Parker Drilling Company, a global drilling contractor and service provider, announced that a subsidiary has executed an agreement to sell its 50 percent interest in its Saudi Arabian joint venture, Al-Rushaid Parker Drilling Company Ltd. ("ARPD") to an affiliate of the Saudi company which currently owns the remaining 50 percent interest.
The agreement will result in aggregate payments of $2 million to Parker's subsidiary as consideration for the subsidiary's 50 percent share interest and other investment in and advances to ARPD. The agreement obligates the resulting Saudi shareholders to indemnify the Parker subsidiary and its affiliates from claims arising out of or related to the operations of ARPD, including, the drilling contracts between ARPD and Saudi Aramco, the bank loans of ARPD and vendors providing goods or services to ARPD. Each party has agreed to waive any claims that it may have against the other party arising out of the business of ARPD on or before the Closing Date and, subject to the completion of the transfer, the Parker subsidiary has agreed to disclaim any remaining rights with respect to the unpaid portion of the shareholder loans and payables owed by ARPD. Parker anticipates that this transaction will result in a reported net loss of approximately $1.5 million.
The agreement further provides that Parker and its subsidiaries and affiliates shall have no restriction against competing with ARPD in the future, including in Saudi Arabia. The closing of the transaction is subject to funding by the Saudi affiliate in exchange for delivery by Parker's subsidiary of a special power of attorney authorizing the Saudi affiliate's representatives to transfer the shares of the Parker subsidiary to the Saudi affiliate, which the parties have agreed to use best efforts to complete on or before April 14, 2008. The transfer of the subsidiary's interest in ARPD is subject to receipt of certain Saudi Arabian governmental approvals.
Mr. Robert L. Parker Jr., chairman and chief executive officer said: "After a careful and thorough analysis, we concluded that this joint venture was not the best organizational structure for applying our project management expertise and disciplined processes; therefore, we have decided to end our participation in the joint venture. As noted in our public filings, we anticipated that completion of construction and commissioning of the rigs would require significant additional capital due primarily to cost overruns, delays and remedial work. Following the sale of our interest in the joint venture, we will be in a position to invest those funds in opportunities that have a greater potential to provide our shareholders with growth and profitability consistent with our strategic plan.
"We have a long and successful history of operating in international markets, and believe that the North Africa/Middle East market is an area with long-term growth potential. We will continue our efforts in this region and in other key international markets in a manner which allows us to focus on our core strength of providing innovative, performance-driven drilling solutions to our customers," Parker concluded.
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