PKD
$0.59
Parker Drilling
($.01)
(1.67%)
Earnings Details
4th Quarter December 2017
Wednesday, February 14, 2018 4:34:00 PM
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Summary

Parker Drilling (PKD) Recent Earnings

Parker Drilling (PKD) reported a 4th Quarter December 2017 loss of $0.16 per share on revenue of $116.3 million. The consensus estimate was a loss of $0.17 per share on revenue of $107.8 million. Revenue grew 23.7% on a year-over-year basis.

Parker Drilling Co provides contract drilling and drilling-related services and rental tools. Its business segments include Rental Tools, U.S. Barge Drilling, U.S. Drilling, International Drilling, and Technical Services.

Results
Reported Earnings
($0.16)
Earnings Whisper
-
Consensus Estimate
($0.17)
Reported Revenue
$116.3 Mil
Revenue Estimate
$107.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Parker Drilling Reports 2017 Fourth Quarter Results and Amendment to Credit Facility

Parker Drilling Company (PKD) today announced results for the fourth quarter ended December 31, 2017, including a reported net loss of $29.6 million, or a $0.21 loss per share, on revenues of $116.3 million.

The net loss includes a non-cash pre-tax loss of $4.3 million of asset and inventory write-offs associated with the sale of a rig in Papua New Guinea and $3.3 million of asset and inventory write-offs associated with select international drilling assets. Excluding these items, the adjusted net loss was $22.0 million, or a $0.16 loss per share.

Fourth quarter Adjusted EBITDA was $22.4 million.

"The year ended on a strong note, thanks in large part to the continuing growth in our Rental Tools Services business," said Gary Rich, the Company’s Chairman, President and CEO. "While 2017 was another challenging year for the oilfield services sector, compared to 2016, Parker Drilling increased gross margin, excluding depreciation and amortization, by 35 percent on essentially flat revenue by maintaining diligent focus on cost control. We also worked to maintain liquidity by focusing on working capital and finished the year with $141.5 million in cash, almost $22 million greater than when we started the year.

"I am proud of our accomplishments and believe we have fundamentally streamlined our cost structure to best position the company for continued strength going forward. We remain optimistic about our future as we continue to see increasing signs of a recovery taking hold," concluded Rich.

Fourth Quarter Review

Parker Drilling’s revenues for the 2017 fourth quarter, compared with the 2017 third quarter, decreased 1.7 percent to $116.3 million from $118.3 million. Operating gross margin, excluding depreciation and amortization expense (gross margin), decreased 19.2 percent to $24.4 million from $30.2 million and gross margin as a percentage of revenues was 21.0 percent, compared with 25.5 percent for the prior period.

Drilling Services

For the Company’s Drilling Services business, which is comprised of the U.S. (Lower 48) Drilling and the International & Alaska Drilling segments, fourth quarter revenues declined 7.6 percent to $62.2 million from $67.3 million. Gross margin decreased 54.6 percent to $5.4 million from $11.9 million and gross margin as a percentage of revenues was 8.7 percent, compared with 17.7 percent for the prior period. Contracted backlog was $241 million at the end of the fourth quarter compared with $257 million at the end of the third quarter.

U.S. (Lower 48) Drilling

U.S. (Lower 48) Drilling segment revenues were $1.5 million, a 66.3 percent decrease from 2017 third quarter revenues of $4.6 million. Gross margin was a $2.7 million loss as compared with a 2017 third quarter loss of $0.5 million. The decrease in revenues and gross margin was driven by fewer revenue days, as utilization dropped from 17% in the third quarter to 5% in the fourth quarter.

International & Alaska Drilling

International & Alaska Drilling segment revenues were $60.6 million, a 3.3 percent decrease from 2017 third quarter revenues of $62.7 million. Gross margin was $8.0 million, a 35.5 percent decrease from 2017 third quarter gross margin of $12.4 million. Gross margin as a percentage of revenues was 13.2 percent as compared with 19.7 percent for the 2017 third quarter. The decrease in revenues was primarily attributable to lower reimbursable revenues. Excluding reimbursable revenues, revenues were flat as increases associated with additional O&M activity and drilling activity in the Kurdistan Region of Iraq were offset by lower joint venture revenues from Kazakhstan and reduced day rates for the Parker-owned rig in Sakhalin, which completed drilling activities in the third quarter and went on a reduced standby rate in the fourth quarter. The decrease in gross margin was primarily the result of inventory and asset related write-offs of select drilling assets and the sale of a rig in Papua New Guinea, which collectively reduced gross margin by $3.0 million.

Rental Tools Services

For the Company’s Rental Tools Services business, which is comprised of the U.S. Rental Tools and International Rental Tools segments, fourth quarter revenues were $54.1 million, a 6.1 percent increase from 2017 third quarter revenues of $51.0 million. Gross margin was $19.1 million, a 4.4 percent increase from $18.3 million for the 2017 third quarter. Gross margin as a percentage of revenues was 35.3 percent as compared with 35.9 percent in the 2017 third quarter.

U.S. Rental Tools

U.S. Rental tools segment revenues were $36.3 million, compared with $35.7 million for the 2017 third quarter. Gross margin was $19.0 million compared with $19.6 million for the 2017 third quarter. Revenues were essentially flat quarter-on-quarter as U.S. Land and offshore shelf increases offset reductions in deepwater activity. Gross margin decreased as a result of higher operating expenses and revenue mix associated with decreased deepwater activity.

International Rental Tools

International Rental Tools segment revenues were $17.8 million, compared with $15.3 million for the 2017 third quarter. Gross margin was a gain of $11.0 thousand compared with a loss of $1.3 million for the 2017 third quarter. The increase in revenues was primarily the result of additional activity in most of our international markets. The improvement in gross margin was due to a more favorable product mix as well as cost reductions taken in the third quarter, which fully impacted the fourth quarter.

Consolidated

General and Administrative expense decreased to $5.1 million for the 2017 fourth quarter, from $7.0 million for the 2017 third quarter, predominately due to incentive plan adjustments.

Capital expenditures in the fourth quarter were $9.7 million, and were $54.5 million for the year.

Credit Facility Amendment

On February 14, 2018, the Company executed an amendment to the 2015 Secured Credit Agreement, modifying the credit facility to an Asset-Based Lending (ABL) structure and reducing the size of the revolver from $100 million to $80 million. The amendment eliminates the financial maintenance covenants required in the 2015 Secured Credit Agreement and replaces them with a liquidity covenant and a monthly borrowing base calculation based on eligible rental equipment and eligible domestic accounts receivable. The liquidity covenant requires the Company to maintain a minimum of $30 million of liquidity (defined as availability under the borrowing base and cash on hand), of which $15 million is restricted, resulting in a maximum availability at any one time of $65 million. The amendment also allows greater flexibility to refinance the Company’s existing Senior Notes on either a secured or unsecured basis.

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. Central Time (11:00 a.m. Eastern Time) on Thursday, February 15, 2018, to review reported results. You may access the call by telephone at (+1) (412) 902-0003 and asking for the 2017 Fourth Quarter Conference Call. The call may also be accessed through the Investor Relations section of the Company’s website. A replay of the call can be accessed on the Company’s website for 12 months and will be available by telephone through February 22, 2018, at (+1) (201) 612-7415, access code 13675091#.

Cautionary Statement

This press release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements in this press release other than statements of historical facts addressing activities, events or developments the Company expects, projects, believes, or anticipates will or may occur in the future are forward-looking statements. These statements include, but are not limited to, statements about anticipated future financial or operational results; the outlook for rental tools utilization and rig utilization and dayrates; the results of past capital expenditures; scheduled start-ups of rigs; general industry conditions such as the demand for drilling and the factors affecting demand; competitive advantages such as technological innovation; future operating results of the Company’s rigs, rental tools operations and projects under management; future capital expenditures; expansion and growth opportunities; acquisitions or joint ventures; asset purchases and sales; successful negotiation and execution of contracts; scheduled delivery of drilling rigs or rental equipment for operation; the Company’s financial position; changes in utilization or market share; outcomes of legal proceedings; compliance with credit facility and indenture covenants; and similar matters. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Although the Company believes its expectations stated in this press release are based on reasonable assumptions, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, that could cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to changes in worldwide economic and business conditions, fluctuations in oil and natural gas prices, compliance with existing laws and changes in laws or government regulations, the failure to realize the benefits of, and other risks relating to, acquisitions, the risk of cost overruns, our ability to refinance our debt and other important factors, many of which could adversely affect market conditions, demand for our services, and costs, and all or any one of which could cause actual results to differ materially from those projected. For more information, see "Risk Factors" in the Company’s Annual Report filed on Form 10-K with the Securities and Exchange Commission and other public filings and press releases. Each forward-looking statement speaks only as of the date of this press release and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

This news release contains non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each such measure to its most directly comparable U.S. Generally Accepted Accounting Principles (GAAP) financial measure, together with an explanation of why management believes that these non-GAAP financial measures provide useful information to investors, is provided in the following tables.

Company Description

Parker Drilling provides drilling services and rental tools to the energy industry. The Company’s Drilling Services business serves operators in the inland waters of the U.S. Gulf of Mexico utilizing Parker Drilling’s barge rig fleet and in select U.S. and international markets and harsh-environment regions utilizing Parker-owned and customer-owned equipment. The Company’s Rental Tools Services business supplies premium equipment and well services to operators on land and offshore in the U.S. and international markets. More information about Parker Drilling can be found on the Company’s website at www.parkerdrilling.com.

Contact: Jason Geach, Vice President, Investor Relations & Corporate Development (+1) (281) 406-2310, jason.geach@parkerdrilling.com.

PARKER DRILLING COMPANY
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
December 31, 2017
December 31, 2016
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
141,549
$
119,691
Accounts and Notes Receivable, net
122,511
113,231
Rig materials and supplies
31,415
32,354
Deferred costs
3,145
1,436
Other current assets
19,216
19,606
Total current assets
317,836
286,318
Property, plant and equipment, net
625,771
693,439
Other assets:
Deferred income taxes
1,284
70,309
Other assets
45,388
53,485
Total other assets
46,672
123,794
Total assets
$
990,279
$
1,103,551
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and Accrued liabilities
$
103,676
$
102,921
Total current liabilities
103,676
102,921
Long-term debt, net of unamortized debt issuance costs 577,971
576,326
Long-term deferred tax liability
78
69,333
Other long-term liabilities
12,433
15,836
Total stockholders’ equity
296,121
339,135
Total liabilities and stockholders’ equity
$
990,279
$
1,103,551
PARKER DRILLING COMPANY
Consolidated Statement Of Operations
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended September 30,
Three Months Ended December 31,
2017
2016
2017
Revenues
$
116,334
$
94,025
$
118,308
Expenses:
Operating expenses
91,912
80,529
88,120
Depreciation and amortization
29,122
33,190
30,067
121,034
113,719
118,187
Total operating gross margin (loss)
(4,700)
(19,694)
121
General and administrative expense
(5,100)
(9,132)
(7,033)
Provision for reduction in carrying value of certain assets
(1,938)
--
--
Gain (loss) on disposition of assets, net
(2,483)
(1,364)
97
Total operating income (loss)
(14,221)
(30,190)
(6,815)
Other income (expense)
Interest expense
(11,194)
(11,048)
(11,067)
Interest income
84
10
128
Other
(326)
(1,409)
(638)
Total other income (expense)
(11,436)
(12,447)
(11,577)
Income (loss) before income taxes
(25,657)
(42,637)
(18,392)
Income tax expense (benefit)
3,036
6,292
1,919
Net income (loss)
(28,693)
(48,929)
(20,311)
Less: Mandatory convertible preferred stock dividend
$
906
$
--
$
906
Net income (loss) available to common stockholders
$
(29,599)
$
(48,929)
$
(21,217)
Earnings (loss) per common share - Basic
Net income (loss)
$
(0.21)
$
(0.39)
$
(0.15)
Earnings (loss) per common share - Diluted
Net Income (loss)
$
(0.21)
$
(0.39)
$
(0.15)
Number of common shares used in computing earnings per share:
Basic
138,675,403
124,830,473
138,300,015
Diluted
138,675,403
124,830,473
138,300,015
PARKER DRILLING COMPANY
Consolidated Statement Of Operations
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Year Ended December 31,
2017
2016
2015
Revenues
$
442,520
$
427,004
$
712,183
Expenses:
Operating expenses
355,487
362,521
526,290
Depreciation and amortization
122,373
139,795
156,194
477,860
502,316
682,484
Total operating gross margin (loss)
(35,340)
(75,312)
29,699
General and administrative expense
(25,676)
(34,332)
(36,190)
Provision for reduction in carrying value of certain assets
(1,938)
--
(12,490)
Gain (loss) on disposition of assets, net
(2,851)
(1,613)
1,643
Total operating income (loss)
(65,805)
(111,257)
(17,338)
Other income (expense)
Interest expense
(44,226)
(45,812)
(45,155)
Interest income
244
58
269
Other
126
367
(9,747)
Total other income (expense)
(43,856)
(45,387)
(54,633)
Income (loss) before income taxes
(109,661)
(156,644)
(71,971)
Income tax expense (benefit)
9,040
74,170
22,313
Net income (loss)
(118,701)
(230,814)
(94,284)
Less: Net income attributable to noncontrolling interest
--
--
789
Net income (loss) attributable to controlling interest
$
(118,701)
$
(230,814)
$
(95,073)
Less: Mandatory convertible preferred stock dividend
$
3,051
$
--
$
--
Net income (loss) available to common stockholders
$
(121,752)
$
(230,814)
$
(95,073)
Earnings (loss) per common share - Basic
Net income (loss)
$
(0.89)
$
(1.86)
$
(0.78)
Earnings (loss) per common share - Diluted
Net Income (loss)
$
(0.89)
$
(1.86)
$
(0.78)
Number of common shares used in computing earnings per share:
Basic
136,266,843
124,130,004
122,562,187
Diluted
136,266,843
124,130,004
122,562,187
PARKER DRILLING COMPANY
Selected Financial Data
(Dollars in Thousands)
(Unaudited)
Three Months Ended
Year Ended December 31,
December 31,
September 30,
2017
2016
2015
2017
2016
2017
Revenues:
Drilling Services:
U.S. (Lower 48) Drilling
$
1,546
$
848
$
4,585
$
12,389
$
5,429
$
30,358
International & Alaska Drilling
60,648
61,478
62,726
247,254
287,332
435,096
Total Drilling Services:
62,194
62,326
67,311
259,643
292,761
465,454
Rental Tools Services:
U.S. Rental Tools
36,324
16,130
35,677
121,937
71,613
141,889
International Rental Tools
17,816
15,569
15,320
60,940
62,630
104,840
Total Rental Tools Services
54,140
31,699
50,997
182,877
134,243
246,729
Total revenues
$
116,334
$
94,025
$
118,308
$
442,520
$
427,004
$
712,183
Operating expenses:
Drilling Services:
U.S. (Lower 48) Drilling
$
4,205
$
4,232
$
5,052
$
19,524
$
19,733
$
36,247
International & Alaska Drilling
52,619
47,307
50,345
206,552
222,824
325,346
Total Drilling Services:
56,824
51,539
55,397
226,076
242,557
361,593
Rental Tools Services:
U.S. Rental Tools
17,283
12,102
16,086
62,797
50,216
77,056
International Rental Tools
17,805
16,888
16,637
66,614
69,748
87,641
Total Rental Tools Services
35,088
28,990
32,723
129,411
119,964
164,697
Total operating expenses
$
91,912
$
80,529
$
88,120
$
355,487
$
362,521
$
526,290
Operating gross margin (loss):
Drilling Services:
U.S. (Lower 48) Drilling
$
(2,659)
$
(3,384)
$
(467)
$
(7,135)
$
(14,304)
$
(5,889)
International & Alaska Drilling
8,029
14,171
12,381
40,702
64,508
109,750
Total Drilling Services
5,370
10,787
11,914
33,567
50,204
103,861
Rental Tools Services:
U.S. Rental Tools
19,041
4,028
19,591
59,140
21,397
64,833
International Rental Tools
11
(1,319)
(1,317)
(5,674)
(7,118)
17,199
Total Rental Tools Services
19,052
2,709
18,274
53,466
14,279
82,032
Total operating gross margin excluding 24,422
13,496
30,188
87,033
64,483
185,893
depreciation and amortization
Depreciation and amortization
(29,122)
(33,190)
(30,067)
(122,373)
(139,795)
(156,194)
Total operating gross margin (loss)
$
(4,700)
$
(19,694)
$
121
$
(35,340)
$
(75,312)
$
29,699
PARKER DRILLING COMPANY
Adjusted EBITDA (1)
(Dollars in Thousands)
(Unaudited)
Three Months Ended
December 31, 2017
September 30, 2017
June 30, 2017
March 31, 2017
December 31, 2016
Net income (loss) available to
common shareholders
$
(29,599)
$
(21,217)
$
(31,127)
$
(39,809)
$
(48,929)
Interest expense
11,194
11,067
11,095
10,870
11,048
Income tax expense (benefit)
3,036
1,919
1,743
2,342
6,292
Depreciation and amortization
29,122
30,067
30,982
32,202
33,190
Mandatory convertible preferred stock dividend
906
906
1,239
--
--
EBITDA
14,659
22,742
13,932
5,605
1,601
Adjustments:
Other (income) expense
242
510
(582)
(540)
1,399
(Gain) loss on disposition of assets, net
2,483
(97)
113
352
1,364
Provision for reduction in carrying value of certain assets
1,938
--
--
--
--
Special items (2)
3,033
--
--
--
876
Adjusted EBITDA
$
22,355
$
23,155
$
13,463
$
5,417
$
5,240
(1) We believe Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare our core operating results from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), remeasurement of foreign currency transactions, tax consequences, impairment and other special items. Special items include items impacting operating expenses that management believes detract from an understanding of normal operating performance. Management uses Adjusted EBITDA as a supplemental measure to review current period operating performance and period to period comparisons. Our Adjusted EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate EBITDA in the same manner. EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. Generally Accepted Accounting Principles (GAAP), and should not be considered in isolation or as an alternative to operating income or loss, net income or loss, cash flows provided by or used in operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.
(2) Special items include:
- For the three months ended December 31, 2017, special items include a $3.0 million write-off of inventory associated with select international drilling assets. This item is recorded in operating expenses in the Consolidated Statement Of Operations.
- For the three months ended December 31, 2016, special items include $0.9 million of net severance associated with the departure of three executives. This item is recorded in general and administrative expense in the Consolidated Statement Of Operations.
PARKER DRILLING COMPANY
Reconciliation of Adjusted Earnings Per Share
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
December 31,
September 30,
2017
2016
2017
Net income (loss) available to common shareholders
$
(29,599)
$
(48,929)
$
(21,217)
Income (loss) per diluted share
$
(0.21)
$
(0.39)
$
(0.15)
Adjustments:
(Gain) loss on disposition of assets, net
$
2,588
--
--
Provision for reduction in carrying value of certain assets
1,938
--
--
Write-off inventory
3,033
--
--
Valuation allowance
--
6,772
--
Special items
--
876
--
Net adjustments
7,559
7,648
--
Adjusted net income (loss) available to common shareholders(1)
$
(22,040)
$
(41,281)
$
(21,217)
Adjusted income (loss) per diluted share(1)
$
(0.16)
$
(0.33)
$
(0.15)
(1) We believe Adjusted net income (loss) available to common shareholders and Adjusted income (loss) per diluted share are useful financial measures for investors to assess and understand operating performance for period to period comparisons. Management views the adjustments to Net income (loss) available to common shareholders and Income (Loss) per diluted share to be items outside of the Company’s normal operating results. Adjusted net income (loss) available to common shareholders and Adjusted income (loss) per diluted share are not measures of financial performance under GAAP, and should not be considered in isolation or as an alternative to Net income (loss) available to common shareholders or Income (loss) per diluted share.

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