Parker Drilling Reports First Quarter 2011 Results
HOUSTON, May 4, 2011 /PRNewswire/ -- Parker Drilling (NYSE-PKD), a drilling contractor and service provider, today reported results for the 2011 first quarter ended March 31, 2011. The Company's results for the first quarter included net income attributable to controlling interest of $4.8 million or $0.04 per diluted share on revenues of $156.2 million, compared with a net loss attributable to controlling interest of $2.1 million or $0.02 per diluted share on revenues of $157.6 million for the 2010 first quarter. Excluding the effects of non-routine items the Company reported net income attributable to controlling interest of $5.3 million or $0.05 per diluted share compared with similarly adjusted 2010 first quarter net income attributable to controlling interest of $2.5 million or $0.02 per diluted share. Adjusted EBITDA, excluding non-routine items, was $42.7 million, compared with $37.9 million for the prior year's first quarter.
"Continued improvements in our U.S. markets provided the primary support for our first quarter results," began Parker Drilling President and Chief Executive Officer David Mannon. "We had another record performance from our Rental Tools segment and our U.S. barge drilling utilization and average dayrate continued to strengthen. In addition, our portfolio of projects and engineering services expanded during the quarter, though utilization of our international rig fleet remained at low levels. Overall, our diverse but related businesses provided a balanced performance that resulted in higher earnings," said Mannon.
First Quarter Highlights
-- Parker's Rental Tools segment achieved record levels of revenues and segment gross margin. (Segment gross margins exclude depreciation and amortization expense). -- The Company's U.S. barge drilling business recorded increases in rig fleet utilization and average dayrate, compared with the prior year's first quarter. -- Parker began the Yastreb rig relocation project, a redeployment of the rig to its original drilling site on Sahkalin Island. -- The International Drilling segment reported higher average dayrates in all regions despite lower average fleet utilization.
"Growing demand for rental tools in the U.S. land market was the principal driver to our first quarter results. Our continued investment in new inventory enabled us to respond to increased demand. By actively positioning equipment among our locations, we continued to improve utilization and pricing . Shallow water drilling in the Gulf of Mexico strengthened and operators have shown increased interest in drilling deeper prospects and in committing to longer-term, multi-well programs. This led to increased utilization and higher average dayrates for Parker's barge rig fleet. Our project management results reflect primarily our continued work on Sahkalin Island, including the development of the Arkutun-Dagi platform and the relocation of the Yastreb rig. We also are working on some early-stage engineering projects that demonstrate our drilling expertise and technological capabilities and which may lead to longer-term operating contracts," Mr. Mannon noted.
"While I am pleased with the results of the first quarter, particularly the contribution from our rental tools business, the continued strength in our barge drilling operations, and our expanding project management activity, we have work yet to do to improve utilization within our international drilling operations. International E&P spending appears to be increasing and we expect it to lead to more exploration and development drilling activity and an increase in work opportunities for Parker in regions where we operate," said Mannon. He concluded, "We believe our established strengths as a drilling services provider and the diversity of our operations should contribute to improved results in the year ahead and provide support for longer-term earnings growth for Parker."
First Quarter Review
Parker's revenues for the 2011 first quarter were $156.2 million compared with 2010 first quarter revenues of $157.6 million. The Company's 2011 first quarter gross margin, before depreciation and amortization expense, was $48.9 million compared with 2010 first quarter gross margin of $44.1 million, while gross margin as a percentage of revenues increased to 31 percent from the 28 percent gross margin for the 2010 first quarter. Results for the three months ended March 31, 2011, included the impact of $0.7 million, pre-tax, of non-routine expenses 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. This non-routine item reduced after-tax earnings by $0.4 million or $0.01 per diluted share. The results for the 2010 first quarter included non-routine, after-tax expense of $4.6 million or $0.04 per diluted share. Details of the non-routine items are provided in the attached financial tables.
In addition, the Company recorded a pre-tax expense of $1.9 million related to a new equity tax law in Colombia. As a result of the new law, the entire expense of the four-year equity tax is recognized at the beginning of the tax period. This reduced 2011 first quarter after-tax earnings by approximately $1.2 million, or $0.01 per diluted share.
-- Rental Toolsrevenues increased 55 percent to $52.3 million from $33.8 million, segment gross margin rose to $34.2 million from $21.2 million, and segment gross margin as a percent of revenues rose to 65 percent from 63 percent. The expanded use of lateral drilling in the U.S. to exploit oil and natural gas resources led to increased demand for rental tools. With facilities strategically located in key U.S. drilling markets and continued investments in rental tool inventory, Parker's Rental Tools business benefited from increased demand, higher utilization and improved pricing. -- U.S. Drilling revenues increased 6 percent to $15.9 million from $15.1 million, segment gross margin declined to $1.9 million from $2.1 million, and segment gross margin as a percent of revenues decreased to 12 percent from 14 percent. The lower earnings and gross margin resulted from an increase in activity for the intermediate portion of the rig fleet and a decrease in activity for the deep portion. For the quarter, the business had an average of 7.5 barge rigs employed, compared with an average of approximately 7 barge rigs employed in the 2010 first quarter. The barge rig fleet's average dayrate was $22,600 for the 2011 first quarter and $21,900 for the 2010 first quarter. -- International Drilling revenues declined 34 percent to $42.4 million from $63.9 million, segment gross margin declined to $7.6 million compared with $16.7 million, and segment gross margin as a percent of revenues decreased to 18 percent from 26 percent. These results were primarily due to a decline in rig utilization in the CIS/AME region and Mexico. This was partially offset by higher average dayrates in each region, compared with the prior year's first quarter. Average rig fleet utilization for the 2011 first quarter was 44 percent, compared with 61 percent for the prior year's first quarter. Three rigs located in the Asia Pacific region were removed from the active rig fleet at year-end 2010, reducing the region's fleet to five rigs and Parker's overall international fleet to 27 rigs. Adjusted for this change, the prior year's rig fleet utilization was 68 percent. For the 2011 first quarter, the ten-rig Americas regional fleet operated at 60 percent average utilization, the eleven-rig CIS/AME regional fleet operated at 27 percent average utilization and the five-rig Asia Pacific regional fleet operated at 60 percent average utilization. (Additional rig fleet information is available on Parker's website). -- Project Management and Engineering Services revenues increased 47 percent to $35.9 million from $24.4 million, segment gross margin increased to $6.0 million from $4.9 million and segment gross margin as a percent of revenues decreased to 17 percent from 20 percent. Reimbursable expenses related to the start of the Yastreb rig relocation project were the leading sources of the revenue increase. The decline in gross margin as a percent of revenues is primarily attributable to increased reimbursable content compared with the prior year's first quarter. -- Construction Contractrevenues declined to $9.6 million compared with $20.4 million as the construction contract for the Liberty rig ended in the first quarter.
Cash Flow and Capitalization
Capital expenditures for the 2011 first quarter were $50.7 million, including $26.1 million for the construction of Parker's two newbuild arctic land rigs for Alaska and $15.8 million for the purchase of tubular goods and other rental equipment. Subsequent to the end of the first quarter Parker expanded its term loan facility by $50 million and used the proceeds to repay the amount outstanding on its revolving credit facility, purchase additional rental tool inventory and for other corporate purposes.
Parker Drilling has scheduled a conference call for 10:00 a.m. CDT (11:00 a.m. EDT) on Wednesday, May 4, 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 website at http://www.parkerdrilling.com. A replay of the call can be accessed on the Company's website for 12 months and will be available by telephone from May 4 through May 12 by dialing (303) 590-3030 and using the access code 4430188#.
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 website 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 March 31, 2011 December 31, 2010 (Unaudited) ASSETS (Dollars in Thousands) CURRENT ASSETS Cash and Cash Equivalents $ 41,595 $ 51,431 Accounts and Notes Receivable, Net 178,984 168,876 Rig Materials and Supplies 24,213 25,527 Deferred Costs 1,822 2,229 Deferred Income Taxes 10,137 9,278 Assets Held for Sale 5,287 5,287 Other Current Assets 70,035 105,496 TOTAL CURRENT ASSETS 332,073 368,124 PROPERTY, PLANT AND EQUIPMENT, NET 843,669 816,147 OTHER ASSETS Deferred Income Taxes 49,157 61,016 Other Assets 28,586 29,268 TOTAL OTHER ASSETS 77,743 90,284 TOTAL ASSETS $ 1,253,485 $ 1,274,555 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current Portion of Long-Term Debt $ 12,000 $ 12,000 Accounts Payable and Accrued Liabilities 148,077 163,263 TOTAL CURRENT LIABILITIES 160,077 175,263 LONG-TERM DEBT 459,283 460,862 LONG-TERM DEFERRED TAX LIABILITY 7,795 20,171 OTHER LONG-TERM LIABILITIES 31,541 30,193 TOTAL CONTROLLING INTEREST IN STOCKHOLDERS' EQUITY 595,088 588,313 Noncontrolling Interest (299) (247) TOTAL EQUITY 594,789 588,066 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,253,485 $ 1,274,555 Current Ratio 2.07 2.10 Total Debt as a Percent of Capitalization 44% 45% Book Value Per Common Share $ 5.10 $ 5.05
PARKER DRILLING COMPANY Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended March 31, 2011 2010 (Dollars in Thousands) REVENUES: International Drilling $ 42,437 $ 63,875 U.S. Drilling 15,920 15,087 Rental Tools 52,319 33,815 Project Management and Engineering Services 35,865 24,441 Construction Contract 9,638 20,387 TOTAL REVENUES 156,179 157,605 OPERATING EXPENSES: International Drilling 34,847 47,173 U.S. Drilling 14,021 12,974 Rental Tools 18,137 12,626 Project Management and Engineering Services 29,908 19,561 Construction Contracts 10,381 21,197 Depreciation and Amortization 27,599 28,588 TOTAL OPERATING EXPENSES 134,893 142,119 TOTAL OPERATING GROSS MARGIN 21,286 15,486 General and Administrative Expense (6,888) (10,032) Gain on Disposition of Assets, Net 1,004 672 TOTAL OPERATING INCOME 15,402 6,126 OTHER INCOME AND (EXPENSE): Interest Expense (5,861) (6,732) Interest Income 47 74 Loss on Extinguishment of Debt - (3,220) Other Income (Expense) 11 142 TOTAL OTHER INCOME AND (EXPENSE) (5,803) (9,736) INCOME (LOSS) BEFORE INCOME TAXES 9,599 (3,610) INCOME TAX EXPENSE (BENEFIT) Current 4,018 3,648 Deferred 821 (5,207) TOTAL INCOME TAX EXPENSE (BENEFIT) 4,839 (1,559) NET INCOME (LOSS) 4,760 (2,051) Less: Net Loss Attributable to Noncontrolling Interest (67) - NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST $ 4,827 $ (2,051) EARNINGS PER SHARE - BASIC Net Income $ 0.04 $ (0.02) EARNINGS PER SHARE - DILUTED Net Income $ 0.04 $ (0.02) NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS PER SHARE Basic 115,119,277 113,512,426 Diluted 116,322,199 113,512,426
PARKER DRILLING COMPANY Selected Financial Data (Unaudited) Three Months Ended March 31, December 31, 2011 2010 2010 (Dollars in Thousands) REVENUES: International Drilling $ 42,437 $ 63,875 $ 49,950 U.S. Drilling 15,920 15,087 19,191 Rental Tools 52,319 33,815 49,310 Project Management and Engineering Services 35,865 24,441 32,470 Construction Contract 9,638 20,387 22,395 Total Revenues 156,179 157,605 173,316 OPERATING EXPENSES: International Drilling 34,847 47,173 39,677 U.S. Drilling 14,021 12,974 13,533 Rental Tools 18,137 12,626 16,559 Project Management and Engineering Services 29,908 19,561 27,795 Construction Contract 10,381 21,197 21,526 Total Operating Expenses 107,294 113,531 119,090 OPERATING GROSS MARGIN: International Drilling 7,590 16,702 10,273 U.S. Drilling 1,899 2,113 5,658 Rental Tools 34,182 21,189 32,751 Project Management and Engineering Services 5,957 4,880 4,675 Construction Contract (743) (810) 869 Depreciation and Amortization (27,599) (28,588) (28,526) Total Operating Gross Margin 21,286 15,486 25,700 General and Administrative Expense (6,888) (10,032) (6,695) Provision for Reduction in Carrying Value of Certain Assets - - (1,952) Gain on Disposition of Assets, Net 1,004 672 1,060 TOTAL OPERATING INCOME $ 15,402 $ 6,126 $ 18,113
Marketable Rig Count Summary As of March 31, 2011 Total U.S. Gulf of Mexico Barge Rigs Intermediate 4 Deep 9 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 Ended March 31, December 31, September 30, March 31, 2011 2010 2010 June 30, 2010 2010 Net Income (Loss) Attributable to Controlling Interest 4,827 (13,409) 492 507 (2,051) Adjustments: Income Tax (Benefit) Expense 4,839 25,362 786 1,624 (1,559) Total Other Income and Expense 5,803 6,196 6,277 11,182 9,736 Loss/(Gain) on Disposition of Assets, Net (1,004) (1,060) (1,176) (1,712) (672) Depreciation and Amortization 27,599 28,526 28,904 29,012 28,588 Provision for Reduction in Carrying Value of Certain Assets - 1,952 - - - EBITDA $ 42,064 $ 47,567 $ 35,283 $ 40,613 $ 34,042 Adjustments: Non-routine Items 685 460 930 694 3,811 Adjusted EBITDA after Non-routine Items $ 42,749 $ 48,027 $ 36,213 $ 41,307 $ 37,853
PARKER DRILLING COMPANY Reconciliation of Non-Routine Items * (Unaudited) (Dollars in Thousands, except Per Share) Three Months Ending March 31, 2011 Net income attributable to controlling interest $ 4,827 Earnings per diluted share $ 0.04 Adjustments: U.S. regulatory investigations / legal matters 685 Total adjustments $ 685 Tax effect of non-routine adjustments (240) Net non-routine adjustments $ 445 Adjusted net income attributable to controlling interest $ 5,272 Adjusted earnings per diluted share $ 0.05 Three Months Ending March 31, 2010 Net loss attributable to controlling interest $ (2,051) Earnings per diluted share $ (0.02) Adjustments: Extinguishment of debt 3,220 U.S. regulatory investigations / legal matters** 3,811 Total adjustments $ 7,031 Tax effect of non-routine adjustments (2,461) Net non-routine adjustments $ 4,570 Adjusted net income attributable to controlling interest $ 2,519 Adjusted earnings per diluted share $ 0.02 * 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 May 4, 2011