Parker Drilling Reports Third Quarter 2008 Results

HOUSTON, Nov. 5 /PRNewswire-FirstCall/ -- Parker Drilling Company (NYSE: PKD), a global drilling contractor and service provider, today reported financial and operating results for the third quarter 2008.

The Company earned $0.16 per diluted share, including $0.04 per diluted share adverse impact from non-routine items, as compared to $0.20 per diluted share for the third quarter of 2007. A record performance from the Company's rental tools business and the benefit of higher dayrates and utilization in the Company's international drilling operations were partially offset by the expected softening of the Gulf of Mexico barge rig market and a modest impact from two Gulf of Mexico hurricanes.

"Parker Drilling's third quarter operating results demonstrate the value of our balanced business mix," remarked Robert L. Parker Jr., chairman and chief executive officer. "Our core international markets strengthened and the newest Quail Tools locations targeting unconventional resource plays in North America continued to grow. These two segments combined accounted for more than 60 percent of our revenue in the quarter and helped to offset the impact from the Gulf of Mexico barge drilling market's retreat from its record level of activity in 2007.

"We continue to execute key elements of our strategic growth plan," Parker continued, "driving growth from Quail Tools' expanded operations; commencing rig operations under new contracts in Mexico and Kazakhstan; and winning the Engineering, Procurement, Construction and Installation (EPCI) contract for the BP Liberty ultra-extended reach drilling rig in Alaska and the Front-End Engineering and Design (FEED) contract for the drilling module of the Arkutun-Dagi platform offshore Sakhalin Island in our project management segment.

"With the key elements of our strategy in place, we believe we have created a base for long-term profitable growth for Parker Drilling. As importantly, these should help us minimize the effects of the current downturn. Considering the global economic uncertainties, our strong balance sheet puts us in a solid financial position. Our cash balances, projected cash flow and existing credit facility are sufficient to fund our capital investments for the remainder of 2008 and for all of 2009.

"We remain focused on executing the key elements of our strategic growth plan -- achieving profitable growth in international drilling, rental tools and project management services and being the preferred drilling contractor in the Gulf of Mexico barge rig market," Parker concluded.

Third Quarter Earnings and Financial Review

For the three months ended September 30, 2008, Parker posted net income of $18.6 million, or $0.16 per diluted share, on revenues of $227.5 million, compared to net income of $22.7 million, or $0.20 per diluted share, on revenues of $172.2 million for the third quarter 2007. Net income in the third quarter of 2008 included $3.7 million of non-routine expenses relating to costs associated with the previously disclosed investigation by the Department of Justice regarding the Company's utilization of the services of a customs agent in certain countries and a non-cash charge to taxes identified and accounted for under Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48). Net income in the third quarter of 2007 included net expense of $1.6 million or $0.02 per diluted share relating to $2.4 million of debt extinguishment cost, $1.1 million provision for carrying value and a non-cash credit to tax expense of $0.5 million for potential interest and exchange rate fluctuations relating to FIN 48.

Adjusted EBITDA was $73.7 million for the third quarter 2008 compared to $74.2 million in the third quarter 2007 and up sequentially from $69.7 million in the second quarter. (Adjusted EBITDA is a non-GAAP financial measure defined below). Higher dayrates and utilization resulted in a 32 percent EBITDA improvement for Parker's international operations over the third quarter 2007. Rental Tools achieved record EBITDA of $27.8 million, which topped the record set in the fourth quarter of 2007. EBITDA for the U.S. drilling segment was $22.9 million, compared to $33.7 million in the third quarter of 2007. For the first nine months of 2008, total EBITDA was $204.4 million, a 6 percent increase over the $192.1 million for the first nine months of 2007.

For the first nine months of 2008, Parker reported record revenues of $617.5 million and net income of $65.0 million or $0.58 per diluted share compared to revenues of $473.7 million and net income of $69.5 million or $0.63 per diluted share for the first nine months of 2007. Included in 2008 results is a net $0.4 million expense from non-routine items. Included in 2007 results are an after-tax gain of $0.07 per diluted share from the sale of two workover barge rigs in January 2007 and non-cash FIN 48 charges of $0.05 per diluted share.

The details of the non-routine items for the 2008 first, second and third quarters and year-to-date, 2006 and 2007 are available on Parker's website and can be viewed or downloaded by going to "Investor Relations" and then to "Reconciliation of Non-Routine Items".

Capital expenditures for the nine months ended September 30, 2008 totaled $157.3 million. Total debt was $413.2 million, and total debt to capitalization was 40 percent. The Company's cash and cash equivalents totaled $75.3 million at September 30, 2008.

Average utilization for the Gulf of Mexico barge rigs for the third quarter 2008 was 79 percent, compared to the 83 percent reported for the third quarter 2007 and the 91 percent reported for the second quarter 2008. Current barge rig utilization is 67 percent. The Company's deep drilling barge dayrates in the Gulf of Mexico averaged $44,300 per day during the third quarter 2008, compared to $47,900 per day in the third quarter 2007 and $43,300 per day in the second quarter 2008. (Average dayrates for each classification of barge by quarter are available on Parker's website and can be viewed or downloaded by going to "Investor Relations" and then to "Dayrates -- GOM.")

With three rigs mobilizing under contracts secured in the second quarter, including the addition of newbuild rig 269 in Kazakhstan, average utilization of international land rigs for the third quarter 2008 increased to 82 percent, up from the 75 percent reported for the second quarter 2008 and the third quarter 2007.

Operations Highlights

-- Rig 121 mobilized for a four-year contract in northern Mexico and spud in September, bringing the total number of contracted Parker rigs in Mexico to eight.

-- Rig 269, the first of Parker's newbuild high-efficiency class land rigs, mobilized to Kazakhstan and spud in August, joining land rig 247. Parker now has eight contracted rigs in Kazakhstan.

-- As discussed above, the Company announced two new contracts in its project management business. In July, Parker announced a new EPCI contract for the land-based BP Liberty rig, designed to drill ultra extended-reach wells to offshore targets in the Liberty field of the Alaskan Beaufort Sea, and in August, the company announced a new FEED contract to design the drilling package for the Sakhalin-1 Arkutun-Dagi offshore platform.

Parker Drilling has scheduled a conference call at 10 a.m. CST (11 a.m. EST) on Wednesday, Nov. 5, 2008 to discuss third quarter 2008 results. Those interested in listening to the call by telephone may do so by dialing (303) 262-2053. Alternatively, the call can be accessed live 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, or by telephone from Nov. 5 through Nov. 12 by dialing (800) 405-2236 and using the access code 11120913#.

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 and rental tool operations, 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 ongoing credit crisis which has created volatility in oil and natural gas prices and could result in reduced 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, and in particular, the report on Form 10-K for the year ended December 31, 2007 and the risk factors in our Form 10-Q for the period ended June 30, 2008. 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 COMPANY AND SUBSIDIARIES
               Consolidated Condensed Statements of Operations
                                 (Unaudited)

                                Three Months Ended        Nine Months Ended
                                   September 30,             September 30,
                                 2008         2007         2008         2007
                                         (Dollars in Thousands)
    REVENUES:
      U.S. Drilling            $44,743      $56,918     $139,999     $174,375
      International Drilling    92,226       58,857      238,885      143,834
      Project Management and
       Engineering Services     24,089       20,922       72,219       58,633
      Construction Contract     20,421            -       40,501            -
      Rental Tools              45,975       35,500      125,858       96,905
    TOTAL REVENUES             227,454      172,197      617,462      473,747

    OPERATING EXPENSES:
      U.S. Drilling             21,850       23,208       65,502       74,101
      International Drilling    63,682       37,288      172,915      101,853
      Project Management and
       Engineering Services     21,451       16,685       61,819       49,004
      Construction Contract     19,323            -       38,373            -
      Rental Tools              18,166       14,579       50,014       38,263
      Depreciation and
       Amortization             30,663       23,043       84,995       60,744
    TOTAL OPERATING EXPENSES   175,135      114,803      473,618      323,965

    TOTAL OPERATING GROSS
     MARGIN                     52,319       57,394      143,844      149,782

    General and Administrative
     Expense                    (9,271)      (6,246)     (24,420)     (18,380)
    Provision for Reduction in
     Carrying Value of Certain
     Assets                          -       (1,091)           -       (1,091)
    Gain on Disposition of
     Assets, Net                   799          543        2,014       17,216

    TOTAL OPERATING INCOME      43,847       50,600      121,438      147,527

    OTHER INCOME AND (EXPENSE):
      Interest Expense          (5,820)      (7,576)     (17,386)     (19,891)
      Change in Fair Value of
       Derivative Positions          -         (262)           -         (671)
      Interest Income              383        2,080        1,121        5,576
      Loss on Extinguishment
       of Debt                       -       (2,396)           -       (2,396)
      Equity in Loss of
       Unconsolidated Joint
       Venture and Related
       Charges, Net of Taxes         -       (1,123)      (1,105)      (1,123)
      Minority Interest              -            -            -       (1,000)
      Other Income                 299          510          503          587
    TOTAL OTHER INCOME AND
     (EXPENSE)                  (5,138)      (8,767)     (16,867)     (18,918)

    INCOME BEFORE INCOME
     TAXES                      38,709       41,833      104,571      128,609

    INCOME TAX EXPENSE:
      Current Tax Expense       14,179       14,598       13,024       43,223
      Deferred Tax Expense       5,979        4,582       26,512       15,879
    TOTAL INCOME TAX EXPENSE    20,158       19,180       39,536       59,102

    NET INCOME                 $18,551      $22,653      $65,035      $69,507

    EARNINGS PER SHARE - BASIC
      Net Income                 $0.17        $0.21        $0.58        $0.64

    EARNINGS PER SHARE - DILUTED
      Net Income                 $0.16        $0.20        $0.58        $0.63

    NUMBER OF COMMON SHARES
     USED IN COMPUTING
     EARNINGS PER SHARE
      Basic                111,756,322  110,270,207  111,243,745  109,269,867
      Diluted              112,647,450  111,278,430  112,324,566  110,522,914



                   PARKER DRILLING COMPANY AND SUBSIDIARIES
                    Consolidated Condensed Balance Sheets
                            (Dollars in Thousands)

                                                September 30,   December 31,
                                                    2008           2007
                    ASSETS                       (Unaudited)
    CURRENT ASSETS
      Cash and Cash Equivalents                    $75,277       $60,124
      Accounts and Notes Receivable, Net           217,104       166,706
      Rig Materials and Supplies                    29,914        24,264
      Deferred Costs                                 8,528         7,795
      Deferred Income Taxes                          9,424         9,423
      Other Current Assets                          40,871        54,871
        TOTAL CURRENT ASSETS                       381,118       323,183

    PROPERTY, PLANT AND EQUIPMENT, NET             653,119       585,888

    OTHER ASSETS
      Goodwill                                     100,315       100,315
      Deferred Income Taxes                         11,838        40,121
      Other Assets                                  31,753        27,480
        TOTAL OTHER ASSETS                         143,906       167,916

    TOTAL ASSETS                                $1,178,143    $1,076,987

        LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES
      Current  Portion of Long-Term Debt            $3,000       $20,000
      Accounts Payable and Accrued Liabilities     127,762       104,180
        TOTAL CURRENT LIABILITIES                  130,762       124,180

    LONG-TERM DEBT                                 410,235       353,721

    LONG-TERM DEFERRED TAX LIABILITY                 8,506         8,044

    OTHER LONG-TERM LIABILITIES                     20,820        56,318

    STOCKHOLDERS' EQUITY                           607,820       534,724

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $1,178,143    $1,076,987


    Current Ratio                                     2.91          2.60

    Total Long-Term Debt as a Percent of
     Capitalization                                     40%           41%

    Book Value Per Common Share                      $5.36         $4.78



                   PARKER DRILLING COMPANY AND SUBSIDIARIES
                           Selected Financial Data
                                 (Unaudited)

                                                      Three Months Ended
                                                 September 30,       June 30,
                                              2008        2007         2008
                                                 (Dollars in Thousands)
    REVENUES:
      U.S. Offshore Drilling                 $44,743     $55,416     $49,368
      U.S. Land Drilling                           -       1,502           -
      International Land Drilling             74,940      48,836      64,255
      International Offshore Drilling         17,286      10,021      13,664
      Project Management and Engineering
       Services                               24,089      20,922      28,951
      Construction Contract                   20,421           -      20,080
      Rental Tools                            45,975      35,500      40,412
        Total Revenues                       227,454     172,197     216,730

    OPERATING EXPENSES:
      U.S. Offshore Drilling                  21,850      22,103      22,130
      U.S. Land Drilling                           -       1,105           -
      International Land Drilling             57,564      30,636      50,659
      International Offshore Drilling          6,118       6,652       5,953
      Project Management and Engineering
       Services                               21,451      16,685      24,707
      Construction Contract                   19,323           -      19,050
      Rental Tools                            18,166      14,579      16,030
        Total Operating Expenses             144,472      91,760     138,529

    OPERATING GROSS MARGIN:
      U.S. Offshore Drilling                  22,893      33,313      27,238
      U.S. Land Drilling                           -         397           -
      International Land Drilling             17,376      18,200      13,596
      International Offshore Drilling         11,168       3,369       7,711
      Project Management and Engineering
       Services                                2,638       4,237       4,244
      Construction Contract                    1,098           -       1,030
      Rental Tools                            27,809      20,921      24,382
      Depreciation and Amortization          (30,663)    (23,043)    (28,166)
        Total Operating Gross Margin          52,319      57,394      50,035

      General and Administrative Expense      (9,271)     (6,246)     (8,481)
      Provision for Reduction in Carrying
       Value of Certain Assets                     -      (1,091)          -
      Gain on Disposition of Assets, Net         799         543         636

    TOTAL OPERATING INCOME                   $43,847     $50,600     $42,190



                         Marketable Rig Count Summary
                           As of September 30, 2008

                                              Total

      U.S. Gulf of Mexico Barge Rigs
        Workover                                2
        Intermediate                            3
        Deep                                   10
      Total U.S. Gulf of Mexico Barge Rigs     15

      International Land Rigs
        Asia Pacific                            8
        Africa - Middle East                    2
        Latin America                           9
        CIS                                     9
          Total International Land Rigs        28

      International Barge Rigs
        Mexico                                  1
        Caspian Sea                             1
          Total International Barge Rigs        2

          Total Marketable Rigs                45



                               Adjusted EBITDA
                                 (Unaudited)
                            (Dollars in Thousands)

                                          Three Months Ending
                            September  June 30,  March 31, December  September
                             30, 2008    2008      2008    31, 2007   30, 2007
    Net Income from
     Continuing
     Operations               $18,551   $22,596   $23,888   $34,571   $22,653
      Adjustments:
        Income Tax
         (Benefit) Expense     20,158    14,232     5,146   (21,379)   19,180
        Total Other Income
         and Expense            5,138     5,362     6,367    30,264     8,767
        Loss/(Gain) on
         Disposition of
         Assets, Net             (799)     (636)     (579)      784      (543)
        Depreciation and
         Amortization          30,663    28,166    26,166    25,059    23,043
        Provision for
         Reduction in
         Carrying Value
         of Certain
         Assets                     -        -          -       371    1,091

    Adjusted EBITDA           $73,711   $69,720   $60,988   $69,670  $74,191


                                          Three Months Ending
                                 June 30, March 31, December 31, September 30,
                                   2007      2007      2006          2006


    Net Income from Continuing
     Operations                   $16,860  $29,994    $37,168      $18,639
      Adjustments:
        Income Tax (Benefit)
         Expense                   15,813   24,109     (5,954)      13,173
        Total Other Income
         and Expense                4,231    5,920      3,554        8,741
        Loss/(Gain) on
         Disposition of
         Assets, Net                 (269) (16,404)      (672)      (4,328)
        Depreciation and
         Amortization              19,642   18,059     17,605       16,993
        Provision for Reduction
         in Carrying Value of
         Certain Assets                 -        -          -            -

    Adjusted EBITDA               $56,277  $61,678    $51,701      $53,218

SOURCE Parker Drilling Company