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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 MARCH 31, 2001
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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
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- -----------------
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
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
--- ---
As of April 30, 2001, 91,939,816 common shares were outstanding.
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PARKER DRILLING COMPANY
INDEX
Page
No.
Part I.
Financial Information
Consolidated Condensed Balance Sheets (Unaudited)
March 31, 2001 and December 31, 2000
2
Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended March 31, 2001 and 2000
3
Consolidated Condensed Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2001 and 2000
4
Notes to Unaudited Consolidated Condensed
Financial Statements
5 - 8
Report of Independent Accountants
10
Management's Discussion and Analysis of Financial
Condition and Results of Operations
11 - 16
Part II.
Other Information
Item 6, Exhibits and Reports on Form 8-K
17
Signatures
18
Exhibit 15, Letter Re Unaudited Interim
Financial Information
PART 1. FINANCIAL INFORMATION
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars In Thousands) (Unaudited)
ASSETS
March 31,
December 31,
- ------
2001
2000
------------
----------
Current assets:
Cash and cash equivalents
$ 53,948
$ 62,480
Other short-term investments
811
811
Accounts and notes receivable
115,226
123,474
Rig materials and supplies
17,950
16,500
Other current assets
7,416
4,600
----------
----------
Total current assets
195,351
207,865
Property, plant and equipment less accumulated
depreciation and amortization of $468,727
at March 31, 2001 and $448,734 at December 31, 2000
676,868
663,525
Goodwill, net of accumulated amortization of $29,656
at March 31, 2001 and $27,786 at December 31, 2000
194,738
196,609
Other noncurrent assets
39,214
39,420
----------
----------
Total assets
$ 1,106,171
$ 1,107,419
==========
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt
$ 4,669
$ 5,043
Accounts payable and accrued liabilities
74,843
77,201
Accrued income taxes
6,814
9,422
-----------
----------
Total current liabilities
86,326
91,666
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----------
Long-term debt
591,653
592,584
Deferred income tax
20,763
18,467
Other long-term liabilities
5,897
5,539
Stockholders' equity:
Common stock, $.16 2/3 par value
15,314
15,287
Capital in excess of par value
431,848
431,043
Accumulated comprehensive income-net unrealized gain on
investments available for sale (net of taxes of $198
at March 31, 2001 and $190 at December 31, 2000).
352
339
Retained earnings (accumulated deficit)
(45,982)
(47,506)
----------
----------
Total stockholders' equity
401,532
399,163
----------
----------
Total liabilities and stockholders' equity
$ 1,106,171
$ 1,107,419
==========
==========
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
- ------------------
March 31,
March 31,
2001
2000
----------
----------
Revenues:
U.S. drilling
$ 49,756
$ 27,454
International drilling
51,421
38,668
Rental tools
13,697
7,829
Other
-
2
----------
---------
Total revenues
114,874
73,953
----------
---------
Operating expenses:
U.S. drilling
27,619
22,844
International drilling
37,158
30,434
Rental tools
4,743
3,582
Other
(4)
(1)
Depreciation and amortization
22,878
21,025
General and administrative
4,871
5,003
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---------
Total operating expenses
97,265
82,887
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---------
Operating income (loss)
17,609
(8,934)
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---------
Other income and (expense):
Interest expense
(13,522)
(14,512)
Interest income
934
947
Gain on disposition of assets
1,075
974
Other income - net
386
1,845
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---------
Total other income and (expense)
(11,127)
(10,746)
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---------
Income (loss) before income taxes
6,482
(19,680)
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---------
Income tax expense (benefit):
Current tax expense-foreign
2,708
2,596
Deferred tax (benefit)
2,250
(7,400)
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--------
4,958
(4,804)
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Net income (loss)
$ 1,524
$ (14,876)
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Earnings (loss) per share,
Basic
$ .02
$ (.19)
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Diluted
$ .02
$ (.19)
---------
---------
Number of common shares used in
computing earnings per share:
Basic
91,773,338
77,466,332
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Diluted
92,808,509
77,466,332
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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)
Three Months Ended
March 31,
- ------------------
2001
2000
- --------
- --------
Cash flows from operating activities:
Net income (loss)
$ 1,524
$ (14,876)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
22,878
21,025
Gain on disposition of assets
(1,075)
(974)
Expenses not requiring cash
1,259
1,212
Deferred income taxes
2,250
(7,400)
Change in operating assets and liabilities
(632)
10,163
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----------
Net cash provided by operating activities
26,204
9,150
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Cash flows from investing activities:
Capital expenditures (net of reimbursements of
$11.0 million in 2000)
(34,729)
(386)
Proceeds from the sale of equipment
955
2,217
Other-net
-
(92)
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----------
Net cash provided by (used in) investing activities
(33,774)
1,739
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----------
Cash flows from financing activities:
Proceeds from issuance of debt
-
-
Principal payments under debt obligations
(1,200)
(1,134)
Other
238
-
----------
----------
Net cash used in
financing activities
(962)
(1,134)
Net change in cash and cash equivalents
(8,532)
9,755
Cash and cash equivalents at beginning of period
62,480
45,501
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Cash and cash equivalents at end of period
$ 53,948
$ 55,256
==========
==========
Supplemental cash flow information:
Interest paid
$ 4,497
$ 5,457
Taxes paid
$ 5,315
$ 3,024
Supplemental noncash investing activity:
Net unrealized loss on investments available
for sale (net of taxes of -0- and $1,242 at
March 31, 2001 and 2000, respectively.)
$ 13
$ 2,208
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 March 31, 2001 and December 31, 2000, (2) the
results of operations for the three months ended March 31, 2001 and 2000, and
(3) cash flows for the three months ended March 31, 2001 and 2000. Results for
the three months ended March 31, 2001 are not necessarily indicative of the
results to be realized during the full year. The condensed financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended December 31, 2000. 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
on that Act.
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
March 31, 2001
- ------------------
Income (loss)
Shares
Per-Share
(Numerator)
(Denominator)
Amount
-----------
-----------
----------
Basic EPS:
Income available to
common stockholders
$ 1,524,000
91,773,338
$ .02
Effect of Dilutive Securities:
Stock options and grants
-
1,035,171
-
Diluted EPS:
Income available to
common stockholders +
assumed conversions
$ 1,524,000
92,808,509
$ .02
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========
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
March 31, 2000
- ------------------
Income (loss)
Shares
Per-Share
(Numerator)
(Denominator)
Amount
-----------
-----------
----------
Basic EPS:
Income (loss) available to
common stockholders
$ (14,876,000)
77,466,332
$ (.19)
Effect of Dilutive Securities:
Stock options and grants
-
Diluted EPS:
Income (loss) available to
common stockholders +
assumed conversions
$ (14,876,000)
77,466,332
$ (.19)
===========
===========
========
The Company has outstanding $124,509,000 of 5.5% Convertible Subordinated
Notes which are convertible into 8,090,254 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 three months ended March 31, 2001, options to purchase
4,649,000 shares of common stock at prices ranging from $6.125 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. For the three months ended March
31, 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 period.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
3. Disposition of Assets - During March 2001 the Company sold the Gulf
Explorer barge rig, classified as assets held for sale, for total
consideration of $1.0 million. The Company recognized a pre-tax gain of
approximately $.5 million.
4. Contingencies - Two subsidiaries of Parker Drilling Company
("Subsidiaries") are named defendants in the lawsuit, Verdin v. R & B
Falcon Drilling USA, Inc., et. al., Civil Action No. G-00-488, currently
pending in the U.S. District Court for the Southern District of Texas,
Galveston Division. The plaintiff is a former employee of a drilling
contractor engaged in offshore drilling operations in the Gulf of Mexico.
The defendants are various drilling contractors, including the
Subsidiaries, who conduct drilling operations in the Gulf of Mexico.
Plaintiff alleges that the defendants have violated federal and state
antitrust laws by agreeing with each other to depress wages and benefits
paid to employees working for said defendants. Based on the information
obtained to date, certain of the defendants, known as the "Big 8", were
alleged to be the principal parties engaged in actions for this purpose.
The Subsidiaries are not a part of the Big 8.
Plaintiff is seeking to bring this case as a "class action", i.e., on
behalf of himself and a proposed class of other similarly situated
employees of the defendants that have allegedly suffered similar damages
from the actions of defendants. At the present time, the court has not
ruled on the issue of whether the plaintiff has established the
requirements for bringing this case as a "class action" on behalf of other
similarly situated employees. At least six of the defendants have entered
into settlement agreements pursuant to which they have agreed to pay
settlement amounts although these settlements are a small fraction of the
amount claimed by plaintiff. Other defendants may be negotiating
settlement agreements with the plaintiffs. The Subsidiaries and certain
other defendants have denied the plaintiff's claims. Based on the
information obtained to date and consultation with legal counsel,
management believes the Subsidiaries have sufficient defenses to prevail in
this case. Although management cannot predict the ultimate result,
management believes the outcome of this case will not have a material
adverse effect on the results of operations, cash flows or financial
position.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
5. Business Segments - The primary services the Company provides are as
follows: U.S. drilling, international drilling and rental tools.
Information regarding the Company's operations by industry segment for the
three months ended March 31, 2001 and 2000 is as follows (dollars in
thousands):
Three Months Ended
- ----------------------------
March 31,
March 31,
2001
2000
- -----------
- -----------
Revenues:
U.S. drilling
$ 49,756
$ 27,454
International drilling
51,421
38,668
Rental tools
13,697
7,829
Other
-
2
--------
--------
Net revenues
$ 114,874
$ 73,953
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--------
Operating income (loss):
U.S. drilling
11,130
(5,633)
International drilling
5,754
274
Rental tools
6,141
1,926
Other
(545)
(498)
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--------
Total operating income
(loss) by segment (1)
22,480
(3,931)
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--------
General and administrative
(4,871)
(5,003)
--------
--------
Total operating
income (loss)
17,609
(8,934)
Interest expense
(13,522)
(14,512)
Other income (expense)-net
2,395
3,766
--------
--------
Income (loss) before
income taxes
$ 6,482
$ (19,680)
========
========
<FN>
<F1> Total operating income (loss) by segment is calculated by
excluding General and administrative expense, from operating income,
as reported in the Consolidated Condensed Statements of Operations.
<FN>
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 March 31, 2001 and the related
consolidated condensed statements of operations and cash flows for the three
month periods ended March 31, 2001 and 2000. 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 accounting principles generally
accepted in the United States.
We have previously audited, in accordance with auditing standards
generally accepted in the United States, the consolidated balance sheet as of
December 31, 2000, 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 January 30, 2001, 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, 2000, is fairly stated in all material
respects in relation to the consolidated balance sheet from which it has been
derived.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
April 24, 2001
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 included in this document, or may be "incorporated by
reference," which means the statements are contained in 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 are "forward-looking
statements," including without limitation:
*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, and
*anticipated cost savings.
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 its 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 and
uncertainties include:
*worldwide economic and business conditions that adversely affect market
conditions and/or the cost of doing business,
*fluctuations in the market prices of oil and gas,
*imposition of unanticipated trade restrictions and political
instability,
*operating hazards and uninsured risks,
*governmental regulations that adversely affect the cost of doing
business,
*adverse environmental events
*adverse weather conditions,
*concentration of customer and supplier relationships,
*unexpected cost increases for upgrade and refurbishment projects,
*competition,
*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. These risks and uncertainties should be considered by the
reader in connection with the forward-looking statements made from time to
time in this document.
INTRODUCTION
- ------------
The significant increase in oil and gas drilling and oil field tool
rental activity, which commenced during 2000, continued through the first
quarter of 2001. Rig utilization rates and dayrates for the Company's Gulf of
Mexico drilling rigs showed marked improvement, and the higher volume of
rental tool activity resulted in record rental tool revenues for the first
quarter. As a result of these positive trends, the Company recognized net
income of $1.5 million for the first quarter of 2001, a significant
RESULTS OF OPERATIONS(continued)
- ---------------------
improvement compared to the first quarter of 2000. Management is unable to
predict the duration of present market conditions, but based on a continuation
of current high commodity prices and spending by oil and gas operators,
particularly in the Company's Gulf of Mexico markets, and which is just
beginning to impact the international rig utilization and day rates,
management is encouraged about the Company's prospects for 2001.
During January 2001, the Company announced the relocation of its
corporate office to Houston, Texas, which is expected to be completed during
the third quarter of 2001. The relocation will be accompanied by a
reorganization of certain senior management positions and of the management of
drilling operations. Management believes that the Company will benefit from
being closer to its customers, competitors and vendors. In addition,
management anticipates the long-term savings from the consolidation of offices
and other administrative cost-cutting steps will offset the moving expenses
for retained employees and severance costs for terminated employees.
Three Months Ended March 31, 2001 Compared with
Three Months Ended March 31, 2000
- --------------------------------------------------------------------------
The Company recorded net income of $1.5 million for the three months
ended March 31, 2001 compared to a net loss of $14.9 million recorded for the
three-month period ended March 31, 2000. Net income in the first quarter of
2001 is reflective of the continuing improvement in utilization and dayrates
in the U.S. drilling operations and continuing strong activity in the
Company's rental tool operations.
The Company's revenues increased $40.9 million to $114.9 million in the
current quarter as compared to the first quarter of 2000. U.S. drilling
revenues increased $22.3 million to $49.8 million. U.S. offshore drilling
revenues increased $22.6 million due to increased utilization and dayrates in
all areas of the operation. Most notable were the increases attributed to the
seven jackup rigs; utilization increased from 83% to 92% while dayrates
increased approximately 80% when comparing the current quarter to the first
quarter of 2000. Jackup rig revenues increased $9.2 million in the current
quarter, which included loss-of-hire proceeds for 44 days related to one of
the Company's rigs which was undergoing Coast Guard inspections and
repairs/upgrades the entire quarter. Barge rig revenues increased $12.7
million during the current quarter due to increasing dayrates and utilization.
As of the end of the quarter 19 of 22 barge rigs were on contract. Platform
rigs revenues increased $.7 million with 2 of 4 rigs working through most of
the current quarter. During the fourth quarter of 2000, the Company sold its
one remaining U.S. land rig, located in Alaska, for $20 million. During the
first quarter of 2000 the Alaska rig generated approximately $.3 million in
revenues.
International drilling revenues increased $12.7 million to $51.4 million
in the current quarter as compared to the first quarter of 2000.
International land drilling revenues increased $11.2 million while offshore
drilling revenues increased $1.5 million. Primarily responsible for the
increase in international land drilling revenues was increased activity in
Kazakhstan resulting in additional revenues of $6.2 million. Since the first
quarter of 2000, the Company has added four additional land rigs in
Kazakhstan. Land drilling revenues increased $3.6 million in the Asia Pacific
region primarily attributed to New Zealand, which increased $2.7 million.
Revenues increased $1.4 million in Latin America. Revenues increased in
Colombia and Bolivia partially offset by a reduction in Ecuador due to the
completion of a contract in 2000.
RESULTS OF OPERATIONS (continued)
- ---------------------
The increase of $1.5 million in international offshore drilling revenues
was due primarily to the four barge rigs in Nigeria being on full dayrates
most of the first quarter of 2001 except for Rig 72 which incurred downtime
for nearly half the quarter due to regularly scheduled inspections. Revenues
associated with the Nigerian barge rigs increased $2.0 million during the
current quarter when compared to the first quarter of 2000. The four barge
rigs in Nigeria were, for most of the first quarter of 2000, on standby rates
due to community unrest. The rigs began going back to drilling activities on
full dayrates during the second and third quarters of 2000. Rig 257,
drilling in the Caspian Sea, experienced reduced revenues of $.5 million in
the current quarter due to reduced dayrates while on a 30-day fishing job.
Rental tool revenues increased $5.9 million as Quail Tools reported
record revenues in the current quarter of $13.7 million compared to $7.8
million during the first quarter of 2000. Quail Tools continues to benefit
from strength of exploration and development spending in both the shallow and
deep waters of the Gulf of Mexico and the new rental tool facility opened May
2000 in Odessa, Texas to service the West Texas drilling market. The increase
in revenues consists of $2.3 million from the New Iberia, Louisiana
operations, $2.0 million from the Victoria, Texas operations and $1.6 million
from the Odessa, Texas operations.
Profit margins (revenues less direct operating expenses) of $45.4 million
in the current quarter reflect an increase of $28.3 million from the $17.1
million recorded during the three months ended March 31, 2000. The U.S. and
international drilling segments recorded profit margin percentages (profit
margin as a percent of revenues) of 44% and 28% in the current quarter, as
compared to 17% and 21% in the first quarter of 2000. In the U.S., profit
margins increased $17.5 million. U.S. profit margins were positively impacted
during the current quarter by increasing utilization and dayrates in the Gulf
of Mexico particularly from the intermediate and deep drilling barges, and
from the jackup rigs. Utilization for the 22 U.S. barge rigs averaged 83% for
the current quarter compared to 57% for the first quarter of 2000. The
average dayrate increased 23% during the current quarter as compared to the
first quarter of 2000. Average dayrates for the jackup rigs increased
approximately 80% and utilization increased from 83% to 92% during the current
quarter when compared to the first quarter of 2000.
International drilling profit margins increased $6.0 million to $14.2
million in the current quarter as compared to the first quarter of 2000.
International land drilling profit margins rose $3.2 million to $8.3 million
during the current quarter due primarily to increased utilization in the
Company's land drilling operations as previously discussed. The international
offshore drilling profit margins increased $2.8 million to $5.8 million in the
current quarter. This increase is primarily attributed to four barge rigs in
Nigeria on standby status at reduced dayrates during most of the first quarter
of 2000 due to community unrest.
Rental Tool profit margins increased $4.8 million to $8.9 million during
the current quarter as compared to the first quarter of 2000. Profit margin
was 66% during the current quarter as compared to 54% for the first quarter of
2000 due to significant increase in revenues.
Depreciation and amortization expense increased $1.9 million to $22.9
million in the current quarter. Depreciation expense increased due to 2000
capital additions, principally two newly built land rigs delivered to
Kazakhstan.
RESULTS OF OPERATIONS (continued)
- ---------------------
Interest expense decreased $1.0 million due primarily to the repurchase
on the open market of $50.5 million principal amount of the 5.5% Convertible
Subordinated Notes at an average price of 86.11 percent of face value during
the fourth quarter of 2000. Gain on disposition of assets includes $.5
million gain on the sale of the Gulf Explorer for $1.0 million in March of
2001.
Income tax expense consists of foreign tax expense and deferred tax
expense. Improved international drilling revenues and operating income has
resulted in an increase in foreign tax expense when comparing the two periods.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of March 31, 2001, the Company had cash, cash equivalents and other
short-term investments of $54.8 million, a decrease of $8.5 million from
December 31, 2000. The primary sources of cash for the three-month period as
reflected on the Consolidated Statement of Cash Flows were $26.2 million
provided by operating activities and $1.0 million from the disposition of
equipment.
The primary uses of cash for the three-month period ended March 31, 2001
were $34.7 million for capital expenditures and $1.2 million for repayment of
debt. Major projects during the quarter included expenditures on three rigs
that will be working in the Karachaganak field in Kazakhstan, the completion
of new Rig 258 for the Tengiz field in Kazakhstan, and modifications to Rig
22J in the Gulf of Mexico as a result of its scheduled five-year Coast Guard
inspection.
The Company has total long-term debt, including the current portion, of
$596.3 million at March 31, 2001. 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 $50.0 million of which none has been drawn down and
$15.1 million in letters of credit have been issued. The revolver terminates
on October 22, 2003.
The Company anticipates that working capital needs and funds required for
capital spending in 2001 will be met from existing cash, other short-term
investments and cash provided by operations. The Company anticipates cash
requirements for capital spending will be approximately $100 million in 2001.
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
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Indonesian Operations
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Due to political and currency instability in Indonesia during 1997 and
1998, the development of certain power plant projects, in which the Company's
subsidiaries were involved by providing management, technical and training
support to an Indonesian drilling contractor, was postponed or delayed. As a
result, companies which were developing the projects defaulted on payments to
the Indonesian contractor, causing the Indonesian contractor to initiate
arbitration proceedings against said companies to collect these delinquent
payments. In 1999, the arbitration panels awarded the Indonesian contractor
approximately $8.5 million, including interest. Due to the uncertainty over
the economic viability of the power plant projects and timing of repayment of
guarantees by the Indonesian government, the Indonesian contractor elected to
accept a settlement of the outstanding awards, which will result in the
payment of approximately $6.0 million to the Company's subsidiaries by the end
of 2001.
Legal Proceedings
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Two subsidiaries of Parker Drilling Company ("Subsidiaries") are named
defendants in the lawsuit, Verdin v. R & B Falcon Drilling USA, Inc., et. al.,
Civil Action No. G-00-488, currently pending in the U.S. District Court for
the Southern District of Texas, Galveston Division. The plaintiff is a former
employee of a drilling contractor engaged in offshore drilling operations in
the Gulf of Mexico. The defendants are various drilling contractors,
including the Subsidiaries, who conduct drilling operations in the Gulf of
Mexico. Plaintiff alleges that the defendants have violated federal and state
antitrust laws by agreeing with each other to depress wages and benefits paid
to employees working for said defendants. Based on the information obtained
to date, certain of the defendants, known as the "Big 8", were alleged to be
the principal parties engaged in actions for this purpose. The Subsidiaries
are not a part of the Big 8.
Plaintiff is seeking to bring this case as a "class action", i.e., on
behalf of himself and a proposed class of other similarly situated employees
of the defendants that have allegedly suffered similar damages from the
actions of defendants. At the present time, the court has not ruled on the
issue of whether the plaintiff has established the requirements for bringing
this case as a "class action" on behalf of other similarly situated employees.
At least six of the defendants have entered into settlement agreements
pursuant to which they have agreed to pay settlement amounts although these
settlements are a small fraction of the amount claimed by plaintiff. Other
defendants may be negotiating settlement agreements with the plaintiffs. The
Subsidiaries and certain other defendants have denied the plaintiff's claims.
Based on the information obtained to date and consultation with legal counsel,
management believes the Subsidiaries have sufficient defenses to prevail in
this case. Although management cannot predict the ultimate result, management
believes the outcome of this case will not have a material adverse effect on
the results of operations, cash flows or financial position.
PART II. OTHER INFORMATION
Page
Item 6.
Exhibits and Reports on Form 8-K
(a)
Exhibits:
Exhibit 15 Letter re Unaudited Interim Financial Information
18
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
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Registrant
Date: May 15, 2001
By:
/s/ James J. Davis
- ----------------------------------
James J. Davis
Senior Vice President-Finance and
Chief Financial Officer
By:
/s/ W. Kirk Brassfield
- ----------------------------------
Controller and Chief Accounting
Officer
INDEX TO EXHIBITS
Exhibit
Number
Description
- --------------
15
Letter re Unaudited Interim Financial Information
18
2