Parker Drilling Reports 2014 Fourth Quarter and Full Year Results

HOUSTON, Feb. 18, 2015 /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 December 31, 2014, including net income of $7.8 million, or $0.06 per diluted share, on revenues of $243.2 million.  Fourth quarter adjusted EBITDA was $65.2 million.

"In the fourth quarter we delivered solid results in a challenging environment.  The growing impact of declining oil prices on our business serving the U.S. Gulf of Mexico shallow and inland waters drilling market was counterbalanced by stronger performance elsewhere, including revenue gains in international markets," said Gary Rich, chairman, president and chief executive officer. "We also increased the number of international rigs under contract and secured an additional Operations and Maintenance (O&M) contract.  These new contracts should begin making contributions in the 2015 first quarter.  In addition, we took actions to address reduced market demand for our U.S. barge drilling and rental tools businesses and began to prepare the company for the more challenging conditions we expect in 2015," Mr. Rich added.

2014 Summary

Results for the year ended December 31, 2014 included net income of $23.5 million, or $0.19 per diluted share, on revenues of $968.7 million.  Included in 2014 results are non-routine items of $16.4 million, after tax, primarily related to debt extinguishment expense and the 2013 acquisition of ITS.  Excluding these non-routine items, the Company earned net income of $39.9 million, or $0.32 per diluted share.  Adjusted EBITDA, excluding non-routine items, was $260.5 million.

"We made good progress in 2014, strengthening our market position, investing in growth, and enhancing our ability to provide innovative, reliable and efficient solutions to customers," said Mr. Rich. "Our U.S. rental tools business achieved significant growth in the U.S. land and Gulf of Mexico deepwater drilling markets.  Our international rental tools business managed through disruptions in several key markets during the year, yet ended 2014 with the highest quarterly revenues and gross margins of the period. In addition, we continued to raise the operational and financial performance of our Arctic-class Alaska drilling rigs.

"Average utilization of our international drilling fleet rose to 70 percent for 2014 from 60 percent for the prior year and we ended the year with eighteen of our twenty-two rigs under contract.  We completed our first full year of operation in the Kurdistan Region of Iraq and added two new projects to our O&M portfolio. During the year, we reduced our debt by approximately $39 million and refinanced $360 million of debt at lower interest rates and with extended maturities. In January 2015, we amended our revolving credit facility, expanding it to $200 million and extending its maturity to 2020, providing greater liquidity and financial flexibility. As a result of the progress we made in 2014 we are in a strong operating position and solid financial condition as we head into this industry downcycle."

Outlook

"It is clear that 2015 will be a challenging year. The steep and rapid decline in oil prices has led to a sharp reduction in drilling activity in U.S. land and Gulf of Mexico inland and shallow water markets.  This also is putting increased pressure on prices for our services.  We anticipate the downturn in our U.S. markets will be severe and expect our international markets to be impacted as well, though with less severity.  We are taking actions across the company to lower our cost base, sustain our utilization, manage our cash and liquidity, and preserve our ability to respond as opportunities develop.

Fourth Quarter Review

Parker Drilling's 2014 fourth quarter revenues of $243.2 million were approximately the same as 2014 third quarter revenues of $242.0 million. The Company's operating gross margin excluding depreciation and amortization expense (gross margin) decreased to $75.2 million for the 2014 fourth quarter from $81.2 million for the prior period, and gross margin as a percentage of revenues was 30.9 percent, compared with 33.6 percent for the 2014 third quarter.

For the Company's combined drilling operations, revenues were $150.8 million, gross margin was $35.9 million, and gross margin as a percentage of revenues was 23.8 percent. Compared with the 2014 third quarter, revenues declined 2 percent and gross margin declined 21 percent. Revenues from reimbursable expenses, which have a minimal impact on gross margin, increased by $5.8 million. Excluding reimbursables, revenues declined 7 percent, gross margin declined 21 percent, and gross margin as a percentage of revenues declined to 28.6 percent from 33.7 percent. The decrease in operating revenues and gross margin is primarily due to the impact of the rapid decline in oil prices on the U.S. Barge Drilling business. Revenue gains and improved operating performance in drilling operations outside of the U.S. Gulf of Mexico offset some of that impact. 

• U.S. Barge Drilling revenues were $26.7 million, gross margin was $9.7 million, and gross margin as a percentage of revenues was 36.3 percent.  Compared with the 2014 third quarter, revenues declined 33 percent and gross margin declined 53 percent.  The declines in revenues and gross margin reflect the impact of the steep decline in oil prices.  This led to lower rig fleet utilization and a decline in realized average dayrates. 
• U.S. Drilling revenues were $20.8 million, gross margin was $6.4 million and gross margin as a percentage of revenues was 30.8 percent. Compared with the 2014 third quarter, revenues increased 6 percent and gross margin increased 21 percent, primarily due to higher realized average dayrates and lower operating costs. 
• International Drilling revenues were $95.2 million, gross margin was $19.0 million, and gross margin as a percentage of revenues was 19.9 percent. Compared with the 2014 third quarter, revenues increased 8 percent and gross margin increased 3 percent.  Excluding reimbursables, revenues increased 2 percent, gross margin increased 3 percent, and gross margin as a percentage of revenues increased to 26.2 percent from 26.0 percent. The increase in operating revenues and gross margin is primarily due to the start-up of Rig 216 in Kazakhstan during the 2014 fourth quarter.
• Technical Services revenues were $8.1 million, gross margin was $0.8 million, and gross margin as a percentage of revenues was 10.1 percent.  Revenues increased $1.3 million and gross margin declined $0.2 million, reflecting shifts in work requirements as projects develop.

Rental Tools revenues were $92.4 million, gross margin was $39.3 million and gross margin as a percentage of revenues was 42.6 percent. Compared with the 2014 third quarter, revenues increased 5 percent and gross margin increased 10 percent. The increases in revenues and gross margin were primarily due to growth in U.S. Gulf of Mexico offshore deepwater activity and key international markets.  This was partially offset by increased handling costs for inbound tools as business slowed in the U.S. Gulf of Mexico shelf and inland waters markets, and, late in the quarter, in the U.S. land drilling market.

General and Administrative Expense were $9.7 million for the 2014 fourth quarter, compared with $9.4 million for the 2014 third quarter. Capital expenditures for 2014 were $176.8 million. 

"We believe we are in sound condition, prepared to meet the challenges ahead and capture opportunities that arise.  We will continue to push forward on our strategic objectives and on strengthening our core competencies to enhance our ability to serve customers and produce value for the company," 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 Thursday, February 19, 2015, to review reported results.  The call will be available by telephone at (888) 510-1786.  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 February 19, 2015 through February 26, 2015 at (719) 457-0820, using the access code 5031371#.

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 reasonable, 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.

SOURCE Parker Drilling Company