Parker Drilling Reports First Quarter Results

HOUSTON, May 5 /PRNewswire-FirstCall/ -- Parker Drilling (NYSE: PKD), a global drilling contractor and service provider, today reported results for the three-month period ended March 31, 2010.  The Company’s results for the quarter included a net loss of $2.1 million or $0.02 per diluted share on revenues of $157.6 million, compared with net income of $2.1 million or $0.02 per diluted share on revenues of $173.9 million for the 2009 first quarter.  Excluding the effects of non-routine items the Company reported net income of $2.6 million or $0.02 per diluted share compared with similarly adjusted 2009 first quarter net income of $5.6 million or $0.05 per diluted share.  Adjusted EBITDA excluding non-routine items was $37.9 million compared with $45.0 million for the prior year’s first quarter.

Compared with the fourth quarter of 2009, the Company’s net income, adjusted for non-routine items, was higher by $3.1 million or $0.03 per diluted share and adjusted EBITDA was $3.4 million higher.  Revenues declined 10 percent compared to the preceding quarter.

“Our performance in the first quarter reflects improvements in U.S. drilling markets and continued sluggishness in international drilling contract awards and renewals.  In our U.S. businesses we are benefitting from actions taken to enhance our strategic position,” said Parker Drilling chief executive officer David Mannon.  “Our barge drilling business had a significant upturn in revenues and earnings this past quarter, compared with the prior year’s first quarter.  In 2009 we decided to 'ready-stack' our Gulf of Mexico barge rigs.  This strategy enabled us to capture a large portion of newly-contracted work by providing fast back-to-work response times while keeping costs in line with market conditions.  Parker’s rental tools business continued to benefit from the strategic positioning of stores in the active shale plays and recent investments in tubular inventory.  These enabled the business to leverage the earnings impact of recovering rig activity and reductions in price discounting.”  Mr. Mannon went on to say, “The effects of the 2009 reduction in worldwide E&P spending continue to contribute to the lower international utilization we have today.”

First Quarter Highlights

    --  Parker’s U.S. barge drilling business increased revenues, gross margin
        and gross margin as a percent of revenues compared with the prior
        year’s first quarter. In addition, Parker operated more barge drilling
        rigs in the U.S. Gulf of Mexico than any of its competitors.
    --  The Company’s Rental Tools business’ gross margin as a percent of
        revenues increased to 63 percent, compared with 55 percent in the prior
        year’s fourth quarter and 57 percent in the prior year’s first
        quarter. The business benefitted from a growing international and
        offshore presence, a reduction of discounting in the U.S. land drilling
        market and lower operating costs.
    --  Parker issued $300 million of 9.125% senior notes due in 2018. Net
        proceeds are being used to retire its 9.625% senior notes maturing in
        2013 and pay off borrowings under its revolving credit facility.


“Recent trends in U.S. land drilling, the sustained level of oil prices and an expected increase in worldwide exploration and production spending are encouraging factors in our markets.  Though natural gas fundamentals present a risk to sustained growth in demand from U.S. land activity, we believe the shift to more oil-directed drilling may mitigate this,” said Mr. Mannon.  “Overall, we believe these trends will contribute to renewed growth for Parker.  Demand for rental tools continues to improve and price discounting has eased.  Our barge drilling activity has picked up and stabilized.  In many of our international drilling markets contract tender activity is improving and should provide increased deployment opportunities for our rig fleet during the year.   Our project management business continues to grow its opportunity list of longer-term design, construction and operating projects.  We are continuing to develop each of our businesses in line with its strategy, and I expect the strategies we have deployed to result in improving operating performance as the year progresses,” he concluded.

First Quarter Review

Results for the three months ended March 31, 2010, included the impact of several non-routine items that decreased net income by $4.6 million or $0.04 per diluted share. Included in non-routine items is $3.9 million, pre-tax, of expense related to the ongoing Department of Justice and Securities and Exchange Commission investigations and Parker’s internal review regarding possible violations of the Foreign Corrupt Practices Act and other laws.  Also included in non-routine items is $3.2 million, pre-tax, of debt extinguishment costs related to the portion of the Company’s 9.625% senior notes which were tendered and exchanged in the quarter.  The remaining non-tendered 9.625% senior notes were redeemed in the second quarter.  The results for the 2009 first quarter included non-routine, net after-tax expense of $3.5 million or $0.03 per diluted share.  Details of the non-routine items are provided in the attached financial tables.

Parker’s revenues for the 2010 first quarter declined to $157.6 million or by 9 percent from the 2009 first quarter revenues of $173.9 million.  The Company’s 2010 first quarter gross margin, before depreciation and amortization expense, declined to $44.1 million or by 16 percent from the 2009 first quarter gross margin of $52.7 million, while gross margin as a percentage of revenues was 28 percent compared with 30 percent for the 2009 first quarter.

    --  International Drilling revenues declined to $63.9 million from $77.4
        million, and gross margin, before depreciation and amortization expense,
        declined to $16.7 million from $27.6 million. The decrease in revenues
        was primarily the result of reduced fleet utilization and the impact of
        having the Caspian Sea barge rig in a shipyard throughout the quarter
        for scheduled overhaul and upgrade. This was partially offset by an
        increase in the fleet's average dayrate. Average fleet utilization for
        the 2010 first quarter was 61 percent, compared with 78 percent for the
        prior year’s first quarter. For the quarter, the ten-rig Americas
        regional fleet operated at 77 percent average utilization, the
        eleven-rig CIS/AME regional fleet operated at 64 percent average
        utilization and the eight-rig Asia Pacific regional fleet operated at 44
        percent average utilization. (Additional rig fleet information is
        available on Parker’s Website.)
    --  U.S. Drilling revenues increased 53 percent, to $15.1 million from $9.9
        million and gross margin, before depreciation and amortization expense,
        rose to $2.1 million from a loss of $3.3 million. The increase in
        revenues and gross margin was primarily due to higher barge rig activity
        and lower operating costs partially offset by a decrease in the
        fleet’s average dayrate. For the quarter the Company had an average of
        three more rigs operating under contract than for the comparable period
        of 2009. The fleet’s average dayrate was $21,900 for the 2010 first
        quarter and $28,000 for the 2009 first quarter.
    --  Rental Toolsrevenues declined to $33.8 million from $37.9 million, gross
        margin, before depreciation and amortization expense, declined to $21.2
        million from $21.4 million, and gross margin as a percent of revenues
        rose to 63 percent from 57 percent. As some demand stability has
        returned to the rental tools marketplace price discounts have eased. In
        addition, the rental tools business benefitted from lower operating
        costs and expanded offshore and international placements.
    --  Project Management and Engineering Services revenues declined to $24.4
        million from $32.1 million and gross margin, before depreciation and
        amortization expense, declined to $4.9 million from $6.2 million. The
        prior year included revenues associated with the relocation and upgrade
        of the Yastreb rig for ExxonNeftegas (ENL) on Sakhalin Island and
        operational revenues for ENL’s Orlan platform which has since moved to
        a non-operating mode.
    --  Construction Contractrevenues increased to $20.4 million from $16.7
        million and the recorded gross margin, before depreciation and
        amortization expense, was a $0.8 million loss, compared to a $0.8
        million gain in the prior year’s comparable period. The 2010 first
        quarter reflects an adjustment of the fixed fee for the
        cost-reimbursable Liberty project, due to the expanded costs which have
        impacted the percentage-of-completion allocation.


Cash Flow and Capitalization

Capital expenditures for the 2010 first quarter were $57.9 million, including $41.2 million for the construction of Parker’s two newbuild arctic rigs for Alaska and $9.3 million for tubular goods and other rental equipment.

During the first quarter Parker issued $300 million of senior debt at an effective rate of 9.125% due in 2018.  The proceeds are being used to refinance the Company’s outstanding $225 million of 9.625% senior notes and to repay borrowings under its revolving credit facility.  Included in the current portion of long-term debt at March 31, 2010 was $130.0 million of 9.625% senior notes which were called in March and retired in April.  

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. CDT (11:00 a.m. EDT) on Wednesday, May 5, 2010, to discuss its reported results.  Those interested in listening to the call by telephone may do so by dialing 480-629-9867.  The call can also be accessed through the Investor Relations section of the Company’s Website at http://www.ParkerDrilling.com.  A replay of the call will be available by telephone from May 5 to May 12 by dialing 330-590-3030 and using the access code 4285952#, and for 12 months on the Company’s Website.

Cautionary Statement

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 demand for drilling and customer spending and the factors affecting demand, competitive advantages including cost effective integrated solutions and technological innovation, future technological innovation, future operating results of the Company’s rigs, rental tools operations and projects under management, capital expenditures, expansion and growth opportunities, asset sales, successful negotiation and execution of contracts, strengthening of financial position, increase in market share 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 due to certain risk factors, including the volatility in oil and natural gas prices, which could reduce the demand for drilling services.  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, including the report on Form 10-K for the year ended December 31, 2009.  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.

Company Description

Parker Drilling (NYSE: PKD) provides high-performance contract drilling solutions, rental tools and project management services to the worldwide energy industry.  Parker owns and operates 28 land rigs and two offshore barge rigs in strategic international markets and 13 barge rigs in the U.S. Gulf of Mexico. The Company’s rental tools business supplies premium equipment to operators on land and offshore in the U.S. and select international markets. Founded in 1934, Parker has set numerous world records for deep and extended-reach drilling and is an industry leader in safety performance.  More information about Parker Drilling can be found at http://www.parkerdrilling.com.


PARKER DRILLING COMPANY

Consolidated Condensed Balance Sheets



                                           March 31, 2010  December 31, 2009

                                           (Unaudited)

ASSETS                                     (Dollars in Thousands)

CURRENT ASSETS

Cash and Cash Equivalents                  $ 202,028       $ 108,803

Accounts and Notes Receivable, Net         169,937         188,687

Rig Materials and Supplies                 28,373          31,633

Deferred Costs                             2,198           4,531

Deferred Income Taxes                      8,013           9,650

Other Current Assets                       110,342         100,225

TOTAL CURRENT ASSETS                       520,891         443,529



PROPERTY, PLANT AND EQUIPMENT, NET         752,955         716,798



OTHER ASSETS

Deferred Income Taxes                      54,255          55,749

Other Assets                               34,541          27,010

TOTAL OTHER ASSETS                         88,796          82,759



TOTAL ASSETS                               $ 1,362,642     $ 1,243,086



LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Current Portion of Long-Term Debt          $ 141,985       $ 12,000

Accounts Payable and Accrued Liabilities   149,459         177,036

TOTAL CURRENT LIABILITIES                  291,444         189,036



LONG-TERM DEBT                             440,727         411,831



MINORITY INTEREST                          (175)           -



LONG-TERM DEFERRED TAX LIABILITY           7,381           16,074



OTHER LONG-TERM LIABILITIES                28,264          30,246



STOCKHOLDERS' EQUITY                       595,001         595,899



TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,362,642     $ 1,243,086





Current Ratio                              1.79            2.35



Total Debt as a Percent of Capitalization  49%             42%



Book Value Per Common Share                $ 5.10          $ 5.13






PARKER DRILLING COMPANY

Consolidated Condensed Statements of Operations

(Unaudited)



                                                   Three Months Ended March 31,

                                                   2010         2009

                                                   (Dollars in Thousands)

REVENUES:

International Drilling                             $ 63,875     $ 77,381

U.S. Drilling                                      15,087       9,856

Rental Tools                                       33,815       37,889

Project Management and Engineering Services        24,441       32,054

Construction Contract                              20,387       16,745

TOTAL REVENUES                                     157,605      173,925



OPERATING EXPENSES:

International Drilling                             47,173       49,777

U.S. Drilling                                      12,974       13,136

Rental Tools                                       12,626       16,454

Project Management and Engineering Services        19,561       25,894

Construction Contract                              21,197       15,914

Depreciation and Amortization                      28,588       27,124

TOTAL OPERATING EXPENSES                           142,119      148,299



TOTAL OPERATING GROSS MARGIN                       15,486       25,626



General and Administrative Expense                 (10,032)     (13,060)

Gain on Disposition of Assets, Net                 672          78



TOTAL OPERATING INCOME                             6,126        12,644



OTHER INCOME AND (EXPENSE):

Interest Expense                                   (6,732)      (8,066)

Interest Income                                    74           286

Loss on extinguishment of debt                     (3,220)      -

Minority interest                                  175          -

Other Income (Expense)                             (33)         (12)

TOTAL OTHER INCOME AND (EXPENSE)                   (9,736)      (7,792)



INCOME (LOSS) BEFORE INCOME TAXES                  (3,610)      4,852



INCOME TAX EXPENSE (BENEFIT)

Current                                            3,648        6,738

Deferred                                           (5,207)      (3,992)

TOTAL INCOME TAX EXPENSE (BENEFIT)                 (1,559)      2,746



NET INCOME                                         $ (2,051)    $ 2,106





EARNINGS PER SHARE - BASIC

Net Income                                         $ (0.02)     $ 0.02



EARNINGS PER SHARE - DILUTED

Net Income                                         $ (0.02)     $ 0.02



NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS
PER SHARE

Basic                                              113,512,426  112,260,517

Diluted                                            115,029,996  113,366,444






PARKER DRILLING COMPANY

Selected Financial Data

(Unaudited)



                                              Three Months Ended

                                              March 31,           December 31,

                                              2010      2009      2009

                                              (Dollars in Thousands)

REVENUES:

 International Drilling                       $ 63,875  $ 77,381  $ 72,712

 U.S. Drilling                                15,087    9,856     14,533

 Rental Tools                                 33,815    37,889    25,109

 Project Management and Engineering Services  24,441    32,054    27,631

 Construction Contract                        20,387    16,745    35,800

 Total Revenues                               157,605   173,925   175,785



OPERATING EXPENSES:

 International Drilling                       47,173    49,777    50,858

 U.S. Drilling                                12,974    13,136    13,233

 Rental Tools                                 12,626    16,454    11,302

 Project Management and Engineering Services  19,561    25,894    22,202

 Construction Contract                        21,197    15,914    35,194

 Total Operating Expenses                     113,531   121,175   132,789



OPERATING GROSS MARGIN:

 International Drilling                       16,702    27,604    21,854

 U.S. Drilling                                2,113     (3,280)   1,300

 Rental Tools                                 21,189    21,435    13,807

 Project Management and Engineering Services  4,880     6,160     5,429

 Construction Contract                        (810)     831       606

 Depreciation and Amortization                (28,588)  (27,124)  (28,593)

 Total Operating Gross Margin                 15,486    25,626    14,403



 General and Administrative Expense           (10,032)  (13,060)  (11,485)

 Provision for Reduction in Carrying Value of
 Certain Assets                               -         -         (1,889)

 Gain on Disposition of Assets, Net           672       78        3,899



TOTAL OPERATING INCOME                        $ 6,126   $ 12,644  $ 4,928








Marketable Rig Count Summary

As of March 31, 2010



                                             Total



 U.S. Gulf of Mexico Barge Rigs

 Intermediate                                3

 Deep                                        10

 Total U.S. Gulf of Mexico Barge Rigs        13



 International Land and Barge Rigs

 Asia Pacific                                8

 Americas                                    10

 CIS/AME                                     11

 Other                                       1

 Total International Land and Barge Rigs     30





 Total Marketable Rigs                       43







PARKER DRILLING COMPANY

Adjusted EBITDA



(Dollars in Thousands)





             Three Months Ended

             March                         June    March                        June    March
             31,      December  September  30,     31,     December  September  30,     31,
             2010     31, 2009  30, 2009   2009    2009    31, 2008  30, 2008   2008    2008



Previously
Reported Net
Income       $        $                    $       $       $                    $       $
(Loss)       (2,051)  (4,324)   $ 7,094    4,391   2,106   (39,477)  $ 18,551   22,596  23,888

Restated
Interest
Expense, Net
of Tax - Per
APB 14-1     -        -         -          -       -       (724)     (721)      (699)   (686)

Restated Net
Income
(Loss)       (2,051)  (4,324)   7,094      4,391   2,106   (40,201)  17,830     21,897  23,202

Adjustments:

Income Tax
(Benefit)
Expense      (1,559)  1,890     (9,155)    5,079   2,746   (31,178)  19,673     13,762  4,685

Total Other
Income and
Expense      9,736    7,362     6,943      7,398   7,792   9,121     6,344      6,531   7,514

Loss/(Gain)
on
Disposition
of Assets,
Net          (672)    (3,899)   (1,225)    (704)   (78)    (683)     (799)      (636)   (579)

Impairment
of Goodwill  -        -         -          -       -       100,315

Depreciation
and
Amortization 28,588   28,593    29,307     28,951  27,124  31,961    30,663     28,166  26,166

Provision
for
Reduction in
Carrying
Value of
Certain
Assets       -        1,889     2,757      -       -       -         -          -       -



Adjusted     $                             $       $                            $       $
EBITDA       34,042   $ 31,511  $ 35,721   45,115  39,690  $ 69,335  $ 73,711   69,720  60,988



Adjustments:

Non-routine
Items        3,888    2,998     2,402      4,048   5,308   6,279     2,264      2,885   441



Adjusted
EBITDA after
Non-routine  $                             $       $                            $       $
Items        37,930   $ 34,509  $ 38,123   49,163  44,998  $ 75,614  $ 75,975   72,605  61,429






PARKER DRILLING COMPANY

Reconciliation of Non-Routine Items *

(Unaudited)

(Dollars in Thousands, except Per Share)



                                                 Three Months Ending

                                                 March 31, 2010



Net income                                       $ (2,051)

Earnings per diluted share                       $ (0.02)



Adjustments:

  Extinguishment of debt                         $ 3,220

  U.S. regulatory investigations / legal matters 3,888

  Total adjustments                              $ 7,108

  Tax effect of pre-tax non-routine adjustments  (2,488)

  Net non-routine adjustments                    $ 4,620



Adjusted net income                              $ 2,569

Adjusted earnings per diluted share              $ 0.02









                                                 Three Months Ending

                                                 March 31, 2009

Net income                                       $ 2,106

Earnings per share                               $ 0.02



Adjustments:

  DOJ investigation                              5,308

  Total adjustments                              $ 5,308

  Tax effect of non-routine adjustments          (1,858)

  Net non-routine adjustments                    $ 3,450



Adjusted net income                              $ 5,556

Adjusted earnings per diluted share              $ 0.05





* 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