Parker Drilling Reports 2019 Fourth Quarter Results

HOUSTON, March 3, 2020 /PRNewswire/ -- Parker Drilling Company today announced results for the fourth quarter ended December 31, 2019, which included a net loss of $2.1 million, or a $0.14 loss per share on revenues of $156.3 million. Fourth quarter Adjusted EBITDA was $25.9 million( (1)).

Michael W. Sumruld, the Company's Senior Vice President and CFO, said, "We are very pleased with our results in 2019 despite the ongoing challenges in the U.S. markets. Our substantial improvement across all business segments was due to the intense focus our employees have on providing innovative, reliable, and efficient solutions to our customers so they can minimize their operational risks and overall well costs. In particular, our O&M backlog grew over 250% to $627 million at the end of 2019 from $176 million at the end of 2018. We believe our focus on capital efficiency positions us to generate long-term positive cash flow going forward.

"Our fourth-quarter results were in-line with our expectations, reflecting weaker industry conditions in the U.S. and improving conditions in several of our key international markets. In the U.S., our rental tools results were generally in line with the decline in the U.S. rig count and our (lower 48) drilling results were impacted by seasonally lower utilization in the inland waterways of the Gulf of Mexico. In the International rental tools and International and Alaska drilling segments, we posted sequential revenue improvement in the fourth quarter as rental tools experienced higher utilization of our surface and tubulars product line in Guyana, the U.A.E., and India, while drilling benefited from the new Alaska O&M contract, higher utilization in Mexico, and our recently awarded barge rig contract in Kazakhstan," concluded Sumruld.

Fourth Quarter Review

Parker Drilling's revenues for the 2019 fourth quarter, compared with the 2019 third quarter, decreased 2.4 percent to $156.3 million from $160.1 million. Operating gross margin, excluding depreciation and amortization expense ("gross margin"), decreased 24.3 percent to $32.2 million from $42.6 million and gross margin as a percentage of revenues was 20.6 percent, compared with 26.6 percent for the 2019 third 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, fourth quarter revenues decreased 7.8 percent to $67.6 million from $73.3 million for the third quarter. Gross margin decreased 22.3 percent to $21.4 million from $27.6 million, and gross margin as a percentage of revenues was 31.7 percent, as compared with 37.6 percent for the 2019 third quarter.

U.S. Rental Tools

U.S. rental tools segment revenues decreased 13.7 percent to $42.5 million in the 2019 fourth quarter from $49.3 million for the 2019 third quarter. Gross margin decreased 26.1 percent to $17.6 million in the 2019 fourth quarter, compared with gross margin of $23.7 million in the 2019 third quarter. The decrease in revenue and gross margin resulted primarily from reduced activity that mirrored the decline in U.S. land rig count and the completion of several deep-water projects midway through the fourth quarter, partially offset by higher revenue from operations in the Permian Basin and Eagle Ford Shale Play.

International Rental Tools

International rental tools segment revenues increased 4.2 percent to $25.1 million in the 2019 fourth quarter from $24.1 million for the 2019 third quarter. Gross margin of $3.9 million in the 2019 fourth quarter was flat with the 2019 third quarter. The increase in revenues was primarily the result of additional activity in certain of our international markets, including Guyana, UAE and India.


            (1)            Adjusted EBITDA is a non-GAAP
                              financial measure. See the
                              reconciliation and table of net
                              income/(loss) to EBITDA and
                              Adjusted EBITDA later in this
                              release for more information on
                              non-GAAP financial measures.

Drilling Services

For the Company's drilling services business, which is comprised of the U.S. (lower 48) drilling and the International & Alaska drilling segments, fourth quarter revenues increased 2.2 percent to $88.7 million from $86.8 million for the third quarter. Gross margin decreased 28.1 percent to $10.8 million from $15.0 million, and gross margin as a percentage of revenues was 12.2 percent, compared with 17.3 percent for the 2019 third quarter.

U.S. (Lower 48) Drilling

U.S. (lower 48) drilling segment revenues decreased 32.7 percent to $9.7 million in the 2019 fourth quarter from $14.5 million for the 2019 third quarter. Gross margin was $0.1 million in the 2019 fourth quarter, compared with $3.9 million in the third quarter. Revenues and gross margin were lower as a result of seasonal declines in an already depressed inland waterway market, where the Company's barge utilization rates declined to 14% in the fourth quarter from 21% in the third quarter. Also, revenue from the O&M project in California was lower as the project transitioned from the re-activation phase to ongoing plug & abandonment operations.

International & Alaska Drilling

International & Alaska drilling segment revenues increased 9.3 percent to $79.0 million in the 2019 fourth quarter from $72.3 million for the 2019 third quarter. Gross margin decreased 3.6 percent to $10.7 million in the 2019 fourth quarter, compared with $11.1 million in the 2019 third quarter. The increase in revenue was primarily due to higher reimbursable revenues from our Sakhalin O&M work, a full quarter of work for the Alaska O&M contract, higher utilization in Mexico, and our barge rig in Kazakhstan returning to service on a standby rate. This was partially offset by our owned rig in Sakhalin going on a standby rate midway through the fourth quarter as well as lower activity in the Kurdistan region of Iraq after two rigs completed work at the end of July. For the fourth quarter, rig utilization was 50% compared to 45% in the third quarter. This mix of activity resulted in a slight gross margin contraction.

Consolidated

General and administrative expense was $6.4 million for the 2019 fourth quarter. Total liquidity at the end of the quarter was $135.9 million, consisting of $105.0 million in cash and cash equivalents and $30.9 million available under the Company's credit facility.

Capital expenditures in the fourth quarter were $24.4 million and totaled $80.3 million for the full year when combining activity in both predecessor and successor periods, with the majority of capital expenditures directed to the Company's 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, March 4, 2020, to review reported results. The call will be available by telephone by dialing (+1) (412) 902-0003 and asking for the Parker Drilling Fourth 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 March 11, 2020, at (+1) (201) 612-7415, conference ID 13699249#.

Cautionary Statement

This press release contains statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). All statements contained in this news release, other than statements of historical facts, are forward-looking statements for purposes of these provisions. In some cases, you can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "outlook," "may," "should," "plan," "seek," "forecast," "target," "will," and "would" or similar words. Forward-looking statements are based on certain assumptions and analyses we make in light of our experience and perception of historical trends, current conditions, expected future developments, and other factors we believe are relevant. Although we believe our assumptions are reasonable based on information currently available, those assumptions are subject to significant risks and uncertainties, many of which are outside our control. Each forward-looking statement speaks only as of the date of this news release, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. You should be aware that certain events could have a material adverse effect on our business, results of operations, financial condition, and cash flows. For more information about such events, see "Risk Factors" described in Item 1A. of the Company's Annual Report filed on Form 10-K, along with additional risk factors described from time to time in our SEC filings.

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 through the use of Parker-owned and customer-owned rig fleets in select U.S. and international markets, specializing in remote and harsh environment regions. 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: Investor Relations, (+1) (281) 406-2000, IR@parkerdrilling.com.

                                                
           
               PARKER DRILLING COMPANY AND SUBSIDIARIES


                                                    
             
                CONSOLIDATED BALANCE SHEET


                                                      
             
                (Dollars in Thousands)


                                                          
              
                (Unaudited)


                                                                        Successor                                      Predecessor

                                                                                                                ---

                                                                    December 31, 2019                                  December 31, 2018


                                                    
             
                ASSETS



     Current assets:



     Cash and cash equivalents                                                         $
              104,951                            $
      48,602



     Restricted cash                                                               -                          10,389



     Accounts receivable, net                                                166,456                          136,437



     Rig materials and supplies                                               23,267                           36,245



     Deferred costs                                                            5,223                            4,353



     Other tax assets                                                          2,949                            2,949



     Other current assets                                                     17,688                           27,929



     Total current assets                                                    320,534                          266,904



      Property, plant and equipment, net                                      299,768                          534,371



     Intangible assets, net                                                   13,675                            4,821



     Rig materials and supplies                                                4,766                           12,971



     Deferred income taxes                                                     4,416                            2,143



     Other non-current assets                                                 39,689                            7,204



     Total assets                                                                      $
              682,848                           $
      828,414



                                              
       
             LIABILITIES AND STOCKHOLDER'S EQUITY



     Current Liabilities:


      Debtor in possession financing                                     
              $                                                 $
      10,000



     Accounts payable                                                         55,104                           39,678



     Accrued liabilities                                                      57,954                           35,385



     Accrued income taxes                                                      5,058                            3,385



     Total current liabilities                                               118,116                           88,448




     Long-term debt                                                          177,937



     Other long-term liabilities                                              25,892                           11,544


      Long-term deferred tax liability                                          7,002                              510



     Commitments and contingencies


      Total liabilities not subject to
       compromise                                                             328,947                          100,502



      Liabilities subject to compromise                                             -                         600,996




     Total liabilities                                                       328,947                          701,498




     Stockholders' equity:



     Predecessor preferred stock                                                   -                             500



     Predecessor common stock                                                      -                           1,398


      Predecessor capital in excess of par
       value                                                                        -                         766,347


      Predecessor accumulated other
       comprehensive income (loss)                                                  -                         (6,879)



     Successor common stock                                                      150


      Successor capital in excess of par value                                347,340


      Successor accumulated other
       comprehensive income (loss)                                               (98)


      Retained earnings (accumulated deficit)                                   6,509                        (634,450)




     Total stockholders' equity                                              353,901                          126,916



      Total liabilities and stockholders'
       equity                                                                           $
              682,848                           $
      828,414


                                                                                            
           
                PARKER DRILLING COMPANY


                                                                                     
             
              CONSOLIDATED STATEMENT OF OPERATIONS


                                                                                 
              
             (Dollars in Thousands, Except Per Share Data)


                                                                                                 
            
                (Unaudited)




                                                           
              
             Successor                                                                          Predecessor



                                                         Three Months Ended                                           Three Months Ended                                            Three Months Ended
                                                December 31,                                       September 30,                                          December 31,

                                                                                                                                                                               ---

                                                                       2019                                      2019                                                           2018

                                                                                                                                                                               ---


     Revenues                                                      156,281                                     160,083                                                                    129,148



     Expenses:


      Operating expenses                                            124,040                                     117,486                                                                    100,993


      Depreciation and
       amortization                                                  20,779                                      20,329                                                                     24,340


                                                                    144,819                                     137,815                                                                    125,333


      Total operating gross
       margin                                                        11,462                                      22,268                                                                      3,815



      General and
       administrative
       expense                                                      (6,374)                                    (5,983)                                                                     4,439


      Loss on impairment                                                  -                                                                                                              (6,708)


      Gain (loss) on
       disposition of
       assets, net                                                      371                                        (92)                                                                   (1,598)


      Pre-petition
       restructuring charges                                              -                                                                                                             (21,820)


      Reorganization items                                                -                                      (211)                                                                   (9,789)



      Total operating income
       (loss)                                                         5,459                                      15,982                                                                   (31,661)




     Other income (expense):


      Interest expense                                              (6,121)                                    (7,118)                                                                   (8,778)


      Interest income                                                   151                                         362                                                                         15



     Other                                                             714                                       (258)                                                                     (414)


      Total other income
       (expense)                                                    (5,256)                                    (7,014)                                                                   (9,177)


      Income (loss) before
       income taxes                                                     203                                       8,968                                                                   (40,838)




     Income tax expense


      Current tax expense                                             1,621                                       3,031                                                                      2,118


      Deferred tax expense
       (benefit)                                                        703                                       1,948                                                                        117


      Total income tax
       expense                                                        2,324                                       4,979                                                                      2,235



      Net income (loss)                                             (2,121)                                      3,989                                                                   (43,073)


      Less: Predecessor
       preferred stock
       dividend                                                           -


      Net income (loss)
       available to common
       stockholders                                                         $
             (2,121)                                           $
             3,989                                              $
       (43,073)



      Basic earnings (loss)
       per common share:                                                     $
             (0.14)                                            $
             0.27                                                $
       (4.60)


      Diluted earnings
       (loss) per common
       share:                                                                $
             (0.14)                                            $
             0.27                                                $
       (4.60)


      Number of common shares used in computing
       earnings per share:



     Basic                                                      15,045,276                                  15,044,739                                                                  9,367,697



     Diluted                                                    15,170,356                                  15,044,739                                                                  9,367,697

                                                                                   
             
                PARKER DRILLING COMPANY


                                                                               
          
                CONSOLIDATED STATEMENT OF OPERATIONS


                                                                           
           
               (Dollars in Thousands, Except Per Share Data)


                                                                                        
              
                (Unaudited)




                                                             Successor                                                      
              
                Predecessor



                                                         Nine Months Ended                                                          Three Months Ended                                 Year Ended
                                                December 31,                                                     March 31,                                  December 31,

                                                                                                                                                                           ---

                                                                      2019                                                  2019                                            2018

                                                                                                                                                                           ---


     Revenues                                                               $
          472,395                                                                       $
         157,397                    $
        480,821



     Expenses:


      Operating expenses                                           354,175                                                 120,871                                                   378,104


      Depreciation and
       amortization                                                 61,499                                                  25,102                                                   107,545



                                                                   415,674                                                 145,973                                                   485,649



      Total operating gross
       margin                                                       56,721                                                  11,424                                                   (4,828)



      General and
       administrative
       expense                                                    (17,967)                                                (8,147)                                                 (24,545)


      Loss on impairment                                                 -                                                                                                        (50,698)


      Gain (loss) on
       disposition of
       assets, net                                                     226                                                     384                                                   (1,724)


      Pre-petition
       restructuring charges                                             -                                                                                                        (21,820)


      Reorganization items                                         (1,173)                                               (92,977)                                                  (9,789)



      Total operating income
       (loss)                                                       37,807                                                (89,316)                                                (113,404)




     Other income (expense):


      Interest expense                                            (20,902)                                                  (274)                                                 (42,565)


      Interest income                                                  887                                                       8                                                        91



     Other                                                          (188)                                                   (10)                                                  (2,023)



      Total other income
       (expense)                                                  (20,203)                                                  (276)                                                 (44,497)



      Income (loss) before
       income taxes                                                 17,604                                                (89,592)                                                (157,901)




     Income tax expense


      Current tax expense                                            5,190                                                   2,341                                                     8,225


      Deferred tax expense
       (benefit)                                                     5,905                                                 (1,685)                                                    (429)



      Total income tax
       expense                                                      11,095                                                     656                                                     7,796



      Net income (loss)                                              6,509                                                (90,248)                                                (165,697)


      Less: Predecessor
       preferred stock
       dividend                                                          -                                                                                                           2,719



      Net income (loss)
       available to common
       stockholders                                                            $
          6,509                                                                      $
         (90,248)                 $
        (168,416)



      Basic earnings (loss)
       per common share:                                                        $
          0.43                                                                        $
         (9.63)                   $
        (18.09)


      Diluted earnings
       (loss) per common
       share:                                                                   $
          0.43                                                                        $
         (9.63)                   $
        (18.09)


      Number of common shares used in computing
       earnings per share:



     Basic                                                     15,044,919                                               9,368,322                                                 9,311,722



     Diluted                                                   15,060,365                                               9,368,322                                                 9,311,722

                                                                                   
              
                PARKER DRILLING COMPANY


                                                                                   
              
                SELECTED FINANCIAL DATA


                                                                                   
              
                (Dollars in Thousands)


                                                                                         
              
                (Unaudited)




                                                                                 
              
                Successor                                                                              Predecessor



                                                                                Three Months Ended                                                Three Months Ended                                        Three Months Ended
                                                                       December 31,                                           September 30,                                       December 31,



                                                                                              2019                                          2019                                               2018



        
              Revenues:



     U.S. rental tools                                                                              $
              42,506                                             $
       49,256                                         $
         48,756



     International rental tools                                                            25,070                                          24,067                                               21,587




     Total rental tools services                                                           67,576                                          73,323                                               70,343




     U.S. (lower 48) drilling                                                               9,744                                          14,487                                                2,562



     International & Alaska drilling                                                       78,961                                          72,273                                               56,243



        
              Total drilling services                                                    88,705                                          86,760                                               58,805



        
              Total revenues                                                            156,281                                         160,083                                              129,148





        
              Operating expenses:



     U.S. rental tools                                                                     24,952                                          25,513                                               23,639



     International rental tools                                                            21,193                                          20,243                                               20,052



        
              Total rental tools services                                                46,145                                          45,756                                               43,691




     U.S. (lower 48) drilling                                                               9,625                                          10,549                                                5,250



     International & Alaska drilling                                                       68,270                                          61,181                                               52,052



        
              Total drilling services                                                    77,895                                          71,730                                               57,302



        
              Total operating expenses                                                  124,040                                         117,486                                              100,993





        
              Operating gross margin (loss):



     U.S. rental tools                                                                     17,554                                          23,743                                               25,117



     International rental tools                                                             3,877                                           3,824                                                1,535



        
              Total rental tools services                                                21,431                                          27,567                                               26,652




     U.S. (lower 48) drilling                                                                 119                                           3,938                                              (2,688)



     International & Alaska drilling                                                       10,691                                          11,092                                                4,191



        
              Total drilling services                                                    10,810                                          15,030                                                1,503



                   Total operating gross margin excluding depreciation
                    and amortization                                                          32,241                                          42,597                                               28,155



        
              Depreciation and amortization                                            (20,779)                                       (20,329)                                            (24,340)



        
              Total operating gross margin                                                        $
              11,462                                             $
       22,268                                          $
         3,815


                                                                                                  
            
              PARKER DRILLING COMPANY


                                                                                                    
              
              ADJUSTED EBITDA


                                                                                                  
            
              (Dollars in Thousands)


                                                                                                      
              
              (Unaudited)




                                                                  
       
          Successor                                                                        
     
        Predecessor



                                                                
       
       Three Months Ended                                                                        Three Months Ended


                                         December 31,                       September 30,               June 30,                                  March 31,                 December 31,
                                                 2019                                 2019                                                               2019                          2018
                                                                                                            2019



      Net income (loss) available to
       common stockholders                            $
      (2,121)                                                  $
             3,989                                     $
              4,641                        $
        (90,248)  $
        (43,073)



     Interest expense                          6,121                                       7,118                                           7,663                                                274       8,778



     Income tax expense                        2,324                                       4,979                                           3,792                                                656       2,235


      Depreciation and amortization            20,779                                      20,329                                          20,391                                             25,102      24,340



     EBITDA                                   27,103                                      36,415                                          36,487                                           (64,216)    (7,720)




     Adjustments:



     Loss on impairment                                                                                                                                                                               6,708


      (Gain) loss on disposition of
       assets, net                              (371)                                         92                                              53                                              (384)      1,598


      Pre-petition restructuring charges
       (1)                                                                                                                                                                                           11,411



     Reorganization items                                                                   211                                             962                                             92,977       9,789



     Interest income                           (151)                                      (362)                                          (374)                                               (8)       (15)



     Other                                     (714)                                        258                                             644                                                 10         414




     Adjusted EBITDA (1) (2)                          $
      25,867                                                  $
             36,614                                    $
              37,772                          $
        28,379    $
         22,185





              (1)              Pre-petition restructuring charges
                                  have been allocated to the respective
                                  period in which the expense was
                                  incurred. Accordingly adjusted EBITDA
                                  will differ from what was reported
                                  previously.





              (2)              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.

                                                                                       
              
                PARKER DRILLING COMPANY


                                                                                
          
                RECONCILIATION OF ADJUSTED EARNINGS PER SHARE


                                                                                
          
                (Dollars in Thousands, Except Per Share Data)


                                                                                             
              
                (Unaudited)




                                         
              
                Successor                                                           Predecessor



                                               Three Months Ended                                            Three Months Ended                                                 Three Months Ended
                                      December 31,                                       September 30,                                                        December 31,



                                                             2019                                      2019                                                                2018



      Net income (loss) available to
       common stockholders                                                 $
      (2,121)                                                              $
      3,989                                      $
         (43,073)


      Diluted earnings (loss) per
       common share                                                         $
      (0.14)                                                               $
      0.27                                        $
         (4.60)





      Adjustments:


        
              Loss on impairment                  
              $                                                                     
             $                                                    $
         6,708



        
              Net adjustments                                                                                                                                                      6,708



      Adjusted net income (loss)
       available to common
       stockholders (1)                                                    $
      (2,121)                                                              $
      3,989                                      $
         (36,365)



      Adjusted diluted earnings
       (loss) per common share (1)                                          $
      (0.14)                                                               $
      0.27                                        $
         (3.88)





              (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.

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SOURCE Parker Drilling Company