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