Parker Drilling Reports 3Q Results
Parker Drilling Co. has reported financial and operating results for the third quarter 2008.
The Company earned $0.16 per diluted share, including $0.04 per diluted share adverse impact from non-routine items, as compared to $0.20 per diluted share for the third quarter of 2007. A record performance from the Company's rental tools business and the benefit of higher dayrates and utilization in the Company's international drilling operations were partially offset by the expected softening of the Gulf of Mexico barge rig market and a modest impact from two Gulf of Mexico hurricanes.
"Parker Drilling's third quarter operating results demonstrate the value of our balanced business mix," remarked Robert L. Parker Jr., chairman and chief executive officer. "Our core international markets strengthened and the newest Quail Tools locations targeting unconventional resource plays in North America continued to grow. These two segments combined accounted for more than 60 percent of our revenue in the quarter and helped to offset the impact from the Gulf of Mexico barge drilling market's retreat from its record level of activity in 2007.
"We continue to execute key elements of our strategic growth plan," Parker continued, "driving growth from Quail Tools' expanded operations; commencing rig operations under new contracts in Mexico and Kazakhstan; and winning the Engineering, Procurement, Construction and Installation (EPCI) contract for the BP Liberty ultra-extended reach drilling rig in Alaska and the Front-End Engineering and Design (FEED) contract for the drilling module of the Arkutun-Dagi platform offshore Sakhalin Island in our project management segment.
"With the key elements of our strategy in place, we believe we have created a base for long-term profitable growth for Parker Drilling. As importantly, these should help us minimize the effects of the current downturn. Considering the global economic uncertainties, our strong balance sheet puts us in a solid financial position. Our cash balances, projected cash flow and existing credit facility are sufficient to fund our capital investments for the remainder of 2008 and for all of 2009.
"We remain focused on executing the key elements of our strategic growth plan -- achieving profitable growth in international drilling, rental tools and project management services and being the preferred drilling contractor in the Gulf of Mexico barge rig market," Parker concluded.
Third Quarter Earnings and Financial Review
For the three months ended September 30, 2008, Parker posted net income of $18.6 million, or $0.16 per diluted share, on revenues of $227.5 million, compared to net income of $22.7 million, or $0.20 per diluted share, on revenues of $172.2 million for the third quarter 2007. Net income in the third quarter of 2008 included $3.7 million of non-routine expenses relating to costs associated with the previously disclosed investigation by the Department of Justice regarding the Company's utilization of the services of a customs agent in certain countries and a non-cash charge to taxes identified and accounted for under Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48). Net income in the third quarter of 2007 included net expense of $1.6 million or $0.02 per diluted share relating to $2.4 million of debt extinguishment cost, $1.1 million provision for carrying value and a non-cash credit to tax expense of $0.5 million for potential interest and exchange rate fluctuations relating to FIN 48.
Adjusted EBITDA was $73.7 million for the third quarter 2008 compared to $74.2 million in the third quarter 2007 and up sequentially from $69.7 million in the second quarter. (Adjusted EBITDA is a non-GAAP financial measure defined below). Higher dayrates and utilization resulted in a 32 percent EBITDA improvement for Parker's international operations over the third quarter 2007. Rental Tools achieved record EBITDA of $27.8 million, which topped the record set in the fourth quarter of 2007. EBITDA for the U.S. drilling segment was $22.9 million, compared to $33.7 million in the third quarter of 2007. For the first nine months of 2008, total EBITDA was $204.4 million, a 6 percent increase over the $192.1 million for the first nine months of 2007.
For the first nine months of 2008, Parker reported record revenues of $617.5 million and net income of $65.0 million or $0.58 per diluted share compared to revenues of $473.7 million and net income of $69.5 million or $0.63 per diluted share for the first nine months of 2007. Included in 2008 results is a net $0.4 million expense from non-routine items. 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.
The details of the non-routine items for the 2008 first, second and third quarters and year-to-date, 2006 and 2007 are available on Parker's website and can be viewed or downloaded by going to "Investor Relations" and then to "Reconciliation of Non-Routine Items."
Capital expenditures for the nine months ended September 30, 2008 totaled $157.3 million. Total debt was $413.2 million, and total debt to capitalization was 40 percent. The Company's cash and cash equivalents totaled $75.3 million at September 30, 2008.
Average utilization for the Gulf of Mexico barge rigs for the third quarter 2008 was 79 percent, compared to the 83 percent reported for the third quarter 2007 and the 91 percent reported for the second quarter 2008. Current barge rig utilization is 67 percent. The Company's deep drilling barge dayrates in the Gulf of Mexico averaged $44,300 per day during the third quarter 2008, compared to $47,900 per day in the third quarter 2007 and $43,300 per day in the second 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.")
With three rigs mobilizing under contracts secured in the second quarter, including the addition of newbuild rig 269 in Kazakhstan, average utilization of international land rigs for the third quarter 2008 increased to 82 percent, up from the 75 percent reported for the second quarter 2008 and the third quarter 2007.
- Rig 121 mobilized for a four-year contract in northern Mexico and spud in September, bringing the total number of contracted Parker rigs in Mexico to eight.
- Rig 269, the first of Parker's newbuild high-efficiency class land rigs, mobilized to Kazakhstan and spud in August, joining land rig 247. Parker now has eight contracted rigs in Kazakhstan.
- As discussed above, the Company announced two new contracts in its project management business. In July, Parker announced a new EPCI contract for the land-based BP Liberty rig, designed to drill ultra extended-reach wells to offshore targets in the Liberty field of the Alaskan Beaufort Sea, and in August, the company announced a new FEED contract to design the drilling package for the Sakhalin-1 Arkutun-Dagi offshore platform.