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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-7573
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PARKER DRILLING COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 73-0618660
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Parker Building, Eight East Third Street, Tulsa, Oklahoma 74103
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (918) 585-8221
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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As of July 31, 2000, 77,670,100 common shares were outstanding.
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PARKER DRILLING COMPANY
INDEX
Page
No.
Part I. Financial Information
Consolidated Condensed Balance Sheets
(Unaudited)
June 30, 2000 and December 31, 1999 2
Consolidated Condensed Statements of Operations
(Unaudited) Three and Six Months Ended
June 30, 2000 and 1999 3
Consolidated Condensed Statements of Cash Flows
(Unaudited) Six Months Ended June 30, 2000 and 4
1999
Notes to Unaudited Consolidated Condensed
Financial Statements 5 - 7
Report of Independent Accountants 9
Management's Discussion and Analysis of
Financial
Condition and Results of Operations 10 - 18
Part II. Other Information
Item 6, Exhibits and Reports on Form 8-K 19
Signatures 20
Exhibit 15, Letter Re Unaudited Interim
Financial Information 22
Exhibit 27, Financial Data Schedule [Edgar
Version Only]
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars In Thousands)
(Unaudited)
ASSETS June 30, December 31,
------ 2000 1999
--------- ---------
Current assets:
Cash and cash equivalents $ 24,876 $ 45,501
Other short-term investments 811 777
Accounts and notes receivable 93,960 75,411
Rig materials and supplies 14,915 13,766
Other current assets 8,020 15,988
----------- -----------
Total current assets 142,582 151,443
Property, plant and equipment less
accumulated depreciation and
amortization of $456,761
at June 30, 2000 and $423,514
at December 31, 1999 646,621 661,402
Goodwill, net of accumulated
amortization of $24,044 at
June 30, 2000 and $20,304
at December 31, 1999 200,350 204,090
Other noncurrent assets 67,033 65,808
----------- -----------
Total assets $ 1,056,586 $ 1,082,743
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 5,247 $ 5,054
Accounts payable and accrued
liabilities 66,430 58,732
Accrued income taxes 4,623 8,323
----------- -----------
Total current liabilities 76,300 72,109
----------- -----------
Long-term debt 645,925 648,577
Deferred income tax 18,929 28,273
Other long-term liabilities 5,912 4,363
Stockholders' equity:
Common stock, $.16 2/3 par value 12,941 12,895
Capital in excess of par value 344,484 343,374
Comprehensive income-net unrealized
gain on investments available for
sale (net of taxes of $2,764 at
June 30, 2000 and $908 at
December 31, 1999). 4,914 1,613
Retained earnings (accumulated
deficit) (52,819) (28,461)
---------- ----------
Total stockholders' equity 309,520 329,421
---------- ----------
Total liabilities and
stockholders
equity $ 1,056,586 $ 1,082,743
=========== ===========
See accompanying notes to consolidated condensed financial statements.
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
-------------------- ------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- -------- -------- --------
Revenues:
Domestic drilling $ 34,851 $ 28,871 $ 62,305 $ 57,288
International drilling 42,580 46,811 81,248 97,752
Rental tools 9,527 6,288 17,356 13,555
Other 2 24 4 245
--------- --------- --------- ---------
Total revenues 86,960 81,994 160,913 168,840
--------- --------- --------- ---------
Operating expenses:
Domestic drilling 23,893 23,586 46,737 51,431
International drilling 32,103 31,680 62,537 66,698
Rental tools 3,548 2,818 7,130 5,375
Other 3 11 2 108
Depreciation and
amortization 21,004 20,326 42,029 40,302
General and administrative 4,444 3,791 9,447 8,195
Restructuring charges - 800 - 3,000
Provision for reduction in
carrying value of
certain assets - 3,750 - 5,250
--------- --------- --------- ---------
Total operating expenses 84,995 86,762 167,882 180,359
--------- --------- --------- ---------
Operating income (loss) 1,965 (4,768) (6,969) (11,519)
--------- --------- --------- ---------
Other income and (expense):
Interest expense (14,523) (13,383) (29,035) (26,647)
Interest income 691 282 1,638 669
Gain on disposition of
assets 974 509 1,948 2,949
Other income - net 31 587 1,876 2,271
--------- --------- --------- ---------
Total other income and (12,827) (12,005) (23,573) (20,758)
(expense) --------- --------- --------- ---------
Income (loss) before income (10,862) (16,773) (30,542) (32,277)
taxes --------- --------- --------- ---------
Income tax expense
(benefit):
Current tax expense-
foreign 2,420 2,127 5,016 5,119
Deferred tax (benefit) (3,800) (5,827) (11,200) (11,527)
--------- --------- --------- ---------
(1,380) (3,700) (6,184) (6,408)
--------- --------- --------- ---------
Net income (loss) $ (9,482) $ (13,073) $ (24,358)$ (25,869)
========= ========= ========= =========
Earnings (loss) per share,
Basic $ (.12) $ (.17) $ (.31)$ (.34)
--------- --------- --------- ---------
Diluted $ (.12) $ (.17) $ (.31)$ (.34)
--------- --------- --------- ---------
Number of common shares
used in computing earnings
per share:
Basic 77,569,904 77,118,498 77,518,230 77,039,523
---------- ----------- ---------- -----------
Diluted 77,569,904 77,118,498 77,518,230 77,039,523
---------- ----------- ---------- -----------
See accompanying notes to consolidated condensed financial statements.
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollars in Thousands)
(Unaudited)
Six Months Ended
June 30,
----------------------
2000 1999
---------- ----------
Cash flows from operating activities:
Net income (loss) $ (24,358) $ (25,869)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 42,029 40,302
Gain on disposition of assets (1,948) (2,949)
Expenses not requiring cash 2,595 2,208
Deferred income taxes (11,200) (11,527)
Provision for reduction in carrying
value of certain assets - 5,250
Change in operating assets and
liabilities (7,000) 2,414
---------- ----------
Net cash provided by operating activities 118 9,829
---------- ----------
Cash flows from investing activities:
Capital expenditures (net of
reimbursements of $13.0 million
in 2000 and $55.3 million
in 1999) (25,634) (35,867)
Proceeds from the sale of equipment 5,214 11,986
Purchase of short-term investments (126) (300)
Proceeds from sale of investments 2,051 -
Other-net - 463
--------- ----------
Net cash used in investing activities (18,495) (23,718)
--------- ----------
Cash flows from financing activities:
Proceeds from issuance of debt - 10,252
Principal payments under debt obligations (2,248) (1,568)
Other - (66)
---------- ----------
Net cash provided by (used in)
financing activities (2,248) 8,618
--------- ----------
Net change in cash and cash equivalents (20,625) (5,271)
Cash and cash equivalents at beginning
of period 45,501 24,314
--------- ----------
Cash and cash equivalents at end of period $ 24,876 $ 19,043
========== ==========
Supplemental cash flow information:
Interest paid $ 28,034 $ 28,335
Taxes paid $ 8,717 $ 6,025
Supplemental noncash investing activity:
Net unrealized gain on investments
available for sale
(net of taxes of $1,770) $ 3,147 $ -
See accompanying notes to consolidated condensed financial statements.
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
1. General - In the opinion of the Company, the
accompanying unaudited consolidated condensed financial
statements reflect all adjustments (of a normally recurring
nature) which are necessary for a fair presentation of (1)
the financial position as of June 30, 2000 and December 31,
1999, (2) the results of operations for the three and six
months ended June 30, 2000 and 1999, and (3) cash flows for
the six months ended June 30, 2000 and 1999. Results for
the six months ended June 30, 2000 are not necessarily
indicative of the results which will be realized for the
year ending December 31, 2000. The financial statements
should be read in conjunction with the Company's Form 10-K
for the year ended December 31, 1999.
Our independent accountants have performed a review of
these interim financial statements in accordance with
standards established by the American Institute of
Certified Public Accountants. Pursuant to Rule 436(c)
under the Securities Act of 1933 their report of that
review should not be considered as part of any
registration statements prepared or certified by them
within the meaning of Section 7 and 11 of that Act.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS (continued)
2. Earnings per share -
RECONCILIATION OF INCOME AND NUMBER OF SHARES USED
TO CALCULATE BASIC AND DILUTED EARNINGS PER SHARE (EPS)
For the Three Months Ended
June 30, 2000
-------------
Income
(loss) Shares Per-Share
(Numerator) (Denominator) Amount
---------- ------------- ----------
Basic EPS:
Income (loss) available to
common stockholders $(9,482,000) 77,569,904 $ (.12)
Effect of Dilutive
Securities:
Stock options and grants -
Diluted EPS:
Income (loss) available to
common stockholders +
assumed conversions $(9,482,000) 77,569,904 $ (.12)
=========== =========== =========
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS (continued)
RECONCILIATION OF INCOME AND NUMBER OF SHARES USED
TO CALCULATE BASIC AND DILUTED EARNINGS PER SHARE (EPS)
For the Six Months Ended
June 30, 2000
------------------------------------
Income Per-
(loss) (Shares Share
(Numerator) (Denominator) Amount
----------- ------------- -------
Basic EPS:
Income (loss) available to
common stockholders $ (24,358,000) 77,518,230 $ (.31)
Effect of Dilutive
Securities:
Stock options and grants -
Diluted EPS:
Income (loss) available to
common stockholders +
assumed conversions $ (24,358,000) 77,518,230 $ (.31)
============= =========== ======
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
RECONCILIATION OF INCOME AND NUMBER OF SHARES USED
TO CALCULATE BASIC AND DILUTED EARNINGS PER SHARE (EPS)
For the Three Months Ended
June 30, 1999
------------------------------------
Income
(loss) Shares Per-Share
(Numerator) (Denominator) Amount
------------ ------------ ---------
Basic EPS:
Income (loss) available to
common stockholders $ (13,073,000) 77,118,498 $ (.17)
Effect of Dilutive
Securities:
Stock options and grants -
Income (loss) available to
common stockholders +
assumed conversions $ (13,073,000) 77,118,498 $ (.17)
============= ========== ========
For the Six Months Ended
June 30, 1999
------------------------------------
Income
(loss) Share Per-Share
(Numerator) (Denominator) Amount
------------ ------------- ----------
Basic EPS:
Income (loss) available
to common stockholders $ (25,869,000) 77,039,523 $ (.34)
Effect of Dilutive
Securities:
Stock options and grants -
Income (loss) available
to common stockholders
+ assumed Conversions $ (25,869,000) 77,039,523 $ (.34)
============= ========== ========
The Company has outstanding $175,000,000 of Convertible
Subordinated Notes which are convertible into 11,371,020 shares
of common stock at $15.39 per share. The notes have been
outstanding since their issuance in July 1997, but were not
included in the computation of diluted EPS because the assumed
conversion of the notes would have had an anti-dilutive effect
on EPS. For the six months ended June 30, 2000 and 1999,
options to purchase 7,269,250 and 5,605,000 shares of common
stock, respectively, at prices ranging from $2.25 to $12.1875,
were outstanding but not included in the computation of diluted
EPS because the assumed exercise of the options would have had
an anti-dilutive effect on EPS due to the net loss incurred
during the respective periods.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
3. Business Segments - During the six months ended June 30,
1999 the Company restructured its worldwide drilling operations
into two primary business units, "Domestic Operations" and
"International Operations." The primary services the Company
provides are as follows: domestic drilling, international
drilling and rental tools. Information regarding the Company's
operations by industry segment for the six months ended June 30,
2000 and 1999 is as follows (dollars in thousands):
Three Months Six Months
Ended Ended
----------------- -----------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- ------- ------- --------
Revenues:
Domestic drilling $ 34,851 $ 28,871 $ 62,305 $ 57,288
International
drilling 42,580 46,811 81,248 97,752
Rental tools 9,527 6,288 17,356 13,555
Other 2 24 4 245
-------- ------- ------- -------
Net revenues 86,960 81,994 160,913 168,840
-------- ------- ------- -------
Operating income
(loss):
Domestic drilling 624 (4,988) (5,009) (14,726)
International
drilling 2,699 7,681 2,973 16,511
Rental tools 3,650 1,277 5,576 3,841
Other (564) (397) (1,062) (700)
-------- ------- ------- -------
Total operating
income (loss)
by segment <1> 6,409 3,573 2,478 4,926
-------- ------- ------- -------
Provision for
reduction in
carrying value
of certain assets - (3,750) - (5,250)
Restructuring charges - (800) - (3,000)
General and
Administrative (4,444) (3,791) (9,447) (8,195)
-------- ------- ------- -------
Total operating
income (loss) 1,965 (4,768) (6,969) (11,519)
Interest expense (14,523) (13,383) (29,035) (26,647)
Other income (expense)-
net 1,696 1,378 5,462 5,889
-------- ------- ------- -------
Income (loss) before
income taxes $(10,862) $(16,773) $(30,542) $(32,277)
======== ======== ======== ========
[FN]
<1> Total operating income (loss) by segment is calculated by
excluding General and administrative expense, Restructuring
charges and Provision for reduction in carrying value of certain
assets from Operating income (loss), as reported in the
Consolidated Condensed Statements of Operations.
Report of Independent Accountants
To the Board of Directors and Shareholders
Parker Drilling Company
We have reviewed the consolidated condensed balance sheet of
Parker Drilling Company and subsidiaries as of June 30, 2000 and
the related consolidated condensed statements of operations for
the three and six month periods ended June 30, 2000 and 1999 and
the consolidated condensed statement of cash flows for the six
month periods ended June 30, 2000 and 1999. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet as of
December 31, 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then
ended (not presented herein); and in our report, dated February
3, 2000, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1999, is fairly stated in all
material respects in relation to the consolidated balance sheet
from which it has been derived.
By: /s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
July 27, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q contains certain statements that are "forward-
looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934. These statements may be made
directly in this document, referring to the Company, or may be
"incorporated by reference," referring to other documents filed
by the Company with the Securities and Exchange Commission. All
statements included in this document, other than statements of
historical facts, that address activities, events or developments
that the Company expects, projects, believes or anticipates will
or may occur in the future, including future operating results,
future capital expenditures and investments in the acquisition
and refurbishment of rigs and equipment, repayment of debt,
expansion and growth of operations, Year 2000 issues, and other
such matters, are forward-looking statements.
Forward-looking statements are based on certain assumptions
and analyses made by the management of the Company in light of
their experience and perception of historical trends, current
conditions, expected future developments and other factors they
believe are relevant. Although management of the Company
believes that their assumptions are reasonable based on current
information available, they are subject to certain risks and
uncertainties, many of which are outside the control of the
Company. These risks include worldwide economic and business
conditions, fluctuations in the market prices of oil and gas,
industry conditions, international trade restrictions and
political instability, operating hazards and uninsured risks,
governmental regulations and environmental matters, substantial
leverage, seasonality and adverse weather conditions,
concentration of customer and supplier relationships,
competition, integration of operations, acquisition strategy, and
other similar factors (some of which are discussed in documents
referred to in this Form 10-Q.) Because the forward-looking
statements are subject to risks and uncertainties, the actual
results of operations and actions taken by the Company may differ
materially from those expressed or implied by such forward-
looking statements.
OUTLOOK AND OVERVIEW
- --------------------
The $24.4 million net loss for the six months ended June 30,
2000 reflects the continued weakness in the company's
international drilling markets. The Company's international
drilling markets have been slow to react to the increase in crude
oil prices over the past year. In addition, due to several
occurrences of community unrest in Nigeria, three of the
Company's four barge rigs have been on reduced standby rates
throughout most of the current six-month period. As a result,
the Company's international rig utilization has remained low,
negatively impacting net income during the six months ended June
30, 2000. Domestically, the Company experienced a significant
increase in activity during the second quarter, with rig
utilization increasing from 61% to approximately 74% and dayrates
for the seven jackup rigs increasing an average of 20%. The
company's rental tool segment, Quail Tools, experienced record
revenues and operating profit during the second quarter as Quail
Tools took advantage of the increased activity in the Gulf of
Mexico.
RESULTS OF OPERATIONS (continued)
- ---------------------
Due mainly to the tightness in supply of natural gas from
domestic production, the Company anticipates that domestic
drilling activity will remain robust through the remainder of
2000 and into 2001. This will benefit the Company's domestic
offshore drilling operations and Quail Tools. During July 2000
all four barge rigs in Nigeria returned to work on full dayrates.
In addition, the Company is experiencing increased activity for
land rigs in Kazakhstan and Latin America, and to a modest extent
Asia Pacific. In spite of the strong improvements in domestic
markets and the signs of a turnaround in international land and
offshore prospects, management anticipates that the Company will
continue to incur losses for the remainder of the current year,
albeit at a reduced level from the first half of the year.
Management believes, however, that cash on hand, cash provided by
operations and funds available under the Company's $50 million
revolving credit facility will be adequate to meet working
capital needs, including maintenance and project capital
expenditures.
Three Months Ended June 30, 2000 Compared with Three Months Ended
June 30, 1999
- -----------------------------------------------------------------
The Company recorded a net loss of $9.5 million for the
three months ended June 30, 2000 compared to a net loss of $13.1
million for the three-month period ended June 30, 1999. The
improvement recognized during the current quarter is primarily
related to improved drilling activity in the Gulf of Mexico.
Utilization and dayrates for the domestic offshore drilling group
increased significantly during the current quarter as compared to
the comparable quarter of 1999. In addition, Quail Tools
recognized record revenues and operating profit during the second
quarter of 2000. Partially offsetting the increases was the
decline in utilization in the Company's international land
drilling operations during the current quarter as compared to the
second quarter of 1999.
The Company's revenues increased $5.0 million to $87.0
million in the current quarter as compared to the second quarter
of 1999. Domestic drilling revenues increased $6.0 million to
$34.9 million. Domestic offshore drilling revenues increased
$10.1 million due primarily to increased utilization for the
intermediate and deep drilling barges and increased utilization
and dayrates for the jackup drilling rigs. The increase in
domestic offshore drilling revenues was offset by a $4.1 million
decrease in domestic land drilling, due primarily to the sale of
the Company's thirteen lower 48 land rigs on September 30, 1999.
The Company's one remaining domestic land rig, located in Alaska,
was stacked throughout the current quarter and during the
comparable quarter in 1999.
International drilling revenues declined $4.2 million to
$42.6 million in the current quarter as compared to the second
quarter of 1999. International land drilling revenues decreased
$6.8 million while international offshore drilling revenues
increased $2.6 million. Primarily responsible for the reduction
in international land drilling revenues was a $4.8 million
decrease in the Latin America region, due to reduced rig
utilization in Colombia, Bolivia and Peru. In addition, land
drilling revenues decreased $4.9 million in the Asia Pacific
region due to the completion of a one-well drilling contract in
Vietnam during the third quarter of 1999 and reduced utilization
in New Guinea. Decreased revenues in Latin America and Asia
Pacific were partially offset by increased revenues in the
Frontier areas which includes Russia, Kazakhstan, Africa and the
Middle East. Revenues increased $2.9 million during the second
quarter of 2000 due primarily to new land drilling revenues in
Nigeria and Kuwait. The Nigeria revenues related to a one-well
project which completed drilling during June 2000.
RESULTS OF OPERATIONS (continued)
- ---------------------
The increase of $2.6 million in international offshore
drilling revenues was due primarily to revenues generated by
barge Rig 257 in the Caspian Sea and barge Rig 75 in Nigeria.
Barge Rig 257, which commenced drilling in September of 1999,
contributed $6.4 million of revenues during the current quarter.
Due to several episodes of community unrest in Nigeria, three of
the four barge rigs were on reduced standby status during most of
the current quarter. Despite the decreased revenues earned while
these rigs were on standby, there was a slight increase of $.2
million in Nigerian offshore revenues to $8.8 million for the
current quarter. The increase is due to standby revenues earned
by the addition of the company's fourth barge rig in the Nigerian
market - new barge Rig 75, and the resumption of drilling
operations on Rig 74 which was on standby status in the
comparable quarter of 1999. Drilling operations on the remaining
Nigerian barge rigs resumed during July 2000. Offsetting the
increased revenues in the Caspian Sea and Nigeria was a $4.0
million decrease in international offshore revenues in Venezuela
due to the completion of a barge contract during the third
quarter of 1999.
RESULTS OF OPERATIONS (continued)
- ---------------------
Rental tool revenues increased $3.2 million due to the
increased level of drilling activity in the Gulf of Mexico and
the opening in May 2000 of a new branch office in Odessa, Texas
to service the West Texas drilling market. Contributing to this
increase was increased revenues from the New Iberia, Louisiana
operations of $1.9 million, $1.1 million from the Victoria, Texas
operations and $.2 million from the new Odessa, Texas operations.
Profit margins (revenues less direct operating expenses,
excluding depreciation) of $27.4 million in the current quarter
reflect an increase of $3.5 million from the $23.9 million
recorded during the three months ended June 30, 1999. The
domestic and international drilling segments recorded profit
margin percentages (profit margin as a percent of revenues) of
31.2% and 24.6% in the current quarter, as compared to 18.3% and
32.4% in the second quarter of 1999. Domestic profit margins
increased $5.6 million. Domestic profit margins were positively
impacted during the current quarter by increased utilization in
the Gulf of Mexico, particularly from the intermediate and deep
drilling barges, and from the jackup rigs. In addition, average
dayrates for the jackup rigs increased approximately 41.5% during
the current quarter when compared to the second quarter of 1999.
Offsetting the increased domestic offshore profit margins was the
sale of all thirteen lower 48 domestic land rigs during the third
quarter of 1999, which contributed $.4 million of profit margin
during the second quarter of 1999. In addition, the remaining
domestic land rig, located in Alaska, has been stacked since
March 1999.
International drilling profit margins declined $4.6 million
to $10.5 million in the current quarter as compared to the second
quarter of 1999. International land drilling profit margins
declined $3.7 million to $6.6 million during the current quarter
primarily due to lower utilization in the Company's land drilling
operations as previously discussed. The offshore segment of
international drilling profit margins declined $.9 million to
$3.9 million in the current quarter. This decrease is primarily
attributed to three barge rigs in Nigeria on standby status
during most of the current quarter due to community unrest.
Drilling operations resumed during July 2000.
Rental tool profit margins increased $2.5 million to $6.0
million during the current quarter as compared to the second
quarter of 1999. Profit margins increased due to an increase in
revenues during the current quarter and a significant increase in
profit margin percentage which was 63% during the current quarter
as compared to 55% for the second quarter of 1999.
Depreciation and amortization expense increased $.7 million
to $21.0 million in the current quarter. Depreciation expense
recorded on 1998/1999 capital additions, principally barge Rigs
257 and 75, was the primary reason for the increase.
Interest expense increased $1.1 million due to $1.5 million
in interest capitalized to construction projects during the
second quarter of 1999; no interest was capitalized during the
current quarter.
Income tax expense consists of foreign tax expense and
deferred tax benefit. Lower international drilling revenues and
operating income have resulted in a decrease in foreign tax
expense when comparing the two periods. The deferred tax benefit
is due to the pre-tax loss incurred during the three and six
months ended June 30, 2000.
RESULTS OF OPERATIONS (continued)
- ---------------------
Six Months Ended June 30, 2000 Compared with Six Months Ended
June 30, 1999
- -----------------------------------------------------------------
The Company recorded a net loss of $24.4 million for the six
months ended June 30, 2000 compared to a net loss of $25.9
million recorded for the six-month period ended June 30, 1999.
The Company's revenues decreased $7.9 million to $160.9
million in the current six-month period as compared to the six
months ended June 30, 1999. Domestic drilling revenue increased
$5.0 million to $62.3 million. Domestic offshore drilling
revenues increased $15.8 million due primarily to increased
utilization for the intermediate and deep drilling barges and
increased utilization and dayrates for the jackup drilling rigs.
The increase in offshore drilling revenues was offset by the
decrease in domestic land drilling. Domestic land drilling
revenues decreased $10.8 million related primarily to the sale of
the Company's thirteen lower 48 land rigs on September 30, 1999.
The Company's one remaining domestic land rig, located in Alaska,
was stacked throughout the current period and was operating
during part of the comparable period in 1999.
International drilling revenues declined $16.5 million to
$81.3 million in the current period as compared to the six months
ended June 30, 1999. International land drilling revenues
decreased $23.0 million while international offshore drilling
revenues increased $6.5 million. Primarily responsible for the
international land drilling revenues decrease was the Latin
America region, which decreased $14.4 million. This decrease is
attributed to reduced rig utilization in Colombia, Bolivia and
Peru. In addition, land drilling revenues decreased $9.2 million
in the Asia Pacific region due to completion of a one-well
drilling contract in Vietnam that ended during the third quarter
of 1999 and reduced utilization in New Guinea. Revenues in the
frontier area, which includes Russia, Kazakhstan, Africa and the
Middle East, increased $.6 million during the current period as
compared to the six months ended June 30, 1999.
The increase of $6.5 million in international offshore
drilling revenues was due primarily to revenues generated by
barge Rig 257 in the Caspian Sea and barge Rig 75 in Nigeria.
Barge Rig 257, which commenced drilling in September of 1999,
contributed $12.5 million of revenues during the six months ended
June 30, 2000, despite being on a reduced dayrate for
approximately five weeks during the period due to winter
conditions. With the addition of barge Rig 75, the Company has
four barge rigs in the Nigerian offshore market. Due to several
episodes of community unrest three of the four barge rigs were on
standby status during most of the current period, while one rig,
barge Rig 74, operated for approximately three and a half months.
Despite the reduced revenues earned while on standby, Nigerian
offshore revenues increased $2.0 million to $19.1 million during
the current period. The increase is due to standby revenues
earned by the new barge Rig 75 and the start-up of drilling
operations on Rig 74 which was on standby status in the
comparable period of 1999. Drilling operations on the remaining
Nigerian barge rigs have resumed, on full dayrate, during July
2000. Offsetting the increased revenues in the Caspian Sea and
Nigeria was an $8.0 million decrease in international offshore
revenues due to the completion of a barge contract in Venezuela
during the third quarter of 1999.
RESULTS OF OPERATIONS (continued)
- ---------------------
Rental tool revenues increased $3.8 million due to the
increased level of drilling activity in the Gulf of Mexico.
Contributing to this increase was the New Iberia, Louisiana
operation in the amount of $2.3 million, $1.3 million from the
Victoria, Texas operation and $.2 million from the new Odessa,
Texas operation which commenced operations in May 2000 to service
the West Texas drilling fields.
Profit margins (revenues less direct operating expenses,
excluding depreciation) of $44.5 million in the current period
reflect a decrease of $.7 million from the $45.2 million recorded
during the six months ended June 30, 1999. The domestic and
international drilling segments recorded profit margin
percentages (profit margin as a percent of revenues) of 25.0% and
23.0% in the current period, as compared to 10.3% and 31.8% in
the comparable period of 1999. Domestically, profit margins
increased $9.7 million. Domestic profit margins were positively
impacted during the current period by increasing utilization in
the Gulf of Mexico particularly from the intermediate and deep
drilling barges, and from the jackup rigs. In addition, average
dayrates for the jackup rigs increased approximately 21% during
the current period when compared to the six months ended June 30,
1999. Offsetting the increased domestic offshore profit margins
was the sale of all thirteen lower 48 domestic land rigs during
the third quarter of 1999; during the six months ended June 30,
1999 these rigs contributed profit margins of $1.0 million. In
addition, the remaining domestic land rig, located in Alaska, has
been stacked since March 1999.
International drilling profit margins declined $12.4 million
to $18.8 million during the six months ended June 30, 2000 as
compared to the comparable period of 1999. International land
drilling profit margins declined $9.4 million to $11.8 million
during the current period primarily due to lower utilization in
the Company's land drilling operations as previously discussed.
The international offshore drilling profit margins declined $3.0
million to $7.0 million in the current period as compared to the
six months ended June 30, 1999. This decrease is primarily
attributed to three barge rigs in Nigeria on standby status
during the current period due to several episodes of community
unrest. Drilling operations at full dayrates resumed during July
2000.
Rental tool profit margins increased $2.0 million to $10.2
million during the current period as compared to the six months
ended June 30, 1999. Profit margins increased due primarily to
the $3.8 million increase in revenue during the current period.
Profit margin percentage decreased slightly during the current
period to 59% from 60% for the comparable period of 1999.
Depreciation and amortization expense increased $1.7 million
to $42.0 million in the current period. Depreciation expense
recorded on 1998/1999 capital additions, principally barge Rig
257 and barge Rig 75, was the primary reason for the increase.
Interest expense increased $2.4 million due to $3.0 million
in interest being capitalized to construction projects during the
six months ended June 30, 1999, no interest was capitalized
during the current period.
RESULTS OF OPERATIONS (continued)
- ---------------------
Income tax expense consists of foreign tax expense and
deferred tax benefit. Lower international drilling revenues and
operating income have resulted in a decrease in foreign tax
expense when comparing the two periods. The deferred tax benefit
is due to the net loss incurred during the six months ended June
30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of June 30, 2000, the Company had cash, cash equivalents
and other short-term investments of $25.7 million, a decrease of
$20.6 million from December 31, 1999. The primary sources of
cash for the six-month period as reflected on the Consolidated
Statement of Cash Flows were $5.2 million from the disposition of
equipment, reimbursements approximating $13 million from the
operator to offset a portion of the expenditures to modify Rig
257 for service in the Caspian Sea and $.1 million provided by
operating activities.
The primary uses of cash for the six-month period ended June
30, 2000 were $25.6 million for capital expenditures (net of
reimbursements) and $2.2 million for repayment of debt. Major
projects included the completion of modifications on Rig 249 and
commencement of construction on Rig 258. Rig 249 and Rig 258 are
currently under contract and anticipated to begin drilling in the
second half of 2000 and early 2001, respectively, in Kazakhstan.
To finance the Company's 1996 and 1997 acquisitions and the
significant capital expenditures made in 1998 and 1999, the
Company has issued various debt instruments. The Company has
total long-term debt, including the current portion, of $651.2
million at June 30, 2000. The Company entered into a $50.0
million revolving credit facility with a group of banks led by
Bank of America on October 22, 1999. This facility is available
for working capital requirements, general corporate purposes and
to support letters of credit. The revolver is collateralized by
accounts receivable, inventory and certain barge rigs located in
the Gulf of Mexico. The facility contains customary affirmative
and negative covenants. Availability under the revolving credit
facility is subject to certain borrowing base limitations based
on 80 percent of eligible receivables plus 50 percent of supplies
in inventory. Currently, the borrowing base is $47.5 million of
which none has been drawn down and $8.2 million in letters of
credit have been issued. The revolver terminates on October 22,
2003. On October 7, 1999 a subsidiary of the Company entered
into a loan agreement with Boeing Capital Corporation for
refinancing the construction costs of Rig 75. The loan of $24.8
million plus interest is to be repaid in 60 monthly payments of
$0.5 million. The loan is collateralized by Rig 75 and is
guaranteed by the Parent.
LIQUIDITY AND CAPITAL RESOURCES (continued)
- -------------------------------
The Company anticipates that working capital needs and funds
required for capital spending in 2000 will be met from existing
cash, other short-term investments, cash provided by operations,
reimbursements from the operator for expenditures on Rig 257 and,
if necessary, from proceeds from sale of the Unit common stock
and funds available under the Company's revolving credit
facility. The Company anticipates cash requirements for capital
spending will be approximately $68 million, net of
reimbursements. Should new opportunities requiring additional
capital arise, the Company may utilize the revolving credit
facility. In addition, the Company may seek project financing or
equity participation from outside alliance partners or customers.
The Company cannot predict whether such financing or equity
participation would be available on terms acceptable to the
Company.
OTHER MATTERS
- -------------
Indonesian Operations
- ---------------------
During 1995-1998, the Company provided management, certain
equipment, technical assistance and training support to an
Indonesian-owned drilling contractor that was performing
geothermal drilling services for two operators in connection with
the construction of power plants in Indonesia. Because these
operators did not pay the drilling contractor for a considerable
portion of the services provided, the drilling contractor was
unable to pay the Company. The Indonesian drilling contractor
initiated two arbitration proceedings in late 1998 to collect
these delinquent payments. Recently, the arbitration panels
convened in these arbitration proceedings awarded the contractor
a total of approximately $ 9.2 million, including interest, which
continues to accrue. The drilling contractor has advised the
Company it will vigorously pursue collection of the awards. The
Company believes that resolution of this matter will not have a
material adverse effect on the Company's results of operations or
financial position.
Year 2000
- ---------
The Company began preparing for Year 2000 in 1997 by
replacing critical financial, human resources and payroll systems
with Year 2000 compliant off-the-shelf software. The Year 2000
problem was not the main reason for upgrading the information
technology platform; however, it was beneficial in achieving Year
2000 compliance. The Company also prepared contingency plans to
cover failures in its supply chain, communications, civil
disturbances and information technology systems.
The Company estimates that $225,000 was spent during 1998
and 1999 in its Year 2000 compliance efforts. While the majority
of those costs were internal salaries, the Company's process for
tracking internal costs did not capture all of the costs incurred
for each individual task on the project.
During the Year 2000 date transition, the Company did not
experience any material failure with its Information Technology
or non-Information Technology systems or key customers or
suppliers. The Company will continue to monitor mission critical
applications, processes and vendors throughout the Year 2000 for
any latent issues that may arise.
PART II. OTHER INFORMATION
Page
Item Exhibits and Reports on Form 8-K
6.
(a) Exhibits:
Exhibit 15 Letter re Unaudited Interim Financial 18
Information
Exhibit 27 Financial Data Schedule
[Edgar Version Only]
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Parker Drilling Company
-----------------------
Registrant
Date: August 10, 2000
By: /s/ James J. Davis
-----------------------------------
James J. Davis
Senior Vice President-Finance and
Chief Financial Officer
By: /s/ W. Kirk Brassfield
-----------------------------------
W. Kirk Brassfield
Controller and Chief Accounting
Officer
<CAPTION
>
INDEX TO EXHIBITS
Exhibit
Number Description
-----------
15 Letter re Unaudited Interim Financial Information
27 Financial Data Schedule [Edgar Version Only]