Parker Drilling: Q1 2019 Results – Books $90.2m Loss

Parker Drilling Company today announced results for the first quarter ended March 31, 2019, which included a net loss of $90.2 million, or a $9.63 loss per common share on revenues of $157.4 million. First quarter Adjusted EBITDA was $28.4 million.¹

Gary Rich, the Company’s President and CEO, said, “With our financial restructuring now complete, we are well positioned to successfully execute on our strategic goals and resume building a stronger Parker Drilling. We have established a solid capital structure with significantly reduced leverage and improved liquidity to pursue profitable growth opportunities as market conditions continue to improve. Higher oil prices and improved global market demand has led to increased customer activity in many of our markets, and while we expect to reap the benefits and seize opportunities, we intend to remain highly disciplined and invest our capital selectively.”

Mr. Rich added, “Our rental tools business continues to provide attractive investment opportunities, both domestically and internationally. Our investment in new technology and commitment to quality has allowed us to capture additional market share and become a market leader in select segments and geographies. In our drilling business, both during the first quarter and looking forward, we are putting rigs back to work and are more actively engaged in new O&M projects. As a result of our financial restructuring and our expectations for improved business performance, we anticipate generating positive cash flow in the second half of 2019.”

First Quarter Review

Parker Drilling’s revenues for the 2019 first quarter, compared with the 2018 fourth quarter, increased 21.9 percent to $157.4 million from $129.1 million. Operating gross margin excluding depreciation and amortization expense (gross margin) increased 29.7 percent to $36.5 million from $28.2 million and gross margin as a percentage of revenues was 23.2 percent, compared with 21.8 percent for the 2018 fourth quarter.

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, first quarter revenues increased 4.8 percent to $73.7 million from $70.3 million for the fourth quarter. Gross margin increased 10.8 percent to $29.5 million from $26.7 million, and gross margin as a percentage of revenues was 40.1 percent compared with 37.9 percent for the prior period.

U.S. Rental Tools

U.S. Rental Tools segment revenues increased 7.9 percent to $52.6 million in the 2019 first quarter from $48.8 million for the 2018 fourth quarter. Gross margin increased 15.5 percent to $29.0 million in the 2019 first quarter, compared with gross margin of $25.1 million in the 2018 fourth quarter. The increase in revenues was due to higher sales and repairs in U.S. land markets and increased offshore activity, primarily deepwater. Gross margin increased as a result of incremental and a favorable mix in revenues, while direct costs remained flat.

International Rental Tools

International Rental Tools segment revenues decreased 2.2 percent to $21.1 million in the 2019 first quarter from $21.6 million for the 2018 fourth quarter. Gross margin decreased 65.2 percent to $0.5 million in the 2019 first quarter, compared with gross margin of $1.5 million in the 2018 fourth quarter. Revenue and gross margin were down slightly as solid growth in Middle East tubular running services was offset by whipstock product sales delays.

Drilling Services

For the Company’s Drilling Services business, which is comprised of the U.S. (Lower 48) Drilling and International & Alaska Drilling segments, first quarter revenues increased 42.3 percent to $83.7 million from $58.8 million for the 2018 fourth quarter. Gross margin increased 364.9 percent to $7.0 million from $1.5 million, and gross margin as a percentage of revenues was 8.3 percent, compared with 2.6 percent for the prior period.

U.S. (Lower 48) Drilling

U.S. (Lower 48) Drilling segment revenues increased 158.7 percent to $6.6 million in the 2019 first quarter from $2.6 million for the 2018 fourth quarter. Gross margin improved 74.0 percent to a $0.7 million loss in the 2019 first quarter, compared with a loss of $2.7 million in the 2018 fourth quarter. Revenues and gross margin benefited from the recently awarded O&M contract offshore California as rig start-up activity began in mid-February.

International & Alaska Drilling

International & Alaska Drilling segment revenues increased 37.0 percent to $77.1 million in the 2019 first quarter from $56.2 million for the 2018 fourth quarter. Gross margin increased 83.4 percent to $7.7 million in the 2019 first quarter, compared with $4.2 million in the 2018 fourth quarter. The increase in revenues and gross margin were primarily due to the reactivation of rigs in Alaska and in Sakhalin Island, Russia, increased activity in Mexico, and higher than usual reimbursable purchases in Sakhalin Island, Russia.

Consolidated

General and administrative expenses were $8.1 million for the 2019 first quarter. Total liquidity at the end of the quarter, exclusive of $21.4 million restricted cash, was $153.0 million, consisting of $127.8 million in unrestricted cash and cash equivalents and $25.2 million available under the Company’s credit facility.

Capital expenditures in the first quarter were $9.2 million, primarily geared to the Company’s Rentals Tools Services business.

¹ Adjusted EBITDA is a non-GAAP financial measure. See the reconciliation and table of net income/(loss) to EBITDA and Adjusted EBITDA later in this release for more information on non-GAAP financial measures.