Parker Drilling Reports 2018 First Quarter Results

News provided by

Parker Drilling Company

May 01, 2018, 04:50 ET

HOUSTON, May 1, 2018 /PRNewswire/ -- Parker Drilling Company (NYSE: PKD) today announced results for the first quarter ended March 31, 2018, including a reported net loss of $29.7 million, or a $0.21 loss per common share, on revenues of $109.7 million. 

First quarter Adjusted EBITDA was $11.9 million.

"Our first quarter results were down sequentially, primarily due to three significant events: a full quarter of zero rate from one rig in Alaska, a full quarter of low standby rates for our rig that finished drilling on Sakhalin Island, Russia in the fourth quarter, and a full quarter of zero rate for our rig that went off contract and demobilized in Kazakhstan in the fourth quarter," said Gary Rich, the Company's chairman, president and CEO.  "During the first quarter, we worked with our long-term partner in Indonesia to convert our business into an Operation and Management (O&M) arrangement.  The conversion into an O&M structure is a continuation of our strategy to build an asset-light operating model in markets where we do not have a significant concentration of assets, which should ultimately result in improved consolidated returns on capital.

"In our Rental Tools Services business, we experienced a slight decline in revenues and gross margin, but we see opportunities for growth in certain markets.  We are also experiencing additional tendering activity for our Drilling Services business as oil prices have stabilized above $60 per barrel; however, the pricing environment remains challenging.  We continue focusing on costs, enhancing efficiency, and maximizing financial flexibility, while remaining resilient and competitive in an evolving market," concluded Mr. Rich.

First Quarter Review

Parker Drilling's revenues for the 2018 first quarter, compared with the 2017 fourth quarter, decreased 5.7 percent to $109.7 million from $116.3 million.  Operating gross margin excluding depreciation and amortization expense (gross margin) decreased 25.8 percent to $18.1 million from $24.4 million and gross margin as a percentage of revenues was 16.5 percent, compared with 21.0 percent for the 2017 fourth quarter.

Drilling Services

For the Company's Drilling Services business, which is comprised of the U.S. (Lower 48) Drilling and International & Alaska Drilling segments, first quarter revenues decreased 7.6 percent to $57.5 million from $62.2 million for the 2017 fourth quarter.  Gross margin decreased 63.0 percent to $2.0 million from $5.4 million, and gross margin as a percentage of revenues was 3.5 percent, compared with 8.7 percent for the prior period.  Contracted backlog was $246 million at the end of the first quarter compared to $241 million at the end of the fourth quarter.

U.S. (Lower 48) Drilling

U.S. (Lower 48) Drilling segment revenues were $1.4 million, down from $1.5 million for the 2017 fourth quarter. Gross margin was a $2.7 million loss, unchanged from the 2017 fourth quarter.  Results were similar to the prior quarter as market activity continues to be subdued in the inland waters of the Gulf of Mexico.

International & Alaska Drilling

International & Alaska Drilling segment revenues decreased 7.4 percent to $56.1 million from $60.6 million for the 2017 fourth quarter. Gross margin was $4.7 million, a 41.3 percent decrease from 2017 fourth quarter gross margin of $8.0 million.  Revenues decreased primarily due to the reduced rig activity in Alaska, Sakhalin Island, Russia, and Kazakhstan, partially offset by increased reimbursable revenues.  Gross margin was negatively impacted by the aforementioned inactive rigs and increased expenses in Kurdistan associated with a rig start-up.  These negative gross margin impacts were partially offset by $3.0 million of inventory and asset related write-offs in the fourth quarter of 2017 that did not repeat in the first quarter.

Rental Tools Services

For the Company's Rental Tools Services business, which is comprised of the U.S. Rental Tools and International Rental Tools segments, first quarter revenues decreased 3.5 percent to $52.2 million from $54.1 million for the 2017 fourth quarter.  Gross margin decreased 14.7 percent to $16.2 million from $19.0 million, and gross margin as a percentage of revenues was 31.0 percent compared with 35.1 percent for the prior period.

U.S. Rental Tools

U.S. Rental Tools segment revenues decreased 4.4 percent to $34.7 million, from $36.3 million for the 2017 fourth quarter.  Gross margin decreased 16.8 percent to $15.8 million from $19.0 million for the 2017 fourth quarter.  The decline in revenues was due to decreased offshore rental activity partially offset by increased land activity.  Gross margin declined primarily as a result of the change in revenue mix with lower offshore and increased land activity as well as increased inspection and repair expenses associated with the return of offshore rental equipment.

International Rental Tools

International Rental Tools segment revenues decreased 1.7 percent to $17.5 million from $17.8 million for the 2017 fourth quarter.  Gross margin improved to $360 thousand from $11 thousand for the 2017 fourth quarter.   Revenues were slightly down due to the timing of projects and gross margin was up, largely due to lower operating costs.

Consolidated

General and Administrative expenses were $6.2 million for the 2018 first quarter, up from $5.1 million for the 2017 fourth quarter.  The increase was primarily due to incentive compensation adjustments during the 2017 fourth quarter.  Total liquidity at the end of the quarter was $170.2 million, consisting of $118.3 million cash and $51.9 million available under our revolving credit facility.  Our cash balance decreased $23.2 million during the quarter, predominantly due to the semiannual interest payments of $20.6 million on our long-term debt.

Capital expenditures in the first quarter were $8.9 million, with 94% dedicated to our Rental Tools Services business.

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. Central Time (11:00 a.m. Eastern Time) on Wednesday, May 2, 2018, to review first quarter results.  The call will be available by telephone by dialing (+1) (412) 902-0003 and asking for the Parker Drilling First Quarter Conference Call.  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 through May 9, 2018 at (+1) (201) 612-7415, conference ID 13678458#.

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 addressing activities, events or developments 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 purchases and sales; successful negotiation and execution of contracts; scheduled delivery of drilling rigs or rental equipment for operation; the Company's financial position; changes 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 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.

This news release contains non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each such measure to its most directly comparable U.S. Generally Accepted Accounting Principles (GAAP) financial measure, together with an explanation of why management believes that these non-GAAP financial measures provide useful information to investors, is provided in the following tables.

Company Description

Parker Drilling provides drilling 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 U.S. and international markets and harsh-environment regions utilizing Parker-owned and customer-owned equipment. The Company's Rental Tools Services 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.

Contact: Nick Henley, Director, Investor Relations, (+1) (281) 406-2082, [email protected].

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)





March 31, 2018

December 31, 2017

(Unaudited)

ASSETS


Current assets:


Cash and cash equivalents

$

118,315

$

141,549

Accounts and Notes Receivable, net

126,685

122,511

Rig materials and supplies

31,822

31,415

Other current assets

20,438

22,361

Total current assets

297,260

317,836




Property, plant and equipment, net

610,744

625,771




Other Assets:


Deferred income taxes

1,826

1,284

Other assets

41,300

45,388

   Total other assets

43,126

46,672




Total assets

$

951,130

$

990,279




LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


Accounts payable and accrued liabilities

$

94,563

$

103,676

Total current liabilities

94,563

103,676




Long-term debt, net of unamortized debt issuance costs

578,404

577,971




Long-term deferred tax liability

78

78




Other long-term liabilities

11,110

12,433




Total stockholders' equity

266,975

296,121




Total liabilities and stockholders' equity

$

951,130

$

990,279

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)

(Unaudited)





Three Months Ended
December 31,

Three Months Ended
March 31,

2018

2017

2017






Revenues

$

109,675

$

98,271

$

116,334






Expenses:




Operating expenses

91,534

85,814

91,912

Depreciation and amortization

28,549

32,202

29,122

120,083

118,016

121,034

Total operating gross margin (loss)

(10,408)

(19,745)

(4,700)






General and administrative expense

(6,201)

(7,040)

(5,100)

Provision for Reduction in Carrying Value of Certain Assets

—

—

(1,938)

Gain (loss) on disposition of assets, net

343

(352)

(2,483)

Total operating income (loss)

(16,266)

(27,137)

(14,221)






Other income (expense):




Interest expense

(11,240)

(10,870)

(11,194)

Interest income

23

10

84

Other

291

530

(326)

Total other income (expense)

(10,926)

(10,330)

(11,436)






Income (loss) before income taxes

(27,192)

(37,467)

(25,657)






Income tax expense (benefit)

1,604

2,342

3,036






Net income (loss)

(28,796)

(39,809)

(28,693)

Less: Mandatory convertible preferred stock dividend

906

—

906

Net income (loss) available to common stockholders

$

(29,702)

$

(39,809)

$

(29,599)

Basic earnings (loss) per share:

$

(0.21)

$

(0.31)

$

(0.21)

Diluted earnings (loss) per share:

$

(0.21)

$

(0.31)

$

(0.21)

Number of common shares used in computing earnings per share:




Basic

138,765,995

130,142,527

138,675,403

Diluted

138,765,995

130,142,527

138,675,403

PARKER DRILLING COMPANY AND SUBSIDIARIES

SELECTED FINANCIAL DATA

(Dollars in Thousands)

(Unaudited)



















Three Months Ended



March 31,

December 31,



2018

2017

2017








Revenues:





Drilling Services:





U.S. (Lower 48) Drilling

$

1,354

$

1,215

$

1,546

International and Alaska Drilling

56,096

63,213

60,648

Total Drilling Services

57,450

64,428

62,194

Rental Tools Services:





U.S. Rental Tools

$

34,748

$

20,231

$

36,324

International Rental Tools

17,477

13,612

17,816

Total Rental Tools Services

52,225

33,843

54,140

Total revenues

$

109,675

$

98,271

$

116,334








Operating expenses:





Drilling Services:





U.S. (Lower 48) Drilling

$

4,053

$

4,200

$

4,205

International and Alaska Drilling

51,426

52,184

52,619

Total Drilling Services

55,479

56,384

56,824

Rental Tools Services:





U.S. Rental Tools

$

18,938

$

13,455

$

17,283

International Rental Tools

17,117

15,975

17,805

Total Rental Tools Services

36,055

29,430

35,088

Total operating expenses

$

91,534

$

85,814

$

91,912








Operating gross margin:





Drilling Services:





U.S. (Lower 48) Drilling

$

(2,699)

$

(2,985)

$

(2,659)

International and Alaska Drilling

4,670

11,029

8,029

Total Drilling Services

1,971

8,044

5,370

Rental Tools Services:





U.S. Rental Tools

$

15,810

$

6,776

$

19,041

International Rental Tools

360

(2,363)

11

Total Rental Tools Services

16,170

4,413

19,052

Total Operating gross margin, excluding depreciation and amortization

$

18,141

$

12,457

$

24,422

Total Depreciation and amortization

(28,549)

(32,202)

(29,122)

Total operating gross margin

(10,408)

(19,745)

(4,700)

PARKER DRILLING COMPANY AND SUBSIDIARIES

ADJUSTED EBITDA (1)

(Dollars in Thousands)

(Unaudited)














Three Months Ended


March 31,
2018

December 31,
2017

September 30,
2017

June 30,
2017

March 31,
2017












Net income (loss) available to common stockholders

$

(29,702)

$

(29,599)

$

(21,217)

$

(31,127)

$

(39,809)

Interest expense

11,240

11,194

11,067

11,095

10,870

Income tax expense (benefit)

1,604

3,036

1,919

1,743

2,342

Depreciation and amortization

28,549

29,122

30,067

30,982

32,202

Mandatory convertible preferred stock dividend

906

906

906

1,239

—

EBITDA

12,597

14,659

22,742

13,932

5,605













Adjustments:










Interest income and other

(314)

242

510

(582)

(540)

(Gain) loss on disposition of assets, net

(343)

2,483

(97)

113

352

Provision for reduction in carrying value of certain assets

—

1,938

—

—

—

Special items (2)

—

3,033

—

—

—













Adjusted EBITDA

$

11,940

$

22,355

$

23,155

$

13,463

$

5,417



(1) We believe Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare our core operating results from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), remeasurement of foreign currency transactions, tax consequences, impairment and other special items. Special items include items impacting operating expenses that management believes detract from an understanding of normal operating performance. Management uses Adjusted EBITDA as a supplemental measure to review current period operating performance and period to period comparisons. Our Adjusted EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate EBITDA in the same manner. EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. Generally Accepted Accounting Principles (GAAP), and should not be considered in isolation or as an alternative to operating income or loss, net income or loss, cash flows provided by or used in operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

(2) Special items include:
- For the three months ended December 31, 2017, special items include a $3.0 million write-off of inventory associated with select international drilling assets. This item is recorded in operating expenses in the Consolidated Statement Of Operations. 

PARKER DRILLING COMPANY AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED EARNINGS PER SHARE

(Dollars in Thousands, except Per Share)

(Unaudited)



Three Months Ended



March 31,

December 31,



2018

2017

2017








Net income (loss) available to common stockholders

$

(29,702)

$

(39,809)

$

(29,599)

Diluted earnings (loss) per share

$

(0.21)

$

(0.31)

$

(0.21)








 Adjustments:





(Gain) loss on disposition of assets, net

$

—

$

—

$

2,588

Provision for reduction in carrying value of certain assets

—

—

1,938

Write-off inventory

—

—

3,033

Net adjustments

—

—

7,559








 Adjusted net income (loss) available to common stockholders(1)

$

(29,702)

$

(39,809)

$

(22,040)

 Adjusted diluted earnings (loss) per share (1)

$

(0.21)

$

(0.31)

$

(0.16)


(1) We believe Adjusted net income (loss) available to common stockholders and adjusted income (loss) per diluted share are useful financial measures for investors to assess and understand operating performance for period to period comparisons. Management views the adjustments to Net income (loss) available to common stockholders and Income (Loss) per diluted share to be items outside of the Company's normal operating results. Adjusted net income (loss) available to common stockholders and Adjusted income (loss) per diluted share are not measures of financial performance under GAAP, and should not be considered in isolation or as an alternative to Net income (loss) available to common stockholders or Income (loss) per diluted share.

SOURCE Parker Drilling Company