Parker Drilling Reports 2018 Third Quarter Results

HOUSTON, Nov. 5, 2018 /PRNewswire/ -- Parker Drilling Company (NYSE: PKD) today announced results for the third quarter ended September 30, 2018, which included a net loss of $71.9 million, or a $7.70 loss per common share on revenues of $123.4 million. Included in the reported net loss is an impairment loss of $44.0 million. Excluding the impairment loss, the adjusted net loss was $2.99 per common share.

Third quarter Adjusted EBITDA was $15.0 million.

Gary Rich, the Company's Chairman, President and CEO, said, "We continue to see early signs of recovery in several end markets, with our U.S. and International Rental Tools Services segments performing very well again in the third quarter. While the current industry environment for our Drilling Services business remains challenging, we are cautiously optimistic that the growing number of tendering opportunities will translate into increased utilization in select markets where we operate. With that said, we do not anticipate a meaningful recovery in our barge markets; therefore, we felt it was appropriate to assess the carrying value of these particular assets and record an impairment loss for the quarter."

Mr. Rich added, "We continue to be judicious with respect to capital spending, and we are giving priority to those opportunities with high return on capital and quick cash payback. Our Rental Tools Services business remains the top focus for our incremental growth capex due to its growing customer demand and ability to meet our capital return requirements. As we have mentioned before, we are proactively working with outside advisers to evaluate multiple options to address our capital structure in light of upcoming debt maturities, and today we disclosed certain material non-public information related to this evaluation. Our third quarter G&A expense was materially higher because of the professional fees we incurred as a result of this effort."

Third Quarter Review

Parker Drilling's revenues for the 2018 third quarter, compared with the 2018 second quarter, increased 4.0 percent to $123.4 million from $118.6 million. Operating gross margin excluding depreciation and amortization expense (gross margin) increased 9.2 percent to $29.5 million from $27.0 million and gross margin as a percentage of revenues was 23.9 percent, compared with 22.7 percent for the 2018 second quarter.

Drilling Services

For the Company's Drilling Services business, which is comprised of the U.S. (Lower 48) Drilling and International & Alaska Drilling segments, third quarter revenues decreased 7.6 percent to $52.3 million from $56.6 million for the 2018 second quarter. Gross margin decreased 125.4 percent to a $0.9 million loss from $3.6 million gain, and gross margin as a percentage of revenues was negative 1.8 percent, compared with positive 6.4 percent for the prior period. Contracted backlog was approximately $238.9 million at the end of the third quarter, compared with $215.5 million at the end of the second quarter.

U.S. (Lower 48) Drilling

U.S. (Lower 48) Drilling segment revenues increased 38.0 percent to $4.5 million from $3.3 million for the 2018 second quarter. Gross margin improved 16.5 percent to a $1.2 million loss, compared with a loss of $1.4 million in the second quarter. Revenues and gross margin benefited from a favorable mix in barge drilling activity and the recent award of an O&M contract offshore California.

International & Alaska Drilling

International & Alaska Drilling segment revenues decreased 10.4 percent to $47.8 million from $53.3 million for the 2018 second quarter. Gross margin decreased 95.0 percent to $0.3 million, compared with $5.0 million in the second quarter. The decreases in revenues and gross margin were primarily due to one of our rigs in Alaska transitioning to a minimal standby rate after completing its work in early July. However, improvement in our Sakhalin Island, Russia and offshore Canada operations helped to mitigate the gross margin compression.

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, third quarter revenues increased 14.6 percent to $71.1 million from $62.0 million for the second quarter. Gross margin increased 30.1 percent to $30.4 million from $23.3 million, and gross margin as a percentage of revenues was 42.7 percent compared with 37.6 percent for the prior period.

U.S. Rental Tools

U.S. Rental Tools segment revenues increased 21.1 percent to $50.9 million from $42.1 million for the 2018 second quarter. Gross margin increased 27.4 percent to $29.0 million compared with gross margin of $22.8 million in the second quarter. The increase in revenues resulted primarily from strong activity and volume in U.S. land markets. Gross margin increased as a result of incremental revenues, combined with lower incremental operating costs.

International Rental Tools

International Rental Tools segment revenues increased 1.1 percent to $20.2 million from $19.9 million for the 2018 second quarter. Gross margin increased 133.2 percent to $1.4 million compared with gross margin of $0.6 million in the second quarter. Revenue and gross margin improvements resulted largely from the continued demand for our tubular running services.

Consolidated

General and Administrative expenses were $14.5 million for the 2018 third quarter, up from $8.3 million for the 2018 second quarter. The increase was largely due to professional fees. Total liquidity at the end of the quarter was $140.3 million, consisting of $81.7 million in cash and cash equivalents and $58.6 million available under our revolving credit facility.

Capital expenditures in the third quarter were $19.5 million. Year to date through September 30, 2018, capital expenditures were $52.0 million.

Form 8-K Filing

In addition, Parker Drilling today is filing on Form 8-K with the U.S. Securities and Exchange Commission certain materials that it previously shared with one of its largest equity holders. These materials were provided by the Company under a time-limited non-disclosure agreement with this investor in order to facilitate proactive discussions regarding the Company's capital structure. The Company continues to actively engage in discussions with other stakeholders regarding its capital structure, well ahead of future debt maturities, and has ample liquidity to continue serving customers without interruption while it continues to evaluate opportunities to best position the business for the long term and across industry cycles.

Conference Call

Parker Drilling has scheduled a conference call for 10:00 a.m. Central Time (11:00 a.m. Eastern Time) on Tuesday, November 6, 2018, to review third quarter results. The call will be available by telephone by dialing (+1) (412) 902-0003 and asking for the Parker Drilling Third Quarter Conference Call. The call can 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 November 13, 2018 at (+1) (201) 612-7415, conference ID 13684492#.

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 our evaluation of options to enhance our capital structure in light of upcoming debt maturities, 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 Company-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:Nick Henley, Director, Investor Relations, (+1) (281) 406-2082, nick.henley@parkerdrilling.com.

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SOURCE Parker Drilling Company