Parker Drilling Sees 32% Increase in 2Q07 Net Income
Parker Drilling reported strong financial and operating results for the second quarter 2007. Highlights include:
-- Net Income increased 32 percent over the second quarter 2006; -- Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 13 percent over the second quarter 2006; -- Deep drilling barge rigs experienced record dayrates and high utilization; -- International land rig utilization continued to increase; -- New convertible debt offering will reduce cash interest expense.
Second Quarter Earnings and Financial Highlights
For the three months ended June 30, 2007, Parker posted net income of $18.1 million, or $0.16 per diluted share, on revenues of $150.3 million, compared to net income of $13.8 million, or $0.13 per diluted share, on revenues of $146.0 million for the second quarter 2006. Included in net income is a non-cash charge to tax expense of $4.0 million, or $0.04 per diluted share, for potential interest and exchange rate fluctuations relating to a tax liability recorded on January 1, 2007, associated with the adoption of the Financial Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). Net income in the second quarter 2006 included a $0.01 per diluted share gain on an insurance settlement and a favorable change in fair value of interest rate derivatives.
EBITDA was $56.3 million for the second quarter 2007, 13 percent higher than the $49.8 million in the second quarter 2006. Significantly higher dayrates resulted in a 44 percent EBITDA improvement for Parker's U.S. operations over the second quarter 2006. (The details of the EBITDA calculation, a non-GAAP financial measure, for the current and prior eight quarters are defined and reconciled later in this press release to their most directly comparable GAAP financial measure.)
For the first six months of 2007, Parker Drilling reported revenues of $301.6 million and net income of $48.1 million or $0.44 per diluted share compared to revenues of $293.3 million and net income of $25.2 million or $0.24 per diluted share for the first six months of 2006. Included in 2007 results are an after-tax gain of $0.07 per diluted share from the sale of two workover barge rigs in January and non-cash FIN 48 charges of $0.05 per diluted share compared to income from non-routine items of $0.02 per diluted share in 2006.
Capital expenditures for the six months ended June 30, 2007 totaled $129.6 million. Total debt remained unchanged at approximately $329 million, and the Company's cash, cash equivalents and marketable securities totaled $102.3 million at June 30, 2007.
Average utilization for barge rigs drilling in the Gulf of Mexico transition zone for the second quarter 2007 was 74 percent, slightly above the 71 percent reported for the second quarter 2006 and similar to the 73 percent reported for the first quarter 2007. Current barge rig utilization is 88 percent. The Company's deep drilling barge dayrates in the Gulf of Mexico continued to experience record levels, averaging $51,600 per day during the second quarter 2007, up approximately 28 percent, or $11,200 per day, from the second quarter 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.")
The average utilization of international land rigs for the second quarter 2007 increased to 71 percent, up from the 66 percent reported for the first quarter 2007 and the 65 percent in the second quarter 2006. Current international utilization is 78 percent and is expected to further increase during 2007 as rigs continue to reposition between contracts.
Quail Tools, Parker Drilling's drilling and production rental tools subsidiary, continued its solid performance as it recorded EBITDA of $18.9 million in the second quarter 2007, up $0.1 million from the first quarter 2007. The expansion of Quail is well underway as equipment is being delivered to Quail's new facility in Texarkana, Texas, which opened on April 2. The new facility provides increased coverage of the Barnett, Fayetteville and Woodford shale areas in East Texas, Arkansas and Oklahoma.
Robert L. Parker Jr., chairman and chief executive officer of Parker Drilling, said: "Parker Drilling's second quarter results are continued evidence that our disciplined approach is driving profitable growth. Our performance was driven by solid dayrates and sustained demand for our preferred barge rigs despite recent uncertainties in the U.S. gas market.
"In line with our strategic growth plan of providing our customers with preferred rigs, three barge rigs completed refurbishment programs during the quarter and re-entered our U.S. fleet in June, all under contract. Two of our four new 2,000 horsepower rigs have begun operations in Algeria, and the remaining two rigs are rigging up in Mexico for a three-year contract. Two new land rigs built in conjunction with our Saudi Arabian joint venture are also operating, with an additional four rigs expected to deploy in the country for the joint venture throughout 2007.
"Quail Tools was flat for the quarter as key deepwater projects have been delayed by our customers and new equipment relating to Quail's expansion has been delivered later than anticipated. We expect the second half of the year to be much improved as new equipment is placed into service and deep-water projects begin.
"With the second quarter announcement of three multi-year contracts in Mexico and Turkmenistan, our global utilization now stands at 81 percent, a strong improvement over last year. Looking ahead, we continue to expect increased contributions from our international segments as more rigs come online, benefiting from our focus on securing long-term, high-margin works in regions with significant growth potential. We remain optimistic that our U.S. barge segment can continue to generate strong utilization and dayrates in the third and fourth quarters, and are confident in the growth of our rental tools segment.
"Additionally, in July we completed a public offering of $125 million aggregate principal amount of convertible senior notes due 2012 that will reduce our interest costs going forward by using the majority of the proceeds to pay down our more expensive debt. As a result, we will be saving approximately $7.4 million in cash interest expense annually, allowing us to reinvest more of our cash flow into growing our business and building high-performance, preferred equipment.
"We have significant momentum heading into the rest of 2007 and are committed to the execution of our strategic growth plan while anticipating the needs of our customers. I am excited about the opportunities ahead."