Quarterly report pursuant to Section 13 or 15(d)

Reportable Segments

v3.10.0.1
Reportable Segments
 9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Reportable Segments Note 11 - Reportable Segments
Our business is comprised of two business lines: (1) Drilling Services and (2) Rental Tools Services. We report our Drilling Services business as two reportable segments: (1) U.S. (Lower 48) Drilling and (2) International & Alaska Drilling. We report our Rental Tools Services business as two reportable segments: (1) U.S. Rental Tools and (2) International Rental Tools.
Within the four reportable segments, we have aggregated our Arctic, Eastern Hemisphere, and Latin America business units under International & Alaska Drilling, one business unit under U.S. (Lower 48) Drilling, one business unit under U.S. Rental Tools, and one business unit under International Rental Tools, for a total of six business units. The Company has aggregated each of its business units in one of the four reporting segments based on the guidelines of the FASB ASC Topic No. 280, Segment Reporting. We eliminate inter-segment revenues and expenses. We disclose revenues under the four reportable segments based on the similarity of the use and markets for the groups of products and services within each segment.
Drilling Services Business
In our Drilling Services business, we drill oil, natural gas, and geothermal wells for customers in both the U.S. and international markets. We provide this service with both Company-owned rigs and customer-owned rigs. We refer to the provision of drilling services with customer-owned rigs as our operations and management (“O&M”) service in which operators own their own drilling rigs but choose Parker Drilling to operate and manage the rigs for them. The nature and scope of activities involved in drilling an oil and natural gas well is similar whether it is drilled with a Company-owned rig (as part of a traditional drilling contract) or a customer-owned rig (as part of an O&M contract). In addition, we provide project-related services, such as engineering, procurement, project management, commissioning of customer-owned drilling rig projects, operations execution, and quality and safety management. We have extensive experience and expertise in drilling geologically challenging wells and in managing the logistical and technological challenges of operating in remote, harsh, and ecologically sensitive areas.
U.S. (Lower 48) Drilling
Our U.S. (Lower 48) Drilling segment provides drilling services with our Gulf of Mexico (“GOM”) barge drilling rig fleet and markets our U.S. (Lower 48)-based O&M services. We also provide O&M services for customer-owned rigs in California. Our GOM barge rigs drill for oil and natural gas in shallow waters in and along the inland waterways and coasts of Louisiana, Alabama and Texas. The majority of these wells are drilled in shallow water depths ranging from 6 to 12 feet. Our rigs are suitable for a variety of drilling programs, from inland coastal waters requiring shallow draft barges, to open water drilling on both state and federal water projects requiring more robust capabilities. Contract terms typically consist of well-to-well or multi-well programs, most commonly ranging from 20 to 180 days.
International & Alaska Drilling
Our International & Alaska Drilling segment provides drilling services, using both Company-owned rigs and O&M contracts, and project-related services. The drilling markets in which this segment operates have one or more of the following characteristics:
•
customers typically are major, independent, or national oil and natural gas companies or integrated service providers;
•
drilling programs in remote locations with little infrastructure, requiring a large inventory of spare parts and other ancillary equipment and self-supported service capabilities;
•
complex wells and/or harsh environments (such as high pressures, deep depths, hazardous or geologically challenging conditions and sensitive environments) requiring specialized equipment and considerable experience to drill; and
•
O&M contracts that generally cover periods of one year or more.
We have rigs under contract in Alaska, Kazakhstan, the Kurdistan region of Iraq, Guatemala, Mexico, and on Sakhalin Island, Russia. In addition, we have O&M and ongoing project-related services for customer-owned rigs in Kuwait, Canada, Indonesia, and on Sakhalin Island, Russia.
Rental Tools Services Business
In our Rental Tools Services business, we provide premium rental equipment and services to exploration & production companies, drilling contractors, and service companies on land and offshore in the U.S. and select international markets. Tools we provide include standard and heavy-weight drill pipe, all of which are available with standard or high-torque connections, tubing, drill collars, pressure control equipment, including blowout preventers, and more. We also provide well construction services, which include tubular running services and downhole tool rentals, well intervention services, which include whipstocks,
fishing and related services, and inspection and machine shop support. Rental tools are used during drilling and/or workover programs and are requested by the customer as needed, requiring us to keep a broad inventory of rental tools in stock. Rental tools are usually rented on a daily or monthly basis.
U.S. Rental Tools
Our U.S. Rental Tools segment maintains an inventory of rental tools for deepwater, drilling, completion, workover, and production applications at facilities in Louisiana, Texas, Wyoming, North Dakota and West Virginia. We also provide well construction and well intervention services. Our largest single market for rental tools is U.S. land drilling, a cyclical market driven primarily by oil and natural gas prices and our customers’ access to project financing. A portion of our U.S. rental tools business supplies tubular goods and other equipment to offshore GOM customers.
International Rental Tools
Our International Rental Tools segment maintains an inventory of rental tools and provides well construction, well intervention, and surface and tubular services to our customers in the Middle East, Latin America, United Kingdom, Europe, and Asia-Pacific regions.
The following table represents the results of operations by reportable segment:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
Dollars in thousands
2018
 
2017
 
2018
 
2017
Revenues: (1)
 
 
 
 
 
 
 
Drilling Services:
 
 
 
 
 
 
 
U.S. (Lower 48) Drilling
$
4,530

 
$
4,585

 
$
9,167

 
$
10,843

International & Alaska Drilling
47,770

 
62,726

 
157,168

 
186,606

Total Drilling Services
52,300

 
67,311

 
166,335

 
197,449

Rental Tools Services:
 
 
 
 
 
 
 
U.S. Rental Tools
50,944

 
35,677

 
127,775

 
85,613

International Rental Tools
20,151

 
15,320

 
57,563

 
43,124

Total Rental Tools Services
71,095

 
50,997

 
185,338

 
128,737

Total revenues
123,395

 
118,308

 
351,673

 
326,186

Operating gross margin: (2)
 
 
 
 
 
 
 
Drilling Services:
 
 
 
 
 
 
 
U.S. (Lower 48) Drilling
(3,402
)
 
(3,516
)
 
(12,443
)
 
(15,278
)
International & Alaska Drilling
(8,541
)
 
1,082

 
(17,701
)
 
(3,461
)
Total Drilling Services
(11,943
)
 
(2,434
)
 
(30,144
)
 
(18,739
)
Rental Tools Services:
 
 
 
 
 
 
 
U.S. Rental Tools
16,588

 
8,556

 
30,903

 
7,746

International Rental Tools
(2,713
)
 
(6,001
)
 
(9,402
)
 
(19,647
)
Total Rental Tools Services
13,875


2,555

 
21,501

 
(11,901
)
Total operating gross margin (loss)
1,932

 
121

 
(8,643
)
 
(30,640
)
General and administrative expense
(14,495
)
 
(7,033
)
 
(28,984
)
 
(20,576
)
Loss on impairment
(43,990
)
 
—

 
(43,990
)
 
—

Gain (loss) on disposition of assets, net
9

 
97

 
(126
)
 
(368
)
Total operating income (loss)
(56,544
)
 
(6,815
)
 
(81,743
)
 
(51,584
)
Interest expense
(11,350
)
 
(11,067
)
 
(33,787
)
 
(33,032
)
Interest income
23

 
128

 
76

 
160

Other income (loss)
(709
)
 
(638
)
 
(1,609
)
 
452

Income (loss) before income taxes
$
(68,580
)
 
$
(18,392
)
 
$
(117,063
)
 
$
(84,004
)
 
(1)
For the nine months ended September 30, 2018, our largest customer, ENL, constituted approximately 25.7 percent of our total consolidated revenues and approximately 57.5 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $34.6 million, ENL constituted approximately 17.9 percent of our total consolidated revenues and approximately 47.6 percent of our International & Alaska Drilling segment revenues.
For the nine months ended September 30, 2017, our largest customer, ENL, constituted approximately 32.6 percent of our total consolidated revenues and approximately 56.9 percent of our International & Alaska Drilling segment revenues. Excluding reimbursable revenues of $39.9 million, ENL constituted approximately 23.6 percent of our total consolidated revenues and approximately 46.9 percent of our International & Alaska Drilling segment revenues. Our second largest customer, BP, constituted 10.0 percent of our total consolidated revenues and approximately 17.5 percent of our International & Alaska Drilling segment revenues.
(2)
Operating gross margin is calculated as revenues less direct operating expenses, including depreciation and amortization expense.
The following table shows the Company’s revenues by geographic region:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Dollars in Thousands
2018
 
2017
 
2018
 
2017
Revenues by geographic region:
 
 
 
 
 
 
 
United States
$
57,016

 
$
51,444

 
$
153,665

 
$
129,405

Russia
30,315

 
35,794

 
90,378

 
106,819

EMEA & Asia
23,902

 
15,646

 
66,206

 
44,283

Latin America
2,596

 
2,393

 
10,214

 
8,013

Other CIS
2,743

 
6,378

 
9,799

 
18,439

Other
6,823

 
6,653

 
21,411

 
19,227

Total revenues
$
123,395

 
$
118,308

 
$
351,673

 
$
326,186