Parker Drilling Reports Fourth Quarter 2011 Results

HOUSTON, Feb. 23, 2012 /PRNewswire/ -- Parker Drilling (NYSE: PKD), a drilling contractor and service provider, today reported results for the period ended December 31, 2011.  The Company's results for the 2011 fourth quarter include a net loss of $90.2 million or $0.77 per diluted share on revenues of $181.1 million, compared with a net loss of $13.4 million or $0.12 per diluted share on revenues of $173.3 million for the 2010 fourth quarter. (Net income or loss represents the amount attributable to Parker Drilling Company.)

Results for the 2011 fourth quarter include the impact of a previously disclosed non-cash asset impairment charge that decreased earnings by $109.1 million or $0.94 per fully diluted share.  Excluding the effects of the impairment charge and other non-routine items, the Company reported 2011 fourth quarter net income of $20.2 million or $0.17 per diluted share compared with similarly adjusted 2010 fourth quarter net income of $1.5 million or $0.01 per diluted share.  Adjusted EBITDA, excluding non-routine items, was $66.7 million, compared with $48.0 million for the prior year's fourth quarter.

"We produced solid growth in revenues and achieved a 37 percent increase in operating gross margin and a 39 percent increase in adjusted EBITDA this quarter," said Parker Drilling President and Chief Executive Officer, David Mannon.  "Our Rental Tools business continued to respond to the shifting focus of U.S. drilling activity while investing in inventory to meet the growing needs of land and offshore customers. The U.S. Barge Drilling business achieved a higher average dayrate despite a moderate reduction in rig fleet utilization, while our International Drilling operations benefited from a higher fleet average dayrate and the addition of an Operations & Maintenance contract."  Mannon continued, "Our efforts to introduce new drilling technology to the Alaskan North Slope have taken more time and a larger investment than we had anticipated. As reported earlier and reflected in both our fourth quarter and full year results, we recorded an impairment charge related to the two new-design rigs developed for this purpose."

Fourth Quarter Highlights

• Parker's Rental Tools segment continued to grow revenues and segment gross margin, setting records for both measures, driven by increased demand for our rental equipment in oil and liquids-rich gas drilling markets. (Segment gross margin excludes depreciation and amortization expense.)
• The Company's U.S. Barge Drilling segment achieved a significant increase in fleet average dayrate and maintained its position as the leading contractor in its market.
• The Technical Services segment advanced its development work on the Exxon Neftegas Limited (ENL) Berkut platform project, transitioning from engineering and design activities to oversight of shipyard construction of the drilling package.

"Our business outlook remains driven by the growing needs for the services, operational efficiency and safety we deliver to our customers.  Though there are concerns about the impact of low domestic natural gas prices on U.S. drilling, the shift to oil and liquids-rich directed drilling continues to require a growing amount of drill pipe and related equipment. In addition, oil-directed drilling continues to sustain activity in the coastal waters of the Gulf of Mexico.  The industry's increased spending to develop oil and gas resources worldwide is expected to lead to more drilling activity and an expanded reach into challenging environments that require fit-for-purpose drilling solutions.  We believe these trends will benefit Parker's U.S. and international operations," commented Mannon.

Fourth Quarter Review  

Parker's revenues for the 2011 fourth quarter were $181.1 million compared with 2010 fourth quarter revenues of $173.3 million. The Company's 2011 fourth quarter gross margin, before depreciation and amortization expense, was $74.0 million compared with 2010 fourth quarter gross margin of $54.2 million, and gross margin as a percentage of revenues increased to 40.9 percent from 31.3 percent.  The 2011 fourth quarter results reflect the impact of a $170.0 million pretax ($109.1 million after tax) impairment charge for the Arctic Alaska Drilling Units (AADUs) and other non-routine expenses, which include those 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.  These non-routine expenses reduced after-tax earnings by $110.4 million, or $0.95 per diluted share.  The results for the 2010 fourth quarter include non-routine, after-tax expenses of $14.9 million or $0.13 per diluted share.  Details of the non-routine items are provided in the attached financial tables.

At year end the Company updated the composition of its reported business segments. The updated segment structure aligns more closely with recent changes in the Company's organizational structure and management responsibilities.  Prior period amounts have been revised to reflect this change.  Following is a review of segment results for the 2011 fourth quarter with comparisons to results for the 2010 fourth quarter.

• Rental Tools revenues increased 30 percent to $63.9 million from $49.3 million, segment gross margin rose to $43.9 million from $32.8 million, and segment gross margin as a percent of revenues rose to 68.8 percent from 66.4 percent.  Demand for drill pipe and related products for U.S. drilling applications continued to expand.  The impact of the growth in drilling for oil and liquids-rich natural gas more than offset the impact from slowing in dry gas focused activity.  Parker's Rental Tools operation continued to actively position products across its locations to efficiently serve customer needs and maintain effective asset utilization. In addition, the level of international and deepwater Gulf of Mexico placements continued to grow.
• U.S. Barge Drilling segment revenues increased 19 percent to $22.9 million from $19.2 million, segment gross margin rose to $6.4 million from $5.7 million, and segment gross margin as a percent of revenues was 27.9 percent compared with 29.5 percent. The revenue increase was driven by a higher average dayrate for the barge rig fleet, as the average dayrate rose 32 percent to $27,700 for the 2011 fourth quarter from $21,000 for the 2010 fourth quarter.  Nevertheless, overall fleet utilization declined as the barge rigs with the deepest drilling capabilities were each idle for some time during the quarter as they awaited other deep drilling opportunities.  For the quarter, the business had an average of 8.6 barge rigs employed, compared with an average of 9.5 barge rigs employed in the 2010 fourth quarter.  
• The U.S. Drilling segment includes two rigs located in Alaska that are expected to begin working in 2012 and one available land rig.  During 2011 and 2010, the Alaska rigs were undergoing construction and commissioning and the available land rig was idle.  As a result, this segment earned no revenues in 2011 and prior years.  The segment had operating costs in 2011 and 2010 that consisted of expenses incurred in preparation for future activities in Alaska, consisting primarily of costs for labor, training and facility leases.
• The International Drilling segment includes the results from drilling activities performed utilizing Parker-owned rigs as well as customer-owned rigs on Operations & Maintenance (O&M) contracts.  Segment revenues increased 22 percent to $89.2 million from $73.1 million, segment gross margin rose to $23.6 million compared with $15.0 million, and segment gross margin as a percent of revenues improved to 26.4 percent from 20.6 percent.  Revenues rose as a result of a higher average dayrate for the Parker-owned rig fleet and an increase in project-related revenues from O&M contracts.  These were partially offset by the impact of a lower active rig count.
  • Average rig fleet utilization for the 2011 fourth quarter was 51 percent, compared with 48 percent for the prior year's fourth quarter.  Three rigs located in the Eastern Hemisphere region were removed from the active rig fleet at year-end 2010, reducing the region's fleet to 16 and Parker's overall international fleet to 26 rigs. Adjusted for this change, the prior year's rig fleet utilization was 54 percent.  For the 2011 fourth quarter, the ten-rig Latin America regional fleet operated at 80 percent average utilization and the sixteen-rig Eastern Hemisphere regional fleet operated at 33 percent average utilization.  (Additional rig fleet information is available on Parker's website).
  • The segment realized higher O&M contract revenues due to the 2011 addition of the Coral Sea project and higher reimbursables for the ENL-operated Sakhalin Island projects.
• The Technical Services segment includes results from engineering related activities primarily focused on providing technological solutions to customers' drilling projects.  The segment's 2011 fourth quarter revenues decreased 45 percent to $5.1 million from $9.3 million for the prior year's fourth quarter.  Segment gross margin increased to $0.8 million from a $0.1 million loss. The revenue decrease was primarily due to the completion of the Liberty project in early 2011, partially offset by contributions from additional engineering projects.  The earnings improvement was primarily due to the additional engineering projects.
• Construction Contract segment recorded no revenues or segment gross margin for the 2011 fourth quarter, compared with $22.4 million of revenues and $0.9 million of segment gross margin in the prior year's fourth quarter.  The construction contract for the Liberty rig ended in the 2011 first quarter and project-related work since then has been included in the Technical Services segment.  

2011 Year Summary  

The Company's results for the 2011 year included a net loss of $50.5 million or $0.43 per diluted share on revenues of $686.6 million, compared with a net loss of $14.5 million or $0.13 per diluted share on revenues of $659.5 million for 2010.  Results for the 2011 year include the impact of a previously disclosed impairment charge and other non-routine items.  Excluding these, the Company reported 2011 net income of $62.9 million or $0.54 per diluted share compared with similarly adjusted 2010 net income of $8.6 million or $0.08 per diluted share.  Adjusted EBITDA, excluding non-routine items, was $242.6 million, compared with $163.4 million for the prior year.

Cash Flow and Capitalization

Capital expenditures were $48.5 million for the 2011 fourth quarter and $190.4 million for the 2011 year.   Capital expenditures for the 2011 year include $77.9 million for the construction of the AADUs and $61.5 million for the purchase of tubular goods and other rental equipment.  

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. CST (11:00 a.m. EST) on Thursday, February 23, 2012, to discuss its reported results.  Those interested in listening to the call by telephone may do so by dialing (480) 629-9819.  The call can also be accessed through the Investor Relations section of the Company's website at http://www.parkerdrilling.com.  A replay of the call can be accessed on the Company's website for 12 months and will be available by telephone from Feb. 23 through Mar. 1 by dialing (303) 590-3030 and using the access code 4510634#.

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 rig utilization and dayrates; 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; capital expenditures; expansion and growth opportunities; acquisitions or joint ventures; asset sales; successful negotiation and execution of contracts; scheduled delivery of drilling rigs for operation; the strengthening of the Company's financial position; increases in market share; outcomes of legal proceedings and investigations; 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 may 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 that could adversely affect market conditions, fluctuations in oil and natural gas prices that could reduce the demand for drilling services, changes in laws or government regulations that could adversely affect the cost of doing business, our ability to refinance our debt and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the Securities and Exchange Commission.  See "Risk Factors" in the Company's Annual Report filed on Form 10-K 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 high-performance contract drilling solutions, rental tools and project management services to the energy industry.  Parker's rig fleet includes 24 land rigs and two offshore barge rigs operating in international locations, 13 barge rigs operating in the U.S. Gulf of Mexico, one land rig located in the U.S., and two land rigs in Alaska undergoing commissioning.  The Company's rental tools business supplies premium equipment to operators on land and offshore in the U.S. and select international markets.  Parker also performs contract drilling for customer-owned rigs and provides technical services addressing drilling challenges for E&P customers worldwide.  More information about Parker Drilling can be found at http://www.parkerdrilling.com.  Included in the Investor Relations section of the Company's website are operating status reports for Parker Drilling's Rental Tools segment and its international and U.S. rig fleets, updated monthly.

SOURCE Parker Drilling