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PARKER DRILLING CO : Parker Drilling Reports 2009 First Quarter Results

05/06/2009 | 08:00am US/Eastern

HOUSTON, May 6 /PRNewswire-FirstCall/ -- Parker Drilling Company (NYSE: PKD), a global drilling contractor and service provider, today reported financial and operating results for the 2009 first quarter. For the period, Parker Drilling reported net income of $2.1 million or $0.02 per diluted share on revenues of $173.9 million. Excluding non-routine items the Company reported net income of $5.6 million or $0.05 per diluted share. (A reconciliation of net income excluding non-routine items is provided in the attached financial tables).

Significant results and achievements of the first quarter include:

    --  Revenues of $173.9 million, on par with the prior year's first
        quarter, with revenue increases in the International Drilling and
        Project Management and Engineering Services segments.  Including
        revenues from the new Construction Contract segment, these offset
        declines in U.S. Drilling and Rental Tools;
    --  A significant year-to-year increase in segment gross margin as a percent
        of revenues for International Drilling, reaching 35.7 percent for the
        quarter;
    --  International average rig utilization of 79 percent, ahead of last
        year's first quarter average utilization of 73 percent;
    --  On-schedule progress in the construction of the BP-owned Liberty rig and
        two Parker-owned arctic Alaska rigs; and

-- A first quarter company safety performance of 0.77 Total Recordable Incident Rate (TRIR), better than the Company's 2009 TRIR goal of 0.92.

"In a difficult market that has impacted every sector of the worldwide energy industry, Parker delivered a successful performance for the quarter, supported by our geographical diversification and balanced business mix," said Robert L. Parker Jr., chairman and chief executive officer. "The Gulf of Mexico barge business has pared back its operating costs to sustain itself through the downturn in its market while capturing a significant portion of the drilling work that has been available. The longer-term nature and oil drilling focus of our international operations have provided a strong boost to revenues and earnings. The impact on Rental Tools from the decline in U.S. land drilling was softened by its position in the stronger shale regions and the strength of its customer relationships.

"The industry outlook for 2009 remains subdued, and will continue to impact the near-term prospects for the Company. Nevertheless, I expect our operating performance to improve as the year progresses, as we gain the benefits of a leaner cost structure; our strong technical, operational and safety leadership and our employee commitment to customer service," Mr. Parker concluded.

2009 First Quarter Financial Review

For the three months ended March 31, 2009, Parker Drilling posted net income of $2.1 million, or $0.02 per diluted share, on revenues of $173.9 million, compared to net income of $23.2 million, or $0.21 per diluted share, on revenues of $173.3 million for the first quarter 2008. Excluding the impact of non-routine items, adjusted net income for the 2009 first quarter was $5.6 million or $0.05 per diluted share, compared with 2008 first quarter adjusted net income of $18.1 million or $0.16 per diluted share. (The results for 2008 have been restated for the impact of the recently adopted FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)"). The 2009 first quarter included non-routine net after-tax expense of $3.5 million, or $0.03 per diluted share related to the previously disclosed investigations by the Department of Justice and the Securities and Exchange Commission regarding the Company's utilization of the services of a customs agent in certain countries and an internal investigation regarding U.S. economic sanctions related primarily to the Company's operations in Turkmenistan. The results for the first quarter 2008 included net after-tax income of $5.1 million, or $0.05 per diluted share, for non-routine items. (Details of the non-routine items are provided in the attached financial tables.)

Total revenues for the 2009 first quarter were relatively unchanged compared to the same period last year. U.S. Barge Drilling revenues declined 78 percent, to $9.9 million from $45.9 million, due to lower utilization and dayrates for the Gulf of Mexico barge drilling fleet. International Drilling revenues rose 13 percent to $77.4 million from $68.7 million, primarily the result of higher average fleet utilization. Rental Tools revenues decreased 4 percent to $37.9 million from $39.5 million, with the impact of the recent decline in U.S. land and Gulf of Mexico shelf drilling mostly offset by increased coverage in the active shale regions and an increase in demand for workover equipment. Revenues for Project Management and Engineering Services increased to $32.1 million from $19.2 million, primarily as a result of higher revenues from the Sakhalin projects and additional engineering and operations and maintenance (O&M) services. Construction Contract segment revenues of $16.7 million reflect the quarter's progress on the construction contract for the BP-owned Liberty ultra-extended-reach rig.

Adjusted EBITDA for the first quarter 2009 was $39.7 million compared to $61.0 million in the first quarter 2008. (Adjusted EBITDA is a non-GAAP financial measure. The calculations of adjusted EBITDA and reconciliation to the most directly comparable GAAP measure are shown on the attached tables). The Company's U.S. Barge Drilling segment's EBITDA was a loss of $3.3 million, compared to income of $24.4 million in the prior year's first quarter, reflecting the impact of lower utilization and dayrates. The International Drilling segment's EBITDA increased 71 percent to $27.6 million, compared to first quarter 2008 segment EBITDA of $16.1 million, primarily the result of an increase in fleet utilization and lower operating costs. Rental Tools achieved segment EBITDA of $21.4 million, 9 percent below the prior year first quarter segment EBITDA of $23.7 million. Delivering high quality products and customer service has provided support to strong operating margins for Quail Tools. Segment EBITDA for Project Management and Engineering Services increased 75 percent to $6.2 million, compared to the prior year's first quarter level of $3.5 million, reflecting higher revenues for the Sakhalin projects and additional O&M and engineering projects.

Operations Review

    --  Average utilization for the Company's Gulf of Mexico barge rigs for
        the first quarter 2009 was 25 percent, compared to the 77 percent
        reported for the first quarter 2008 and the 61 percent reported for the
        fourth quarter 2008.  Currently, barge rig utilization is 40 percent. 
        The Company's barge dayrates in the Gulf of Mexico averaged $28,000
        per day during the first quarter 2009, compared to $41,200 per day in
        the first quarter 2008 and $39,400 per day in the fourth quarter 2008. 
        (Average dayrates for each classification of barge by quarter are
        available in the "Dayrates - GOM" schedule posted on
        Parker's Web site under "Investor Relations" at
        "Quarterly Support Materials".)
    --  Average utilization of international rigs, both land and barge rigs, for
        the first quarter 2009 was 79 percent, compared to 73 percent reported
        for the first quarter 2008 and 87 percent reported for the fourth
        quarter 2008.  (Average utilization for each international region's
        rig fleet by quarter is available in the "Rig Utilization
        Schedule" posted on Parker's Web site under "Investor
        Relations" at "Quarterly Support Materials".)
        --  The Company's Americas region operated at 90 percent
            utilization, with nine of ten rigs working throughout the quarter. 
            Most of the working rigs in this region are on multi-well contracts
            that extend beyond 2009.
        --  Parker's twelve rigs located in the Commonwealth of Independent
            States / Africa Middle East (CIS / AME) region achieved average
            utilization of 86 percent during the quarter.  Eleven rigs worked
            during the quarter, with one rig completing its contracted work in
            January.  The majority of the working rigs in the CIS / AME region
            are operating under contracts that extend beyond 2009.
        --  The eight-rig Parker fleet located in the Asia Pacific region
            operated at 64 percent utilization during the quarter.  Five of the
            eight rigs worked during the quarter, one of which completed its
            contracted work in January. Most contracts in this region are for
            short duration projects.  One working rig is on a contract that
            extends beyond 2009.

-- In Project Management and Engineering Services, the Yastreb rig, operated by Parker Drilling for the Sakhalin-1 consortium, completed its move north and spent much of the first quarter preparing to drill the Odoptu field.

Capital expenditures for the three months ended March 31, 2009 totaled $51.4 million, including $17.5 million for the construction of Parker's two newbuild land rigs for Alaska; and $17.2 million for tubular goods and other rental equipment.

At the end of the period total debt was $446.5 million, and the Company's total debt-to-capitalization ratio was 43.2 percent. Adjusted for the Company's cash and cash equivalents balance of $148.4 million at March 31, 2009, Parker's ratio of net-debt-to-net capitalization increased to 33.7 percent from 31.6 percent at the end of 2008. The Company's $50 million term loan begins to amortize at $3.0 million per quarter beginning the third quarter 2009, while the remaining components of the Company's debt do not mature until 2012 and 2013.

Conference Call

Parker Drilling has scheduled a conference call at 10:00 a.m. CDT (11:00 a.m. EDT) on Wednesday, May 6, 2009 to discuss first quarter 2009 results. Those interested in listening to the call by telephone may do so by dialing (303) 228-2964. Alternatively, the call can 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 May 6 through May 13 by dialing (303) 590-3000 and using the access code 11130198#, 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 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, 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 Balance Sheets


                                        March 31, 2009  December 31, 2008
                                        --------------  -----------------
                                          (Unaudited)
                  ASSETS                      (Dollars in Thousands)
    CURRENT ASSETS
        Cash and Cash Equivalents           $148,403           $172,298
        Accounts and Notes
         Receivable, Net                     182,333            186,164
        Rig Materials and Supplies            30,201             30,241
        Deferred Costs                         7,044              7,804
        Deferred Income Taxes                  9,735              9,735
        Other Current Assets                  61,546             67,049
                                              ------             ------
            TOTAL CURRENT ASSETS             439,262            473,291
                                             -------            -------

    PROPERTY, PLANT AND
     EQUIPMENT, NET                          707,128            675,548

    OTHER ASSETS
        Deferred Income Taxes                 25,852             22,956
        Other Assets                          33,060             33,925
                                              ------             ------
            TOTAL OTHER ASSETS                58,912             56,881
                                              ------             ------

    TOTAL ASSETS                          $1,205,302         $1,205,720
                                          ==========         ==========

        LIABILITIES AND STOCKHOLDERS' EQUITY
              CURRENT LIABILITIES
        Current  Portion of
         Long-Term Debt                       $9,000             $6,000
        Accounts Payable and
         Accrued Liabilities                 145,635            152,528
                                             -------            -------
            TOTAL CURRENT LIABILITIES        154,635            158,528
                                             -------            -------

    LONG-TERM DEBT                           437,464            435,394

    LONG-TERM DEFERRED
     TAX LIABILITY                             7,133              8,230

    OTHER LONG-TERM
     LIABILITIES                              19,342             21,396

    STOCKHOLDERS' EQUITY                     586,728            582,172

                                          ----------         ----------
    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY                 $1,205,302         $1,205,720
                                          ==========         ==========


    Current Ratio                               2.84               2.99

    Total Debt as a Percent of
     Capitalization                               43%                43%

    Book Value Per
     Common Share                              $5.04              $5.13



                   PARKER DRILLING COMPANY AND SUBSIDIARIES
                Consolidated Condensed Statements of Operations
                                  (Unaudited)

                                                     Three Months Ended
                                                          March 31,
                                                      -----------------
                                                      2009         2008
                                                      ----         ----
                                                    (Dollars in Thousands)
    REVENUES:
        U.S. Drilling                                 $9,856      $45,888
        International Drilling                        77,381       68,740
        Project Management and Engineering
         Services                                     32,054       19,179
        Construction Contract                         16,745            -
        Rental Tools                                  37,889       39,471
                                                      ------       ------
    TOTAL REVENUES                                   173,925      173,278
                                                     -------      -------

    OPERATING EXPENSES:
        U.S. Drilling                                 13,136       21,522
        International Drilling                        49,777       52,621
        Project Management and Engineering
         Services                                     25,894       15,661
        Construction Contract                         15,914            -
        Rental Tools                                  16,454       15,818
        Depreciation and Amortization                 27,124       26,166
                                                      ------       ------
    TOTAL OPERATING EXPENSES                         148,299      131,788
                                                     -------      -------

    TOTAL OPERATING GROSS
     MARGIN                                           25,626       41,490
                                                      ------       ------

    General and Administrative Expense               (13,060)      (6,668)
    Gain on Disposition of Assets, Net                    78          579
                                                          --          ---

    TOTAL OPERATING INCOME                            12,644       35,401
                                                      ------       ------

    OTHER INCOME AND (EXPENSE):
        Interest Expense                              (8,066)      (6,837)
        Interest Income                                  286          368
        Equity in Loss of Unconsolidated Joint
         Venture and Related Charges, net of tax           -       (1,105)
        Other Income                                     (12)          60
                                                         ---           --
    TOTAL OTHER INCOME AND (EXPENSE)                  (7,792)      (7,514)
                                                      ------       ------

    INCOME BEFORE INCOME TAXES                         4,852       27,887
                                                       -----       ------

    INCOME TAX EXPENSE (BENEFIT)
        Current                                        6,738      (10,643)
        Deferred                                      (3,992)      15,328
                                                      ------       ------
    TOTAL INCOME TAX EXPENSE (BENEFIT)                 2,746        4,685
                                                       -----        -----

    NET INCOME                                        $2,106      $23,202
                                                      ======      =======

    EARNINGS  PER SHARE - BASIC
        Net Income                                     $0.02        $0.21

    EARNINGS PER SHARE - DILUTED
        Net Income                                     $0.02        $0.21

    NUMBER OF COMMON SHARES USED IN
     COMPUTING EARNINGS PER SHARE
        Basic                                    112,260,517  110,546,311
        Diluted                                  113,366,444  111,481,301



               PARKER DRILLING COMPANY AND SUBSIDIARIES
                       Selected Financial Data
                             (Unaudited)


                                          Three Months Ended
                                    ------------------------------
                                      March 31,       December 31,
                                    -------------     ------------
                                    2009     2008         2008
                                    ----     ----         ----
                                      (Dollars in Thousands)
    REVENUES:
      U.S. Drilling                $9,856  $45,888       $33,634
      International Drilling       77,381   68,740        86,211
      Project Management and
       Engineering Services        32,054   19,179        37,928
      Construction Contract        16,745        -         8,911
      Rental Tools                 37,889   39,471        45,696
                                   ------   ------        ------
        Total Revenues            173,925  173,278       212,380
                                  -------  -------       -------

    OPERATING EXPENSES:
      U.S. Drilling                13,136   21,522        18,929
      International Drilling       49,777   52,621        58,494
      Project Management and
       Engineering Services        25,894   15,661        29,858
      Construction Contract        15,914        -         8,442
      Rental Tools                 16,454   15,818        17,034
                                   ------   ------        ------
        Total Operating Expenses  121,175  105,622       132,757
                                  -------  -------       -------

    OPERATING GROSS
     MARGIN:
      U.S. Drilling                (3,280)  24,366        14,705
      International Drilling       27,604   16,119        27,717
      Project Management and
       Engineering Services         6,160    3,518         8,070
      Construction Contract           831        -           469
      Rental Tools                 21,435   23,653        28,662
      Depreciation and
       Amortization               (27,124) (26,166)      (31,961)
                                  -------  -------       -------
        Total Operating
         Gross Margin              25,626   41,490        47,662

      General and
       Administrative Expense     (13,060)  (6,668)      (10,288)
      Impairment of Goodwill            -        -      (100,315)
      Gain on Disposition of
       Assets, Net                     78      579           683

                                  -------  -------      --------
    TOTAL OPERATING
     INCOME (LOSS)                $12,644  $35,401      $(62,258)
                                  =======  =======      ========



                  Marketable Rig Count Summary
                      As of March 31, 2009

                                                        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 and Barge Rigs
          Asia Pacific                                     8
          Americas                                        10
          CIS/AME                                         12
          Other                                            1
                                                           -
              Total International Land and Barge Rigs     31


                                                          --
              Total Marketable Rigs                       46
                                                          ==



                                      Adjusted EBITDA
                                        (Unaudited)
                                   (Dollars in Thousands)


                                          Three Months Ended
                   -----------------------------------------------------------
                   March 31,  December 31,  September 30,  June 30,  March 31,
                     2009        2008           2008         2008      2008
                   ---------  ------------  -------------  --------  ---------

     Previously
      Reported
      Net Income
      (Loss)           $2,106    $(39,477)      $18,551     $22,596   $23,888
     Restated
      Interest
      Expense,
      Net
      of Tax -
      Per
      APB 14-1              -        (724)         (721)       (699)     (686)
                       ------        ----          ----        ----      ----
     Restated
      Net
      Income
      (Loss)            2,106     (40,201)       17,830      21,897    23,202
      Adjustments:
        Income
         Tax
         (Benefit)
         Expense        2,746     (31,178)       19,673      13,762     4,685
        Total
         Other
         Income
         and
         Expense        7,792       9,121         6,344       6,531     7,514
        Loss/(Gain)
         on
         Disposition
         of Assets,
         Net              (78)       (683)         (799)       (636)     (579)
        Impairment
         of Goodwill        -     100,315
        Depreciation
         and
         Amortization  27,124      31,961        30,663      28,166    26,166
        Provision
         for
         Reduction
         in
         Carrying
         Value of
         Certain
         Assets             -           -             -           -         -
                       ------      ------        ------      ------    ------

    Adjusted
     EBITDA           $39,690     $69,335       $73,711     $69,720   $60,988
                      =======     =======       =======     =======   =======


                                           Three Months Ended
                           ---------------------------------------------------
                           December 31,   September 30, June 30,   March 31,
                                2007          2007        2007       2007
                           -------------  ------------- ---------  ---------

     Previously Reported
      Net Income (Loss)       $34,571       $22,653      $16,860     $29,994
     Restated
      Interest
      Expense, Net
      of Tax - Per
      APB 14-1                   (670)         (562)           -           -
                                 ----          ----        -----      ------
     Restated Net
      Income (Loss)            33,901        22,091       16,860      29,994
      Adjustments:
        Income Tax
         (Benefit)
         Expense              (21,830)       18,803       15,813      24,109
        Total Other
         Income and
         Expense               31,385         9,706        4,231       5,920
        Loss/(Gain)
         on
         Disposition
         of Assets,
         Net                      784          (543)        (269)    (16,404)
        Impairment
         of Goodwill
        Depreciation and
         Amortization          25,059        23,043       19,642      18,059
        Provision for
         Reduction in
         Carrying Value of
         Certain Assets           371         1,091            -           -
                                  ---         -----       ------       -----

    Adjusted EBITDA           $69,670       $74,191      $56,277     $61,678
                              =======       =======      =======     =======



                  PARKER DRILLING COMPANY AND SUBSIDIARIES
                    Reconciliation of Non-Routine Items *
                                 (Unaudited)
                  (Dollars in Thousands, except Per Share)


                                                         Three Months Ending
                                                            March 31, 2009
                                                            --------------

     Net income                                                  $2,106
     Earnings per diluted share                                   $0.02

     Adjustments:
       DOJ investigation                                          5,308
                                                                  -----
                 Total adjustments                               $5,308
       Tax effect of non-routine adjustments                     (1,858)
                                                                 ------
                 Net non-routine adjustments                     $3,450
                                                                 ------

     Adjusted net income                                         $5,556
                                                                 ======
     Adjusted earnings per diluted share                          $0.05
                                                                  =====


                                                         Three Months Ending
                                                            March 31, 2008
                                                            --------------
     Previously reported net income                             $23,888
     Previously reported earnings per diluted
      share                                                       $0.21

     Restated interest expense, net of tax - per
      APB 14-1                                                    $(686)

     Restated net income                                        $23,202
     Restated earnings per share                                  $0.21

     Adjustments:
       Saudi Arabia                                              $1,105
       FIN 48 tax benefit - Kazakhstan                          (10,560)
       PNG tax                                                    4,127
       DOJ investigation                                            441
                                                                    ---
                 Total adjustments                              $(4,887)
       Tax effect of non-routine adjustments                       (175)
                                                                   ----
                 Net non-routine adjustments                    $(5,062)
                                                                -------

     Adjusted net income                                        $18,140
                                                                =======
     Adjusted earnings per diluted share                          $0.16
                                                                  =====


    * 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 Company

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