increased from fourth quarter levels and the pace of price concessions was significantly less than in the prior quarter.
  • The second of Parker Drilling’s two new-design Arctic class rigs completed its acceptance testing process and commenced operating under the terms of the Company’s five-year contract with BP.
  • Parker was awarded a contract to operate and maintain three drilling platforms offshore California. The project was quickly crewed up and began operating in mid-February.
  • During the quarter, the International Drilling operation completed the moves of two rigs from their base in Algeria to reposition them for work in other markets. As a result, the segment incurred $1.7 million of move-related costs.
  • The Company initiated negotiations to acquire certain subsidiaries of ITS Tubular Services (Holdings) Limited. The acquisition, completed in April, expands the reach of Parker’s rental tools business into growing international markets.

Outlook

“We are making progress in improving Parker’s fundamental performance potential in line with our key corporate objectives,” said Mr. Rich. “Our innovative AADU rigs have been successfully launched and are performing well. Our U.S. barge drilling fleet is operating at high utilization levels and rising dayrates. The U.S. rental tools business appears to be strengthening and the recent acquisition of ITS added a growing international position to our market presence. We are making progress toward repositioning our international land rigs that should lead to better returns from our rig fleet, complementing our growing operations and maintenance (O&M) activity,” he concluded.

First Quarter Review

Parker Drilling’s revenues for the 2013 first quarter, compared with the 2012 fourth quarter, increased 6 percent to $167.2 million from $157.2 million, segment gross margin rose 14 percent to $50.1 million from $44.1 million, and segment gross margin as a percentage of revenues improved to 30.0 percent from 28.0 percent. (Segment gross margin excludes depreciation and amortization expense).

  • Rental Tools segment revenues were $57.1 million, segment gross margin was $32.2 million and segment gross margin as a percentage of revenues was 56.4 percent. Compared with the 2012 fourth quarter, segment revenues increased 3 percent, gross margin weakened 2 percent, and gross margin as a percentage of revenues declined. By focusing on meeting customer needs and actively rebalancing its stock of equipment among its operating locations, the Rental Tools segment achieved higher equipment utilization despite continued weakness in U.S. land drilling market conditions. In addition, while price erosion continued, the pace of decline slowed.
  • U.S. Barge Drilling segment revenues were $29.9 million, segment gross margin was $12.4 million, and segment gross margin as a percentage of revenues was 41.6 percent. Compared with the 2012 fourth quarter, segment revenues increased 2 percent, gross margin fell 6 percent, and gross margin as a percentage of revenues declined. Higher average utilization and rising dayrates led to the increase in revenues. The earnings contribution from the operational improvement was offset by an increase in workers’ compensation expense, compared with the prior quarter.
  • U.S. Drilling segment revenues were $11.6 million, segment gross margin was $0.3 million and segment gross margin as a percentage of revenues was 2.8 percent. Compared with the 2012 fourth quarter, revenues increased as a result of the initiation during the first quarter of a new O&M contract to manage three drilling platforms located offshore California, and the first quarter start of operations by the second of two AADU rigs on the North Slope of Alaska. Segment gross margins reflect receiving revenues for the second AADU rig for approximately one half of the 2013 first quarter, while incurring costs throughout the quarter as it was being prepared for operation.
  • International Drilling segment revenues were $64.7 million, segment gross margin was $4.8 million, and segment gross margin as a percentage of revenues was 7.4 percent. Compared with the 2012 fourth quarter, segment revenues declined 4 percent, while segment gross margin increased and gross margin as a percentage of revenues rose. An increase in revenues from higher rig fleet utilization was more than offset by the impact of rig mobilizations and operating downtime in the Latin America region. The increase in segment operating margin reflects the benefits of improved fleet utilization, lessened by increased downtime, and $3.0 million less in rig redeployment related expenses.
  • Technical Services segment revenues were $3.9 million, segment gross margin was $0.4 million and segment gross margin as a percentage of revenues was 9.1 percent. Compared with the 2012 fourth quarter, segment revenues increased 25 percent and segment gross margin returned to profit. The upturn in results was primarily due to contribution from a customer-funded project.

General and administrative expense, excluding non-routine items, compared with the 2012 fourth quarter, increased $1.1 million, primarily due to costs of the ongoing implementation of a new enterprise resource planning system. Income tax expense, excluding non-routine items, reflects the tax impact of the settlement with the DOJ and SEC, and reduced taxes on prior period tax returns.

Capital Expenditures

Capital expenditures were $30.0 million for the 2013 first quarter. They included $12.2 million for the purchase of rental tools equipment, including products for the growing U.S. offshore market, and $4.5 million in enterprise resource planning system expenditures.

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. CDT (11:00 a.m. EDT) on Wednesday, May 1, 2013, to review reported results. The call will be available by telephone at (480) 629-9818. The call can also be accessed through the Investor Relations section of the Company’s website. A replay of the call can be accessed on the Company’s website for 12 months and will be available by telephone from May 1 through May 8 at (303) 590-3030, using the access code 4612858#.

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 DOJ and SEC 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, well services, and project management to the energy industry. Parker Drilling’s rig fleet includes 23 land rigs and two offshore barge rigs in international locations, 12 barge rigs in the U.S. Gulf of Mexico, and two land rigs in Alaska. The Company’s rental tools business supplies premium equipment to operators on land and offshore in the U.S. and international markets and well services to international customers. 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 on the Company’s website including operating status reports for the Company’s Rental Tools segment and its international and U.S. Gulf of Mexico rig fleets, updated monthly.

                                                                     PARKER DRILLING COMPANY

                                                              Consolidated Condensed Balance Sheets

                                                                     (Dollars in Thousands)

                                                                 March 31, 2013                     December 31, 2012
                                                                 --------------                     -----------------

                                                                  (Unaudited)

                                            ASSETS

    CURRENT ASSETS

    Cash and Cash Equivalents                                                        $83,687                             $87,886

    Accounts and Notes Receivable,
     Net                                                                             187,632                             168,562

    Rig Materials and Supplies                                                        29,388                              28,860

    Deferred Costs                                                                     3,775                               1,089

    Deferred Income Taxes                                                             10,406                               8,742

    Assets held for sale                                                              11,526                              11,550

    Other Current Assets                                                              50,499                              46,345

    TOTAL CURRENT ASSETS                                                             376,913                             353,034
                                                                                     -------                             -------

    PROPERTY, PLANT AND EQUIPMENT,
     NET                                                                             784,795                             786,158

    OTHER ASSETS

    Deferred Income Taxes                                                             99,898                              95,295

    Other Assets                                                                      18,483                              21,246
                                                                                      ------

    TOTAL OTHER ASSETS                                                               118,381                             116,541
                                                                                     -------                             -------

    TOTAL ASSETS                                                                  $1,280,089                          $1,255,733
                                                                                  ==========                          ==========

                             LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES

    Current  Portion of Long-Term
     Debt                                                                            $10,000                             $10,000

    Accounts Payable and Accrued
     Liabilities                                                                     162,064                             141,866
                                                                                     -------                             -------

    TOTAL CURRENT LIABILITIES                                                        172,064                             151,866
                                                                                     -------                             -------

    LONG-TERM DEBT                                                                   466,449                             469,205

    LONG-TERM DEFERRED TAX
     LIABILITY                                                                        25,507                              20,847

    OTHER LONG-TERM LIABILITIES                                                       22,756                              23,182

    TOTAL CONTROLLING INTEREST IN
     STOCKHOLDERS' EQUITY                                                            594,104                             591,404

    Noncontrolling interest                                                             (791)                               (771)
                                                                                        ----                                ----

    TOTAL EQUITY                                                                     593,313                             590,633

    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY                                                         $1,280,089                          $1,255,733
                                                                                  ==========                          ==========

    Current Ratio                                                                       2.19                                2.32

    Total Debt as a  Percent of
     Capitalization                                                                       45%                                 45%

    Book Value Per Common Share                                                        $4.97                               $4.97

                                                  PARKER DRILLING COMPANY

                                            Consolidated Statement Of Operations

                                       (Dollars in Thousands, Except Per Share Data)

                                                        (Unaudited)

                                                                                                         Three Months Ended

                                                                                                            December 31,
                                                                                                            ------------

                                                                  Three Months Ended March 31,
                                                                  ----------------------------

                                                                           2013                    2012                            2012
                                                                           ----                    ----                            ----

    REVENUES:                                                          $167,155                $176,569                        $157,187

    EXPENSES:

    Operating Expenses                                                  117,046                  94,932                         113,122

    Depreciation and
     Amortization                                                        29,512                  27,619                          27,660

    TOTAL OPERATING GROSS MARGIN                                         20,597                  54,018                          16,405
                                                                         ------                  ------                          ------

    General and Administrative
     Expense                                                            (12,883)                 (5,497)                        (24,230)

    Gain on Disposition of
     Assets, Net                                                          1,148                     492                            (492)
                                                                          -----                     ---

    TOTAL OPERATING INCOME                                                8,862                  49,013                          (8,317)
                                                                          -----                  ------                          ------

    OTHER INCOME AND (EXPENSE):

    Interest Expense                                                    (10,006)                 (8,037)                         (8,409)

    Interest Income                                                          37                      26                              44

    Loss on extinguishment of
     debt                                                                     -                       -                            (364)

    Change in fair value of
     derivative positions                                                    59                     (49)                             47

    Other                                                                   116                      16                            (444)

    TOTAL OTHER EXPENSE                                                  (9,794)                 (8,044)                         (9,126)
                                                                         ------                  ------                          ------

    INCOME (LOSS) BEFORE INCOME
     TAXES                                                                 (932)                 40,969                         (17,443)

    INCOME TAX EXPENSE (BENEFIT)                                         (1,504)                 14,643                           2,724
                                                                         ------                  ------                           -----

    NET INCOME (LOSS)                                                       572                  26,326                         (20,167)
                                                                            ---                  ------                         -------

    Less: net income (loss)
     attributable to
     noncontrolling interest                                                (20)                    (66)                            (69)

    NET INCOME ATTRIBUTABLE TO
     CONTROLLING INTEREST                                                  $592                 $26,392                        $(20,098)
                                                                           ====                 =======                        ========

    EARNINGS  PER SHARE - BASIC

    Net Income (loss)                                                     $0.00                   $0.23                          $(0.17)

    EARNINGS PER SHARE - DILUTED

    Net Income (loss)                                                     $0.00                   $0.22                          $(0.17)

    NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS PER SHARE

    Basic                                                           118,867,678             116,848,516                     118,503,732

    Diluted                                                         120,072,574             118,404,491                     118,503,732

                                                                 PARKER DRILLING COMPANY

                                                                 Selected Financial Data

                                                                 (Dollars in Thousands)

                                                                       (Unaudited)

                                            Three Months Ended
                                            ------------------

                                             March 31,                    December 31,
                                             ---------

                                                           2013                             2012     2012
                                                           ----                             ----     ----

    REVENUES:

             Rental Tools                               $57,082                          $66,284  $55,666

             U.S. Barge Drilling                         29,865                           27,835   29,404

             U.S. Drilling                               11,635                                -    1,387

             International Drilling                      64,650                           78,750   67,596

             Technical Services                           3,923                            3,700    3,134

             Construction Contract                            -                                -        -

               Total Revenues                           167,155                          176,569  157,187
                                                        -------

    OPERATING EXPENSES:

             Rental Tools                                24,875                           21,630   22,823

             U.S. Barge Drilling                         17,441                           17,140   16,217

             U.S. Drilling                               11,309                              466    5,897

             International Drilling                      59,854                           52,243   64,932

             Technical Services                           3,567                            3,453    3,253

             Construction Contract                            -                                -        -

               Total Operating Expenses                 117,046                           94,932  113,122
                                                        -------

    OPERATING GROSS MARGIN:

             Rental Tools                                32,207                           44,654   32,843

             U.S. Barge Drilling                         12,424                           10,695   13,187

             U.S. Drilling                                  326                             (466)  (4,510)

             International Drilling                       4,796                           26,507    2,664

             Technical Services                             356                              247     (119)

             Construction Contract                            -                                -        -

             Depreciation and Amortization              (29,512)                         (27,619) (27,660)
                                                       --------

               Total Operating Gross Margin              20,597                           54,018   16,405
                                                         ------

                                                                                 PARKER DRILLING COMPANY

                                                                                     Adjusted EBITDA

                                                                                  (Dollars in Thousands)

                                             Three Months Ended
                                             ------------------

                            March 31, 2013                      December 31, 2012                      September 30, 2012       June 30, 2012        March 31, 2012
                            --------------                      -----------------                      ------------------       -------------        --------------

    Net Income (Loss)
     Attributable to
     Controlling Interest                  $592                                $(20,098)                               $10,936              $20,083               $26,392

      Adjustments:

    Income Tax (Benefit)
     Expense                             (1,504)                                  2,724                                  6,695                9,817                14,643

    Interest Expense                     10,006                                   8,409                                  8,171                8,925                 8,037

    Other Income and
     Expense                               (212)                                    717                                     42                1,538                     7

    Gain on Disposition of
     Assets, Net                         (1,148)                                    492                                   (606)              (1,368)                 (492)

    Depreciation and
     Amortization                        29,512                                  27,660                                 29,779               27,959                27,619

    Impairment and other
     charges                                  -                                       -                                      -                    -                     -

    Provision for Reduction
     in Carrying Value of
     Certain Assets                           -                                       -                                      -                    -                     -
                                            ---                                     ---                                    ---                  ---                   ---

    Adjusted EBITDA                      37,246                                  19,904                                 55,017               66,954                76,206
                                         ======                                  ======                                 ======               ======                ======

    Adjustments:

         Non-routine Items                3,463                                  15,921                                    564                   42                    23
                                          -----                                  ------                                    ---                  ---                   ---

    Adjusted EBITDA after
     Non-routine Items                  $40,709                                 $35,825                                $55,581              $66,996               $76,229
                                        =======                                 =======                                =======              =======               =======

                                                                                PARKER DRILLING COMPANY

                                                                         Reconciliation of Non-Routine Items *

                                                                        (Dollars in Thousands, except Per Share)

                                                                                      (Unaudited)

                                                    Three Months Ending                                    Three Months Ending           Three Months Ending

                                                       March 31, 2013                                       December 31, 2012               March 31, 2012
                                                       --------------                                       -----------------               --------------

     Net income attributable to
      controlling interest                                                   $592                                              $(20,098)                     $26,392
                                                                             ====                                              ========                      =======

     Earnings per diluted share                                             $0.00                                                $(0.17)                       $0.22
                                                                            =====                                                ======                        =====

     Adjustments:

              ITS Acquisition Due Diligence                                $3,015                                    $                -        $                   -

              U.S. Department of Justice proposed
               settlement                                                       -                                                15,850                            -

              Extinguishment of debt                                            -                                                   364                            -

              U.S. regulatory investigations /
               legal matters                                                  448                                                    71                           23

                        Total adjustments                                   3,463                                                16,285                           23

              Tax effect of non-routine
               adjustments                                                   (157)                                                 (152)                          (8)

                        Net non-routine adjustments                         3,306                                                16,133                           15
                                                                            -----

     Adjusted net income
      attributable to controlling
      interest                                                             $3,898                                               $(3,965)                     $26,407
                                                                           ======                                               =======                      =======

     Adjusted earnings per diluted
      share                                                                 $0.03                                                $(0.03)                       $0.22
                                                                            =====                                                ======                        =====

             *   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.

SOURCE Parker Drilling Company


Source: PR Newswire