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Parker Drilling Reports 2012 Second Quarter Results

HOUSTON, Aug. 2, 2012 /PRNewswire/ -- Parker Drilling Company (NYSE-PKD), a drilling contractor, drilling services and rental tools provider, today reported results for the quarter and year-to-date periods ended June 30, 2012.  The Company's results for the 2012 second quarter included net income of $20.1 million or $0.17 per diluted share on revenues of $178.9 million compared with net income of $14.2 million or $0.12 per diluted share on revenues of $172.8 million for the 2011 second quarter.  Excluding the effects of non-routine items, the Company reported net income of $21.3 million or $0.18 per diluted share compared with similarly adjusted 2011 second quarter net income of $15.8 million or $0.13 per diluted share.  Adjusted EBITDA, excluding non-routine items, was $67.2 million compared with $62.7 million for the prior year's second quarter.

"Parker's operating results for the 2012 second quarter included year-to-year increases in revenues, adjusted EBITDA, net income and earnings per share," said Parker Drilling Company Chairman, President and Chief Executive Officer, Robert L. Parker Jr. "We achieved revenue growth in our Rental Tools and U.S. Barge Drilling segments, driven by increases in drilling activity and the quality and value of our rental tools and barge drilling services.  We also realized an improved operating performance from our international drilling rig fleet, though this was offset by reduced revenues and earnings from our operations and maintenance (O&M) contracts.  In addition, we made progress toward the completion of our two Arctic Alaska Drilling Unit (AADU) rigs," stated Mr. Parker. 

Second Quarter Highlights

  • Parker Drilling achieved year-to-year increases of 4 percent in revenues, 7 percent in adjusted EBITDA, 35 percent in net income and 38 percent in earnings per share, excluding non-routine items.
  • The Company's Rental Tools segment produced year-to-year increases in revenues and segment gross margin, and benefitted from a growing offshore Gulf of Mexico market that supplemented the contribution from a slowing U.S. land drilling market.  The segment continued to position rental tools inventory in line with the shifting geographic focus of U.S. land drilling and invested in added inventory to meet customer needs. (Gross margins mentioned here and later exclude depreciation and amortization expense).
  • The U.S. Gulf of Mexico shallow water drilling market remained active and Parker's U.S. Barge Drilling segment achieved further increases in average dayrate and full utilization of its actively marketed rig fleet. 
  • The U.S. Barge Drilling and International Drilling segments contributed significantly to the 2012 second quarter year-to-year increase in operating gross margin. 
  • The Company issued an additional $125 million of Senior Notes due 2018, using the proceeds during the quarter to refinance its Convertible Notes that matured in July. 

Outlook

"The market's current uncertainty about future prices for oil and natural gas and the future level of U.S. drilling has begun to lead to slower growth in some U.S. drilling markets and has us alert for changing conditions that may further impact our business.  We believe that our competitive position, geographic and market diversity, and other strategic strengths, position us to face these market challenges and take advantage of competitive opportunities to produce relatively resilient operating results," commented Mr. Parker.  "While the broader application of lateral drilling and the trend toward more complex well designs continue to lead to demand for premium drill pipe and premier customer service, we expect near-term market conditions for rental tools to reflect the recent slower growth in U.S. land drilling. We believe current market prices for oil and natural gas liquids will provide some support to the pace of activity in the U.S. Gulf of Mexico barge drilling market.  Due to current contract terms and market conditions, we expect near-term declines in utilization of our international rig fleet and reduced levels of revenues and earnings from our O&M contract portfolio.  Growing interest among international operators to expand land drilling in several regions where we are focused has led to a notable increase in rig tender requests recently and could provide operational momentum for 2013," he concluded.

Second Quarter Review

Parker Drilling's revenues for the 2012 second quarter increased 4 percent to $178.9 million from revenues of $172.8 million for the 2011 second quarter.  The Company's 2012 second quarter gross margin increased 9 percent to $74.4 million from gross margin of $68.1 million for the 2011 second quarter, while gross margin was 41.6 percent of revenues for the 2012 second quarter compared with 39.4 percent for the 2011 second quarter.  Results for the 2012 second quarter included $1.9 million, pre-tax, of non-routine expenses primarily related to debt extinguishment costs associated with the refinancing of the Company's Convertible Notes. These non-routine items reduced after-tax earnings by $1.3 million or $0.01 per diluted share.  The results for the 2011 second quarter included non-routine, after-tax expense of $1.6 million or $0.01 per diluted share.  Details of the non-routine items are provided in the attached financial tables.

  • Rental Tools segment revenues increased 11 percent to $65.0 million from $58.5 million, segment gross margin rose 4 percent to $42.5 million from $40.8 million, and segment gross margin as a percentage of revenues was 65.3 percent compared with 69.7 percent for the prior year's second quarter.  The segment benefitted from the expanded use of lateral drilling and the trend toward more complex well designs in the U.S. land market, and renewed growth in Gulf of Mexico drilling.  Rental tool utilization and pricing in the U.S. land market has trended back to more typical levels, impacting the segment's revenue growth and gross margin.
  • U.S. Barge Drilling segment revenues increased 28 percent to $33.3 million from $26.1 million, segment gross margin rose 60 percent to $14.5 million from $9.1 million, and segment gross margin as a percentage of revenues increased to 43.6 percent from 34.7 percent for the prior year's second quarter.  The increase in revenues, segment gross margin and gross margin as a percentage of revenues resulted from higher utilization and an increase in the average dayrate. For the quarter, the business had all eleven of its actively marketed drilling rigs employed, compared with an average of approximately 10.5 barge drilling rigs employed in the 2011 second quarter.  In addition, the barge drilling rig fleet's average dayrate increased 23 percent, to $31,900 for the 2012 second quarter from $26,000 for the 2011 second quarter.  
  • U.S. Drilling segment includes two AADU rigs located in Alaska and one land rig located in Louisiana. The AADU rigs are undergoing commissioning and the available land rig is idle. As a result, this segment earned no revenues in the 2012 second quarter and prior periods. The segment's operating costs consist of expenses incurred in preparation for future activities in Alaska, primarily for labor, training and facility leases.
  • International Drilling segment revenues declined 4 percent to $76.9 million from $79.7 million, segment gross margin increased 20 percent to $18.2 million from $15.2 million, and segment gross margin as a percentage of revenues increased to 23.7 percent from 19.1 percent for the prior year's second quarter.  The reduction in revenues was primarily driven by significantly lower reimbursable expenses from O&M contracts.  The increases in segment gross margin and gross margin as a percentage of revenues are due to higher average utilization and a higher average dayrate for the Parker Drilling-owned drilling rig fleet.  Average rig fleet utilization for the 2012 second quarter was 51 percent, compared with 48 percent for the prior year's second quarter. 
  • Technical Services segment revenues declined 57 percent to $3.7 million from $8.5 million for the prior year's second quarter.  The segment reported a gross margin loss of $0.3 million compared with gross margin of $1.8 million in the prior year's second quarter.  The revenue change was primarily due to the completion of the "pre-operating" phase of the Liberty project in early 2011 and the transition of our role on the Berkut platform project from engineering to construction oversight. The segment's earnings loss reflects retained overhead costs as we transition from recently competed projects.
  • The Construction Contract segment includes only the results of activities related to the construction of the BP-owned Liberty rig.  The construction contract for the Liberty rig ended in the 2011 first quarter.  The Construction Contract segment reported no revenues or gross margin in the 2012 second quarter compared with $1.5 million of segment gross margin in the 2011 second quarter.    

2012 Year-to-Date Summary

The Company's results for the first six months of 2012 included net income of $46.5 million or $0.39 per diluted share on revenues of $355.5 million compared with the prior year's first six month net income of $19.0 million or $0.16 per diluted share on revenues of $329.0 million.  Excluding the effects of non-routine items, the Company reported adjusted net income of $47.8 million or $0.40 per diluted share compared with similarly adjusted 2011 first-half net income of $21.0 million or $0.18 per diluted share. Adjusted EBITDA, excluding non-routine items, was $143.5 million for the first six months of 2012 and $105.4 million for the same period of the prior year.

Results for the first six months of 2012 included $2.0 million, pre-tax, of non-routine expenses primarily related to debt extinguishment costs associated with the refinancing of the Company's Convertible Notes. These non-routine items reduced after-tax earnings by $1.3 million or $0.01 per diluted share.  Earnings for the comparable period of 2011 included $2.0 million of after-tax expense for non-routine items. 

Capital Expenditures

Capital expenditures were $50.1 million for the 2012 second quarter and $109.5 for the year-to-date period.  Year-to-date 2012 capital expenditures included $48.5 million for the construction of Parker Drilling's two newbuild arctic land rigs and $41.6 million for the purchase of tubular goods and other rental tools equipment. 

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. CDT (11:00 a.m. EDT) on Thursday, August 2, 2012, to review its reported results.  Those interested in listening to the call by telephone may do so by dialing (480) 629-9868.  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 Aug. 2 through Aug. 9 by dialing (303) 590-3030 and using the access code 4553665#.

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 that address activities, events or developments that 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 rig utilization and dayrates; 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; capital expenditures; expansion and growth opportunities; acquisitions or joint ventures; asset sales; successful negotiation and execution of contracts; scheduled delivery of drilling rigs for operation; the strengthening of the Company's financial position; increases in market share; outcomes of legal proceedings and investigations; 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 that 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 may 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 that could adversely affect market conditions, fluctuations in oil and natural gas prices that could reduce the demand for drilling services, changes in laws or government regulations that could adversely affect the cost of doing business, our ability to refinance our debt and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the Securities and Exchange Commission. See "Risk Factors" in the Company's Annual Report filed on Form 10-K 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.

Company Description

Parker Drilling (NYSE: PKD) provides high-performance contract drilling solutions, rental tools and project management services to the energy industry. Parker Drilling's rig fleet includes 24 land rigs and two offshore barge rigs in international locations, 13 barge rigs in the U.S. Gulf of Mexico, one land rig located in the U.S., and two land rigs in Alaska undergoing commissioning. The Company's rental tools business supplies premium equipment to operators on land and offshore in the U.S. and select international markets. Parker Drilling also performs contract drilling for customer-owned rigs and provides technical services addressing drilling challenges for E&P customers worldwide. More information about Parker Drilling can be found at http://www.parkerdrilling.com, including operating status reports for the Company's Rental Tools segment and its international and U.S. rig fleets, updated monthly.

 

PARKER DRILLING COMPANY

Consolidated Condensed Balance Sheets

(Dollars in Thousands)

       
 

June 30, 2012

 

December 31, 2011

 

(Unaudited)

   

ASSETS

 

CURRENT ASSETS

     

Cash and Cash Equivalents

$                   77,467

 

$                    97,869

Accounts and Notes Receivable, Net

176,190

 

183,923

Rig Materials and Supplies

24,246

 

29,947

Deferred Costs

2,859

 

3,249

Deferred Income Taxes

6,380

 

6,650

Assets held for sale

5,312

 

5,315

Other Current Assets

46,880

 

40,660

TOTAL CURRENT ASSETS

339,334

 

367,613

       

PROPERTY, PLANT AND EQUIPMENT, NET

770,761

 

719,809

       

OTHER ASSETS

     

Deferred Income Taxes

99,622

 

108,311

Other Assets

27,649

 

20,513

TOTAL OTHER ASSETS

127,271

 

128,824

       

TOTAL ASSETS

$              1,237,366

 

$               1,216,246

       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

CURRENT LIABILITIES

     

Current  Portion of Long-Term Debt

$                   51,136

 

$                  145,723

Accounts Payable and Accrued Liabilities

112,732

 

140,087

TOTAL CURRENT LIABILITIES

163,868

 

285,810

       

LONG-TERM DEBT

429,888

 

337,000

       

LONG-TERM DEFERRED TAX LIABILITY

17,830

 

15,934

       

OTHER LONG-TERM LIABILITIES

29,535

 

33,452

       

TOTAL CONTROLLING INTEREST IN STOCKHOLDERS' EQUITY

596,843

 

544,606

Noncontrolling interest

(598)

 

(556)

TOTAL EQUITY

596,245

 

544,050

       

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$              1,237,366

 

$               1,216,246

       
       

Current Ratio

2.07

 

1.29

       

Total Debt as a  Percent of Capitalization

45%

 

47%

       

Book Value Per Common Share

$                       5.05

 

$                        4.65

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PARKER DRILLING COMPANY

Consolidated Condensed Statements of Operations

(Dollars in Thousands, Except Per Share and Weighted Average Shares Outstanding)

(Unaudited)

               
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2012

 

2011

 

2012

 

2011

               

REVENUES:

178,925

 

172,812

 

355,494

 

328,991

               

EXPENSES:

             

Operating Expenses

104,526

 

104,683

 

199,458

 

212,059

Depreciation and Amortization

27,959

 

27,332

 

55,578

 

54,931

               

TOTAL OPERATING GROSS MARGIN

46,440

 

40,797

 

100,458

 

62,001

               

General and Administrative Expense

(7,420)

 

(7,948)

 

(12,917)

 

(14,752)

Gain on Disposition of Assets, Net

1,368

 

366

 

1,860

 

1,370

               

TOTAL OPERATING INCOME 

40,388

 

33,215

 

89,401

 

48,619

               

OTHER INCOME AND (EXPENSE):

             

Interest Expense

(8,925)

 

(5,755)

 

(16,962)

 

(11,616)

Interest Income

53

 

133

 

79

 

179

Loss on extinguishment of debt

(1,649)

 

-

 

(1,649)

 

-

Change in fair of derivative positions

38

 

(137)

 

(11)

 

(137)

Other 

20

 

123

 

36

 

134

TOTAL OTHER EXPENSE

(10,463)

 

(5,636)

 

(18,507)

 

(11,440)

               

INCOME BEFORE INCOME TAXES

29,925

 

27,579

 

70,894

 

37,179

               

INCOME TAX EXPENSE 

9,817

 

13,464

 

24,460

 

18,303

               

NET INCOME 

20,108

 

14,115

 

46,434

 

18,876

Less: net income (loss) attributable to noncontrolling interest

25

 

(58)

 

(41)

 

(125)

NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$               20,083

 

$               14,173

 

$               46,475

 

$               19,001

               
               

EARNINGS  PER SHARE - BASIC 

             

Net Income 

$                   0.17

 

$                   0.12

 

$                   0.40

 

$                   0.16

               

EARNINGS PER SHARE - DILUTED

             

Net Income 

$                   0.17

 

$                   0.12

 

$                   0.39

 

$                   0.16

               

NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS PER SHARE

             

Basic 

117,410,212

 

116,144,818

 

117,129,364

 

115,634,881

Diluted

118,526,879

 

117,253,588

 

118,623,037

 

116,750,717

 
 
 

PARKER DRILLING COMPANY

Selected Financial Data

(Dollars in Thousands)

(Unaudited)

               
     

Three Months Ended

     

June 30,

 

March 31,

     

2012

 

2011

 

2012

       

REVENUES:

   
 

Rental Tools

 

$       65,002

 

$      58,490

 

$       66,284

 

U.S. Barge Drilling

 

33,292

 

26,060

 

27,835

 

U.S. Drilling

 

-

 

-

 

-

 

International Drilling

 

76,923

 

79,725

 

78,750

 

Technical Services

 

3,708

 

8,537

 

3,700

 

Construction Contract

 

-

 

-

 

-

 

  Total Revenues

 

178,925

 

172,812

 

176,569

               

OPERATING EXPENSES:

           
 

Rental Tools

 

22,552

 

17,719

 

21,630

 

U.S. Barge Drilling

 

18,792

 

17,006

 

17,140

 

U.S. Drilling

 

533

 

212

 

466

 

International Drilling

 

58,683

 

64,513

 

52,243

 

Technical Services

 

3,966

 

6,748

 

3,453

 

Construction Contract

 

-

 

(1,515)

 

-

 

  Total Operating Expenses

 

104,526

 

104,683

 

94,932

               

OPERATING GROSS MARGIN:

           
 

Rental Tools

 

42,450

 

40,771

 

44,654

 

U.S. Barge Drilling

 

14,500

 

9,054

 

10,695

 

U.S. Drilling

 

(533)

 

(212)

 

(466)

 

International Drilling

 

18,240

 

15,212

 

26,507

 

Technical Services

 

(258)

 

1,789

 

247

 

Construction Contract

 

-

 

1,515

 

-

 

Depreciation and Amortization 

 

(27,959)

 

(27,332)

 

(27,619)

 

  Total Operating Gross Margin 

 

46,440

 

40,797

 

54,018

               
 

General and Administrative Expense

 

(7,420)

 

(7,948)

 

(5,497)

 

Gain on Disposition of Assets, Net

 

1,368

 

366

 

492

               

TOTAL OPERATING INCOME 

 

$     40,388

 

$    33,215

 

$     49,013

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PARKER DRILLING COMPANY

Adjusted EBITDA 

(Dollars in Thousands)

                                     
   

Three Months Ended

   

June 30, 2012

 

March 31, 2012

 

December 31, 2011

 

September 30, 2011

 

June 30, 2011

 

March 31, 2011

 

December 31, 2010

 

September 30, 2010

 

June 30, 2010

                                     

Net Income (Loss) Attributable to Controlling Interest

 

$           20,083

 

$           26,392

 

$                      (90,177)

 

$                 20,725

 

$                 14,173

 

$                   4,827

 

$               (13,409)

 

$                      492

 

$                      507

  Adjustments:

                                   

Income Tax (Benefit) Expense

 

9,817

 

14,643

 

(48,112)

 

15,042

 

13,464

 

4,839

 

25,362

 

786

 

1,624

Total Other Income and Expense

 

10,463

 

8,044

 

5,066

 

6,268

 

5,636

 

5,803

 

6,196

 

6,277

 

11,182

Gain on Disposition of Assets, Net

 

(1,368)

 

(492)

 

(1,666)

 

(623)

 

(366)

 

(1,004)

 

(1,060)

 

(1,176)

 

(1,712)

Depreciation and Amortization

 

27,959

 

27,619

 

29,624

 

27,581

 

27,332

 

27,599

 

28,526

 

28,904

 

29,012

Impairment and other charges

 

-

 

-

 

170,000

 

-

 

-

 

-

 

-

 

-

   

Provision for Reduction in Carrying Value of Certain Assets

 

-

 

-

 

1,350

 

-

 

-

 

-

 

1,952

 

-

 

-

                                     

Adjusted EBITDA

 

$           66,954

 

$           76,206

 

$                       66,085

 

$                 68,993

 

$                 60,239

 

$                 42,064

 

$                 47,567

 

$                 35,283

 

$                 40,613

                                     

Adjustments:

                                   

     Non-routine Items

 

289

 

23

 

567

 

1,517

 

2,451

 

685

 

460

 

930

 

694

                                     

Adjusted EBITDA after Non-routine Items

 

$           67,243

 

$           76,229

 

$                       66,652

 

$                 70,510

 

$                 62,690

 

$                 42,749

 

$                 48,027

 

$                 36,213

 

$                 41,307

 
 
 

PARKER DRILLING COMPANY

Reconciliation of Non-Routine Items *

(Dollars in Thousands, except Per Share)

(Unaudited)

             
     

Three Months Ending

   

Six Months Ended

     

June 30, 2012

   

June 30, 2012

             

 Net income attributable to controlling interest 

 

$                20,083

   

$                  46,475

 Earnings per diluted share 

 

$                    0.17

   

$                      0.39

             

 Adjustments: 

         
 

 Extinguishment of debt 

 

1,649

   

1,649

 

 U.S. regulatory investigations / legal matters** 

 

289

   

312

 

           Total adjustments 

 

$                 1,938

   

$                    1,961

 

 Tax effect of non-routine adjustments 

 

(678)

   

(686)

 

           Net non-routine adjustments 

 

$                 1,260

   

$                    1,275

             

 Adjusted net income attributable to controlling interest 

 

$               21,343

   

$                  47,750

 Adjusted earnings per diluted share 

 

$                   0.18

   

$                      0.40

             
             
             
             
     

Three Months Ending

   

Six Months Ended

     

June 30, 2011

   

June 30, 2011

 Net income attributable to controlling interest 

 

$                  14,173

   

$                   19,001

 Earnings per diluted share 

 

$                      0.12

   

$                       0.16

             

 Adjustments: 

         
 

 Extinguishment of debt 

 

-

   

-

 

 U.S. regulatory investigations / legal matters** 

 

2,451

   

3,136

 

           Total adjustments 

 

$                   2,451

   

$                     3,136

 

 Tax effect of non-routine adjustments 

 

(858)

   

(1,098)

 

           Net non-routine adjustments 

 

$                   1,593

   

$                     2,038

             

 Adjusted net income attributable to controlling interest 

 

$                 15,766

   

$                  21,039

 Adjusted earnings per diluted share 

 

$                      0.13

   

$                      0.18

             
             

 * 

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 Company

 

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