Parker Drilling Reports 2019 Fourth Quarter Results

|Mar 3|magazine43 min read

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, [email protected].

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
December 31,


Three Months Ended
September 30,



Three Months Ended
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
December 31,



Three Months Ended
 March 31,


Year Ended
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
December 31,


Three Months Ended
September 30,



Three Months Ended
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,
2019


September 30,
2019


June 30,

2019



March 31,
2019


December 31,
2018

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
December 31,


Three Months Ended
September 30,



Three Months Ended
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