Parker Drilling Reports 2014 Second Quarter Results

HOUSTON, Aug. 6, 2014 /PRNewswire/ -- Parker Drilling Company (NYSE-PKD), an international provider of contract drilling and drilling-related services and rental tools to the energy industry, today reported results for the quarter ended June 30, 2014, including net income of $15.7 million, or $0.13 per diluted share, on revenues of $254.2 million.  Excluding non-routine items, the Company earned net income of $15.1 million or $0.12 per diluted share, compared with similarly adjusted 2014 first quarter net income of $5.5 million or $0.04 per diluted share, on revenues of $229.2 million.  Second quarter adjusted EBITDA, excluding non-routine items, was $71.0 million, compared with $54.1 million for the preceding quarter.

"Second quarter results were largely in line with our expectations," said Gary Rich, chairman, president and chief executive officer.  "We had solid gains in revenues and earnings from both our drilling and rental tools operations.

"Our U.S. Barge Drilling segment had strong results in the second quarter, primarily due to higher utilization and dayrates.  We recently made significant investments in this business which we believe will provide revenue and earnings growth and attractive returns for our shareholders.  We completed the rebuild of Rig 55B and put it into service during the second quarter.  Also during the second quarter, we acquired Rig 30B, a three-year old posted barge rig, at an attractive price.  The rig has been inspected, crewed and is now at work.  These rig additions give us more flexibility to meet customer needs. 

"Our International Drilling segment continued to have good success in putting rigs to work. In the second quarter we put Rig 122 to work in Mexico and contracted Rig 216 to work in Kazakhstan later this year.  Both rigs had been idle since 2010.  In addition, we re-contracted our three 3,000-horsepower rigs in Mexico on four year terms at higher dayrates.

"Our rental tools business capitalized on improving conditions in the U.S. land market and achieved higher utilization and better pricing during the quarter, leading to increased revenues and profitability."

Outlook

"We continue to build a foundation from which to grow Parker Drilling and consistently produce solid operating performance and financial results," said Mr. Rich.  "We expect continued improvement in market conditions in the U.S., on land and in the Gulf of Mexico.  Our recent gains in rental tools utilization and pricing in the U.S. land drilling market are encouraging and position us to benefit from further market growth that may develop. In addition, we expect further expansion of our rental tools presence in the Gulf of Mexico offshore drilling market as committed contracts are initiated later this year. Recent additions to our Gulf of Mexico barge drilling fleet and strong dayrates should allow that operation to continue contributing to revenues and earnings growth into 2015. 

"The international markets in which we work are expected to provide good demand to support growth of our rental tools business and strong tender activity and contract renewal opportunities for our rig fleet. However, conditions in several key international markets may delay our ability to benefit from these in the near-term.

"We continue to focus on consistent execution of our strategy and providing our customers with innovative, reliable and efficient solutions to their operational needs.  We expect this focus, combined with increasing market demand, will provide additional opportunities to produce further growth and enhanced returns."

Second Quarter Review

Parker Drilling's revenues for the 2014 second quarter, compared with the 2014 first quarter, increased 11 percent to $254.2 million from $229.2 million, operating gross margin excluding depreciation and amortization expense (segment gross margin) increased 26 percent to $79.7 million from $63.2 million and segment gross margin as a percentage of revenues was 31.3 percent, compared with 27.6 percent for the prior period.

The Company's combined drilling operations achieved increases in revenues, gross margin and gross margin as a percentage of revenues for the 2014 second quarter, compared with 2014 first quarter results.  Drilling operations' revenues increased 12 percent to $167.1 million from $148.7 million, gross margin increased 35 percent to $46.3 million from $34.4 million, and drilling operations' gross margin as a percentage of revenues was 27.7 percent, compared with 23.2 percent.  Higher rig fleet utilization and increases in realized average dayrates were among the leading contributors to these results.

  • U.S. Barge Drilling segment revenues were $40.3 million, segment gross margin was $21.5 million, and segment gross margin as a percentage of revenues was 53.4 percent. Compared with the 2014 first quarter, revenues increased 32 percent and segment gross margin increased 82 percent. The increases in revenues and segment gross margin were primarily the result of higher utilization, an increase in average dayrate, and the addition of Rig 55B.
  • U.S. Drilling segment revenues were $20.0 million, segment gross margin was $5.0 million and segment gross margin as a percentage of revenues was 24.9 percent. Compared with the 2014 first quarter, revenues increased 3 percent and segment gross margin declined 10 percent. Excluding the beneficial impact in the prior quarter of a reduction in allowances for doubtful accounts, segment revenues, gross margin and gross margin as a percentage of revenues all increased.
  • International Drilling segment revenues were $91.8 million, segment gross margin was $18.8 million, and segment gross margin as a percentage of revenues was 20.5 percent. Compared with the 2014 first quarter, revenues increased 7 percent and segment gross margin increased 15 percent. The growth in revenues and segment gross margin reflects modest increases in utilization and realized dayrates. Revenues rose further due to an increase in reimbursables, and segment gross margin benefited from lower operating expenses.
  • Technical Services segment revenues were $15.0 million, segment gross margin was $1.0 million, and segment gross margin as a percentage of revenues was 6.8 percent. Compared with the 2014 first quarter, revenues increased 12 percent and segment gross margin increased 56 percent. Revenues and segment gross margin both benefitted from the advanced development of a customer-funded engineering and design project.

Rental Tools segment revenues were $87.2 million, segment gross margin was $33.3 million and segment gross margin as a percentage of revenues was 38.2 percent. Compared with the 2014 first quarter, revenues increased 8 percent and segment gross margin increased 16 percent. The increases in revenues and segment gross margin were primarily due to higher utilization and modest price improvements in our U.S. land markets, though the benefits were dampened by difficult market conditions and operating disruptions in some key international regions.

General and administrative expense declined to $7.0 million for the 2014 second quarter, from $9.0 million for the 2014 first quarter, primarily due to a non-routine item, the receipt in the second quarter of $1.5 million from an escrow account established in connection with the ITS acquisition.

In addition to the $1.5 million of escrow funds received, non-routine items in the second quarter include $0.5 million in debt extinguishment expenses associated with the refinancing of our 9.125 percent Senior Notes.  Together, these non-routine items increased 2014 second quarter net income by $0.6 million, or $0.01 per diluted share, and adjusted EBITDA by $1.5 million.

Capital expenditures year-to-date through June 2014 were $106.2 million

"Our attention remains focused on developing strong, durable and competitive operations capable of providing our customers with innovative, reliable and efficient business solutions while producing sustainable and profitable results, solid returns and continued growth for Parker Drilling," concluded Mr. Rich.

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. Central time (11:00 a.m. Eastern time) on Wednesday, August 6, 2014, to review reported results.  The call will be available by telephone at (719) 325-2429.  The call can also be accessed through the Investor Relations section of the Company's website.  A replay of the call can be accessed on the Company's website for 12 months and will be available by telephone from August 6, 2014 through August 13, 2014 at (719) 457-0820, using the access code 8098371#.

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 rental tools utilization and rig utilization and dayrates; the results of past capital expenditures; scheduled start-ups of rigs; 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; future capital expenditures; expansion and growth opportunities; acquisitions or joint ventures; asset sales; successful negotiation and execution of contracts; scheduled delivery of drilling rigs or rental equipment for operation; the strengthening of the Company's financial position; increases in utilization or market share; outcomes of legal proceedings; 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 could 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, fluctuations in oil and natural gas prices, compliance with existing laws and changes in laws or government regulations, the failure to realize the benefits of, and other risks relating to, acquisitions, the risk of cost overruns, our ability to refinance our debt and other important factors, many of which could adversely affect market conditions, demand for our services, and costs, and all or any one of which could cause actual results to differ materially from those projected. For more information, see "Risk Factors" in the Company's Annual Report filed on Form 10-K with the Securities and Exchange Commission 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 contract drilling and drilling-related services and rental tools to the energy industry. The Company's drilling services business serves operators in the inland waters of the U.S. Gulf of Mexico utilizing Parker Drilling's barge rig fleet and in select international markets and harsh-environment regions utilizing Parker Drilling-owned and customer-owned equipment. The Company's rental tools business supplies premium equipment and well services to operators on land and offshore in the U.S. and international markets.  More information about Parker Drilling can be found on the Company's website at www.parkerdrilling.com.

 

PARKER DRILLING COMPANY

Consolidated Condensed Balance Sheets

(Dollars in Thousands)







June 30, 2014


December 31, 2013





ASSETS




CURRENT ASSETS




Cash and Cash Equivalents

$         86,446


$              148,689

Accounts and Notes Receivable, Net

258,578


257,889

Rig Materials and Supplies

45,501


41,781

Deferred Costs

9,621


13,682

Deferred Income Taxes

8,876


9,940

Other Current Assets

50,579


47,302

TOTAL CURRENT ASSETS

459,601


519,283





PROPERTY, PLANT AND EQUIPMENT, NET

906,099


871,356





OTHER ASSETS




Deferred Income Taxes

121,483


102,420

Other Assets

36,793


41,697

TOTAL OTHER ASSETS

158,276


144,117





TOTAL ASSETS

$    1,523,976


$           1,534,756





LIABILITIES AND STOCKHOLDERS' EQUITY




CURRENT LIABILITIES




Current  Portion of Long-Term Debt

$         10,000


$                25,000

Accounts Payable and Accrued Liabilities

191,269


182,152

TOTAL CURRENT LIABILITIES

201,269


207,152





LONG-TERM DEBT

610,000


628,781





LONG-TERM DEFERRED TAX LIABILITY

47,915


38,767





OTHER LONG-TERM LIABILITIES

20,357


26,914





TOTAL CONTROLLING INTEREST IN STOCKHOLDERS' EQUITY

641,091


631,696

Noncontrolling interest

3,344


1,446

TOTAL EQUITY

644,435


633,142





TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$    1,523,976


$           1,534,756









Current Ratio

2.28


2.51





Total Debt as a  Percent of Capitalization

49%


51%





Book Value Per Common Share

$             5.27


$                    5.24

 

PARKER DRILLING COMPANY

Consolidated Statement Of Operations

(Dollars in Thousands, Except Per Share Data)

(Unaudited)












Three Months Ended
March 31,


Three Months Ended June 30,



2014


2013


2014







REVENUES

$      254,234


$      225,954


$                 229,225







EXPENSES:






Operating Expenses

174,569


143,401


166,025

Depreciation and Amortization

36,180


32,280


34,337


210,749


175,681


200,362

TOTAL OPERATING GROSS MARGIN

43,485


50,273


28,863







General and Administrative Expense

(7,007)


(22,203)


(8,964)

Gain (Loss) on Disposition of Assets, Net

1,019


517


(129)







TOTAL OPERATING INCOME 

37,497


28,587


19,770







OTHER INCOME AND (EXPENSE):






Interest Expense

(10,599)


(10,741)


(12,039)

Interest Income

88


2,203


32

Loss on extinguishment of debt

(479)


-


(29,673)

Change in fair value of derivative positions

-


17


-

Other 

1,032


(459)


895

TOTAL OTHER EXPENSE

(9,958)


(8,980)


(40,785)







INCOME (LOSS) BEFORE INCOME TAXES

27,539


19,607


(21,015)







INCOME TAX EXPENSE

11,702


11,233


(8,623)







NET INCOME (LOSS)

15,837


8,374


(12,392)

Less: net income (loss) attributable to noncontrolling interest

156


93


157

NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST

$        15,681


$          8,281


$                (12,549)













EARNINGS  PER SHARE - BASIC 






Net Income (loss)

$            0.13


$            0.07


$                    (0.10)







EARNINGS PER SHARE - DILUTED






Net Income (loss)

$            0.13


$            0.07


$                    (0.10)







NUMBER OF COMMON SHARES USED IN COMPUTING EARNINGS PER SHARE






Basic 

121,078,359


119,483,780


120,368,650

Diluted

122,764,247


121,860,011


120,368,650

 

PARKER DRILLING COMPANY

Consolidated Statement Of Operations

(Dollars in Thousands, Except Per Share Data)

(Unaudited)






Six Months Ended June 30,


2014


2013





REVENUES

$      483,459


$      393,090





EXPENSES:




Operating Expenses

340,594


260,147

Depreciation and Amortization

70,517


61,792


411,111


321,939

TOTAL OPERATING GROSS MARGIN

72,348


71,151





General and Administrative Expense

(15,971)


(35,049)

Gain on Disposition of Assets, Net

890


1,665





TOTAL OPERATING INCOME 

57,267


37,767





OTHER INCOME AND (EXPENSE):




Interest Expense

(22,638)


(20,747)

Interest Income

120


2,262

Loss on extinguishment of debt

(30,152)


-

Change in fair value of derivative positions

-


54

Other 

1,927


(661)

TOTAL OTHER EXPENSE

(50,743)


(19,092)





INCOME (LOSS) BEFORE INCOME TAXES

6,524


18,675





INCOME TAX EXPENSE (BENEFIT)

3,079


9,729





NET INCOME (LOSS)

3,445


8,946

Less: net income (loss) attributable to noncontrolling interest

313


73

NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST

$          3,132


$          8,873









EARNINGS  PER SHARE - BASIC 

$            0.03


$            0.07





EARNINGS PER SHARE - DILUTED

$            0.03


$            0.07





NUMBER OF COMMON SHARES USED IN COMPUTING 




EARNINGS PER SHARE:




Basic 

120,726,004


119,177,431

Diluted

122,586,056


121,498,223

 

PARKER DRILLING COMPANY

Selected Financial Data

(Dollars in Thousands)

(Unaudited)




















Three Months Ended




June 30,


March 31,




2014


2013


2014









REVENUES:








Rental Tools


$   87,169


$   82,022


$    80,506


U.S. Barge Drilling


40,289


38,301


30,490


U.S. Drilling


20,039


17,910


19,417


International Drilling


91,754


83,182


85,469


Technical Services


14,983


4,539


13,343


  Total Revenues


254,234


225,954


229,225









OPERATING EXPENSES:








Rental Tools


53,842


43,675


51,755


U.S. Barge Drilling


18,761


18,290


18,654


U.S. Drilling


15,045


14,270


13,854


International Drilling


72,954


62,707


69,070


Technical Services


13,967


4,459


12,692


  Total Operating Expenses


174,569


143,401


166,025









OPERATING GROSS MARGIN:








Rental Tools


33,327


38,347


28,751


U.S. Barge Drilling


21,528


20,011


11,836


U.S. Drilling


4,994


3,640


5,563


International Drilling


18,800


20,475


16,399


Technical Services


1,016


80


651


Depreciation and Amortization 


(36,180)


(32,280)


(34,337)


  Total Operating Gross Margin 


43,485


50,273


28,863

 

PARKER DRILLING COMPANY

Adjusted EBITDA 

(Dollars in Thousands)















































Three Months Ended



June 30, 2014


March 31, 2014


December 31, 2013


September 30, 2013


June 30, 2013












Net Income (Loss) Attributable to Controlling Interest


$       15,681


$         (12,549)


$              10,174


$                7,970


$         8,281

  Adjustments:











Income Tax (Benefit) Expense


11,702


(8,623)


6,766


9,112


11,233

Interest Expense


10,599


12,039


13,946


13,127


10,741

Other Income and Expense


(641)


28,746


(2,313)


5,234


(1,761)

(Gain) Loss on Disposition of Assets, Net


(1,019)


129


(1,234)


(1,094)


(517)

Depreciation and Amortization


36,180


34,337


36,378


35,882


32,280

Provision for Reduction in Carrying Value of Certain Assets


-


-


2,544




-












Adjusted EBITDA*


72,502


54,079


66,261


70,231


60,257












Adjustments:











     Non-routine Items


(1,500)


-


3,306


4,819


11,390












Adjusted EBITDA after Non-routine Items


$       71,002


$          54,079


$              69,567


$              75,050


$       71,647


*Adjusted EBITDA, 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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