Parker Drilling Reports 2019 Third Quarter Results
HOUSTON, November 5, 2019 - Parker Drilling Company (NYSE: PKD) today announced results for the third quarter ended September 30, 2019, which included a net income of $4.0 million, or diluted earnings of $0.27 per share, on revenues of $160.1 million. Third quarter Adjusted EBITDA was $36.6 million (1).
Gary Rich, the Company’s President and CEO, said, “Despite the challenging industry environment, we achieved strong third quarter results and took additional steps toward strengthening our balance sheet by paying down $35 million of debt, which will provide significant interest savings going forward, while maintaining ample liquidity as our cash balance is over $100 million at the end of the quarter.
“Our U.S. rental tools segment results decreased as expected during the period, due to declining U.S. land activity, but was partially offset by improved deepwater performance.
"Strategically, our Company’s international presence bodes well for the burgeoning up-cycle, both in our drilling and rental tools businesses. Through nine months, our year over year International and Alaska Drilling and International Rental Tools segments revenue have increased 38.6 percent and 17.0 percent, respectively, and we continue to see high levels of tendering activity and new project awards.”
Mr. Rich added, “We are very pleased to have received several significant contract awards since the end of the second quarter - all aligned with our focus on capital efficiency. Among these awards are two long-term projects allowing idle drilling rigs to return to service, one new O&M project, and a number of meaningful contract extensions.”
Third Quarter Review
Parker Drilling’s revenues for the 2019 third quarter, compared with the 2019 second quarter, increased 2.6 percent to $160.1 million from $156.0 million. Operating gross margin, excluding depreciation and amortization expense (the “gross margin”) decreased 1.8 percent to $42.6 million from $43.4 million and gross margin as a percentage of revenues was 26.6 percent, compared with 27.8 percent for the 2019 second quarter.
Rental Tools Services
For the Company’s rental tools services business, which is comprised of the U.S. rental tools and international rental tools segments, third quarter revenues decreased 2.4 percent to $73.3 million from $75.1 million for the second quarter. Gross margin decreased 9.9 percent to $27.6 million from $30.6 million, and gross margin as a percentage of revenues was 37.6 percent compared with 40.8 percent for the prior period.
U.S. Rental Tools
U.S. rental tools segment revenues decreased 7.0 percent to $49.3 million in the 2019 third quarter from $52.9 million for the 2019 second quarter. Gross margin decreased 14.2 percent to $23.7 million in the third quarter, compared with gross margin of $27.7 million in the 2019 second quarter. Revenues and gross margin decreased in the third quarter primarily as a result of lower customer activity in U.S. land and shelf rentals.
International Rental Tools
International rental tools segment revenues increased 8.6 percent to $24.1 million in the 2019 third quarter from $22.2 million for the 2019 second quarter. Gross margin increased 30.5 percent to $3.8 million in the third quarter, compared with gross margin of $2.9 million in the 2019 second quarter. Improvement in revenues and gross margin resulted from the recognition of project awards in well intervention and increases in surface and tubular activity.

(1) 
Adjusted EBITDA is a non-GAAP financial measure. See the reconciliation and table of net income/(loss) to EBITDA and Adjusted EBITDA later in this release for more information on non-GAAP financial measures.





Drilling Services
For the Company’s drilling services business, which is comprised of the U.S. (lower 48) drilling and International & Alaska drilling segments, third quarter revenues increased 7.2 percent to $86.8 million from $80.9 million for the second quarter. Gross margin increased 17.6 percent to $15.0 million from $12.8 million, and gross margin as a percentage of revenues was 17.3 percent compared with 15.8 percent for the prior period.
U.S. (Lower 48) Drilling
U.S. (lower 48) drilling segment revenues increased 16.1 percent to $14.5 million in the 2019 third quarter from $12.5 million for the 2019 second quarter. Gross margin increased 54.1 percent to $3.9 million in the third quarter, compared with gross margin of $2.6 million in the 2019 second quarter. Third quarter revenues and gross margin were primarily driven by increased utilization of our inland barge rig fleet and favorable O&M activity.
International & Alaska Drilling
International & Alaska drilling segment revenues increased 5.6 percent to $72.3 million in the 2019 third quarter from $68.5 million for the 2019 second quarter. Gross margin increased 8.5 percent to $11.1 million in the third quarter, compared with gross margin of $10.2 million in the 2019 second quarter. Revenues and gross margin were primarily driven by activity increases in Mexico as well as O&M operations in Sakhalin Island, Russia and offset by lower utilization in the Kurdistan Region of Iraq.
Consolidated
General and administrative expense was $6.0 million for the 2019 third quarter. Total liquidity at the end of the quarter, was $125.8 million, consisting of $101.1 million in cash and cash equivalents and $24.7 million available under the Company’s credit facility.
Capital expenditures in the third quarter were $21.7 million, primarily related to the Company’s rentals tools services business.





Conference Call
Parker Drilling has scheduled a conference call for 10:00 a.m. Central Time (11:00 a.m. Eastern Time) on Wednesday, November 6, 2019, to review third quarter results. The call will be available by telephone by dialing (+1) (412) 902-0003 and asking for the Parker Drilling Third Quarter Conference Call. 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 through November 13, 2019 at (+1) (201) 612-7415, conference ID 13695493#.
Cautionary Statement
This press release contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements contained in this news release, other than statements of historical facts, are forward-looking statements for purposes of these provisions. In some cases, you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “outlook,” “may,” “should,” “plan,” “seek,” “forecast,” “target,” “will,” and “would” or similar words. Forward-looking statements are based on certain assumptions and analyses we make in light of our experience and perception of historical trends, current conditions, expected future developments, and other factors we believe are relevant. Although we believe our assumptions are reasonable based on information currently available, those assumptions are subject to significant risks and uncertainties, many of which are outside our control. Each forward-looking statement speaks only as of the date of this news release, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. You should be aware that certain events could have a material adverse effect on our business, results of operations, financial condition, and cash flows. For more information about such events, see “Risk Factors” described in Item 1A. of the Company’s Annual Report filed on Form 10-K, and the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2019, along with additional risk factors described from time to time in our SEC filings.

This news release contains non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each such measure to its most directly comparable U.S. Generally Accepted Accounting Principles (GAAP) financial measure, together with an explanation of why management believes that these non-GAAP financial measures provide useful information to investors, is provided in the following tables.
Company Description
Parker Drilling provides drilling services and rental tools to the energy industry. The Company's Drilling Services business serves operators through the use of Parker-owned and customer-owned rig fleets in select U.S. and international markets, specializing in remote and harsh environment regions. The Company's Rental Tools Services business supplies premium equipment and well services to operators on land and offshore in the U.S. and international markets. More information about Parker Drilling can be found on the Company's website at www.parkerdrilling.com.

Contact: Nick Henley, Director, Investor Relations, (+1) (281) 406-2082, nick.henley@parkerdrilling.com.







PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
 
 
 
 
 
 
Successor
 
 
Predecessor
 
September 30,
2019
 
 
December 31,
2018
 
(Unaudited)
 
 
 
ASSETS
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
101,106

 
 
 
$
48,602

 
Restricted cash
 
 
 
 
10,389
 
 
Accounts and notes receivable, net of allowance for bad debts
167,236
 
 
 
 
136,437
 
 
Rig materials and supplies
22,367
 
 
 
 
36,245
 
 
Other current assets
28,380
 
 
 
 
35,231
 
 
Total current assets
319,089
 
 
 
 
266,904
 
 
Property, plant and equipment, net of accumulated depreciation
297,213
 
 
 
 
534,371
 
 
Intangible assets, net
15,117
 
 
 
 
4,821
 
 
Deferred income taxes
4,608
 
 
 
 
2,143
 
 
Other non-current assets
31,630
 
 
 
 
20,175
 
 
Total assets
$
667,657

 
 
 
$
828,414

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS EQUITY
 
 
Current liabilities:
 
 
 
 
Debtor in possession financing
$

 
 
 
$
10,000

 
Accounts payable and accrued liabilities
107,638
 
 
 
 
75,063
 
 
Accrued income taxes
6,352
 
 
 
 
3,385
 
 
Total current liabilities
113,990
 
 
 
 
88,448
 
 
Long-term debt
177,032
 
 
 
 
 
 
Other long-term liabilities
15,328
 
 
 
 
11,544
 
 
Long-term deferred tax liability
6,491
 
 
 
 
510
 
 
Commitments and contingencies
 
 
 
 
Total liabilities not subject to compromise
312,841
 
 
 
 
100,502
 
 
Liabilities subject to compromise
 
 
 
 
600,996
 
 
Total liabilities
312,841
 
 
 
 
701,498
 
 
Stockholders' equity:
 
 
 
 
Predecessor preferred stock
 
 
 
 
500
 
 
Predecessor common stock
 
 
 
 
1,398
 
 
Predecessor capital in excess of par value
 
 
 
 
766,347
 
 
Predecessor accumulated other comprehensive income (loss)
 
 
 
 
(6,879)
 
 
Successor common stock
150
 
 
 
 
 
 
Successor capital in excess of par value
345,831
 
 
 
 
 
 
Successor accumulated other comprehensive income (loss)
205
 
 
 
 
 
 
Retained earnings (accumulated deficit)
8,630
 
 
 
 
(634,450)
 
 
Total stockholders’ equity
354,816
 
 
 
 
126,916
 
 
Total liabilities and stockholders’ equity
$
667,657

 
 
 
$
828,414

 






PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
 
 
 
Successor
 
 
Predecessor
 
Three Months Ended September 30,
 
Three Months Ended June 30,
 
 
Three Months Ended September 30,
 
2019
 
2019
 
 
2018
Revenues
$
160,083

 
 
$
156,031

 
 
 
$
123,395

 
Expenses:
 
 
 
 
 
 
Operating expenses
117,486
 
 
 
112,649
 
 
 
 
93,943
 
 
Depreciation and amortization
20,329
 
 
 
20,391
 
 
 
 
27,520
 
 
 
137,815
 
 
 
133,040
 
 
 
 
121,463
 
 
Total operating gross margin
22,268
 
 
 
22,991
 
 
 
 
1,932
 
 
General and administrative expense
(5,983)
 
 
 
(5,610)
 
 
 
 
(14,495)
 
 
Loss on impairment
 
 
 
 
 
 
 
(43,990)
 
 
Gain (loss) on disposition of assets, net
(92)
 
 
 
(53)
 
 
 
 
9
 
 
Reorganization items
(211)
 
 
 
(962)
 
 
 
 
 
 
 
Total operating income (loss)
15,982
 
 
 
16,366
 
 
 
 
(56,544)
 
 
Other income (expense):
 
 
 
 
 
 
Interest expense
(7,118)
 
 
 
(7,663)
 
 
 
 
(11,350)
 
 
Interest income
362
 
 
 
374
 
 
 
 
23
 
 
Other
(258)
 
 
 
(644)
 
 
 
 
(709)
 
 
Total other income (expense)
(7,014)
 
 
 
(7,933)
 
 
 
 
(12,036)
 
 
Income (loss) before income taxes
8,968
 
 
 
8,433
 
 
 
 
(68,580)
 
 
Income tax expense
4,979
 
 
 
3,792
 
 
 
 
2,371
 
 
Net income (loss)
3,989
 
 
 
4,641
 
 
 
 
(70,951)
 
 
Less: Predecessor preferred stock dividend
 
 
 
 
 
 
 
906
 
 
Net income (loss) available to common stockholders
$
3,989

 
 
$
4,641

 
 
 
$
(71,857)

 
Basic earnings (loss) per common share:
$
0.27

 
 
$
0.31

 
 
 
$
(7.70)

 
Diluted earnings (loss) per common share:
$
0.27

 
 
$
0.31

 
 
 
$
(7.70)

 
Number of common shares used in computing earnings per share:
 
 
 
 
 
 
Basic
15,044,739
 
 
 
15,044,739
 
 
 
 
9,334,390
 
 
Diluted
15,044,739
 
 
 
15,044,739
 
 
 
 
9,334,390
 
 










PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
 
 
 
 
 
 
Successor
 
 
Predecessor
 
Six Months Ended September 30,
 
 
Three Months Ended March 31,
 
Nine Months Ended September 30,
 
2019
 
 
2019
 
2018
Revenues
$
316,114

 
 
 
$
157,397

 
 
$
351,673

 
Expenses:
 
 
 
 
 
 
Operating expenses
230,135
 
 
 
 
120,871
 
 
 
277,111
 
 
Depreciation and amortization
40,720
 
 
 
 
25,102
 
 
 
83,205
 
 
 
270,855
 
 
 
 
145,973
 
 
 
360,316
 
 
Total operating gross margin
45,259
 
 
 
 
11,424
 
 
 
(8,643)
 
 
 
 
 
 
 
 
 
General and administrative expense
(11,593)
 
 
 
 
(8,147)
 
 
 
(28,984)
 
 
Loss on impairment
 
 
 
 
 
 
 
(43,990)
 
 
Gain (loss) on disposition of assets, net
(145)
 
 
 
 
384
 
 
 
(126)
 
 
Reorganization items
(1,173)
 
 
 
 
(92,977)
 
 
 
 
 
Total operating income (loss)
32,348
 
 
 
 
(89,316)
 
 
 
(81,743)
 
 
Other income (expense):
 
 
 
 
 
 
Interest expense
(14,781)
 
 
 
 
(274)
 
 
 
(33,787)
 
 
Interest income
736
 
 
 
 
8
 
 
 
76
 
 
Other
(902)
 
 
 
 
(10)
 
 
 
(1,609)
 
 
Total other income (expense)
(14,947)
 
 
 
 
(276)
 
 
 
(35,320)
 
 
Income (loss) before income taxes
17,401
 
 
 
 
(89,592)
 
 
 
(117,063)
 
 
Income tax expense
8,771
 
 
 
 
656
 
 
 
5,561
 
 
Net income (loss)
8,630
 
 
 
 
(90,248)
 
 
 
(122,624)
 
 
Less: Predecessor preferred stock dividend
 
 
 
 
 
 
 
2,719
 
 
Net income (loss) available to common stockholders
$
8,630

 
 
 
$
(90,248)

 
 
$
(125,343)

 
Basic earnings (loss) per common share:
$
0.57

 
 
 
$
(9.63)

 
 
$
(13.49)

 
Diluted earnings (loss) per common share:
$
0.57

 
 
 
$
(9.63)

 
 
$
(13.49)

 
Number of common shares used in computing earnings per share:
 
 
 
 
 
 
Basic
15,044,739
 
 
 
 
9,368,322
 
 
 
9,292,858
 
 
Diluted
15,044,739
 
 
 
 
9,368,322
 
 
 
9,292,858
 
 








PARKER DRILLING COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Dollars in Thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
Successor
 
 
Predecessor
 
 
 
Three Months Ended September 30,
 
Three Months Ended June 30,
 
 
Three Months Ended September 30,
 
 
 
2019
 
2019
 
 
2018
Revenues:
 
 
 
 
 
 
 
U.S. rental tools
 
$
49,256
 
 
$
52,936
 
 
 
$
50,944
 
International rental tools
 
24,067
 
 
22,155
 
 
 
20,151
 
Total rental tools services
 
73,323
 
 
75,091
 
 
 
71,095
 
U.S. (lower 48) drilling
 
14,487
 
 
12,479
 
 
 
4,530
 
International and Alaska drilling
 
72,273
 
 
68,461
 
 
 
47,770
 
Total drilling services
 
86,760
 
 
80,940
 
 
 
52,300
 
Total revenues
 
160,083
 
 
156,031
 
 
 
123,395
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
U.S. rental tools
 
25,513
 
 
25,267
 
 
 
21,949
 
International rental tools
 
20,243
 
 
19,224
 
 
 
18,773
 
Total rental tools services
 
45,756
 
 
44,491
 
 
 
40,722
 
U.S. (lower 48) drilling
 
10,549
 
 
9,923
 
 
 
5,701
 
International and Alaska drilling
 
61,181
 
 
58,235
 
 
 
47,520
 
Total drilling services
 
71,730
 
 
68,158
 
 
 
53,221
 
Total operating expenses
 
117,486
 
 
112,649
 
 
 
93,943
 
 
 
 
 
 
 
 
 
Operating gross margin, excluding depreciation and amortization:
 
 
 
 
 
U.S. rental tools
 
23,743
 
 
27,669
 
 
 
28,995
 
International rental tools
 
3,824
 
 
2,931
 
 
 
1,378
 
Total rental tools services
 
27,567
 
 
30,600
 
 
 
30,373
 
U.S. (lower 48) drilling
 
3,938
 
 
2,556
 
 
 
(1,171)
 
International and Alaska drilling
 
11,092
 
 
10,226
 
 
 
250
 
Total drilling services
 
15,030
 
 
12,782
 
 
 
(921)
 
Total operating gross margin, excluding depreciation and amortization
 
42,597
 
 
43,382
 
 
 
29,452
 
Depreciation and amortization
 
(20,329)
 
 
(20,391)
 
 
 
(27,520)
 
Total operating gross margin
 
$
22,268
 
 
$
22,991
 
 
 
$
1,932
 







PARKER DRILLING COMPANY AND SUBSIDIARIES
ADJUSTED EBITDA
(Dollars in Thousands)
(Unaudited)
 
 
 
 
 
Successor
 
 
Predecessor
 
 
Three Months Ended
 
 
Three Months Ended
 
 
September 30, 2019
 
June 30, 2019
 
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
Net income (loss) available to common stockholders
 
$
3,989

 
 
$
4,641

 
 
 
$
(90,248)

 
 
$
(43,073)

 
 
$
(71,857)

 
Interest expense
 
7,118
 
 
 
7,663
 
 
 
 
274
 
 
 
8,778
 
 
 
11,350
 
 
Income tax expense
 
4,979
 
 
 
3,792
 
 
 
 
656
 
 
 
2,235
 
 
 
2,371
 
 
Depreciation and amortization
 
20,329
 
 
 
20,391
 
 
 
 
25,102
 
 
 
24,340
 
 
 
27,520
 
 
Predecessor preferred stock dividend
 
 
 
 
 
 
 
 
 
 
 
 
 
 
906
 
 
EBITDA
 
36,415
 
 
 
36,487
 
 
 
 
(64,216)
 
 
 
(7,720)
 
 
 
(29,710)
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
Loss on impairment
 
 
 
 
 
 
 
 
 
 
 
6,708
 
 
 
43,990
 
 
(Gain) loss on disposition of assets, net
 
92
 
 
 
53
 
 
 
 
(384)
 
 
 
1,598
 
 
 
(9)
 
 
Pre-petition restructuring charges (1)
 
 
 
 
 
 
 
 
 
 
 
11,411
 
 
 
7,724
 
 
Reorganization items
 
211
 
 
 
962
 
 
 
 
92,977
 
 
 
9,789
 
 
 
 
 
Interest income
 
(362)
 
 
 
(374)
 
 
 
 
(8)
 
 
 
(15)
 
 
 
(23)
 
 
Other
 
258
 
 
 
644
 
 
 
 
10
 
 
 
414
 
 
 
709
 
 
Adjusted EBITDA (1) (2)
 
$
36,614

 
 
$
37,772

 
 
 
$
28,379

 
 
$
22,185

 
 
$
22,681

 

(1)
Pre-petition restructuring charges have been allocated to the respective period in which the expense was incurred. Accordingly adjusted EBITDA will differ from what was reported previously.
(2)
We believe Adjusted EBITDA is an important measure of operating performance because it allows management, investors, and others to evaluate and compare our core operating results from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), remeasurement of foreign currency transactions, tax consequences, impairment and other special items. Special items include items impacting operating expenses that management believes detract from an understanding of normal operating performance. Management uses Adjusted EBITDA as a supplemental measure to review current period operating performance and period to period comparisons. Our Adjusted EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate EBITDA in the same manner. EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. Generally Accepted Accounting Principles (GAAP), and should not be considered in isolation or as an alternative to operating income or loss, net income or loss, cash flows provided by or used in operating, investing, and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.






PARKER DRILLING COMPANY AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EARNINGS PER SHARE
(Dollars in Thousands, except Per Share)
(Unaudited)
 
 
 
 
 
Successor
 
 
Predecessor
 
 
Three Months Ended September 30,
 
Three Months Ended June 30,
 
 
Three Months Ended September 30,
 
 
2019
 
2019
 
 
2018
Net income (loss) available to common stockholders
$
3,989

 
 
$
4,641

 
 
 
$
(71,857)
 
Diluted earnings (loss) per common share
$
0.27

 
 
$
0.31

 
 
 
$
(7.70)
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
Loss on impairment
$

 
 
$

 
 
 
$
43,990
 
Net adjustments
 
 
 
 
 
 
 
43,990
 
 
 
 
 
 
 
 
 
Adjusted net income (loss) available to common stockholders (1)
$
3,989

 
 
$
4,641

 
 
 
$
(27,867)
 
Adjusted diluted earnings (loss) per common share (1)
$
0.27

 
 
$
0.31

 
 
 
$
(2.99)
 

(1)
We believe Adjusted net income (loss) available to common stockholders and Adjusted diluted earnings (loss) per common share are useful financial measures for investors to assess and understand operating performance for period to period comparisons. Management views the adjustments to Net income (loss) available to common stockholders and Diluted earnings (loss) per common share to be items outside of the Company’s normal operating results. Adjusted net income (loss) available to common stockholders and Adjusted diluted earnings (loss) per common share are not measures of financial performance under GAAP, and should not be considered in isolation or as an alternative to Net income (loss) available to common stockholders or Diluted earnings (loss) per common share.