Parker Drilling Reports 2018 Third Quarter Results
HOUSTON, Nov. 5, 2018 /PRNewswire/ -- Parker Drilling Company (NYSE: PKD) today announced results for the third quarter ended September 30, 2018, which included a net loss of $71.9 million, or a $7.70 loss per common share on revenues of $123.4 million. Included in the reported net loss is an impairment loss of $44.0 million. Excluding the impairment loss, the adjusted net loss was $2.99 per common share.
Third quarter Adjusted EBITDA was $15.0 million.
Gary Rich, the Company's Chairman, President and CEO, said, "We continue to see early signs of recovery in several end markets, with our U.S. and International Rental Tools Services segments performing very well again in the third quarter. While the current industry environment for our Drilling Services business remains challenging, we are cautiously optimistic that the growing number of tendering opportunities will translate into increased utilization in select markets where we operate. With that said, we do not anticipate a meaningful recovery in our barge markets; therefore, we felt it was appropriate to assess the carrying value of these particular assets and record an impairment loss for the quarter."
Mr. Rich added, "We continue to be judicious with respect to capital spending, and we are giving priority to those opportunities with high return on capital and quick cash payback. Our Rental Tools Services business remains the top focus for our incremental growth capex due to its growing customer demand and ability to meet our capital return requirements. As we have mentioned before, we are proactively working with outside advisers to evaluate multiple options to address our capital structure in light of upcoming debt maturities, and today we disclosed certain material non-public information related to this evaluation. Our third quarter G&A expense was materially higher because of the professional fees we incurred as a result of this effort."
Third Quarter Review
Parker Drilling's revenues for the 2018 third quarter, compared with the 2018 second quarter, increased 4.0 percent to $123.4 million from $118.6 million. Operating gross margin excluding depreciation and amortization expense (gross margin) increased 9.2 percent to $29.5 million from $27.0 million and gross margin as a percentage of revenues was 23.9 percent, compared with 22.7 percent for the 2018 second 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, third quarter revenues decreased 7.6 percent to $52.3 million from $56.6 million for the 2018 second quarter. Gross margin decreased 125.4 percent to a $0.9 million loss from $3.6 million gain, and gross margin as a percentage of revenues was negative 1.8 percent, compared with positive 6.4 percent for the prior period. Contracted backlog was approximately $238.9 million at the end of the third quarter, compared with $215.5 million at the end of the second quarter.
U.S. (Lower 48) Drilling
U.S. (Lower 48) Drilling segment revenues increased 38.0 percent to $4.5 million from $3.3 million for the 2018 second quarter. Gross margin improved 16.5 percent to a $1.2 million loss, compared with a loss of $1.4 million in the second quarter. Revenues and gross margin benefited from a favorable mix in barge drilling activity and the recent award of an O&M contract offshore California.
International & Alaska Drilling
International & Alaska Drilling segment revenues decreased 10.4 percent to $47.8 million from $53.3 million for the 2018 second quarter. Gross margin decreased 95.0 percent to $0.3 million, compared with $5.0 million in the second quarter. The decreases in revenues and gross margin were primarily due to one of our rigs in Alaska transitioning to a minimal standby rate after completing its work in early July. However, improvement in our Sakhalin Island, Russia and offshore Canada operations helped to mitigate the gross margin compression.
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, third quarter revenues increased 14.6 percent to $71.1 million from $62.0 million for the second quarter. Gross margin increased 30.1 percent to $30.4 million from $23.3 million, and gross margin as a percentage of revenues was 42.7 percent compared with 37.6 percent for the prior period.
U.S. Rental Tools
U.S. Rental Tools segment revenues increased 21.1 percent to $50.9 million from $42.1 million for the 2018 second quarter. Gross margin increased 27.4 percent to $29.0 million compared with gross margin of $22.8 million in the second quarter. The increase in revenues resulted primarily from strong activity and volume in U.S. land markets. Gross margin increased as a result of incremental revenues, combined with lower incremental operating costs.
International Rental Tools
International Rental Tools segment revenues increased 1.1 percent to $20.2 million from $19.9 million for the 2018 second quarter. Gross margin increased 133.2 percent to $1.4 million compared with gross margin of $0.6 million in the second quarter. Revenue and gross margin improvements resulted largely from the continued demand for our tubular running services.
Consolidated
General and Administrative expenses were $14.5 million for the 2018 third quarter, up from $8.3 million for the 2018 second quarter. The increase was largely due to professional fees. Total liquidity at the end of the quarter was $140.3 million, consisting of $81.7 million in cash and cash equivalents and $58.6 million available under our revolving credit facility.
Capital expenditures in the third quarter were $19.5 million. Year to date through September 30, 2018, capital expenditures were $52.0 million.
Form 8-K Filing
In addition, Parker Drilling today is filing on Form 8-K with the U.S. Securities and Exchange Commission certain materials that it previously shared with one of its largest equity holders. These materials were provided by the Company under a time-limited non-disclosure agreement with this investor in order to facilitate proactive discussions regarding the Company's capital structure. The Company continues to actively engage in discussions with other stakeholders regarding its capital structure, well ahead of future debt maturities, and has ample liquidity to continue serving customers without interruption while it continues to evaluate opportunities to best position the business for the long term and across industry cycles.
Conference Call
Parker Drilling has scheduled a conference call for 10:00 a.m. Central Time (11:00 a.m. Eastern Time) on Tuesday, November 6, 2018, to review third quarter results. The call will be available by telephone by dialing (+1) (412) 902-0003 and asking for the Parker Drilling Third 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 November 13, 2018 at (+1) (201) 612-7415, conference ID 13684492#.
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 our evaluation of options to enhance our capital structure in light of upcoming debt maturities, 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 Company-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, nick.henley@parkerdrilling.com.
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
September 30, December 31,
2018 2017
---
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $
81,728 $
141,549
Accounts and notes receivable, net of allowance for bad debts 137,901 122,511
Rig materials and supplies 34,498 31,415
Other current assets 27,673 22,361
Total current assets 281,800 317,836
Property, plant and equipment, net of accumulated depreciation 550,469 625,771
Goodwill 6,708 6,708
Intangible assets, net 5,398 7,128
Deferred income taxes 1,811 1,284
Other noncurrent assets 22,995 31,552
Total assets $
869,181 $
990,279
LIABILITIES AND STOCKHOLDERS
' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $
103,241 $
99,246
Accrued income taxes 4,212 4,430
Total current liabilities 107,453 103,676
Long-term debt, net of unamortized debt issuance costs 579,289 577,971
Other long-term liabilities 12,208 12,433
Long-term deferred tax liability 60 78
Total stockholders' equity 170,171 296,121
Total liabilities and stockholders' equity $
869,181 $
990,279
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Three Months
Three Months Ended September 30, Ended June 30,
2018 2017 2018
---
Revenues $
123,395 $
118,308 $
118,603
Expenses:
Operating expenses 93,943 88,120 91,634
Depreciation and
amortization 27,520 30,067 27,136
121,463 118,187 118,770
Total operating gross
margin (loss) 1,932 121 (167)
General and
administrative
expense (14,495) (7,033) (8,288)
Loss on impairment (43,990)
Gain (loss) on
disposition of
assets, net 9 97 (478)
Total operating income
(loss) (56,544) (6,815) (8,933)
Other income (expense):
Interest expense (11,350) (11,067) (11,197)
Interest income 23 128 30
Other (709) (638) (1,191)
Total other income
(expense) (12,036) (11,577) (12,358)
Income (loss) before
income taxes (68,580) (18,392) (21,291)
Income tax expense
(benefit) 2,371 1,919 1,586
Net income (loss) (70,951) (20,311) (22,877)
Less: Convertible
preferred stock
dividend 906 906 907
Net income (loss)
available to common
stockholders $
(71,857) $
(21,217) $
(23,784)
Basic earnings (loss)
per common share: (1) $
(7.70) $
(2.30) $
(2.56)
Diluted earnings
(loss) per common
share: (1) $
(7.70) $
(2.30) $
(2.56)
Number of common shares used in
computing earnings per share:
Basic (1) 9,334,390 9,220,001 9,292,224
Diluted (1) 9,334,390 9,220,001 9,292,224
(1) The Company's 1-for-15
reverse stock split was
effective when markets opened
on July 27, 2018. All share
and per share data have been
retroactively restated for all
periods presented.
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Nine Months Ended September 30,
2018 2017
---
Revenues $
351,673 $
326,186
Expenses:
Operating expenses 277,111 263,575
Depreciation and amortization 83,205 93,251
360,316 356,826
Total operating gross margin (loss) (8,643) (30,640)
General and administrative expense (28,984) (20,576)
Loss on impairment (43,990)
Gain (loss) on disposition of assets, net (126) (368)
Total operating income (loss) (81,743) (51,584)
Other income (expense):
Interest expense (33,787) (33,032)
Interest income 76 160
Other (1,609) 452
Total other income (expense) (35,320) (32,420)
Income (loss) before income taxes (117,063) (84,004)
Income tax expense (benefit) 5,561 6,004
Net income (loss) (122,624) (90,008)
Less: Convertible preferred stock dividend 2,719 2,145
Net income (loss) available to common stockholders $
(125,343) $
(92,153)
Basic earnings (loss) per common share: (1) $
(13.49) $
(10.20)
Diluted earnings (loss) per common share: (1) $
(13.49) $
(10.20)
Number of common shares used in computing earnings per share:
Basic (1) 9,292,858 9,030,345
Diluted (1) 9,292,858 9,030,345
(1) The Company's 1-for-15
reverse stock split was
effective when markets opened
on July 27, 2018. All share
and per share data have been
retroactively restated for all
periods presented.
PARKER DRILLING COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Dollars in Thousands)
(Unaudited)
Three Months Ended
September 30, June 30,
2018 2017 2018
---
Revenues:
Drilling Services:
---
U.S. (Lower 48) Drilling $
4,530 $
4,585 $
3,283
International and Alaska Drilling 47,770 62,726 53,302
Total Drilling Services 52,300 67,311 56,585
Rental Tools Services:
---
U.S. Rental Tools 50,944 35,677 42,083
International Rental Tools 20,151 15,320 19,935
Total Rental Tools Services 71,095 50,997 62,018
Total revenues 123,395 118,308 118,603
Operating expenses:
Drilling Services:
---
U.S. (Lower 48) Drilling 5,701 5,052 4,686
International and Alaska Drilling 47,520 50,345 48,278
Total Drilling Services 53,221 55,397 52,964
Rental Tools Services:
---
U.S. Rental Tools 21,949 16,086 19,326
International Rental Tools 18,773 16,637 19,344
Total Rental Tools Services 40,722 32,723 38,670
Total operating expenses 93,943 88,120 91,634
Operating gross margin (loss), excluding depreciation and amortization:
Drilling Services:
---
U.S. (Lower 48) Drilling (1,171) (467) (1,403)
International and Alaska Drilling 250 12,381 5,024
Total Drilling Services (921) 11,914 3,621
Rental Tools Services:
---
U.S. Rental Tools 28,995 19,591 22,757
International Rental Tools 1,378 (1,317) 591
Total Rental Tools Services 30,373 18,274 23,348
Total Operating gross margin (loss), excluding depreciation and
amortization 29,452 30,188 26,969
Depreciation and amortization (27,520) (30,067) (27,136)
Total operating gross margin (loss) $
1,932 $
121 $
(167)
PARKER DRILLING COMPANY AND SUBSIDIARIES
ADJUSTED EBITDA
(Dollars in Thousands)
(Unaudited)
Three Months Ended
September 30, June 30, 2018 March 31, 2018 December 31, September 30,
2018 2017 2017
---
Net income (loss)
available to common
stockholders $
(71,857) $
(23,784) $
(29,702) $
(29,599) $
(21,217)
Interest expense 11,350 11,197 11,240 11,194 11,067
Income tax expense
(benefit) 2,371 1,586 1,604 3,036 1,919
Depreciation and
amortization 27,520 27,136 28,549 29,122 30,067
Convertible preferred
stock dividend 906 907 906 906 906
EBITDA (29,710) 17,042 12,597 14,659 22,742
Adjustments:
Loss on impairment 43,990
Interest income and
other 686 1,161 (314) 242 510
(Gain) loss on
disposition of
assets, net (9) 478 (343) 2,483 (97)
Provision for
reduction in carrying
value of certain
assets - 1,938
Special items (2) - 3,033
Adjusted EBITDA (1) $
14,957 $
18,681 $
11,940 $
22,355 $
23,155
(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) 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
September 30, June 30,
2018 2017 2018
Net income (loss) available to
common stockholders $
(71,857) $
(21,217) $
(23,784)
Diluted earnings (loss) per common
share (2) $
(7.70) $
(2.30) $
(2.56)
Adjustments:
Loss on impairment $
43,990
$
$
Net adjustments 43,990
Adjusted net income (loss) available
to common stockholders(1) $
(27,867) $
(21,217) $
(23,784)
Adjusted diluted earnings (loss) per
common share (1) $
(2.99) $
(2.30) $
(2.56)
(1) We believe Adjusted net income
(loss) available to common
stockholders and Adjusted diluted
earnings (loss) per common 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 Diluted
earnings (loss) per common share
to be items outside of the
Company's normal operating
results. Adjusted net income
(loss) available to common
stockholders and Adjusted diluted
earnings (loss) per common 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 Diluted
earnings (loss) per common share.
(2) The Company's 1-for-15 reverse
stock split was effective when
markets opened on July 27, 2018.
All share and per share data have
been retroactively restated for
all periods presented.
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SOURCE Parker Drilling Company
