Nov. 3, 2009 (PR Newswire) -- HOUSTON, Nov. 3 /PRNewswire-FirstCall/ -- Parker Drilling (NYSE: PKD), a global drilling contractor and service provider, today reported results for the quarter ended Sept. 30, 2009, including net income of $7.1 million or $0.06 per diluted share on revenues of $181.4 million, compared to net income of $17.8 million or $0.16 per diluted share on revenues of $227.5 million for the prior year's third quarter. Excluding the effect of non-routine items, the Company reported 2009 third quarter net income of $4.4 million or $0.04 per diluted share, compared to similarly adjusted 2008 third quarter net income of $21.6 million or $0.19 per diluted share.
"The results of this past quarter reflect the harsh conditions that prevailed in many of our markets as well as the durability and resilience of the Company's strategy, business balance and geographic diversity," said executive chairman Robert L. Parker Jr. "Through cost management actions we were able to moderate the adverse effects on our operations' results while employing our business strategy to advance our competitive position and strengthen our business."
Third Quarter Highlights:
-- Revenues of $181.4 million were 20 percent below the prior year's third
quarter revenues of $227.5 million. Increased revenues related to
project management and construction contracts partially offset declines
in worldwide drilling and tool rental revenues;
-- Gross margin as a percent of revenues increased for International
Drilling and Project Management and Engineering Services, compared with
the prior year's third quarter. These improvements partially offset
lower gross margin profitability from Parker's U.S. Barge Drilling and
Rental Tools operations;
-- The U.S. Barge Drilling segment recorded a positive gross margin for the
third quarter, and improved its year-to-date gross margin to
better-than-breakeven. This is a notable achievement in the industry,
which has experienced a severe downturn in activity and declining
dayrates;
-- Parker successfully completed the sealift of the BP-owned "Liberty" rig
to its operating site off Alaska's North Slope and has initiated rig-up
and commissioning activities. During the quarter Parker was awarded the
operations and maintenance contract for the rig's initial drilling
program;
-- The construction of the two Parker-owned arctic land rigs continues on
schedule for a 2010 deployment to the North Slope to begin drilling on
five-year contracts for BP;
-- The Company achieved a better-than-industry average safety performance.
Parker's September year-to-date Total Recordable Incident Rate (TRIR) of
0.55 surpassed the Company's 2008 industry-leading TRIR of 0.66.
"Our recent results reflect the severe industry downturn of the past several quarters," said Mr. Parker. "The International Drilling, U.S. Gulf of Mexico Barge Drilling and Rental Tools segments experienced significant declines in revenues, compared to the prior year's third quarter. This was caused by lower utilization for the international rig fleet, lower utilization and lower dayrates for the barge drilling operation, and price discounts for rental tools. Meanwhile, Project Management & Engineering Services revenues grew due to the long-term nature of our customers' plans and programs; and Construction Contract revenues increased in line with progress on the Liberty rig. Each of these two operations achieved an increase in gross margin and gross margin as a percent of revenues.
"Despite these difficult and challenging market conditions, our operations overall were profitable, including the contribution from our barge drilling business which recorded a 19 percent gross margin as a percent of revenues this past quarter and has achieved a positive gross margin year-to-date.
"Business activity may have neared the bottom in the third quarter and there are tentative signs that improvement is underway," continued Mr. Parker. "Our U.S. Gulf of Mexico barge rig utilization rate increased sequentially in each of the last two quarters, rental tool placements have risen, the number of tenders for international drilling contracts has grown and project management opportunities have expanded. There are still areas of concern - dayrates remain under pressure, tool rental rates are heavily discounted, and contract commitments are slow to develop. Overall, though, the outlook is slowly improving. I believe these are times of opportunity, when Parker Drilling can make competitive and strategic gains based on the strength of our operations and business relationships," he concluded.
Financial Review
For the three months ended Sept. 30, 2009, Parker Drilling posted net income of $7.1 million, or $0.06 per diluted share, on revenues of $181.4 million, compared to net income of $17.8 million, or $0.16 per diluted share, on revenues of $227.5 million for the 2008 third quarter. Excluding the impact of non-routine items, adjusted net income for the 2009 third quarter was $4.4 million or $0.04 per diluted share, compared with 2008 third quarter adjusted net income of $21.6 million or $0.19 per diluted share. (The results for 2008 have been restated for the impact of the recently issued guidance related to accounting for convertible debt instruments). The results for the 2009 third quarter included non-routine net after-tax income of $2.7 million, or $0.02 per diluted share. This includes expenses related to previously disclosed investigations by the Department of Justice and the Securities and Exchange Commission regarding the Company's utilization of the services of a customs agent in certain countries and an internal investigation regarding U.S. economic sanctions related to the Company's operations in Turkmenistan and the write-off of a prepayment to an equipment supplier who went bankrupt. This was more than offset by income from the recovery of previously unutilized foreign tax credits. The results for the 2008 third quarter included non-routine net after-tax expense of $3.8 million, or $0.03 per diluted share, for non-routine items. (Details of the non-routine items are provided in the attached financial tables.)
U.S. Barge Drilling revenues for the 2009 third quarter declined 72 percent, to $12.4 million from $44.7 million for the 2008 third quarter, due to lower utilization and reduced dayrates for the Gulf of Mexico barge drilling fleet. International Drilling revenues fell 31 percent, to $64.0 million from $92.2 million, the result of lower average fleet utilization. Rental Tools revenues decreased 48 percent, to $23.9 million from $46.0 million, primarily from the decline in U.S. land and Gulf of Mexico shelf drilling activity and the impact of increased discounts. The declines were partially offset by increased demand for workover equipment, growing coverage in the active shale regions and additional offshore deep drilling accounts. Revenues for Project Management and Engineering Services increased 7 percent, to $25.9 million from $24.1 million, reflecting the contribution from a FEED (Front End Engineering & Design) study for a drilling package on the Arkutun-Dagi platform offshore Sakhalin Island, Russia and pre-operational revenues related to the BP-owned Liberty rig. Construction Contract segment revenues of $55.3 million, represents the Company's progress on delivering, rigging-up and commissioning the Liberty rig.
Adjusted EBITDA, after non-routine items, for the 2009 third quarter was $38.1 million compared to $76.0 million in the 2008 third quarter. (Adjusted EBITDA is a non-GAAP financial measure. The calculations of adjusted EBITDA and reconciliation to the most directly comparable GAAP measure are provided in the attached financial tables).
International Drilling's gross margin decreased 23 percent to $22.0 million from the prior year's third quarter gross margin of $28.5 million. Gross margin as a percent of revenues was 34.4 percent in the 2009 third quarter compared to 31.0 percent in the prior year's third quarter. The increase in gross margin percent was primarily the result of lower operating costs throughout the segment.
Project Management and Engineering Services' gross margin for the 2009 third quarter increased significantly to $6.4 million from $2.6 million for the prior year's third quarter. Gross margin as a percent of revenues was 24.9 percent for the 2009 third quarter compared to 11.0 percent in the prior year's third quarter. Much of this improvement was due to the contribution from the Arkutun-Dagi platform and Liberty rig projects and a lower level of reimbursables in the current quarter.
U.S. Barge Drilling reported a gross margin of $2.3 million for the 2009 third quarter, the result of cost management actions and fleet deployment initiatives put in place to counter the low level of activity in the market. The third quarter performance is in line with the Company's objective to enhance its position as the leading and preferred contractor in the U.S. Gulf of Mexico barge drilling market and achieve a better-than-breakeven cash flow for this segment this year.
The decline in gross margin for Rental Tools, to $11.7 million for the 2009 third quarter from $27.8 million for the prior year's third quarter, reflected a decline in overall demand due to reduced drilling activity in the U.S. land market and Gulf of Mexico shelf. This led to competitive discounting of rental rates that has impacted the segment's gross margin and gross margin as a percent of revenues.
For the first nine months of 2009, Parker reported a 7 percent decline in revenues, to $577.1 million from $617.5 million for the same period in the prior year. Adjusted EBITDA, excluding non-routine items, declined 37 percent, to $132.3 million from $210.0 million for the comparable period. Earnings per diluted share, excluding non-routine items, was $0.15, down from $0.56 for the same period of 2008.
Operations Review
-- Average utilization of international rigs, both land and barge rigs, for
the 2009 third quarter was 61 percent, compared to 84 percent for the
prior year's third quarter and 68 percent for the 2009 second quarter.
(Average utilization for each international region's rig fleet by
quarter is available in the "Rig Utilization Schedule" posted on
Parker's website under "Investor Relations" at "Quarterly Support
Materials".)
-- The Company's Americas region operated at 75 percent average
utilization, with eight of ten rigs having worked during the period,
including one rig that began work in September on a multi-well
contract. Seven of the ten rigs in this region have commitments to
work into 2010.
-- Parker's twelve rigs located in the Commonwealth of Independent
States / Africa Middle East (CIS / AME) region achieved average
utilization of 69 percent, with nine rigs having worked during the
period.
