Parker Drilling Reports Third Quarter Results
HOUSTON, Nov. 3, 2010 /PRNewswire-FirstCall/ -- Parker Drilling (NYSE: PKD), a drilling contractor and service provider, today reported results for the 2010 third quarter and nine-month year-to-date periods ended September 30, 2010. The Company’s results for the third quarter included net income of $0.5 million or $0.00 per diluted share on revenues of $172.0 million, compared with net income of $7.1 million or $0.06 per diluted share on revenues of $181.4 million for the 2009 third quarter. Excluding the effects of non-routine items the Company reported net income of $1.2 million or $0.01 per diluted share compared with similarly adjusted 2009 third quarter net income of $4.4 million or $0.04 per diluted share. Adjusted EBITDA, excluding non-routine items, was $36.4 million, compared with $38.1 million for the prior year’s third quarter.
“We had a record performance from our rental tools segment in the third quarter. The growth of directional drilling in the U.S., in both shale and conventional formations, has contributed to the increased demand for rental tools. Parker’s rental tools operation continues to benefit from the strategic positioning of stores in the more active markets, reductions in price discounting, and timely investments in tubular inventory,” said Parker Drilling Chief Executive Officer David Mannon. “In addition, drilling in the shallow-water Gulf of Mexico barge market has remained active despite seasonal influences. Our barge rig fleet utilization has improved significantly from the prior year and average dayrates have edged up since the 2010 second quarter. We also had solid results in our project management business, with revenues and gross margin contributions from our renewed activity on the Orlan platform and expanded content on the Arkutun-Dagi program,” said Mannon. He went on to say, “The energy industry’s expected increase in international E&P spending has been slow to develop and has not been uniform across all regions. In the international drilling markets we serve, demand has been lower overall, with results reflecting a slower spending environment.”
Third Quarter Highlights
-- The Company’s Rental Tools segment reported record levels of revenues, segment gross margin and segment gross margin as a percent of revenues. (Segment gross margins exclude depreciation and amortization expense). -- Parker’s U.S. barge drilling business sustained its operating improvements as the Gulf of Mexico barge drilling market remained firm during the Gulf’s hurricane season. -- International Drilling extended contracts on four rigs in Mexico into 2012 and benefited from new contracts in the Asia Pacific region, one for a rig in Indonesia and another for a rig in Papua New Guinea.
“Our recent performance demonstrates the advantage of our business mix and the potential of our individual operations. While we operate in a highly cyclical industry, our business diversity moderates the impact on Parker,” said Mr. Mannon. “Oil-directed drilling in the U.S. on land and in the shallow waters of the Gulf of Mexico has offset the slowing interest in natural gas prospects. As a result, demand for rental tools has been strong and barge drilling activity has improved and stabilized. While international drilling has weakened overall, strength in the Americas region has somewhat offset softening demand in the CIS/AME region, and the Asia-Pacific region has begun to improve. Our project management business continues to operate its portfolio of projects while also developing other programs. We are continuing to advance each of our businesses in line with a strategy to sustain their earnings and cash flow potential in uncertain times and leverage their growth when markets improve,” Mannon concluded.
Third Quarter Review
Results for the three months ended September 30, 2010, included the impact of $1.1 million, pre-tax, of non-routine expenses 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. This reduced after-tax earnings by $0.7 million or $0.1 per diluted share. The results for the 2009 third quarter included non-routine, net after-tax income of $2.7 million or $0.2 per diluted share. Details of the non-routine items are provided in the attached financial tables.
Parker’s revenues for the 2010 third quarter were $172.0 million compared with 2009 third quarter revenues of $181.4 million. The Company’s 2010 third quarter gross margin, before depreciation and amortization expense and non-routine items, was $42.3 million compared with 2009 third quarter gross margin of $45.5 million, while gross margin as a percentage of revenues was 25 percent, the same as for the 2009 third quarter.
-- Rental Toolsrevenues increased 101 percent, to $48.1 million from $23.9 million, segment gross margin rose to $31.5 million from $11.7 million, and segment gross margin as a percent of revenues rose to 66 percent from 49 percent. Recent investment in rental equipment inventory, higher utilization and less discounting all contributed to the segment’s success. With facilities strategically located in all the major shale resource areas, the rental tools business has positioned itself to service the activity in the U.S. land drilling market. In addition, the operation has continued to expand its international business with an increase in overseas equipment placements. -- U.S. Drilling revenues increased 21 percent, to $14.9 million from $12.4 million, and segment gross margin declined to $1.6 million from $2.3 million. The benefit from higher utilization more than offset a lower average dayrate, while a $0.8 million sales and use tax expense and higher worker’s compensation expense reduced overall earnings. For the quarter the business had an average of 3 more barge rigs operating under contract than for the comparable period of 2009. The barge rig fleet’s average dayrate was $20,000 for the 2010 third quarter and $26,200 for the 2009 third quarter. The 2009 third quarter dayrate was impacted by one barge having operated at higher rates established in a 2008 contract. -- International Drilling revenues declined 16 percent, to $53.6 million from $64.0 million, and segment gross margin declined to $2.3 million compared with $22.0 million. Reduced average rig fleet utilization was the primary contributor to the decline in revenues. Average rig fleet utilization for the 2010 third quarter was 49 percent, compared with 61 percent for the prior year’s third quarter. For the quarter, the ten-rig Americas regional fleet operated at 86 percent average utilization, the eleven-rig CIS/AME regional fleet operated at 36 percent average utilization and the eight-rig Asia Pacific regional fleet operated at 27 percent average utilization. (Additional rig fleet information is available on Parker’s Web site.) In addition, Parker’s Caspian Sea Arctic Barge Rig 257 earned a reduced average dayrate for the quarter, approximately $5.8 million less than for the prior year’s third quarter, as it completed a required overhaul and customer-requested upgrade and prepared for redeployment. Segment gross margin included a $6.4 million non-cash expense for the correction of the accounting for value added taxes in prior periods, and a $1.7 million property tax assessment, both in the Company’s Kazakhstan operations. -- Project Management and Engineering Services revenues increased 7 percent, to $27.6 million from $25.9 million, and segment gross margin rose to $7.2 million from $6.4 million. The segment continued to benefit from the reactivation of the Orlan platform and the associated higher dayrate. In addition, the continued development of the Arkutun-Dagi project contributed as it progressed further toward construction. -- Construction Contractrevenues declined to $27.8 million compared with $55.3 million and the recorded segment gross margin was a $0.3 million loss, compared to a $3.1 million gain in the prior year’s comparable period. Segment revenues reflect the reimbursed costs of the construction activity on the Liberty rig. The segment gross margin loss reflects an adjustment during the quarter of the fixed fee allocation for the project, resulting from increased costs and an extended construction timeline. This adjustment represents a non-cash allocation of project earnings that will be recognized in future periods.
Nine Month Year-to-date Summary
The Company’s results for the 2010 first nine months included a net loss of $1.1 million or $0.01 per diluted share on revenues of $486.2 million, compared with net income of $13.6 million or $0.12 per diluted share on revenues of 577.1 million for the 2009 first nine months. Excluding the effects of non-routine items the Company reported adjusted net income of $8.7 million or $0.07 per diluted share compared with similarly adjusted 2009 year-to-date net income of $17.0 million or $0.15 per diluted share. Adjusted EBITDA, excluding non-routine items, was $116.0 million for the 2010 first nine months and $132.3 million for the prior year’s comparable period.
Results for the nine months ended September 30, 2010, included the impact of several non-routine items that decreased net income by $9.7 million or $0.8 per diluted share. Included in non-routine items are $7.2 million, pre-tax, of debt extinguishment costs related to the redemption of the Company’s 9.625% senior notes; $6.1 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; and $1.1 million of tax expense for an assessment related to a prior year’s tax audit in Mexico.
Cash Flow and Capitalization
Capital expenditures for the first nine months of 2010 were $181.6 million, including $91.1 million for the construction of Parker’s two newbuild arctic rigs for Alaska and $41.3 million for the purchase of tubular goods and other rental equipment.
Parker Drilling has scheduled a conference call for 10:00 a.m. CDT (11:00 a.m. EDT) on Wednesday, November 3, 2010, to discuss its reported results. Those interested in listening to the call by telephone may do so by dialing (480) 629-9690. The call can also be accessed through the Investor Relations section of the Company’s Web site at http://www.ParkerDrilling.com. A replay of the call will be available by telephone from November 3 to November 10 by dialing (303) 590-3030 and using the access code 4375427# and for 12 months on the Company’s Web site.
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 energy industry. Parker's international fleet includes 28 land rigs and two offshore barge rigs, and its U.S. fleet includes 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. More information about Parker Drilling can be found at http://www.parkerdrilling.com. Included in the Investor Relations section of the Company's Web site are operating status reports for Parker Drilling's rental tools segment and its international and U.S. rig fleets, updated monthly.
PARKER DRILLING COMPANY Consolidated Condensed Balance Sheets September 30, 2010 December 31, 2009 (Unaudited) ASSETS (Dollars in Thousands) CURRENT ASSETS Cash and Cash Equivalents $ 47,334 $ 108,803 Accounts and Notes Receivable, Net 187,394 188,687 Rig Materials and Supplies 24,277 31,633 Deferred Costs 2,378 4,531 Deferred Income Taxes 10,051 9,650 Other Current Assets 107,747 100,225 TOTAL CURRENT ASSETS 379,181 443,529 PROPERTY, PLANT AND EQUIPMENT, NET 809,749 716,798 OTHER ASSETS Deferred Income Taxes 57,698 55,749 Other Assets 30,679 27,010 TOTAL OTHER ASSETS 88,377 82,759 TOTAL ASSETS $ 1,277,307 $ 1,243,086 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current Portion of Long-Term Debt $ 12,000 $ 12,000 Accounts Payable and Accrued Liabilities 170,993 177,036 TOTAL CURRENT LIABILITIES 182,993 189,036 LONG-TERM DEBT 457,466 411,831 MINORITY INTEREST - - LONG-TERM DEFERRED TAX LIABILITY 8,514 16,074 OTHER LONG-TERM LIABILITIES 28,629 30,246 STOCKHOLDERS' EQUITY 599,705 595,899 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,277,307 $ 1,243,086 Current Ratio 2.07 2.35 Total Debt as a Percent of Capitalization 44% 42% Book Value Per Common Share $ 5.13 $ 5.13
PARKER DRILLING COMPANY Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2010 2009 2010 2009 (Dollars in Thousands) (Dollars in Thousands) REVENUES: International Drilling $ 53,614 $ 63,966 $ 170,421 $ 220,626 U.S. Drilling 14,929 12,350 45,352 35,095 Rental Tools 48,114 23,899 123,288 89,948 Project Management and Engineering Services 27,599 25,869 78,403 81,814 Construction Contract 27,773 55,325 68,695 149,642 TOTAL REVENUES 172,029 181,409 486,159 577,125 OPERATING EXPENSES: International Drilling 51,312 41,964 137,908 140,628 U.S. Drilling 13,287 10,057 39,801 34,821 Rental Tools 16,583 12,232 43,477 41,438 Project Management and Engineering Services 20,378 19,420 61,640 63,597 Construction Contract 28,122 52,203 69,362 142,117 Depreciation and Amortization 28,904 29,307 86,504 85,382 TOTAL OPERATING EXPENSES 158,586 165,183 438,692 507,983 TOTAL OPERATING GROSS MARGIN 13,443 16,226 47,467 69,142 General and Administrative Expense (7,064) (9,812) (24,033) (33,998) Gain on Disposition of Assets, Net 1,176 1,225 3,560 2,007 TOTAL OPERATING INCOME 7,555 4,882 26,994 34,394 OTHER INCOME AND (EXPENSE): Interest Expense (6,391) (7,093) (20,509) (22,663) Interest Income 46 435 198 895 Loss on extinguishment of debt - - (7,209) - Other Income (Expense) 68 (285) 325 (365) TOTAL OTHER INCOME AND (EXPENSE) (6,277) (6,943) (27,195) (22,133) INCOME (LOSS) BEFORE INCOME TAXES 1,278 (2,061) (201) 12,261 INCOME TAX EXPENSE (BENEFIT) Current (3,104) 1,325 5,536 14,224 Deferred 3,890 (10,480) (4,685) (15,554) TOTAL INCOME TAX EXPENSE (BENEFIT) 786 (9,155) 851 (1,330) NET INCOME $ 492 $ 7,094 $ (1,052) $ 13,591 EARNINGS PER SHARE - BASIC Net Income $ 0.00 $ 0.06 $ (0.01) $ 0.12 EARNINGS PER SHARE - DILUTED Net Income $ 0.00 $ 0.06 $ (0.01) $ 0.12 NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS PER SHARE Basic 114,287,238 113,263,123 114,111,198 112,905,172 Diluted 116,015,674 115,237,348 116,155,958 114,604,108
PARKER DRILLING COMPANY Selected Financial Data (Unaudited) Three Months Ended September 30, June 30, 2010 2009 2010 (Dollars in Thousands) REVENUES: International Drilling $ 53,614 $ 63,966 $ 52,932 U.S. Drilling 14,929 12,350 15,336 Rental Tools 48,114 23,899 41,359 Project Management and Engineering Services 27,599 25,869 26,363 Construction Contract 27,773 55,325 20,535 Total Revenues 172,029 181,409 156,525 OPERATING EXPENSES: International Drilling 51,312 41,964 39,423 U.S. Drilling 13,287 10,057 13,540 Rental Tools 16,583 12,232 14,268 Project Management and Engineering Services 20,378 19,420 21,701 Construction Contract 28,122 52,203 20,043 Total Operating Expenses 129,682 135,876 108,975 OPERATING GROSS MARGIN: International Drilling 2,302 22,002 13,509 U.S. Drilling 1,642 2,293 1,796 Rental Tools 31,531 11,667 27,091 Project Management and Engineering Services 7,221 6,449 4,662 Construction Contract (349) 3,122 492 Depreciation and Amortization (28,904) (29,307) (29,012) Total Operating Gross Margin 13,443 16,226 18,538 General and Administrative Expense (7,064) (9,812) (6,937) Provision for Reduction in Carrying Value of Certain Assets - (2,757) - Gain on Disposition of Assets, Net 1,176 1,225 1,712 TOTAL OPERATING INCOME $ 7,555 $ 4,882 $ 13,313
Marketable Rig Count Summary As of September 30, 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 Three Months Ended June March June March September 30, 31, December September 30, 31, December September 30, 2010 2010 2010 31, 2009 30, 2009 2009 2009 31, 2008 30, 2008 Previously Reported Net Income $ $ $ $ $ (Loss) $ 492 $ 507 (2,051) (4,324) $ 7,094 4,391 2,106 (39,477) $ 18,551 Restated Interest Expense, Net of Tax - Per APB 14-1 - - - - - - - (724) (721) Restated Net Income (Loss) 492 507 (2,051) (4,324) 7,094 4,391 2,106 (40,201) 17,830 Adjustments: Income Tax (Benefit) Expense 786 1,624 (1,559) 1,890 (9,155) 5,079 2,746 (31,178) 19,673 Total Other Income and Expense 6,277 11,182 9,736 7,362 6,943 7,398 7,792 9,121 6,344 Loss/(Gain) on Disposition of Assets, Net (1,176) (1,712) (672) (3,899) (1,225) (704) (78) (683) (799) Impairment of Goodwill - - - - - - - 100,315 Depreciation and Amortization 28,904 29,012 28,588 28,593 29,307 28,951 27,124 31,961 30,663 Provision for Reduction in Carrying Value of Certain Assets - - - 1,889 2,757 - - - - Adjusted $ $ $ $ EBITDA $ 35,283 40,613 34,042 $ 31,511 $ 35,721 45,115 39,690 $ 69,335 $ 73,711 Adjustments: Non-routine Items 1,081 1,087 3,888 2,998 2,402 4,048 5,308 6,279 2,264 Adjusted EBITDA after Non-routine $ $ $ $ Items $ 36,364 41,700 37,930 $ 34,509 $ 38,123 49,163 44,998 $ 75,614 $ 75,975
PARKER DRILLING COMPANY Reconciliation of Non-Routine Items * (Unaudited) (Dollars in Thousands, except Per Share) Three Months Ending Nine Months Ending September 30, 2010 September 30, 2010 Net income $ 492 $ (1,052) Earnings per diluted share $ 0.00 $ (0.01) Adjustments: Extinguishment of debt $ - $ 7,209 U.S. regulatory investigations / legal matters 1,081 6,056 Total adjustments $ 1,081 $ 13,265 Tax effect of pre-tax non-routine adjustments (378) (4,643) Fin 48 Tax Expense - Mexico - 1,085 Net non-routine adjustments $ 703 $ 9,707 Adjusted net income $ 1,195 $ 8,655 Adjusted earnings per diluted share $ 0.01 $ 0.07 Three Months Ending Nine Months Ending September 30, 2009 September 30, 2009 Net income $ 7,094 $ 13,591 Earnings per share $ 0.06 $ 0.12 Adjustments: Provision for reduction in carrying value $ 2,757 $ 2,757 DOJ investigation 2,402 11,758 Total adjustments $ 5,159 $ 14,515 Tax effect of non-routine adjustments (1,806) (5,080) Prior years Foreign Tax Credits/Fin 48 reserve (6,053) (6,053) Net non-routine adjustments $ (2,700) $ 3,382 Adjusted net income $ 4,394 $ 16,973 Adjusted earnings per diluted share $ 0.04 $ 0.15 * 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 Company
Released November 3, 2010