Exhibit 1.01
Conflict Minerals Report
This Conflict Minerals Report of Parker Drilling Company for calendar year 2016 was prepared in accordance with Rule 13p-1 under the Securities Exchange Act of 1934.
This Conflict Minerals Report contains one or more forward-looking statements within the meaning of federal securities laws. These forward-looking statements involve a number of risks, uncertainties, assumptions and other factors including, among other things, our customers’ requirements to use certain suppliers, our suppliers’ responsiveness and cooperation with our due diligence efforts, our ability to implement improvements in our conflict minerals program, changes to the sourcing status of smelters and refiners in our supply chain, and our ability to identify and mitigate related risks in our supply chain. We undertake no obligation to review or update any forward-looking statements to reflect events or circumstances occurring after filing this Conflict Minerals Report with the SEC, except as required by law.
Business Overview
The Company is an international provider of contract drilling and drilling-related services and rental tools and services. We report our Drilling Services business as two reportable segments: (1) U.S. (Lower 48) Drilling and (2) International & Alaska Drilling. We report our Rental Tools Services business as two reportable segments: (1) U.S. Rental Tools and (2) International Rental Tools.
In our Drilling Services business, we drill oil, natural gas and geothermal wells for customers in both the United States (U.S.) and international markets. We provide this service with both Company-owned rigs and customer-owned rigs. We refer to the provision of drilling services with customer-owned rigs as our operations and management (O&M) service in which operators own their own drilling rigs but choose Parker Drilling to operate and manage the rigs for them. The nature and scope of activities involved in drilling an oil and natural gas well is similar whether it is drilled with a Company-owned rig (as part of a traditional drilling contract) or a customer-owned rig (as part of an O&M contract). In addition, we provide project-related services, such as engineering, procurement, project management and commissioning of customer-owned drilling facility projects. We have extensive experience and expertise in drilling geologically difficult wells
and in managing the logistical and technological challenges of operating in remote, harsh and ecologically sensitive areas.
In our Rental Tools Services business, we provide premium rental equipment and services to exploration and production (E&P) companies, drilling contractors and service companies on land and offshore in the U.S. and international markets. Tools we provide include standard and heavy-weight drill pipe, all of which are available with standard or high-torque connections, tubing, drill collars, pressure control equipment, including blow-out preventers (BOPs), and more. We also provide well construction services, which include tubular running services and downhole tool rentals, and well intervention services, which include whipstock, fishing and related services, as well as inspection and machine shop support. Rental tools are used during drilling and/or workover programs and are requested by the customer when they are needed, requiring us to keep a broad inventory of rental tools in stock. Rental tools are usually rented on a daily or monthly basis.
Reasonable Country of Origin Inquiry
We conducted an analysis of our business and determined that even though we do not operate a specific manufacturing segment, we do, on occasion and as part of the services offered to our customers, manufacture products for sale and for the use of our customers. As part of our analysis, all manufactured products were assessed in order to identify Conflict Minerals scope and risk. Our analysis did not identify any Conflict Mineral or Conflict Mineral derivative other than tungsten that is contained as a necessary element to the functionality or production of any product manufactured for sale by the Company.
Based on this, the Company identified products for which tungsten was used as a necessary element to their functionality or production. Identified products containing tungsten as a necessary element to their functionality or production are:
Whipstocks;
Mills;
Watermelon Mills;
Top-Tek Casing Running Tool (CRT).
After performing this analysis, we conducted a reasonable country of origin inquiry (RCOI) to determine whether any of the tungsten used in our products originated in the Democratic Republic of the Congo or an adjoining country or whether such tungsten came from recycled or scrap sources. Based on the limited scope of the Company’s product manufacturing, we contacted each of our
tungsten suppliers. We received responses from all tungsten suppliers. Some suppliers provided their Conflict Minerals Reporting Template (“CMRT”), while other suppliers provided statements regarding the origin of their Conflict Minerals and/or their Conflict Minerals policies, which either (1) prohibit the sourcing of Conflict Minerals from the Democratic Republic of the Congo or an adjoining country (together, the “Covered Countries”) or prohibit the sourcing of Conflict Minerals that directly or indirectly finance or benefit armed groups in the Covered Countries, or (2) state that the supplier is working toward those objectives.
Based on the responses to our RCOI, we know or have reason to believe that a small portion from a single supplier of the Conflict Minerals in our products originated from the Covered Countries or may not be solely from recycled or scrap sources.
Due Diligence
We undertook due diligence on the sources of the Conflict Minerals we use. Our due diligence measures are designed to conform with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. We conducted our due diligence using tools and relying on information provided by the CFSI. In addition to reviewing the CMRT, which facilitates the collection of information on the source of Conflict Minerals, we also relied on information from the Conflict-Free Smelter Program (CFSP), a voluntary initiative managed by the Conflict-Free Sourcing Initiative (CFSI) in which an independent third party audits the procurement activities of a smelter or refiner to determine, with reasonable confidence, that the minerals it processes originated from conflict-free sources. Upon completion of a successful audit, the smelter or refiner is designated by the CFSI as “Compliant.”
Because we are a downstream user of tungsten, we must rely on the representations and information provided by our suppliers and other third parties within our supply chain. As a result, incomplete or inaccurate information provided by suppliers or by a smelter could affect the accuracy or completeness of the information set forth in this Conflict Minerals Report.
Results of Due Diligence
For the calendar year 2016, the Company determined that a single supplier stated that two of its suppliers identified smelters sourcing from a Covered Country (smelters listed by those two suppliers are included below in Table 1). This supplier and other of our suppliers may not have received accurate and complete information from their respective suppliers. In summary, we were not able to establish chain of custody or determine whether any of the Conflict Minerals used in
our Products originated from Covered Countries. We were also unable to determine the facilities used to process Conflict Minerals necessary to the functionality or production of our products or the countries of origin of those Conflict Minerals. Accordingly, we were unable to undertake any efforts beyond the RCOI and the due diligence described above to determine the mine or location of origin of Conflict Minerals used in our products.
Table 1: Smelter/Refiner List
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| | |
Smelter/Refiner Name | CFSP Status | Sourced from Covered Country? |
A.L.M.T. Tungsten Corp. | Compliant | No |
Asia Tungsten Products Vietnam Ltd. | Compliant | Yes |
Chenzhou Diamond Tungsten Products Co., Ltd. | Compliant | No |
Chongyi Zhangyuan Tungsten Co., Ltd. | Compliant | No |
Fujian Jinxin Tungsten Co., Ltd. | Compliant | No |
Ganzhou Huaxing Tungsten Products Co., Ltd. | Compliant | No |
Ganzhou Jiangwu Ferrotungsten Co., Ltd. | Compliant | No |
Ganzhou Seadragon W & Mo Co., Ltd. | Compliant | No |
Global Tungsten & Powders Corp. | Compliant | No |
Guangdong Xianglu Tungsten Co., Ltd. | Compliant | No |
H.C. Starck GmbH | Compliant | No |
H.C. Starck Group | Compliant | No |
H.C. Starck Smelting GmbH & Co.KG | Compliant | No |
Hunan Chenzhou Mining Co., Ltd. | Compliant | No |
Hunan Chuangda Vanadium Tungsten Co., Ltd. Wuji | Compliant | No |
Hunan Chuangda Vanadium Tungsten Co., Ltd. Yanglin | Compliant | No |
Hunan Chunchang Nonferrous Metals Co., Ltd. | Compliant | No |
Hydrometallurg, JSC | Compliant | No |
Japan New Metals Co., Ltd. | Compliant | No |
Jiangwu H.C. Starck Tungsten Products Co., Ltd. | Compliant | No |
Jiangxi Gan Bei Tungsten Co., Ltd. | Compliant | No |
Jiangxi Minmetals Gao'an Non-ferrous Metals Co., Ltd. | Compliant | No |
Jiangxi Tonggu Non-ferrous Metallurgical & Chemical Co., Ltd. | Compliant | No |
Jiangxi Xinsheng Tungsten Industry Co., Ltd. | Compliant | No |
Jiangxi Xiushui Xianggan Nonferrous Metals Co., Ltd. | Compliant | No |
Jiangxi Yaosheng Tungsten Co., Ltd. | Compliant | No |
Kennametal Fallon | Compliant | No |
Kennametal Huntsville | Compliant | No |
Malipo Haiyu Tungsten Co., Ltd. | Compliant | Yes |
Nui Phao H.C. Starck Tungsten Chemicals Manufacturing LLC | Compliant | No |
Tejing (Vietnam) Tungsten Co., Ltd. | Compliant | No |
Wolfram Bergbau und Hütten AG | Compliant | No |
Vietnam Youngsun Tungsten Industry Co., Ltd. | Compliant | Yes |
Xinhai Rendan Shaoguan Tungsten Co., Ltd. | Compliant | Yes |
Xiamen Honglu Tungsten Molybdenum Co., Ltd. | Compliant | Yes |
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| | |
Smelter/Refiner Name | CFSP Status | Sourced from Covered Country? |
Xiamen Tungsten Co., Ltd. | Compliant | Yes |
Ganzhou Yatai Tungsten Co., Ltd. | Not Enrolled | Yes |
Ganxian Shirui New Material Co., Ltd. | Not Enrolled | Yes |
Treibacher | Not Enrolled | Yes |
Izawa Metal Co., Ltd | Not Enrolled | Undetermined |
ThyssenKrupp Steel | Not Enrolled | Yes |
North American Tungsten | Not Enrolled | No |
Mitsui Mining and Smelting Co., Ltd. | Not Enrolled | Yes |
Changchun up-optotech | Not Enrolled | Undetermined |
Scandmetal | Not Enrolled | Undetermined |
IBG China | Not Enrolled | Undetermined |
Zhuzhou Decheng Nonferrous Metals Industry Co., Ltd. | Not Enrolled | Undetermined |
AB Ferrolegeringar/Minpro | Not Enrolled | Undetermined |
Advanced Alloy Services | Not Enrolled | Yes |
Zigong | Not Enrolled | Undetermined |
Yuntinic Resources | Not Enrolled | No |
Ganzhou Non-ferrous Metals Smelting Co., Ltd. | Not Enrolled | No |
Sumitomo Metal Mining Co., Ltd. | Not Enrolled | No |
Central Glass | Not Enrolled | Undetermined |
IES Technical Sales | Not Enrolled | Undetermined |
ULVAC | Not Enrolled | Yes |
Zhuzhou Better Tungsten Carbide, Co Limited | Not Enrolled | Undetermined |
Foshan Nanhai Xihai Metal Material Co., Ltd. | Not Enrolled | Undetermined |
Nanchang | Not Enrolled | No |
PT Timah (Persero), Tbk | Not Enrolled | Yes |
GESAC | Not Enrolled | Undetermined |
La Parrila | Not Enrolled | No |
LLC "RELIT" | Not Enrolled | Undetermined |
Minmetals Ganzhou Tin Co. Ltd. | Not Enrolled | Undetermined |
CB-Ceratizit | Not Enrolled | No |
Ceratizit S.A. | Not Enrolled | No |
JX Nippon Mining & Metals Co., Ltd. | Not Enrolled | Yes |
Evraz Stratcor, Inc. | Not Enrolled | Undetermined |
TaeguTec | Not Enrolled | Yes |
Taiyo Nippon Sanso Trading (Shanghai) Co., LTD | Not Enrolled | Undetermined |
Buffalo Tungsten | Not Enrolled | No |
Specialty Metal Trading | Not Enrolled | Yes |
Air Liquide Far Eastern (ALFE) | Not Enrolled | Yes |
Sincemat Co, Ltd. | Not Enrolled | Undetermined |
Ningxia Orient Tantalum Industry Co., Ltd. | Not Enrolled | Undetermined |
Iljin Diamond Co., Ltd. | Not Enrolled | Undetermined |
Kyoritsu Gokin Co. Ltd. | Not Enrolled | Undetermined |
Wogen Resources Ltd. | Not Enrolled | Yes |
Nippon Micrometal Corporation | Not Enrolled | No |
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| | |
Smelter/Refiner Name | CFSP Status | Sourced from Covered Country? |
Weartech | Not Enrolled | No |
AB Ferrolegeringar | Not Enrolled | Undetermined |
Beijing Zenith Materials | Not Enrolled | Undetermined |
Chengtong Electrical Appliance Factory | Not Enrolled | Undetermined |
PT Indra Eramulti Logam Industri | Not Enrolled | Yes |
Zhuzhou Cemented Carbide Group Co. Ltd. | Not Enrolled | Undetermined |
Sanher Tungsten Vietnam Co., Ltd. | Not Enrolled | Yes |
Wolfram Company CISC | Not Enrolled | Undetermined |
A&M Minerals Limited | Not Enrolled | Yes |
CTS Industries | Not Enrolled | Undetermined |
Hi-Temp Specialty Metals, Inc. | Not Enrolled | Undetermined |
Pobedit, JSC | Not Enrolled | Undetermined |
Zhuzhou Cement Carbide | Not Enrolled | No |
Jiangsu Hetian Sci-Tech Material Co., Ltd. | Not Enrolled | Undetermined |
Dayu Jincheng Tungsten Industry Co., Ltd. | Not Enrolled | Yes |
NingHua XingLuoKeng Tungsten Mining CO.,LID | Not Enrolled | No |
Western Metal Materials Co.,ltd | Not Enrolled | Undetermined |
Plansee SE Liezen | Not Enrolled | Yes |
Sylham | Not Enrolled | Undetermined |
Metallo-Chimique N.V. | Not Enrolled | No |
Degutea | Not Enrolled | Undetermined |
Saganoseki Smelter & Refinery | Not Enrolled | Yes |
Sandvik Material Technology | Not Enrolled | Yes |
Cookson Sempsa | Not Enrolled | Undetermined |
Jinzhou Xingye Smelt Duty Corp., Ltd. | Not Enrolled | Undetermined |
Xiamen Golden Egret Special Alloy Co. Ltd. | Not Enrolled | Undetermined |
Thaisarco | Not Enrolled | No |
TDC Metal Co., Ltd. | Not Enrolled | Undetermined |
Chunbao Carbide Science & Technology Co.,Ltd | Not Enrolled | Undetermined |
Kanto Denka Kogyo Co., Ltd. | Not Enrolled | Undetermined |
PT Stanindo Inti Perkasa | Not Enrolled | Undetermined |
Voss Metals Company, Inc. | Not Enrolled | Undetermined |
Tamano Smelter, Hibi Kyodo Smelting Co., Ltd | Not Enrolled | Yes |
Guangdong Guangzhou Guangsheng Non-Ferrous Import & Export Co. Ltd | Not Enrolled | Undetermined |
W-Si | Not Enrolled | Undetermined |
Wah Lee Industrial Corp., | Not Enrolled | Undetermined |
Axis Material Limited | Not Enrolled | Undetermined |
Dayu Weiliang Tungsten Co., Ltd. | Not Enrolled | No |
Hitachi | Not Enrolled | Yes |
Solar Applied Materials Technology Corp. | Not Enrolled | Yes |
Jiangxi Richsea New Materials Co., Ltd. | Not Enrolled | No |
Bejing Tian-long | Not Enrolled | Undetermined |
Nanchang Cemented Carbide Limited Liability Company | Not Enrolled | No |
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| | |
Smelter/Refiner Name | CFSP Status | Sourced from Covered Country? |
Tosoh | Not Enrolled | No |
Ganzhou Grand Sea W & Mo Group Co Ltd | Not Enrolled | No |
Materion | Not Enrolled | Yes |
Sunaga Tungsten | Not Enrolled | Undetermined |
Sichuan Metals & Materials Imp & Exp Co | Not Enrolled | Undetermined |
Triumph Northwest | Not Enrolled | Yes |
Renhua Taiheyuan Ltd | Not Enrolled | Undetermined |
Nankang Jingfeng Mining Ltd | Not Enrolled | Undetermined |
Please note, we do not have access to audit reports or detailed findings of the third-party audits conducted as part of the CFSP or any equivalent audit programs accepted by the CFSI. Audits conducted as part of the CFSP or any other equivalent programs and the information received from respondents may yield inaccurate or incomplete conclusions.
Countries of Origin
The countries of origin for the smelters and refiners in Table 1 are believed to be those listed below. The list is based on publicly available information, our RCOI and due diligence. For the reasons described herein, however, these possible countries of origin cannot necessarily be linked to materials used in our products.
Austria
Belgium
Canada
China
Czech Republic
Germany
Indonesia
Japan
Luxembourg
Republic of Korea
Russian Federation
Singapore
Spain
Sweden
Taiwan
Thailand
Ukraine
United Kingdom
United States
Vietnam
Plans to review and determine if additional due diligence efforts are warranted.
As of May 30, 2017, the Company no longer purchases tungsten from the identified supplier that stated that its suppliers sourced from smelters sourcing from Covered Countries. Prior to the preparation and filing of our Form SD for the 2017 reporting period, the Company plans to review its supply chain, continue dialogue with suppliers, and determine additional steps that may be appropriate to continue conforming our due diligence and supply chain to an internationally recognized due diligence framework. The Company is committed to ensuring the Company’s suppliers comply with its expectations.