Parker Drilling Reports Second Quarter Results
HOUSTON, Aug. 5 /PRNewswire-FirstCall/ -- Parker Drilling (NYSE: PKD), a global drilling contractor and service provider, today reported results for the second quarter ended June 30, 2010. The Company's results for the second quarter included net income of $0.5 million or $0.00 per diluted share on revenues of $156.5 million, compared with net income of $4.4 million or $0.04 per diluted share on revenues of $221.8 million for the 2009 second quarter. Excluding the effects of non-routine items the Company reported net income of $4.9 million or $0.04 per diluted share compared with similarly adjusted 2009 second quarter net income of $7.0 million or $0.06 per diluted share. Adjusted EBITDA, excluding non-routine items, was $41.7 million compared with $49.2 million for the prior year's second quarter.
Compared with the immediately preceding quarter, the 2010 first quarter, the Company's net income, adjusted for non-routine items, was higher by $2.3 million or $0.02 per diluted share and adjusted EBITDA was 10 percent or $3.8 million higher. Revenues were essentially unchanged from the prior quarter.
"Our second quarter performance reflects improved results from our U.S. markets, a low period in international drilling activity and a solid contribution from our project management operations," said Parker Drilling Chief Executive Officer David Mannon. "The growth of shale drilling in the U.S. has contributed to the increased demand for rental tools. Parker's rental tools business continues to benefit from the strategic positioning of stores in the more active shale plays and our recent investments in tubular inventory, as well as improved pricing. Our shallow-water Gulf of Mexico barge drilling business had a significant upturn in utilization this past quarter, compared with the prior year's second quarter. The 2009 decision to "ready-stack" our underutilized barge rigs to provide fast back-to-work response times while keeping costs in line with market conditions enabled us to capture a large portion of available work and maintain a positive cash flow," said Mannon. He went on to say, "The industry's expected increase in international E&P spending, however, has been slow to develop, principally held up by instability in European and Central Asian financial markets. The impact on contract drilling has not been uniform across all regions, but the overall effect has been a slow deceleration of drilling activity from prior levels. This has not hindered the growth in our project management business where longer term programs have contributed to more steady results."
Second Quarter Highlights
-- The Company's Rental Tools business increased gross margin as a percent of revenues to 66 percent in the 2010 second quarter from 55 percent in the 2009 second quarter. -- Parker's U.S. barge drilling business increased utilization, revenues and gross margin compared with the 2009 second quarter. -- Project Management and Engineering Services revenues increased to $26.4 million from $23.9 million, driven by increased activity in our Sakhalin Island Arkutun Dagi and Orlan projects.
"The strategic diversity of our business operations has supported a solid revenue and EBITDA performance despite the uneven path of our markets," said Mannon. "Oil-directed drilling in the U.S., on land and in shallow waters of the Gulf of Mexico, has offset the slowing interest in natural gas prospects. As a result, demand for rental tools continued to improve and barge drilling activity picked up. While international market trends have been weak collectively, our diverse, selective geographic presence should continue to temper the broader market weakness. Also, the longer terms on some existing contracts and the level of contract tender activity should sustain our current operating levels for the remainder of the year. Our project management business continued to grow its opportunity list of longer-term design, construction and operating projects which could supplement our growth. We are continuing to develop each of our businesses in line with its strategy, and, as a result, I expect an improving operating performance as the year progresses," he concluded.
Second Quarter Review
Results for the three months ended June 30, 2010, included the impact of several non-routine items that decreased net income by $4.4 million or $0.04 per diluted share. Included in non-routine items are $4.0 million, pre-tax, of debt extinguishment costs related to the portion of the Company's 9.625% senior notes which were redeemed in the quarter, $1.1 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 2005 tax audit in Mexico. The results for the 2009 second quarter included non-routine, net after-tax expense of $2.6 million or $0.02 per diluted share. Details of the non-routine items are provided in the attached financial tables.
Parker's revenues for the 2010 second quarter declined to $156.5 million from the 2009 second quarter revenues of $221.8 million. The Company's 2010 second quarter gross margin, before depreciation and amortization expense, declined to $47.6 million from the 2009 second quarter gross margin of $56.2 million, while gross margin as a percentage of revenues was 30 percent compared with 25 percent for the 2009 second quarter.
-- International Drilling revenues declined to $52.9 million from $79.3 million, and gross margin, before depreciation and amortization expense, declined to $13.5 million from $30.4 million. Reduced average fleet utilization was the primary contributor to the decline in revenues. Average fleet utilization for the 2010 second quarter was 55 percent, compared with 68 percent for the prior year's second quarter. For the quarter, the ten-rig Americas regional fleet operated at 83 percent average utilization, the eleven-rig CIS/AME regional fleet operated at 50 percent average utilization and the eight-rig Asia Pacific regional fleet operated at 36 percent average utilization. (Additional rig fleet information is available on Parker's Web site). In addition, Parker's Caspian Sea Barge Rig 257 earned a reduced dayrate throughout the quarter as it underwent a required overhaul and customer-requested upgrade. -- U.S. Drilling revenues increased 19 percent, to $15.3 million from $12.9 million and gross margin, before depreciation and amortization expense, rose to $1.8 million from $1.3 million. The benefits of higher utilization were partially offset by a lower average dayrate. The fleet's average dayrate was $19,000 for the 2010 second quarter and $29,800 for the 2009 second quarter. The 2009 second quarter dayrate was impacted by one barge having operated at higher rates established in a 2008 contract. For the quarter the Company had an average of four more rigs operating than for the comparable period of 2009. -- Rental Tools revenues increased to $41.4 million from $28.2 million and gross margin, before depreciation and amortization expense, rose 76 percent to $27.1 million from $15.4 million, and gross margin as a percent of revenues rose to 66 percent from 55 percent. Recent purchases of rental equipment, higher utilization and less discounting all contributed to the segment's strong results. -- Project Management and Engineering Services revenues increased to $26.4 million from $23.9 million and gross margin declined to $4.7 million from $5.6 million. Parker's operational activities on the Orlan platform transitioned from a ready-stack mode to a higher-revenue mode during the 2010 second quarter, and Parker also continued to provide engineering and procurement services for an offshore platform that will target the Arkutun-Dagi field near Sakhalin Island. The 2009 second quarter included revenues for the relocation of the Yastreb rig to the Odoptu field to drill extended-reach wells offshore Sakhalin Island. -- Construction Contract revenues decreased to $20.5 million from $77.6 million as the Liberty rig nears completion and the recorded gross margin was $0.5 million, compared to $3.6 million.
Six Month Year-to-Date Summary
The Company's results for the first six months of 2010 included a net loss of $1.5 million or $0.01 per diluted share on revenues of $314.1 million, compared with net income of $6.5 million or $0.06 per diluted share on revenues of $395.7 million for the first six months of 2009. Excluding the effects of non-routine items the Company reported net income of $7.5 million or $0.06 per diluted share compared with similarly adjusted 2009 year-to-date net income of $12.6 million or $0.11 per diluted share. Adjusted EBITDA excluding non-routine items was $79.6 million for the 2010 first six months and $94.2 million for the prior year's comparable period.
Cash Flow and Capitalization
Capital expenditures for the first six months of 2010 were $129.0 million, including $75.1 million for the construction of the two Parker-owned newbuild arctic land rigs for Alaska and $25.8 million for tubular goods and other rental equipment.
During the 2010 first quarter Parker called for redemption its outstanding 9.625% senior notes. During that quarter $96.3 million of the senior notes were redeemed and the remaining $128.7 million were redeemed in April.
Parker Drilling has scheduled a conference call for 10:00 a.m. CDT (11:00 a.m. EDT) on Thursday, August 5, 2010, to discuss its reported results. Those interested in listening to the call by telephone may do so by dialing (480) 629-9818. 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 August 5 to August 12 by dialing 330-590-3030 and using the access code 4322304#, 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 worldwide 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. 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 June 30, 2010 December 31, 2009 (Unaudited) ASSETS (Dollars in Thousands) CURRENT ASSETS Cash and Cash Equivalents $ 49,770 $ 108,803 Accounts and Notes Receivable, Net 165,120 188,687 Rig Materials and Supplies 29,314 31,633 Deferred Costs 2,965 4,531 Deferred Income Taxes 8,799 9,650 Other Current Assets 111,406 100,225 TOTAL CURRENT ASSETS 367,374 443,529 PROPERTY, PLANT AND EQUIPMENT, NET 792,354 716,798 OTHER ASSETS Deferred Income Taxes 56,096 55,749 Other Assets 30,600 27,010 TOTAL OTHER ASSETS 86,696 82,759 TOTAL ASSETS $ 1,246,424 $ 1,243,086 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current Portion of Long-Term Debt $ 12,000 $ 12,000 Accounts Payable and Accrued Liabilities 160,902 177,036 TOTAL CURRENT LIABILITIES 172,902 189,036 LONG-TERM DEBT 439,075 411,831 MINORITY INTEREST - - LONG-TERM DEFERRED TAX LIABILITY 6,640 16,074 OTHER LONG-TERM LIABILITIES 30,880 30,246 STOCKHOLDERS' EQUITY 596,927 595,899 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,246,424 $ 1,243,086 Current Ratio 2.12 2.35 Total Debt as a Percent of Capitalization 43% 42% Book Value Per Common Share $ 5.11 $ 5.13
PARKER DRILLING COMPANY Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2010 2009 2010 2009 (Dollars in Thousands) (Dollars in Thousands) REVENUES: International Drilling $ 52,932 $ 79,279 $ 116,807 $ 156,660 U.S. Drilling 15,336 12,889 30,423 22,745 Rental Tools 41,359 28,160 75,174 66,049 Project Management and Engineering Services 26,363 23,891 50,804 55,945 Construction Contract 20,535 77,572 40,922 94,317 TOTAL REVENUES 156,525 221,791 314,130 395,716 OPERATING EXPENSES: International Drilling 39,423 48,887 86,596 98,664 U.S. Drilling 13,540 11,628 26,514 24,764 Rental Tools 14,268 12,752 26,894 29,206 Project Management and Engineering Services 21,701 18,283 41,262 44,177 Construction Contract 20,043 74,000 41,240 89,914 Depreciation and Amortization 29,012 28,951 57,600 56,075 TOTAL OPERATING EXPENSES 137,987 194,501 280,106 342,800 TOTAL OPERATING GROSS MARGIN 18,538 27,290 34,024 52,916 General and Administrative Expense (6,937) (11,126) (16,969) (24,186) Gain on Disposition of Assets, Net 1,712 704 2,384 782 TOTAL OPERATING INCOME 13,313 16,868 19,439 29,512 OTHER INCOME AND (EXPENSE): Interest Expense (7,386) (7,504) (14,118) (15,570) Interest Income 78 174 152 460 Loss on extinguishment of debt (3,989) - (7,209) - Minority interest (7) - 168 - Other Income (Expense) 122 (68) 89 (80) TOTAL OTHER INCOME AND (EXPENSE) (11,182) (7,398) (20,918) (15,190) INCOME (LOSS) BEFORE INCOME TAXES 2,131 9,470 (1,479) 14,322 INCOME TAX EXPENSE (BENEFIT) Current 4,992 6,161 8,640 12,899 Deferred (3,368) (1,082) (8,575) (5,074) TOTAL INCOME TAX EXPENSE (BENEFIT) 1,624 5,079 65 7,825 NET INCOME $ 507 $ 4,391 $ (1,544) $ 6,497 EARNINGS PER SHARE - BASIC Net Income $ 0.00 $ 0.04 $ (0.01) $ 0.06 EARNINGS PER SHARE - DILUTED Net Income $ 0.00 $ 0.04 $ (0.01) $ 0.06 NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS PER SHARE Basic 114,298,319 113,180,858 113,909,798 112,723,230 Diluted 115,428,649 114,757,123 115,350,103 114,107,675
PARKER DRILLING COMPANY Selected Financial Data (Unaudited) Three Months Ended June 30, March 31, 2010 2009 2010 (Dollars in Thousands) REVENUES: International Drilling $ 52,932 $ 79,279 $ 63,875 U.S. Drilling 15,336 12,889 15,087 Rental Tools 41,359 28,160 33,815 Project Management and Engineering Services 26,363 23,891 24,441 Construction Contract 20,535 77,572 20,387 Total Revenues 156,525 221,791 157,605 OPERATING EXPENSES: International Drilling 39,423 48,887 47,173 U.S. Drilling 13,540 11,628 12,974 Rental Tools 14,268 12,752 12,626 Project Management and Engineering Services 21,701 18,283 19,561 Construction Contract 20,043 74,000 21,197 Total Operating Expenses 108,975 165,550 113,531 OPERATING GROSS MARGIN: International Drilling 13,509 30,392 16,702 U.S. Drilling 1,796 1,261 2,113 Rental Tools 27,091 15,408 21,189 Project Management and Engineering Services 4,662 5,608 4,880 Construction Contract 492 3,572 (810) Depreciation and Amortization (29,012) (28,951) (28,588) Total Operating Gross Margin 18,538 27,290 15,486 General and Administrative Expense (6,937) (11,126) (10,032) Provision for Reduction in Carrying Value of Certain Assets - - - Gain on Disposition of Assets, Net 1,712 704 672 TOTAL OPERATING INCOME $ 13,313 $ 16,868 $ 6,126 Marketable Rig Count Summary As of June 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 December September June March December September June 30, 31, 31, 30, 30, 31, 31, 30, 30, 2010 2010 2009 2009 2009 2009 2008 2008 2008 Previously Reported Net Income $ $ $ $ $ $ (Loss) $ 507 (2,051) (4,324) $ 7,094 4,391 2,106 (39,477) $ 18,551 22,596 Restated Interest Expense, Net of Tax - Per APB 14-1 - - - - - - (724) (721) (699) Restated Net Income (Loss) 507 (2,051) (4,324) 7,094 4,391 2,106 (40,201) 17,830 21,897 Adjustments: Income Tax (Benefit) Expense 1,624 (1,559) 1,890 (9,155) 5,079 2,746 (31,178) 19,673 13,762 Total Other Income and Expense 11,182 9,736 7,362 6,943 7,398 7,792 9,121 6,344 6,531 Loss/(Gain) on Disposition of Assets, Net (1,712) (672) (3,899) (1,225) (704) (78) (683) (799) (636) Impairment of Goodwill - - - - - - 100,315 Depreciation and Amortization 29,012 28,588 28,593 29,307 28,951 27,124 31,961 30,663 28,166 Provision for Reduction in Carrying Value of Certain Assets - - 1,889 2,757 - - - - - Adjusted $ $ $ $ $ EBITDA 40,613 34,042 $ 31,511 $ 35,721 45,115 39,690 $ 69,335 $ 73,711 69,720 Adjustments: Non-routine Items 1,087 3,888 2,998 2,402 4,048 5,308 6,279 2,264 2,885 Adjusted EBITDA after Non-routine $ $ $ $ $ Items 41,700 37,930 $ 34,509 $ 38,123 49,163 44,998 $ 75,614 $ 75,975 72,605
PARKER DRILLING COMPANY Reconciliation of Non-Routine Items * (Unaudited) (Dollars in Thousands, except Per Share) Three Months Ending Six Months Ending June 30, 2010 June 30, 2010 Net income $ 507 $ (1,544) Earnings per diluted share $ 0.00 $ (0.01) Adjustments: Extinguishment of debt $ 3,989 $ 7,209 U.S. regulatory investigations / legal matters 1,087 4,975 Total adjustments $ 5,076 $ 12,184 Tax effect of pre-tax non-routine adjustments (1,777) (4,264) Tax audit assessment - Mexico 1,085 1,085 Net non-routine adjustments $ 4,384 $ 9,005 Adjusted net income $ 4,891 $ 7,461 Adjusted earnings per diluted share $ 0.04 $ 0.06 Three Months Ending Six Months Ending June 30, 2009 June 30, 2009 Net income $ 4,391 $ 6,497 Earnings per share $ 0.04 $ 0.06 Adjustments: DOJ investigation 4,048 9,356 Total adjustments $ 4,048 $ 9,356 Tax effect of non-routine adjustments (1,417) (3,275) Net non-routine adjustments $ 2,631 $ 6,081 Adjusted net income $ 7,022 $ 12,578 Adjusted earnings per diluted share $ 0.06 $ 0.11 *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 August 5, 2010