Parker Drilling Co (fka PKDC)

[eastunder]

Parker Drilling Reports Fourth Quarter Results

Wednesday, February 23, 2011 08:00ET



HOUSTON, Feb. 23, 2011 /PRNewswire/ -- Parker Drilling (NYSE: PKD), a drilling contractor and service provider, today reported results for the 2010 fourth quarter and annual periods ended December 31, 2010. The Company's results for the fourth quarter included a net loss attributable to controlling interest of $13.4 million or $0.12 per diluted share on revenues of $173.3 million, compared with a net loss attributable to controlling interest of $4.3 million or $0.04 per diluted share on revenues of $175.8 million for the 2009 fourth quarter. Excluding the effects of non-routine items the Company reported net income attributable to controlling interest of $1.5 million or $0.01 per diluted share compared with a similarly adjusted 2009 fourth quarter net loss attributable to controlling interest of $0.5 million or $0.00 per diluted share. Adjusted EBITDA, excluding non-routine items, was $48.0 million, compared with $34.5 million for the prior year's fourth quarter.


"Our fourth quarter results reflect the balance that our diverse geographic and business mix provides in a cyclical industry," began Parker Drilling President and Chief Executive Officer David Mannon. "We had another record performance from our rental tools business and improved results from our U.S. barge drilling operations. Though these gains were offset, principally by declines in our international drilling segment, the overall result was a significant increase in operating income on a one percent decline in revenues. The required payment of a contested tax assessment in Kazakhstan, disclosed previously, and other non-routine items, resulted in a reported net loss for the quarter," said Mannon.


Fourth Quarter Highlights

-- Parker's Rental Tools segment reported record levels of revenues,
segment gross margin and segment gross margin as a percent of revenues.
(Segment gross margins exclude depreciation and amortization expense.)
-- The Company's U.S. barge drilling business continued to achieve
year-to-year increases in rig fleet utilization, which, combined with
operating improvements, have led to its highest reported revenues and
segment gross margin and segment gross margin as a percent of revenues
since 2008.
-- International Drilling benefited from a new contract in the Asia Pacific
region, deploying a rig in Papua New Guinea that had been previously
stacked. In addition, the contract for Rig 257, Parker's Caspian Sea
arctic barge drilling rig, was extended into 2012.
-- The Parker-operated Yastreb rig set a new, extended-reach drilling
record of 40,502 feet, nearly eight miles, in total measured depth.
This rig, designed, built and operated by Parker Drilling for Exxon
Neftegas Limited, set this record during development drilling of the
Sakhalin-1 Project's Odoptu field.



"The benefits of Parker's commitment to develop and grow its diverse, complementary operations are reflected in the results of the fourth quarter," said Mannon. "The proliferation of lateral drilling on land in the U.S., predominantly in the emerging shale plays, has raised demand for rental equipment in the markets where our Rental Tools operations are located. The pick-up in shallow water drilling in the Gulf of Mexico for oil and natural gas has renewed the barge drilling market, and, as the leading operator in that market, our business has continued to strengthen. Our international drilling rig activity slowed, mostly the result of local market conditions in the CIS/Africa-Middle East region that have idled several rigs and the effect of redeploying rigs in the Americas region in response to changed opportunities. Our project management business continued to provide a steady stream of revenues and cash flow as it performed on our existing operational contracts and continued development of additional project opportunities," he summarized. "We believe our established strengths as a drilling services provider and our diversity of operations should contribute to improved results in the year ahead and provide support for longer-term earnings growth for Parker," Mannon concluded.


Fourth Quarter Review

Parker's revenues for the 2010 fourth quarter were $173.3 million compared with 2009 fourth quarter revenues of $175.8 million. The Company's 2010 fourth quarter gross margin, before depreciation and amortization expense, was $54.2 million compared with 2009 fourth quarter gross margin of $43.0 million, while gross margin as a percentage of revenues increased to 31 percent from the 24 percent gross margin for the 2009 fourth quarter. Results for the three months ended December 31, 2010, included the impact of several non-routine expenses. These were comprised of $13.3 million related to a previously disclosed contested tax assessment in Kazakhstan; $0.5 million, pre-tax, 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; and a $2.0 million, pre-tax, reserve taken for the doubtful collection of a customer receivable. These non-routine items reduced after-tax earnings by $14.9 million or $0.13 per diluted share. The results for the 2009 fourth quarter included non-routine, after-tax expense of $3.8 million or $0.04 per diluted share. Details of the non-routine items are provided in the attached financial tables.




--Rental Tools revenues increased 96 percent, to $49.3 million
from $25.1 million, segment gross margin rose to $32.8 million
from $13.8 million, and segment gross margin as a percent of
revenues rose to 66 percent from 55 percent. The continued
growth in the U.S. in the development of shale formations and the
expanded use of lateral drilling to exploit oil and natural gas
resources has led to increased demand for rental tools. With
facilities strategically located in key U.S. drilling markets and
recent timely investments in rental tool inventory, Parker's
Rental Tools business continued to benefit from increased demand,
higher utilization and improved pricing. The increase in onshore
demand was slightly offset by a decline in U.S. offshore and
international revenues.
-- U.S. Drilling revenues increased 32 percent, to $19.2 million
from $14.5 million, segment gross margin rose to $5.7 million
from $1.3 million, and segment gross margin as a percent of
revenues increased to 30 percent from 9 percent. Barge drilling
in the shallow water and inland areas of the Gulf of Mexico
remained active, with continued improvement, year-to-year, in
rigs working and dayrates. For the quarter, the business had an
average of 9.5 barges employed, approximately 2 more than for the
comparable period of 2009. The barge rig fleet's average dayrate
was $21,000 for the 2010 fourth quarter and $19,300 for the 2009
fourth quarter.
-- International Drilling revenues declined 31 percent, to $49.9
million from $72.7 million, segment gross margin declined to
$10.3 million compared with $21.9 million, and segment gross
margin as a percent of revenues decreased to 21 percent from 30
percent. A reduction in drilling activity in the CIS/AME region
and Mexico led to a decline in rig utilization and lower revenues
for the 2010 fourth quarter compared with the prior year's fourth
quarter. This was offset in part by higher revenues from our
Caspian Sea arctic barge rig which returned to a warm-stack rate
during the fourth quarter of 2010, having been on a lower average
dayrate in the prior year's fourth quarter. Though operating
costs were reduced as utilization declined, gross margin declined
more than revenues.
Average rig fleet utilization for the 2010 fourth quarter was 46
percent, compared with 64 percent for the prior year's fourth
quarter. For the quarter, the ten-rig Americas regional fleet
operated at 67 percent average utilization, the eleven-rig CIS/
AME regional fleet operated at 33 percent average utilization and
the eight-rig Asia Pacific regional fleet operated at 45 percent
average utilization. Three rigs located in the Asia Pacific
region are being marketed for sale, reducing the region's fleet
at year-end 2010 to five rigs and Parker's overall international
fleet to 27 rigs. (Additional rig fleet information is available
on Parker's Web site).

--Project Management and Engineering Services revenues increased
18 percent, to $32.5 million from $27.6 million, segment gross
margin decreased to $4.7 million from $5.4 million and segment
gross margin as a percent of revenues decreased to 14 percent
from 20 percent. The increase in revenues was primarily due to
higher operating rates on the Yastreb rig and Orlan platform and
increased engineering services revenues. The segment's gross
margin decline is primarily attributable to lower earnings on the
2010 fourth quarter's engineering revenues compared with the
prior year's fourth quarter.
-- Construction Contract revenues declined to $22.4 million
compared with $35.8 million and segment gross margin was $0.9
million, compared to a $0.6 million in the prior year's
comparable period. Segment revenues and gross margin represent
work completed during the period on the construction of the
customer-owned Liberty rig. In the fourth quarter, construction
of the rig was halted by the customer while it reviews the rig's
engineering and design, including its safety systems.



2010 Summary

The Company's results for the 2010 year included a net loss attributable to controlling interest of $14.5 million or $0.13 per diluted share on revenues of $659.5 million, compared with net income attributable to controlling interest of $9.3 million or $0.08 per diluted share on revenues of $752.9 million for the prior year. Excluding the effects of non-routine items the Company reported adjusted net income attributable to controlling interest of $8.6 million or $0.08 per diluted share compared with similarly adjusted 2009 net income attributable to controlling interest of $16.5 million or $0.14 per diluted share. Adjusted EBITDA, excluding non-routine items, was $163.4 million for the 2010 year and $166.8 million for the prior year.


Results for the 2010 year included the impact of non-routine items that decreased after-tax earnings by $23.1 million or $0.20 per diluted share. Included in non-routine items are $7.2 million, pre-tax, of debt extinguishment costs related to the redemption of the Company's 9.625% senior notes; $5.9 million, pre-tax, of expense related to the U.S. regulatory investigations and Parker's internal review regarding possible violations of the Foreign Corrupt Practices Act and other laws; $13.3 million of expense related to a tax assessment in Kazakhstan that is currently on appeal; and a $2.0 million, pre-tax, reserve taken for the doubtful collection of a customer receivable. Net income for 2009 included $7.2 million of expense for non-routine items. Also included in segment operating expenses for 2010 are $8.8 million, pre-tax ($5.5 million, after tax), from several tax settlements and adjustments that occurred in the 2010 third quarter related to prior periods' operations.


Cash Flow and Capitalization

Capital expenditures for 2010 were $219.2 million, including $112.5 million for the construction of Parker's two newbuild arctic land rigs for Alaska and $48.9 million for the purchase of tubular goods and other rental equipment.

Financials continued at:

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