Parker Drilling Reports Fourth Quarter Results
HOUSTON, Feb. 23, 2011 /PRNewswire/ -- Parker Drilling (NYSE: PKD), a drilling contractor and service provider, today reported results for the 2010 fourth quarter and annual periods ended December 31, 2010. The Company's results for the fourth quarter included a net loss attributable to controlling interest of $13.4 million or $0.12 per diluted share on revenues of $173.3 million, compared with a net loss attributable to controlling interest of $4.3 million or $0.04 per diluted share on revenues of $175.8 million for the 2009 fourth quarter. Excluding the effects of non-routine items the Company reported net income attributable to controlling interest of $1.5 million or $0.01 per diluted share compared with a similarly adjusted 2009 fourth quarter net loss attributable to controlling interest of $0.5 million or $0.00 per diluted share. Adjusted EBITDA, excluding non-routine items, was $48.0 million, compared with $34.5 million for the prior year's fourth quarter.
"Our fourth quarter results reflect the balance that our diverse geographic and business mix provides in a cyclical industry," began Parker Drilling President and Chief Executive Officer David Mannon. "We had another record performance from our rental tools business and improved results from our U.S. barge drilling operations. Though these gains were offset, principally by declines in our international drilling segment, the overall result was a significant increase in operating income on a one percent decline in revenues. The required payment of a contested tax assessment in Kazakhstan, disclosed previously, and other non-routine items, resulted in a reported net loss for the quarter," said Mannon.
Fourth Quarter Highlights
-- Parker'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.) -- The Company's U.S. barge drilling business continued to achieve year-to-year increases in rig fleet utilization, which, combined with operating improvements, have led to its highest reported revenues and segment gross margin and segment gross margin as a percent of revenues since 2008. -- International Drilling benefited from a new contract in the Asia Pacific region, deploying a rig in Papua New Guinea that had been previously stacked. In addition, the contract for Rig 257, Parker's Caspian Sea arctic barge drilling rig, was extended into 2012. -- The Parker-operated Yastreb rig set a new, extended-reach drilling record of 40,502 feet, nearly eight miles, in total measured depth. This rig, designed, built and operated by Parker Drilling for Exxon Neftegas Limited, set this record during development drilling of the Sakhalin-1 Project's Odoptu field.
"The benefits of Parker's commitment to develop and grow its diverse, complementary operations are reflected in the results of the fourth quarter," said Mannon. "The proliferation of lateral drilling on land in the U.S., predominantly in the emerging shale plays, has raised demand for rental equipment in the markets where our Rental Tools operations are located. The pick-up in shallow water drilling in the Gulf of Mexico for oil and natural gas has renewed the barge drilling market, and, as the leading operator in that market, our business has continued to strengthen. Our international drilling rig activity slowed, mostly the result of local market conditions in the CIS/Africa-Middle East region that have idled several rigs and the effect of redeploying rigs in the Americas region in response to changed opportunities. Our project management business continued to provide a steady stream of revenues and cash flow as it performed on our existing operational contracts and continued development of additional project opportunities," he summarized. "We believe our established strengths as a drilling services provider and our diversity of operations should contribute to improved results in the year ahead and provide support for longer-term earnings growth for Parker," Mannon concluded.
Fourth Quarter Review
Parker's revenues for the 2010 fourth quarter were $173.3 million compared with 2009 fourth quarter revenues of $175.8 million. The Company's 2010 fourth quarter gross margin, before depreciation and amortization expense, was $54.2 million compared with 2009 fourth quarter gross margin of $43.0 million, while gross margin as a percentage of revenues increased to 31 percent from the 24 percent gross margin for the 2009 fourth quarter. Results for the three months ended December 31, 2010, included the impact of several non-routine expenses. These were comprised of $13.3 million related to a previously disclosed contested tax assessment in Kazakhstan; $0.5 million, pre-tax, related to the ongoing U.S. regulatory investigations and Parker's internal review regarding possible violations of the Foreign Corrupt Practices Act and other laws; and a $2.0 million, pre-tax, reserve taken for the doubtful collection of a customer receivable. These non-routine items reduced after-tax earnings by $14.9 million or $0.13 per diluted share. The results for the 2009 fourth quarter included non-routine, after-tax expense of $3.8 million or $0.04 per diluted share. Details of the non-routine items are provided in the attached financial tables.
-- Rental Toolsrevenues increased 96 percent, to $49.3 million from $25.1 million, segment gross margin rose to $32.8 million from $13.8 million, and segment gross margin as a percent of revenues rose to 66 percent from 55 percent. The continued growth in the U.S. in the development of shale formations and the expanded use of lateral drilling to exploit oil and natural gas resources has led to increased demand for rental tools. With facilities strategically located in key U.S. drilling markets and recent timely investments in rental tool inventory, Parker's Rental Tools business continued to benefit from increased demand, higher utilization and improved pricing. The increase in onshore demand was slightly offset by a decline in U.S. offshore and international revenues. -- U.S. Drilling revenues increased 32 percent, to $19.2 million from $14.5 million, segment gross margin rose to $5.7 million from $1.3 million, and segment gross margin as a percent of revenues increased to 30 percent from 9 percent. Barge drilling in the shallow water and inland areas of the Gulf of Mexico remained active, with continued improvement, year-to-year, in rigs working and dayrates. For the quarter, the business had an average of 9.5 barges employed, approximately 2 more than for the comparable period of 2009. The barge rig fleet's average dayrate was $21,000 for the 2010 fourth quarter and $19,300 for the 2009 fourth quarter. -- International Drilling revenues declined 31 percent, to $49.9 million from $72.7 million, segment gross margin declined to $10.3 million compared with $21.9 million, and segment gross margin as a percent of revenues decreased to 21 percent from 30 percent. A reduction in drilling activity in the CIS/AME region and Mexico led to a decline in rig utilization and lower revenues for the 2010 fourth quarter compared with the prior year's fourth quarter. This was offset in part by higher revenues from our Caspian Sea arctic barge rig which returned to a warm-stack rate during the fourth quarter of 2010, having been on a lower average dayrate in the prior year's fourth quarter. Though operating costs were reduced as utilization declined, gross margin declined more than revenues. Average rig fleet utilization for the 2010 fourth quarter was 46 percent, compared with 64 percent for the prior year's fourth quarter. For the quarter, the ten-rig Americas regional fleet operated at 67 percent average utilization, the eleven-rig CIS/AME regional fleet operated at 33 percent average utilization and the eight-rig Asia Pacific regional fleet operated at 45 percent average utilization. Three rigs located in the Asia Pacific region are being marketed for sale, reducing the region's fleet at year-end 2010 to five rigs and Parker's overall international fleet to 27 rigs. (Additional rig fleet information is available on Parker's Web site). -- Project Management and Engineering Services revenues increased 18 percent, to $32.5 million from $27.6 million, segment gross margin decreased to $4.7 million from $5.4 million and segment gross margin as a percent of revenues decreased to 14 percent from 20 percent. The increase in revenues was primarily due to higher operating rates on the Yastreb rig and Orlan platform and increased engineering services revenues. The segment's gross margin decline is primarily attributable to lower earnings on the 2010 fourth quarter's engineering revenues compared with the prior year's fourth quarter. -- Construction Contractrevenues declined to $22.4 million compared with $35.8 million and segment gross margin was $0.9 million, compared to a $0.6 million in the prior year's comparable period. Segment revenues and gross margin represent work completed during the period on the construction of the customer-owned Liberty rig. In the fourth quarter, construction of the rig was halted by the customer while it reviews the rig's engineering and design, including its safety systems.
The Company's results for the 2010 year included a net loss attributable to controlling interest of $14.5 million or $0.13 per diluted share on revenues of $659.5 million, compared with net income attributable to controlling interest of $9.3 million or $0.08 per diluted share on revenues of $752.9 million for the prior year. Excluding the effects of non-routine items the Company reported adjusted net income attributable to controlling interest of $8.6 million or $0.08 per diluted share compared with similarly adjusted 2009 net income attributable to controlling interest of $16.5 million or $0.14 per diluted share. Adjusted EBITDA, excluding non-routine items, was $163.4 million for the 2010 year and $166.8 million for the prior year.
Results for the 2010 year included the impact of non-routine items that decreased after-tax earnings by $23.1 million or $0.20 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; $5.9 million, pre-tax, of expense related to the U.S. regulatory investigations and Parker's internal review regarding possible violations of the Foreign Corrupt Practices Act and other laws; $13.3 million of expense related to a tax assessment in Kazakhstan that is currently on appeal; and a $2.0 million, pre-tax, reserve taken for the doubtful collection of a customer receivable. Net income for 2009 included $7.2 million of expense for non-routine items. Also included in segment operating expenses for 2010 are $8.8 million, pre-tax ($5.5 million, after tax), from several tax settlements and adjustments that occurred in the 2010 third quarter related to prior periods' operations.
Cash Flow and Capitalization
Capital expenditures for 2010 were $219.2 million, including $112.5 million for the construction of Parker's two newbuild arctic land rigs for Alaska and $48.9 million for the purchase of tubular goods and other rental equipment.
Parker Drilling has scheduled a conference call for 10:00 a.m. CST (11:00 a.m. EST) on Wednesday, February 23, 2011, to discuss its reported results. Those interested in listening to the call by telephone may do so by dialing (480) 629-9722. 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 can be accessed on the Company's Web site for 12 months and will be available by telephone from February 23 through March 3 by dialing (303) 590-3030 and using the access code 4403236#.
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 reports on Form 10-K and Form 10-Q. 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 25 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 December 31, 2010 December 31, 2009 (Unaudited) ASSETS (Dollars in Thousands) CURRENT ASSETS Cash and Cash Equivalents $ 51,431 $ 108,803 Accounts and Notes Receivable, Net 168,876 188,687 Rig Materials and Supplies 25,527 31,633 Deferred Costs 2,229 4,531 Deferred Income Taxes 9,278 9,650 Assets held for sale 5,287 - Other Current Assets 105,496 100,225 TOTAL CURRENT ASSETS 368,124 443,529 PROPERTY, PLANT AND EQUIPMENT, NET 816,147 716,798 OTHER ASSETS Deferred Income Taxes 52,081 55,749 Other Assets 26,944 27,010 TOTAL OTHER ASSETS 79,025 82,759 TOTAL ASSETS $ 1,263,296 $ 1,243,086 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current Portion of Long-Term Debt $ 12,000 $ 12,000 Accounts Payable and Accrued Liabilities 163,263 177,036 TOTAL CURRENT LIABILITIES 175,263 189,036 LONG-TERM DEBT 460,862 411,831 LONG-TERM DEFERRED TAX LIABILITY 9,324 16,074 OTHER LONG-TERM LIABILITIES 29,781 30,246 TOTAL CONTROLLING INTEREST IN STOCKHOLDERS' EQUITY 588,313 595,899 Noncontrolling interest (247) - TOTAL EQUITY 588,066 595,899 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,263,296 $ 1,243,086 Current Ratio 2.10 2.35 Total Debt as a Percent of Capitalization 45% 42% Book Value Per Common Share $ 5.05 $ 5.13
PARKER DRILLING COMPANY Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended December 31, Year Ended December 31, 2010 2009 2010 2009 (Dollars in Thousands) (Dollars in Thousands) REVENUES: International Drilling $ 49,950 $ 72,711 $ 220,371 $ 293,337 U.S. Drilling 19,191 14,533 64,543 49,628 Rental Tools 49,310 25,109 172,598 115,057 Project Management and Engineering Services 32,470 27,631 110,873 109,445 Construction Contract 22,395 35,801 91,090 185,443 TOTAL REVENUES 173,316 175,785 659,475 752,910 OPERATING EXPENSES: International Drilling 39,677 50,858 177,585 191,486 U.S. Drilling 13,533 13,233 53,334 48,054 Rental Tools 16,559 11,302 60,036 52,740 Project Management and Engineering Services 27,795 22,202 89,435 85,799 Construction Contract 21,526 35,194 90,888 177,311 Depreciation and Amortization 28,526 28,593 115,030 113,975 TOTAL OPERATING EXPENSES 147,616 161,382 586,308 669,365 TOTAL OPERATING GROSS MARGIN 25,700 14,403 73,167 83,545 General and Administrative Expense (6,695) (11,485) (30,728) (45,483) Impairment of Goodwill - - - - Provision for Reduction in Carrying Value of Certain Assets (1,952) (1,889) (1,952) (4,646) Gain on Disposition of Assets, Net 1,060 3,899 4,620 5,906 TOTAL OPERATING INCOME 18,113 4,928 45,107 39,322 OTHER INCOME AND (EXPENSE): Interest Expense (6,296) (6,787) (26,805) (29,450) Interest Income 59 146 257 1,041 Loss on extinguishment of debt - - (7,209) - Other Income (Expense) 41 (721) 155 (1,086) TOTAL OTHER INCOME AND (EXPENSE) (6,196) (7,362) (33,602) (29,495) INCOME (LOSS) BEFORE INCOME TAXES 11,917 (2,434) 11,505 9,827 INCOME TAX EXPENSE (BENEFIT) Current 21,985 1,200 27,521 15,424 Deferred 3,377 690 (1,308) (14,864) TOTAL INCOME TAX EXPENSE (BENEFIT) 25,362 1,890 26,213 560 NET INCOME (LOSS) (13,445) (4,324) (14,708) 9,267 Less: net (loss) attributable to noncontrolling interest (36) - (247) - NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST $ (13,409) $ (4,324) $ (14,461) $ 9,267 EARNINGS PER SHARE - BASIC Net Income $ (0.12) $ (0.04) $ (0.13) $ 0.08 EARNINGS PER SHARE - DILUTED Net Income $ (0.12) $ (0.04) $ (0.13) $ 0.08 NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS PER SHARE Basic 114,671,545 113,288,308 114,258,965 113,000,555 Diluted 114,671,545 115,465,565 114,258,965 114,925,446
PARKER DRILLING COMPANY Selected Financial Data (Unaudited) Three Months Ended December 31, September 30, 2010 2009 2010 (Dollars in Thousands) REVENUES: International Drilling $ 49,950 $ 72,711 $ 53,614 U.S. Drilling 19,191 14,533 14,929 Rental Tools 49,310 25,109 48,114 Project Management and Engineering Services 32,470 27,631 27,599 Construction Contract 22,395 35,801 27,773 Total Revenues 173,316 175,785 172,029 OPERATING EXPENSES: International Drilling 39,677 50,858 51,312 U.S. Drilling 13,533 13,233 13,287 Rental Tools 16,559 11,302 16,583 Project Management and Engineering Services 27,795 22,202 20,378 Construction Contract 21,526 35,194 28,122 Total Operating Expenses 119,090 132,789 129,682 OPERATING GROSS MARGIN: International Drilling 10,273 21,853 2,302 U.S. Drilling 5,658 1,300 1,642 Rental Tools 32,751 13,807 31,531 Project Management and Engineering Services 4,675 5,429 7,221 Construction Contract 869 607 (349) Depreciation and Amortization (28,526) (28,593) (28,904) Total Operating Gross Margin 25,700 14,403 13,443 General and Administrative Expense (6,695) (11,485) (7,064) Provision for Reduction in Carrying Value of Certain Assets (1,952) (1,889) - Gain on Disposition of Assets, Net 1,060 3,899 1,176 TOTAL OPERATING INCOME $ 18,113 $ 4,928 $ 7,555 Marketable Rig Count Summary As of December 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 5 Americas 10 CIS/AME 11 Other 1 Total International Land and Barge Rigs 27 Total Marketable Rigs 40
PARKER DRILLING COMPANY Adjusted EBITDA (Dollars in Thousands) Three Months Three Months Ended Ended June March June March December September 30, 31, December September 30, 31, December 31, 2010 30, 2010 2010 2010 31, 2009 30, 2009 2009 2009 31, 2008 Previously Reported Net Income $ $ $ $ $ $ (Loss) (13,445) $ 492 $ 507 (2,051) (4,324) $ 7,094 4,391 2,106 (39,477) Restated Interest Expense, Net of Tax - Per APB 14-1 - - - - - - - - (724) Restated Net Income (Loss) (13,445) 492 507 (2,051) (4,324) 7,094 4,391 2,106 (40,201) Adjustments: Income Tax (Benefit) Expense 25,362 786 1,624 (1,559) 1,890 (9,155) 5,079 2,746 (31,178) Total Other Income and Expense 6,196 6,277 11,182 9,736 7,362 6,943 7,398 7,792 9,121 Loss/(Gain) on Disposition of Assets, Net (1,060) (1,176) (1,712) (672) (3,899) (1,225) (704) (78) (683) Impairment of Goodwill - - - - - - - - 100,315 Depreciation and Amortization 28,526 28,904 29,012 28,588 28,593 29,307 28,951 27,124 31,961 Provision for Reduction in Carrying Value of Certain Assets 1,952 - - - 1,889 2,757 - - - Adjusted $ $ $ $ EBITDA $ 47,531 $ 35,283 40,613 34,042 $ 31,511 $ 35,721 45,115 39,690 $ 69,335 Adjustments: Non-routine Items 460 930 694 3,811 2,998 2,402 4,048 5,308 6,279 Adjusted EBITDA after Non-routine $ $ $ $ Items $ 47,991 $ 36,213 41,307 37,853 $ 34,509 $ 38,123 49,163 44,998 $ 75,614
PARKER DRILLING COMPANY Reconciliation of Non-Routine Items * (Unaudited) (Dollars in Thousands, except Per Share) Three Months Ending Twelve Months Ending December 31, 2010 December 31, 2010 Net loss attributable to controlling interest $ (13,409) $ (14,461) Earnings per diluted share $ (0.12) $ (0.13) Adjustments: Extinguishment of debt - 7,209 Provision for the reduction in carrying value 1,952 1,952 U.S. regulatory investigations / legal matters** 460 5,895 Total adjustments $ 2,412 $ 15,056 Tax effect of pre-tax non-routine adjustments (844) (5,270) Kazakhstan tax audit assessment 13,304 13,304 Net non-routine adjustments $ 14,872 $ 23,090 Adjusted net income attributable to controlling interest $ 1,463 $ 8,629 Adjusted earnings per diluted share $ 0.01 $ 0.08 Three Months Ending Twelve Months Ending December 31, 2009 December 31, 2009 Net income (loss) attributable to controlling interest $ (4,324) $ 9,267 Earnings per share $ (0.04) $ 0.08 Adjustments: Provision for reduction in carrying value 1,889 4,646 Rig 57B settlement (3,750) (3,750) U.S. regulatory investigations / legal matters 3,944 15,702 Total adjustments $ 2,083 $ 16,598 Tax effect of non-routine adjustments (729) (5,809) Prior years Foreign Tax Credits/Fin 48 reserve 2,464 (3,589) Net non-routine adjustments $ 3,818 $ 7,200 Adjusted net income (loss) attributable to controlling interest $ (506) $ 16,467 Adjusted earnings per diluted share $ (0.00) $ 0.14
* 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. ** Amended to include comparable expenses in all periods.
SOURCE Parker Drilling
Released February 23, 2011