Annual report pursuant to Section 13 and 15(d)

Reportable Segments

v3.19.3.a.u2
Reportable Segments
 12 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Reportable Segments
Note 17 - Reportable Segments
Our business is comprised of two business lines: (1) rental tools services and (2) drilling services. We report our rental tools services business as two reportable segments: (1) U.S. rental tools and (2) International rental tools. We report our drilling services business as two reportable segments: (1) U.S. (lower 48) drilling and (2) International & Alaska drilling.
Within the four reportable segments, we have one business unit under U.S. rental tools, one business unit under International rental tools, one business unit under U.S. (lower 48) drilling, and we aggregate our Arctic, Eastern Hemisphere, and Latin America business units under International & Alaska drilling, for a total of six business units. The Company has aggregated each of its business units in one of the four reporting segments based on the guidelines of the FASB ASC Topic No. 280, Segment Reporting. We eliminate inter-segment revenues and expenses. We disclose revenues under the four reportable segments based on the similarity of the use and markets for the groups of products and services within each segment.
Rental Tools Services Business
In our rental tools services business, we provide premium rental equipment and services to exploration & production companies, drilling contractors, and service companies on land and offshore in the U.S. and select 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 blowout preventers, and more. We also provide well construction services, which includes tubular running services and downhole tool rentals, well intervention services, which includes whipstocks, 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 as needed, requiring us to keep a broad inventory of rental tools in stock. Rental tools are usually rented on a daily or monthly basis.
U.S. Rental Tools
Our U.S. rental tools segment maintains an inventory of rental tools for deepwater drilling, completion, workover, and production applications at facilities in Louisiana, Texas, Wyoming, North Dakota, and West Virginia. We also provide well construction and well intervention services. Our largest single market for rental tools is U.S. land drilling, a cyclical market driven primarily by oil and natural gas prices and our customers’ access to project financing. A portion of our U.S. rental tools business supplies tubular goods and other equipment to offshore GOM customers.
International Rental Tools
Our International rental tools segment maintains an inventory of rental tools and provides well construction, well intervention, and surface and tubular services to our customers in the Middle East, Latin America, Europe, and Asia-Pacific regions.
Drilling Services Business
In our drilling services business, we drill oil, natural gas, and geothermal wells for customers globally. 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 our customers own their drilling rigs, but choose Parker to operate and manage the rigs for them. The nature and scope of activities involved in drilling a 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, commissioning of customer-owned drilling rig projects, operations execution, and quality and safety management. We have extensive experience and expertise in drilling geologically challenging wells and in managing the logistical and technological challenges of operating in remote, harsh, and ecologically sensitive areas.
U.S. (lower 48) Drilling
Our U.S. (lower 48) drilling segment provides drilling services with our GOM barge drilling rig fleet and markets our U.S. (lower 48) based O&M services. We also provide O&M services for a customer-owned rig offshore California. Our GOM barge rigs drill for oil and natural gas in shallow waters in and along the inland waterways and coasts of Louisiana, Alabama, and Texas. The majority of these wells are drilled in shallow water depths ranging from 6 to 12 feet. Our rigs are suitable for a variety of drilling programs, from inland coastal waters requiring shallow draft barges, to open water drilling in both state and federal waters. Contract terms typically consist of well-to-well or multi-well programs, most commonly ranging from 20 to 180 days.
International & Alaska Drilling
Our International & Alaska drilling segment provides drilling services, using both Company-owned rigs and O&M contracts, and project-related services. The drilling markets in which this segment operates have one or more of the following characteristics:
•
customers typically are major, independent, or national oil and natural gas companies or integrated service providers;
•
drilling programs in remote locations with little infrastructure, requiring a large inventory of spare parts and other ancillary equipment and self-supported service capabilities;
•
complex wells and/or harsh environments (such as high pressures, deep depths, hazardous or geologically challenging conditions and sensitive environments) requiring specialized equipment and considerable experience to drill; and
•
O&M contracts that generally cover periods of one year or more.
We have rigs under contract in Alaska, Kazakhstan, the Kurdistan region of Iraq, Guatemala, Mexico, and on Sakhalin Island, Russia. In addition, we have O&M and ongoing project-related services for customer-owned rigs in Alaska, Kuwait, Canada, Indonesia, and on Sakhalin Island, Russia.


The following table represents the results of operations by reportable segment:
 
Successor
 
 
Predecessor
 
Nine Months Ended December 31,
 
 
Three Months Ended March 31,
 
Year Ended December 31,
Dollars in thousands
2019
 
 
2019
 
2018
Revenues: (1)
 
 
 
 
 
 
U.S. rental tools
$
144,698

 
 
$
52,595

 
$
176,531

International rental tools
71,292

 
 
21,109

 
79,150

Total rental tools services
215,990

 
 
73,704

 
255,681

U.S. (lower 48) drilling
36,710

 
 
6,627

 
11,729

International & Alaska drilling
219,695

 
 
77,066

 
213,411

Total drilling services
256,405

 
 
83,693

 
225,140

Total revenues
$
472,395

 
 
$
157,397

 
$
480,821

Operating gross margin: (2)
 
 
 
 
 
 
U.S. rental tools
$
38,054

 
 
$
17,289

 
$
44,512

International rental tools
4,633

 
 
(3,581
)
 
(11,684
)
Total rental tools services
42,687

 
 
13,708

 
32,828

U.S. (lower 48) drilling
2,189

 
 
(1,508
)
 
(15,720
)
International & Alaska drilling
11,845

 
 
(776
)
 
(21,936
)
Total drilling services
14,034

 
 
(2,284
)
 
(37,656
)
Total operating gross margin
56,721

 
 
11,424

 
(4,828
)
General and administrative expense
(17,967
)
 
 
(8,147
)
 
(24,545
)
Loss on impairment
—

 
 
—

 
(50,698
)
Gain (loss) on disposition of assets, net
226

 
 
384

 
(1,724
)
Pre-petition restructuring charges
—

 
 
—

 
(21,820
)
Reorganization items
(1,173
)
 
 
(92,977
)
 
(9,789
)
Total operating income (loss)
37,807

 
 
(89,316
)
 
(113,404
)
Interest expense
(20,902
)
 
 
(274
)
 
(42,565
)
Interest income
887

 
 
8

 
91

Other
(188
)
 
 
(10
)
 
(2,023
)
Income (loss) before income taxes
$
17,604

 
 
$
(89,592
)
 
$
(157,901
)
(1)
For the nine months ended December 31, 2019, our largest customer, ENL, constituted approximately 29.3 percent of our total consolidated revenues and approximately 62.9 percent of our International & Alaska drilling segment revenues. Excluding reimbursable revenues of $63.2 million, ENL constituted approximately 18.6 percent of our total consolidated revenues and approximately 48.8 percent of our International & Alaska drilling segment revenues.
For the three months ended March 31, 2019, our largest customer, ENL, constituted approximately 31.2 percent of our total consolidated revenues and approximately 63.8 percent of our International & Alaska drilling segment revenues. Excluding reimbursable revenues of $26.3 million, ENL constituted approximately 17.7 percent of our total consolidated revenues and approximately 46.6 percent of our International & Alaska drilling segment revenues.
For the year ended December 31, 2018, our largest customer, ENL, constituted approximately 25.7 percent of our total consolidated revenues and approximately 58.0 percent of our International & Alaska drilling segment revenues. Excluding reimbursable revenues of $47.2 million, ENL constituted approximately 17.9 percent of our total consolidated revenues and approximately 48.0 percent of our International & Alaska drilling segment revenues.
(2)
Operating gross margin is calculated as revenues less direct operating expenses, including depreciation and amortization expense.
Other business segment information
The following table represents capital expenditures and depreciation and amortization by reportable segment:
 
Successor
 
 
Predecessor
 
Nine Months Ended December 31,
 
 
Three Months Ended March 31,
 
Year Ended December 31,
Dollars in thousands
2019
 
 
2019
 
2018
Capital expenditures:
 
 
 
 
 
 
U.S. rental tools
$
51,539

 
 
$
4,429

 
$
55,545

International rental tools
9,650

 
 
3,166

 
6,275

U.S. (lower 48) drilling
1,061

 
 
395

 
444

International & Alaska drilling
7,787

 
 
1,199

 
7,444

Corporate
1,070

 
 
42

 
859

Total capital expenditures
$
71,107

 
 
$
9,231

 
$
70,567

 
 
 
 
 
 
 
Depreciation and amortization: (1)
 
 
 
 
 
 
U.S. rental tools
$
30,912

 
 
$
11,715

 
$
48,167

International rental tools
5,999

 
 
4,115

 
15,548

U.S. (lower 48) drilling
4,424

 
 
808

 
7,758

International & Alaska drilling
20,164

 
 
8,464

 
36,072

Total depreciation and amortization
$
61,499

 
 
$
25,102

 
$
107,545

(1)
For presentation purposes, for the nine months ended December 31, 2019, the three months ended March 31, 2019, and the year ended December 31, 2018, depreciation expense for corporate assets are as follows:
 
Successor
 
 
Predecessor
 
Nine Months Ended December 31,
 
 
Three Months Ended March 31,
 
Year Ended December 31,
Dollars in thousands
2019
 
 
2019
 
2018
Depreciation expense for corporate assets
$
572

 
 
$
2,337

 
$
8,441

The following table represents identifiable assets by reportable segment:
 
Successor
 
 
Predecessor
Dollars in Thousands
December 31,
2019
 
 
December 31,
2018
U.S. rental tools
$
221,383

 
 
$
216,123

International rental tools
98,041

 
 
146,471

U.S. (lower 48) drilling
27,335

 
 
30,283

International & Alaska drilling
255,844

 
 
366,856

Total identifiable assets
602,603

 
 
759,733

Corporate
80,245

 
 
68,681

Total assets
$
682,848

 
 
$
828,414


Geographic information     
The following table represents selected geographic information:
 
Successor
 
 
Predecessor
 
Nine Months Ended December 31,
 
 
Three Months Ended March 31,
 
Year Ended December 31,
Dollars in Thousands
2019
 
 
2019
 
2018
Revenues:
 
 
 
 
 
 
United States
$
204,450

 
 
$
66,252

 
$
207,612

Russia
138,893

 
 
49,388

 
123,767

EMEA & Asia
69,027

 
 
25,133

 
92,568

Latin America
29,351

 
 
5,482

 
14,631

Other CIS
11,635

 
 
3,621

 
13,703

Other
19,039

 
 
7,521

 
28,540

Total revenues
$
472,395

 
 
$
157,397

 
$
480,821

 
Successor
 
 
Predecessor
Dollars in Thousands
December 31,
2019


December 31,
2018
Long-lived assets: (1)
 
 
 
 
United States
$
238,497

 
 
$
369,106

Russia
3,276

 
 
16,964

EMEA & Asia
27,342

 
 
89,696

Latin America
20,181

 
 
36,656

Other CIS
10,472

 
 
21,949

Total long-lived assets
$
299,768

 
 
$
534,371

(1)
Long-lived assets consist of property, plant, and equipment, net.