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Parker Drilling Reports Second Quarter Earnings: Announces New Commitments

Posted on: Tuesday, 1 August 2006, 09:01 CDT

HOUSTON, Aug. 1 /PRNewswire-FirstCall/ -- Parker Drilling Company today reported significantly higher operating results for the three months ended June 30, 2006 over the excellent quarter reported in 2005, led by the record performance of the Company's U.S. drilling and rental tool operations.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was $49.8 million for the second quarter of 2006, 24 percent higher than the $40.1 million reported in the second quarter of 2005. For the second consecutive quarter, both the U.S. Gulf of Mexico barge rigs and Quail Tools generated record EBITDA results. (The details of the EBITDA calculation, a non-GAAP financial measure, for the current and prior eight quarters are defined and reconciled later in this press release to their most directly comparable GAAP financial measure.)

The Company reported second quarter 2006 net income of $13.8 million, or $0.13 per diluted share, compared to 2005 second quarter net income of $20.2 million, or $0.21 per diluted share. The second quarter of 2005 included net income on non-routine items of $7.6 million or $0.08 per diluted share as previously disclosed. The current quarter includes non-routine net income items of $0.8 million or $0.01 per diluted share for an insurance settlement gain and favorable change in fair value of interest derivatives.

Net income for the second quarter of 2006 includes income tax expense of $14.7 million compared to $3.5 million in the second quarter of 2005. Of the $14.7 million, $10.7 million, or $0.10 per diluted share, is non-cash deferred tax expense relating primarily to the utilization of net operating loss carryforwards in 2006. Net deferred tax expense was not recognized during the second quarter of 2005 as the expense from utilizing the net operating loss carryforwards offset the net operating loss valuation allowance which was not fully released until the fourth quarter of 2005. "Although our effective tax rate for 2006 is expected to be 54%, we anticipate that the effective tax rate for 2007 should be in the low to mid-40% range," said W. Kirk Brassfield, senior vice president and chief financial officer.

For the first six months of 2006, Parker Drilling reported revenues of $293.3 million and net income of $25.2 million or $0.24 per diluted share compared to revenues of $254.2 million and net income of $24.1 million or $0.25 per diluted share for the first six months of 2005. Included in 2006 results are income of $0.01 per diluted share from non-routine items and $0.18 per share of non-cash deferred tax expense compared to income from non-routine items of $0.07 per diluted share and no deferred tax expense in 2005.

The average utilization of international land rigs for the second quarter of 2006 decreased to 65 percent from the 71 percent reported for the second quarter of 2005. This decrease is attributed to six of the seven land rigs in Mexico completing contracted work during the second quarter. The seventh rig was released in July. Three of the rigs will begin operations during the third quarter at considerably higher dayrates. The remaining four rigs are currently being marketed and are expected to return to work in the second half of 2006.

Average utilization for the Gulf of Mexico barge rigs for the second quarter of 2006 was 71 percent, compared to 79 percent reported for the second quarter of 2005. The decline in Gulf of Mexico's average utilization is mainly due to barge rig 12, which completed its conversion from a workover to a drilling barge in mid-May and barge rig 54, which has been in the shipyard since early May for upgrades and regularly scheduled preventive maintenance. Barge rig 54 is scheduled to be back in service this week. The Company's deep drilling barge dayrates in the Gulf of Mexico during the second quarter of 2006 averaged $40,400, up approximately 52 percent, or $13,800 per day, from the second quarter of 2005 and approximately 7 percent, or $2,700 per day, above the first quarter of 2006. Average dayrates for each classification of barge by quarter are available on Parker's website and can be viewed or downloaded by going to "Investor Relations" and then to "Dayrates - GOM."

Quail Tools, Parker Drilling's drilling and production rental tools subsidiary, continued its outstanding performance as it posted its second consecutive quarterly record with revenues of $30.3 million. Expansion of Quail Tools is ongoing as a new operating facility located in Northeast Texas has been secured and is scheduled to open during the fourth quarter. This facility will allow Quail to provide better coverage of the Barnett Shale area and Fayetteville Shale area in Arkansas.

"Record quarters for both Quail Tools and our U.S. Gulf of Mexico barge business segments resulted in Parker Drilling delivering solid revenue and earnings per share for the quarter," said Robert L. Parker Jr., chairman, president and chief executive officer. "We expect to continue to realize significant contributions from these business segments throughout the remainder of this year and into 2007. This is consistent with our five-year strategic growth plan that includes: growing a fleet of premium drilling rigs, focusing on markets that have long-term exploration and development opportunities, and growing the Company's rental tool business.

"New contracts, detailed below, in Algeria, Kazakhstan and Alaska, in addition to our previously announced joint venture in Saudi Arabia, evidence the progress we have made in implementing our plan. Although we have experienced a short-term decrease in international rig utilization as some of our long-term contracts end and rigs move to new locations, we are excited about the many opportunities for our international segment. In fact, recently awarded international contracts confirm our earlier statements that dayrates will rise significantly when older contracts end and rigs are repositioned at higher dayrates and margins. Of the recent international contracts signed, the average dayrate has increased approximately 75 percent above previous contracted terms."

Capital expenditures for the six months ended June 30, 2006 were $80.2 million. Total debt was $379.7 million at June 30, 2006, and the Company's cash balance, including marketable securities, was $190.3 million.

Additionally, Parker Drilling today announced the award of several new commitments in the Company's domestic and international drilling operations, and also issued an update of its current rig contract status and rig utilization.

* The sale of Rigs 73 and 75 in Nigeria for $46 million is expected to close today, August 1, and fund this week. * Parker Drilling was awarded a two-rig, three-year contract for land drilling services in the Hassi Massoud area of Algeria, representing a return to the country after 26 years. The contract will utilize two of the Company's new 2,000 horsepower land rigs currently under construction. The rigs will be mobilized immediately upon completion, with delivery dates scheduled for the fourth quarter of 2006. The land rigs represent Parker Drilling's newest additions to its fleet, and incorporate several new design features. The rigs utilize a design that enables a faster, safer rig-up and ease of transportation, which improves drilling performance and operating efficiency, and reduces maintenance costs. * Parker's U.S. business unit has been awarded two one-year term contracts on deep drilling barge rigs. The remaining barge rigs currently operate on multiple well contracts with options. * The Company has been awarded a technical service project by BP America to provide a drilling rig conceptual design for its Liberty Project in the Alaskan Beaufort Sea. BP plans to drill extended-reach wells from one of its existing facilities to the Liberty offshore location. Some of these wells are projected to extend to nominal measured depths in excess of 40,000 feet. * The Company was awarded a one-year contract for land drilling services in the Dunga field of Kazakhstan. The contract will utilize Parker Drilling rig 236, a 1,500 horsepower rig, which is moving from Turkmenistan. * The Company was awarded an additional nine-month contract, at a significant increase in dayrate, for its barge rig 53 by Pemex for work in the Macuspana Basin, located in the inland waters of the state of Tabasco, Mexico. The rig has drilled continuously for Pemex since May 2004. * The Company has received two Letters of Intent to provide land drilling services in Colombia. A pending one-year contract with options will utilize Parker rig 174 and a pending two-year contract will utilize rig 165, both 3,000 horsepower land rigs. The rigs will mobilize from inactive status in Mexico to Colombia upon finalizing mutually agreeable contracts. * Land rig 122 is currently under contract to Golden Gate Petroleum and is operating on Padre Island, Texas in the Gulf of Mexico, as announced in the second quarter. * Parker land rig 221 is being moved to Kuwait in preparation of a work opportunity in the Middle East currently being negotiated. * Parker land rigs 256 and 260 in Mexico were released in the second quarter and rig 121 was released on July 23 after completing their respective drilling programs. The Company is currently evaluating multiple opportunities for additional work in international and domestic markets scheduled for the second half of 2006. * Parker land rigs 230, 236 and 247 in Turkmenistan were released in May after completing a multi-year drilling program. As noted above, rig 236 is under commitment in Kazakhstan, and the Company is currently evaluating multiple opportunities for rig 230 in the CIS and Africa/Middle East operational areas, and expects the rig to return to work in the second half of 2006. Rig 247 is currently undergoing a major upgrade program and is expected to return to work in the first quarter of 2007.

"This is a very active time for Parker. With new contracts being secured at higher dayrates the outlook for the remainder of the year and 2007 is excellent," concluded Robert L. Parker Jr.

Parker has scheduled a conference call at 10 a.m. CT (11 a.m. ET) August 1, 2006 to discuss second quarter 2006 results. Those interested in participating in the call may dial in at (303) 262-2131. The conference call replay can be accessed from August 1 through August 8 by dialing (303) 590- 3000 and using the access code 11066225#. Alternatively, the call can be accessed live through the Company's website at http://www.parkerdrilling.com/ and will be archived on the site for 12 months.

This release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of the Securities Acts. All statements, 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, including earnings per share guidance, the outlook for rig utilization and dayrates, general industry conditions including bidding activity, future operating results of the Company's rigs and rental tool operations, capital expenditures, expansion and growth opportunities, asset sales, successful negotiation of contracts, future effective tax rates and other such matters, are forward-looking statements. Although the Company believes that its expectations stated in this release are based on reasonable assumptions, actual results may differ materially from those expressed or implied in the forward-looking statements. For a detailed discussion of risk factors that could cause actual results to differ materially from the Company's expectations, please refer to the Company's reports filed with the SEC, and in particular, the report on Form 10-K for the year ended December 31, 2005. Each forward-looking statement speaks only as of the date of this release, and the Company undertakes no obligation to publicly update or revise any forward-looking statement.

PARKER DRILLING COMPANY AND SUBSIDIARIES Consolidated Condensed Statements of Operations (Dollars in Thousands Except Per Share and Average Share Data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 DRILLING AND RENTAL REVENUES U.S. Drilling $42,697 $31,110 $82,950 $58,227 International Drilling 72,972 78,301 152,802 150,473 Rental Tools 30,319 24,543 57,570 45,497 TOTAL DRILLING AND RENTAL REVENUES 145,988 133,954 293,322 254,197 DRILLING AND RENTAL OPERATING EXPENSES U.S. Drilling 19,814 18,838 37,284 33,226 International Drilling 57,854 59,697 119,226 115,500 Rental Tools 10,969 8,951 21,439 17,136 Depreciation and Amortization 17,715 17,146 34,672 34,022 TOTAL DRILLING AND RENTAL OPERATING EXPENSES 106,352 104,632 212,621 199,884 DRILLING AND RENTAL OPERATING INCOME 39,636 29,322 80,701 54,313 General and Administration Expense (7,575) (6,400) (15,269) (13,376) Gain on Disposition of Assets, Net 2,125 15,898 2,573 16,450 TOTAL OPERATING INCOME 34,186 38,820 68,005 57,387 OTHER INCOME AND (EXPENSE) Interest Expense (8,199) (10,759) (17,300) (21,815) Change in Fair Value of Derivative Positions 382 (1,538) 1,195 69 Loss on Extinguishment of Debt --- (3,298) (2) (4,727) Other Income (Expense) - Net 2,086 455 2,511 1,456 TOTAL OTHER INCOME AND (EXPENSE) (5,731) (15,140) (13,596) (25,017) INCOME BEFORE INCOME TAXES 28,455 23,680 54,409 32,370 INCOME TAX EXPENSE Current Tax Expense 3,963 3,486 9,526 8,338 Deferred Tax Expense 10,731 --- 19,664 --- TOTAL INCOME TAX EXPENSE 14,694 3,486 29,190 8,338 INCOME FROM CONTINUING OPERATIONS 13,761 20,194 25,219 24,032 Discontinued Operations, Net of Taxes --- (14) --- 77 NET INCOME $13,761 $20,180 $25,219 $24,109 EARNINGS PER SHARE - BASIC Income From Continuing Operations $0.13 $0.21 $0.24 $0.25 Discontinued Operations, Net of Taxes $--- $--- $--- $--- Net Income $0.13 $0.21 $0.24 $0.25 EARNINGS PER SHARE - DILUTED Income From Continuing Operations $0.13 $0.21 $0.24 $0.25 Discontinued Operations, Net of Taxes $--- $--- $--- $--- Net Income $0.13 $0.21 $0.24 $0.25 AVERAGE COMMON SHARES OUTSTANDING Basic 107,082,784 95,691,205 105,783,424 95,321,850 Diluted 108,363,036 96,935,113 107,283,318 96,516,790 PARKER DRILLING COMPANY AND SUBSIDIARIES Consolidated Condensed Balance Sheets (Unaudited) June 30, December 31, 2006 2005 ASSETS (Dollars in Thousands) CURRENT ASSETS Cash and Cash Equivalents $162,682 $60,176 Marketable Securities 27,570 18,000 Accounts and Notes Receivable, Net 119,143 104,681 Rig Materials and Supplies 13,286 18,179 Deferred Costs 2,544 4,223 Deferred income taxes 14,841 12,018 Other Current Assets 49,003 64,058 TOTAL CURRENT ASSETS 389,069 281,335 PROPERTY, PLANT AND EQUIPMENT, NET 366,085 355,397 OTHER ASSETS Goodwill 100,314 107,606 Other Assets 79,588 57,282 TOTAL OTHER ASSETS 179,902 164,888 TOTAL ASSETS $935,056 $801,620 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current Portion of Long-Term Debt $--- $--- Accounts Payable and Accrued Liabilities 144,676 150,755 TOTAL CURRENT LIABILITIES 144,676 150,755 LONG-TERM DEBT 379,691 380,015 OTHER LONG-TERM LIABILITIES 13,371 11,021 STOCKHOLDERS' EQUITY 397,318 259,829 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $935,056 $801,620 Current Ratio 2.69 1.87 Total Long-Term Debt as a Percent of Capitalization 49% 59% Book Value Per Common Share $3.65 $2.66 PARKER DRILLING COMPANY AND SUBSIDIARIES Selected Financial Data (Unaudited) Three Months Ended June 30 March 31 2006 2005 2006 DRILLING AND RENTAL REVENUES (Dollars in Thousands) U.S. Drilling $42,697 $31,110 $40,253 International Land Drilling 59,028 63,158 66,126 International Offshore Drilling 13,944 15,143 13,704 Rental Tools 30,319 24,543 27,251 Total Drilling and Rental Revenues 145,988 133,954 147,334 DRILLING AND RENTAL OPERATING EXPENSES U.S. Drilling 19,814 18,838 17,470 International Land Drilling 46,350 45,765 49,211 International Offshore Drilling 11,504 13,932 12,161 Rental Tools 10,969 8,951 10,470 Drilling and Rental Operating Expenses 88,637 87,486 89,312 DRILLING AND RENTAL OPERATING INCOME U.S. Drilling 22,883 12,272 22,783 International Land Drilling 12,678 17,393 16,915 International Offshore Drilling 2,440 1,211 1,543 Rental Tools 19,350 15,592 16,781 Depreciation and Amortization (17,715) (17,146) (16,957) Total Drilling and Rental Operating Income 39,636 29,322 41,065 General and Administration Expense (7,575) (6,400) (7,694) Gain on Disposition of Assets, Net 2,125 15,898 448 TOTAL OPERATING INCOME $34,186 $38,820 $33,819 Marketable Rig Count Summary As of June 30, 2006 Total U.S. Gulf of Mexico Barge Rigs Workover 5 Intermediate 4 Deep 10 Total U.S. Gulf of Mexico Barge Rigs 19 International Land Rigs Asia Pacific 9 Mexico 7 CIS 8 Total International Land Rigs 24 International Barge Rigs Mexico 1 Nigeria 2 Caspian Sea 1 Total International Barge Rigs 4 Total International Rigs 28 Total Marketable Rigs 47 Adjusted EBITDA (Unaudited) Three Months Ending June 30, March 31, December 31, September 30, June 30, 2006 2006 2005 2005 2005 Income (Loss) from Continuing Operations $13,530 $11,458 $56,707 $18,073 $20,194 Adjustments: Income Tax Expense 14,925 14,496 (39,087) 2,165 3,486 Total Other Income and Expense 5,731 7,865 10,251 9,627 15,140 Gain on Disposition of Assets, Net (2,125) (448) (3,185) (5,943) (15,898) Depreciation and Amortization 17,714 16,957 16,619 16,563 17,146 Provision for Reduction in Carrying Value - - 2,584 2,300 - Adjusted EBITDA $49,775 $50,328 $43,889 $42,785 $40,068 Adjusted EBITDA (Unaudited) Three Months Ending March 31, December 31, September 30, June 30, 2005 2004 2004 2004 Income (Loss) from Continuing Operations $3,838 $(2,147) $(24,802) $(16,022) Adjustments: Income Tax Expense 4,852 3,001 4,542 3,417 Total Other Income and Expense 9,877 10,698 22,027 13,017 Gain on Disposition of Assets, Net (552) (2,328) (333) (346) Depreciation and Amortization 16,876 18,642 17,806 16,544 Provision for Reduction in Carrying Value - 6,562 - 6,558 Adjusted EBITDA $34,891 $34,428 $19,240 $23,168

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Parker Drilling Company

CONTACT: Investor, David Tucker, Parker Drilling Company,+1-281-406-2370

Web site: http://www.parkerdrilling.com/

Source: PRNewswire-FirstCall

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