Parker Drilling Reports 2017 Fourth Quarter Results and Amendment to Credit Facility

HOUSTON, Feb. 14, 2018 /PRNewswire/ -- Parker Drilling Company (NYSE: PKD) today announced results for the fourth quarter ended December 31, 2017, including a reported net loss of $29.6 million, or a $0.21 loss per share, on revenues of $116.3 million.

The net loss includes a non-cash pre-tax loss of $4.3 million of asset and inventory write-offs associated with the sale of a rig in Papua New Guinea and $3.3 million of asset and inventory write-offs associated with select international drilling assets.  Excluding these items, the adjusted net loss was $22.0 million, or a $0.16 loss per share.

Fourth quarter Adjusted EBITDA was $22.4 million.

"The year ended on a strong note, thanks in large part to the continuing growth in our Rental Tools Services business," said Gary Rich, the Company's Chairman, President and CEO.  "While 2017 was another challenging year for the oilfield services sector, compared to 2016, Parker Drilling increased gross margin, excluding depreciation and amortization, by 35 percent on essentially flat revenue by maintaining diligent focus on cost control.  We also worked to maintain liquidity by focusing on working capital and finished the year with $141.5 million in cash, almost $22 million greater than when we started the year.

"I am proud of our accomplishments and believe we have fundamentally streamlined our cost structure to best position the company for continued strength going forward.  We remain optimistic about our future as we continue to see increasing signs of a recovery taking hold," concluded Rich.

Fourth Quarter Review

Parker Drilling's revenues for the 2017 fourth quarter, compared with the 2017 third quarter, decreased 1.7 percent to $116.3 million from $118.3 million.  Operating gross margin, excluding depreciation and amortization expense (gross margin), decreased 19.2 percent to $24.4 million from $30.2 million and gross margin as a percentage of revenues was 21.0 percent, compared with 25.5 percent for the prior period. 

Drilling Services

For the Company's Drilling Services business, which is comprised of the U.S. (Lower 48) Drilling and the International & Alaska Drilling segments, fourth quarter revenues declined 7.6 percent to $62.2 million from $67.3 million.  Gross margin decreased 54.6 percent to $5.4 million from $11.9 million and gross margin as a percentage of revenues was 8.7 percent, compared with 17.7 percent for the prior period.  Contracted backlog was $241 million at the end of the fourth quarter compared with $257 million at the end of the third quarter.

U.S. (Lower 48) Drilling    

U.S. (Lower 48) Drilling segment revenues were $1.5 million, a 66.3 percent decrease from 2017 third quarter revenues of $4.6 million.  Gross margin was a $2.7 million loss as compared with a 2017 third quarter loss of $0.5 million. The decrease in revenues and gross margin was driven by fewer revenue days, as utilization dropped from 17% in the third quarter to 5% in the fourth quarter.

International & Alaska Drilling

International & Alaska Drilling segment revenues were $60.6 million, a 3.3 percent decrease from 2017 third quarter revenues of $62.7 million.  Gross margin was $8.0 million, a 35.5 percent decrease from 2017 third quarter gross margin of $12.4 million Gross margin as a percentage of revenues was 13.2 percent as compared with 19.7 percent for the 2017 third quarter. The decrease in revenues was primarily attributable to lower reimbursable revenues.  Excluding reimbursable revenues, revenues were flat as increases associated with additional O&M activity and drilling activity in the Kurdistan Region of Iraq were offset by lower joint venture revenues from Kazakhstan and reduced day rates for the Parker-owned rig in Sakhalin, which completed drilling activities in the third quarter and went on a reduced standby rate in the fourth quarter.  The decrease in gross margin was primarily the result of inventory and asset related write-offs of select drilling assets and the sale of a rig in Papua New Guinea, which collectively reduced gross margin by $3.0 million.

Rental Tools Services

For the Company's Rental Tools Services business, which is comprised of the U.S. Rental Tools and International Rental Tools segments, fourth quarter revenues were $54.1 million, a 6.1 percent increase from 2017 third quarter revenues of $51.0 million.  Gross margin was $19.1 million, a 4.4 percent increase from $18.3 million for the 2017 third quarter. Gross margin as a percentage of revenues was 35.3 percent as compared with 35.9 percent in the 2017 third quarter.

U.S. Rental Tools

U.S. Rental tools segment revenues were $36.3 million, compared with $35.7 million for the 2017 third quarter. Gross margin was $19.0 million compared with $19.6 million for the 2017 third quarter.  Revenues were essentially flat quarter-on-quarter as U.S. Land and offshore shelf increases offset reductions in deepwater activity.  Gross margin decreased as a result of higher operating expenses and revenue mix associated with decreased deepwater activity.

International Rental Tools

International Rental Tools segment revenues were $17.8 million, compared with $15.3 million for the 2017 third quarter. Gross margin was a gain of $11.0 thousand compared with a loss of $1.3 million for the 2017 third quarter.   The increase in revenues was primarily the result of additional activity in most of our international markets.  The improvement in gross margin was due to a more favorable product mix as well as cost reductions taken in the third quarter, which fully impacted the fourth quarter.

Consolidated

General and Administrative expense decreased to $5.1 million for the 2017 fourth quarter, from $7.0 million for the 2017 third quarter, predominately due to incentive plan adjustments.

Capital expenditures in the fourth quarter were $9.7 million, and were $54.5 million for the year.

Credit Facility Amendment

On February 14, 2018, the Company executed an amendment to the 2015 Secured Credit Agreement, modifying the credit facility to an Asset-Based Lending (ABL) structure and reducing the size of the revolver from $100 million to $80 million. The amendment eliminates the financial maintenance covenants required in the 2015 Secured Credit Agreement and replaces them with a liquidity covenant and a monthly borrowing base calculation based on eligible rental equipment and eligible domestic accounts receivable. The liquidity covenant requires the Company to maintain a minimum of $30 million of liquidity (defined as availability under the borrowing base and cash on hand), of which $15 million is restricted, resulting in a maximum availability at any one time of $65 million. The amendment also allows greater flexibility to refinance the Company's existing Senior Notes on either a secured or unsecured basis.

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. Central Time (11:00 a.m. Eastern Time) on Thursday, February 15, 2018, to review reported results.  You may access the call by telephone at (+1) (412) 902-0003 and asking for the 2017 Fourth Quarter Conference Call.  The call may 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 through February 22, 2018, at (+1) (201) 612-7415, access code 13675091#.

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 addressing activities, events or developments 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 purchases and sales; successful negotiation and execution of contracts; scheduled delivery of drilling rigs or rental equipment for operation; the Company's financial position; changes 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 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.

This news release contains non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each such measure to its most directly comparable U.S. Generally Accepted Accounting Principles (GAAP) financial measure, together with an explanation of why management believes that these non-GAAP financial measures provide useful information to investors, is provided in the following tables.

Company Description

Parker Drilling provides drilling 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 U.S. and international markets and harsh-environment regions utilizing Parker-owned and customer-owned equipment. The Company's Rental Tools Services 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.

Contact: Jason Geach, Vice President, Investor Relations & Corporate Development (+1) (281) 406-2310, jason.geach@parkerdrilling.com.

 

PARKER DRILLING COMPANY

Consolidated Condensed Balance Sheets

(Dollars in Thousands)






December 31, 2017


December 31, 2016


(Unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$

141,549



$

119,691


Accounts and Notes Receivable, net

122,511



113,231


Rig materials and supplies

31,415



32,354


Deferred costs

3,145



1,436


Other current assets

19,216



19,606


Total current assets

317,836



286,318






Property, plant and equipment, net

625,771



693,439






Other assets:




Deferred income taxes

1,284



70,309


Other assets

45,388



53,485


Total other assets

46,672



123,794






Total assets

$

990,279



$

1,103,551






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable and Accrued liabilities

$

103,676



$

102,921


Total current liabilities

103,676



102,921






Long-term debt, net of unamortized debt issuance costs

577,971



576,326






Long-term deferred tax liability

78



69,333






Other long-term liabilities

12,433



15,836






Total stockholders' equity

296,121



339,135






Total liabilities and stockholders' equity

$

990,279



$

1,103,551


 

PARKER DRILLING COMPANY

Consolidated Statement Of Operations

(Dollars in Thousands, Except Per Share Data)

(Unaudited)






Three Months Ended September 30,


Three Months Ended December 31,



2017


2016


2017







Revenues

$

116,334



$

94,025



$

118,308








Expenses:






Operating expenses

91,912



80,529



88,120


Depreciation and amortization

29,122



33,190



30,067



121,034



113,719



118,187


Total operating gross margin (loss)

(4,700)



(19,694)



121








General and administrative expense

(5,100)



(9,132)



(7,033)


Provision for reduction in carrying value of certain assets

(1,938)






Gain (loss) on disposition of assets, net

(2,483)



(1,364)



97


Total operating income (loss)

(14,221)



(30,190)



(6,815)








Other income (expense)






Interest expense

(11,194)



(11,048)



(11,067)


Interest income

84



10



128


Other

(326)



(1,409)



(638)


Total other income (expense)

(11,436)



(12,447)



(11,577)








Income (loss) before income taxes

(25,657)



(42,637)



(18,392)








Income tax expense (benefit)

3,036



6,292



1,919








Net income (loss)

(28,693)



(48,929)



(20,311)


Less: Mandatory convertible preferred stock dividend

$

906



$



$

906


Net income (loss) available to common stockholders

$

(29,599)



$

(48,929)



$

(21,217)








Earnings (loss) per common share - Basic






Net income (loss)

$

(0.21)



$

(0.39)



$

(0.15)








Earnings (loss) per common share - Diluted






Net Income (loss)

$

(0.21)



$

(0.39)



$

(0.15)








Number of common shares used in computing earnings per share:






Basic

138,675,403



124,830,473



138,300,015


Diluted

138,675,403



124,830,473



138,300,015


 

PARKER DRILLING COMPANY

Consolidated Statement Of Operations

(Dollars in Thousands, Except Per Share Data)

(Unaudited)








Year Ended December 31,


2017


2016


2015







Revenues

$

442,520



$

427,004



$

712,183








Expenses:






Operating expenses

355,487



362,521



526,290


Depreciation and amortization

122,373



139,795



156,194



477,860



502,316



682,484


Total operating gross margin (loss)

(35,340)



(75,312)



29,699








General and administrative expense

(25,676)



(34,332)



(36,190)


Provision for reduction in carrying value of certain assets

(1,938)





(12,490)


Gain (loss) on disposition of assets, net

(2,851)



(1,613)



1,643


Total operating income (loss)

(65,805)



(111,257)



(17,338)








Other income (expense)






Interest expense

(44,226)



(45,812)



(45,155)


Interest income

244



58



269


Other

126



367



(9,747)


Total other income (expense)

(43,856)



(45,387)



(54,633)








Income (loss) before income taxes

(109,661)



(156,644)



(71,971)








Income tax expense (benefit)

9,040



74,170



22,313








Net income (loss)

(118,701)



(230,814)



(94,284)


Less: Net income attributable to noncontrolling interest





789


Net income (loss) attributable to controlling interest

$

(118,701)



$

(230,814)



$

(95,073)


Less: Mandatory convertible preferred stock dividend

$

3,051



$



$


Net income (loss) available to common stockholders

$

(121,752)



$

(230,814)



$

(95,073)








Earnings (loss) per common share - Basic






Net income (loss)

$

(0.89)



$

(1.86)



$

(0.78)








Earnings (loss) per common share - Diluted






Net Income (loss)

$

(0.89)



$

(1.86)



$

(0.78)








Number of common shares used in computing earnings per share:






Basic

136,266,843



124,130,004



122,562,187


Diluted

136,266,843



124,130,004



122,562,187


 

PARKER DRILLING COMPANY

Selected Financial Data

(Dollars in Thousands)

(Unaudited)





























Three Months Ended


Year Ended December 31,



December 31,


September 30,


2017


2016


2015



2017


2016


2017

















Revenues:












Drilling Services:












U.S. (Lower 48) Drilling

$

1,546



$

848



$

4,585



$

12,389



$

5,429



$

30,358


International & Alaska Drilling

60,648



61,478



62,726



247,254



287,332



435,096



Total Drilling Services:

62,194



62,326



67,311



259,643



292,761



465,454


Rental Tools Services:












U.S. Rental Tools

36,324



16,130



35,677



121,937



71,613



141,889


International Rental Tools

17,816



15,569



15,320



60,940



62,630



104,840



Total Rental Tools Services

54,140



31,699



50,997



182,877



134,243



246,729



  Total revenues

$

116,334



$

94,025



$

118,308



$

442,520



$

427,004



$

712,183















Operating expenses:












Drilling Services:












U.S. (Lower 48) Drilling

$

4,205



$

4,232



$

5,052



$

19,524



$

19,733



$

36,247


International & Alaska Drilling

52,619



47,307



50,345



206,552



222,824



325,346



Total Drilling Services:

56,824



51,539



55,397



226,076



242,557



361,593


Rental Tools Services:












U.S. Rental Tools

17,283



12,102



16,086



62,797



50,216



77,056


International Rental Tools

17,805



16,888



16,637



66,614



69,748



87,641



Total Rental Tools Services

35,088



28,990



32,723



129,411



119,964



164,697



  Total operating expenses

$

91,912



$

80,529



$

88,120



$

355,487



$

362,521



$

526,290















Operating gross margin (loss):












Drilling Services:












U.S. (Lower 48) Drilling

$

(2,659)



$

(3,384)



$

(467)



$

(7,135)



$

(14,304)



$

(5,889)


International & Alaska Drilling

8,029



14,171



12,381



40,702



64,508



109,750



Total Drilling Services

5,370



10,787



11,914



33,567



50,204



103,861


Rental Tools Services:












U.S. Rental Tools

19,041



4,028



19,591



59,140



21,397



64,833


International Rental Tools

11



(1,319)



(1,317)



(5,674)



(7,118)



17,199



Total Rental Tools Services

19,052



2,709



18,274



53,466



14,279



82,032



  Total operating gross margin excluding

  depreciation and amortization

24,422



13,496



30,188



87,033



64,483



185,893


Depreciation and amortization

(29,122)



(33,190)



(30,067)



(122,373)



(139,795)



(156,194)



  Total operating gross margin (loss)

$

(4,700)



$

(19,694)



$

121



$

(35,340)



$

(75,312)



$

29,699


 

PARKER DRILLING COMPANY

Adjusted EBITDA (1)

(Dollars in Thousands)

(Unaudited)














Three Months Ended



December 31, 2017


September 30, 2017


June 30, 2017


March 31, 2017


December 31, 2016












Net income (loss) available to  common shareholders


$

(29,599)



$

(21,217)



$

(31,127)



$

(39,809)



$

(48,929)


Interest expense


11,194



11,067



11,095



10,870



11,048


Income tax expense (benefit)


3,036



1,919



1,743



2,342



6,292


Depreciation and amortization


29,122



30,067



30,982



32,202



33,190


Mandatory convertible preferred stock dividend


906



906



1,239

















EBITDA


14,659



22,742



13,932



5,605



1,601













Adjustments:











Other (income) expense


242



510



(582)



(540)



1,399


(Gain) loss on disposition of assets, net


2,483



(97)



113



352



1,364


Provision for reduction in carrying value of certain assets


1,938










Special items (2)


3,033









876
























Adjusted EBITDA


$

22,355



$

23,155



$

13,463



$

5,417



$

5,240



(1) We believe Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare our core operating results from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), remeasurement of foreign currency transactions, tax consequences, impairment and other special items. Special items include items impacting operating expenses that management believes detract from an understanding of normal operating performance. Management uses Adjusted EBITDA as a supplemental measure to review current period operating performance and period to period comparisons. Our Adjusted EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate EBITDA in the same manner. EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. Generally Accepted Accounting Principles (GAAP), and should not be considered in isolation or as an alternative to operating income or loss, net income or loss, cash flows provided by or used in operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.


(2) Special items include:

- For the three months ended December 31, 2017, special items include a $3.0 million write-off of inventory associated with select international drilling assets. This item is recorded in operating expenses in the Consolidated Statement Of Operations.
- For the three months ended December 31, 2016, special items include $0.9 million of net severance associated with the departure of three executives. This item is recorded in general and administrative expense in the Consolidated Statement Of Operations.

 

PARKER DRILLING COMPANY

Reconciliation of Adjusted Earnings Per Share

(Dollars in Thousands, Except Per Share Data)

(Unaudited)




Three Months Ended




December 31,


September 30,




2017


2016


2017









Net income (loss) available to common shareholders


$

(29,599)



$

(48,929)



$

(21,217)


Income (loss) per diluted share


$

(0.21)



$

(0.39)



$

(0.15)










 Adjustments:








(Gain) loss on disposition of assets, net


$

2,588







Provision for reduction in carrying value of certain assets


1,938







Write-off inventory


3,033







Valuation allowance




6,772





Special items




876





           Net adjustments


7,559



7,648












 Adjusted net income (loss) available to common shareholders(1)


$

(22,040)



$

(41,281)



$

(21,217)


 Adjusted income (loss) per diluted share(1)


$

(0.16)



$

(0.33)



$

(0.15)



(1) We believe Adjusted net income (loss) available to common shareholders and Adjusted income (loss) per diluted share are useful financial measures for investors to assess and understand operating performance for period to period comparisons. Management views the adjustments to Net income (loss) available to common shareholders and Income (Loss) per diluted share to be items outside of the Company's normal operating results. Adjusted net income (loss) available to common shareholders and Adjusted income (loss) per diluted share are not measures of financial performance under GAAP, and should not be considered in isolation or as an alternative to Net income (loss) available to common shareholders or Income (loss) per diluted share.

 

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SOURCE Parker Drilling Company