Parker Drilling said that excluding non-routine items the company reported net income of $5.6 million or $0.05 per diluted share.
Significant results and achievements of the first quarter include:
— With revenue increases in the international drilling and project management and engineering services segments. Including revenues from the new construction contract segment, these equalized declines in US drilling and rental tools;
— A major year-to-year raise in segment gross margin as percentage of revenues for international drilling, reaching 35.7% for the quarter;
— International average rig utilization of 79%, ahead of year-ago quarter’s average utilization of 73%;
— On-schedule progress in the building of the BP-owned liberty rig and two Parker Drilling owned arctic Alaska rigs; and
— A first quarter company safety performance of 0.77 total recordable incident rate (TRIR), better than Parker Drilling’s 2009 TRIR goal of 0.92.
In a difficult market that has impacted every sector of the worldwide energy industry, Parker Drilling delivered a successful performance for the quarter, supported by our geographical diversification and balanced business mix, said Robert L. Parker Drilling chairman and chief executive officer. The Gulf of Mexico barge business has pared back its operating costs to maintain itself through the downturn in its market while capturing a major portion of the drilling work that has been available. The longer-term nature and oil drilling focus of our international operations have provided a strong boost to revenues and earnings. The impact on rental tools from the decline in US land drilling was softened by its position in the stronger shale regions and the strength of its customer relationships.
The industry outlook for 2009 remains subdued, and will continue to impact the near-term prospects for the Company. Nevertheless, I expect our operating performance to improve as the year progresses, as we gain the benefits of a leaner cost structure; our strong technical, operational and safety leadership and our employee commitment to customer service, Parker concluded.
2009 First Quarter Financial Review
Excluding the impact of non-routine items, adjusted net income for the 2009 first quarter was $5.6 million or $0.05 per diluted share, compared year-ago quarter’s adjusted net income of $18.1 million or $0.16 per diluted share. (The results for 2008 have been restated for the impact of the recently adopted FASB Staff Position APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)). The 2009 first quarter comprised non-routine net after-tax expense of $3.5 million, or $0.03 per diluted share related to the 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 US economic sanctions related primarily to Parker Drilling’s operations in Turkmenistan. The results for the first quarter 2008 included net after-tax income of $5.1 million, or $0.05 per diluted share, for non-routine items.
Total revenues for the 2009 first quarter were comparatively unchanged compared to the year-ago quarter. US barge drilling revenues declined 78%, to $9.9 million from $45.9 million, due to lower utilization and dayrates for the Gulf of Mexico barge drilling fleet. International drilling revenues rose 13% to $77.4 million from $68.7 million, mainly the result of higher average fleet utilization. Rental tools revenues declined 4% to $37.9 million from $39.5 million, with the impact of the recent decline in US land and Gulf of Mexico shelf drilling mostly equalized by raised coverage in the active shale regions and an increase in demand for workover equipment.
Revenues for project management and engineering services increased to $32.1 million from $19.2 million, mainly as a result of higher revenues from the Sakhalin projects and further engineering and operations and maintenance (O&M) services. Construction contract segment revenues of $16.7 million reflect the quarter’s progress on the building contract for the BP-owned Liberty ultra-extended-reach rig.
Adjusted EBITDA for the first quarter 2009 was $39.7 million compared to $61.0 million in the year-ago quarter. Parker Drilling’s US barge drilling segment’s EBITDA was a loss of $3.3 million, compared to income of $24.4 million in the year-ago quarter, reflecting the impact of lower utilization and dayrates. The international drilling segment’s EBITDA raised 71% to $27.6 million, compared in the year-ago quarter segment EBITDA of $16.1 million, mainly the result of a raise in fleet utilization and lower operating costs. Rental tools achieved segment EBITDA of $21.4 million, 9% below the previous year first quarter segment EBITDA of $23.7 million. Delivering high quality products and customer service has provided support to strong operating margins for quail tools. Segment EBITDA for project management and engineering services increased 75% to $6.2 million, compared to the previous year’s first quarter level of $3.5 million, reflecting higher revenues for the Sakhalin projects and additional O&M and engineering projects.
Operations Review
— Average utilization for Parker Drilling’s Gulf of Mexico barge rigs for the first quarter 2009 was 25% , compared to the 77% in the year-ago quarter and the 61% reported for the fourth quarter 2008. Currently, barge rig utilization is 40%. The company’s barge dayrates in the Gulf of Mexico averaged $28,000 per day during the first quarter 2009, compared to $41,200 per day in the year-ago quarter and $39,400 per day in the fourth quarter 2008.
— Average utilization of international rigs, both land and barge rigs, for the first quarter 2009 was 79% , compared to 73% in the year-ago quarter and 87% reported for the fourth quarter 2008.
— Parker Drilling’s Americas region operated at 90% utilization, with nine of ten rigs working throughout the quarter. Most of the working rigs in this region are on multi-well contracts that extend beyond 2009.
— Parker Drilling’s twelve rigs situated in the commonwealth of independent states / Africa Middle East (CIS / AME) region achieved average utilization of 86% during the quarter. Eleven rigs worked during the quarter, with one rig completing its contracted work in January. The majority of the working rigs in the CIS / AME region are operating under contracts that extend beyond 2009.
— The eight-rig Parker Drilling fleet situated in the Asia Pacific region operated at 64% utilization during the quarter. Five of the eight rigs worked during the quarter, one of which completed its contracted work in January 2009. Most contracts in this area are for short duration projects. One working rig is on a contract that extends beyond 2009.
— In project management and engineering services, the Yastreb rig, operated by Parker Drilling for the Sakhalin-1 consortium, concluded its move north and spent much of the first quarter preparing to drill the Odoptu field.
Capital expenditures for the three months ended March 31, 2009 totaled $51.4 million, including $17.5 million for the building of Parker Drilling’s two newbuild land rigs for Alaska; and $17.2 million for tubular goods and other rental equipment.
