Earnings before interest, taxes, depreciation and amortization (EBITDA) was $49.8 million for the second quarter of 2006, 24 percent higher than the $40.1 million reported in the second quarter of 2005. For the second consecutive quarter, both the U.S. Gulf of Mexico barge rigs and Quail Tools generated record EBITDA results.
The Company reported second quarter 2006 net income of $13.8 million, or $0.13 per diluted share, compared to 2005 second quarter net income of $20.2 million, or $0.21 per diluted share. The second quarter of 2005 included net income on non-routine items of $7.6 million or $0.08 per diluted share as previously disclosed. The current quarter includes non-routine net income items of $0.8 million or $0.01 per diluted share for an insurance settlement gain and favorable change in fair value of interest derivatives.
Net income for the second quarter of 2006 includes income tax expense of $14.7 million compared to $3.5 million in the second quarter of 2005. Of the $14.7 million, $10.7 million, or $0.10 per diluted share, is non-cash deferred tax expense relating primarily to the utilization of net operating loss carryforwards in 2006. Net deferred tax expense was not recognized during the second quarter of 2005 as the expense from utilizing the net operating loss carryforwards offset the net operating loss valuation allowance which was not fully released until the fourth quarter of 2005. "Although our effective tax rate for 2006 is expected to be 54%, we anticipate that the effective tax rate for 2007 should be in the low to mid-40% range," said W. Kirk Brassfield, senior vice president and chief financial officer.
For the first six months of 2006, Parker Drilling reported revenues of $293.3 million and net income of $25.2 million or $0.24 per diluted share compared to revenues of $254.2 million and net income of $24.1 million or $0.25 per diluted share for the first six months of 2005. Included in 2006 results are income of $0.01 per diluted share from non-routine items and $0.18 per share of non-cash deferred tax expense compared to income from non-routine items of $0.07 per diluted share and no deferred tax expense in 2005.
The average utilization of international land rigs for the second quarter of 2006 decreased to 65 percent from the 71 percent reported for the second quarter of 2005. This decrease is attributed to six of the seven land rigs in Mexico completing contracted work during the second quarter. The seventh rig was released in July. Three of the rigs will begin operations during the third quarter at considerably higher dayrates. The remaining four rigs are currently being marketed and are expected to return to work in the second half of 2006.
Average utilization for the Gulf of Mexico barge rigs for the second quarter of 2006 was 71 percent, compared to 79 percent reported for the second quarter of 2005. The decline in Gulf of Mexico's average utilization is mainly due to barge rig 12, which completed its conversion from a workover to a drilling barge in mid-May and barge rig 54, which has been in the shipyard since early May for upgrades and regularly scheduled preventive maintenance. Barge rig 54 is scheduled to be back in service this week. The Company's deep drilling barge dayrates in the Gulf of Mexico during the second quarter of 2006 averaged $40,400, up approximately 52 percent, or $13,800 per day, from the second quarter of 2005 and approximately 7 percent, or $2,700 per day, above the first quarter of 2006. Average dayrates for each classification of barge by quarter are available on Parker's website and can be viewed or downloaded by going to "Investor Relations" and then to "Dayrates - GOM."
Quail Tools, Parker Drilling's drilling and production rental tools subsidiary, continued its outstanding performance as it posted its second consecutive quarterly record with revenues of $30.3 million. Expansion of Quail Tools is ongoing as a new operating facility located in Northeast Texas has been secured and is scheduled to open during the fourth quarter. This facility will allow Quail to provide better coverage of the Barnett Shale area and Fayetteville Shale area in Arkansas.
"Record quarters for both Quail Tools and our U.S. Gulf of Mexico barge business segments resulted in Parker Drilling delivering solid revenue and earnings per share for the quarter," said Robert L. Parker Jr., chairman, president and chief executive officer. "We expect to continue to realize significant contributions from these business segments throughout the remainder of this year and into 2007. This is consistent with our five-year strategic growth plan that includes: growing a fleet of premium drilling rigs, focusing on markets that have long-term exploration and development opportunities, and growing the Company's rental tool business.
"New contracts, detailed below, in Algeria, Kazakhstan and Alaska, in addition to our previously announced joint venture in Saudi Arabia, evidence the progress we have made in implementing our plan. Although we have experienced a short-term decrease in international rig utilization as some of our long-term contracts end and rigs move to new locations, we are excited about the many opportunities for our international segment. In fact, recently awarded international contracts confirm our earlier statements that dayrates will rise significantly when older contracts end and rigs are repositioned at higher dayrates and margins. Of the recent international contracts signed, the average dayrate has increased approximately 75 percent above previous contracted terms."
Capital expenditures for the six months ended June 30, 2006 were $80.2 million. Total debt was $379.7 million at June 30, 2006, and the Company's cash balance, including marketable securities, was $190.3 million.
Additionally, Parker Drilling today announced the award of several new commitments in the Company's domestic and international drilling operations, and also issued an update of its current rig contract status and rig utilization.
"This is a very active time for Parker. With new contracts being secured at higher dayrates the outlook for the remainder of the year and 2007 is excellent," concluded Robert L. Parker Jr.
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