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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
-----------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 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
PARKER DRILLING COMPANY
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 73-0618660
------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Parker Building, Eight East Third Street, Tulsa, Oklahoma 74103
--------------------------------------------------------- -----
(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
--- ---
As of October 31, 2000 92,140,706 common shares were outstanding.
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PARKER DRILLING COMPANY
INDEX
Page
No.
Part I. Financial Information
Consolidated Condensed Balance Sheets (Unaudited)
September 30, 2000 and December 31, 1999 2
Consolidated Condensed Statements of Operations
(Unaudited)
Three and Nine Months Ended September 30, 2000 and 3
1999
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30, 2000 and 1999 4
Notes to Unaudited Consolidated Condensed
Financial Statements 5 - 9
Report of Independent Accountants 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-19
Part Other Information
II.
Item 6, Exhibits and Reports on Form 8-K 20
Signatures 21
Exhibit 15, Letter Re Unaudited Interim
Financial Information 23
Exhibit 27, Financial Data Schedule [Edgar Version
Only]
PART 1. FINANCIAL INFORMATION
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars In Thousands)
(Unaudited)
ASSETS September December
30, 31,
------ 2000 1999
------------ ----------
Current assets:
Cash and cash equivalents $117,987 $ 45,501
Other short-term investments 864 777
Accounts and notes receivable 107,982 75,411
Rig materials and supplies 15,955 13,766
Other current assets 6,953 15,988
---------- ----------
Total current assets 249,741 151,443
Property, plant and equipment less
accumulated
depreciation and amortization of
$473,847
at September 30, 2000 and $423,514 at
December 31, 1999 658,555 661,402
Goodwill, net of accumulated
amortization
of $25,915 at September 30, 2000 and
$20,304
At December 31, 1999 198,479 204,090
Other noncurrent assets 51,316 65,808
---------- ----------
Total assets $1,158,091 $1,082,743
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 5,124 $ 5,054
Accounts payable and accrued 85,349 58,732
liabilities
Accrued income taxes 6,686 8,323
----------- ----------
Total current liabilities 97,159 72,109
---------- ----------
Long-term debt 644,565 648,577
Deferred income tax 17,415 28,273
Other long-term liabilities 6,341 4,363
Stockholders' equity:
Common stock, $.16 2/3 par value 15,269 12,895
Capital in excess of par value 430,218 343,374
Comprehensive income-net unrealized
gain on investments available for
sale
(net of taxes of $550 at September
30,
2000 and $908 at December 31, 1999). 977 1,613
Retained earnings (accumulated (53,853) (28,461)
deficit)
---------- ----------
Total stockholders' equity 392,611 329,421
---------- ----------
Total liabilities and
stockholders' equity $1,158,091 $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 Nine Months Ended
--------------------- ---------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2000 1999 2000 1999
--------- --------- --------- --------
Revenues:
Domestic drilling $ 39,893 $ 27,206 $102,198 $ 84,494
International drilling 49,959 45,868 131,207 143,620
Rental tools 11,996 6,978 29,352 20,533
Other 1 28 5 273
--------- --------- -------- --------
Total revenues 101,849 80,080 262,762 248,920
--------- --------- -------- --------
Operating expenses:
Domestic drilling 25,436 26,047 72,173 77,478
International drilling 35,971 31,719 98,508 98,417
Rental tools 3,986 2,801 11,116 8,176
Other - 836 2 944
Depreciation and amortization 21,011 20,944 63,040 61,246
General and administrative 5,492 4,106 14,939 12,301
Restructuring charges - - - 3,000
Provision for reduction in
carrying value of certain - 5,357 - 10,607
assets
--------- --------- -------- --------
Total operating expenses 91,896 91,810 259,778 272,169
--------- --------- -------- --------
Operating income (loss) 9,953 (11,730) 2,984 (23,249)
--------- --------- -------- --------
Other income and (expense):
Interest expense (14,554) (15,048) (43,589) (41,695)
Interest income 597 373 2,235 1,042
Gain on disposition of assets 7,953 34,330 9,901 37,279
Other income - net 749 (590) 2,625 1,681
--------- --------- -------- --------
Total other income and (expense) (5,255) 19,065 (28,828) (1,693)
--------- --------- -------- --------
Income (loss) before income 4,698 7,335 (25,844) (24,942)
taxes
--------- --------- -------- --------
Income tax expense (benefit):
Current tax expense-foreign 5,032 3,402 10,048 8,521
Deferred tax (benefit) 700 2,608 (10,500) (8,919)
--------- --------- -------- --------
5,732 6,010 (452) (398)
--------- --------- -------- --------
Net income (loss) $ (1,034) $ 1,325 $(25,392) $(24,544)
========= ========= ========= ========
Earnings (loss) per share,
Basic $ (.01) $ .02 $ (.32) $ (.32)
Diluted $ (.01) $ .02 $ (.32) $ (.32)
-------- --------- -------- ---------
Number of common shares used in
computing earnings per share:
Basic 80,258,339 77,227,118 78,438,141 77,102,742
---------- ---------- ---------- ----------
Diluted 80,258,339 77,782,921 78,438,141 77,102,742
---------- --------- ---------- ----------
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)
Nine Months Ended
September 30,
------------------
2000 1999
-------- --------
Cash flows from operating activities:
Net income (loss) $(25,392) $(24,544)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 63,040 61,246
Gain on disposition of assets (9,901) (37,279)
Expenses not requiring cash 3,225 2,746
Deferred income taxes (10,500) (8,919)
Provision for reduction in carrying
value of certain assets - 10,607
Change in operating assets and 346 17,909
liabilities
-------- --------
Net cash provided by operating activities 20,818 21,766
-------- ---------
Cash flows from investing activities:
Capital expenditures (net of reimbursements
of
$13.8 million in 2000 and $49.0 million in (59,654) (46,000)
1999)
Proceeds from the sale of equipment 10,141 51,862
Purchase of short-term investments - (300)
Proceeds from sale of investments 16,872 -
Other-net - 463
-------- --------
Net cash provided by (used in) investing (32,641) 6,025
activities
-------- --------
Cash flows from financing activities:
Proceeds from issuance of debt - 10,252
Proceeds from common stock offering 87,313 -
Principal payments under debt obligations (3,388) (41,763)
Other 384 (62)
Net cash provided by (used in)
financing activities 84,309 (31,573)
Net change in cash and cash equivalents 72,486 (3,782)
Cash and cash equivalents at beginning of 45,501 24,314
period
Cash and cash equivalents at end of period $117,987 $ 20,532
Supplemental cash flow information:
Interest paid $ 33,410 $ 34,362
Taxes paid $ 11,686 $ 8,501
Supplemental noncash investing activity:
Net unrealized loss on investments available
for sale for the nine-month period ended
September 30, 2000 (net of taxes of $358) $ 636 $ -
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 September 30, 2000 and December 31, 1999,
(2) the results of operations for the three and nine months ended September
30, 2000 and 1999, and (3) cash flows for the nine months ended September
30, 2000 and 1999. Results for the nine months ended September 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
September 30, 2000
------------------
Income Shares Per-Share
(loss)
(Numerator) (Denominator) Amount
----------- ----------- ----------
Basic EPS:
Income (loss) available to
common stockholders $(1,034,000) 80,258,339 $ (.01)
Effect of Dilutive
Securities:
Stock options and grants -
Diluted EPS:
Income (loss) available to
common stockholders +
assumed conversions $(1,034,000) 80,258,339 $ (.01)
=========== =========== ========
For the Nine Months Ended
September 30, 2000
------------------
Income (loss) Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------ ---------
Basic EPS:
Income (loss) available to
common stockholders $(25,392,000) 78,438,141 $ (.32)
Effect of Dilutive
Securities:
Stock options and grants -
Diluted EPS:
Income (loss) available to
common stockholders +
assumed conversions $(25,392,000) 78,438,141 $ (.32)
============= ========== ========
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
September 30, 1999
------------------------------------
Income Shares Per-Share
(loss)
(Numerator) (Denominator) Amount
----------- ----------- ---------
Basic EPS:
Income (loss) available to
common
stockholders $1,325,000 77,227,118 $ .02
Effect of Dilutive
Securities:
Stock options and grants 555,803
Income (loss) available to
common
stockholders + assumed
conversions $1,325,000 77,782,921 $ .02
=========== ========== ========
For the Nine Months Ended
September 30, 1999
----------------------------------
Income (loss) Shares Per-
Share
(Numerator) (Denominator) Amount
----------- ------------ --------
Basic EPS:
Income (loss) available to
common
stockholders $(24,544,000) 77,102,742 $ (.32)
Effect of Dilutive
Securities:
Stock options and grants -
Income (loss) available to
common
stockholders + assumed
Conversions $(24,544,000) 77,102,742 $ (.32)
============ =========== ======
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 (see note 6). 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
three and nine months ended September 30, 2000, options to purchase
7,269,250 shares of common stock 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. For the three months ended
September 30, 1999, options to purchase 5,319,500 shares of common
stock at prices ranging from $4.500 to $12.1875 were outstanding
but not included in the computation of diluted EPS because the
options' exercise price was greater than the average market price
of common shares for the quarter. In addition, for the nine months
ended September 30, 1999, options to purchase 7,231,000 shares of
common stock 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 in the period.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
3. Business Segments - During the nine months ended September
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 three and nine months
ended September 30, 2000 and 1999 is as follows (dollars in
thousands):
Three Months Ended Nine Months Ended
---------------- -----------------
September September September September
30, 30, 30, 30,
2000 1999 2000 1999
-------- ------- ------- -------
Revenues:
Domestic drilling $ 39,893 $ 27,206 $102,198 $ 84,494
International 49,959 45,868 131,207 143,620
drilling
Rental tools 11,996 6,978 29,352 20,533
Other 1 28 5 273
-------- -------- -------- --------
Net revenues 101,849 80,080 262,762 248,920
-------- -------- -------- --------
Operating income
(loss):
Domestic drilling 3,821 (9,915) (1,649) (24,641)
International 6,105 7,418 8,475 23,929
drilling
Rental tools 5,518 1,901 11,094 5,742
Other 1 (1,671) 3 (2,371)
-------- -------- -------- --------
Total operating
income
(loss) by segment 15,445 (2,267) 17,923 2,659
(1) -------- -------- -------- --------
Provision for
reduction
in carrying value
of
certain assets - (5,357) - (10,607)
Restructuring charges - - - (3,000)
General and
Administrative (5,492) (4,106) (14,939) (12,301)
-------- -------- -------- --------
Total operating
income (loss) 9,953 (11,730) 2,984 (23,249)
Interest expense (14,554) (15,048) (43,589) (41,695)
Other income (expense)- 9,299 34,113 14,761 40,002
net -------- -------- -------- --------
Income (loss) before
income taxes $ 4,698 $ 7,335 $(25,844) $(24,942)
======== ========= ======== ========
<FN>
<F1>Total operating income (loss) by segment is c
alculated 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.
<FN>
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
4. On September 8, 2000 the Company sold one million shares of
common stock of Unit Corporation. The Company received net
proceeds of $15.0 million resulting in a pre-tax gain of
approximately $7.4 million. The one million shares were
received by the Company in partial consideration for its sale
of the thirteen lower-48 land rigs to Unit Corporation in
September 1999.
5. During September 2000, the Company sold 13.8 million shares
of common stock pursuant to an effective shelf registration.
The Company raised net proceeds of $87.3 million. The net
proceeds will be used to acquire, upgrade and refurbish
certain offshore and land drilling rigs and for general
corporate purposes, including the repayment of debt (see note
6).
6. Subsequent Event - During October 2000, the Company
repurchased on the open market $50.5 million par value of its
5.5% Convertible Notes due 2004 at an average price of 86.11%
of par. Net cash outlay for the repurchase of the Convertible
Notes was $43.4 million.
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 September 30, 2000
and the related consolidated condensed statements of operations
for the three and nine month periods ended September 30, 2000 and
1999 and the consolidated condensed statement of cash flows for
the nine month periods ended September 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
October 25, 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, the outlook for rig utilization and
dayrates, general industry conditions including bidding activity,
future operating results of the Company's rigs and rental tool
operations, future capital expenditures and investments in the
acquisition and refurbishment of rigs and equipment, asset sales,
repayment of debt, financing activities, expansion and growth
opportunities, 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 of the Company, seasonality and adverse weather
conditions, concentration of customer and supplier relationships,
competition in the industry, 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 $25.4 million net loss for the nine months ended
September 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, the
Company's four barge rigs were on reduced standby rates for
extended periods during the first six months of the current year.
As a result, the Company's international rig utilization has
remained low, negatively impacting net income during the nine
months ended September 30, 2000. Offsetting this, the Company
experienced a significant increase in activity during the second
and third quarters in its domestic operations, with rig
utilization increasing from 60% to approximately 75% and dayrates
for the seven jackup rigs increasing an average of 37% from the
first quarter of 2000 to the third quarter. The company's rental
tool segment, Quail Tools, experienced record revenues and
operating profit during the third 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. Since June 2000
all four barge rigs in Nigeria worked more consistently at full
dayrates. In addition, the Company is experiencing increased
activity for land rigs in Kazakhstan and Latin America, and to a
modest extent in the Asia Pacific region. In spite of the strong
improvements in domestic markets and the encouraging signs of a
turnaround in international land and offshore markets, management
anticipates that the Company will incur a small loss for the
remainder of the current year. Management believes that cash on
hand, cash provided by operations and funds available under the
Company's $50.0 million revolving credit facility will be
adequate to meet working capital needs, including maintenance and
project capital expenditures. During September 2000 the Company
sold 13.8 million shares of common stock pursuant to an effective
shelf registration. The Company raised net proceeds of $87.3
which will be used to acquire, upgrade and refurbish certain
offshore and land drilling rigs and equipment and for general
corporate purposes, including the repayment of debt. In October
2000, the Company repurchased on the open market $50.5 million
par value of its 5.5% Convertible Notes due 2004 at an average
price of 86.11% of par.
Three Months Ended September 30, 2000 Compared with Three Months
Ended September 30, 1999
- -----------------------------------------------------------
The Company recorded a net loss of $1.0 million for the
three months ended September 30, 2000 compared to a net income of
$1.3 million for the three months ended September 30, 1999. The
current quarter was positively impacted by a pre-tax gain of $7.4
million on the sale of 1.0 million shares of Unit Corporation
common stock received as partial consideration for its sale of
thirteen lower-48 land rigs in September 1999. The 1999 third
quarter was positively impacted by a pre-tax gain of
approximately $35.8 million from the sale of thirteen lower-48
land rigs. This 1999 gain was partially offset by a $5.4 million
provision for reduction in the carrying value of certain assets,
including the impairment of certain assets and various provisions
for doubtful accounts.
The Company's revenues increased $21.8 million to $101.9
million in the current quarter as compared to the third quarter
of 1999. Domestic drilling revenues increased $12.7 million to
$39.9 million. Domestic offshore drilling revenues increased
$18.1 million due primarily to increased utilization in the barge
and jackup drilling rigs and a significant increase in dayrates
for the jackup drilling rigs. Utilization for the 22 barge rigs
increased from approximately 52% during the third quarter of 1999
to approximately 80% during the current quarter. Utilization for
the seven jackup drilling rigs increased from approximately 44%
during the third quarter of 1999 to approximately 85% for the
current quarter. In addition average dayrates for the jackup
drilling rigs increased 53% to approximately $24.3 thousand per
day when compared to the third quarter of 1999.
International drilling revenues increased $4.1 million to
$50.0 million in the current quarter as compared to the third
quarter of 1999. International land drilling revenues increased
$.3 million while international offshore drilling revenues
increased $3.8 million. International land drilling was
positively impacted by a $5.1 million increase in the Frontier
areas, which includes Kazakhstan, Russia, Africa and the Middle
East, offset by decreases of $2.5 million in Latin America and
$2.3 million in Asia Pacific. The $5.1 million increase in the
Frontier areas is primarily attributed to increased rig activity
in Kazakhstan and a one-well drilling contract in Madagascar
during the current
RESULTS OF OPERATIONS (continued)
- ---------------------
quarter. The decrease in Latin America was due primarily to the
completion of a contract in Ecuador during the second quarter of
2000. Decreased revenues in Asia Pacific are primarily due to
the completion of a one-well drilling contract in Vietnam during
the third quarter of 1999 and reduced utilization in Papua New
Guinea.
The increase of $3.8 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 the third quarter of
1999, contributed $6.1 million of revenues during the current
quarter as compared to $3.6 million during the third quarter of
1999. During the first and second quarters of 2000, several
episodes of community unrest in Nigeria disrupted normal
operations of the four barge rigs in Nigeria, leaving three of
the four barge rigs on reduced standby rates throughout most of
this period. During the third quarter of 2000 conditions
improved allowing all four barge rigs to resume normal operations
at full dayrates other than for brief periods of time. As a
result, revenues increased $4.1 million during the current
quarter as compared to 1999. Increased revenue in the Caspian
Sea and Nigeria were partially offset by the completion of barge
Rig 76 contract in Venezuela during the third quarter of 1999.
Barge Rig 76 generated revenues of $2.8 million during the prior
year quarter and has been relocated to the Gulf of Mexico market.
Rental tool revenues increased $5.0 million due to the
increased level of drilling activity in the Gulf of Mexico and
the opening in May 2000 of a new rental tool facility in Odessa,
Texas to service the West Texas drilling market. The increase in
revenues consists of $2.4 million from the New Iberia, Louisiana
operations, $1.8 million from the Victoria, Texas operations and
$.8 million from the new Odessa, Texas operations.
Profit margins (revenues less direct operating expenses,
excluding depreciation) of $36.5 million in the current quarter
reflect an increase of $17.8 million from the $18.7 million
recorded during the three months ended September 30, 1999. The
domestic and international drilling segments recorded profit
margin percentages (profit margin as a percent of revenues) of
36.2% and 28.0% in the current quarter, respectively, as compared
to 4.3% and 30.8% in the third quarter of 1999. Domestic profit
margins increased $13.3 million. Domestic drilling profit
margins were positively impacted during the current quarter, by
increased utilization in the Gulf of Mexico, particularly from
the barge rigs and the jackup rigs. In addition, average
dayrates for the jackup rigs increased approximately 53% during
the current quarter when compared to the third 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 $.7 million of profit margin
during the third quarter of 1999. The remaining domestic land
rig, located in Alaska, has been stacked since March 1999.
International drilling profit margins declined $.2 million
to $14.0 million in the current quarter as compared to the third
quarter of 1999. International land drilling profit margins
declined $.1 million to $8.0 million during the current quarter
as revenues and costs were comparable between the two periods.
The offshore segment of international drilling profit margins
declined $.1 million to $5.9 million in the current quarter.
Profit margin percentages decreased from 40% during the third
quarter of 1999 to 31% during the current quarter. The decline
in profit margin is primarily
RESULTS OF OPERATIONS (continued)
- ---------------------
attributable to the aforementioned community unrest in Nigeria
that resulted in reduced dayrates through the beginning of the
third quarter of 2000. Specifically, Rig 74 had 19 days of no
revenues which adversely impacted the profit margin. Currently
all four barge rigs are maintaining normal operations at full
drilling dayrates.
Rental tool profit margins increased $3.8 million to $8.0
million during the current quarter as compared to the third
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 67% during the current quarter
as compared to 60% for the third quarter of 1999.
Depreciation and amortization expense was $21.0 million in
the current quarter and the comparable quarter of 1999.
Interest expense decreased $.5 million due to the reduction
of the $40.0 million outstanding balance of the $75.0 million
revolving credit facility which was repaid in full with the
proceeds from the sale of the lower-48 land rigs on September 30,
1999. Gain on disposition of assets decreased $26.4 million
during the current quarter when compared to the third quarter of
1999. On September 30, 1999 the Company sold its thirteen lower-
48 land rigs to Unit Corporation for $40.0 million cash plus one
million shares of Unit Corporation common stock. The Company
recognized a pre-tax gain of $35.8 million during the third
quarter of 1999. During the third quarter of 2000 the Company
sold its one million shares of Unit Corporation common stock and
recognized a pre-tax gain of $7.4 million.
Income tax expense consists of foreign tax expense and
deferred tax expense. Higher third quarter foreign revenues have
resulted in an increase in foreign tax expense when comparing the
two periods. The deferred tax expense is due to the pre-tax
income generated during the current quarter.
RESULTS OF OPERATIONS (continued)
- ---------------------
Nine Months Ended September 30, 2000 Compared with Nine Months
Ended September 30, 1999
- ---------------------------------------------------------
The Company recorded a net loss of $25.4 million for the
nine months ended September 30, 2000 compared to a net loss of
$24.5 million recorded for the nine months ended September 30,
1999.
The Company's revenues increased $13.8 million to $262.8
million in the current nine-month period as compared to the nine
months ended September 30, 1999. Domestic drilling revenues
increased $17.7 million to $102.2 million. Domestic offshore
drilling revenues increased $34.0 million due primarily to
increased utilization for the drilling barge rigs and increased
utilization and dayrates for the jackup rigs. Domestic land
drilling revenues decreased $16.3 million due 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 $12.4 million to
$131.2 million in the current period as compared to the nine
months ended September 30, 1999. International land drilling
revenues decreased $22.7 million while international offshore
drilling revenues increased $10.3 million. Primarily responsible
for the international land drilling revenues decrease was the
Latin America region, which decreased $16.9 million. This
decrease is attributed to reduced rig utilization in Colombia,
Bolivia and Peru. In addition, land drilling revenues decreased
$11.6 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 Papua New
Guinea. Revenues in the Frontier area, which includes Russia,
Kazakhstan, Africa and the Middle East, increased $5.8 million
during the current period as compared to the nine months ended
September 30, 1999. This increase is primarily attributed to
short-term drilling contracts during the current year in
Madagascar, Nigeria (land contract) and a labor contract in
Kuwait. As of September 30, 2000, these contracts have been
completed.
The increase of $10.3 million in international offshore
drilling revenues was due primarily to barge Rig 257 in the
Caspian Sea and barge Rig 75 in Nigeria. Barge Rig 257, which
commenced drilling in September of 1999, contributed $18.6
million of revenues during the nine months ended September 30,
2000, an increase of $15.0 million, despite being on a reduced
dayrate for approximately five weeks during the period due to
winter conditions. With the addition of barge Rig 75 during the
third quarter of 1999, 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 first six months of the current year, 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 $6.1 million to
$32.0 million during the current period. The increase is due to
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. Since July 2000 drilling operations
on the Nigerian barge rigs have resumed at full dayrates.
Offsetting the increased revenues in the Caspian Sea and Nigeria
was a $10.8 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 $8.8 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 $4.7 million, $3.1 million from the
Victoria, Texas operation and $1.0 million from the new Odessa,
Texas operation which commenced operations in May 2000.
Profit margins (revenues less direct operating expenses,
excluding depreciation) of $81.0 million in the current period
reflect an increase of $17.1 million from the $63.9 million
recorded during the nine months ended September 30, 1999. The
domestic and international drilling segments recorded profit
margin percentages (profit margin as a percent of revenues) of
29.4% and 25.0%, respectively, in the current period, as compared
to 8.3% and 31.5% in the comparable period of 1999.
Domestically, profit margins increased $23.0 million. Domestic
drilling profit margins were positively impacted during the
current period by increasing utilization in the Gulf of Mexico
from the barge rigs and from the jackup rigs. In addition,
average dayrates for the jackup rigs increased approximately 33%
during the current period when compared to the nine months ended
September 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 nine
months ended September 30, 1999 these lower-48 land rigs
contributed profit margins of $1.7 million. In addition, the
remaining domestic land rig, located in Alaska, has been stacked
since March 1999.
International drilling profit margins declined $12.5 million
to $32.7 million during the nine months ended September 30, 2000
as compared to the comparable period of 1999. International land
drilling profit margins declined $9.3 million to $19.8 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 $3.2
million to $12.9 million in the current period as compared to the
nine months ended September 30, 1999. This decrease is primarily
attributed to the four barge rigs in Nigeria on standby status
during most of the current period due to several episodes of
community unrest. Drilling operations at full dayrates resumed
during July 2000.
Rental tool profit margins increased $5.9 million to $18.2
million during the current period as compared to the nine months
ended September 30, 1999. Profit margins increased primarily due
to the $8.8 million increase in revenue during the current
period. Profit margin percentage increased during the current
period to 62.1% from 60.2% for the comparable period of 1999.
Depreciation and amortization expense increased $1.8 million
to $63.0 million in the current period. Depreciation expense
recorded in connection with 1998/1999 capital additions,
principally barge Rig 257 and barge Rig 75, was the primary
reason for the increase.
Interest expense increased $1.9 million due to $3.0 million
in interest being capitalized to construction projects during the
nine months ended September 30, 1999. Gain on disposition of
assets decreased $27.4 million to $9.9 million for the current
nine-month period. On September 30, 1999 the Company sold its
lower-48 land rigs to Unit Corporation for $40.0 million cash
plus one million shares of Unit Corporation common stock. The
Company recognized a pre-tax gain of $35.8 million during the
third quarter of 1999. During September of 2000, the Company
sold its one million shares of Unit Corporation common stock and
recognized a pre-tax gain of $7.4 million.
RESULTS OF OPERATIONS (continued)
- ---------------------
Income tax expense consists of foreign tax expense and
deferred tax benefit. The deferred tax benefit is due to the net
loss incurred during the nine months ended September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of September 30, 2000, the Company had cash, cash
equivalents and other short-term investments of $118.9 million,
an increase of $72.6 million from December 31, 1999. The primary
sources of cash for the nine-month period as reflected on the
Consolidated Statement of Cash Flows were $87.3 million proceeds
from the sale of 13.8 million shares of the Company's common
stock in September 2000, $10.1 million from the disposition of
equipment, $16.9 proceeds from the sale of investments including
the $15.0 million proceeds received from the disposition of 1.0
million shares of Unit Corporation common stock, reimbursements
approximating $13.8 million from the operator to offset a portion
of the expenditures to modify Rig 257 for service in the Caspian
Sea and $20.8 million provided by operating activities.
The primary uses of cash for the nine-month period ended
September 30, 2000 were $59.7 million for capital expenditures
(net of reimbursements) and $3.4 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 to perform drilling services in
Kazakhstan, Rig 249 began drilling in October 2000 and Rig 258 is
anticipated to begin drilling in early 2001.
During October 2000, the Company repurchased on the open
market $50.5 million par value of its 5.5% Convertible Notes due
2004 at an average price of 86.11% of par. Net cash paid for the
repurchase was $43.4 million.
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 $649.7
million as of September 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% of eligible receivables plus 50% of
supplies in inventory. Currently, the borrowing base is $50.0
million of which none has been drawn down but $11.7 million of
availability has been used to support letters of credit that 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,
and, if necessary, funds available under the Company's revolving
credit facility. The Company anticipates cash requirements for
the year 2000 capital spending will be approximately $95.0
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 geothermal 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. The arbitration
panels awarded the contractor a total of approximately $ 9.2
million, including interest, which continues to accrue. The
Indonesian 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: November 14, 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
INDEX TO EXHIBITS
Exhibit
Number Description
-----------
15 Letter re Unaudited Interim Financial Information
27 Financial Data Schedule [Edgar Version Only]