Parker Packs Away 34% Net Income Increase in Q2
Parker Drilling Company has announced that 44% revenue growth for the three months ended June 30, 2008 led to a 34% increase in profitability compared with the second quarter of 2007. Other highlights include:
- Net Income of $22.6 million, or $0.20 per diluted share, a 34% increase over the second quarter 2007;
- Adjusted EBITDA was 24% higher than the second quarter 2007 (adjusted EBITDA is a non-GAAP financial measure defined below);
- International rig utilization of 75% in the second quarter continues to increase, with four new international land rig commitments, and is currently at 87%, up sequentially from 72% in the first quarter;
- Quail Tools EBITDA increased 29% over the second quarter 2007.
Parker Drilling delivered solid results in the second quarter driven by gains in our targeted growth areas of international drilling, drilling and production rental tools, and project management services," said Robert L. Parker Jr., chairman and chief executive officer.
"Parker's line of services enables the Company to serve customers at multiple points in the drilling process. The combination of long-term contracts for our international rig fleet, Quail Tools' lower-risk, high-margin rental tools business and our non-capital-intensive project management business strategically positions us to design, build, deliver, operate and maintain innovative solutions for lowering the total well cost for our customers.
"We believe that our recent achievements in these businesses, combined with our relentless focus on execution of our strategic plan, will result in strengthening returns throughout 2008," Parker concluded.
Second Quarter Earnings and Financial Review
For the three months ended June 30, 2008, Parker posted net income of $22.6 million, or $0.20 per diluted share, on revenues of $216.7 million, compared to net income of $16.9 million, or $0.15 per diluted share, on revenues of $150.3 million for the second quarter 2007.
Net income in the second quarter 2007 included 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 Financial Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48").
EBITDA was $69.7 million for the second quarter 2008 compared to $56.3 million in the second quarter 2007 and up sequentially from $61.0 million in the first quarter. Higher dayrates and utilization resulted in a 159 percent EBITDA improvement for Parker's international operations over the second quarter 2007.
Quail Tools also showed significant gains, with a 29 percent EBITDA increase from the second quarter 2007. EBITDA for the U.S. barge segment was $27.2 million, compared to $32.1 million in the second quarter of 2007. (The definition of the adjusted EBITDA, a non-GAAP financial measure, for the current and prior eight quarters is reconciled later in this press release to its most directly comparable GAAP financial measure.)
For the first six months of 2008, Parker reported record revenues of $390.0 million and net income of $46.5 million or $0.41 per diluted share compared to revenues of $301.6 million and net income of $46.9 million or $0.43 per diluted share for the first six months of 2007.
Included in 2008 results are a net benefit of $0.04 per diluted share from non-routine items, comprised of a $1.1 million loss from our Saudi Arabia partnership and a net tax benefit of $6.4 million (relating to a settlement of the interest portion of a tax case in Kazakhstan and a valuation allowance on a net operating loss carry-forward in Papua New Guinea). 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 2007 and non-cash FIN 48 charges of $0.05 per diluted share.
Capital expenditures for the six months ended June 30, 2008 totaled $99.8 million. Total debt was $388.4 million, and total debt to capitalization was 40 percent. The Company's cash and cash equivalents totaled $65.6 million at June 30, 2008.
Average utilization for the Gulf of Mexico barge rigs for the second quarter 2008 was 91 percent, up substantially from the 74 percent reported for the second quarter 2007 and the 76 percent reported for the first quarter 2008. Current barge rig utilization is 87 percent, as deep barge rig 51 entered the shipyard in June for a scheduled refurbishment program.
The Company's deep drilling barge dayrates in the Gulf of Mexico averaged $43,300 per day during the second quarter 2008, compared to $51,600 per day in the second quarter 2007 and $44,800 per day in the first quarter 2008. (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 2008 increased to 75 percent, up from the 72 percent reported for the first quarter 2008 and the 68 percent in the second quarter 2007. With three rigs mobilizing from an inactive status under contracts secured in the second quarter and the addition of newbuild rig 269 in Kazakhstan, current international utilization has increased to 87 percent.
-- The Company recently announced a new contract to construct, deliver and commission a land-based rig for BP to drill ultra extended-reach wells to offshore targets in the Liberty field of the Alaskan Beaufort Sea.
-- The Company has signed a new contract to design the drilling package for the Arkutun-Dagi offshore platform. The Arkutun-Dagi field, offshore Sakhalin Island, Russia, is the third offshore field in the Sakhalin-1 project to be developed.
-- A Parker subsidiary was awarded a four-year contract in northern Mexico utilizing land rig 121. Operations are expected to begin in September 2008, after the rig mobilizes from an inactive status in Libya. Upon arrival, rig 121 will increase the total number of contracted Parker rigs in Mexico to eight.
-- Land rig 268 mobilized from an inactive status in Colombia for a one-year contract awarded in May.
-- In July, land rig 188 in New Zealand was awarded a one-year extension of its current contract in New Zealand.
-- Rig 269, the first of Parker's newbuild high-efficiency class land rigs, has mobilized to Kazakhstan, joining land rig 247 for a long-term contract. Rig 247 spud in March, and rig 269 is expected to spud in August.
-- The Company is currently operating under a Letter of Understanding that significantly increases the dayrate for barge rig 257, operating in the Kazakhstan waters of the Caspian Sea, pending execution of an amendment to the contract for a three-year term.
-- In May, the Company announced the award of a Letter of Intent for a drilling contract from BP requiring two newbuild land rigs for a development drilling program in Alaska. Operations are anticipated to commence during the second half of 2010 after construction and mobilization to the North Slope.