Parker Drilling Reports 2014 Third Quarter Results

HOUSTON, Nov. 5, 2014 /PRNewswire/ -- Parker Drilling Company (NYSE-PKD), an international provider of contract drilling and drilling-related services and rental tools to the energy industry, today reported results for the quarter ended September 30, 2014, including net income of $12.6 million, or $0.10 per diluted share, on revenues of $242.0 million.  Excluding non-routine items, the Company earned net income of $11.8 million or $0.10 per diluted share, compared with similarly adjusted 2014 second quarter net income of $15.1 million or $0.12 per diluted share, on revenues of $254.2 million.  Third quarter adjusted EBITDA, excluding non-routine expenses, was $70.3 million, compared with $71.0 million for the preceding quarter.

"Our third quarter results were in line with our expectations and reflect a solid performance from our operations.  We achieved a sequential increase in gross margin and gross margin as a percentage of revenues, although revenues declined due to anticipated reductions in Technical Services project revenues, reimbursable expenses and the Latin America region's rig fleet utilization," said Gary Rich, chairman, president and chief executive officer.

"We continue to make gains in growing and strengthening our business. Recently, we committed one of two rigs currently stationed in Tunisia for work in the Caspian / Middle East market. The commitment also includes further work for one of our two rigs in the Kurdistan Region of Iraq.  In addition, we secured a new operations and maintenance contract to provide extended reach drilling services for two customer-owned rigs in the Arabian Gulf.

Outlook

"We believe the recent decline in the price of crude oil is beginning to influence drilling activity in U.S. markets. This could lead to lower than previously expected fourth quarter revenues and earnings from our U.S. operations.  However, our international businesses operate in markets where drilling activity is less volatile.  As a result, our near-term expectations for our international businesses are largely unchanged.

"As current market concerns resolve themselves, we expect the long-term needs of the industry to generate growth in demand for the services we provide.  We believe this will produce opportunities to further grow our businesses, enhance our operating performance and deliver strong financial results," Mr. Rich added.

Third Quarter Review

Parker Drilling's revenues for the 2014 third quarter, compared with the 2014 second quarter, decreased 4.8 percent to $242.0 million from $254.2 million, operating gross margin excluding depreciation and amortization expense (segment gross margin) increased to $81.2 million from $79.7 million and segment gross margin as a percentage of revenues was 33.6 percent, compared with 31.3 percent for the prior period.

For the Company's combined drilling operations, revenues declined 8 percent to $154.3 million from $167.1 million, gross margin declined 2 percent to $45.5 million from $46.3 million, and drilling operations' gross margin as a percentage of revenues was 29.5 percent, compared with 27.7 percent. The decrease in revenues was primarily due to the anticipated reduction in Technical Services project revenues, lower reimbursable expenses and lower Latin America rig fleet utilization.  This was largely offset by higher average dayrates and lower operating costs.

  • U.S. Barge Drilling revenues were $39.6 million, gross margin was $20.7 million, and gross margin as a percentage of revenues was 52.2 percent.  Compared with the 2014 second quarter, revenues declined 2 percent and gross margin declined 4 percent.  The declines in revenues and gross margin were primarily the result of lower utilization, partially offset by an increase in realized average dayrate. 
  • U.S. Drilling revenues were $19.7 million, gross margin was $5.3 million, and gross margin as a percentage of revenues was 26.9 percent. Compared with the 2014 second quarter, revenues declined 2 percent due to a reduction in reimbursable expenses.  Gross margin increased 6 percent, primarily reflecting growing efficiencies in our Alaska operations.
  • International Drilling revenues were $88.2 million, gross margin was $18.5 million, and gross margin as a percentage of revenues was 20.9 percent. Compared with the 2014 second quarter, revenues declined 4 percent and gross margin declined 2 percent. The decrease in revenues was primarily due to the anticipated decline in reimbursable expenses and the expected reduction in our Latin America rig fleet utilization.  This was partially offset by a higher realized average dayrate.  Lower operating expenses, primarily in our operations in the Kurdistan Region of Iraq, kept gross margin relatively unchanged.
  • Technical Services revenues were $6.8 million, gross margin was $1.0 million, and gross margin as a percentage of revenues was 15.4 percent.  Compared with the 2014 second quarter, revenues decreased 55 percent due to the expected reduction in vendor services associated with customer projects.  Vendor services revenues make little contribution to gross margin.  As a result, gross margin was relatively unchanged.

Rental Tools revenues were $87.7 million, gross margin was $35.7 million, and gross margin as a percentage of revenues was 40.7 percent. Compared with the 2014 second quarter, revenues increased 1 percent and gross margin increased 7 percent. The increases in revenues and gross margin were primarily due to growth in U.S. Gulf of Mexico offshore deepwater activity and lower operating costs in our international operations.  These benefits were partially offset by reduced activity in the U.S. Gulf of Mexico shelf and inland waters markets.

General and Administrative Expense increased to $9.4 million for the 2014 third quarter, from $7.0 million for the 2014 second quarter.  Both periods benefited from the receipt of funds from an escrow account established in connection with the ITS acquisition.  Excluding this benefit, General and Administrative Expense was $10.6 million in the 2014 third quarter and $8.5 million in the 2014 second quarter.  The increased expense was primarily due to higher professional fees for corporate services.

Capital expenditures year-to-date through September 30, 2014 were $151.1 million. 

"Our attention remains focused on developing strong, durable and competitive operations capable of providing customers with innovative, reliable and efficient business solutions.  We believe our success in this will produce sustainable and profitable results, attractive returns and growth for Parker Drilling," concluded Mr. Rich.

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. Central Time (11:00 a.m. Eastern Time) on Thursday, November 6, 2014, to review reported results.  The call will be available by telephone at (719) 325-2454.  The call can also be accessed through the Investor Relations section of the Company's website.  A replay of the call can be accessed on the Company's website for 12 months and will be available by telephone from November 6, 2014 through November 13, 2014 at (888) 203-1112, using the access code 9060888#.

Cautionary Statement

This press release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements in this press release 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 are forward-looking statements. These statements include, but are not limited to, statements about anticipated future financial or operational results; the outlook for rental tools utilization and rig utilization and dayrates; the results of past capital expenditures; scheduled start-ups of rigs; general industry conditions such as the demand for drilling and the factors affecting demand; competitive advantages such as technological innovation; future operating results of the Company's rigs, rental tools operations and projects under management; future capital expenditures; expansion and growth opportunities; acquisitions or joint ventures; asset sales; successful negotiation and execution of contracts; scheduled delivery of drilling rigs or rental equipment for operation; the strengthening of the Company's financial position; increases in utilization or market share; outcomes of legal proceedings; compliance with credit facility and indenture covenants; and similar matters. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Although the Company believes that its expectations stated in this press release are based on reasonable assumptions, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, that could cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to changes in worldwide economic and business conditions, fluctuations in oil and natural gas prices, compliance with existing laws and changes in laws or government regulations, the failure to realize the benefits of, and other risks relating to, acquisitions, the risk of cost overruns, our ability to refinance our debt and other important factors, many of which could adversely affect market conditions, demand for our services, and costs, and all or any one of which could cause actual results to differ materially from those projected. For more information, see "Risk Factors" in the Company's Annual Report filed on Form 10-K with the Securities and Exchange Commission and other public filings and press releases. Each forward-looking statement speaks only as of the date of this press release and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Company Description

Parker Drilling (NYSE: PKD) provides contract drilling and drilling-related services and rental tools to the energy industry. The Company's drilling services business serves operators in the inland waters of the U.S. Gulf of Mexico utilizing Parker Drilling's barge rig fleet and in select international markets and harsh-environment regions utilizing Parker Drilling-owned and customer-owned equipment. The Company's rental tools business supplies premium equipment and well services to operators on land and offshore in the U.S. and international markets.  More information about Parker Drilling can be found on the Company's website at www.parkerdrilling.com.



PARKER DRILLING COMPANY

Consolidated Condensed Balance Sheets

(Dollars in Thousands, Except Per Share Data)








September 30, 2014


December 31, 2013


(Unaudited)




ASSETS






CURRENT ASSETS






Cash and Cash Equivalents

$

78,311



$

148,689


Accounts and Notes Receivable, Net

264,803



257,889


Rig Materials and Supplies

45,774



41,781


Deferred Costs

6,857



13,682


Deferred Income Taxes

8,015



9,940


Other Current Assets

41,606



47,302


TOTAL CURRENT ASSETS

445,366



519,283








PROPERTY, PLANT AND EQUIPMENT, NET

912,853



871,356








OTHER ASSETS






Deferred Income Taxes

126,100



102,420


Other Assets

36,694



41,697


TOTAL OTHER ASSETS

162,794



144,117








TOTAL ASSETS

$

1,521,013



$

1,534,756








LIABILITIES AND STOCKHOLDERS' EQUITY






CURRENT LIABILITIES






Current  Portion of Long-Term Debt

$

10,000



$

25,000


Accounts Payable and Accrued Liabilities

172,464



182,152


TOTAL CURRENT LIABILITIES

182,464



207,152








LONG-TERM DEBT

607,500



628,781








LONG-TERM DEFERRED TAX LIABILITY

54,540



38,767








OTHER LONG-TERM LIABILITIES

17,907



26,914








TOTAL CONTROLLING INTEREST IN STOCKHOLDERS' EQUITY

654,969



631,696


Noncontrolling interest

3,633



1,446


TOTAL EQUITY

658,602



633,142








TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,521,013



$

1,534,756














Current Ratio

2.44



2.51








Total Debt as a Percent of Capitalization

49

%


51

%







Book Value Per Common Share

$

5.37



$

5.24


 

PARKER DRILLING COMPANY

Consolidated Statement Of Operations

(Dollars in Thousands, Except Per Share Data)

(Unaudited)








Three Months
Ended June 30,


Three Months Ended September 30,



2014


2013


2014










REVENUES

$

242,012



$

237,762



$

254,234











EXPENSES:









Operating Expenses

160,797



153,147



174,569


Depreciation and Amortization

36,149



35,882



36,180



196,946



189,029



210,749


TOTAL OPERATING GROSS MARGIN

45,066



48,733



43,485











General and Administrative Expense

(9,370)



(14,238)



(7,007)


Gain (Loss) on Disposition of Assets, Net

(457)



1,094



1,019











TOTAL OPERATING INCOME

35,239



35,589



37,497











OTHER INCOME AND (EXPENSE):









Interest Expense

(10,848)



(13,127)



(10,599)


Interest Income

36



130



88


Loss on extinguishment of debt



(5,218)



(479)


Change in fair value of derivative positions






Other

(536)



(144)



1,032


TOTAL OTHER EXPENSE

(11,348)



(18,359)



(9,958)











INCOME (LOSS) BEFORE INCOME TAXES

23,891



17,230



27,539











INCOME TAX EXPENSE

11,014



9,112



11,702











NET INCOME (LOSS)

12,877



8,118



15,837


Less: net income (loss) attributable to noncontrolling interest

311



148



156


NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST

$

12,566



$

7,970



$

15,681











EARNINGS  PER SHARE - BASIC









Net Income (loss)

$

0.10



$

0.07



$

0.13











EARNINGS PER SHARE - DILUTED









Net Income (loss)

$

0.10



$

0.07



$

0.13











NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS PER SHARE









Basic

121,523,674



119,990,196



121,078,359


Diluted

123,177,753



121,674,591



122,764,247


 


PARKER DRILLING COMPANY

Consolidated Statement Of Operations

(Dollars in Thousands, Except Per Share Data)

(Unaudited)








Nine Months Ended September 30,


2014


2013







REVENUES

$

725,471



$

630,851








EXPENSES:






Operating Expenses

501,391



413,294


Depreciation and Amortization

106,666



97,674



608,057



510,968


TOTAL OPERATING GROSS MARGIN

117,414



119,883








General and Administrative Expense

(25,341)



(49,286)


Gain on Disposition of Assets, Net

433



2,759








TOTAL OPERATING INCOME

92,506



73,356








OTHER INCOME AND (EXPENSE):






Interest Expense

(33,486)



(33,874)


Interest Income

156



2,392


Loss on extinguishment of debt

(30,152)



(5,218)


Change in fair value of derivative positions



54


Other

1,391



(805)


TOTAL OTHER EXPENSE

(62,091)



(37,451)








INCOME (LOSS) BEFORE INCOME TAXES

30,415



35,905








INCOME TAX EXPENSE (BENEFIT)

14,093



18,841








NET INCOME (LOSS)

16,322



17,064








Less: net income (loss) attributable to noncontrolling interest

624



221


NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST

$

15,698



$

16,843














EARNINGS  PER SHARE - BASIC

$

0.13



$

0.14








EARNINGS PER SHARE - DILUTED

$

0.13



$

0.14








NUMBER OF COMMON SHARES USED IN COMPUTING






EARNINGS PER SHARE:






Basic

120,994,728



119,443,260


Diluted

122,972,014



121,693,781


 


PARKER DRILLING COMPANY

Selected Financial Data

(Dollars in Thousands)

(Unaudited)


























Three Months Ended





September 30,


June 30,




2014


2013


2014












REVENUES:











Rental Tools


$

87,711



$

89,614



$

87,169



U.S. Barge Drilling


39,630



33,919



40,289



U.S. Drilling


19,687



18,693



20,039



International Drilling


88,173



88,562



91,754



Technical Services


6,811



6,974



14,983



  Total Revenues


$

242,012



$

237,762



$

254,234













OPERATING EXPENSES:











Rental Tools


$

51,987



$

48,739



$

53,842



U.S. Barge Drilling


18,939



18,112



18,761



U.S. Drilling


14,395



14,786



15,045



International Drilling


69,713



64,720



72,954



Technical Services


5,763



6,790



13,967



  Total Operating Expenses


$

160,797



$

153,147



$

174,569













OPERATING GROSS MARGIN:











Rental Tools


$

35,724



$

40,875



$

33,327



U.S. Barge Drilling


20,691



15,807



21,528



U.S. Drilling


5,292



3,907



4,994



International Drilling


18,460



23,842



18,800



Technical Services


1,048



184



1,016



Depreciation and Amortization


(36,149)



(35,882)



(36,180)



  Total Operating Gross Margin


$

45,066



$

48,733



$

43,485













 


PARKER DRILLING COMPANY

Adjusted EBITDA

(Dollars in Thousands)

(Unaudited)



















Three Months Ended



September
30, 2014


June 30,
2014


March 31,
2014


December
31, 2013


September
30, 2013

















Net Income (Loss) Attributable to Controlling Interest


$

12,566



$

15,681



$

(12,549)



$

10,172



$

7,970


Adjustments:
















Income Tax (Benefit) Expense


11,014



11,702



(8,623)



6,766



9,112


Interest Expense


10,848



10,599



12,039



13,946



13,127


Other Income and Expense


500



(641)



28,746



(2,313)



5,234


(Gain) Loss on Disposition of Assets, Net


457



(1,019)



129



(1,234)



(1,094)


Depreciation and Amortization


36,149



36,180



34,337



36,378



35,882


Provision for Reduction in Carrying Value of Certain Assets








2,544




















Adjusted EBITDA*


71,534



72,502



54,079



66,259



70,231


















Adjustments:
















Non-routine Items


(1,250)



(1,500)





3,306



4,819


















Adjusted EBITDA after Non-routine Items


$

70,284



$

71,002



$

54,079



$

69,565



$

75,050























*Adjusted EBITDA, 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