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.
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.
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.
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
Released May 5, 2010